ASSET PURCHASE
AGREEMENT
THIS AGREEMENT is made as of the 30th day of December 2005.
BETWEEN:
N. HARRIS COMPUTER CORPORATION , a corporation
incorporated under the laws of the Province of Ontario (hereinafter
referred to as the "Purchaser")
- and -
Government e-Management Solutions, Inc. (the
"Vendor")
- and --
Cass Information Systems, Inc. (the "Warrantor");
WHEREAS the Vendor carries on the business of software
development, sales and marketing and application support;
AND WHEREAS the Vendor desires to sell and the Purchaser desires
to purchase certain of the assets and assume certain of the
liabilities of the Vendor pertaining to the Business (as hereafter
defined), upon and subject to the terms and conditions hereinafter
set forth;
NOW THEREFORE, in consideration of the premises and the
covenants and agreements herein contained, the parties hereto agree
as follows:
1.0
INTERPRETATION
1.1
Definitions. In this Agreement, unless something in the subject
matter or context is inconsistent therewith:
(a)
"Agreement" means this agreement and all Schedules hereto and all
amendments made hereto and thereto by written agreement between the
Vendor and the Purchaser.
(b)
"Assets" means the assets referred to or described in Sections 2.1
and 2.2.
(c)
"Business" means the business of developing, selling and supporting
the Software products currently organized under Government
e-Management Solutions, Inc., including any products that are in
the development stage or currently being supported by the Vendor.
The Business includes all versions and modules of the Software.
(d)
"Business Day" means a day other than a Saturday, Sunday or
statutory holiday in Ontario or Missouri.
(e)
"Claims" means all actually incurred or asserted losses, damages,
expenses, liabilities, claims and demands of whatever nature or
kind including, without limitation, all reasonable legal fees and
costs.
(f)
"Closing Date" means December 30, 2005 or such other date as may be
agreed to in writing between the Vendor and the Purchaser.
(g)
"Contracts" means any contract, lease, agreement, entitlement,
arrangement, commitment, work order or license by which the
Business is bound including, without limitation, all licenses,
support and maintenance arrangements applicable to the Software
which are attached and incorporated by referenced on Schedule B and
G (Lease).
(h)
"Effective Date" means the day next following the Closing Date.
(i)
"Intellectual Property" has the meaning set out in Section
2.1(a).
(j)
"Lien" means any security interest, mortgage, encumbrance, option,
lien or charge of any kind, including any limitation on transfer,
use, receipt of income or other exercise of any attributes of
ownership of the Assets, and any license for use or possession of
the Assets of the Business, excluding (1) any rights or interests
related thereto which have been granted with respect to the
Software under any Contract and (2) any rights arising under the
matters disclosed in any Schedule to this Agreement.
(k)
"Letter of Intent" shall mean the letter of intent entered into
between Vendor and Purchaser dated December 2, 2005.
(l)
"Material" as it relates to known issues or defects in the Software
means anything that would not allow the Software to perform
according to its published specification or intention.
(m)
"Purchase Price" has the meaning set out in Section 2.3.
(n)
"Software" means the computer programs known by the names as set
out in Schedule A, including all versions thereof, and all related
documentation, manuals, source code and object code, program files,
data files, computer related data, field and data definitions and
relationships, data definition specifications, data models, program
and system logic, interfaces, program modules, routines,
sub-routines, algorithms, program architecture, design concepts,
system designs, program structure, sequence and organization,
screen displays and report layouts specifically related to the
Business, and all other material related to the said computer
programs, all as they exist at the Time of Closing, whether under
development or as currently being marketed by the Vendor
specifically with respect to the Business.
(o)
"Schedules" means those schedules listed in Section 1.5.
(p)
"Tangible Assets" means the tangible assets of the Business
described on Schedule C attached hereto.
(q)
"Tangible Liabilities" means the tangible liabilities of the
Business described on Schedule C attached hereto.
(r)
"Time of Closing" means 1:00 p.m. (local Ottawa Time) on the
Closing Date.
1.2
Extended Meanings. In this Agreement words importing any gender
include all genders, words importing the singular number include
the plural and vice versa, and words importing persons include
individuals, partnerships, associations, trusts, unincorporated
organizations and corporations.
1.3
Accounting Principles. Wherever in this Agreement reference is made
to a calculation to be made or an action to be taken in accordance
with generally accepted accounting principles, such reference will
relate to the generally accepted accounting principles from time to
time approved by the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board, or any
successor institute, applicable as at the date on which such
calculation or action is made or taken or required to be made or
taken in accordance with generally accepted accounting
principles.
1.4
Currency. All references to currency herein are to lawful money of
the United States.
1.5
Schedules. The following are the Schedules attached hereto and
incorporated by reference and deemed to be part hereof:
Schedule A - Software and Intellectual Property;
Schedule B - Contracts;
Schedule C -- Net Tangible Assets;
Schedule D -- Contracts in Progress;
Schedule E -- Transferred Employees;
Schedule F -- Employment Agreement;
Schedule G -- Lease for Premises;
Schedule H -- Lawsuit Disclosures; and
Schedule I -- Additional Disclosures and Limitations
1.6
Contracts in Progress. The parties acknowledge and accept the
information regarding Contracts in Progress disclosed on Schedule
D.
2.0 SALE
AND PURCHASE
2.1
Purchase and Sale of Software and Intellectual Property.
(a)
Upon and subject to the terms and conditions hereof, the Vendor
will sell, convey, assign and transfer in perpetuity to the
Purchaser free and clear of all Liens, and Purchaser will purchase
from the Vendor, as of and with effect from the opening of business
on the Effective Date:
(i)
the Software and all of Vendor's intellectual property rights in
the Software as listed on Schedule A, subject to Schedules H and
I;
(ii)
all intellectual property of the Vendor relating solely to the
Business existing as of the Time of Closing and used or currently
being developed for use by the Vendor solely in connection with the
Business, whether registered or unregistered (the "Intellectual
Property"), including without limitation:
(A)
Copyrights - all copyrights in the Software owned by the Vendor and
used solely in connection with the Business, including without
limitation, all copyrights in and to the Software and all
applications and registrations of such copyrights;
(B)
Trade-marks -- all trade-marks, trade-names, service marks, brand
names, logos or the like owned by the Vendor and used solely in
connection with the Business and listed in Schedule A, whether used
in association with wares or services, and all associated goodwill
and all applications, registrations, renewals, modifications and
extensions of such trade-marks;
(C)
Patents - all patents, patent applications and other patent rights,
if any, owned by the Vendor that are used solely in connection with
the Business and are listed in Schedule A, including divisional and
continuation patents;
(D) Name
-- all of the Vendor's rights in the names associated with the
products listed in Schedule A;
(E)
Technology - all technology created, developed or acquired by the
Vendor in connection with the Software that is used solely in
connection with the Business whether or not patented or patentable
and whether or not fixed in any medium whatsoever, including
without limitation, all inventions, know how, techniques,
processes, procedures, methods, trade secrets, research and
technical data, records, formulae, designs, sketches, patterns,
specifications, schematics, blue prints, flow charts or sheets,
equipment and parts lists and descriptions, samples, reports,
studies, findings, algorithms, instructions, guides, manuals, and
plans for new or revised products and/or services;
(F)
Licenses -- to the extent assignable, all licenses, sub-licenses
and franchises related to the Vendor and the Business in which the
Vendor and the Business is a licensee or a licensor of intellectual
property of a nature described in paragraphs (A)-(E) above; and
(iii) for
greater certainty, all of the Vendor's rights to develop, modify,
market, sell, distribute, license and install the current and any
future releases of the Software and Intellectual Property as
outlined in Schedule A.
2.2
Purchase and Sale of Other Assets.
(1)
Upon and subject to the terms and conditions hereof, the Vendor
will sell, convey, assign and transfer to the Purchaser, free and
clear of all Liens, but subject to the licenses granted with
respect to any customer Contracts, and the Purchaser will purchase
from the Vendor, as of and with effect from the opening of business
on the Effective Date, the other assets listed below. The assets to
be sold and purchased pursuant to this Section 2.2(1) are the
following:
(a)
Contracts - the right, title and interest of the Vendor and
relating solely to the Business in, to and under all software
support and maintenance arrangements and any other agreements,
engagements, commitments and other rights of or pertaining to the
customers whether written or oral, as which are described in and
attached on Schedule B;
(b)
Work in Process - all work and contracts in process relating solely
to the Business;
(c)
Warranty Rights -- to the extent assignable by Vendor, the full
benefit of all representations, warranties, guarantees,
indemnities, undertakings, certificates, covenants, agreements and
the like and all security therefor received by the Vendor on the
purchase or other acquisition of any part of the Assets;
(d)
Records - photocopies of all books, records or files relating
solely to the Business for the years 2003 through 2005 inclusive,
including, without limitation, all financial, production, personnel
(where allowed under Missouri law), sales and customer records,
exclusive of Vendor's tax returns and corporate operational
documents and exclusive of any such records which contain
information concerning any of the divisions of Vendor's company,
other than the Business; and
(e)
Tangible Assets of the Business as described on Schedule C.
(2)
For greater certainty, the Vendor hereby acknowledges that the
Purchase Price payable by Purchaser to Vendor in accordance with
the provisions of this Article 2 represents the full and final
payment due to Vendor from Purchaser in respect of the purchase of
the Assets. The Vendor and Warrantor hereby:
(a)
surrender all its right, title and interest in and to the
Assets;
(b)
Vendor waives all moral rights in the Software and Intellectual
Property; and
(c)
release the Purchaser from any and all claims which the Vendor now
or in future may have in respect of the Assets.
2.3
Purchase Price and Allocation Thereof. The purchase price payable
by the Purchaser to the Vendor for the Assets (such amount being
hereinafter referred to as the "Purchase Price") will be Seven
Million Dollars ($7,000,000) and will be allocated no later than
fifteen (15) days after the Effective Date on a basis satisfactory
to Purchaser, and in compliance with the Internal Revenue Code of
1986, as amended (the "Code"). In no event will the Intellectual
Property valuation exceed Four Million Five Hundred and Fifty
Thousand Dollars ($4,550,000).
2.4
Payment of Purchase Price. The Purchase Price shall be paid by the
Purchaser in the following manner:
(a)
Cash on Closing -- Subject to Section 4.1 hereof, a wire transfer
in the amount of Six Million Six Hundred Thousand Dollars
($6,600,000) shall be payable to or to the order of the Vendor at
the Time of Closing.
(b)
Balance of Purchase Price; Purchase Price Adjustment - The balance
of the Purchase Price, Four Hundred Thousand Dollars ($400,000)
(the "Holdback Amount"), shall be subject to adjustment as
described below. The Holdback Amount shall be used to compensate
the Purchaser for any indemnification Claims made by the Purchaser
in accordance with this Agreement during the nine month period
following the Closing Date that are determined to be the
responsibility of Vendor. The Purchaser shall pay the remaining
Holdback Amount, after any such adjustments required by this
section, to the Vendor by wire transfer, no later than the date
which is nine months and ten days from the Time of Closing. Such
Holdback Amount shall be paid in good faith and on a timely basis
and shall not be unreasonably withheld.
(c)
Net Tangible Assets - Within thirty (30) days from the Closing
Date, Vendor and Purchaser shall determine the amount equal to the
difference, if any between the "Net Tangible Assets" of the
Business at the Closing Date (which is determined by subtracting
the Tangible Liabilities from the Tangible Assets as described on
Schedule C) and $600,000 (the "Book Value Adjustment"). If the Book
Value Adjustment is a negative number, an amount equal to the Book
Value Adjustment shall immediately be paid by Vendor and/or
Warrantor to the Purchaser. If the Book Value Adjustment is a
positive number, an amount equal to the Book Value Adjustment shall
immediately be paid by the Purchaser to Vendor or Warrantor.
Schedule C sets out the formula for the calculation of Net Tangible
Assets which are prepared using GAAP, consistently applied.
In the event of a claim or dispute between the parties under
subsections (b) or (c) above, the prevailing party in such claim or
dispute shall be entitled to its reasonable attorneys' fees and
costs from the other.
2.5
Determination of Amounts; Elections. The Vendor and the Purchaser
covenant and agree with each other that the Purchase Price shall be
allocated among the Assets in accordance with the provisions of
Section 2.3. The Vendor and the Purchaser agree to cooperate in the
filing of such elections under the Code and similar tax statutes in
the United States and Canada or any other jurisdiction as may be
necessary or mutually desirable to give effect to such allocation
for tax purposes. The Vendor and the Purchaser agree to prepare and
file their respective tax returns in a manner consistent with the
aforesaid allocations and elections. If either party fails to file
its tax returns as aforesaid, it shall indemnify and save harmless
the other of them in respect of any additional tax, interest,
penalty and legal and/or accounting costs paid or incurred by the
other of them as a result of the failure to file as aforesaid.
2.6
Assumption of Obligations and Liabilities.
(a)
Except as otherwise expressly provided herein, the Purchaser will
assume, fulfill and perform only those obligations and liabilities
of the Vendor that arise under the Contracts and other commitments
as described in Schedule B and will assume the obligation to
maintain the Software. Without limiting the generality of the
foregoing, Purchaser expressly agrees to assume at the Time of
Closing: (i) the Leases described on Exhibit G for the Premises
described on Exhibit G, copies of which are attached as Schedule G
("Leases"); (ii) all future maintenance obligations of Vendor with
respect to all customers who have a software maintenance agreement
with Vendor and such other customers to which Vendor otherwise
currently provides such maintenance services. At the Time of
Closing, Vendor hereby assigns any and all interest in the Leases,
to the extent assignable, to Purchaser provided that Purchaser
agrees not to exercise any rights under the respective Leases to
extend the respective Leases unless Purchaser obtains a full
release with respect to the respective Lease from the landlord
under the respective Lease.
(b)
For greater certainty, the Purchaser will not assume any obligation
or liabilities of the Vendor to the IRS or any taxing authority.
The Vendor will be solely responsible for any termination and
severance costs of Vendor's employees that may arise on or before
the Closing Date, provided that Purchaser agrees to offer
employment to the employees listed as such on Exhibit E on terms
reasonably similar to their current employment terms.
2.7
Obligations and Liabilities Not Assumed. Except as otherwise
expressly provided herein, the Purchaser does not assume and will
not be liable for any obligations or liabilities of the Vendor
except as specifically described in this Agreement.
2.8
Restrictions on Assignment. Nothing contained in this Agreement
shall be construed as an assignment or an attempt to assign:
(a)
any permit to be assigned to Purchaser hereunder which, as a matter
of law, is not assignable without the approval of the granting body
unless such approval shall have been given;
(b)
any Contract to be assigned to Purchaser hereunder which, as a
matter of law, is not assignable without the consent of and/or
advance notice to the other party or parties thereto, unless such
consent and/or advance notice shall have been given; or
(c)
any claim or demand thereunder or under any right of action or
chose in action as to which all the remedies for the enforcement
thereof enjoyed by the Vendor, would not, as a matter of law, pass
to Purchaser as an incident of the transfers to be made under this
Agreement.
In order, however, that the full value of every Contract,
permit, claim and demand of the character described in items (a)
through (c) above and which constitutes part of the Assets (herein
referred to as the "Rights") may be realized for the benefit of
Purchaser, Vendor shall hold the Rights in trust in accordance with
the terms described in Section 4.5 hereof for a period of two (2)
years from the date of this Agreement for and on behalf of
Purchaser. For a period of twenty-four (24) months following the
Time of Closing, Vendor will assist Purchaser in accordance with
the terms described in Section 4.5 hereof to obtain any assignments
or consents, but Vendor shall not be liable to Purchaser for any
reason as a result of any failure to obtain such assignments or
consents.
2.9
Substitution and Subrogation. To the extent not otherwise
prohibited by applicable law or contract, the conveyance of the
Assets to Purchaser, its successors and permitted assigns,
hereunder is with full rights of substitution and subrogation of
Purchaser, its successors and permitted assigns, in and to all
covenants and warranties by others heretofore given or made in
respect of the Assets or any part thereof.
3.0
REPRESENTATIONS AND WARRANTIES
3.1
Vendor's and Warrantor's Representations and Warranties. The Vendor
and Warrantor represent and warrant to the Purchaser that, subject
to the disclosures contained in this Agreement and the schedules
attached hereto:
(a)
Authority - The Vendor has good and sufficient power, authority and
right to enter into and deliver this Agreement and to transfer the
legal and beneficial title and ownership of the Assets to the
Purchaser free and clear of all Liens, and the execution, delivery
and performance of this Agreement and the consummation of the
transactions contemplated under this Agreement have been duly and
validly authorized and approved by all necessary legal action on
the part of the Vendor.
(b)
Binding Agreement - This Agreement and all other agreements,
documents and instruments to be executed by the Vendor constitute a
valid and legally binding obligation of the Vendor, except as
enforceability may be limited or otherwise affected by bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer,
moratorium, or other laws affecting creditors' rights or
contractual rights generally, or equitable principles affecting the
enforceability of remedies (regardless of whether the
enforceability is considered in a proceeding at law or in
equity).
(c)
No Options -- There is no contract, option or any other right of
another binding upon the Vendor to sell, transfer, assign, pledge,
charge, mortgage or in any other way dispose of or encumber any of
the Assets other than pursuant to the provisions of this Agreement
and except as provided in customer Contracts for licensure of the
Software.
(d)
No Conflict - Neither the entering into nor the delivery of this
Agreement nor the completion of the transactions contemplated
hereby by the Vendor will result in the violation of:
(i)
any of the provisions of the Vendor's articles of incorporation or
by-laws of the Vendor;
(ii)
subject to obtaining any required consent or approval, any
agreement or other instrument to which the Vendor is a party or by
which the Vendor is bound, or
(iii) any
applicable law, rule or regulation.
(e)
Books and Records - The books and records of the Vendor relating to
the Business are materially true and correct. The books and records
of the Vendor relating to the Business present fairly and disclose
in all material respects the operations of the Business. The
Vendor's annual financial statements have been prepared in
accordance with generally accepted accounting principles
consistently applied.
(f)
Interim Period - Since the signing of the Letter of Intent the
Business has been carried on in its usual and ordinary course and
the Vendor has not entered into any transaction (including any
transfer or sale of assets) out of the usual and ordinary course of
the Business. Since the signing of the letter of intent, there has
been no change in the operations or conditions of the Business,
financial or otherwise, whether arising as a result of any
legislative or regulatory change, revocation or licence or right to
do business, fire, explosion, accident, casualty, labour dispute,
flood, drought, riot, storm, condemnation, act of God, public force
or otherwise, except changes occurring in the usual and ordinary
course of business which have had a material adverse affect on the
Business, financial or otherwise.
(g)
Intellectual Property - Schedule A sets forth a full, complete and
true list of the Intellectual Property, and specifies the
jurisdictions in which such Intellectual Property has been issued
or registered or in which an application for such issuance and
registration has been filed, including the respective registration
or application numbers and the names of all registered owners,
together with a list of all of the currently marketed software
products of the Business and an indication as to which, if any, of
such software products have been registered for copyright
protection with the United States or other relevant Copyright
Office and any foreign offices and by whom such items have been
registered. The Vendor is the sole and exclusive owner of, with all
right, title and interest in and to (free and clear of any Liens,
but subject to any licenses granted with respect to the Software),
the Intellectual Property, and has sole and exclusive rights (and
is not contractually obligated to pay any compensation to any third
party in respect thereof) to the use thereof. There is no and has
not been any unauthorized use, infringement or misappropriation of
any of the Intellectual Property by any person, current or former
employee or other third party.
(h)
Software -
(i)
After January 2, 2001, the Software was written only by persons who
at the time they wrote the Software, were either employees of the
Vendor employed or any company that the Vendor acquired, or they
were contractors who assigned their intellectual property rights in
the Software to the Vendor or any company acquired by the Vendor
pursuant to written agreements;
(ii)
The Software neither contains nor embodies nor uses nor requires
any third party software, including development tools and
utilities, and the Software, together with any third party
programs, contains all materials necessary for the continued
maintenance and development of the Software in the manner the
Vendor conducted the Business through the Closing Date;
(iii) any
and all license, distribution and maintenance agreements for the
third party programs have been purchased by the Vendor, or paid up
to date as applicable, as program development tools, except in
respect of third party programs that are shrinkwrapped software and
that are purchased off-the-shelf or ordered via mail by the Vendor
in order to be passed through to the Vendor's customers or to be
used by the Vendor;
(iv) there
are no known material problems or material defects in the Software
including material failures of the Software to operate as described
in their related documentation or specifications, and, except for
such disclosed problems or defects, the Software operates in
substantial accordance with its documentation and specifications
and has no other material problems or material defects, provided
that the current versions of Permits and Inspection as well as the
current version of Tax Billing, Distribution & Collection as
well as the current version of Tax Access Portal have performance
defects and are in the process of being redeveloped, the process of
which is not complete.;
(v)
there are no commitments to enhance or improve the Software except
as may be provided in the Contracts or any work order executed in
connection therewith;
(vi) the
Software which has been delivered to customers is Year 2000
Compliant. "Year 2000 Compliant" means the product is able (i) to
accurately process date/time data (including, but not limited to,
calculating, comparing and sequencing) from, into and between the
twentieth and twenty-first centuries and during the years 1999 and
2000, including leap year calculations (2000 is a leap year), when
used in accordance with the product's documentation, and (ii) to
function accurately and without interruption before, during and
after January 1, 2000 without any change in operations associated
with the advent of 1999 or the twenty-first century;
(vii) there are
no distributors, sales agents, representatives or any other
persons, including VARs, OEMs or resellers, who have rights to
market or license the Software; and
(viii) the Vendor
has not obtained any government, regulatory, technical and similar
approvals in jurisdictions where the Software is sold or may
otherwise be required. The failure to obtain such approvals has not
had a material adverse effect on the Business.
(i)
Third Party and Customer Contracts - The Contracts, including any
amendments or addenda thereto and work orders executed in
connection therewith represent in each case the entire agreement of
the Vendor and the respective parties to such contracts. Except as
set forth on Schedules H and I, all Contracts (including the
related RFP's and proposals) are not in default or breach by Vendor
and there exists no condition, event or act that, with the giving
of notice or lapse of time or both, would constitute such a default
or breach by Vendor. All Contracts, including any amendments or
addenda thereto and work orders executed in connection therewith,
are in full force and effect without amendment thereto and the
Vendor is entitled to all benefits thereunder, and the Vendor has
performed all obligations required to be performed by it under the
Contracts. The Vendor does not know and has not received notice of
the intention of any customer to make any warranty claims in
respect of the Software or to terminate any customer. The Vendor
has made no commitments to release or develop any updates, versions
or releases of the Software except as may be provided in such
customer Contracts.
(j)
Infringement -- the Intellectual Property does not infringe upon or
violate any intellectual property right, including copyrights,
patents, trade secrets or other proprietary rights, of any third
party. The Vendor has not entered into any agreement to indemnify
any other person against any charge of infringement of any of the
Intellectual Property except as may be set forth in the
Contracts.
(k)
Litigation -- Except as disclosed on Schedules H and I, there are
no actions, suits, proceedings or judgments (whether or not
purportedly on behalf of the Vendor), threatened against or
adversely affecting, or which could adversely affect the Business
or the Assets or before or by any federal, provincial, municipal or
other governmental court, department, commission, board, bureau,
agency or instrumentality, domestic or foreign, whether or not
insured, and which might involve the possibility of any lien,
charge, encumbrance or any other right of another against the
Assets.
(l)
Orders - There are no outstanding orders, notices or similar
requirements directed specifically to the Business or to the Assets
issued by any building, environmental, fire, health, labour or
police authorities or from any other federal, state or municipal
authority including, without limitation, occupational health and
safety authorities and there are no matters under discussion with
any such authorities
