EXECUTION VERSION
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
AXS-ONE INC.
(SELLER)
AND
COMPUTRON SOFTWARE, LLC
(BUYER)
DATED AS OF OCTOBER 31, 2006
TABLE OF CONTENTS
ARTICLE I TRANSFER OF ASSETS AND LIABILITIES
Section 1.1
Assets; Excluded Assets.....................................
2
Section 1.2
Purchase Price; Assumption of Liabilities...................
4
Section 1.3
Closing.....................................................
5
Section 1.4
Deliveries by Seller........................................
6
Section 1.5
Deliveries by Buyer.........................................
6
Section 1.6
[INTENTIONALLY OMITTED].....................................
7
Section 1.7
[INTENTIONALLY OMITTED].....................................
7
Section 1.8
Certain Taxes...............................................
7
Section 1.9
Royalty Payment.............................................
7
Section 1.10
Pfizer Service Fee..........................................
9
ARTICLE II RELATED MATTERS
Section 2.1
Possession..................................................
10
Section 2.2
Books and Records of Seller.................................
10
Section 2.3
Employees and Employee Benefits.............................
10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER
Section 3.1
Organization................................................
13
Section 3.2
Authorization...............................................
14
Section 3.3
Title to Assets.............................................
14
Section 3.4
Consents and Approvals; No Violations.......................
15
Section 3.5
Financial Statements........................................
15
Section 3.6
Absence of Undisclosed Liabilities..........................
16
Section 3.7
Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions.......................................
16
Section 3.8
Properties and Related Matters..............................
19
Section 3.9
Enterprise Management Solution Identification; Ownership....
20
Section 3.10
Intellectual Property Rights................................
21
Section 3.11
Litigation..................................................
25
Section 3.12
Compliance with Applicable Law; Permits.....................
25
Section 3.13
Certain Contracts and Arrangements..........................
25
Section 3.14
Employee Benefit Plans; ERISA...............................
26
Section 3.15
Taxes.......................................................
28
i
Section 3.16
Labor Matters...............................................
29
Section 3.17
Certain Fees................................................
30
Section 3.18
Hazardous Materials.........................................
30
Section 3.19
Insurance...................................................
30
Section 3.20
Customers...................................................
30
Section 3.21
Affected Employees..........................................
30
Section 3.22
Receivables.................................................
31
Section 3.23
Certain Business Practices..................................
31
Section 3.24
Full Disclosure.............................................
32
Section 3.25
No Other Representations and Warranties.....................
32
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER
Section 4.1
Organization................................................
32
Section 4.2
Authorization...............................................
32
Section 4.3
Consents and Approvals; No Violations.......................
33
Section 4.4
Litigation..................................................
33
Section 4.5
No Implied Representation...................................
33
Section 4.6
Interpretation of Representations and Warranties and
Company Letter..............................................
33
Section 4.7
Certain Fees................................................
33
ARTICLE V COVENANTS
Section 5.1
[INTENTIONALLY OMITTED].....................................
34
Section 5.2
[INTENTIONALLY OMITTED].....................................
34
Section 5.3
Consents; Shared Customers..................................
34
Section 5.4
Reasonable Efforts..........................................
35
Section 5.5
Public Announcements........................................
35
Section 5.6
Covenant to Satisfy Conditions..............................
36
Section 5.7
[INTENTIONALLY OMITTED].....................................
36
Section 5.8
Confidentiality.............................................
36
Section 5.9
No Solicitation or Negotiation..............................
37
Section 5.10
Reimbursement of Sales Tax and VAT..........................
37
ARTICLE VI CONDITIONS TO OBLIGATIONS OF THE PARTIES
Section 6.1
Conditions to Each Party's Obligation.......................
37
Section 6.2
Conditions to Obligations of Seller.........................
37
Section 6.3
Conditions to Obligations of Buyer..........................
38
ii
ARTICLE VII SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS
Section 7.1
Survival of Representations.................................
39
Section 7.2
Seller's Agreement to Indemnify.............................
39
Section 7.3
Buyer's Agreement to Indemnify..............................
41
Section 7.4
Third Party Indemnification.................................
42
Section 7.5
Certain Tax Matters.........................................
43
ARTICLE VIII MISCELLANEOUS
Section 8.1
Fees and Expenses...........................................
44
Section 8.2
Further Assurances..........................................
44
Section 8.3
Counterparts................................................
44
Section 8.4
Notices.....................................................
44
Section 8.5
Severability................................................
45
Section 8.6
Binding Effect; Assignment..................................
45
Section 8.7
No Third Party Beneficiaries................................
46
Section 8.8
Interpretation..............................................
46
Section 8.9
Jurisdiction; Consent to Service; Waiver of Jury Trial......
46
Section 8.10
Entire Agreement............................................
47
Section 8.11
Law Governing...............................................
47
iii
EXHIBITS
Exhibit A
Bill of Sale and Assignment
Exhibit B
Intellectual Property Assignments
Exhibit C
[INTENTIONALLY OMITTED]
Exhibit D
Instrument of Assumption
Exhibit E
Transition Services Agreement
Exhibit F
License and Maintenance Agreement
COMPANY LETTER
Section 1.1(a)(v)
Permits
Section 1.1(a)(vi)
Customers and Vendors
Section 1.1(a)(vii)
Credits and Claims
Section 1.1(a)(x)
South African Leases
Section 1.1(a)(xi)
Working Capital Cash Exceptions
Section 1.2(c)
Preliminary Allocation of the Purchase Price
Section 1.2(d)
Assumed Liabilities
Section 1.8
Certain Taxes
Section 2.3(a)
Affected Employees
Section 3.1
Accounting Methodology
Section 3.3(a)(i)
Contested Taxes
Section 3.3(a)(ii)
Other Liens
Section 3.4
Consents and Approvals
Section 3.5
Financial Statements
Section 3.6
Disclosed Liabilities
Section 3.7
Disclosed Conduct
Section 3.8(a)
Real Property Leased or Subleased
Section 3.8(b)
Lease Disclosures
Section 3.8(e)
Occupancy of Real Property
Section 3.8(h)
Tangible Personal Property Owned, Leased or Subleased
Section 3.9(a)
Enterprise Management Solution
Section 3.9(b)
Nonconformities of Enterprise Management Solution
Section 3.10(a)
Intellectual Property Rights Owned by Seller
Section 3.10(b)
Encumbrances on Ownership
Section 3.10(c)
Third Party Materials
Section 3.10(d)
Inbound License Agreements
Section 3.10(e)
Sufficiency of Intellectual Property
Section 3.10(f)
Exclusive Licenses to Enterprise Management Solution IP
Section 3.10(n)
Open Source Software
Section 3.10(p)
Source Code Disclosures
Section 3.10(q)
Seller's Ownership Claims
Section 3.10(r)
Shared Intellectual Property
Section 3.11
Litigation
Section 3.13(a)
Certain Contracts and Arrangements
Section 3.13(b)
Contract Disclosures
Section 3.14(a)
Seller Benefit and Compensation Plans
Section 3.14(e)
Foreign Plans
Section 3.14(k)
Additional Compensation
Section 3.15
Tax Matters
Section 3.16
Labor Matters
iv
Section 3.20
Customers
Section 3.22(b)
Certain Maintenance Agreements
Section 5.1
Conduct of Business
Section 5.3(c)
Shared Customers
Section 6.2(d)
Required Consents
v
DEFINITIONS AND INDEX OF DEFINED TERMS
APPLICATION means compiled software programs containing the
features and
functionality for the Enterprise Management Solution in machine
readable object
code form and their related graphical user interfaces and screen
displays, all
as specifically identified in Section 3.9(a) of the Company Letter.
COPYRIGHTS means all rights in works of authorship, whether or not
registered,
provided by Title 17 of the United States Code, its foreign
equivalents, and
international treaties and conventions, including all applications
for
registration.
DOCUMENTATION means the technical and operational documentation
describing for
general, non-technical expert users, the features and functions of
and ordinary
use and operation of and navigation within the Applications.
INTELLECTUAL PROPERTY RIGHTS is a collective term meaning all
Copyrights, Patent
Rights, Trademark Rights, Trade Secret Rights, and any other
proprietary rights
under any jurisdiction.
KNOWN INTELLECTUAL PROPERTY RIGHTS are the Intellectual Property
Rights existing
in those jurisdictions in which Seller maintains or has maintained
an affiliate
entity or has otherwise formally registered or otherwise sought and
obtained
intellectual property or proprietary rights.
NAMES AND LOGOS means all tradenames, brand names, logos,
trademarks, service
marks, graphics, Internet domain names and other identifiers of the
Enterprise
Management Solution and its related Services in the marketplace.
OPEN SOURCE SOFTWARE means any software application that is
distributed without
license fee or royalty but requires as a condition of use,
modification, and/or
subsequent distribution that: (a) its source code be disclosed,
distributed or
otherwise made available at no charge; (b) no restrictions be
placed on the
creation or further distribution of derivative works by subsequent
users and
licensees; and (c) that each of the foregoing conditions be applied
to any other
software or Proprietary Materials incorporated into, bundled or
linked with or
derived from the original software. For avoidance of doubt and by
way of
example, only, Open Source Software is generally licensed pursuant
to the
agreements terms found at www.opensource.org/licenses/index.php.
PATENT RIGHTS means all rights in patents and patent applications,
including
provisional, utility, continuation, continuation-in-part,
divisional, reissue,
reexamination, substitution, and inventor's certificates, provided
under Title
35 of the United States Code, its foreign equivalents, and
international
treaties and conventions.
PROPRIETARY MATERIALS means all works of authorship, inventions,
processes,
printed or graphic matter materials, prototypes, models, designs,
files,
templates libraries, tools, creative content, algorithms, code,
formulae, data,
information, reports and technologies to the extent: (a) reduced to
practice as
of the Effective Date; and (b) in tangible form or recorded in a
medium as of
the Effective Date.
i
REGISTERED IP means all Intellectual Property Rights that are
registered or
filed with or issued by any governmental body, including all Patent
Rights,
registered Copyrights, and registered Trademarks and all
applications for any of
the foregoing.
SOURCE CODE means the compilable source code corresponding to the
object code of
a given component of the Enterprise Management Solution plus any
pertinent
commentary or explanation that may be necessary to render such
source code
understandable and useable by a reasonably trained
computer-programming expert
generally familiar with enterprise information technology systems.
THIRD PARTY MATERIALS means Proprietary Materials or Intellectual
Property
Rights owned by a party other than Seller.
TRADE SECRET RIGHTS means all rights in trade secrets, know-how and
other
confidential or proprietary technical, business and other
information, including
manufacturing and production processes and techniques, research and
development
information, technology, drawings, specifications, designs, plans,
proposals,
technical data, financial, marketing and business data, pricing and
cost
information, business and marketing plans, customer and supplier
lists and
information, and all rights in any jurisdiction to limit the use or
disclosure
thereof.
TRADEMARK RIGHTS means all rights in trademarks, service marks,
trade dress,
logos, trade names, corporate names, URL addresses, domain names
and symbols,
slogans and other indicia of source or origin, whether or not
registered,
including the goodwill of the business symbolized thereby or
associated
therewith, provided under Title 15, Section 1123 et seq., the
common law, their
foreign equivalents, and international treaties and conventions.
Affected
Employees.........................................................
10
affiliate..................................................................
46
affiliated.................................................................
46
Agreement..................................................................
1
Ancillary
Agreements.......................................................
6
Assets.....................................................................
2
Assumed
Liabilities........................................................
5
Basket
Amount..............................................................
40
Bill of Sale and
Assignment................................................
3
Business...................................................................
1
business
day...............................................................
46
Buyer......................................................................
1
Buyer Change of
Control....................................................
8
Buyer Change of Control
Date...............................................
8
Buyer
Competitor...........................................................
8
Buyer
Damages..............................................................
40
Buyer
Indemnitees..........................................................
40
Buyer
Plans................................................................
11
Cap........................................................................
40
Cases......................................................................
25
Claim......................................................................
42
Closing....................................................................
5
Closing
Date...............................................................
5
Code.......................................................................
5
Company
Letter.............................................................
13
Enterprise Management Solution
IP..........................................
21
Enterprise Management
Solutions............................................
1
Environmental
Laws.........................................................
30
ERISA......................................................................
11
ERISA
Affiliate............................................................
27
Excluded
Assets............................................................
3
Excluded
Liabilities.......................................................
5
Excluded
Marks.............................................................
4
Final
Allocation...........................................................
5
Financial
Statements.......................................................
15
GAAP.......................................................................
16
Inbound License
Agreements.................................................
22
Income
Statement...........................................................
15
Income
Tax.................................................................
29
Income
Taxes...............................................................
29
Indemnity
Period...........................................................
39
Independent Accounting
Firm................................................
9
Instrument of
Assumption...................................................
5
Intellectual Property
Assignment...........................................
3
Knowledge..................................................................
21
Known Intellectual Property
Rights.........................................
i
License and Maintenance
Agreement..........................................
6
Liens......................................................................
14
Material Adverse
Effect....................................................
13
Minimum Payment
Discrepancy................................................
9
ii
Non-Exclusive
Permits......................................................
2
Options....................................................................
19
Other
Instruments..........................................................
3
Permits....................................................................
2
Permitted
Encumbrances.....................................................
14
person.....................................................................
46
Pfizer Service
Fee.........................................................
9
Pfizer
Services............................................................
9
Plans......................................................................
27
Pre-Closing Tax
Period.....................................................
4
Preliminary
Allocation.....................................................
5
Purchase
Price.............................................................
4
Real
Property..............................................................
19
Receivables................................................................
31
Records Compliance
Platform................................................
1
Required
Consents..........................................................
38
Royalty
Payment............................................................
7
SEC........................................................................
16
Seller.....................................................................
1
Seller 401(k)
Plan.........................................................
11
Seller Change of
Control...................................................
8
Seller
Damages.............................................................
41
Seller
Indemnitees.........................................................
5
September 2006 Financial
Statements........................................
15
Services...................................................................
1
Shared Customer
Period.....................................................
35
Shared
Customers...........................................................
34
Shared Intellectual
Property...............................................
2
Tangible Personal
Property.................................................
20
Tax
Return.................................................................
29
Taxes......................................................................
29
Third Party
IP.............................................................
21
Transfer
Taxes.............................................................
7
Transition Services
Agreement..............................................
6
VAT........................................................................
7
Working Capital
Cash.......................................................
3
iii
EXECUTION VERSION
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "AGREEMENT"), dated as of
October 31,
2006 (the "EFFECTIVE DATE"), is by and between AXS-One Inc., a
Delaware
corporation ("SELLER"), and Computron Software, LLC, a Delaware
limited
liability company ("BUYER"). Capitalized terms used herein are
either defined on
the page following the table of contents to this Agreement or, if
not defined
therein, they are defined in this Agreement in the Section in which
they first
appear (as indicated by bold type) and their definitions are
indexed on the page
following the table of contents.
WHEREAS, Seller is the developer, owner and licensor of information
technology solutions targeted to two distinct market segments, the
first being
the records compliance market for which Seller licenses solutions
related to
management and integrated disposition and discovery for e-mail,
instant
messaging and other corporate records (the "RECORDS COMPLIANCE
PLATFORM" as
further defined below);
WHEREAS, Seller also targets the corporate enterprise management
software
market by offering an integrated suite of financial management and
accounting
applications that include components for accounting/general ledger,
financial
reporting, time and expense management and procurement
(collectively, the
"ENTERPRISE MANAGEMENT SOLUTION" as further defined below);
WHEREAS, Seller also offers consulting, implementation, training,
technical
support and maintenance services in support of its customers' use
of the Records
Compliance Platform and the Enterprise Management Solution (the
"SERVICES");
WHEREAS, Seller conducts the business of licensing the Enterprise
Management Solution and providing its related Services separately
from Seller's
other business units and accounts for its costs, revenues,
employees,
Proprietary Materials, Intellectual Property Rights and other
assets
(collectively, the "BUSINESS") separately from those of the Records
Compliance
Platform's costs, revenues, employees, Proprietary Materials,
Intellectual
Property Rights and other assets (collectively, the "RCM
BUSINESS");
WHEREAS, Seller's intention hereunder is to convey to Buyer the
Business by
transferring to Buyer the assets of Seller related exclusively to
the Business
and, subject to Section 3.10(r), certain rights to the Shared
Intellectual
Property (as defined below), and by the assumption by Buyer of
certain
obligations and liabilities to the extent set forth herein; and
WHEREAS, pursuant to the terms and conditions of this Agreement,
Seller
desires to sell or cause to be sold to Buyer, and Buyer desires to
purchase from
Seller, the Business and the Assets more fully described herein for
consideration that includes the assumption by Buyer of certain
obligations and
liabilities.
NOW, THEREFORE, in consideration of the foregoing and the
respective
representations, warranties, covenants, agreements and conditions
hereinafter
set forth, and intending to be legally bound hereby, the parties
hereto agree as
follows:
ARTICLE I
TRANSFER OF ASSETS AND LIABILITIES
Section 1.1 Assets; Excluded Assets
(a) Subject to the terms and conditions of this Agreement, at the
Closing
provided for in Section 1.3, Seller shall sell, convey, assign,
transfer and
deliver, or shall cause to be sold, conveyed, assigned, transferred
and
delivered to Buyer, all of Seller's right, title and interest in
and to the
assets, whether tangible or intangible, real, personal or mixed,
directly or
indirectly owned by Seller or to which Seller is directly or
indirectly entitled
and, in any case, belonging to or used exclusively in the Business
(collectively, the "ASSETS"), including the following:
(i) all the Tangible Personal Property (as defined below),
including
the items listed on Section 3.8(h) of the Company Letter;
(ii) the Enterprise Management Solution IP (as defined below and as
listed on Section 3.10(a) of the Company Letter), subject to
Section
3.10(q);
(iii) all portions and components of Seller's proprietary
technology
products listed on Section 3.9(a) of the Company Letter;
(iv) Subject to Section 3.10(r), certain rights to the Intellectual
Property Rights used or held under license for use in connection
with the
Business and the RCM Business (the "SHARED INTELLECTUAL PROPERTY"),
as
listed on Section 3.10(r) of the Company Letter;
(v) all transferable licenses, permits, authorizations, consents,
approvals, orders, filings or registrations with any court or
administrative or governmental authority owned, utilized or held by
Seller
that relate exclusively to the Business (collectively, the
"PERMITS"),
including copies of all other licenses, permits, authorizations,
consents,
approvals, orders, filings or registrations with any court or
administrative or governmental authority owned, utilized or held by
Seller
that do not relate exclusively to the Business but are necessary to
the
operation of the Business in the ordinary course (collectively, the
"NON-EXCLUSIVE PERMITS"), as set forth on Section 1.1(a)(v) of the
Company
Letter and provided that the Non-Exclusive Permits shall not be
transferred
as part of the Assets;
(vi) all customer or vendor lists used exclusively in connection
with
the Business and copies of all customer or vendor lists used
non-exclusively in connection with the Business, as previously
provided to
Buyer, or other documents used by Seller exclusively in connection
with the
Business, including, but not limited to, correspondence, credit
information, manuals and data, sales, marketing and advertising
materials;
(vii) all rights, deposits, advance payments, prepaid items and
expenses, deferred charges, rights of offset, causes of action,
credits and
claims with respect to or arising out of the Assets, the Assumed
Liabilities or proceeds paid or payable under insurance contracts
relating
exclusively to the Assets, including those listed on Section
1.1(a)(vii) of
the Company Letter;
2
(viii) all contracts, instruments, agreements, commitments, orders
or
other understandings or arrangements to which Seller is a party
that relate
exclusively to the Business, the Assets or the Assumed Liabilities,
including, without limitation, license agreements, maintenance
agreements
and consulting agreements that relate exclusively to the Business,
the
Assets or the Assumed Liabilities, and any amendments, supplements
or
modifications thereto, and those contracts, instruments,
agreements,
commitments, orders or other understandings or arrangements,
including
those identified on Section 3.13(a) of the Company Letter;
(ix) subject to applicable law, Seller's books and records that
relate
exclusively to the Business and copies of Seller's books and
records,
including its general ledger and financials as of the month end
immediately
preceding the Closing Date, to the extent they relate to both the
Business
and Seller's business operations other than the Business;
(x) certain rights of Seller under certain of the South African
leases, as set forth on Section 1.1(a)(x) of the Company Letter;
and
(xi) a cash amount equal to the revenue of the Business derived
from
the maintenance agreements set forth on Section 3.22(b) of the
Company
Letter, other than the revenue set forth in Section 1.1(a)(xi) of
the
Company Letter (the "WORKING CAPITAL CASH").
The Assets are owned or leased directly by Seller or indirectly
through its
affiliates as of the Closing Date. The Assets shall be delivered by
Seller free
and clear of any Liens, except for Permitted Encumbrances (as
defined in Section
3.3 below).
(b) Such sale, conveyance, assignment, transfer and delivery will
be
effected by delivery by Seller to Buyer of:
(i) a duly executed bill of sale and assignment (the "BILL OF SALE
AND
ASSIGNMENT") substantially in the form of Exhibit A attached
hereto;
(ii) duly executed instruments of assignment assigning Seller's
Intellectual Property Rights in and to the Assets in the form of
Exhibit B
attached hereto (the "INTELLECTUAL PROPERTY ASSIGNMENTS"); and
(iii) such other good and sufficient instruments of conveyance,
transfer and assignment, as shall be necessary to vest in Buyer
good and
valid title to, or valid and subsisting leasehold interests in, the
other
Assets (collectively, the "OTHER INSTRUMENTS"), free and clear of
all
Liens, except for Permitted Encumbrances.
(c) Notwithstanding anything contained in Section 1.1(a) to the
contrary,
the Assets comprise, and are intended by the parties to comprise
solely, those
items used by Seller exclusively in the Business. The term "Assets"
shall not
include the following assets of Seller or any of its affiliates
(each and all
such items being herein referred to as, the "EXCLUDED ASSETS"):
3
(i) the consideration delivered by Buyer to Seller pursuant to this
Agreement and cash or other cash equivalents;
(ii) any of Seller's corporate franchises, certificates of
incorporation (or other similar organizational documents),
corporate seals,
minute books, and other corporate records;
(iii) all of Seller's insurance policies and binders and all
claims,
refunds and credits from such insurance policies or binders due or
to
become due with respect to such policies or binders;
(iv) all trusts, trust assets, trust accounts, reserves and
insurance
policies relating to or funding Seller's employee benefit plans,
except as
otherwise provided in Section 2.3;
(v) all Tax credits, net operating loss carry-forwards and refunds
pertaining to the Business or the Assets that are attributable to
(A) any
taxable period ending on or before the Closing Date and (B) for any
taxable
period that includes but does not end on the Closing Date, the
portion
thereof ending on the Closing Date (collectively, a "PRE-CLOSING
TAX
PERIOD");
(vi) all tradenames, brand names, logos, graphics, Internet domain
names and other identifiers of Seller as the source of goods or
services
not specifically listed as being included in the Names and Logos as
well as
all Trademark Rights in or to them (collectively, the "EXCLUDED
MARKS");
(vii) all rights, property interests (whether real or personal) and
assets (whether tangible or intangible) of Seller and its
affiliates that
are not exclusively used in or necessary to the operation of the
Business
in the ordinary course, including, without limitation, all rights,
property
interests and assets related to the RCM Business;
(viii) all claims, recoveries and judgments in favor of or for the
benefit of Seller or any of its affiliates relating to any Excluded
Liabilities; and
(ix) all other assets of Seller that are not Assets.
Section 1.2 Purchase Price; Assumption of Liabilities
(a) The purchase price of the Assets and the Business shall be
Twelve
Million Dollars ($12,000,000) in the aggregate (the "PURCHASE
PRICE"). In
addition to the Purchase Price, Buyer shall pay to Seller the
Royalty Payment
(as defined in Section 1.9 below) pursuant to Section 1.9 hereof.
(b) (i) On the Closing Date, Buyer shall cause the Purchase Price
to be
delivered to Seller via wire transfer in immediately available
funds to such
bank account as directed by Seller.
4
(ii) On the Closing Date, Seller shall cause the aggregate amount
of
the Working Capital Cash to be delivered to Buyer via wire transfer
in
immediately available funds to such bank account as directed by
Buyer.
(c) Delivery of the Purchase Price, plus the assumption by Buyer of
the
Assumed Liabilities on the Closing Date, plus all amounts paid by
Buyer to
Seller pursuant to Section 1.9, shall constitute the final Purchase
Price (but
shall be subject to adjustment on additional payments made pursuant
to Section
1.9). Section 1.2(c) of the Company Letter sets forth a preliminary
allocation
of the Purchase Price among the Assets (the "PRELIMINARY
ALLOCATION") in
accordance with Section 1060 of the Internal Revenue Code of 1986,
as amended
(the "CODE"), and the Treasury Regulations promulgated thereunder.
Seller and
Buyer shall negotiate in good faith to agree as promptly as
possible, but in any
event within one hundred twenty days (120) days after the Closing
Date, upon an
allocation of the Purchase Price to the Assets, together with the
methodology
for allocation of the Purchase Price related to the Royalty Payment
to be paid
pursuant to Section 1.9 below, in accordance with Section 1060 of
the Code and
the applicable Treasury Regulations or applicable local law,
starting with the
Preliminary Allocation and making the applicable changes thereto
(the "FINAL
ALLOCATION"). Seller and Buyer (i) shall be bound by the
allocations determined
pursuant to this paragraph for purposes of determining any Taxes,
(ii) shall
prepare and file all Tax Returns in a manner consistent with such
allocations,
and (iii) shall take no position inconsistent with such allocations
in any Tax
Return, any proceeding before any taxing authority or otherwise. In
the event
that any such allocation is disputed by any taxing authority, the
party
receiving notice of such dispute shall promptly notify and consult
with the
other party hereto concerning resolution of such dispute.
(d) At the Closing, in reliance on the representations, warranties,
covenants and agreements made by Seller herein, Buyer will deliver
to Seller an
instrument of assumption substantially in the form of Exhibit D
attached hereto
(the "INSTRUMENT OF ASSUMPTION"), whereby Buyer will solely and
exclusively
undertake, assume and agree to perform, pay, become liable for and
discharge
when due, and hold Seller and its directors, officers, employees,
affiliates,
controlling persons, agents and representatives and their
successors and assigns
(collectively, the "SELLER INDEMNITEES") harmless from and
indemnify the Seller
Indemnitees against, any and all liabilities and obligations of
Seller resulting
from or related to the Business set forth on Section 1.2(d) of the
Company
Letter (collectively, the "ASSUMED LIABILITIES").
(e) Notwithstanding anything in this Agreement to the contrary,
Seller
shall retain, and shall be responsible for paying, performing and
discharging
when due, and Buyer shall not assume or have any responsibility
for, all
liabilities and obligations of Seller resulting from or related to
the Business
as of the Closing other than the Assumed Liabilities (collectively,
the
"EXCLUDED LIABILITIES").
Section 1.3 Closing
The closing of the transactions contemplated by this Agreement (the
"CLOSING") shall take place at the offices of Wiggin and Dana LLP,
400 Atlantic
Street, Stamford, Connecticut, effective as of 11:59 p.m. Eastern
Time on
October 31, 2006, or on such other date as the Parties mutually
agree (the
"CLOSING DATE"). The exchange of copies of this Agreement and the
Ancillary
Agreements (as defined below) and of all signature pages by
electronic mail or
5
facsimile transmission shall constitute effective execution and
delivery hereof
and thereof as to the parties and may be used in lieu of the
originals for all
purposes. Signatures of the parties transmitted by electronic mail
or facsimile
shall be deemed to be their original signatures for all purposes.
Section 1.4 Deliveries by Seller
At the Closing, Seller will deliver or cause to be delivered to
Buyer
(unless delivered previously) the following:
(a) A duly executed Bill of Sale and Assignment;
(b) Duly executed Intellectual Property Assignments;
(c) A duly executed counterpart of the transition services
agreement,
substantially in the form of Exhibit E attached hereto (the
"TRANSITION SERVICES
AGREEMENT"), pursuant to which Seller will supply certain Services
to Buyer for
the periods indicated thereunder;
(d) A duly executed counterpart of the license agreement,
substantially in
the form of Exhibit F attached hereto (the "LICENSE AND MAINTENANCE
AGREEMENT"),
pursuant to which Buyer will (i) license the Enterprise Management
Solution to
Seller and its affiliates, on a worldwide, royalty-free, fully-paid
and
perpetual basis, thereby granting up to one hundred (100)
concurrent users
designated by Seller (not limited by the number of servers or
platforms used by
Seller or its affiliates) in connection with the internal
operations of Seller
and its affiliates, and (ii) provide to Seller and its affiliates a
commitment
for two (2) years of Services for maintenance in connection with
the Enterprise
Management Solution, including any updates thereof, at no cost to
Seller or its
affiliates, after which Seller and its affiliates shall be entitled
to continued
maintenance at a cost no greater than Twenty-Five Thousand Dollars
($25,000) per
year, subject to an annual increase equal to the Consumer Price
Index for All
Urban Consumers of computer software and accessories, on a U.S.
city average, as
reported by the Bureau of Labor and Statistics of the U.S.
Department of Labor
on the commencement of the third annual renewal date;
(e) The Working Capital Cash; and
(f) All other documents, instruments and writings required or
reasonably
requested to be delivered by Buyer at or prior to the Closing
pursuant to this
Agreement or otherwise required in connection herewith (the
agreements referred
to in this Section 1.4, being collectively referred to herein as
the "ANCILLARY
AGREEMENTS").
Section 1.5 Deliveries by Buyer
At the Closing, Buyer will deliver or cause to be delivered to
Seller
(unless previously delivered) the following:
(a) The Purchase Price;
(b) A duly executed Instrument of Assumption;
6
(c) A duly executed counterpart of the Transition Services
Agreement;
(d) A duly executed counterpart of the License and Maintenance
Agreement;
and
(e) All other documents, instruments and writings required or
reasonably
requested by Seller to be delivered at or prior to the Closing
pursuant to this
Agreement or otherwise required in connection herewith.
Section 1.6 [INTENTIONALLY OMITTED]
Section 1.7 [INTENTIONALLY OMITTED]
Section 1.8 Certain Taxes
Except as otherwise provided for in this Agreement, each stamp,
transfer,
documentary, sales, use, registration, real property transfer, and
other such
Tax or fee (including any penalties and interest) incurred in
connection with
this Agreement and the transactions contemplated hereby
(collectively, "TRANSFER
TAXES"), in addition to those tax liabilities directly related to
the Business
and set forth on Section 1.8 of the Company Letter, shall be borne
and paid by
Seller, and Seller shall properly file on a timely basis all
necessary tax
returns and other documentation with respect to any Transfer Tax,
provided that
where such return or other documentation is required to be filed on
a joint
basis, the parties shall cooperate in the timely preparation and
filing thereof.
Section 1.9 Royalty Payment
(a) For a period of three (3) years after the Closing Date, within
forty-five (45) days after the end of each twelve (12) month period
from and
after the Closing Date, Buyer will pay Seller fifty percent (50%)
of the Net
License Revenue actually received by Buyer from any source
(including, without
limitation, end users, VARs, distributors or other channel
partners) for
licensing the Applications acquired at Closing, including any
enhancements,
improvements or derivate works, during such fiscal year which
exceeds one
million dollars ($1,000,000) (the "ROYALTY PAYMENT"). Along with
such payment,
Buyer will provide a statement showing the quantity of licenses to
the
Applications provided during such fiscal year and a calculation of
the fees
payable under this Section 1.9. Seller will treat the statement as
confidential
information of Buyer, will protect it from unauthorized use, access
or
disclosure in the same manner as Seller protects its own
confidential or
proprietary information of similar nature and with no less than
reasonable care,
and will disclose it only to the employees or agents of Seller who
have a need
to know such information for purpose of this Agreement and who are
under a duty
of confidentiality no less restrictive than Seller's duties
hereunder. For
purposes of this Agreement, "Net License Revenue" means the gross
invoiced
license fees billed by Buyer to any third party in connection with
the license,
sublicense or other use of the Applications, less (i) ordinary and
necessary
handling, insurance and other reasonable charges relating to the
delivery or
return of Applications to or by such end user customers, (ii)
customary
discounts actually allowed and taken, (iii) customs duties,
surcharges, value
added taxes ("VAT"), sales taxes, excise taxes and any other
charges of any
other governmental body placed on licensing of the Applications,
(iv) reasonable
bad debt expense, (v) amounts repaid or credits by reason of
rejections or
returns of Applications, or service credits provided under the
service level
agreements, (vi) associated
7
royalties, license fees or commissions paid to third parties and
(vii)
reasonable travel costs incurred which are directly related to
license sales.
For avoidance of doubt, Net License Revenue does not include any
fees received
for performing any services, including any consulting services,
maintenance
services or support fees or any fees received in connection with
licensing of
any products or software, other than the Applications. In the case
of so-called
"bundled sales," where Applications purchased as part of the Assets
are
"bundled" with other software offered by Buyer, its affiliates, or
by Buyer and
a third party or parties, the amount of Net License Revenue
allocable to the
Applications purchased as part of the Assets shall be used to
determine the
Royalty Payment; provided, further, Buyer shall also fairly
allocate among
license, professional services and maintenance fees in determining
the Royalty
Payment. Acknowledging Seller's reliance upon the anticipated share
of Net
License Revenue as an express condition of entering into this
Agreement, Buyer
shall use commercially reasonable efforts to adequately license,
service and
maintain its Application customers in accordance with good industry
practice,
and use its commercially reasonable efforts to timely recognize and
realize the
maximum license revenue generated therefrom during the entire
three-year period
following the Closing Date.
(b) Notwithstanding Section 1.9(a) above, in the event a "SELLER
CHANGE OF
CONTROL" occurs, Buyer shall not be obligated to pay Seller, and
Seller shall
not be entitled to receive, the Royalty Payment at any time on or
after such
occurrence. For purposes of this Agreement, the "Seller Change of
Control" shall
be deemed to have occurred if:
(i) a sale, transfer, or other disposition of all or substantially
all
of the assets and properties of Seller to any person, company or
other
enterprise that directly competes with the Enterprise Management
Solution
IP or any other Intellectual Property Rights owned by Buyer (a
"BUYER
COMPETITOR") is closed or consummated;
(ii) a Buyer Competitor becomes the "beneficial owner" (as defined
in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities
of Seller representing fifty percent (50%) or more of the combined
voting
power of Seller's then outstanding securities that have the right
to vote
in the election of directors generally; or
(iii) Seller is dissolved or liquidated or a merger,
reorganization,
or consolidation involving Seller and a Buyer Competitor is closed
or
consummated.
(c) If there occurs prior to the third anniversary of the Closing
Date (i)
any liquidation, dissolution or winding up of Buyer after the
Closing, either
voluntary or involuntary, (ii) the acquisition of Buyer by means of
any
transaction or series of related transactions (including, without
limitation,
any reorganization, merger or consolidation but, excluding any
merger effected
exclusively for the purpose of changing the domicile of the
entity), or (iii) a
sale outside the ordinary course of business of all, substantially
all or any
material part of the Assets acquired pursuant to the terms of this
Agreement
(clauses (i), (ii) and (iii) are collectively referred to as a
"BUYER CHANGE OF
CONTROL"), and the entity or person owning the Assets subsequent to
the date of
the event giving rise to a Change of Control (the "BUYER CHANGE OF
CONTROL
DATE") has expressly assumed Buyer's obligations under this
Agreement, including
its obligations under Section 1.9(a), then (A) Buyer shall be
obligated to pay
Seller the Royalty Payment pursuant to the terms of Section 1.9(a)
in respect of
the period from the Closing Date to
8
the Buyer Change of Control Date, and (B) the entity or person
owning the Assets
subsequent to the Buyer Change of Control shall be obligated to pay
Seller the
Royalty Payment pursuant to the terms of Section 1.9(a) in respect
of the period
from the Buyer Change of Control Date through the third anniversary
of the
Closing Date.
(d) For twelve (12) months following the third anniversary of the
Closing
Date, Seller shall have reasonable access to the financial books
and records of
Buyer and Buyer's successor-in-interest of the Business, if any,
for the purpose
of auditing the Royalty Payment and Pfizer Service Fee (as defined
below). If
the audit results in any additional payments to Seller in excess of
ten percent
(10%) of the Royalty Payment or Pfizer Service Fee (the "MINIMUM
PAYMENT
DISCREPANCY"), then Buyer shall be liable for the fees and expenses
of the
auditor. If the audit results in no additional payments to Seller
or payments
below the Minimum Payment Discrepancy, then Seller shall be liable
for the
auditor's fees and expenses. Buyer shall make any additional
payments to Seller
within twenty (20) days after completion of the audit. The auditor
shall be a
nationally-recognized independent accounting firm other than a "big
four" firm
(the "INDEPENDENT ACCOUNTING FIRM") selected by Seller and Buyer
within ten (10)
days of Seller's request for an audit. If Seller and Buyer are
unable to agree
on the Independent Accounting Firm, then Buyer and Seller shall
each have the
right to request the American Arbitration Association to appoint
the Independent
Accounting Firm, which shall not have had a material relationship
with Seller,
Buyer or any of their respective affiliates within the past two (2)
years.
(e) Seller will be responsible for and will indemnify and hold
Buyer
harmless from payment of any taxes, duties and other governmental
charges and
any related penalties and interests, arising from the payment of
any fees under
this Section 1.9.
Section 1.10 Pfizer Service Fee
If at any time prior to the two-year anniversary of the Closing
Date,
Pfizer and Buyer enter into a contact pursuant to which Pfizer
engages Buyer to
provide extended maintenance and support for version 8 of the
Enterprise
Management Solution with or without integration of the back-port
features and
functionality of the Oracle 10G runtimes or any other appropriate
runtime into
version 8 of the Enterprise Management Solution (the "PFIZER
SERVICES"), Buyer
will pay to Seller, within ten (10) days after receipt by Buyer,
fifty percent
(50%) of the gross proceeds actually received by Buyer from Pfizer
for the
Pfizer Services in an aggregate amount not to exceed one million
dollars
($1,000,000) (the "PFIZER SERVICE FEE"). In consideration for
payment received,
Seller agrees to provide consultation services in connection with
providing such
extended maintenance or the back-port of the Oracle 10G runtimes
into version 8
of the Enterprise Management Solution. The Pfizer Service Fee shall
be payable
notwithstanding a Seller change of control or Buyer change of
control. The
parties acknowledge and agree that, once the Pfizer Service Fee has
been paid to
Seller, Buyer shall be entitled to all proceeds resulting from any
contract
between Pfizer and Buyer, and Seller shall not be entitled at any
time to any
claims relating to contracts between Pfizer and Buyer relating to
the Pfizer
Services.
ARTICLE II
RELATED MATTERS
9
Section 2.1 Possession
Possession of the Assets shall be delivered to Buyer on the Closing
Date,
and the assignment to Buyer of each of Seller's rights in the
Assets will be
effective as between Buyer and Seller as of the Closing Date;
provided, however,
if the attempted assignment of any Assets without the consent or
approval of a
third party would materially and adversely affect the rights of
Buyer, as
assignee, the assignment will not be effective as to the third
party, and Seller
hereby agrees to use its commercially reasonable efforts to obtain
such consent
and approval pursuant to the terms of Section 5.3(b) hereof.
Section 2.2 Books and Records of Seller
Subject to applicable law, in addition to the deliveries set forth
in
Section 2.1 above, Seller agrees to deliver, or cause to be
delivered, to Buyer
on or as soon as practicable after the Closing, all books and
records of Seller
exclusively used or held for use in the conduct of the Business or
pertaining to
those Assets and Assumed Liabilities conveyed or assumed at the
Closing
(including, but not limited to, correspondence, memoranda, books of
account,
personnel and payroll records and the like), other than books and
records (i)
relating to Taxes or to individual personnel or payroll records or
(ii) that are
inseparable from Seller's other operations. Subject to applicable
law, any books
and records relating to the Business that are not delivered to
Buyer hereunder,
other than books and records relating to Taxes, will be preserved
by Seller in
accordance with the document retention policy of the Business as in
effect on
the date hereof (including any legal holds placed on books and
records relating
to litigated matters), which in no event shall be less than three
(3) years and
will be made available (for review and copying) to Buyer and its
authorized
representatives at Buyer's expense upon reasonable notice during
normal business
hours, to the extent reasonably required by Buyer, except to the
extent that
such books and records are subject to a legal privilege that, in
the good faith
judgment of Seller, may be lost or impaired by virtue of such
disclosure. Buyer
will preserve and make available (for review and copying) to Seller
and its
authorized representatives upon reasonable notice during normal
business hours
the records transferred by Seller in accordance with the document
retention
policy of the Business as in effect on the date hereof (including
any legal
holds placed on books and records relating to litigated matters),
which in no
event shall be less than three (3) years and, with respect to
records that may
be relevant to any actual Tax audits or proceedings, such
additional period as
is reasonably required by Seller; provided, however, that Buyer
shall notify
Seller prior to destroying any such record during such period.
Section 2.3 Employees and Employee Benefits
(a) Employment. Section 2.3(a) of the Company Letter lists all
employees of
Seller whose primary duties relate to the Business and to whom
Buyer agrees to
offer employment as of the Closing Date pursuant to the terms
hereof (the
"AFFECTED EMPLOYEES"). As of the Closing Date, Seller shall
terminate all
Affected Employees, and Buyer shall offer all Affected Employees
employment in
the Business on terms no less favorable in the aggregate (including
with respect
to position, duties, responsibilities, compensation, incentives and
location,
but excluding with respect to stock options, education, and any
benefits listed
on Section 3.14(k) of the Company Letter) than those provided to
the Affected
Employees on the date hereof. As of the Closing, except as set for
in Section
1.2(d) of the Company Letter, Seller shall pay to the
10
Affected Employees any and all liabilities relating to or arising
out of their
employment or termination of employment, including any payments and
benefits due
such Affected Employees.
(b) Substantially Equivalent Benefits. For a twelve (12) month
period
following the Closing, Buyer shall provide each Affected Employee
who continues
to be employed by Buyer with benefits that are at least
substantially equivalent
in the aggregate to either (i) the benefits provided to each such
Affected
Employee immediately prior to the Closing or (ii) the benefits
provided to
employees of Buyer that are similarly situated as, or hold
positions similar to,
the Affected Employees, except as otherwise required by applicable
law;
provided, however, that Buyer, in providing such substantially
equivalent
benefits, shall not be required to provide or maintain any
particular plan or
benefit that was provided to or maintained for Affected Employees
prior to the
Closing.
(c) Service Credit, Deductibles, and Preexisting Conditions. Buyer
agrees
that, for purposes of all employee benefit plans (including, but
not limited to,
all "employee benefit plans" within the meaning of Section 3(3) of
the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and
all policies
and employee fringe benefit programs, including vacation policies)
of Buyer
(such plans, programs, policies and arrangements, the "BUYER
PLANS") in which
the Affected Employees may participate following the Closing,
credit will be
given to the Affected Employees for service previously credited
with the
Business prior to the Closing for purposes of vesting and
eligibility; provided,
however, that such crediting of service shall not apply for
purposes of
determining benefit accruals and shall not result in a duplication
of benefits.
To the extent permitted by the Buyer Plans, Affected Employees
shall also be
given credit for any deductible or co-payment amounts paid in
respect of the
plan year in which the Closing occurs, to the extent that,
following the
Closing, they participate in any corresponding Buyer Plan for which
deductibles
or co-payments are required. Buyer shall also cause each Buyer Plan
to waive any
pre-existing condition exclusion or restriction, any waiting period
limitation,
or any evidence of insurability requirements for the Affected
Employees to the
extent such exclusions, restrictions, limitations or requirements
had been
waived or satisfied under the terms of any corresponding Plans
immediately prior
to the Closing. Seller shall or shall cause its flexible spending
account to
continue to honor reimbursement requests from each Affected
Employee (up to the
amount available for reimbursement for each such Affected Employee
as of the
Closing Date) that are submitted on or prior to February 28, 2007;
provided,
however, that such expenses must actually be incurred on or prior
to December
31, 2006.
(d) 401(k) Plan. Effective as of the Closing Date, the Affected
Employees
shall no longer make contributions or receive matching
contributions in Seller's
401(k) Plan (the "SELLER 401(k) PLAN"), and Seller shall have taken
all such
action prior to the Closing Date as may be required to achieve this
result. To
the extent elected by each Affected Employee (who actually becomes
employed by
Buyer) and permitted by law and provided that the Seller 401(k)
plan is
qualified under all relevant provisions of the Code and ERISA, as
applicable,
Buyer and Seller shall, to the extent permissible under applicable
laws, take
whatever actions are reasonably necessary or appropriate to effect
a
trust-to-trust transfer of the accounts of Affected Employees in
the Seller
401(k) Plan, into a plan designated by Buyer to accept the
transferred accounts,
and Seller and Buyer shall use their commercially reasonable
efforts to take
whatever actions are reasonably necessary or appropriate in order
for such plan
to accept the transferred accounts, and Buyer shall provide Seller
a
certification that Buyer is using Fidelity as the trustee under the
plan
11
to which the assets are being transferred. In connection therewith,
Seller shall
pay all fees, whether occurring prior to or after the Closing Date,
charged by
its third party administrator to effectuate such plan-to-plan
transfer, and
Buyer shall pay all fees, whether occurring prior to or after the
Closing Date,
charged by its third party administrator to effectuate such
plan-to-plan
transfer.
(e) Pre-Closing Claims. Except as otherwise provided in Section
2.3(f) with
respect to sickness and disability claims or claims originating on
after the
Closing Date, Seller or the Plans, as the case may be, will remain
responsible
for all claims under the applicable Plans. As of the Closing, any
Affected
Employee who is receiving benefits under Seller's short-term
disability program
shall be deemed to be an employee of Seller until such time as such
employee is
no longer eligible for Seller's short-term disability program. If
at such time
such Affected Employee will be returning to work, such employee
shall be
employed by Buyer in accordance with the terms of Sections 2.2(a)
and 2.2(b)
hereof. If at such time such employee will be eligible for
long-term disability
benefits or disability retirement, such employee shall receive such
benefits
under Seller's long-term disability program or pension plan.
(f) Disabled Employees. Seller will remain responsible for (i) all
benefits
payable to Affected Employees under Seller's health, accident,
sickness, salary
continuation, or short-term or long-term disability benefits plans
or programs,
and (ii) all workers compensation claims based on injuries
occurring on or prior
to the Closing Date; provided, however, that a workers compensation
claim
relating to any such injury is made within the applicable statutory
time period.
(g) Cooperation of Parties. Seller and Buyer agree to cooperate
fully with
respect to the actions which are necessary or reasonably desirable
to accomplish
the transactions contemplated hereunder, including, without
limitation, the
provision of records and information as each may reasonably request
and the
making of all appropriate filings under ERISA and the Code.
(h) No Right of Employment. Nothing contained herein, express or
implied,
is intended to confer upon any Affected Employee any right to
continued
employment for any period by reason of this Agreement. Nothing
contained herein
is intended to confer upon any Affected Employee any particular
term or
condition of employment. Nothing herein shall restrict Buyer in the
exercise of
its independent business judgment, as to the terms and conditions
under which it
may agree to continue to employ any Affected Employees, the
duration of any such
employment or the basis on which such employment is terminated. The
parties
agree that the Affected Employees are and will remain "at will"
employees.
(i) Accommodation with respect to Certain Affected Employees.
Solely as an
accommodation to Buyer and because Buyer will need a reasonable
period of time
in which to establish its payroll and benefits plans for Affected
Employees,
Seller will act as payroll agent for Buyer during the period (i)
through
November 15, 2006 in respect of Affected Employees in the United
States and (ii)
not to exceed thirty (30) days following the Closing in respect of
Affected
Employees in Australia, South Africa and the United Kingdom. As
such, Buyer
shall, prior to or contemporaneously with the payment of any
compensation or
benefits to such Affected Employees by Seller on behalf of Buyer,
upon Seller's
provision to Buyer of an invoice
12
or related documentation describing in sufficient detail the amount
of
compensation or benefits to be paid to each Affected Employee,
reimburse Seller
for any and all amounts to be expended by Seller in paying such
Affected
Employees their payroll and benefits plans until the sooner to
occur of (A) the
last day of the period that Seller acts as payroll agent for Buyer,
as provided
in subparagraphs (i) and (ii) above, and (B) such time as Buyer has
established
its payroll and benefits plans in the United States, Australia,
South Africa and
the United Kingdom. Nothing in this subsection (i) shall reduce or
be deemed to
reduce any liability or obligation of Buyer in respect of the
Affected Employees
arising under this Agreement.
(j) Indemnification. After the Closing Date, Buyer shall be
responsible
for, and shall indemnify and hold harmless Seller and its
affiliates and their
officers, directors, employees, affiliates and agents and the
fiduciaries
(including plan administrators) of the health, welfare and other
employee
benefit plans maintained by Seller from and against any and all
claims, losses,
damages, costs and expenses (including, without limitation,
reasonable
attorneys' fees and expenses) and other liabilities and obligations
relating to
or arising out of (i) all commissions and vacation entitlement
accrued but
unpaid as of the Closing due to any Affected Employees to the
extent set forth
on Section 1.2(d) of the Company Letter, (ii) the liabilities
assumed by Buyer
under this Section 2.3 or any failure by Buyer to comply with the
provisions of
this Section 2.3, and (iii) any claims of, or damages or penalties
brought by,
any Affected Employee, or any governmental entity on behalf of or
concerning any
Affected Employee, with respect to any payroll or benefits services
provided by
Seller to Buyer under Section 2.3(i), except to the extent such
claims, damages
or penalties result from Seller's gross negligence, fraud or
intentional act or
omission.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as disclosed in a separate disclosure letter, a copy of
which is
being delivered to Buyer herewith (the "COMPANY LETTER"), Seller
hereby
represents and warrants to Buyer as set forth below.
Section 3.1 Organization
Seller is a corporation duly organized, validly existing and in
good
standing under the laws of the State of Delaware. Seller has all
requisite
corporate power and corporate authority to own, lease and operate
its properties
and to carry on the Business as now being conducted, except where
any such
failure to be so organized and existing or to have such power and
authority
would not individually or in the aggregate have a Material Adverse
Effect.
Seller is duly qualified or licensed to do business in each
jurisdiction in
which the property owned, leased or operated by Seller in the
conduct of the
Business or the nature of the Business makes such qualification
necessary,
except in any such jurisdictions where the failure to be duly
qualified or
licensed would not, individually or in the aggregate, be reasonably
likely to
have a Material Adverse Effect.
As used in this Agreement, "MATERIAL ADVERSE EFFECT" means any
material
adverse change in, or effect on, the Assets or the financial
condition or
results of operations of the
13
Business, taken as a whole, that: (a) was not reasonably
foreseeable at the
Effective Date; and (b) is so substantial and adverse as to
fundamentally impair
the value of the Business; provided, however, that any such effect
resulting
from (i) any change in economic conditions generally or in the
industries in
which the Business operates, (ii) any continuation of an adverse
trend or
condition, (iii) any change in law, rule or regulation or GAAP (as
defined in
Section 3.5 and subject to the accounting methodology applied under
Section 3.1
of the Company Letter, which methodology shall be based on
principles derived
from GAAP) or interpretations thereof applicable to either Seller
or Buyer, (iv)
increases in energy, electricity, raw materials or other operating
costs, (v)
any change in the financial condition or results of operation of
the Business
resulting from the pending sale of the Business to Buyer or the
announcement of
the execution of this Agreement, and (vi) any actions to be taken
pursuant to
this Agreement shall not be considered when determining whether a
Material
Adverse Effect has occurred.
Section 3.2 Authorization
The execution, delivery and performance by Seller of this Agreement
and the
Ancillary Agreements, and the consummation by Seller of the
transactions
contemplated hereby and thereby are within Seller's corporate
powers and have
been duly authorized by all necessary corporate action on the part
of Seller.
This Agreement constitutes, and, when executed at the Closing, each
Ancillary
Agreement will constitute, a valid and binding agreement of Seller,
enforceable
against Seller in accordance with its terms, applicable bankruptcy,
insolvency,
moratorium, reorganization and other laws affecting the rights and
remedies of
creditors and to general equitable principles.
Section 3.3 Title to Assets
(a) Except with respect to the Liens of Silicon Valley Bank, which
shall be
terminated and released in respect of the Assets prior to the
Closing Date,
Seller is the beneficial owner of the Assets other than the Assets
leased from
third parties, and has good and valid title to, or valid and
subsisting
leasehold interests in, all of the Assets, free and clear of all
Liens except
for Permitted Encumbrances. As used herein, the term "LIENS" means
any lien,
pledge, mortgage, hypothecation, charge, claim, title,
imperfection, defect or
objection, security interest, conditional and installment sales
agreement,
encumbrance, prior assignments, rights-of-way, easement,
encroachment, third
party right or restriction, of any kind. As used herein, "PERMITTED
ENCUMBRANCES" means (i) Liens for current Taxes not yet due or
Taxes being
contested in good faith, as set forth on Section 3.3(a)(i) of the
Company
Letter, and (ii) the other Liens set forth on Section 3.3(a)(ii) of
the Company
Letter.
(b) Except as set forth on Section 3.10(c) and Section 3.10(e) of
the
Company Letter and for services provided under the Transition
Services
Agreement, the Assets constitute all properties, assets and rights
forming a
part of, used or held in, and all such properties, assets and
rights as are
reasonably necessary in the conduct of, the Business, as presently
conducted by
Seller. At all times since September 30, 2006, Seller has caused
the Assets to
be maintained in accordance with good business practice, and all
the Assets are
in good operating condition and repair, reasonable wear and tear
excepted, and
are suitable for the purposes for which they are presently used.
14
(c) Except as set forth on Section 3.4 of the Company Letter,
Seller has
the complete and unrestricted power and unqualified right to sell,
assign,
transfer, convey and deliver the Assets to Buyer without penalty or
other
adverse consequences. Following the consummation of the
transactions
contemplated by this Agreement and the execution of the instruments
of transfer
contemplated by this Agreement, Buyer will own, with good, valid
and marketable
title, or lease, under valid and subsisting leases, or otherwise
acquire the
interests of Seller in the Assets, free and clear of any Liens,
other than
Permitted Encumbrances, and without incurring any penalty or other
adverse
consequence, including any increase in rentals, royalties, or
license or other
fees imposed as a result of, or arising from, the consummation of
the
transactions contemplated by this Agreement.
Section 3.4 Consents and Approvals; No Violations
Except as set forth in Section 3.4 of the Company Letter, neither
the
execution, delivery or performance of this Agreement or the
Ancillary Agreements
nor the consummation by Seller of the transactions contemplated
hereby or
thereby will (a) conflict with or result in any breach or violation
of any
provision of the certificate of incorporation or by-laws of Seller;
(b) require
any filing or registration with, or notice or declaration to, or
the obtaining
of any permit, license, authorization, consent or approval of, any
governmental
or regulatory authority whether within or outside the United
States; (c)
violate, conflict with or result in a default (or any event which,
with notice
or lapse of time or both, would constitute a default) under, or
result in any
termination, cancellation or acceleration, or give rise to any such
right of
termination, cancellation or acceleration under, any of the terms,
conditions or
provisions of any agreement set forth on Section 3.13(a) of the
Company Letter;
(d) violate any order, injunction, decree, statute, rule or
regulation
applicable to Seller or any of the Assets, or (e) result in the
creation or
imposition of any Lien upon any of the assets or properties of the
Business,
excluding from the foregoing clauses (b), (c), (d) and (e), such
requirements,
conflicts, defaults, rights, Liens or violations that are not,
individually or
in the aggregate, reasonably likely to have a Material Adverse
Effect and would
not adversely affect, in any material respect, the ability of
Seller to
consummate the transactions contemplated by this Agreement or the
Ancillary
Agreements or that become applicable as a result of the business or
activities
(other than the Business) in which Buyer engages or proposes to be
engaged or as
a result of any acts or omissions by, or the status of or any facts
pertaining
to, Buyer. As used in this Section 3.4, references to Seller shall
refer only to
Seller in connection with the conduct of the Business.
Section 3.5 Financial Statements
Section 3.5 of the Company Letter contains the Business' (i)
unaudited
balance sheet as of September 30, 2006 and income statement for the
six-month
period ended September 30, 2006 (the "SEPTEMBER 2006 FINANCIAL
STATEMENTS"),
(ii) unaudited income statement for the year ended December 31,
2005 (the
"INCOME STATEMENT", and together with the September 2006 Financial
Statements,
the "FINANCIAL STATEMENTS") and (iii) audited balance sheet of
Seller for the
fiscal year ended December 31, 2005, and the related audited
statements of
income, retained earnings, stockholders' equity and changes in
financial
position of Seller, together with all related notes and schedules
thereto,
accompanied by the report thereon of Seller's accountants. The
September 2006
Financial Statements and the Income Statement have been extracted
from the books
of account and financial records of Seller, which books and records
are the
basis for
15
the preparation of Seller's audited financial statements. Seller's
financial
statements have been prepared in accordance with GAAP. Except as
disclosed in
the Financial Statements or on Section 3.5 of the Company Letter,
each balance
sheet fairly presents, in all material respects, the financial
position of the
Business as of the date thereof, and each income statement fairly
presents, in
all material respects, the results of operations of the Business
for the period
indicated and has been derived from the books and records of
Seller; provided,
however, that the Financial Statements present such information in
accordance
with Seller's historical practices with respect to financial
statements prepared
for management in the ordinary course of business and do not
conform to U.S.
generally accepted accounting principles consistently applied
("GAAP");
provided, further, that all such accounting practices to the extent
material and
all deviations from historical practices with respect to the
Financial
Statements, have been fairly disclosed to Buyer by Seller and such
Financial
Statements have been prepared in accordance with the accounting
methodology
applied under Section 3.1 of the Company Letter, consistently
applied, which
methodology shall be based on principles derived from GAAP. Buyer
acknowledges
that Seller has not prepared and does not prepare separate
financial statements
for the Business although Seller has prepared certain financial
reporting by
segment in its periodic filings with the Securities and Exchange
Commission (the
"SEC").
Section 3.6 Absence of Undisclosed Liabilities
Except (a) for liabilities and obligations incurred in the ordinary
course
of business and consistent with past practice since September 30,
2006 and (b)
as otherwise disclosed herein or on Section 3.6 of the Company
Letter, since
September 30, 2006, the Business has not incurred any liabilities
or obligations
(whether direct, indirect, accrued or contingent) that would,
individually or in
the aggregate, be reasonably likely to have a Material Adverse
Effect and be
required to be reflected or reserved against in a balance sheet of
the Business
prepared in accordance with the methodology used in preparation of
the balance
sheet of September 30, 2006 referred to in Section 3.5.
Section 3.7 Conduct in the Ordinary Course; Absence of Certain
Changes, Events
and Conditions
Since September 30, 2006, except as set forth on Section 3.7 of the
Company
Letter, the Business has been conducted in the ordinary course and
consistent
with past practice. As amplification and not limitation of the
foregoing, except
as set forth on Section 3.7 of the Company Letter, since September
30, 2006,
Seller has not:
(a) permitted or allowed any of the Assets to be subjected to any
Lien,
other than Permitted Encumbrances and Liens that will be released
at or prior to
the Closing;
(b) except in the ordinary course of business consistent with past
practice, discharged or otherwise obtained the release of any Liens
related to
the Business, or paid or otherwise discharged any Liability related
to the
Business, other than current liabilities reflected on the Financial
Statements
and current liabilities incurred in the ordinary course of business
consistent
with past practice since September 30, 2006;
16
(c) written down or written up (or failed to write down or write up
in
accordance with the accounting methodology applied under Section
3.1 of the
Company Letter, consistently applied) the value of any of the
Assets other than
in the ordinary course of business consistent with past practice
and in
accordance with the accounting methodology applied under Section
3.1 of the
Company Letter, consistently applied;
(d) made any change in any method of accounting or accounting
practice or
policy used by Seller;
(e) amended, terminated, cancelled or compromised any claims of
Seller
(related to the Business) or waived any other rights of substantial
value to
Seller (related to the Business);
(f) sold, transferred, leased, subleased, licensed or otherwise
disposed of
any properties or assets, real, personal or mixed (including
leasehold interests
and intangible property) of Seller (related to the Business);
(g) merged with, entered into a consolidation with or acquired an
interest
of 5% or more in any Person engaged in a business relating to the
Business or
acquired a substantial portion of the assets or business of any
Person engaged
in a business relating to the Business or any division or line of
business
thereof, or otherwise acquired any material assets relating to the
Business
other than in the ordinary course of business consistent with past
practice;
(h) made any capital expenditure or commitment for any capital
expenditure
, in each case relating to the Business, in excess of $25,000
individually or
$100,000 in the aggregate;
(i) issued any purchase orders or otherwise agreed to make any
purchases,
in each case relating to the Business, involving exchanges in value
in excess of
$25,000 individually or $100,000 in the aggregate;
(j) made any changes in the customary methods of operations of the
Business, including practices and policies relating to
manufacturing,
purchasing, marketing, selling and pricing;
(k) made, revoked or changed any material tax election or method of
tax
accounting, except insofar as may have been required by a change in
GAAP, or
settled or compromised any material liability with respect to
Taxes;
(l) incurred any indebtedness relating to the Business in excess of
$25,000
individually or $100,000 in the aggregate;
(m) made any loan to, guaranteed any indebtedness of or otherwise
incurred
any Indebtedness on behalf of any Person in connection with the
Business;
(n) failed to pay any creditor any amount owed to such creditor
when due,
except in the ordinary course consistent with past practice;
(o) granted any increase, or announced any increase, in the wages,
salaries, compensation, bonuses, incentives, pension or other
benefits payable
by Seller to any of its
17
Affected Employees, including any increase or change pursuant to
any Plan, or
(ii) established or increased or promised to increase any benefits
under any
Plan, in either case except as required by law or any collective
bargaining
agreement;
(p) entered into any agreement, arrangement or transaction relating
to the
Business with any of its directors, officers, employees or
stockholders (or with
any relative, beneficiary, spouse or Affiliate of such Persons);
(q) terminated, discontinued, closed or disposed of any plant,
facility or
other business operation used in connection with the Business, or
laid off any
employees employed in connection with the Business (other than
layoffs of less
than 50 employees in any six-month period in the ordinary course of
business
consistent with past practice) or implemented any early retirement,
separation
or program providing early retirement window benefits within the
meaning of
Section 1.401(a)-4 of the Treasury Regulations or announced or
planned any such
action or program for the future;
(r) except for ordinary disclosure to actual and prospective
customers and
other prospective buyers of the Business, disclosed any secret or
confidential
Intellectual Property Rights relating to the Business (except by
way of issuance
of a patent) or permitted to lapse or become abandoned any
Intellectual Property
Rights relating to the Business (or any registration or grant
thereof or any
application relating thereto) to which, or under which, Seller has
any right,
title, interest or license;
(s) allowed any Permit relating to the Business to lapse or
terminate or
failed to renew any insurance policy, Permit that is scheduled to
terminate or
expire within 45 calendar days of the Closing;
(t) failed to maintain the plant, property and equipment included
in the
Assets in good repair and operating condition, ordinary wear and
tear excepted;
(u) suffered any casualty loss or damage with respect to any of the
Assets
which in the aggregate have a replacement cost of more than
$50,000, whether or
not such loss or damage shall have been covered by insurance;
(v) amended, modified or consented to the termination of any
agreements set
forth on Section 3.13(a) of the Company Letter or Seller's rights
thereunder;
(w) abandoned, sold, assigned, or granted any security interest in
or to
any of the Enterprise Management Solution or any of its Source Code
Application
and Documentation components or any other Intellectual Property
Rights or
Proprietary Materials used in the Business, including failing to
perform or
cause to be performed all applicable filings, recordings and other
acts, and pay
or caused to be paid all required fees and taxes, to maintain and
protect its
interest in such Intellectual Property Rights, (ii) granted to any
third party
any license with respect to any Intellectual Property Rights, other
than
licenses of the Intellectual Property Rights to the customers of
the Business in
the ordinary course of its business, (iii) developed, created or
invented any
Intellectual Property Rights jointly with any third party (other
than such joint
development, creation or invention with a third party that is in
progress prior
to September 30, 2006) or (iv) disclosed, or allow to be disclosed,
any
confidential Intellectual Property Rights,
18
unless such Intellectual Property Rights is subject to a
confidentiality or
non-disclosure covenant protecting against disclosure thereof;
(x) suffered any Material Adverse Effect; or
(y) agreed, whether in writing or otherwise, to take any of the
actions
specified in this Section 3.7 or granted any options to purchase,
rights of
first refusal, rights of first offer or any other similar rights or
commitments
with respect to any of the actions specified in this Section 3.7,
except as
expressly contemplated by this Agreement and the Ancillary
Agreements.
Section 3.8 Properties and Related Matters
(a) Seller does not own any real property that is used in the
operation of
the Business. Seller leases or subleases all real property used
exclusively in
the Business. Section 3.8(a) of the Company Letter describes, as of
the date
hereof, all such real property leased or subleased by Seller that
may be leased
or subleased by Buyer upon the Closing Date (the "REAL PROPERTY"),
specifying
the street address of each property, the name of the lessor or
sublessor, the
lease term and basic annual rent and sets forth a true and complete
list of all
leases and subleases relating to the Real Property and any and all
ancillary
documents pertaining thereto (including all amendments,
modifications,
supplements, exhibits, schedules, addenda and restatements thereto
and thereof
and all consents, including consents for alterations, assignments
and sublets,
documents recording variations, memoranda of lease, options, rights
of
expansion, extension, first refusal and first offer and evidence of
commencement
dates and expiration dates). With respect to each of such leases
and subleases,
except as set forth in Section 3.8(a) of the Company Letter, Seller
has not
exercised or given any notice of exercise, nor has any lessor or
landlord
exercised or received any notice of exercise by a lessor or
landlord of, any
option, right of first offer or right of first refusal contained in
any such
lease or sublease, including any such option or right pertaining to
purchase,
expansion, renewal, extension or relocation (collectively,
"OPTIONS").
(b) Except as set forth in Section 3.8(b) of the Company Letter,
each lease
or sublease listed in Section 3.8(a) of the Company Letter: (i) is
valid and
binding on the parties thereto and is in full force and effect,
(ii) is freely
and fully assignable to Buyer without penalty or other adverse
consequences, and
(iii) upon consummation of the transactions contemplated by this
Agreement shall
be in full force and effect without penalty or other adverse
consequence. To its
Knowledge, Seller is not in breach of, or default under, any lease
or sublease
listed in Section 3.8(a) of the Company Letter.
(c) Seller is in peaceful and undisturbed possession of each parcel
of Real
Property, and, to Seller's Knowledge, there are no contractual or
legal
restrictions that preclude or restrict the ability to use the Real
Property for
the purposes for which it is currently being used. All existing
water, sewer,
steam, gas, electricity, telephone, cable, fiber optic cable,
Internet access
and other utilities required for the use, occupancy, operation and
maintenance
of the Real Property are adequate for the conduct of the Business
as it has been
and currently is conducted. To Seller's Knowledge, there are no
material adverse
physical conditions affecting the Real Property or any of the
facilities,
buildings, structures, erections, improvements, fixtures, fixed
assets and
personalty of a permanent nature annexed, affixed or attached to,
located on or
19
forming part of the Real Property. Seller has not leased or
subleased any parcel
or any portion of any parcel of Real Property to any other Person
and no other
Person has any rights to the use, occupancy or enjoyment thereof
pursuant to any
lease, sublease, license, occupancy or other agreement, nor has
Seller assigned
its interest under any lease or sublease listed in Section 3.8(a)
of the Company
Letter to any third party.
(d) The interests of Seller in the Real Property to be transferred
pursuant
to this Agreement are sufficient for the continued conduct of the
Business after
the Closing in substantially the same manner as conducted prior to
the Closing.
(e) Except as listed in Section 3.8(e) of the Company Letter, to
the
Knowledge of Seller, there are no facts that would prevent the Real
Property
from being occupied by Buyer after the Closing in the same manner
as occupied by
Seller immediately prior to the Closing.
(f) The rent set forth in each lease or sublease of the Real
Property is
the actual rent being paid, and there are no separate agreements or
understandings with respect to the same.
(g) Seller has the full right to exercise any unexpired Options
contained
in the leases and subleases pertaining to the Real Property on the
terms and
conditions contained therein and upon due exercise would be
entitled to enjoy
the full benefit of such Options with respect thereto.
(h) Section 3.8(h) of the Company Letter describes, as of the date
hereof,
all tangible personal property owned, leased or subleased by Seller
that was
used by Seller exclusively in the Business, including, but not
limited to,
equipment, machinery, furniture, computers, computer software
(other than the
Applications), photocopy machines, office supplies, spare and
replacement parts,
and other trade fixtures and fixed assets (the "TANGIBLE PERSONAL
PROPERTY").
All such leases of the Tangible Personal Property are in good
standing and are
valid, binding and enforceable in accordance with their respective
terms, and
there does not exist under any such lease any material breach by
any Seller or
any event known to a Seller that, with notice or lapse of time or
both, would
constitute a Material Adverse Effect. Seller has the full right to
exercise any
unexpired renewal options contained in the leases pertaining to the
Tangible
Personal Property on the terms and conditions contained therein and
upon due
exercise would be entitled to enjoy the use of each item of leased
Tangible
Personal Property for the full term of such renewal options.
(i) To Seller's Knowledge, since December 31, 2005, all of the
Assets have
been acquired for consideration not less or greater than fair
market value of
such Assets at the date of such acquisition.
Section 3.9 Enterprise Management Solution Identification;
Ownership
(a) Section 3.9(a) of the Company Letter sets forth the full and
complete
list of the Enterprise Management Solution and each of its Source
Code,
Application and Documentation components and all Proprietary
Materials used by
Seller exclusively in the Business and which would be necessary for
its
continued operation in the ordinary course of business consistent
with past
practice. As such, Section 3.9(a) of the Company Letter further
sets forth the
full and complete list of the portions and components of Seller's
proprietary
technology products being transferred and conveyed hereunder.
20
(b) Each of the material features and functions of the Applications
are in
substantial conformity with their Documentation and are also in
substantial
conformity with any express warranties in force and effect as of
the Effective
Date of this Agreement between Seller and any licensees of the
Applications, if
any, except for such nonconformities: (i) as may require only
replacement or
repair (or, in the case of services, re-performance) in the
ordinary course of
business consistent with past practice; or (ii) for which (and to
the extent)
there is a reserve set forth on the balance sheet as of September
30, 2006 or as
otherwise disclosed on Section 3.9(b) of the Company Letter.
(c) No material actions, suits, proceedings, hearings,
investigations,
charges, complaints, claims or demands have been asserted and
remain outstanding
or, to the Knowledge of Seller, threatened against Seller with
respect to any
Application or Documentation delivered to a customer giving rise to
liability or
damages owed to third parties in connection therewith except
liabilities: (i)
for replacement or repair (or, in the case of services,
re-performance) incurred
in the ordinary course of business consistent with past practice;
or (ii) for
which (and to the extent) there is a specific reserve set forth on
the balance
sheet as of September 30, 2006 or as otherwise disclosed on Section
3.9(b) of
the Company Letter.
(d) The Enterprise Management Solution is not subject to any
guaranty,
warranty or indemnity beyond the applicable terms and conditions of
sale,
license or lease or beyond that imposed by applicable law.
As used in this Agreement, "KNOWLEDGE" means the knowledge of
William P.
Lyons, Joseph P. Dwyer and Elias Typaldos after reasonable inquiry
into the
relevant subject matter as of the Effective Date.
Section 3.10 Intellectual Property Rights
(a) Section 3.10(a) of the Company Letter lists all Intellectual
Property
Rights (including any Registered IP) currently used in the conduct
of the
Business owned by Seller, including, without limitation,
Intellectual Property
Rights in and to: (i) the Enterprise Management Solution and each
of its
Application, Documentation and Source Code components; (ii) the
Shared
Intellectual Property, (iii) any Proprietary Materials used by
Seller
exclusively in the Business; and (iv) all Names and Logos used by
Seller in the
Business (Section 3.10(a) of the Company Letter also identifies the
Names and
Logos being conveyed hereunder as part of the Assets),
(collectively,
"ENTERPRISE MANAGEMENT SOLUTION IP").
(b) Except for Permitted Encumbrances specifically identified in
Section
3.10(b) of the Company Letter, Seller owns, free and clear of any
Liens, all
Enterprise Management Solution IP.
(c) Except for "off-the-shelf" programs, Section 3.10(c) of the
Company
Letter lists all Third Party Materials embedded or incorporated in,
or bundled
with, the Enterprise Management Solution and all of the agreements
pursuant to
which Seller has received the right to such Third Party Materials
("THIRD PARTY
IP"). Except as specifically identified in Section 3.10(c) or
Section 3.4 of the
Company Letter: (i) Seller is not in breach or violation of the
agreements
governing the Third Party IP or other license or grant of rights
pursuant to
which the
21
Third Party IP are possessed and used by Seller and/or delivered to
Seller's
licensees; and (ii) Seller's rights to Third Party IP are
assignable or
otherwise transferable to Buyer hereunder without payment of
additional
consideration.
(d) To Seller's Knowledge and except as specifically identified in
Section
3.10(d) of the Company Letter: (i) Seller is not in breach or
violation of any
Inbound License Agreements; and (ii) the Inbound License Agreements
are
assignable or otherwise transferable to Buyer hereunder without
payment of
additional consideration. As used herein the term "INBOUND LICENSE
AGREEMENTS"
means any software, tools or technology used for the development,
maintenance or
support of the Enterprise Management Solution or otherwise used in
the conduct
of the Business and which are necessary to continue operating the
Business in
the ordinary course consistent with past practice but do not
include such
productivity and other software as Seller may use incidentally in
the Business.
(e) Except as set forth in Section 3.10(c) and Section 3.10(e) of
the
Company Letter, the Enterprise Management Solution IP and the Third
Party IP
constitute all Intellectual Property Rights and Proprietary
Materials needed to
conduct the Business as currently conducted.
(f) Section 3.10(f) of the Company Letter lists all agreements
pursuant to
which any third party has been granted any license under, or
otherwise has
received or acquired any right or interest in, any Enterprise
Management
Solution IP, other than non-exclusive licenses to Applications
granted pursuant
to the Company's standard form of end user license agreement.
(g) Seller has provided to Buyer a complete and accurate copy of
each end
user license agreement, service agreement, and support agreement
used by Seller
in conducting the Business. Seller has provided to Buyer the
opportunity to
review complete and accurate copies of all agreements that deviate
in any
material respect from Seller's standard form agreements, if any
were provided to
Buyer.
(h) The operation of the Business as currently conducted, the
offering and
sale of the Enterprise Management Solutions and each of its
Application,
Documentation and Source Code components and any related Third
Party Materials,
do not infringe any third party's Known Intellectual Property
Rights and, to the
Knowledge of Seller, do not infringe any third party's Intellectual
Property
Rights. Seller has not received any actual notice relating to any
actual,
alleged, or suspected infringement, misappropriation, or violation
of any such
Intellectual Property Rights of any third party in connection with
the Business
or the Enterprise Management Solutions. The COMPUTRON trademark
does not
conflict or interfere with any tradenames, brand names, logos,
trademarks,
service marks, graphics, or Internet domain names lawfully owned,
used, or
applied for by any other Person. No event or circumstance
(including a failure
to exercise adequate quality controls and an assignment in gross
without the
accompanying goodwill) has occurred or exists that has resulted in,
or could
reasonably be expected to result in, the abandonment of the
COMPUTRON trademark
or the *computronsoftware.com** domain name.
(i) No third party has filed with or commenced in a court or other
body of
competent jurisdiction a claim, suit, action or proceeding that
challenges the
validity, enforceability, effectiveness or ownership by Seller of
any Enterprise
Management Solution IP. Seller has no
22
Knowledge of facts or circumstances which would render any
Enterprise Management
Solution IP to be rendered invalid or unenforceable, nor, to
Seller's Knowledge,
has any third party asserted or threatened claims that would result
in a
material change in the manner in which the Enterprise Management
Solutions are
offered and sold in the marketplace.
(j) No legal, regulatory or governmental proceedings, including
interference, re-examination, reissue, opposition, nullity, or
cancellation
proceedings that relate to any of Enterprise Management Solution IP
have been
filed, commenced or are pending, other than review of pending
Patent Rights, as
the case may be, and Seller has not received any written notice
from a court or
other body of competent jurisdiction, nor does Seller have
Knowledge indicating
that such proceedings are threatened or contemplated by any
governmental
authority or any other person.
(k) Seller has secured written agreements in favor of Seller that
are valid
and enforceable under the laws of those jurisdictions in which
Seller maintains
an affiliate entity or has otherwise formally registered or
otherwise sought and
obtained intellectual property or proprietary rights from all
parties (including
former employees and present and former consultants) who have
created any
portion of, or otherwise should have reasonably been known to have
any claim for
rights in or to, the Enterprise Management Solutions IP, containing
an
assignment of Intellectual Property Rights to Seller and
confidentiality
provisions protecting the Enterprise Management Solution IP. To
Seller's
Knowledge, no parties to such agreements are in breach of any terms
or
conditions of such agreements.
(l) Seller has taken all commercially reasonable steps to maintain
the
confidentiality of and otherwise protect and enforce its rights in
all Trade
Secrets included in the Enterprise Management Solution IP.
(m) The consummation of the transactions contemplated hereby shall
not
alter, impair or otherwise affect any of Seller's (or Buyer's as
Seller's
successor or assign) rights in the Enterprise Management Solution
IP or Third
Party Materials, and Buyer shall succeed to all of S
