Acquisition Commitment
This Acquisition Commitment (the "Commitment") is dated as of July 1,
1996, (the "Effective Date") by and between WASATCH EDUCATION SYSTEMS
CORPORATION, a Utah corporation (the "Seller"), and a new corporation ("Newco")
to be formed by XXXXXXX XXXXXX, XXXXX XXXXX, and XXXXX XXXXX (collectively, the
"Management Group").
RECITALS:
A. The Management Group are presently employed as senior officers of
Seller with responsibility for managing the business of Seller.
B. Newco is interested in licensing certain intellectual property
from Seller and in acquiring certain tangible and intangible
assets of the Seller (collectively the "Education Market
Assets"), to engage in the development, marketing, and sale of
education products in the Education Market (as defined below).
Seller will retain ownership rights in its intellectual property
(including existing products) to engage in development,
marketing, and sale of education products in the Home Market (as
defined below).
C. Seller and Newco intend that this Commitment shall constitute a
binding agreement subject only to the conditions specifically set
forth below.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements hereinafter contained, the parties hereto hereby agree
as follows:
1. Consent and Waiver; Exclusive Negotiation. Seller hereby ratifies
and confirms the Consent and Waiver of Conflicts of Interests (the "Consent and
Waiver") attached hereto as Exhibit A to this Commitment and Seller agrees that
the Consent and Waiver shall remain in full force and effect until the first to
occur of the following (the "Expiration Date"): (a) three (3) months from the
date hereof; or (b) notice from Newco to Seller that Newco is unable to complete
the purchase transaction contemplated by this Commitment. If Newco has made
reasonable progress towards consummation of this Commitment prior to the
Expiration Date, but is unable to close prior to the Expiration Date, Newco may
extend the Expiration Date in one (1) month increments, subject to Seller's
consent which shall not be unreasonably withheld. Until the Expiration Date,
Seller shall deal exclusively with Newco with regard to a disposition of the
Education Market Assets. Seller shall fully cooperate with Newco and make
reasonable efforts to support Newco's efforts to secure necessary debt or equity
financing. However, Seller does not represent or warrant, and shall not be
responsible for, Newco's success in raising the desired financing.
2. Description of Education Market Assets. Seller hereby agrees to sell
to Newco, and Newco agrees to purchase the Education Market Assets of Seller
relating to or arising out of Seller's business (the "Business") of developing,
marketing and licensing proprietary and third party educational software and
related products and services in the Education Market. The Education Market
Assets shall include the following:
(a) All cash, bank deposits, and cash equivalents relating to the
Education Market as of the Closing Date;
(b) All accounts receivable and other entitlements to payment under
all contracts, licenses, and other arrangements relating to the
Education Market;
(c) All distributor agreements, customer contracts, renewals, and
installed base of licensees of the Seller's products relating to
the Education Market, including but not limited to the Product
Distribution Agreements with TRO;
(d) All inventory and raw materials, including CD-ROMs, printed
instructional and training materials, brochures, and marketing
materials relating to the Education Market;
(e) All tangible property, including all office equipment, computers
and related equipment, audio-visual equipment, desks, chairs,
leasehold improvements, library and reference materials, trade
show equipment and displays, file cabinets, and other supplies
and personal property relating to the Education Market;
(f) All insurance policies on persons, property, and risks relating
to the Education Market;
(g) All outstanding bids, proposals, and purchase orders of Seller
relating to the Education Market;
(i) All files and records of Seller in hard copy or magnetic format
relating to the Education Market, including customer and vendor
lists and files, advertising materials and signs, correspondence,
and equipment warranty information and maintenance records;
(j) All contracts and agreements with employees, independent
marketing representatives, dealers, and sales agents of Seller
relating to the Education Market;
(k) All leasehold interests in property and leased equipment relating
to the Education Market; and
(l) All third party software licenses (excluding the Third Party
Software identified on Schedule II), programs, development tools,
and utilities used in the Business for the Education Market,
including without limitation all word processing, spreadsheet,
database, graphics and desktop publishing, project management,
product testing and authoring programs.
Newco shall pay all state and local sales, transfer, value-added, or other
similar taxes, and all recording and filing fees that may be imposed by reason
of the sale, transfer, assignment, and delivery of the Education Market Assets.
Risk of loss to the Education Market Assets shall pass from the Seller to Newco
at the Closing. All Assets shall be sold free and clear of all liens and
encumbrances except those expressly assumed by Newco. The Education Market
Assets shall specifically exclude ownership rights in Seller's intellectual
property, products, and related copyrights, capitalized development costs, net
operating losses, and other tax benefits which shall remain with Seller.
3. Grant of Licenses; Exclusivity Period. Seller shall grant to Newco
the following licenses and distribution rights with respect to the Licensed
Programs (as described on Schedule I attached hereto) and Third Party Software
(as described on Schedule II attached hereto):
(a) A non-exclusive, perpetual, fully paid-up, worldwide right and license
to use, copy or otherwise reproduce, modify, correct defects or
deficiencies in, and to prepare Newco Derivative Works (as defined
below) based on, all or any portion of the Licensed Programs
(specifically including any and all lesson content);
(b) A perpetual, worldwide right and license to market, distribute, and
sublicense the Licensed Programs and Newco Derivative Works of the
Licensed Programs in the Education Market, directly or through
sub-distributors, dealers, Independent Marketing Representatives
("IMRs") or other third parties, subject to the royalty obligations set
forth in Section 6 below. The foregoing license shall be exclusive
during the Exclusivity Period (as defined below);
(c) Commencing upon expiration of the Exclusivity Period, a non-exclusive,
perpetual, worldwide right and license to market, distribute, and
sublicense the Licensed Programs and Newco Derivative Works of the
Licensed Programs in the Home Market, subject to the royalty
obligations set forth in Section 6 below;
(d) A non-exclusive perpetual, worldwide right and sublicense to use, copy
or otherwise reproduce, modify, correct defects or deficiencies in, and
to prepare Newco Derivative Works based on, all or any portion of the
Third Party Software, subject to the provisions and royalties, if any,
due to the original licensors of the Third Party Software;
(e) A perpetual, worldwide right and sublicense to market, distribute, and
sublicense the Third Party Software and Newco Derivative Works of the
Third Party Software in the Education Market, directly or through
sub-distributors, dealers, IMRs, or other third parties, subject to the
provisions and royalties, if any, due to the original licensors of the
Third Party Software. The foregoing license shall be exclusive during
the Exclusivity Period;
(f) Commencing upon expiration of the Exclusivity Period, a non-exclusive,
perpetual, worldwide right and sublicense to market, distribute and
sublicense the Third Party Software and Newco Derivative Works of the
Third Party Software in the Home Market, directly or through
sub-distributors, dealers, IMRs, or other third parties, subject to the
provisions and royalties, if any, due to the original licensors of the
Third Party Software; and
(g) A non-exclusive, perpetual, worldwide right and sublicense to market,
distribute and sublicense the Licensed Programs, the Third Party
Software, and Newco Derivative Works of the Licensed Programs or Third
Party Software, in the Internet Market, directly or through
sub-distributors, dealers, IMRs, or other third parties, subject to the
provisions and royalties, if any, due to the original licensors of the
Third Party Software and the royalty provisions of Section 6 below.
All licenses of Licensed Programs from Seller to Newco shall include source code
and object code, but all sublicenses from Newco shall be object code only.
Notwithstanding the foregoing grants of licenses and sublicenses to Newco,
Seller reserves all rights not explicitly granted herein, including the
perpetual, worldwide right to use, copy or otherwise reproduce, modify, correct
defects or deficiencies in, prepare and distribute Seller Derivative Works based
upon, and market, distribute, and sublicense the Licensed Programs, Third Party
Software, and Seller Derivative Works of the Licensed Programs or Third Party
Software, in the Home Market and Internet Market, directly or through
sub-distributors, dealers, IMRs or other third parties, subject to the
provisions and royalties, if any, due to the original licensors of the Third
Party Software. The foregoing reservation of rights shall be exclusive to Seller
for the Home Market during the Exclusivity Period, i.e., during the Exclusivity
Period Newco shall not market, distribute, or sublicense through retail channels
to the Home Market the Licensed Programs, Third Party Software, or Newco
Derivative Works of the Licensed Programs.
Notwithstanding any of the foregoing provisions to the contrary, during the
Exclusivity Period Seller shall not market, distribute, or sublicense to the
Education Market the Licensed Programs, Third Party Software or Seller
Derivative Works of the Licensed Programs. The provisions of the foregoing
sentence shall not apply to inadvertent or incidental sales of the Licensed
Programs, Third Party Software or Derivative Works of the Licensed Programs to
education institutions in the Education Market so long as the sales occur
through a retail distribution channel and result from general marketing
activities or catalogs that are not substantially directed or targeted at
educators or educational institutions in the Education Market.
For purposes of this Commitment, "Education Market" means the following markets
for standalone products (program resides and runs on one workstation only) and
networked products (program runs on more than one workstation concurrently, with
multiple workstations connected to a common server): (i) preschool education
institutions, facilities, and programs, both public and private; (ii) K-12
education institutions, facilities, and programs, both public and private; (iii)
juvenile and adult basic education institutions, facilities, and programs, both
public and private, including correctional facilities and corporate sites; (iv)
post-secondary educational institutions, facilities, and programs, including
vocational schools and community colleges; (v) individuals (or parents of minor
students) who are enrolled in the foregoing educational institutions,
facilities, or programs, provided the sales are made through such institutions,
facilities, or programs (as opposed to retail sales); and (vi) organizations
directly affiliated with the above education institutions, such as PTAs.
For purposes of this Commitment, "Home Market" means the following markets: (i)
retail or off-the-shelf sales to individual end-users; and (ii) direct channel
sales, including mail order, directed to individual end-users. Seller shall
develop new product names for the Home Market so that products offered by Seller
in the Home Market are distinguishable from products offered by Buyer in the
Education Market. Seller shall in all events have the right, where accurate and
appropriate, to refer to Wasatch Education Systems as the development origin of
products it offers in the Home Market. In the event Seller introduces a
"networked" product for the Home Market during the Exclusivity Period, Seller
shall (i) provide Buyer at least 3 months' prior written notice of the
anticipated release date; and (ii) label the "networked" product as follows:
"Not Intended for School Use".
For purposes of this Commitment, "Internet Market" shall mean distribution or
delivery of the Licensed Programs, Third Party Software, or Derivative Works to
end users over a wide area network using electronic data communications
technology as presently implemented in the Internet or as hereafter designed for
use in conjunction with telephone, cable, wireless, or other types of data
transmission systems.
The "Exclusivity Period" shall be a period of one (1) year from the Closing
Date; provided, however, that the Exclusivity Period may be extended upon
payment of certain Minimum Royalties by Newco to Seller as follows:
Minimum Royalty Due Date New Exclusivity Period
--------------- ----------------------- -----------------------
$ 500,000 End of 1st License Year Two (2) License Years
$ 500,000 End of 2nd License Year Three (3) License Years
$ 500,000 End of 3rd License Year Four (4) License Years
$ 500,000 End of 4th License Year Five (5) License Years
Minimum Royalties paid under this Section 3 shall be credited against royalties
due under Section 6 below for Net Revenues, and royalties paid under Section 6
below for Net Revenues shall be applied to satisfy the Minimum Royalty
obligations. In the event the royalties due under Section 6 below for any
License Year are less than the Minimum Royalty paid for that License Year, an
amount equal to the Minimum Royalty paid for that License Year minus the actual
royalties payable for that License Year under Section 6 below shall be credited
against royalties due under Section 6 below for Net Revenues in subsequent
License Years. In the event royalties paid under Section 6 below for Net
Revenues in any License Year exceed the Minimum Royalty due for that License
Year, an amount equal to the Section 6 royalties actually paid minus the Minimum
Royalty shall be credited against Minimum Royalties next falling due under this
Section 3 for subsequent License Years.
4. Assumption of Liabilities. On the Closing Date, Newco shall assume (and
indemnify Seller against) the following liabilities and obligations
(collectively the "Assumed Liabilities"):
(a) Liabilities of the Seller relating to its business in the
Education Market or to this Acquisition which are shown on the
most recent balance sheet of Seller and/or are otherwise known to
the Management Group, excepting the following which Seller shall
retain: (i) indebtedness and obligations evidenced by certain
debentures having a face principal amount of $1.2 million; and
(ii) any and all obligations and commitments of Seller to its
shareholders or directors who are not Seller's employees;
(b) Obligations to the existing installed base of Education Market
customers for software support and maintenance arising before and
after the Closing Date;
(c) Royalties owed to third party licensors on account of (i)
Seller's sublicensing of Third Party Software to its customers
before the Closing Date; and (ii) Newco's sublicensing of Third
Party Software to its customers from and after the Closing Date,
but specifically excluding Seller's sublicensing of Third Party
Software to its customers after the Closing Date.
5. Cash Purchase Price. In addition to the assumption of the Assumed
Liabilities, Newco shall pay to Seller cash consideration ("Cash Consideration")
in the amount of One Million Five Hundred Thousand Dollars ($1,500,000), payable
at the Closing. At its option, Newco may discharge the royalty obligations set
forth in Section 6 below and the Minimum Royalty payments under Section 3 above
by paying to Seller, on the Closing Date or within one (1) year after the
Closing Date, an additional Cash Consideration of Three Million Five Hundred
Thousand Dollars ($3,500,000) for a total Cash Consideration of Five Million
Dollars ($5,000,000), in which event Newco's licenses in the Education Market
shall be perpetually exclusive and the Exclusivity Period shall be deemed to be
5 years for all other purposes.
6. Royalty Payments to Seller. In addition to assuming the Assumed
Liabilities and paying the Cash Consideration, Newco shall pay to Seller
royalties based upon Net Revenues collected by Newco from the distribution and
licensing of the Licensed Programs and Newco Derivative Works during the five
(5) year period commencing on the Closing Date (each of the five (5) years
during this period is sometimes referred to as a "License Year.") The royalties
shall be calculated as follows:
(a) On Net Revenues derived from licenses of the Licensed Programs
(existing code and educational content), the royalty shall be
ten percent (10%) of said Net Revenues;
(b) On Net Revenues from Newco Derivative Works which are
modifications or enhancements of the Licensed Programs (code
and content), the royalty shall be five percent (5%) of said
Net Revenues until aggregate royalties paid to Seller on said
Net Revenues are equal to the fully burdened cost of
developing such Newco Derivative Works; thereafter the royalty
shall be ten percent (10%) of said Net Revenues;
(c) On Net Revenues from Newco Derivative Works which are all new
code, but which are based substantially upon the educational
content of the Licensed Programs, the royalty shall be two and
one-half percent (2.5%) of said Net Revenues until aggregate
royalties paid to Seller on said Net Revenues are equal to the
fully burdened costs of developing such Newco Derivative
Works; thereafter the royalty shall be five percent (5%) of
said Net Revenues.
For purposes of this Commitment, "Net Revenues" shall mean gross monies actually
received by Newco from the distribution or sublicensing of the Licensed Programs
or Newco Derivative Works, less the following: sales, use, and excise taxes,
tariff duties, packing, insurance, shipping and similar charges separately
invoiced and reimbursed by customers, reasonable amounts of credits or refunds
for returns, and credits, discounts, rebates and promotional allowances. "Net
Revenues" shall not include monies received by Newco for installation services,
consulting or training services, maintenance and upgrade services and support
purchased separately from the initial sublicense, sales or leases of hardware or
peripheral devices, sales or licenses of Third Party Software (as to which Newco
makes payment directly to the original licensor thereof), sales of print
materials, or sales, licenses or sublicenses or software products or works other
than the Licensed Programs or Newco Derivative Works of the Licensed Programs.
Royalties owed under this Section 6 shall be due and payable annually within
forty five (45) days after the end of Newco's fiscal year. For purposes of this
Commitment, "Newco Derivative Works" shall mean any software programs offered by
Newco an integral part of which includes substantial code or instructional
content of the Licensed Programs; and "Seller Derivative Works" shall mean any
software programs offered by Seller an integral part of which includes
substantial code or instructional content of the Licensed Programs. Except for
the royalty obligations owed by Newco to Seller on Newco Derivative Works,
neither Seller nor Newco shall acquire any intellectual property rights or
licenses in the Derivative Works of the other.
7. Adjustment to Cash Consideration. In arriving at the Cash Consideration
set forth in Section 5 above and the royalty payments set forth in Section 6
above (collectively, the "Purchase Price"), the parties have attempted to make a
reasonable and good faith allocation of value between the assets and business
being sold or transferred to Newco under this Agreement (the "Sold Business")
and the assets and business being retained by Seller (the "Retained Business").
However, neither party is entirely comfortable that the Purchase Price properly
reflects the appropriate allocation of value between the Sold Business and the
Retained Business. Therefore, Seller and Newco hereby agree that the Purchase
Price shall be adjusted as set forth below in the event there is an acquisition,
merger, or sale of all or substantially all of the assets (the "Acquisition") of
the Sold Business or Retained Business:
(a) In the event of an Acquisition of the Sold Business, Newco or its
successor shall have the option of discharging the royalty
obligations set forth in Section 6 above by paying to Seller an
amount equal to $3,500,000, which royalty discharge amount shall
be paid within thirty (30) days after the closing of the
Acquisition. In the event Newco or its successor does not
exercise the foregoing option, the royalty obligations set forth
in Section 6 above shall be expressly assumed by the successor
company in the Acquisition and continue in full force and effect
against said successor.
(b) In the event of an Acquisition of the Sold Business within two
(2) years after the Closing Date, then, in addition to the
payment of any royalty or royalty buyout under subsection (a)
above, the Purchase Price shall be increased by an amount
calculated as follows (the "Increased Amount") based upon the
"Net Sold Business Acquisition Proceeds":
Portion of
Net Sold Business
Month of Sold Business Acquisition AcquisitionProceeds
---------------------------------- -------------------
1-12 months after Closing Date 10.00%
13-16 months after Closing Date 7.50%
17-20 months after Closing Date 5.00%
21-24 months after Closing Date 2.50%
25 or more months after Closing Date 0.00%
For purposes of this Commitment, "Net Sold Business
Acquisition Proceeds" shall mean (a) the total cash
consideration, plus the Fair Market Value of property or
stock, received by Newco or its Shareholders as payment in the
Sold Business Acquisition, less all commissions and
out-of-pocket expenses of the Sold Business Acquisition, minus
(b) the sum of (i) the Cash Consideration paid to date, (ii)
the aggregate royalties paid to date under Section 6 above or
subsection 7(a) above, and (iii) in the case of an asset sale,
the debts and obligations owed to creditors of Newco
immediately prior to the Sold Business Acquisition. The
Increase Amount of the Purchase Price shall be paid by Newco
to Seller within thirty (30) days after the closing of the Net
Sold Business Acquisition.
(c) In the event of an Acquisition of the Retained Business within
two (2) years after the Closing Date, then notwithstanding the
payment of any royalty or royalty buyout under subsection (a)
above, the Purchase Price shall be decreased by an amount
calculated as follows (the "Decreased Amount") based upon the
"Net Retained Business Acquisition Proceeds":
Portion of
Month of Net Retained Business
Retained Business Acquisition Acquisition Proceeds
----------------------------- ---------------------
1-12 months after Closing Date 10.00%
13-16 months after Closing Date 7.50%
17-20 months after Closing Date 5.00%
21-24 months after Closing Date 2.50%
25 or more months after Closing Date 0.00%
For purposes of this Commitment, "Net Retained Business
Acquisition Proceeds" shall mean (a) the total cash
consideration, plus the Fair Market Value of property or
stock, received by Seller or its Shareholders as payment in
the Retained Business Acquisition, less all commissions and
out-of-pocket expenses of the Retained Business Acquisition,
minus (b) the sum of (i) Seller's shareholder indebtedness and
Preferred Stock liquidation preferences as of the Closing
Date, and (ii) in the case of an asset sale, the debts and
obligations owed to creditors of Seller immediately prior to
the Retained Business Acquisition.
(d) For purposes of subsections (b) and (c) above, "Fair Market
Value" shall be determined by agreement between Newco and Seller;
provided, however, that if Newco and Seller cannot agree upon
Fair Market Value by the closing date, Newco and Seller shall
each appoint an appraiser qualified to value the property or
stock received, and if the two appraisers so appointed cannot
agree upon Fair Market Value within twenty (20) days after the
Acquisition closing date, the two appraisers shall jointly select
a third appraiser and the Fair Market Value shall be the average
of the three appraisals. The Decreased Amount of the Purchase
Price shall be offset against the next royalties due by Newco to
Seller under Section 6 above.
8. Transition Support and Services. At the Closing, Newco shall deliver
to Seller copies of all source code and object code with respect to the Licensed
Programs and Third Party Software, together with copies of scripts, functional
specifications, design documents, story boards, programming notes and other
documentation relating to the foregoing; provided however, that Newco's
obligations shall be limited to materials which presently exist and are within
the possession or control of Newco. For a period of six (6) months after the
Closing Date, Newco shall provide to Seller technical assistance on a "best
efforts, as available" basis to support Seller's use of the Licensed Programs
and development of Seller Derivative Works of the Licensed Programs. This
support shall consist of timely telephone, fax, or e-mail responses to specific
questions of Seller relating to the code or documentation of the Licensed
Programs that can be readily answered by Newco without the need for substantial
research or analysis on the part of Newco.
At the Closing, the Management Group shall deliver to Seller copies of all files
and records of Seller in hard copy or magnetic format relating to the Education
Market and/or the Licensed Products and Third Party Software (including, without
limitation, those assets listed above in Sections 2 (c, d, f, i, j, and l) which
might assist Seller in continuing its business in an orderly and efficient
manner. In particular, Newco shall provide to Seller accounting assistance on a
"best efforts, as available" basis to support Seller's ownership and use of the
capitalized development, net operating losses, and other tax benefits which
remain with Seller. Seller shall hold all such material and information
confidential, not disclose it to third parties, and use it solely for its own
internal purposes in connection with its business in the Home Market.
9. Conditions to Closing. Newco's obligations under this Commitment are
contingent upon satisfaction of the following conditions:
(a) Approval of this Commitment by the Board of Directors of Seller
on or before July 1, 1996;
(b) Newco's obtaining the necessary cash or other financing to pay
the Cash Consideration;
(c) Newco's obtaining the required consents, if any, of third parties
to an outright assignment or transfer of Education Market Assets;
and
(d) Newco's obtaining the required consents, if any, of third parties
to a license of the Licensed Programs and sublicense of Third
Party Software, on terms acceptable to Newco.
(e) Seller's obtaining the approval or forbearance, if required, of
its shareholders and debenture holders prior to consummation of
the Acquisition; provided that: (i) Seller shall use its best
efforts to obtain prior to July 31, 1996, any approval or
forbearance of debenture holders required for the consummation of
this Acquisition; (ii) Seller's Board of Directors shall prior to
July 15, 1996, determine whether shareholder approval is required
for the Acquisition, and, if required, (A) use its best efforts
to obtain prior to July 31, 1996, the shareholder commitment to
approve the consummation of this Acquisition from those
shareholders, or the shareholder's parent, subsidiary or related
entity, in which one of the disinterested directors of Seller is
an officer, director, corporate agent, or general partner; and
(iii) Seller's Board of Directors shall recommend the approval of
this Acquisition to all other shareholders in connection with the
notice of shareholders' meeting.
10. Limited Warranty. Seller warrants that it has good and marketable title
to all Education Market Assets and that its conveyance of the same to Newco
shall vest in Newco good, marketable and unencumbered title to all Education
Market Assets. SELLER MAKES NO WARRANTY, EXPRESS OR IMPLIED, EXCEPT AS
SPECIFICALLY SET FORTH IN THIS COMMITMENT, AND HEREBY DISCLAIMS AND EXCLUDES ALL
WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING ANY AND ALL WARRANTIES OF
MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR
NONINFRINGEMENT, OR QUALITY, WITH RESPECT TO THE EDUCATION MARKET ASSETS OR ANY
PART THEREOF, OR THE BUSINESS, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER
LATENT OR PATENT, IT BEING UNDERSTOOD THAT EXCEPT AS EXPRESSLY SET FORTH IN THIS
COMMITMENT, THE EDUCATION MARKET ASSETS AND THE BUSINESS ARE TO BE CONVEYED
THEREUNDER "AS IS, WHERE IS" ON THE CLOSING DATE, AND NEWCO SHALL RELY UPON ITS
OWN EXAMINATION THEREOF.
11. Cooperation of Seller to Effect Closing. Seller and Newco covenant to
cooperate in good faith to permit Closing of the transaction contemplated by
this Commitment, including the following:
(a) Continue to maintain, in all material respects, the Education
Market Assets in accordance with present practices of Seller's
Business; and
(b) With respect to Seller's Business, keep its books of account,
records, and files in accordance with existing practices of the
Business;
(c) Use commercially reasonable efforts to obtain all material
consents, waivers, authorizations, and approvals of all other
persons required in connection with the execution, delivery, and
performance by of this Commitment;
(d) Diligently cooperate in preparing and filing all documents
required to be submitted by Seller or Newco to governmental
entities in connection with such transactions and in obtaining
any consents, waivers, authorizations or approvals of the
governmental entities which may be required to be obtained by
Newco in connection with such transactions (which cooperation
shall include, without limitation, timely furnishing to Newco all
information concerning the Business which counsel to Newco
reasonably determines is required to be included in such
documents);
(e) Use commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things
necessary, proper, or advisable consistent with applicable law to
consummate and make effective in the most expeditious manner
practicable the transactions contemplated hereby.
12. Finders Fees. Seller and Newco each warrant to the other that it has
incurred no obligation to pay any finders fees or commissions in connection with
Newco's acquisition of the Education Market Assets and each agree to defend,
indemnify, and hold the other harmless from and against any and all liability
for any such commission, fee, or other compensation asserted by any person
claiming by, through, or under Seller or Newco, respectively, in
connection with these transactions.
13. Transferred Employees. Newco shall offer all employees of Seller
employment with Newco at the same title, salary, and responsibility, and Newco
shall assume all liabilities of Seller with respect to such transferred
employees, including but not limited to accrued wages, accrued vacation, sick
leave, employee reimbursements, and severance, if any; and Newco shall defend,
indemnify, and hold Seller harmless from and against any claims or liability for
such employee obligations.
14. Expenses. Each of the parties hereto shall pay its own expenses in
connection with this Commitment and the transactions contemplated hereby,
including, without limitation, any legal and accounting fees, whether or not the
transactions contemplated hereby are consummated.
15. Bulk Sales Waiver. Newco waives compliance by Seller with any
applicable bulk sales laws that may apply to the transactions contemplated by
this Agreement.
16. Notices. Any notice or communication required or permitted by this
Commitment shall be in writing and shall be delivered as follows: (i) by
personal delivery to the party to whom the notice is to be given, (ii) by
overnight delivery service, (iii) by prepaid registered or certified mail,
return receipt requested, or (iv) by facsimile. Except for notice of a party's
change of address, which shall be effective only upon actual receipt, a notice
or communication shall be effective (a) in the case of personal service, upon
receipt by the party, (b) by overnight delivery, one (1) day after placing the
notice of communication in the care of the delivery service as confirmed by the
receipt provided by such service, (c) by registered or certified mail, five (5)
days after mailing, as confirmed by the date on the receipt provided by the
postal service, and (d) by facsimile transmission, upon transmission as
confirmed by telephone that such notice or communication has been received in
legible form. All notices or other communications shall be sent to the recipient
at the address listed below (or such other address that the receiving party may
have provided for the purpose of receiving notices and other communications in
accordance with this Section 16.8):
If to the Seller:
Wasatch Education Systems Corporation
c/o Technology Funding, Inc.
0000 Xxxxxxx xx xxx Xxxxxx
Xxx Xxxxx, XX 00000
Attention: Xxxx Xxxxxx
Fax: (000) 000-0000
Copy to:
Xxxxxxx Xxx
c/o Technology Funding, Inc.
0000 Xxxxxxx xx xxx Xxxxxx
Xxx Xxxxx, XX 00000
Xxxx Xxxxxx
Unison Capital Group
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxx, XX 00000
If to Newco:
Wasatch Education Systems
0000 Xxxxx 000 Xxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxxx Xxxxx
Fax: (000) 000-0000
with copy to:
Xxxx X. Xxxxxxxxxxx, Esq.
00000 X. X. 000xx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
17. Public Announcements. The parties agree that after the signing of this
Commitment, neither party shall make any press release or announcement
concerning this transaction without the prior written approval of the other
party; provided however, that the parties shall negotiate in good faith a joint
press release or announcement to be released after the Closing. Such release
shall not reveal the material terms of the consummated transactions. If any such
announcement or other disclosure is required by law, the disclosing party agrees
to provide the nondisclosing party with prior notice and an opportunity to
comment on the proposed disclosure.
18. Parties in Interest. Nothing in this Commitment is intended to confer
any rights or remedies under or by reason of this Commitment on any persons
other than the Seller and Newco and their respective successors and permitted
assigns. Nothing in this Commitment is intended to relieve or discharge the
obligations or liability of any third persons to the Seller or Newco. No
provision of this Commitment shall give any third persons any right of
subrogation or action over or against the Seller or Newco.
19. Counterparts. This Commitment may be executed in counterparts, each of
which shall be deemed an original, but all of which shall constitute the same
instrument.
20. Closing Date. For purposes of this Commitment, the "Closing Date" shall
be the sooner of: (a) the Expiration Date (as defined in Section 1 above); or
(b) ten (10) days after the date on which Newco advises Seller that Newco is
ready, willing, and able to consummate the purchase of the Education Market
Assets and assumption of the Assumed Liabilities on the terms and provisions set
forth in this Commitment. On the Closing Date, all Education Market Assets shall
be transferred to Newco and Newco shall assume all Assumed Liabilities and
responsibilities relating to the Licensed Programs and Third Party Software as
set forth in this Commitment.
21. Entire Agreement. This Commitment contains the entire understanding
between the parties hereto with respect to the transactions contemplated hereby
and supersedes and replaces all prior and contemporaneous agreements and
understandings, oral or written, with regard to such transactions. All schedules
hereto and any documents and instruments delivered pursuant to any provision
hereof are expressly made a part of this Commitment as if completely set forth
herein. Seller acknowledges that Newco has not yet been formed, and agrees to
look solely to Newco, and not to any of the Management Group for performance or
satisfaction of any obligations undertaken for or on behalf of Newco.
IN WITNESS WHEREOF, the parties hereto have executed this Commitment by their
respective officers thereunto duly authorized on the date first written above.
SELLER: NEWCO:
WASATCH EDUCATION SYSTEMS WASATCH NEWCO,
CORPORATION, a Utah corporation a Utah Corporation to be formed
By /s/Xxxxxxx X. Xxxxxx By /s/Xxxxxxx Xxxxxx
--------------------- -----------------
Xxxxxxx X. Xxxxxx, Director Xxxxxxx Xxxxxx, President
