EXHIBIT 10.12
EXECUTION COPY
ASSET PURCHASE AGREEMENT
dated as of
November 8, 2004
among
VOCUS, INC.,
VOCUS GS HOLDINGS LLC,
GNOSSOS SOFTWARE, INC.
and
XXXXXX XXXXXX XXXXXX
TABLE OF CONTENTS
PAGE
----
ARTICLE 1
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.01. Rules of Construction............................................... 1
Section 1.02. Definitions......................................................... 3
ARTICLE 2
SALE AND PURCHASE OF ASSETS
Section 2.01. Purchase and Sale................................................... 8
Section 2.02. Excluded Assets..................................................... 10
Section 2.03. Assumed Liabilities................................................. 12
Section 2.04. Excluded Liabilities................................................ 12
Section 2.05. Assignment of Contracts and Rights; Purchase Price Adjustment....... 14
Section 2.06. Purchase Price...................................................... 16
Section 2.07. Closing............................................................. 16
Section 2.08. Payment of the Holdback Amount...................................... 17
Section 2.09. Repurchase of the Shares............................................ 18
Section 2.10. Reimbursement of Office Lease Deposit............................... 18
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER AND THE COMPANY
Section 3.01. Corporate Existence and Qualification............................... 18
Section 3.02. Authority, Approval and Enforceability.............................. 18
Section 3.03. Capitalization and Corporate Records................................ 19
Section 3.04. No Shareholder Defaults or Consents................................. 19
Section 3.05. No Company Defaults or Consents..................................... 19
Section 3.06. No Proceedings...................................................... 20
Section 3.07. Financial Statements................................................ 20
Section 3.08. Payables and Receivables............................................ 21
Section 3.09. No Undisclosed Liabilities.......................................... 21
Section 3.10. Absence of Certain Changes.......................................... 21
Section 3.11. Compliance with Laws................................................ 22
Section 3.12. Litigation.......................................................... 22
Section 3.13. Properties; Capital Leases.......................................... 23
Section 3.14. Contracts and Commitments........................................... 23
Section 3.15. Insurance........................................................... 24
Section 3.16. Sufficiency of and Title to the Purchased Assets.................... 24
Section 3.17. Intellectual Property............................................... 25
Section 3.18. Equipment and Other Tangible Property............................... 27
Section 3.19. Permits; Environmental Matters...................................... 27
i
Section 3.20. Products, Services and Authorizations............................... 27
Section 3.21. Employee Matters.................................................... 28
Section 3.22. Assumptions Contained in the Letter of Intent....................... 28
Section 3.23. Finder's Fees....................................................... 28
Section 3.24. Investment Representations of the Company and the Shareholder....... 28
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND VGS
Section 4.01. Corporate Existence and Qualification............................... 31
Section 4.02. Authority, Approval and Enforceability.............................. 31
Section 4.03. No Default or Consents.............................................. 32
Section 4.04. No Proceedings...................................................... 32
Section 4.05. Capital Stock....................................................... 32
Section 4.06. Finder's Fees....................................................... 33
ARTICLE 5
CONDITIONS TO THE COMPANY'S AND VGS's OBLIGATIONS
Section 5.01. Conditions to Obligations of the Company and the Shareholder........ 33
Section 5.02. Conditions to Obligations of the Buyer.............................. 34
ARTICLE 6
COVENANTS OF THE COMPANY AND THE SHAREHOLDER
Section 6.01. Non-Competition, Non-Solicitation and Non-Disclosure................ 35
Section 6.02. Notification to Customers........................................... 39
Section 6.03. Publicity........................................................... 39
Section 6.04. Confidentiality..................................................... 39
Section 6.05. Access to Records................................................... 40
Section 6.06. Use of Corporate Name and Trademarks................................ 40
ARTICLE 7
COVENANTS OF PARENT, VGS, THE COMPANY AND THE SHAREHOLDER
Section 7.01. Further Assurances.................................................. 40
Section 7.02. Employee Matters.................................................... 41
Section 7.03. Delivery of Property Received by the Company after Closing.......... 41
Section 7.04. Collection of Accounts Receivable................................... 42
Section 7.05. Transition Services................................................. 42
Section 7.06. Presentation to Parent's Investors.................................. 42
Section 7.07. Shareholder's Use of Office Space................................... 42
ARTICLE 8
SURVIVAL; INDEMNIFICATION
Section 8.01. Survival............................................................ 43
Section 8.02. Indemnification..................................................... 43
Section 8.03. Procedures.......................................................... 44
ii
Section 8.04. Other Matters....................................................... 45
ARTICLE 9
MISCELLANEOUS
Section 9.01. Notices............................................................. 46
Section 9.02. Governing Law....................................................... 47
Section 9.03. WAIVER OF JURY TRIAL................................................ 47
Section 9.04. Entire Agreement; Amendments and Waivers............................ 47
Section 9.05. Binding Effect and Assignment....................................... 48
Section 9.06. Remedies............................................................ 48
Section 9.07. Multiple Counterparts............................................... 48
Section 9.08. Survival............................................................ 48
Section 9.09. Attorneys' Fees..................................................... 48
Section 9.10. Bulk Sales; Transfer Taxes.......................................... 49
Section 9.11. Interpretation...................................................... 49
Section 9.12. Risk of Loss........................................................ 49
Section 9.13. Severability........................................................ 49
Section 9.14. No Third Party Beneficiaries........................................ 49
LIST OF EXHIBITS
Exhibit A Consulting Agreement
Exhibit B Assignment and Assumption Agreement
Exhibit C Xxxx of Sale
Exhibit D Trademark Assignment
Exhibit E Transferability Restriction Agreement
Exhibit F License Agreement
iii
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "AGREEMENT") is made and entered into
as of the 8th day of November, 2004, by and among (1) Vocus, Inc., a Delaware
corporation (the "PARENT"), (2) Vocus GS Holdings LLC, a Maryland limited
liability company and wholly-owned subsidiary of the Parent ("VGS"; together
with the Parent, the "BUYER"), (3) Gnossos Software, Inc., a Delaware close
corporation (the "COMPANY"), and (4) Xxxxxx Xxxxxx Xxxxxx (the "SHAREHOLDER").
RECITALS
WHEREAS, the Company conducts a business which, among other things,
produces, sells and distributes government relations, government affairs and
political action committee software and services under the trade names "GNOSSOS"
and "KEEP IN TOUCH" to companies, associations and public affairs consulting
firms (the "BUSINESS");
WHEREAS, the Shareholder owns 100% of the Company's outstanding capital
stock;
WHEREAS, VGS desires to purchase and the Company desires to sell
substantially all of the Company's assets, including substantially all of the
assets of the Business, upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.01. Rules of Construction. (a) The terms defined below have the
meanings set forth below for all purposes of any agreement or instrument
governed by this Agreement, and such meanings shall apply equally to both the
singular and plural forms of the terms defined and to the correlative forms of
such terms.
(b) Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. References in an agreement
or instrument to Articles, Sections, Annexes, Exhibits and Schedules shall be
deemed to be references to Articles and Sections of, and Annexes, Exhibits and
Schedules to, such agreement or instrument unless the context shall otherwise
require.
(c) General words shall not be given a restrictive meaning because they
are followed by words which are particular examples of the acts.
(d) All Annexes and Schedules attached to an agreement or instrument
shall be deemed incorporated therein as if set forth in full therein. The words
"include," "INCLUDES" and "INCLUDING" shall be deemed to be followed by the
phrase "WITHOUT LIMITATION." The word "OR" is not exclusive. All references to
"$" or "DOLLARS" shall be to the lawful currency of the United States, all
references to "DAYS" shall be to calendar days and or all references to "MONTHS"
shall be to calendar months, unless otherwise specified.
(e) The headings of Articles, Sections, Subsections and paragraphs in
this Agreement are for descriptive purposes only and shall not control, alter,
or otherwise affect the meaning, scope or intent of any provisions of this
Agreement.
(f) All accounting terms not defined in any agreement or instrument
shall have the meanings determined by the generally accepted accounting
principles of the United States as in effect from time to time, consistently
applied. Any references to income or profits or gains earned, accrued or
received shall include income or profits or gains treated as earned, accrued or
received for the purposes of any applicable Legal Requirement.
(g) The words "HEREOF," "HEREIN" and "HEREUNDER" and words of similar
import when used in any agreement or instrument shall refer to such agreement or
instrument as a whole and not to any particular provision of such agreement or
instrument.
(h) Each of the representations and warranties in this Agreement shall
be separate and independent and, except as expressly provided, shall not be
limited by reference to any other representation or warranty or anything in this
Agreement.
(i) References to a Person are also to its permitted successors and
permitted assigns.
(j) Unless otherwise expressly provided in any agreement or instrument,
any agreement, instrument, statute, proclamation or decree defined or referred
to therein or in any agreement or instrument that is referred to therein means
such agreement, instrument, statute, proclamation or decree as from time to time
amended, modified, supplanted or supplemented, including (in the case of
agreements or instruments) by waiver or consent and (in the case of statutes,
proclamations or decrees) by succession of comparable successor statutes,
proclamations or decrees. References to all agreements or instruments include
attachments thereto and instruments incorporated therein and references to any
statute, proclamation or decree include all rules and regulations promulgated
thereunder.
2
Section 1.02. Definitions. The following terms, as used herein, have the
following meanings:
"AFFILIATE" (whether or not capitalized) means, with respect to any
Person, any other Person directly or indirectly controlling, controlled by, or
under common control with such Person. For the purposes of this definition,
"CONTROL," "CONTROLLED BY," and "UNDER COMMON CONTROL WITH" means, with respect
to a corporation, the right to exercise, directly or indirectly, more than 50%
of the voting rights attributable to the shares of the controlled corporation
and, with respect to any Person other than a corporation, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person.
"BALANCE SHEET" means the unaudited balance sheet of the Company as of
September 30, 2004.
"BALANCE SHEET DATE" means June 30, 2004.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, and any rules or regulations promulgated
thereunder.
"CLOSING DATE" means the date of the Closing.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL AGREEMENTS" means the Assignment and Assumption Agreement, the
Xxxx of Sale, the Consulting Agreement, the Trademark Assignment, the
Transferability Restriction Agreement, and any and all other agreements,
instruments or documents required or expressly provided under this Agreement to
be executed and delivered in connection with the transactions contemplated by
this Agreement.
"CONFIDENTIAL INFORMATION" means confidential data and confidential
information relating to the Business (which does not rise to the status of a
Trade Secret under applicable law).
"CONFLICTING SERVICES" means any product, service or process of any Person
other than the Parent or its Affiliates which competes with a product, service
or process performed, offered or owned by the Parent or its Affiliates in the
fields of public relations, investor relations, marketing automation, corporate
communications, government relations, political action committees and/or public
affairs.
"CONSULTING AGREEMENT" means the consulting agreement between the Parent
and the Company, a copy of which is attached hereto as Exhibit A.
3
"CONTRACTS," when described as being those of or applicable to any Person,
means any and all contracts, agreements, franchises, understandings,
arrangements, leases, licenses, registrations, authorizations, easements,
servitudes, rights of way, mortgages, bonds, notes, guaranties, liens,
indebtedness, approvals or other instruments or undertakings to which such
Person is a party or to which or by which such Person or the property of such
Person is subject or bound, excluding any Permits. The term "CONTRACTS"
expressly includes the customer licenses described in Schedule 3.14(a).
"CONTROLLED GROUP" means the Parent and its Affiliates.
"CUSTOMER" means each and every Person who or which, at any time during
the three (3) years prior to termination of the Shareholder's employment with
any member of the Controlled Group: (1) contracted for, was billed for, or
received services from any member of the Controlled Group or the Company; or (2)
was in contact with the Shareholder concerning the Controlled Group's or the
Company's products or services.
"DAMAGES" means any and all actual damages, liabilities, obligations,
penalties, fines, judgments, claims, deficiencies, losses, costs, expenses and
assessments (including reasonable expenses of investigation, income and other
taxes, interest, penalties and attorneys' and accountants' fees and
disbursements in connection with any action, suit or proceeding whether
involving a third-party claim or a claim solely between the parties hereto).
"ENVIRONMENTAL LAWS" means any federal, state, local or foreign law
(including common law), treaty, judicial decision, regulation, rule, judgment,
order, decree, injunction, permit or governmental restriction or any agreement
with any governmental authority or other third party, whether now or hereafter
in effect, relating to the environment, human health and safety or to
pollutants, contaminants, wastes or chemicals or any toxic, radioactive,
ignitable, corrosive, reactive or otherwise hazardous substances, wastes or
materials.
"ENVIRONMENTAL LIABILITIES" means any and all liabilities arising in
connection with or in any way relating to the Company (or any predecessor of the
Company or any prior owner of all or part of its business and assets), any
property now or previously owned, leased or operated by the Company, the
Business (as currently or previously conducted), the Purchased Assets or any
activities or operations occurring or conducted at the real property (including
offsite disposal), whether accrued, contingent, absolute, determined,
determinable or otherwise, which (1) arise under or relate to any Environmental
Law and (2) relate to actions occurring or conditions existing on or prior to
the Closing Date (including any matter disclosed or required to be disclosed in
Schedule 3.19).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
4
"ESCROW AGREEMENT" means the Deposit Letter Agreement dated as of August
19, 2004, among the Parent, the Company and Comerica Bank, as escrow agent.
"GOVERNMENTAL AUTHORITY" means any competent governmental, administrative,
supervisory, regulatory, judicial, determinative, disciplinary, enforcement or
tax raising body, authority, agency, board, department, court or tribunal of any
jurisdiction and whether supranational, national, regional or local.
"HAZARDOUS SUBSTANCES" means any pollutant, contaminant, waste or chemical
or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous
substance, waste or material or any substance, waste or material having any
constituent elements displaying any of the foregoing characteristics including
petroleum, its derivatives, by-products and other hydrocarbons, and any
substance, waste or material regulated under any Environmental Law.
"INTELLECTUAL PROPERTY RIGHT" means (1) inventions, whether or not
patentable, reduced to practice or made the subject of one or more pending
patent applications, (2) national and multinational statutory invention
registrations, patents and patent applications (including all reissues,
divisions, continuations, continuations-in-part, extensions and reexaminations
thereof) registered or applied for in the United States and all other nations
throughout the world, all improvements to the inventions disclosed in each such
registration, patent or patent application, (3) trademarks, service marks, trade
dress, logos, domain names, trade names and corporate names (whether or not
registered) in the United States and all other nations throughout the world,
including all variations, derivations, combinations, registrations and
applications for registration of the foregoing and all goodwill associated
therewith, (4) copyrights (whether or not registered) and registrations and
applications for registration thereof in the United States and all other nations
throughout the world, including all derivative works, moral rights, renewals,
extensions, reversions or restorations associated with such copyrights, now or
hereafter provided by law, regardless of the medium of fixation or means of
expression, (5) computer software, (including source code, object code,
firmware, operating systems and specifications), (6) trade secrets and, whether
or not confidential, business information (including pricing and cost
information, business and marketing plans and customer and supplier lists) and
know-how (including manufacturing and production processes and techniques and
research and development information), (7) industrial designs (whether or not
registered), (8) databases and data collections, (9) copies and tangible
embodiments of any of the foregoing, in whatever form or medium, (10) all rights
to obtain and rights to apply for patents, and to register trademarks and
copyrights, (11) all rights in all of the foregoing provided by treaties,
conventions and common law and (12) all rights to xxx or recover and retain
damages and costs and reasonable attorneys' fees for past, present and future
infringement or misappropriation of any of the foregoing.
5
"INVENTORY" means all goods, merchandise and other personal property owned
and held for sale, and all raw materials, works-in-process, materials and
supplies of every nature which contribute to the finished products of the
Company in the ordinary course of its business, specifically excluding, however,
damaged, defective or otherwise unsaleable items.
"KNOWLEDGE OF THE COMPANY" means the knowledge of the Shareholder or any
of the other directors, officers or managerial personnel of the Company with
respect to the matter in question that reasonably should have been obtained upon
diligent investigation and inquiry into the matter in question.
"LEGAL REQUIREMENTS," when described as being applicable to any Person,
means any and all laws (statutory, judicial or otherwise), ordinances,
regulations, judgments, orders, directives, injunctions, writs, decrees or
awards of, and any Contracts with, any Governmental Authority, in each case as
and to the extent applicable to such Person or such Person's business,
operations or properties.
"LETTER OF INTENT" means the letter agreement dated August 2, 2004 between
the Company and the Parent, as amended by the letter agreement dated October 4,
2004 between the Company and the Parent.
"LICENSED INTELLECTUAL PROPERTY RIGHTS" means all Intellectual Property
Rights owned by a third party and licensed or sublicensed to the Company or an
Affiliate of the Company and held for use or used in the conduct of the
Business.
"LIEN" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such property or asset. For the purposes of this Agreement, a
Person shall be deemed to own subject to a Lien any property or asset which it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
"OFFICE LEASE" means the lease dated as of June 17, 2002 between the
Company and Intrepid Eye Street, L.L.C.
"OUTSOURCING CONTRACT" refers to a contract pursuant to which the Company
provides outsourcing, administrative, management, accounting and/or compliance
services.
"OWNED INTELLECTUAL PROPERTY RIGHTS" means all Intellectual Property
Rights owned by the Company or an Affiliate of the Company and held for use or
used in the conduct of the Business.
6
"PERMITS" means any and all permits, rights, approvals, licenses,
authorizations, legal status, orders or Contracts under any Legal Requirement or
otherwise granted by any Governmental Authority.
"PERSON" (whether or not capitalized) means an individual, corporation,
partnership, limited liability company, association, trust or other entity or
organization, including a Governmental Authority.
"PRODUCT" (whether or not capitalized) means the "Gnossos" and "Keep in
Touch" family of government relations and government affairs products and
services, and each software product, or service under development, developed,
manufactured, licensed, distributed or sold by the Company and any other
products in which the Company has any proprietary rights or beneficial interest.
"PROPERTIES" (whether or not capitalized) means any and all properties and
assets (real, personal or mixed, tangible or intangible) owned or used by the
Company, including the Purchased Assets.
"TAX" (whether or not capitalized) means any Federal, state, local or
foreign income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes
under Section 59A of the Code), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated or other tax of any kind
whatsoever, including any interest, penalty or addition thereto, whether
disputed or not, and "TAXES" means any or all of the foregoing collectively; and
"TAX RETURN" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto and including any amendment thereof.
"TRADE SECRETS" means information of the Company including technical or
nontechnical data, formulas, patterns, compilations, programs, financial data,
financial plans, product or service plans or lists of actual or potential
customers or suppliers which (1) derives economic value, actual or potential,
from not being generally known to, and not being readily ascertainable by proper
means by, other Persons who can obtain economic value from its disclosure or
use, and (2) is the subject of efforts, whether reasonable or otherwise, to
maintain its secrecy.
"USED" (whether or not capitalized) means, with respect to the Properties,
Contracts or Permits of the Company, those owned, leased, licensed or otherwise
held by the Company which were acquired for use or held for use by the Company
in connection with the Company's business and operations, whether or not
reflected on the Company's books of account.
7
(a) Each of the following terms is defined in the Section set forth
opposite such term:
TERM SECTION
---- -------
Accredited Investor 3.24
Act 3.24
Assignment and Assumption Agreement 2.07
Assumed Liabilities 2.03
Xxxx of Sale 2.07
Buyer Indemnitees 8.02
Cash Payment 3.21
Closing 2.07
Closing Date 2.07
Consulting Agreement 2.07
Copier Lease 2.03
ERISA 3.21
Excluded Assets 2.02
Excluded Liabilities 2.04
Gnossos Marks 6.06
Indemnified Party 8.03
Intellectual Property Assignment 2.07
Leases 3.13
License Agreement 2.07
Non-Competition Period 6.01
Notice 9.01
Phone Lease 2.03
Post-Termination Period 6.01
Purchase Price 2.06
Purchased Assets 2.01
Seller Indemnitees 8.02
Shares 2.06
Transferability Restriction Agreement 2.07
Warranty Breach 8.02
ARTICLE 2
SALE AND PURCHASE OF ASSETS
Section 2.01. Purchase and Sale. Except as otherwise provided below, upon
the terms and subject to the conditions of this Agreement, VGS agrees to
purchase from the Company and the Company agrees to sell, convey, transfer,
assign and deliver, or cause to be sold, conveyed, transferred, assigned and
delivered, to the VGS at the Closing, free and clear of all Liens, all of the
Company's right, title and interest in, to and under all of the assets,
properties and business, of every kind and description, wherever located, real,
personal or mixed,
8
tangible or intangible, owned, held or used by the Company as the same shall
exist on the Closing Date, including all assets shown on the Balance Sheet and
not disposed of in the ordinary course of business as permitted by this
Agreement, and all assets of the Company thereafter acquired by the Company (the
"PURCHASED ASSETS"), and including all right, title and interest of the Company
in, to and under:
(1) all inventories, raw materials, works-in-process, and other
materials of the Company, wherever located and including all
Inventory in transit or on order and not yet delivered, and
all rights with respect to the processing and completion of
any works-in-process of the Company, including the right to
collect and receive charges for services performed by the
Company with respect thereto;
(2) all supplies, equipment, computers, machinery, furniture,
fixtures, and other tangible property held or used by the
Company in connection with its business, and the Company's
interest as lessee in any leases with respect to any of the
foregoing;
(3) all of the Company's rights under the Contracts listed on
Schedule 2.01 (the "ASSIGNED CONTRACTS");
(4) all proprietary knowledge, Trade Secrets, Confidential
Information, computer software and licenses, patents,
copyrights, formulae, designs and drawings, quality control
data, processes (whether secret or not), methods, inventions,
Product manuals and other similar know-how or rights used in
the conduct of the Company's business, including the areas of
software development, manufacturing, marketing, advertising
and personnel training and recruitment, together with all
other Intellectual Property Rights used in connection with the
Company's business, including all files, manuals,
documentation and source and object codes related thereto, in
particular its source code to all products and services sold
under the "GNOSSOS" and "KEEP IN TOUCH" trade names;
(5) all rights in and to the Gnossos web site and the content
therein including the domain name registration
xxxx://xxx.xxxxxxx.xxx/;
(6) all utility, security and other deposits and prepaid assets
and expenses other than the security deposits in connection
with the Office Lease;
9
(7) the Company's franchises, Permits and other authorizations of
Governmental Authorities (to the extent such Permits and other
authorizations of Governmental Authorities are transferable)
and third parties, licenses, telephone numbers, customer and
prospective customer lists, vendor lists, referral lists and
contracts, advertising materials and data, restrictive
covenants, chooses in action and similar obligations owing to
the Company from its present and former Shareholders,
officers, employees, agents and others, together with all
books, operating data and records (including financial,
accounting and credit records), files, papers, records and
other data of the Company;
(8) all rights of the Company in and to the names "GNOSSOS" and
"KEEP IN TOUCH" and all trade names, trademarks and logos used
in the Company's business, all variants thereof and all
goodwill associated therewith; and
(9) all of the Company's rights, claims, credits, causes of action
or rights of set-off against third parties relating to the
Purchased Assets, including unliquidated rights under
manufacturers' and vendors' warranties.
Section 2.02. Excluded Assets. VGS expressly understands and agrees that
the following assets and properties of the Company (the "EXCLUDED ASSETS") shall
be excluded from the Purchased Assets:
(1) the Purchase Price and other rights of the Company under this
Agreement;
(2) the Company's corporate minute book and stock records;
(3) all accounts, notes and other receivables (or collections with
respect to such receivables) as of October 31, 2004, except to
the extent that any such accounts, notes or receivables (or
collections in respect of such receivables) are with respect
to a customer (A) whose monthly or annual services or fees
were scheduled to commence on or after November 1, 2004 (in
which case such accounts, notes or receivables (or collections
in respect of such receivables) shall be Purchased Assets) or
(B) which was invoiced, as applicable, for more than one year
of annual fees or services (in which case such accounts, notes
or receivables (or collections in respect of such receivables)
shall be apportioned on a straight-line basis, and any amounts
10
attributable to the period greater than twelve (12) months
shall be Purchased Assets). For purposes of example:
(i) if, in December 2003, the Company collected or
invoiced $5,000 which related to the service period beginning
December 1, 2004 and ending on November 30, 2005, such amount
entirely would be a Purchased Asset because the payment or
invoice related to services which commenced after the Closing;
(ii) if, on October 1, 2004, the Company invoiced a
customer (x) $1,000 for the monthly service period beginning
on October 1, 2004 and ending on October 31, 2004, and (y)
$1,000 for the monthly service period beginning on November 1,
2004 and ending on November 31, 2004), such amount relating to
the first month of service would be an Excluded Asset because
the monthly services in question commenced on or prior to
October 31, 2004 and such amount relating to the second month
of service would be a Purchased Asset because the monthly
services in question commenced on or after November 1, 2004;
(iii) if, on November 1, 2004, the Company invoiced a
customer $5,000 for the service period beginning on November
1, 2004 and ending on October 31, 2005, such amount entirely
would be a Purchased Asset because the service period in
question commenced after October 31, 2004; and
(iv) if, on October 1, 2004, the Company invoiced a
customer $18,000 for the service period beginning on October
1, 2004 and ending on March 30, 2006, the amount would be
apportioned on the basis that $12,000 (or two-thirds) would be
an Excluded Asset (representing the first 12 months of
services) and $6,000 (or one third) would be a Purchased Asset
(representing the remaining 6 months of services); and
(v) if, on November 1, 2004, the Company invoiced a
customer $18,000 for the service period beginning on November
1, 2004 and ending on April 30, 2006, the entire amount would
be a Purchased Asset because the service in question commenced
after October 31, 2004.
(4) all Contracts other than the Assigned Contracts;
11
(5) all insurance policies;
(6) all cash and cash equivalents on hand and in banks;
(7) any Real Property or leases for Real Property other than the
Office Lease;
(8) any Purchased Assets sold or otherwise disposed of in the
ordinary course of business and not in violation of any
provisions of this Agreement during the period from June 30,
2004 until the Closing Date; and
(9) the Gnossos Software Inc. Political Action Committee (GNOPAC).
Section 2.03. Assumed Liabilities. Upon the terms and subject to the
conditions of this Agreement, VGS agrees, effective at the time of the Closing,
to assume only the following liabilities (the "ASSUMED LIABILITIES"): (1) the
Office Lease; (2) the Lease Agreement between Court Square Leasing Corporation
and the Company, as executed by the Company on November 21, 2003 (the "PHONE
LEASE"); (3) the Lease Agreement between CitiCapital/CitiCorp Vendor Finance,
Inc. and the Company dated October 29, 2003 (the "COPIER LEASE"); and (4) the
customer contracts listed on Schedule 2.01.
Section 2.04. Excluded Liabilities. Notwithstanding any provision in this
Agreement or any other writing to the contrary, VGS is assuming only the Assumed
Liabilities and is not assuming any other liability or obligation of the Company
(or any predecessor of the Company or any prior owner of all or part of its
businesses and assets) of whatever nature, whether presently in existence or
arising hereafter. All such other liabilities and obligations shall be retained
by and remain obligations and liabilities of the Company (all such liabilities
and obligations not being assumed being herein referred to as the "EXCLUDED
LIABILITIES"). Without limiting the generality of the foregoing, the Company and
the Shareholder expressly acknowledge and agree that the Company shall retain,
and VGS shall not assume or otherwise be obligated to pay, perform, defend or
discharge:
(1) any liability or obligation of the Company and/or the
Shareholder for Taxes, whether measured by income or
otherwise;
(2) any liability or obligation for Taxes arising in connection
with any products or services sold, delivered or otherwise
provided by or on behalf of the Company prior to the Closing;
12
(3) any liability or obligation relating to employee benefits or
compensation arrangements existing on or prior to the Closing
Date, including any liability or obligation of the Company
under or in connection with ERISA or any Plan or Benefit
Program or Agreement;
(4) any Environmental Liability;
(5) any product liability or warranty pertaining to products
and/or services sold, licensed, developed, manufactured or
delivered by the Company prior to the Closing Date;
(6) any liability or obligation to a third party with respect to
any Assumed Liability to the extent such liability or
obligation relates to or arises from any act or omission
taking place prior to the Closing Date;
(7) any liability or obligation of the Company to the Shareholder,
any Affiliate of the Company or the Shareholder, or any Person
claiming to have a right to acquire any capital stock or other
securities of the Company;
(8) any liability relating to leases for real or personal property
other than the Copier Lease, Office Lease and Phone Lease;
(9) any liability or obligation relating to an Excluded Asset;
(10) any liability or obligation to provide services or products to
any customer under or in connection with any Assigned Contract
from and after December 31, 2006 (it being understood that VGS
is responsible for providing such products or services prior
to December 31, 2006 in accordance with the terms of such
Assigned Contract); or
(11) any liability or obligation under any Assigned Contract to the
extent that such liability or obligation exceeds the lesser of
(A) the amount of monies collected with respect to such
Assigned Contract by and for the account of VGS or the Parent
after the Closing and (B) the contract counterparty's actual,
direct damages under such Assigned Contract, unless such
liability arises from non-performance under the Assigned
Contract as a result of the negligent act or omission of the
Buyer (other than any failure to provide services or products
from and after December 31, 2006).
13
The Company further agrees to use its commercially reasonable efforts to satisfy
and discharge promptly after the Closing all debts, obligations and liabilities
of the Company not specifically assumed by VGS hereunder.
Section 2.05. Assignment of Contracts and Rights; Purchase Price
Adjustment.
(a) Anything in this Agreement to the contrary notwithstanding, this
Agreement shall not constitute an agreement to assign any Purchased Asset
or any claim or right or any benefit arising thereunder or resulting
therefrom if such assignment, without the consent of a third party
thereto, would constitute a breach or other contravention of such
Purchased Asset or in any way adversely affect the rights of the Buyer or
the Company thereunder. The Company will use its reasonable best efforts
(but without any payment of money by VGS or the Parent) to obtain the
consent of the other parties to any such Purchased Asset or any claim or
right or any benefit arising thereunder for the assignment thereof to VGS
as VGS may request. If such consent is not obtained, or if an attempted
assignment thereof would be ineffective or would adversely affect the
rights of the Company thereunder so that VGS would not in fact receive all
such rights, the Company and VGS will diligently cooperate in good faith
in the thirty-five (35) days after the Closing to arrive at a mutually
agreeable arrangement under which VGS would obtain the benefits and assume
the obligations thereunder in accordance with this Agreement, including
subcontracting, sub-licensing, or sub-leasing to VGS, or under which the
Company would enforce for the benefit of VGS, with VGS assuming the
Company's obligations, any and all rights of the Company against a third
party thereto; provided that the foregoing procedures shall not apply to
any Outsourcing Contracts. The Company will promptly pay to VGS when
received all monies received by the Company under any Purchased Asset or
any claim or right or any benefit arising thereunder, except to the extent
the same represents an Excluded Asset.
(b) At the Closing, the parties shall make the following downward
adjustment in the consideration paid by VGS for the Purchased Assets with
respect to the Contracts listed on Schedule 2.05(b): (1) with respect to
any Outsourcing Contract listed on Schedule 2.05(b), an amount equal to
220% of the product of (A) the most recent monthly fee paid by (or
invoiced to) such customer and (B) 12; and (2) with respect any other
Contract listed on Schedule 2.05(b), an amount equal to 220% of the most
recent annual maintenance or service fee paid by such customer (or, if
such customer is in the first year of service, the first annual
maintenance or service fee which would be charged such customer under such
Contract). The downward adjustment hereunder shall be offset at the
Closing against the Cash Payment, and shall be subject to repayment to the
Company in accordance with Section 2.05(f).
14
(c) To the extent the benefits from any Purchased Asset and
obligations thereunder have not been provided pursuant to Section 2.05(a)
by alternate arrangements reasonably satisfactory to VGS, the parties
shall make a downward adjustment in the consideration paid by VGS for the
Purchased Assets as follows: (1) with respect to any Assigned Contract
which is an Outsourcing Contract, an amount equal to 220% of the product
of (A) the most recent monthly fee paid by (or invoiced to) such customer
and (B) 12; (2) with respect to any Assigned Contract which is not an
Outsourcing Contract, an amount equal to 220% of the most recent annual
maintenance or service fee paid by such customer (or, if such customer is
in the first year of service, the first annual maintenance or service fee
which would be charged such customer under such Contract); and (3) with
respect to any other Purchased Asset, an equitable adjustment to the
Purchase Price. The downward adjustment hereunder shall be paid to VGS by
the Company and/or the Shareholder on the date which is thirty-one (31)
days after the Closing.
(d) For purposes of illustration, (x) if the most recent annual
maintenance fee paid by a customer under a Contract which is not an
Outsourcing Contract were $4,000, then the Purchase Price would be reduced
by $8,800 with respect to such Assigned Contract; and (y) if the most
recent monthly fee payable by a customer under an Outsourcing Contract
were $500, then the Purchase Price would be reduced by $13,200 (i.e., $500
x 12 x 2.2) with respect to such Outsourcing Contract.
(e) VGS may set off any Purchase Price adjustments hereunder against
the Holdback Amount. To the extent that there remain unsatisfied any
Purchase Price adjustments described above, the Parent and VGS shall have
full recourse against the Shareholder and the Company (including their
assets of whatsoever kind or nature) for the payment to VGS of any
unsatisfied Purchase Price adjustment.
(f) To the extent that VGS receives a purchase price adjustment with
respect to a Contract listed on Schedule 2.05(b), and within thirty-five
(35) days of the Closing the Company and the applicable customer
thereunder enter into an amendment agreement in the form set forth on
Schedule 2.05(f), then such Contract will be deemed an Assigned Contract
for all purposes under this Agreement and VGS shall pay the Company the
amount of any adjustment made with respect to such Contract pursuant to
Section 2.05.
(g) If, prior to the first anniversary of the Closing, VGS or the
Parent enters into a contract for services similar to those provided to
the same customer pursuant to a Contract for which VGS has received a
purchase price adjustment pursuant to Sections 2.05(b) or 2.05(c), then
VGS promptly shall credit the applicable purchase price adjustment back to
the Holdback Amount (if such purchase price adjustment were set off
against the Holdback Amount) or pay the purchase price adjustment to the
Company (if such adjustment had
15
not been set off against the Holdback Amount and instead had been paid
separately to VGS by the Company or the Shareholder).
Section 2.06. Purchase Price.
(a) The purchase price for the Purchased Assets (the "PURCHASE
PRICE") is (x) Two Million Nine Hundred Thousand Dollars ($2,900,000) in
cash, less any purchase price adjustment pursuant to Section 2.05 (the
"CASH PAYMENT"), of which $20,000 was paid to the Company prior to the
Closing as a deposit and $185,000 was delivered to an escrow account and
(y) 174,772 shares of Parent's Common Stock, par value $0.01 per share
(the "Shares"). Of the Cash Payment, Four Hundred Thousand Dollars
($400,000) (the "HOLDBACK AMOUNT") shall be payable after the Closing in
accordance with, and subject to, Section 2.08.
(b) The Purchase Price shall be allocated, apportioned and adjusted
among the Purchased Assets in the manner specified in IRS Form 8594
attached as Schedule 2.06 and the parties agree to abide by such
allocations for all tax reporting purposes. In addition, the Purchase
Price shall be adjusted in accordance with Section 2.05.
Section 2.07. Closing.
(a) Subject to the conditions stated in Article 5 of this Agreement,
the closing of the transactions contemplated hereby (the "CLOSING") shall
be held at the offices of Xxxxxxxxx Xxxxxxx LLP at 0000 Xxxxxx Xxxxxxxxx,
XxXxxx, XX 00000, simultaneously with the execution of this Agreement and
any and all Collateral Agreements and Exhibits thereto. At the Closing:
(1) VGS shall deliver to the Company $1,668,160 in immediately
available funds by wire transfer to an account of the
Company designated by the Company, by notice to VGS (or if
not so designated, then by certified or official bank
check payable in immediately available funds to the order
of the Company in such amount);
(2) VGS and Parent shall deliver instructions to Comerica
Bank, as escrow agent under the Escrow Agreement, to
transfer $185,000 to the Company.
(3) VGS shall deliver to the Company the Shares;
(4) VGS and the Company shall enter into an assignment and
assumption agreement substantially in the form attached
hereto as Exhibit B (the "ASSIGNMENT AND ASSUMPTION
AGREEMENT");
16
(5) the Company shall deliver a xxxx of sale substantially in
the form attached hereto as Exhibit C (the "XXXX OF
SALE");
(6) the Company shall deliver the a trademark assignment
substantially in the form attached hereto a Exhibit D (the
"TRADEMARK ASSIGNMENT");
(7) the Company shall deliver to VGS such other deeds, bills
of sale, endorsements, consents, assignments, and other
good and sufficient instruments of title as VGS reasonably
shall require to vest in VGS all right, title and interest
in, to and under the Purchased Assets;
(8) the Company and the Shareholder shall deliver the
transferability restriction agreement substantially in the
form attached hereto as Exhibit E (the "TRANSFERABILITY
RESTRICTION AGREEMENT");
(9) the Company and the Parent shall enter into the Consulting
Agreement;
(10) the Shareholder and the VGS shall enter into a license
agreement in the form attached hereto as Exhibit F (the
"LICENSE AGREEMENT");
(11) the Company shall deliver to VGS evidence satisfactory to
VGS that consents have been obtained with respect to the
items set forth in Schedule 2.07; and
(12) the Company shall deliver possession of (A) all of its
source codes relating to the Products; (B) all of its
customer and prospective customer lists; and (C) all
software used for billing and collections.
(b) At or promptly after the Closing, and except to the extent they
constitute Excluded Assets, the Company shall deliver possession of all of
originals and copies of agreements, instruments, documents, deeds, books,
records, files and other data and information within the possession of the
Company, any Shareholder or any Affiliate of the Company pertaining to the
Company, the Purchased Assets and the Business, including all original
customer license agreements, all other customer agreements, invoices and
correspondence.
Section 2.08. Payment of the Holdback Amount. The Holdback Amount shall
be payable as follows: (1) on January 1, 2006, VGS shall make a payment to
the Company equal to $150,000, together with interest on such amount computed
at the "mid-term applicable Federal rate" in effect on the Closing Date; (2)
on
17
January 1, 2007, VGS shall make a payment to the Company equal to $100,000,
together with interest on such amount computed at the "mid-term applicable
Federal rate" in effect on the Closing Date; and (3) on July 1, 2007, VGS shall
make a payment to the Company equal to $ 150,000, together with interest on such
amount computed at the "mid-term applicable Federal rate" in effect on the
Closing Date; provided that VGS shall have the right to deduct as a setoff from
the Holdback Amount any amounts for which Buyer or its Affiliates are seeking
indemnification pursuant to Article 8 or for which VGS is entitled to a downward
adjustment in the Purchase Price pursuant to Section 2.05.
Section 2.09. Repurchase of the Shares. On the third anniversary of the
Closing Date (and only on such date), the Company (or the Shareholder, if the
Shares shall have been transferred to him) may elect to have the Parent
repurchase one half of the Shares (taking into account any stock splits or other
similar adjustments) for an amount equal to $200,000; provided that the Company
or the Shareholder, as may be applicable, shall have given the Parent written
notice to this effect not less than thirty (30) days prior to the third
anniversary of the Closing Date.
Section 2.10. Reimbursement of Office Lease Deposit. Promptly after the
Closing, VGS shall pay the Company $9,500, in payment for the Office Lease
deposit which will remain in place after the Closing.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
AND THE COMPANY
The Shareholder and the Company hereby jointly and severally represent and
warrant to VGS and Parent that except as set forth in the Disclosure Schedules
attached to this Agreement:
Section 3.01. Corporate Existence and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate powers and all material
governmental licenses, authorities, permits, consents and approvals required to
own, manage, lease and hold its Properties and to carry on its business as and
where such Properties are presently located and such business is presently
conducted.
Section 3.02. Authority, Approval and Enforceability. This Agreement has
been duly executed and delivered by the Company and the Shareholder, and each of
the Shareholder and the Company has all requisite power and legal
18
capacity to execute and deliver this Agreement and all Collateral Agreements
executed and delivered or to be executed and delivered in connection with the
transactions provided for hereby, to consummate the transactions contemplated
hereby and by the Collateral Agreements, and to perform its obligations
hereunder and under the Collateral Agreements. This Agreement and each
Collateral Agreement to which any of the Shareholder and/or the Company is a
party constitutes, or upon execution and delivery will constitute, the legal,
valid and binding obligation of such party, enforceable in accordance with its
terms, except as such enforcement may be limited by general equitable principles
or by applicable bankruptcy, insolvency, moratorium, or similar laws and
judicial decisions from time to time in effect which affect creditors' rights
generally.
Section 3.03. Capitalization and Corporate Records.
(a) All issued and outstanding shares of the Company's capital stock
are owned beneficially and of record by the Shareholder.
(b) The copies of the Certificate of Incorporation and Bylaws of the
Company provided to VGS are true, accurate, and complete and reflect all
amendments made through the date of this Agreement. The Company's minute
books which were made available to VGS for review were correct as of the date
of such review, and such minute books contains all written shareholder and
corporate actions that materially affect the Assumed Liabilities or the
Purchased Assets. All corporate actions taken by the Company have been duly
authorized or ratified. All accounts, books, ledgers and official and other
records of the Company fairly and accurately reflect all of the Company's
transactions, properties, assets and liabilities.
(c) The Company does not own, directly or indirectly, any outstanding
voting securities of or other equity interests in any other Person.
Section 3.04. No Shareholder Defaults or Consents. The execution and
delivery of this Agreement by the Shareholder and the performance by the
Shareholder of their obligations hereunder will not violate any provision of law
or any judgment, award or decree or any indenture, agreement or other instrument
to which the Shareholder is a party, or by which the properties or assets of the
Shareholder is bound or affected, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under, any such
indenture, agreement or other instrument.
Section 3.05. No Company Defaults or Consents. The execution, delivery and
performance by the Company and Shareholder of this Agreement and each other
Collateral Agreement to which they are party and the consummation of the
transactions contemplated hereby and thereby do not and will not:
19
(1) violate or conflict with any of the terms, conditions or
provisions of the certificate of incorporation or bylaws of
the Company;
(2) violate any Legal Requirements applicable to the Company, the
Shareholder or the Purchased Assets:
(3) violate, conflict with, result in a breach of, constitute a
default under (whether with or without notice or the lapse of
time or both), or accelerate or permit the acceleration of the
performance required by, or give any other party the right to
terminate, any Contract or Permit binding upon or applicable
to the Company or by which any of the Purchase Assets may be
bound;
(4) result in the creation of any Lien on any Purchased Assets or
other Properties of the Company; or
(5) require the Shareholder or the Company to obtain or make any
waiver, consent, action, approval or authorization of, or
registration, declaration, notice or filing with, any private
non-governmental third party or any Governmental Authority.
Section 3.06. No Proceedings. No suit, action, investigation or other
proceeding is pending or, to the Knowledge of the Company, threatened against or
affecting the Company, the Buyer, the Business or any Purchased Asset before any
Governmental Authority seeking to restrain the Company or any of the Shareholder
or prohibit their entry into this Agreement or prohibit the Closing, or seeking
damages against the Company or its Properties as a result of the consummation of
this Agreement or the transaction contemplated hereby.
Section 3.07. Financial Statements.
The balance sheet as of December 31, 2003 and the related profit and loss
statement for the year ended December 31, 2003 and the interim balance sheet as
of September 30, 2004, and the related interim profit and loss statement for the
nine (9) months ended September 30, 2004, for the Company have been prepared
using the modified income tax accrual method of accounting and fairly present
the information purported to be presented therein at the date and for the period
indicated therein.
20
Section 3.08. Payables and Receivables.
(a) Schedule 3.08(a) lists (1) all trade payables and accrued
expenses of the Company incurred in the ordinary course of business that
are currently due and owing as of October 31, 2004, and (2) any other
liabilities incurred by the Company in the ordinary course of business
that are currently due and owing.
(b) Schedule 3.08(b) lists all of the Company's accounts receivable
as of October 31, 2004. All such receivables are valid, genuine and fully
collectible in the aggregate amount thereof. No such account has been
assigned or pledged to any other Person and no defense or set-off to any
such account has been asserted by the account obligor or exists.
(c) All such receivables are valid, genuine and fully collectible in
the aggregate amount thereof. No such account has been assigned or pledged
to any other Person and no defense or set-off to any such account has been
asserted by the account obligor or exists.
(d) Since June 1, 2004, the Company has not invoiced any customer
for its annual fees (whether for maintenance, management services or
otherwise) earlier than the date on which such customer's services are
scheduled to terminate.
Section 3.09. No Undisclosed Liabilities. There are no liabilities of the
Company or the Business of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, and there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a liability, other than (1) liabilities provided for in the
Balance Sheet or disclosed in the notes thereto or (2) liabilities disclosed on
Schedule 3.09.
Section 3.10. Absence of Certain Changes. Since the Balance Sheet Date,
the Company has conducted its business in the ordinary course consistent with
past practices and there has not been:
(1) any event, occurrence, development or state of circumstances or facts
which, individually or in the aggregate, has had or could reasonably be expected
to have adverse effect (whether covered by insurance or not) on the business,
operations, Properties or financial condition of the Company or the Business;
(2) any incurrence, assumption or guarantee by the Company of any
indebtedness for borrowed money;
(3) any creation or other incurrence of any Lien on any Purchased Asset;
21
(4) any damage, destruction or other casualty loss (whether or not covered
by insurance) affecting the Business or any Purchased Asset; or
(5) any transaction or commitment made, or any contract or agreement
entered into, by the Company relating to the Business or any Purchased Asset
(including the acquisition or disposition of any assets) or any relinquishment
by the Company of any contract or other right, in either case other than
transactions and commitments in the ordinary course of business consistent with
past practices and those contemplated by this Agreement.
Section 3.11. Compliance with Laws. The Company is and has been in
compliance with any and all material Legal Requirements applicable to the
Company and Business. The Company (x) has not received or entered into any
citations, complaints, consent orders, compliance schedules, or other similar
enforcement orders or received any written notice from any Governmental
Authority or any other written notice that would indicate that there is not
currently compliance with all such Legal Requirements, and (y) is not in
material default under, and no condition exists (whether covered by insurance or
not) that with or without notice or lapse of time or both would constitute a
material default under, or breach or violation of, any Legal Requirement or
Permit applicable to the Company. Without limiting the generality of the
foregoing, the Company has not received notice of, to the Knowledge of the
Company, there is no basis for, any claim, action, suit, investigation or
proceeding that might result in a finding that the Company is not or has not
been in compliance with Legal Requirements relating to the development, testing,
manufacture, packaging, distribution and marketing of the Products.
Section 3.12. Litigation. Schedule 3.12 lists a true and correct listing
of (1) all settlement agreements which are binding on the Company or the
Shareholder and (2) all actions, suits, investigations, claims or proceedings
with respect to the Company, the Business or any Purchased Asset that are
currently pending, or were settled or adjudicated since January 1, 2001. Except
as set forth in Schedule 3.12, there are no claims, actions, suits,
investigations or proceedings against or affecting the Company, the Business or
any Purchased Asset or, to the Knowledge of the Company, threatened in any court
or before or by any governmental authority, or before any arbitrator, that might
have an, in any material respects, an adverse effect (whether covered by
insurance or not) on the business, operations, prospects, properties or
financial condition of the Company or the Business and there is no basis for any
such claim, action, suit, investigation or proceeding.
22
Section 3.13. Properties; Capital Leases.
(a) Schedule 3.13(a) sets forth a list of all leases, licenses or
similar agreements relating to the Company's use or occupancy of real
property owned by a third party ("LEASES"), true and correct copies of which
have previously been furnished to VGS, in each case setting forth (1) the
lessor and lessee thereof and the commencement date, term and renewal rights
under each of the Leases, and (2) the street address and legal description of
each property covered thereby. The Company is not, in any material respects,
in breach of any of the terms or covenants of any Leases. The Company does
not own any real property
(b) Schedule 3.13(a) lists all capital leases of the Company.
(c) The Company has good and marketable, indefeasible, fee simple title
to, or in the case of leased real property or personal property has valid
leasehold interests in, all Purchased Assets (whether real, personal,
tangible or intangible) reflected on the Balance Sheet or acquired after the
Balance Sheet Date. Except as reflected on Schedule 3.13(a), no Purchased
Asset is subject to any Lien.
(d) There are no developments affecting any of the Purchased Assets
pending or, to the knowledge of the Company threatened, which might
materially detract from the value, materially interfere with any present or
intended use of such Purchased Assets.
Section 3.14. Contracts and Commitments.
(a) Schedule 3.14(a) lists all material Contracts to which the Company
is a party. True and correct copies of the Contracts have previously been
furnished to VGS, in each case setting forth the material terms of such
Contracts. All of the Contracts listed in Schedule 3.14(a) are valid, binding
and in full force and effect, and the Company has not been notified or
advised by any party thereto of such party's intention or desire to terminate
or modify any such Contract in any respect, except as disclosed in Schedule
3.14(a). Neither the Company nor, to the Knowledge of the Company, any other
party is in breach of any of the terms or covenants of any Contract listed in
Schedule 3.14(a).
(b) Schedule 3.14(b) sets forth a list of all Contracts which are
software license or management service agreements with customers/licensees
together with: (1) the name of the customer/licensee; (2) the annual
maintenance or service fees; (3) the renewal dates, as indicated by months 1
through 12; (4) the license fees paid in 2003; and (5) the license fees
invoiced in 2004, if the renewal is prior to November 1, 2004, or the license
fees
23
scheduled to be invoiced in 2004, if the renewal date is on or after November
1, 2004.
(c) Schedule 3.14(c) sets forth a list of all Contracts which limit the
freedom of the Company to compete in any line of business or with any Person
or in any area or to own, operate, sell, transfer, pledge or otherwise
dispose of or encumber any Purchased Asset or which would so limit the
freedom of VGS or the Parent after the Closing Date. The Contract listed on
Schedule 3.14(c) will not limit the freedom of VGS or the Parent after the
Closing to compete in any line of business or with any Person or in any area
or to own, operate, sell, transfer, pledge or otherwise dispose of or
encumber any Purchased Asset.
(d) Schedule 3.14(d) sets forth a list of all Contracts with or for the
benefit of any Affiliate of the Company.
(e) Schedule 3.14(e) sets forth a list of all Contracts not made in the
ordinary course of business or which were arrived at by other than
arms-length negotiation or bargaining.
(f) The Company has not entered into any software license, management
services or similar agreements which shall obligate the Company (or any
assignee) to perform services beyond two years from the Closing Date.
(g) Except as set forth in Schedule 3.14(g), since June 1, 2004, the
Company has not entered into any software license (or similar) agreements
which provides for an annual maintenance fee less than 18% of the initial
license fee.
Section 3.15. Insurance. Schedule 3.15 hereto is a complete and correct
list of all insurance policies (including fire, liability, product liability,
workers' compensation and vehicular) presently in effect that relate to the
Company its Properties, or the Business, including the amounts of such insurance
and annual premiums with respect thereto, all of which have been in full force
and effect from and after the date(s) set forth on Schedule 3.15. Such policies
are sufficient, in all material respects, for compliance by the Company with all
applicable Legal Requirements and all Assigned Contracts.
Section 3.16. Sufficiency of and Title to the Purchased Assets . (a) The
Purchased Assets constitute all of the property and assets used or held for us
in the Business which are reasonably necessary to conduct the Business as
currently conducted.
(b) Notwithstanding anything in this Agreement herein to the contrary,
upon consummation of the transactions contemplated hereby, VGS will have
24
acquired good and marketable title in and to, or a valid leasehold interest in,
each of the Purchased Assets, free and clear of all Liens.
Section 3.17. Intellectual Property. (a) Schedule 3.17(a)(1) contains a
true and complete list of each of the registrations, applications and other
material Intellectual Property Rights included in the Owner Intellectual
Property Rights. Schedule 3.17(a)(2) contains a true and complete list of the
Licensed Intellectual Property Rights reasonably necessary to conduct the
Business as currently conducted.
(b) The Licensed Intellectual Property Rights and the Owned Intellectual
Property Rights together constitute all the Intellectual Property Rights
reasonably necessary to conduct the Business as currently conducted. Except as
set forth on Schedule 3.17(b)(1), there exist no restrictions on the disclosure,
use or transfer of the Owned Intellectual Property Rights. Except as set forth
on Schedule 3.17(b)(2), the consummation of the transactions contemplated by
this Agreement will not alter, impair or extinguish any Owned Intellectual
Property Rights or Licensed Intellectual Property Rights. Notwithstanding any
disclosure on Schedule 3.17(b)(1), the Company and the Shareholder shall still
be liable with respect to any claim that a customer may bring in connection with
any rights such customer may have in the Owned Intellectual Property Rights,
such claim to be treated for all purposes under this Agreement as an Excluded
Liability.
(c) None of the Company and any Affiliate of the Company has given to any
Person an indemnity in connection with any Intellectual Property Right, other
than indemnities that arise under a standard form sales contract used in the
Business, a copy of which is attached in Schedule 3.17(c).
(d) The Purchased Assets do not infringe, misappropriate or otherwise
violate any Intellectual Property Right of any third person. There is no claim,
action, suit, investigation or proceeding pending against, or, to the Knowledge
of the Company, threatened against, the Company or any present or former
officer, director or employee of the Company (1) based upon, or challenging or
seeking to deny or restrict, the rights of the Company or any Affiliate of the
Company in any of the Owned Intellectual Property Rights and, to the actual
Knowledge of the Company, the Licensed Intellectual Property Rights, (2)
alleging that the use of the Owned Intellectual Property Rights misappropriates,
infringes or otherwise violates any Intellectual Property Right of any third
party or (3) alleging that the Company or any Affiliate of the Company
infringed, misappropriated or otherwise violated any Intellectual Property Right
of any third party. Except as set forth in Section 3.17(d), none of the Company
and any Affiliate of the Company has received from any third party an offer to
license any Intellectual Property Rights of such third party for use in the
Business.
(e) None of the Owned Intellectual Property Rights material to the
operation of the Business has been adjudged invalid or unenforceable in whole or
25
part, and, to the Knowledge of the Company, all such Owned Intellectual Property
Rights are valid and enforceable.
(f) The Company or an Affiliate of the Company holds all right, title and
interest in and to all Owned Intellectual Property Rights listed on Schedule
3.17(a)(1) free and clear of any Lien. In each case where a patent or patent
application, trademark registration or trademark application, service xxxx
registration or service xxxx application, or copyright registration or copyright
application included in the Owned Intellectual Property is held by assignment,
the assignment has been duly recorded with the governmental authority from which
the patent or registration issued or before which the application or application
for registration is pending. The Company or an Affiliate of the Company has
taken all commercially reasonable actions necessary to maintain and protect the
Owned Intellectual Property Rights and their rights in the Licensed Intellectual
Property Rights, including payment of applicable maintenance fees and filing of
applicable statements of use.
(g) To the Knowledge of the Company, no Person has infringed,
misappropriated or otherwise violated any Owned Intellectual Property Right. The
Company has taken reasonable steps in accordance with normal industry practice
to maintain the confidentiality of all confidential Intellectual Property
Rights. None of the Intellectual Property Rights that are material to the
Company or the Business and the value of which to the Business is contingent
upon maintaining the confidentiality thereof, has been disclosed other than to
employees, representatives and agents of the Company or an Affiliate of the
Company all of whom are bound by written confidentiality agreements
substantially in the form previously disclosed to VGS.
(h) The Company has taken reasonable steps in accordance with normal
industry practice to preserve and maintain reasonably complete notes and records
relating to the Owned Intellectual Property Rights.
(i) As of the Closing Date and to the Knowledge of the Company, with
respect to pending applications and applications for registration of the Owned
Intellectual Property Rights that are material to the Company or the Business,
the Company is not aware of any reason that could reasonably be expected to
prevent any such application or application for registration from being granted.
To the Knowledge of the Company, none of the trademarks, service marks,
applications for trademarks and applications for service marks included in the
Owned Intellectual Property Rights that are material to the Business has been
the subject of an opposition or cancellation procedure. To the Knowledge of the
Company, none of the patents and patent applications included in the Owned
Intellectual Property Rights that are material to the Business has been the
subject of an interference, protest, public use proceeding or third party
reexamination request.
26
(j) All Products sold by the Company or an Affiliate of the Company, or
any licensee of the Company or an Affiliate of the Company, in connection with
the Business and covered by a patent, trademark or copyright included in the
Owned Intellectual Property Rights have been marked with the notice (applicable
as of the date hereof) of all nations requiring such notice in order to collect
damages.
Section 3.18. Equipment and Other Tangible Property. Schedule 3.18 lists
the Company's equipment, furniture, machinery, vehicles, structures, fixtures
and other tangible property included in the Purchased Assets, other than
Inventory, all of which are suitable for the purposes for which intended and in
good operating condition and repair consistent with normal industry standards,
except for ordinary wear and tear.
Section 3.19. Permits; Environmental Matters.
(a) To the Knowledge of the Company, no polychlorinated biphenyls,
radioactive material, lead, asbestos-containing material, incinerator, sump,
surface impoundment, lagoon, landfill, septic, wastewater treatment or other
disposal system or underground storage tank (active or inactive) is or has been
present at, on or under any real property used in connection with the Business
or in any Purchased Asset or any other property now or previously owned, leased
or operated by the Company;
(b) To the Knowledge of the Company, no Hazardous Substance has been
discharged, disposed of, dumped, injected, pumped, deposited, spilled, leaked,
emitted or released at, on or under any real property used in the connection
with the Business or any other property now or previously owned, leased or
operated by the Company;
(c) The Company has been and is currently in compliance, in all material
respects, with all applicable Environmental Laws.
Section 3.20. Products, Services and Authorizations.
(a) Schedule 3.20(a) sets forth a list of Products developed by the
Company. Each such product has been designed, manufactured, or serviced in
accordance with (1) the specifications set forth in the manuals for such
product, and (2) the provisions of all applicable laws, policies, guidelines
and any other governmental requirements.
(b) Except as set forth in Schedule 3.20(a), there are no claims
existing or, to the Knowledge of the Company, threatened under or pursuant to
any warranty, whether express or implied, on Products or services sold by the
Company. There are no claims existing and, to the Knowledge of the Company,
there is no basis for any claim against the Company for injury to
27
Persons or property as a result of the sale, distribution, development or
manufacture of any product or performance of any service by the Company,
including claims arising out of the defective or unsafe nature of its
products or services.
Section 3.21. Employee Matters.
(a) Neither VGS nor any of its Affiliates shall have any liability or
obligations under or with respect to the Workers Adjustment Retraining
Notification Act in connection with any of the transactions contemplated in
connection herewith.
(b) The Company is, in all material respects, in compliance with ERISA.
(c) Schedule 3.21 (c) sets forth any and all employment agreements,
confidentiality agreements, non-solicitation and non-competition agreements,
intellectual property assignment and work-for-hire agreements between the
Company and any of its employees or consultants, whereby, to the extent
indicated, the Company's employee or consultant assigns to the Company any
and all rights that such employee may have in the Company's Products or
Intangible Rights, or covenants not to compete against the Company or keep
the Company's Confidential Information secret.
Section 3.22. Assumptions Contained in the Letter of Intent. Except for
item 10 listed therein, each of the Assumptions included in Annex 1 of the
Letter of Intent is true and correct.
Section 3.23. Finder's Fees. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of the Company or the Shareholder who might be entitled to any fee or
commission in connection with the transactions contemplated by this Agreement.
Section 3.24. Investment Representations of the Company and the
Shareholder. In connection with its acquisition of capital stock of the Parent,
the Company and the Shareholder hereby jointly and severally represent and
warrant to VGS and the Parent as follows:
(a) In evaluating the suitability of an investment in Parent, the
Company and the Shareholder have not relied upon any representations or other
information (whether written or oral) from VGS or the Parent except as
expressly set forth herein.
(b) THE COMPANY AND THE SHAREHOLDER ARE AWARE THAT AN INVESTMENT IN THE
PARENT INVOLVES A HIGH DEGREE OF RISK.
28
(c) The Company and the Shareholder recognize that any information
furnished by VGS or the Parent does not constitute investment, accounting,
tax or legal advice. Moreover, the Company and the Shareholder are not
relying upon VGS or the Parent with respect to the Company's and the
Shareholder's tax and other economic circumstances in connection with its
investment in VGS or the Parent. In regard to the tax and other economic
considerations related to such investment, the Company and the Shareholder
have relied solely on the advice of, or have consulted with, only their own
professional advisors.
(d) The Company and the Shareholder are aware that the Shares are being
offered and sold by means of an exemption under the Securities Act of 1933,
as amended (the "ACT"), as well as exemptions under certain state securities
laws for nonpublic offerings, and that it makes the representations,
declarations and warranties as contained in this Section 3.24 with the intent
that the same shall be relied upon in determining their suitability as a
purchaser of the Shares.
(e) Each of the Company and the Shareholder is an "ACCREDITED INVESTOR"
as defined in Rule 501 of Regulation D and has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of an investment in VGS or the Parent and of making an informed and
intelligent investment decision.
(f) The Company and the Shareholder are aware that they cannot sell or
otherwise transfer the Shares without registration under applicable federal
or state securities laws or without an exemption therefrom, and are aware
that they will be required to bear the financial risks of their purchase for
an indefinite period of time because, among other reasons, the Shares have
not been registered with any regulatory authority of any state and,
therefore, cannot be transferred or resold unless subsequently registered
under applicable state securities laws or an exemption from such registration
is available. The Company and the Shareholder also understand that neither
VGS nor the Parent is under any obligation to register the Shares on their
behalf or to assist them in complying with any exemption from registration
under applicable state securities laws.
(g) The Company and the Shareholder recognize that no federal or state
agency has recommended or endorsed the purchase of the Shares or passed upon
the adequacy or accuracy of the information set forth herein, and that Parent
is relying on the truth and accuracy of the representations, declarations and
warranties made by the Company and the Shareholder as contained herein in
issuing the Shares.
(h) The Company and the Shareholder have at all times been given the
opportunity to obtain reasonably requested additional information, to
29
verify the accuracy of the information received and to ask questions of and
receive answers from certain representatives of VGS and the Parent concerning
the terms and conditions of the Company's and the Shareholder's investment in
the Parent and the nature and prospects of Parent's business.
(i) The Company and the Shareholder recognize that there may be no
public market for the Shares, and that it is extremely unlikely that there
will be such a market in the future since neither Parent nor VGS is under any
obligation to register the Shares under the Act or any state securities laws,
or to comply with any exemption available for the resale of capital stock of
Parent without registration. The transferability of the Shares will also be
restricted by contract. Furthermore, the laws of various states also may
require transferees of the Shares to meet standards similar to those set
forth in Section 3.24(e) above. Thus, the Company and the Shareholder realize
that they cannot expect to be able to liquidate their investment in the
Shares readily or at all in case of an emergency.
(j) The Company and the Shareholder are purchasing the Shares for
investment for their own account and not with a view to or for sale in
connection with any distribution of the Shares to or for the accounts of
others provided that the Company may distribute the Shares to the
Shareholder. In addition to any other transfer restrictions applicable to the
Shares pursuant to this Agreement or the Collateral Agreements, the Company
and the Shareholder agree that they will not dispose of the Shares, or any
portion thereof or interest therein, unless and until counsel for Parent
shall have determined that the intended disposition is permissible and does
not violate the Act or the rules and regulations of the Security and Exchange
Commission thereunder, or the provisions of any applicable state securities
laws, or any rules or regulations thereunder.
(k) The Company and the Shareholder recognize that the purchase of the
Shares is a speculative investment and any financial forecasts or other
estimates which may have been made by VGS or Parent merely represent
predictions of future events which may or may not occur and are based on
assumptions which may or may not occur. As a consequence, the Company and the
Shareholder acknowledge and agree that such financial forecasts or other
estimates may not be relied upon to indicate the actual results which might
be attained.
(1) The Shareholder is a resident of the State of Maryland. The
Shareholder understands and agrees that depending upon his state of
residence, a legend in substantially the following form may be placed on all
certificates evidencing the Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933,
30
AS AMENDED (THE "ACT") NOR ANY APPLICABLE STATE SECURITIES LAWS BY REASON
OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF
THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED UNDER
THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, IF SUCH REGISTRATION IS
REQUIRED.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND VGS
The Buyer represents and warrants to the Company that except as set forth
in VGS's Disclosure Schedules attached hereto:
Section 4.01. Corporate Existence and Qualification. (a) The Parent is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate powers and all material
governmental licenses, authorities, permits, consents and approvals required to
own, manage, lease and hold its properties and to carry on its business as and
where such properties are presently located and such business is presently
conducted and is duly qualified to do business and is in good standing as a
foreign corporation in each of the jurisdictions where the character of its
properties or the nature of its business requires it to be so qualified. The
Parent owns all of the issued and outstanding membership interests in VGS.
(b) The Buyer is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Maryland and has
the limited liability company powers and all material governmental licenses,
authorities, permits, consents and approvals required to own, manage, lease and
hold its properties and to carry on its business as and where such properties
are presently located and such business is presently conducted and is duly
qualified to do business and is in good standing as a foreign corporation in
each of the jurisdictions where the character of its properties or the nature of
its business requires it to be so qualified.
Section 4.02. Authority, Approval and Enforceability. This Agreement has
been duly executed and delivered by each of Parent and VGS. The Parent and VGS
have all requisite corporate power and legal capacity to execute and deliver
this Agreement and all Collateral Agreements to be executed and delivered by
them, as applicable, in connection with the transactions provided for hereby, to
consummate the transactions contemplated hereby and by the Collateral
Agreements, and to perform their obligations hereunder and under the Collateral
Agreements. This Agreement and each Collateral Agreement to which the Parent or
VGS is a party constitutes, or upon execution and delivery will constitute, the
31
legal, valid and binding obligation of the Parent and VGS, as applicable,
enforceable in accordance with its terms, except as such enforcement may be
limited by general equitable principles or by applicable bankruptcy, insolvency,
moratorium, or similar laws and judicial decisions from time to time in effect
which affect creditors' rights generally.
Section 4.03. No Default or Consents
(a) Neither the execution and delivery of this Agreement nor the
carrying out of the transactions contemplated hereby will:
(1) violate or conflict with any of the terms, conditions or
provisions of the organizational documents of VGS or the
Parent;
(2) violate any Legal Requirements applicable to the Parent or
VGS;
(3) violate, conflict with, result in a breach of, constitute a
default under (whether with or without notice or the lapse of
time or both), or accelerate or permit the acceleration of the
performance required by, or give any other party the right to
terminate, any contract or Permit applicable to the Parent or
VGS; or
(4) require the Parent or VGS to obtain or make any waiver,
consent, action, approval or authorization of, or
registration, declaration, notice or filing with, any private
non-governmental third party or any Governmental Authority.
Section 4.04. No Proceedings. No suit, action or other proceeding is
pending or, to the Buyer's knowledge, threatened before any Governmental
Authority seeking to restrain Parent or VGS or prohibit their entry into this
Agreement or prohibit the Closing, or seeking Damages against Parent or VGS or
their properties as a result of the consummation of this Agreement.
Section 4.05. Capital Stock.
(a) Parent has:
(1) as of the Closing Date, 48,912,649 shares of stock authorized,
of which 29,282,519 shares are issued, and 27,428,377 are
outstanding; and
(2) except as provided pursuant to the Parent's Stock Option Plan,
agreements with lenders, and the Parent's Articles of
32
Incorporation, there are no options, warrants, convertible
securities, or rights of any kind outstanding giving any
Person any right to acquire any shares of the Parent's stock.
(b) All of the Shares to be issued to the Company and/or Shareholder
pursuant to this Agreement shall be validly issued and shall be fully paid
and non-assessable. As of the Closing Date, the Parent shall have full power
and authority to convey the Shares and the Parent will convey such Shares to
the Company, free and clear of any Lien, except for restrictions on transfer
imposed by applicable securities laws and pursuant to this Agreement and the
transactions contemplated hereby.
Section 4.06. Finder's Fees. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of the Parent or VGS who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
ARTICLE 5
CONDITIONS TO THE COMPANY'S AND VGS's OBLIGATIONS
Section 5.01. Conditions to Obligations of the Company and the
Shareholder. The obligations of the Company to carry out the transactions
contemplated by this Agreement are subject, at the option of the Company, to the
satisfaction (or the extent permitted by Legal Requirement, waiver by the
Company and the Shareholder) of the following conditions:
(a) The Parent and VGS shall have furnished the Company with a
certified copy of all necessary organizational action on their behalf
approving their execution, delivery and performance of this Agreement.
(b) All representations and warranties of the Parent and VGS and
contained in this Agreement shall be true and correct in all material
respects at and as of the Closing, and the Parent and VGS shall have
performed and satisfied in all material respects all covenants and agreements
required by this Agreement to be performed and satisfied by the Parent and
VGS at or prior to the Closing.
(c) As of the Closing Date, no suit, action or other proceeding shall
prohibit consummation of the Closing.
(d) The Parent shall have executed and delivered to the Company, the
Consulting Agreement.
(e) VGS shall have executed and delivered to the Company the License
Agreement.
33
(f) VGS shall have executed and delivered to the Company the Assignment
and Assumption Agreement.
(g) The Parent shall have executed and delivered to the Company the
Transfer Restriction Agreement.
(h) VGS shall have executed and delivered to the Company the Trademark
Assignment.
(i) VGS and Parent shall have executed and delivered to VGS and
Intrepid Eye Street, L.L.C an assignment agreement with respect to the Office
Lease.
Section 5.02. Conditions to Obligations of the Buyer. The obligations of
Buyer to carry out the transactions contemplated by this Agreement are subject,
at the option of Buyer, to the satisfaction (or the extent permitted by Legal
Requirement, waiver by the Buyer) of the following conditions:
(a) All representations and warranties of the Company and the
Shareholder contained in this Agreement shall be true and correct in all
material respects at and as of the Closing, and the Company and the
Shareholder shall have performed and satisfied in all material respects all
agreements and covenants required by this Agreement to be performed and
satisfied by them at or prior to the Closing.
(b) As of the Closing Date, no suit, action or other proceeding shall
prohibit consummation of the Closing.
(c) There shall not have been any event, circumstance, change or effect
that, individually or in the aggregate, had or might have a material adverse
effect on the Company's business, operations, Properties or financial
condition.
(d) The Company shall have furnished VGS with a certified copy of all
necessary corporate and shareholder action on its behalf approving the
Company's execution, delivery and performance of this Agreement.
(e) All proceedings to be taken by the Company or the Shareholder in
connection with the transactions contemplated hereby and all documents
incident thereto shall be satisfactory in form and substance to VGS and its
counsel, and VGS and said counsel shall have received all such counterpart
originals or certified or other copies of such documents as it or they may
reasonably request.
(f) The Board of Directors of the Parent shall have approved this
Agreement and VGS's acquisition of the Purchased Assets contemplated hereby.
34
(g) No proceeding in which any of the Shareholder or the Company shall
be a debtor, defendant or party seeking an order for its own relief or
reorganization shall have been brought or be pending by or against such
Person under any United States or state bankruptcy or insolvency law.
(h) The Company shall have executed and delivered to VGS the Consulting
Agreement.
(i) The Company shall have executed and delivered to VGS the License
Agreement.
(j) The Company shall have executed and delivered to VGS the Transfer
Restriction Agreement.
(k) The Company shall have executed and delivered to VGS the Xxxx of
Sale.
(l) The Company shall have executed and delivered to VGS the Trademark
Assignment.
(m) The Company and Intrepid Eye Street, L.L.C shall have executed and
delivered to VGS an assignment agreement with respect to the Office Lease.
(n) Intrepid Eye Street, L.L.C shall have amended the Office Lease to
delete Section XXXII thereunder.
ARTICLE 6
COVENANTS OF THE COMPANY AND THE SHAREHOLDER
Section 6.01. Non-Competition, Non-Solicitation and Non-Disclosure.
(a) General. In consideration of the payment of a portion of the
Purchase Price to the Shareholder, and in order to induce the Parent and VGS
to enter into this Agreement and to consummate the transactions contemplated
hereby, the Shareholder hereby acknowledges that he is the beneficiary of the
Purchase Price payments to the Company and that the Shareholder hereby
covenants and agrees as follows:
(1) the Shareholder shall not for a period beginning on the date
hereof and ending three (3) years from and after the
"POST-TERMINATION PERIOD" (as defined in the Consulting
Agreement; such period referred to herein as the
"NON-COMPETITION PERIOD"), directly, indirectly, or in concert
with any other Person (including the Company and those
35
persons or entities in actual competition with the Corporation
such as Aristotle International, Inc., Bacon's Information,
Inc., Biz360, Inc., BurrellesLuce, Cymfony, Inc., Democracy
Data & Communications, L.L.C., GetActive Software, Inc.,
Grassroots Enterprise, Inc., Legislative Demographic Services,
Inc., Political Action Committee Services LLC, Public Affairs
Support Services, Inc. or TEKgroup International, Inc., or any
other company or other business directly engaged in public
relations or government relations automation): (1) acquire or
have any interest in, whether as a proprietor, partner,
co-venturer, financier, or investor, any person, firm,
partnership, corporation, association, limited liability
company, or other entity that directly or through an
Affiliate, either (A) offers, solicits, provides, or engages
in Conflicting Services or (B) intends to offer, solicit,
provide or engage in Conflicting Services; or (2) be employed
by or serve as director, officer, servant, agent,
representative, or consultant to any Person that directly or
through an Affiliate, either (x) offers, solicits, provides,
or engages in Conflicting Services or (y) intends to offer,
solicit, provide or engage in Conflicting Services. However,
nothing contained herein shall be deemed to prevent the
Shareholder from acquiring through market purchases and
owning, solely as an investment, less than five percent (5%)
in the aggregate of any publicly-traded equity securities. The
Shareholder agrees that the market for the Parent's products
and services is nationwide, so that this Section 6.01 applies
to his activities within the United States.
(2) Without the prior written consent of the Parent, the
Shareholder shall not, during the Non-Competition Period,
directly, indirectly, or in concert with any other Person
(including the Company and those persons or entities in actual
competition with the Corporation such as Aristotle
International, Inc., Bacon's Information, Inc., Biz360, Inc.,
BurrellesLuce, Cymfony, Inc., Democracy Data & Communications,
L.L.C., GetActive Software, Inc., Grassroots Enterprise, Inc.,
Legislative Demographic Services, Inc., Political Action
Committee Services LLC, Public Affairs Support Services, Inc.
or TEKgroup International, Inc., or any other company or other
business directly engaged in public relations or government
relations automation), whether as a proprietor, partner,
co-venturer, financier, investor, director, officer, employer,
employee, servant, agent, representative, consultant or
otherwise (1)
36
request, induce, or attempt to induce any Customer to
terminate its relationship with Parent or any of its
Affiliates; (2) solicit, contact, perform or offer to perform
any Conflicting Services for any Customer of the Parent or any
of its Affiliates; (3) interfere with or disrupt, or attempt
to interfere with or disrupt, the relationship, contractual or
otherwise, between any member of the Controlled Group and any
Customer or employee of Parent or its Affiliates;
(3) Without the prior written consent of the Parent, the
Shareholder shall not for a period beginning on the date
hereof and ending one (1) year from and after the "POST-
TERMINATION PERIOD" directly, indirectly, or in concert with
any other Person (including the Company and those persons or
entities in actual competition with the Corporation such as
Aristotle International, Inc., Bacon's Information, Inc.,
Biz360, Inc., BurrellesLuce, Cymfony, Inc., Democracy Data &
Communications, L.L.C., GetActive Software, Inc., Grassroots
Enterprise, Inc., Legislative Demographic Services, Inc.,
Political Action Committee Services LLC, Public Affairs
Support Services, Inc., or TEKgroup International, Inc., or
any other company or other business directly engaged in public
relations or government relations automation), whether as a
proprietor, partner, co-venturer, financier, investor,
director, officer, employer, employee, servant, agent,
representative, consultant or otherwise offer employment to or
solicit (directly or indirectly, individually or in connection
with any new employer or other business partner) any
individual who is an employee of Controlled Group or had left
the employ of the Controlled Group within the preceding one
(1) year, regardless of who initiates the contact or how the
Person comes to the Shareholder's attention.
(4) The Shareholder acknowledges and agrees that the covenants
provided for in this Section 6.01 (a) are reasonable and
necessary in terms of time, area and line of business to
protect the Parent's trade secrets. The Shareholder further
acknowledges and agrees that such covenants are reasonable and
necessary in terms of time, area and line of business to
protect the legitimate business interests of Parent and its
Affiliates, which include its interests in protecting the
Parent's and its Affiliates' (1) valuable confidential
business information, (2) substantial
37
relationships with customers throughout the United States, and
(3) customer goodwill associated with the ongoing business of
the Parent. The Shareholder expressly authorizes the
enforcement of the covenants provided for in this Article 6 by
(A) Parent and its subsidiaries, (B) Parent's permitted
assigns, and (C) any successors to Parent's or Parent's
business. The Shareholder and Parent agree that they have
attempted to restrict the Shareholder's activities to a
reasonable degree appropriate to protect the interests of the
Parent, although they agree that others may disagree about
this determination. Therefore, the Shareholder and the Parent
agree that a court or other trier of fact, may modify and
enforce these restrictions to the minimum extent deemed
necessary to be found reasonable. If a court declines to
modify and enforce this Agreement as provided above, the
Shareholder and the Parent agree that this Agreement will be
automatically modified to provide the Parent with the maximum
protection of its business interests allowed by law and the
Shareholder agree to be bound by such Agreement as modified;
but in no event shall the Parent be entitled to greater rights
than it has under this Agreement.
(5) The Shareholder shall not directly or indirectly disparage the
Parent, any of its Affiliates or products, or any officer,
director, employee, shareholder or member of the Parent or its
Affiliates.
(6) The Shareholder shall not at any time divulge, communicate,
use to the detriment of Parent or for the benefit of any other
Person or Persons, or misuse in any way, any confidential
information pertaining to the Company. Any confidential
information or data now known or hereafter acquired by the
Shareholder with respect to the Company shall be deemed a
valuable, special and unique asset of Parent that is received
by such Shareholder in confidence and as a fiduciary, and such
Shareholder shall remain a fiduciary to Parent with respect to
all of such information.
(7) Notwithstanding anything in this Section 6.01 (a) to the
contrary, the Shareholder and the Company may continue to
perform the Contracts listed on Schedule 2.05(b) to the extent
such Contracts do not become Assigned Contracts; provided that
the Shareholder and the Company shall not
38
expand the scope of the services offered under such Contracts
as of the Closing.
(b) Injunction. It is recognized and hereby acknowledged by the parties
hereto that a breach or violation by the Shareholder of any or all of the
covenants and agreements contained in this Section 6.01 may cause irreparable
harm and damage to Parent in a monetary amount which may be virtually
impossible to ascertain. As a result, the Shareholder recognizes and hereby
acknowledges and agrees that the Parent, in addition to and not in limitation
of any other rights, remedies or damages available to the Parent at law or in
equity, shall be entitled to a temporary restraining order, preliminary
injunction and permanent injunction in order to prevent or to restrain any
such breach by the Shareholder, or by any or all of the Shareholder's
partners, co-venturers, employers, employees, servants, agents,
representatives and any and all Persons directly or indirectly acting for, on
behalf of or with the Shareholder, and that the Parent shall not be required
in connection with any such order or injunction to post a bond of any nature
whatsoever. If the Parent enforces the provisions of this Section 6.01
through a court order, the Shareholder agrees that the restrictions contained
in this Section 6.01 shall remain in effect immediately following the end of
the applicable three-year period (or one-year period, in the case of Section
6.01(a)(3)), for an additional period equal to the number of days that begins
with the date of the breach and ends with the earlier of (1) the date that
the Shareholder consents to an injunction, or (2) the date of such order.
Section 6.02. Notification to Customers. Within three (3) business days
after Closing, as mutually agreed by the parties hereto, the Company shall
execute and deliver to VGS letters to its customers and licensees in form and
content satisfactory to the Buyer advising of the transactions contemplated by
this Agreement and directing that all payments to the Company shall be made to
VGS, at the address supplied by VGS.
Section 6.03. Publicity. The Company and the Shareholder acknowledge and
agree that after the Closing occurs, the Parent and VGS shall have the sole
right to determine the time, method and manner of communicating or announcing
the transactions contemplated by this Agreement to third parties, including but
not limited to the Company's customers. Without limiting the foregoing sentence,
neither the Company nor Shareholder shall issue or make, or cause to have issued
or made, any public release or other public announcement concerning this
Agreement or the transactions contemplated hereby, without the advance approval
in writing of the form and substance thereof by the Parent, except as required
by law (in which case, so far as possible, there shall be consultation among the
parties prior to such announcement).
Section 6.04. Confidentiality. (a) After the Closing, the Company, the
Shareholder and their Affiliates will hold, and will use their best efforts to
cause
39
their respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to hold, in confidence, unless compelled to
disclose by judicial or administrative process or by other requirements of law,
all confidential documents and information concerning the Business except to the
extent that such information can be shown to have been in the public domain
through no fault of the Company or its Affiliates.
Section 6.05. Access to Records. On and after the Closing Date, the
Company and the Shareholder will afford promptly to the Parent and VGS and their
agents reasonable access to their books of account, financial and other records
(including accountant's work papers), information, employees and auditors to the
extent necessary or useful for the Parent or VGS in connection with any audit,
investigation, dispute or litigation or any other reasonable business purpose
relating to the Business, the Purchased Assets or the Assumed Liabilities.
Section 6.06. Use of Corporate Name and Trademarks.
(a) After the Closing, and except to the extent expressly permitted by
the License Agreement, the Company and the Shareholder shall not use the
trademarks GNOSSOS, KEEP IN TOUCH or any of the marks or names set forth on
Schedule 6.06. In addition, promptly after the Closing, the Company shall
amend its certificate of incorporation so as to remove the word "Gnossos"
from its corporate name.
(b) Gnossos and Xxxxxx jointly and severally agree to pay for all
attorney's fees and costs and expenses (including all administrative filing
fees and expenses) associated with the U.S. applications for the registration
of each of the trademarks GNOSSOS (Serial No. 78498910) and KEEP IN TOUCH
(Serial No. 78498916) before the U.S. Patent & Trademark Office, which
applications were filed on or about October 13, 2004 (collectively the
"GNOSSOS MARKS"), including any and all attorney's fees and costs in
connection with any court or administrative actions or any other legal
proceedings relating to the Gnossos Marks, including any opposition to
registration of the Gnossos Marks; provided that, subject to Section 3(d) of
the License Agreement, any fees, costs and expenses incurred after the
registration of the Gnossos Marks shall be the responsibility of VGS.
ARTICLE 7
COVENANTS OF PARENT, VGS, THE COMPANY AND THE SHAREHOLDER
Section 7.01. Further Assurances. Following the Closing, the Company, the
Shareholder, the Parent and VGS shall execute and deliver such documents, and
take such other action, as shall be reasonably requested by any other party
hereto to carry out the transactions contemplated by this Agreement. In
40
particular, the Company and the Shareholder agree that the Company shall, at the
Parent's or VGS's request, take all actions to enforce any confidentiality,
non-competition, non-solicitation or similar right it may have against any
current or former employee or contractor of the Company; and to the maximum
extent permissible, the Parent and VGS shall be permitted to take any such
action in the name of and on behalf of the Company, and shall control any action
or proceeding commenced hereunder in the name of the Company.
Section 7.02. Employee Matters.
(a) Following Closing, the Company shall retain sole responsibility for
the payment of any employee benefits or entitlement, including severance pay,
accrued vacation, sick or holiday pay, to any employee pursuant to any
employment agreement with any of the employees, Plan, or law or regulation as
a result of the consummation of the transactions contemplated hereby.
(b) The parties acknowledge that the transactions provided for in this
Agreement may result in obligations on the part of the Company and one or
more of the Plans that is a welfare benefit plan (within the meaning of
Section 3(1) of ERISA) to comply with the health care continuation
requirements of Part 6 of Title 1 of ERISA and Code Section 4980B, as
applicable. The parties expressly agree that the Parent, VGS and the Parent's
and VGS's benefit plans shall have no responsibility for compliance with such
health care continuation requirements (1) for qualified beneficiaries who
previously elected to receive continued coverage under the Company's ERISA
benefit plans or who between the date of this Agreement and the Closing Date
elect to receive continued coverage, or (2) with respect to those employees
or former employees of the Company who may become eligible to receive such
continued coverage as a result of the transactions provided for in this
Agreement.
(c) Nothing in this Agreement, express or implied, shall confer upon
any employee of the Company, or any representative of any such employee, any
rights or remedies, including any right to employment or continued employment
for any period, of any nature whatsoever.
Section 7.03. Delivery of Property Received by the Company after Closing.
The Company agrees that it will transfer or deliver to VGS, promptly after the
receipt thereof, any cash or other property which the Company receives after the
Closing Date in respect of any claims, contracts, licenses, leases, commitments,
sales orders, purchase orders, receivables of any character or any other items
transferred or intended to be transferred to VGS as part of the Purchased Assets
under this Agreement.
41
Section 7.04. Collection of Accounts Receivable. The Company hereby
assigns to the Parent all rights and responsibilities with respect to the
collection of all accounts receivable (the "RECEIVABLES"); it being understood
that any collections of accounts receivable from and after the Closing Date will
be applied first to the Receivables until paid in full. The Parent will use the
same level of effort to collect such Receivables that the Parent uses to collect
its own accounts receivable and, after the Closing Date, will pay the proceeds
from the Receivables (to the extent they are Excluded Assets) to the Company on
no less than a semimonthly basis; provided, however, that, with respect to any
Receivables that are not collected within 90 days after the Closing Date, the
Shareholder shall have the right to participate in collection calls to such
customers with the Parent's personnel.
Section 7.05. Transition Services.
(a) From and after the Closing and for a period of thirty (30) days
thereafter, the Company shall provide VGS with the transition services
described on Schedule 7.05 (the "TRANSITION SERVICES"). The Company shall use
its reasonable efforts to ensure that the nature and quality of Transition
Services provided to VGS by the Company's employees or contractors shall be
undifferentiated as compared with the same services performed by such
employees or contractors prior to the Closing Date (it being understood that
the Company shall not be deemed in breach of its obligations under this
Section 7.05 if the Company is unable to provide the foregoing services on
account of the voluntary resignation by one or more of the Company's
employees or contractors). The management of and control over the provision
of the Transition Services shall reside solely with the Company. Without
limiting the generality of the foregoing, all labor matters relating to
employees and contractors of the Company and its Affiliates shall be within
the exclusive control of the Company, and VGS and the Parent shall not take
any action affecting such matters. The Company shall, at its own expense,
employ and retain staff needed to perform the Transition Services.
(b) Within seven (7) days of its receipt of a detailed invoice from the
Company, VGS shall reimburse the Company for (1) the lease payments for the
month of November 2004 due under each of Copier Lease, Office Lease and Phone
Lease, in each case to the extent paid by the Company and (2) its actual
out-of-pocket costs it incurs for the salaries, benefits and related payroll
costs for those employees of the Company (other than the Shareholder)
providing Transition Services (but not for increases in salary, bonuses or
payments not in the usual and ordinary course of business), with such
reimbursement to occur no later than seven (7) days after the Company has
provided a reimbursement statement to the Parent.
Section 7.06. Presentation to Parent's Investors. At the Shareholder's
request and during the one (1)-year period after the Closing Date, the Parent
will
42
use its reasonable efforts to arrange for a mutually-convenient one (1)-hour
presentation by the Shareholder to the Company's lead investors.
Section 7.07. Shareholder's Use of Office Space. VGS will permit the
Shareholder to use his existing office rent free at the premises leased pursuant
to the Office Lease until the earlier to occur of (1) the termination of the
Consulting Agreement or (2) the termination of the Office Lease.
ARTICLE 8
SURVIVAL; INDEMNIFICATION
Section 8.01. Survival. The representations and warranties of the parties
hereto contained in this Agreement or in any certificate or other writing
delivered pursuant hereto or in connection herewith shall survive the Closing
until June 30, 2007; provided that (1) the representations and warranties in
Sections 3.01, 3.02, 3.03, 3.04, 3.05, 3.09, 3.16, 3.17, 3.19, 3.23, 3.24, 4.01,
4.02, 4.03, 4.05 and 4.06 shall survive indefinitely. Notwithstanding the
preceding sentence, any representation or warranty in respect of which indemnity
may be sought under this Agreement shall survive the time at which it would
otherwise terminate pursuant to the preceding sentence, if notice of the
inaccuracy thereof giving rise to such right of indemnity shall have been given
to the party against whom such indemnity may be sought prior to such time.
Section 8.02. Indemnification.
(a) The Company and the Shareholder hereby jointly and severally
indemnify Buyer and its and their Affiliates, directors, officers and
employees (the "BUYER INDEMNITEES") against and agrees to hold each of them
harmless from any and all Damages incurred or suffered by any Buyer
Indemnitee arising out of: (1) any misrepresentation or breach of warranty
(each such misrepresentation and breach of warranty a "WARRANTY BREACH") or
breach of covenant or agreement made or to be performed by the Shareholder
and/or the Company pursuant to this Agreement or the Collateral Agreements;
(2) the assets, business or operations of the Company prior to the Closing
Date; (3) any Excluded Asset; (4) any Excluded Liability; or (5) the failure
of the Company to be duly qualified to do business as a foreign corporation;
provided that with respect to indemnification by the Company or the
Shareholder for any Warranty Breach pursuant to Section 8.02(a): (A) the
Company and the Shareholder shall not be liable unless the aggregate amount
of Damages with respect to any Warranty Breach (determined without regard to
any materiality qualification contained in any representation, warranty or
covenant giving rise to the claim for indemnity hereunder) exceeds $33,000,
it being understood that such amount shall be a deductible, and (B) the
aggregate liability of the Company and the Shareholder to the Buyer
Indemnitees for Warranty Breaches shall not exceed $3,300,000; provided,
43
further, that the foregoing limitation on liability shall not apply to fraud
or any breach of Section 3.09.
(b) The Parent and VGS hereby jointly and severally indemnify the
Shareholder, the Company and their Affiliates (the "SELLER INDEMNITEES")
against and agrees to hold each of them harmless from any and all Damages
incurred or suffered by the Seller Indemnitees arising out of any Warranty
Breach or breach of covenant or agreement (including, without limiting the
generality of the foregoing, payment of the Purchase Price and any Assumed
Liabilities) made or to be performed by VGS pursuant to this Agreement;
provided that with respect to indemnification by the Parent and VGS for any
Warranty Breach pursuant to this Section, (1) the Parent and VGS shall not be
liable unless the aggregate amount of Damages with respect to such Warranty
Breaches (determined without regard to any materiality qualification
contained in any representation, warranty or covenant giving rise to the
claim for indemnity hereunder) exceeds $33,000, it being understood that such
amount shall be a deductible, and (2) the aggregate liability of the Parent
and VGS to the Seller Indemnitees for Warranty Breaches shall not exceed
$3,300,000.
Section 8.03. Procedures.
(a) A party making a claim for indemnity under Section 8.02 is
hereinafter referred to as an "INDEMNIFIED PARTY" and the party against whom
such claim is asserted is hereinafter referred to as the "INDEMNIFYING
PARTY." All claims by any Indemnified Party under Section 8.02 hereof shall
be asserted and resolved in accordance with the following provisions. If any
claim or demand for which an Indemnifying Party would be liable to an
Indemnified Party is asserted against or sought to be collected from such
Indemnified Party by a third party, said Indemnified Party shall with
reasonable promptness notify in writing the Indemnifying Party of such claim
or demand stating with reasonable specificity the circumstances of the
Indemnified Party's claim for indemnification; provided, however, that any
failure to give such notice will not waive any rights of the Indemnified
Party except to the extent the rights of the Indemnifying Party are actually
prejudiced or to the extent that any applicable period set forth in Section
8.01 has expired without such notice being given. After receipt by the
Indemnifying Party of such notice, then upon reasonable notice from the
Indemnifying Party to the Indemnified Party, or upon the request of the
Indemnified Party, the Indemnifying Party shall defend, manage and conduct
any proceedings, negotiations or communications involving any claimant whose
claim is the subject of the Indemnified Party's notice to the Indemnifying
Party as set forth above, and shall take all actions necessary, including the
posting of such bond or other security as may be required by any Governmental
Authority, so as to enable the claim to be defended against or resolved
without expense or other action by the Indemnified Party. Upon
44
request of the Indemnifying Party, the Indemnified Party shall, to the extent
it may legally do so and to the extent that it is compensated in advance by
the Indemnifying Party for any costs and expenses thereby incurred,
(1) take such action as the Indemnifying Party may reasonably
request in connection with such action,
(2) allow the Indemnifying Party to dispute such action in the
name of the Indemnified Party and to conduct a defense to such
action on behalf of the Indemnified Party, or
(3) render to the Indemnifying Party all such assistance as the
Indemnifying Party may reasonably request in connection with
such dispute and defense.
(b) The Shareholder and the Company specifically agree that any claims
due and owing for indemnification by the Parent or VGS against the
Shareholder and the Company (or any of them) shall be first satisfied by
deducting and otherwise offsetting such claims against the Holdback Amount;
and to the extent that there remain unsatisfied indemnification claims after
the deductions and set-offs described above, the Parent and VGS shall have
full recourse against the Shareholder and the Company (including their assets
of whatsoever kind or nature) for payment of such indemnification claims.
Notwithstanding anything in this Agreement to the contrary, the Shareholder
and the Company expressly agree that VGS or the Parent may settle or
compromise any individual claim for indemnity they make hereunder to the
extent that the amount of the settlement or compromise is less than or equal
to $5,000 and the settlement or compromise does not impose any injunctive
relief with respect to the Company or the Shareholder; provided that the
aggregate amount of such claims that VGS or the Parent may settle or
compromise pursuant to the foregoing sentence is $50,000.
Section 8.04. Other Matters.
(a) The indemnification provisions of this Article 8 shall be the sole and
exclusive remedy of the parties hereto for any breach of any representations or
warranties made by any other party hereto in this Agreement and each party
hereby waives all statutory, common law and other claims with respect thereto,
other than claims for indemnification pursuant to this Article 8; provided,
however, that the foregoing limitations shall not apply to any claim seeking
money damages for fraud or intentional misrepresentation by a party hereto or
for breach of any covenant.
(b) Except for fraud or intentional misrepresentation, there shall be no
indemnification by any party hereto for any special, incidental, punitive or
consequential damages.
45
(d) Any indemnification payment by the Company pursuant to shall be
treated as an adjustment to the Purchase Price hereunder for Tax purposes.
(f) In calculating amounts payable to an Indemnified Party, the amount of
the indemnified Damages shall be computed net of payments that the Indemnified
Party receives under any insurance policy with respect to such Damages.
ARTICLE 9
MISCELLANEOUS
Section 9.01. Notices. Any notice, request, instruction, correspondence or
other document to be given hereunder by any party hereto to another (herein
collectively called "NOTICE") shall be in writing and delivered personally or
sent by overnight mail carrier, return receipt requested, or by telecopier, as
follows:
Vocus, Inc.
0000 Xxxxxx Xxxxxxxxx
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx
Chief Financial Officer
Fax: (000)000-0000
with a copy (which shall not constitute
notice) to:
Xxxxxxxxx Xxxxxxx, LLP
0000 Xxxxxx Xxxxxxxxx, Xxxxx 0000
XxXxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Fax:(000)000-0000
if, to the Company Xxxxxx X. Xxxxxx
and/or the Shareholder: 0000 Xxxxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
with a copy (which shall not constitute
notice) to:
Xxxxxxx LLP
000 0xx Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx
Fax: (000) 000-0000
46
Each of the above addresses for notice purposes may be changed by providing
appropriate notice hereunder. Notice given by personal delivery or overnight
mail shall be effective upon actual receipt or refusal. Notice given by
facsimile shall be effective upon actual receipt if received during the
recipient's normal business hours, or at the beginning of the recipient's next
normal business day after receipt if not received during the recipient's normal
business hours and confirmed by reply facsimile.
Section 9.02. Governing Law. The provisions of this agreement and the
documents delivered pursuant hereto shall be governed by and construed in
accordance with the laws of the State of Maryland (excluding any conflict of law
rule or principle that would refer to the laws of another jurisdiction). Each
party hereto irrevocably submits to the jurisdiction of state and federal courts
located in the State of Maryland, in any action or proceeding arising out of or
relating to this Agreement or any of the Collateral Agreements, and each party
hereby irrevocably agrees that all claims in respect of any such action or
proceeding must be brought and/or defended in such court; provided, however,
that matters which are under the jurisdiction of the federal courts in Maryland
shall be brought in the United States Federal District Court in Greenbelt,
Maryland. Each party hereto consents to service of process by any means
authorized by the applicable law of the forum in any action brought under or
arising out of this Agreement or any of the Collateral Agreements, and each
party irrevocably waives, to the fullest extent each may effectively do so, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court; provided that each party hereto hereby agrees that service of
any process, summons, notice or document by U.S. registered mail addressed to
such party shall be effective service of process for any such suit, action or
proceeding brought against such party in any such court. Each party hereto
agrees that a final judgment in any such suit, action or proceeding brought in
any such court shall be conclusive and binding upon such party and may be
enforced in any other courts to whose jurisdiction such party is or may be
subject by suit upon such judgment.
Section 9.03. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 9.04. Entire Agreement; Amendments and Waivers. This Agreement
constitutes the entire agreement between and among the parties hereto pertaining
to the subject matter hereof and supersedes all prior agreements (including the
Letter of Intent), understandings, negotiations and discussions, whether oral or
written, of the parties, and there are no warranties, representations or other
agreements between the parties in connection with the subject matter hereof
except as set forth specifically herein or contemplated hereby. No
47
supplement, modification or waiver of this Agreement shall be binding unless
executed in writing by the party to be bound thereby. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (regardless of whether similar), nor shall any such
waiver constitute a continuing waiver unless otherwise expressly provided.
Section 9.05. Binding Effect and Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns; but neither this Agreement nor any of the
rights, benefits or obligations hereunder shall be assigned, by operation of law
or otherwise, by the Company or the Shareholder without the Buyer's written
consent. Nothing in this Agreement, express or implied, is intended to confer
upon any Person other than the parties hereto and their respective permitted
successors and assigns, any rights, benefits or obligations hereunder.
Section 9.06. Remedies. The rights and remedies provided by this Agreement
are cumulative, and the use of any one right or remedy by any party hereto shall
not preclude or constitute a waiver of its right to use any or all other
remedies. Except as otherwise limited in Article 8 hereof, such rights and
remedies are given in addition to any other rights and remedies a party may have
by law, statute or otherwise.
Section 9.07. Multiple Counterparts. This Agreement may be signed and
delivered, by facsimile or otherwise, in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement shall become effective
when each party hereto shall have received a counterpart hereof (whether by
facsimile or otherwise) signed by the other party hereto.
Section 9.08. Survival. Any provision of this Agreement which contemplates
performance or the existence of obligations after the Closing Date, and any and
all representations and warranties set forth in this Agreement, shall not be
deemed to be merged into or waived by the execution and delivery of the
instruments executed at the Closing, but shall expressly survive Closing and
shall be binding upon the party or parties obligated thereby in accordance with
the terms of this Agreement, subject to any limitations expressly set forth in
this Agreement.
Section 9.09. Attorneys' Fees. In the event any suit or other legal
proceeding is brought for the enforcement of any of the provisions of this
Agreement, the parties hereto agree that the prevailing party or parties shall
be entitled to recover from the other party or parties upon final judgment on
the merits reasonable attorneys' fees (and sales taxes thereon, if any),
including attorneys' fees for any appeal, and costs incurred in bringing such
suit or proceeding. For the purposes of this Section 9.09, the Company and
Shareholder
48
shall be jointly and severally liable for any payment due hereunder from the
Company and/or the Shareholder.
Section 9.10. Bulk Sales; Transfer Taxes, (a) The Buyer and the Company
each hereby waive compliance by the Company with the provisions of the "bulk
sales," "bulk transfer" or similar laws of any state. The Company and the
Shareholder hereby jointly and severally agree to indemnify and hold VGS and its
Affiliates harmless against any and all Damages incurred or suffered by VGS or
any of its Affiliates as a result of any failure to comply with any such "bulk
sales," "bulk transfer" or similar laws.
(b) The Company shall pay all transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement when due.
Section 9.11. Interpretation. The parties hereto acknowledge and agree
that (1) each party and its counsel reviewed and negotiated the terms and
provisions of this Agreement and have contributed to its revision; (2) any rule
of construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this Agreement;
and (3) the terms and provisions of this Agreement shall be construed fairly as
to all parties hereto and not in favor of or against any party, regardless of
which party was generally responsible for the preparation of this Agreement.
Section 9.12. Risk of Loss. Prior to the Closing, the risk of loss of
damage to, or destruction of, any and all of the Company's assets, including the
Properties, shall remain with the Company, and the legal doctrine known as the
"Doctrine of Equitable Conversion" shall not be applicable to this Agreement or
to any of the transactions contemplated hereby.
Section 9.13. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.
Section 9.14. No Third Party Beneficiaries. No provision of this Agreement
is intended to confer upon any Person other than the parties hereto any rights
or remedies hereunder. Without limiting the foregoing, no provision of this
Agreement shall create any third party beneficiary or other rights in any
employee
49
or former employee (including any beneficiary or dependent thereof) of the
Company or of any of its affiliates in respect of continued employment (or
resumed employment) with either VGS or the Business or any of their Affiliates
and no provision of this Agreement shall create any such rights in any such
Persons in respect of any benefits that may be provided, directly or indirectly,
under any Plan or any plan or arrangement which may be established by VGS or any
of its Affiliates. No provision of this Agreement shall constitute a limitation
on rights to amend, modify or terminate after the Closing Date any such plans or
arrangements of VGS or any of its Affiliates.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]
50
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
VOCUS, INC.
By: /s/ Xxxxxxx Xxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxx
Title: Chief Executive Officer
VOCUS GS HOLDINGS LLC
BY: VOCUS, INC.,
as Managing Member
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Chief Financial Officer
GNOSSOS SOFTWARE, INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
XXXXXX XXXXXX XXXXXX
/s/ Xxxxxx Xxxxxx Xxxxxx
------------------------------------
51
