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ASSET PURCHASE AGREEMENT

Asset Purchase Agreement

ASSET PURCHASE AGREEMENT | Document Parties: MIGO SOFTWARE, INC. | STOMPSOFT, INC You are currently viewing:
This Asset Purchase Agreement involves

MIGO SOFTWARE, INC. | STOMPSOFT, INC

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Title: ASSET PURCHASE AGREEMENT
Governing Law: Delaware     Date: 1/3/2007
Industry: Software and Programming     Law Firm: Ellis Funk, P.C.     Sector: Technology

ASSET PURCHASE AGREEMENT, Parties: migo software  inc. , stompsoft  inc
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ASSET PURCHASE AGREEMENT

 

 

THIS AGREEMENT is made as of the 27th day of December, 2006, by and between MIGO SOFTWARE, INC., a Delaware corporation (the “ Buyer ”) and STOMPSOFT, INC., a California corporation (the “ Seller ”).

 

 

RECITALS

 

The Seller is engaged in the business of developing Internet security and privacy software titles, including software solutions for home and business users for (i) Internet security and privacy; (ii) data protection and disaster recovery; and (iii) PC performance and reliability utilities (the “Stomp Business”). The Buyer wishes to purchase, and the Seller wishes to sell, substantially all of the assets of the Seller, including the Stomp Business as a going concern, upon the terms and conditions herein set forth (the “ Asset Sale ”).

 

NOW, THEREFORE, in consideration of the mutual promises herein made, and intending to be legally bound hereby, the parties agree as follows;

 

 

ARTICLE 1

PURCHASE AND SALE OF ASSETS

 

1.1    Purchased Assets . Subject to the terms and conditions herein set forth, the Buyer shall purchase on the Closing Date (as hereinafter defined), and the Seller shall sell and transfer to the Buyer, all of the Seller’s assets and properties of every kind and description, real, personal and mixed, tangible and intangible, and wherever situated, but expressly excluding the Excluded Assets described in Section 1.2 hereof, all as the foregoing may exist as of the Closing Date (hereinafter, all of such assets and properties are referred to as the “ Purchased Assets ”). The Purchased Assets shall include, without limitation, the following assets of the Seller:

 

(a)    All inventories of whatever kind, including, without limitation, finished goods, supplies, work-in-process and raw materials, but excluding any consigned inventory as described in Schedule 1.2 (the “Inventory” );

 

(b)    All customer contracts of Seller, including but not limited to those described on Schedule 1.1(b) (the “ Customer Contracts ”);

 

(c)    All prepaid expenses listed on Schedule 1.1(c) ;

 

(d)    All equipment, furniture, computer systems, assets held under capitalized leases, fixtures and fixed assets, including those items listed on Schedule 1.1(d) attached hereto;

 

(e)    All rights of the Seller pursuant to equipment leases, contracts, purchase orders, sales orders, supplier relationships, and other agreements whatsoever relating to the Business;

 


 

(f)    All right, title and interest (including the right to sue for past infringements) in and to intellectual property, including all patents and applications therefor, unpatented inventions, trademarks, corporate names (including the name “StompSoft, Inc.” or all variations thereof), trade names, domain names, service marks, copyrights, applications for and registrations of any of the foregoing, software, operating systems, know-how, trade secrets, formulas and technical information and the goodwill associated with any and all of the foregoing throughout the world (collectively, “ Intellectual Property Rights ”) and all rights of Seller to enforce its Intellectual Property Rights against others;

 

(g)    All governmental and nongovernmental licenses, permits, authorizations, consents and indulgences to the extent the Seller has the right to transfer and assign the same to the Buyer;

 

(h)    All computer, office and other supplies;

 

(i)    All warranty rights, guaranty rights, causes of actions, judgments and claims and similar rights against vendors, suppliers, designers, architects, engineers or other third parties;

 

(j)    All rights of Seller under confidentiality, noncompetition and invention assignment agreements with employees, contractors or others;

 

(k)    All lists of the Seller’s customers, suppliers, vendors and sources; all books, records, journals, computer software and files; all information, blueprints, engineering data, drawings, sales and promotional materials, telephone and telecopier numbers and listings; and

 

(l)    The goodwill associated with the Stomp Business.

 

1.2    Excluded Assets . The Purchased Assets shall not include, and the Seller shall retain, the following assets (the “ Excluded Assets ”):

 

(a)    The Seller’s bank accounts and all cash and cash equivalents;

 

(b)    all employee agreements (other than agreements relating to the intellectual property of Seller, inventions or discoveries by employees or restrictions on competition or confidential information, all of which shall constitute part of the Purchased Assets), employee benefit plans, programs and arrangements and other commitments of the Seller relating to employees, whether written or oral, express or implied;

 

(c)    any claims, rights and interest in and to any refunds of income and any other taxes or fees of any nature whatsoever which relate solely to the period up to and including the Closing Date;

 

(d)    All claims for refunds including, without limitation, insurance claims;

 

(e)    All insurance policies;

 

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(f)    The Seller’s accounts receivable for products sold or services performed on or before Closing and all claims and contract rights relating thereto;

 

(g)    The Seller’s rights under the lease of Seller’s office space at 2811 McGaw, Suite A, Irvine, California 92614 (the “ Office Lease ”);

 

(h)    The Seller’s rights under this Agreement;

 

(i)    The Seller’s corporate record books, minute books, stock record books and corporate franchise and tax returns and reports, and employee records;

 

(j)    The assets listed in Schedule 1.2 attached hereto; and

 

(k)    The Seller’s records relating to the items described in the foregoing clauses (a) through (i).

 

1.3    Closing . The closing (the “ Closing ” or “Closing Date”) of the purchase and sale of the Stomp Business and the Purchased Assets shall take place at 1:00 p.m., Pacific Standard Time, on December 27, 2006, at the offices of the Seller, or at such other time and place as may be mutually agreed by the Buyer and the Seller. The effective time of the “ Closing Date ” and the effective date of the transactions described herein shall be the close of business on the date immediately preceding the Closing Date, unless otherwise agreed by the parties. All transactions relating to the Stomp Business occurring on or after the Closing Date shall be for the Buyer's account.

 

1.4    Taking of Necessary Action; Further Action If, at any time after the Closing, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Buyer with full right, title and possession to the Purchased Assets and the Stomp Business, Seller shall, at Buyer’s expense, use commercially reasonable efforts to take such lawful and necessary actions.

 

 

ARTICLE 2

CONSIDERATION FOR TRANSFER

 

2.1    Purchase Price . The purchase price (the “Purchase Price”) shall consist of the following consideration: (i) Six Hundred Fifty Thousand Dollars ($650,000.00) payable by satisfaction of that certain promissory note dated on or about December 20, 2006 from Seller to Buyer and the balance payable in cash at Closing; and (ii) twenty million (20,000,000) shares of the Common Stock, $.0001 par value per share, of Buyer (the “ Buyer Shares ”).

 

2.2    Conveyance of Assets . At the Closing, the parties shall execute a Bill of Sale, General Conveyance, Assignment and Assumption Agreement substantially in the form attached hereto as Exhibit 2.2 (the “ Conveyance Agreement ”).

 

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2.3    Website and Other Rights . Effective upon the Closing and during the Website Term (as defined below), the Buyer shall, without cost or expense to Seller or the Seller’s customers that previously purchased the Software Product (as defined below): (i) maintain and support on Buyer’s website (the “ Website ”) prominent links (“ Links ”) with words that are reasonably prominently displayed on the website to the effect that make clear such link is for a free backup MyPC upgrade to   version 6 for “backup my pc” and which allow, without cost to Seller or Seller’s customers and former customers who previously bought “backup my pc” software products and which Software Products are part of the Excluded Assets (the “ Software Products ”) the right, through such link, to download certain updates and corrections to such Software Products, which updates and corrections shall be provided by Seller’s licensor or Seller (collectively, the “ Downloads ”) ; (ii) maintain and support the websites and other infrastructure such as servers to allow for the downloading of the Updates to the Software Products; (iii) provide for a reasonable location of such down link on the Buyer’s website so that customers and former customers who purchased the Software Products will be able to readily locate and utilize such link; (iv) allow for the StompSoft domain name to be linked to such Website; (v) reasonably maintain and support a StompSoft.com web page that will provide for the Downloads as described in this paragraph 2.3; and (vi) assist Seller in conducting email blasts to customers and former customers of the Software Products as required by Seller from time to time and Seller will pay for the out of pocket costs of conducting such email blasts that Seller desires to do during the Website Term. The Website Term means the period from the Closing Date and ending on the later of July 1, 2007 or until the Seller no longer has any legal obligation to make available the Downloads as described herein. In addition, effective on the Closing, Buyer hereby grants to Seller an irrevocable royalty free non exclusive license (“ License ”) to use the name “StompSoft” and all other trade names and marks that are part of the Purchased Assets for the following limited purposes: marketing and selling the consigned inventory that Seller owns as of the Closing; selling of Seller’s consigned inventory by Seller’s retailers and distributors and brokers; and collection of Seller’s accounts receivable existing from time to time. Such License shall end when all of the Seller’s consigned inventory has been sold or returned; and all of its accounts receivable have been collected or reasonably expected to be collected, but no later than December 31, 2007. Further, notwithstanding any term in this Agreement or any exhibits to the contrary, Seller may, after the Closing, continue to sell all of its existing consigned inventory through its retailers and distributors and other marketing channels, and collect all of its current and future accounts receivable and Seller may conduct such activities using the License on a royalty free basis as described above. The terms of this Section 2.3 and the terms of Section 2.4 below shall survive the Closing.

 

2.4    Purchase Price Allocation. The parties agree to allocate the Purchase Price among the Purchased Assets and the non-competition covenants set forth in Section 10.4 of this Agreement as mutually agreed upon and to execute a memorandum (“Memo”) to confirm such allocation on or before February 28, 2007, subject to the following: (i) Each of the parties shall report the income tax consequences of the transactions called for in this Agreement in a manner consistent with the allocation set forth in such Memo; (ii) such allocation shall be followed in all tax returns of the Buyer and the Seller for the taxable year that includes the Closing Date; (iii) neither the Buyer nor the Seller will take any position inconsistent with such allocation unless otherwise required by applicable law; and (iv) for purposes of this Section 2.4, the determination of the Purchase Price and the consideration to be allocated on all required IRS forms and as reflected in the Memo shall be determined by Kelly & Co.(who will be retained by Seller and Seller shall pay for Kelly & Co’s fees for such determination) and such determination of Purchase Price by Kelly & Co. shall be binding on the parties hereto.

 

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ARTICLE 3

LIABILITIES

 

3.1    Assumed Liabilities . The Buyer agrees to assume, pay and discharge as and when due the following liabilities of the Seller (the “ Assumed Liabilities ”):

 

(a)    Liabilities and obligations of the Seller under those quotes, bids, proposals, awards, customer orders, work-in-process, pending projects, contracts and purchase orders with customers given, entered into and accepted by the Seller and remaining uncompleted or outstanding on the Closing Date that are listed on Schedule 3.1(a) ;

 

(b)    Liabilities and obligations under the contracts listed on Schedule 3.1(b) but only to the extent such liabilities and obligations are to be performed on and after the Closing.

 

(c)    All product warranty obligations of Seller but only to the extent of the warranties described on Schedule 3.1(c) ; provided, however, that Buyer shall have no obligation to honor any rebate or refund claims of Seller’s customers;

 

(d)    All liabilities listed on Schedule 3.1(d) attached hereto;

 

(e)    All rent, percentage rent, utilities, common area charges, pass through charges, real property taxes and insurance payable under that certain lease of space at the Seller’s current location that accrue commencing on the Closing Date and ending on the earlier of: (i) four months thereafter; or (ii) the vacating of such location by Seller if Seller vacates such location prior to the end of such four (4)month period; and

 

(f)    Liabilities and obligations with respect to all Purchased Assets to the extent such liabilities and obligations accrue on and after the Closing.

 

3.2    Non-Assumption of Liabilities . With the exception of the Assumed Liabilities, the Buyer shall not assume, pay, perform, discharge, accept, or be responsible for any liabilities, accounts payable, debts or obligations of the Seller of any kind whatsoever, whether actual, contingent, accrued, known or unknown, including, without limitation, any relating to taxes, contracts, loans, breach of warranty claims, liabilities resulting from breach of contract, torts, illegal activity, unlawful business practice or any other liability or obligation whatsoever. All such non-assumed liabilities, debts and obligations shall remain the responsibility of the Seller, and Seller shall discharge all such liabilities in full or otherwise fully satisfy such liabilities. The Buyer hereby waives compliance by the Seller with the provisions of all applicable state bulk sales laws.

 

3.3    Employee Liabilities . The Buyer shall not assume, honor or accept any agreement relating to the Seller’s employees, leased employees or contractors, or any employee benefit plan of the Seller. Except for accrued vacation obligations of Seller’s employees, which are described in Schedule 3.1.(d) and which obligations shall be assumed by Buyer, the Seller shall be solely responsible for satisfying all obligations (whether arising under federal, state or local law, or pursuant to contract) which may arise or which may have arisen or accrued prior to the Closing Date in connection with the Seller’s employees, leased employees or contractors, the creation, funding or operation of any employee benefit plan, or which may arise in any claims by Seller’s employees, leased employees or contractors in connection with the termination of their employment or relationship with the Seller or the transactions described in this Agreement. Notwithstanding any provision in this Agreement to the contrary, in addition to any other obligation of Buyer, the Buyer shall pay for all compensation, benefits and payroll costs associated with Seller’s employees for the time period commencing December 15, 2006 and through December 31, 2006.

 

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3.4     Further Cooperation; Consents to Assignment . Each of the Seller and the Buyer shall cooperate, and use commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. With respect to those agreements identified on Schedule 3.4 for which consents or approvals are not provided at Closing, from and after the Closing the Seller shall use commercially reasonable efforts to obtain the consent of the other party to each such agreement to the assignment thereof to Buyer. If such consent is not obtained with respect to any such agreement, such agreement shall not be assigned, but the Seller will cooperate with the Buyer in any reasonable arrangement designed to provide to the Buyer the benefits thereof and the Buyer's assumption of the obligations and liabilities of the Seller under any such agreement.

 

 

ARTICLE 4

REPRESENTATIONS AND WARRANTIES

OF THE SELLER

 

In order to induce the Buyer to enter into this Agreement, the Seller makes the representations and warranties set forth in this Article 4, each of which shall be deemed to be independently material and relied upon by the Buyer, regardless of any investigation made by, or information known to, the Buyer.

 

4.1    Organization and Qualification .

 

(a)    The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of California. The Seller is qualified to transact business as a foreign corporation in the jurisdictions set forth on Schedule 4.1 attached hereto, and the Seller is not required to be so qualified in any other jurisdiction except where failure to be so qualified would not have a “Material Adverse Effect” on Seller. For purposes of this Agreement, Material Adverse Effect means a material adverse effect on the financial condition, results of operations of the Stomp Business, taken as a whole, or on the ability of Seller to consummate timely the transactions contemplated hereby, or on the future sales of StompSoft products by the five largest customers of Seller.

 

(b)    The Seller has delivered to the Buyer complete and correct copies of the Seller's Articles of Incorporation and By-laws, as amended to the date hereof, certified by the Secretary of State of California and the Secretary of the Seller, respectively. The Articles of Incorporation and Bylaws are in full force and effect.  Seller is not in violation of any of the provisions of its Articles of Incorporation or Bylaws.

 

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4.2    Ownership of Shares . Schedule 4.2 lists all the stockholders of the Seller and the shares owned by each. There are no outstanding options, warrants, calls, subscriptions, commitments, agreements, or other rights to purchase or dispose of any of the stock of the Seller, or other securities outstanding which are convertible into the stock of the Seller, and no other party has any right or option to acquire any equity interest in the Seller.

 

4.3    No Subsidiaries; Investments . The Seller has no subsidiaries, nor does it own any stock, bonds or other securities of, have any proprietary interest in, or control the management or policies (by means of a management contract or otherwise) of any other corporation, firm, association or business organization. No corporation, firm, association or business organization controls the management or policies (by means of a management contract or otherwise) of the Seller. “Control” in the preceding sentences means the power, by means of ownership of securities, contract or otherwise, to elect or designate a majority of the board of directors or other management policies of a corporation, firm, association or business organization. Except as disclosed on Schedule 4.3 , Seller does not rely on any single vendor, service provider or distributor which reliance could reasonably have a material adverse effect on Seller or the Business.

 

4.4    Conflicting Obligations; Consents . Except as set forth in Schedule 4.4 , the execution and delivery of this Agreement do not, and the consummation of the sale and purchase of the Purchased Assets and the Stomp Business contemplated hereby will not: (a) conflict with or violate any provisions of the Articles of Incorporation or Bylaws of the Seller; or (b) conflict with or violate any provisions of, or result in the maturation or acceleration of, or termination right under, any obligations under any contract (including customer contracts), agreement, instrument, document, lease, license, permit, indenture, or obligation, or any law, statute, ordinance, rule, regulation, code, guideline, order, arbitration award, judgment or decree, to which the Seller is subject or to which the Seller is a party, except where any such violation, maturation or acceleration would not have a Material Adverse Effect on the operation of the Stomp Business by Buyer after the Closing. Except as set forth on Schedule 4.4 , no third-party consents, approvals or authorizations are necessary for the execution and consummation of the transactions contemplated hereby, nor are any such consents, approvals or authorizations required in order to enable the Buyer to enjoy the benefits of any contracts, agreements, instruments, documents, leases, licenses, permits, indentures or rights of the Seller in accordance with their existing terms.

 

4.5    Enforceability . This Agreement and all other agreements of the Seller contemplated hereby or to be delivered in connection herewith are or, upon the execution and delivery thereof, will be valid and binding obligations of the Seller, enforceable against it in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting enforcement of creditors’ rights generally, or general principles of equity.

 

4.6    Authorization . The Seller has all necessary power and authority to enter into and perform the transactions contemplated hereby in accordance with the terms and conditions hereof. The execution, delivery and performance of this Agreement by the Seller have been duly authorized and approved by the Seller’s Board of Directors and by its stockholders and no other corporate proceedings on the part of Seller are necessary to authorize this Agreement or to consummate the transactions contemplated hereby.  This Agreement has been duly executed and delivered by Seller.

 

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4.7    Financial Statements; No Undisclosed Liabilities . Attached as Schedule 4.7A are true and complete copies of the financial statements (including balance sheets, statements of income and retained earnings, statements of cash flow, and any notes pertaining thereto of the Seller for its fiscal years ending December 31, 2004 and December 31, 2005, and interim financial statements for the period ending September 30, 2006 (collectively, the “ Financial Statements ”). The balance sheet as of September 30, 2006 is hereinafter referred to as the “ Latest Balance Sheet .” The Seller’s books and records of accounts accurately reflect all of the assets, liabilities, transactions and results of operations of the Seller in all material respects, and the Financial Statements have been prepared based upon and in conformity therewith. Except as set forth in Schedule 4.7B , the Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (“ GAAP ”) maintained and applied on a consistent basis throughout the indicated periods, and fairly present the financial condition and results of operation of the Seller in all material respects at the dates and for the relevant periods indicated. (except as may be indicated in the footnotes to the Financial Statements and that the interim financial statements may not have notes thereto and other presentation items that may be required by GAAP and are subject to normal and recurring year-end adjustments that are not reasonably expected to be material in amount). Except as set forth on the Financial Statements or on the Liabilities Schedule attached as Schedule 4.7 , Seller has no liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) that are, individually or in the aggregate, material to the Stomp Business and that would be required to be reflected on a balance sheet or in notes thereto prepared in accordance with GAAP, except for immaterial liabilities or obligations incurred in the ordinary course of business consistent with past practice since the Latest Balance Sheet.  All reserves established by Seller and set forth in the Financial Statements are in accordance with GAAP.  As of the date of the Latest Balance Sheet, there were no material loss contingencies (as such term is used in Statement of Financial Accounting Standard No. 5) that are not adequately provided for in the Latest Balance Sheet.

 

4.8    Taxes .

 

(a)      To the extent failure to do so would materially adversely affect the  Stomp Business or Buyer’s ownership or operation of the Stomp Business, Seller has timely filed all material Tax Returns that it was required to file.  All such Tax Returns have been true and complete in all material respects.  All Taxes owed by Seller (whether or not shown or required to be shown on any Tax Return) have been paid to the extent failure to do so would materially adversely affect the Stomp Business or Buyer’s ownership or operation of the Stomp Business.  No claim has ever been made in writing by an authority in a jurisdiction where Seller does not file Tax Returns that Seller is or may be subject to taxation in such jurisdiction.  To the extent failure to do so would materially adversely affect the Stomp Business or Buyer’s ownership or operation of the Stomp Business, Seller has withheld and paid all material Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, or stockholder or other third party, and all Forms W-2 and 1099 required with respect thereto have been properly completed and timely filed in all material respects.  There is no material dispute or claim concerning any Tax liability of Seller (A) raised by any authority in writing or (B) of which Seller has knowledge.  

 

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(b)      For purposes of this Section:

 

(i)   “Tax” means any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, windfall profits, custom duties, ownership interests, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value-added, alternative, or other tax of any kind whatsoever, whether computed on a separate or consolidated, unitary, or combined basis or in any other manner, including any interest, penalty, or addition thereto, whether disputed or not and including any obligation to indemnify or otherwise assume or succeed to the Tax liability of any other Person.

 

(ii)    “Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

 

 

(c)    There are no waivers of the applicable statutes of limitations for such taxes for any period and no deficiency assessment or proposed adjustment of the Seller’s income taxes is pending.

 

4.9    Real Property .

 

(a)    No Owned Real Property . Seller does not own any interest in any real property.

 

(b)    No Leased Real Property to be Assumed . Seller does not lease any real property to be assumed by Buyer.

 

4.10     Personal Property; Good Title; Condition . Except for such personal property as has been disposed of in the ordinary course of the Seller’s businesses since the date of the Latest Balance Sheet, the Seller owns good and marketable title to all property which it purports to own (including, but not limited to, that reflected on the Latest Balance Sheet), as well as all property acquired by the Seller since the date of the Latest Balance Sheet. All tangible personal property reflected on the Latest Balance Sheet is actually on hand, increased and decreased by acquisitions and dispositions of such property in the ordinary course of business since the date of the Latest Balance Sheet. Seller’s equipment in regular use has been reasonably maintained, is in good condition and repair (normal wear and tear excepted), and, as of the Closing, will be owned by the Seller free and clear of all security interests (including any conditional sale or other title retention agreements), liens, claims, charges, pledges, exceptions, and defects of title and other encumbrances of any kind, except as otherwise set forth on Schedule 4.10. Schedule 4.10 lists all leases of tangible personal property under which the Seller is the lessee, and the Seller has delivered to the Buyer true and complete copies of each such lease. No default exists under any such lease, as to the payment of rent or otherwise. All tangible personal property owned or leased by the Seller is located upon the Seller's premises, except as otherwise set forth on Schedule 4.10 . The Purchased Assets and Excluded Assets consist of all assets and rights used in, or useful to, Seller in the operation of the Stomp Business.

 

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4.11     Inventory . The Inventory consists solely of raw materials, supplies, work-in-process and finished goods and has been valued as reflected in the Financial Statements.. The Inventory is usable and generally salable at normal profit margins and within customary time periods in the ordinary course of the Stomp Business and contains no material amount of slow-moving, obsolete or damaged items. The value at which Inventory is reflected on the Financial Statements reflects appropriate writedowns for slow-moving, obsolete and damaged merchandise. Except as noted in the Financial Statements and as disclosed in Schedule 4.11 herein, no Inventory has been consigned to others, nor is any Inventory consigned to the Seller.

 

4.12     Authorizations . Seller is in possession of all permits necessary for Seller to own, lease and operate its properties or to produce, store, distribute and market its products or otherwise to carry on the Stomp Business as it is now being conducted (the “ Permits ”), and, as of the date of this Agreement, none of the Permits has been suspended or cancelled nor is any such suspension or cancellation pending or, to the knowledge of Seller, threatened, except for such Permits for which the failure to possess or the suspension or termination of which would not, individually or in the aggregate, have a Material Adverse Effect. All of Seller’s Permits are listed on Schedule 4.12 .  The operation of the Stomp Business by Seller is not in conflict with, or in default or violation of, any Permits, except for such conflict, default or violation of which would not have a Material Adverse Effect.

 

4.13     Litigation . Except as set forth on Schedule 4.13 , there is no litigation, claim, proceeding or investigation pending, or, to the Seller’s knowledge, threatened against or relating to the Seller, its properties or business, or the transactions contemplated herein. Schedule 4.13 discloses, with respect to each item described thereon, the name or title of the action (and parties or potential parties thereto), a description of the nature of the action or claim, and an estimate of the maximum liability of the Seller in the event of an adverse result. Except as so described, the Seller knows of no state of facts or circumstances which reasonably could be expected to ripen into litigation, proceeding or investigation or have a material adverse effect on the properties or business of the Seller. Except as described on Schedule 4.13 , there is no outstanding order, decree or stipulation issued by any federal, state or local authority to which the Seller is a party or subject and which has or may have a Material Adverse Effect. No injunction, judgment, or other order has been issued by any court or governmental authority in any legal action or proceeding instituted by a third party against Seller or any of its assets arising by reason of the acquisition of the Stomp Business pursuant to this Agreement, which restrains, prohibits or invalidates or seeks to restrain, prohibit or invalidate, the consummation of the transactions contemplated by this Agreement, or seeks damages related thereto.

 

4.14     Compliance With Law . The conduct of the Stomp Business does not violate, nor is Seller in default under, any law, statute, ordinance, rule, regulation, code, license, permit, guideline, order, arbitration award, judgment or decree, including, without limitation, civil rights legislation, equal employment opportunity legislation, occupational safety and health legislation, legislation pertaining to illegal bribes or kickbacks except for any such violation that would not have a Material Adverse Effect on the conduct of the Stomp Business.  No investigation or review by any Governmental Entity is pending or, to Seller’s knowledge, has been threatened in a writing delivered to Seller against Seller, nor, to Seller’s knowledge, has any Governmental Entity indicated an intention to conduct an investigation of Seller. There is no agreement, judgment, injunction, order or decree binding upon Seller which has or could reasonably be expected to have the effect of prohibiting or materially impairing any business practice of Buyer as the successor to the Stomp Business.

 

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4.15     Environmental Laws . Except as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, to the knowledge of Seller (i) Seller is in compliance with all federal, state, local and foreign statutes, codes, laws, ordinances, regulations, rules, guidance, notices, permits, judgments, orders and decrees applicable to it or any of its properties, assets, operations and businesses relating to pollution or the protection of human health or the environment (“ Environmental Laws ”); (ii) all past noncompliance of Seller with Environmental Laws has been resolved without any pending, ongoing or future obligation, cost or liability; and (iii) Seller has not released a Hazardous Waste, Hazardous Material or Hazardous Substance (as defined in any Environmental Law) at, or transported a Hazardous Material to or from, any real property leased or occupied by Seller, in violation of any Environmental Law.

 

4.16     Employees .

 

(a)      Schedule 4.16 lists all individuals currently employed by the Seller or engaged as independent contractors in connection with the Stomp Business (excluding all attorneys, accountants, consultants and other advisors engaged for purposes of this transaction), the current pay arrangement for each such person, and a description of any written or oral agreements with such individuals that are not terminable by the Seller at will. All payments to the Seller’s employees which would have been paid in the ordinary course of business consistent with the Seller’s past practices on or before the Closing Date shall have been paid as of the Closing with respect to any of Seller’s employees whose employment with Seller is terminated as of the Closing. No promises or representations have been made by the Seller to any employee of the Seller with respect to his employment by the Buyer after the Closing, or the terms thereof.

 

(b)      Seller is not a party to any collective bargaining or other labor union contract applicable to persons employed by Seller, and no collective bargaining agreement is being negotiated by Seller.  As of the date of this Agreement, there is no labor dispute, strike or work stoppage against Seller pending or, to the knowledge of Seller, threatened that may interfere with the business activities of the Stomp Business.  As of the date of this Agreement, to the knowledge of Seller, neither Seller nor any of its representatives or employees has committed any unfair labor practice in connection with the operation of the Stomp Business, and to Seller’s knowledge, there is no charge or complaint against Seller by the National Labor Relations Board or any comparable governmental entity pending or threatened in writing.

 

(c)      Except as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, Seller is in compliance with all currently applicable laws and regulations respecting employment, discrimination in employment, terms and conditions of employment, wages, hours and occupational safety and health and employment practices.  There are no controversies pending or, to the knowledge of Seller, threatened, between Seller and any of its employees, which controversies have or could reasonably be expected to result in an action, suit, proceeding, claim, arbitration or investigation before any agency, court or tribunal, foreign or domestic, and to Seller’s knowledge, there are no existing factors or circumstances that could reasonably be expected to result in such an action, suit, proceeding, claim, arbitration or investigation.  To the knowledge of Seller, no employees of Seller are in violation of any material term of any employment Contract, patent disclosure agreement, noncompetition agreement, or any restrictive covenant to a former employer relating to the right of any such employee to be employed by Seller because of the nature of the business conducted or presently proposed to be conducted by Seller or to the use of trade secrets or proprietary information of others.  Seller has not received since June 30, 2006, any written or, to Seller's knowledge, oral notice that any such employee intends to terminate his or her employment with the Stomp Business.

 

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(d)      Schedule 4.16  lists all proposed or anticipated bonuses to be paid to any employee, representative or agent of the Stomp Business through or relating to activities performed prior to the Closing Date.

 

(e)        Foreign Employees . There are no officers or employees, current or former, of the Seller working outside the United States.

 

4.17    Employee Benefits .

 

(a)    Schedule 4.17 to this Agreement is a list of all Seller’s current employment contracts, collective bargaining agreements, and pension, bonus, profit-sharing, stock option, or other agreements providing for employee remuneration and benefits, and the Seller has provided the Buyer with true and complete copies of each. Seller and its transferees shall remain responsible for all compensation and benefits claimed by Seller’s employees with respect to employment by Seller, including any claims resulting from their termination of employment as a result of the transaction contemplated hereby. Buyer shall not have any responsibility therefor.

 

(b)    Exclusivity . The Seller has no material responsibility or liability, contingent or otherwise, with respect to any employee benefits for or on behalf of its employees other than under the Plans listed on Schedule 4.17 . The Seller has the right to amend or terminate, without the consent of any other person, any Plan, except as prohibited by law. None of the Plans is (i) a multiemployer plan (as such term is defined in Section 3(37) of ERISA), or (ii) an arrangement providing medical or other welfare benefits to retirees or other former employees or their beneficiaries, except as required under COBRA and similar state statutes.

 

4.18      Intellectual Property .

 

(a)    Intellectual Property Rights ” shall mean any and all of the following which are used and/or owned by Seller, along with all income, royalties, damages and payments due or payable after the Closing, including, without limitation, damages and payments for infringements or misappropriations thereof occurring after Closing, the right to sue and recover for past infringements or misappropriations thereof and any and all corresponding rights that, now or hereafter, may be secured throughout the world: patents, patent applications, patent disclosures and inventions (whether or not patentable and whether or not reduced to practice) and any reissue, continuation, continuation-in-part, division, revision, extension or reexamination thereof, utility model registrations and applications; design registrations and applications; trademarks, service marks, trade dress, logos, trade names, Internet sites, email domain names, email addresses and corporate names together with all goodwill associated therewith, copyrights registered or unregistered and copyrightable works; mask works; and all registrations, applications, and renewals for any of the foregoing; trade secrets and confidential information (including without limitation, ideas, formulae, compositions, manufacturing and production processes and techniques, research and developmental information, drawings, specifications, designs, plans, proposals, technical data, financial, business and marketing plans, and customer and supplier lists and related information); computer software and software systems (including, without limitation, data, databases, object code, source code, executable code and firmware and related documentation); licenses or other agreements including but not limited to those assigning, waiving or relating to rights of publicity, moral rights or neighboring rights to or from third parties; and all copies and tangible embodiments of the foregoing (in whatever form or medium), in each case including, without limitation, the items set forth on Schedule 4.18 .

 

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(b)    Schedule 4.18 sets forth a complete and correct list of (i) all patents, trademark and service mark registrations, copyright registrations and other Intellectual Property Rights registered by Seller as well as all pending applications therefor; (ii) all business names, trade names and material unregistered trademarks used by Seller (to the extent not reflected on other schedules attached hereto) as its own marks; (iii) all material computer software owned or used by Seller (other than commercial software products generally available to users); (iv) all other material licenses or similar agreements for the Intellectual Property Rights to which Seller is a party, in each case identifying the subject Intellectual Property Rights; and (v) all Internet sites and email domain names owned or used by Seller in the Stomp Business.

 

(c)    Except as set forth on Schedule 4.18 , (i) Seller owns, free and clear of any security interests and has a valid and enforceable right to, each of the Intellectual Property Rights as described on Schedule 4.18 other than the Intellectual Property Rights that Seller licenses from others, as to which Seller has a valid and enforceable right to use such licensed Intellectual Property Rights, and no claim by any third party contesting the validity, enforceability, use or ownership of any of the Intellectual Property Rights has been made, is currently outstanding or, to Seller's knowledge, is threatened; (ii) the Intellectual Property Rights comprise all material intellectual property rights which are currently being used by Seller or which are necessary for the operation of the Stomp Business as currently conducted by Seller; (iii) to Seller's knowledge, no present or former member, shareholder, officer, director, manager, agent, consultant or independent contractor of Seller owns or has any other right in or to, or has claimed any ownership or other right in or to, any Intellectual Property Rights which are necessary or desirable in connection with the Stomp Business as now conducted; (iv) no loss or expiration of any Intellectual Property Right or related group of Intellectual Property Rights is, to Seller’s knowledge, threatened, or is pending, except for those which could not reasonably be expected, individually or in the aggregate, to cause a Material Adverse Effect on the Stomp Business; (v) Seller has not received any notices of, nor is Seller aware of any facts which indicate a likelihood of any infringement or misappropriation by, or conflict with, any third party with respect to any of the Intellectual Property Rights including, without limitation, any demand or request by Seller that such third party license any of the Intellectual Property Rights from Seller or to Seller; (vi) to Seller’s  knowledge, Seller has not infringed, misappropriated or otherwise conflicted with any rights, including intellectual property rights of any third parties, and Seller is not aware of any infringement, misappropriation or conflict by Seller of any third-party patent, trademark, copyright or other intellectual property right or of any such infringement, misappropriation or conflict which shall occur as a result of the continued operation of the Stomp Business, as currently conducted, and there is no demand or request from a third party that Seller take a license under any intellectual property right; and (vii) none of the Intellectual Property Rights owned or used by Seller are, to Seller’s knowledge, being infringed, misappropriated or conflicted by any third party.

 

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(d)    Seller has taken commercially reasonable and practical steps to protect its trade secrets and other confidential information.

 

(e)    Seller represents that the Intellectual Property Rights being transferred to Buyer include all of Seller's rights, if any, in and to the relevant source and executable codes for Seller's software along with all of Seller's rights, if any, in and to any existing modifications, bug fixes and enhancements that have been developed by or for Seller for use with Seller’s software.

 

(f)    All personnel, including employees, officers, directors, agents, consultants and contractors, who have contributed to or participated in the conception, use or development of the Intellectual Property Rights have executed agreements that require such personnel to assign any and all interest in the Intellectual Property Rights to Seller and to keep confidential all trade secrets, proprietary data, customer information or other business information of Seller.  No such personnel is a party to any Contract with any Person other than Seller that requires such personnel to assign interest in any Intellectual Property Rights to any Person other than Seller.

 

(g)    Except for escrow agreements executed in the ordinary course of business with persons listed on  Schedule 4.18 , and persons listed on Schedule 4.18  who are bound by an appropriate confidentiality Contract, the source code and system documentation relating to Seller's software programs (i) have been disclosed by Seller only to personnel who have a “need to know” the contents thereof in connection with the performance of their duties to Seller, and (ii) have not been disclosed to any third party.

 

4.19     Customers and Suppliers .

 

(a)    Schedule 4.19A lists all the customers of the Seller during the period January 1, 2005 to the date hereof. Except as described on Schedule 4.19A , Seller is not aware of any adverse change in its relationships with respect to customers with which it is currently doing business or of any intention of any customer with which it is currently doing business to terminate or reduce its business relationship with the Seller prior to the Closing or fail to continue such relationship with the Buyer. The Seller has delivered to the Buyer true and complete copies of all existing Customer Contracts. For these purposes, Seller shall be considered to be currently doing business with all customers identified on Schedule 4.19A .

 

(b)    For purposes of this Agreement, “Material Customer” shall mean Seller’s top ten (10) customers during the twelve (12) month period ended December 31, 2005, and top ten (10) customers during the nine (9) month period ended September 30, 2006, based upon total dollars invoiced in such period. The Material Customers for each such period are listed on Schedule 4.19B . To Seller’s knowledge, the consummation of the transactions contemplated hereunder will not have any Material Adverse Effect on the business relationship of Seller with any Material Customer.

 

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(c)    Seller has received no written, or to the knowledge of Seller, oral notice from any material customer or supplier of Seller that such customer does not intend to pay for services rendered or products purchased, such customer is dissatisfied with any service or product of Seller in any material respect, such supplier does not intend to continue to supply goods or services to Seller or there exists any breach or event of default under any Contract with such customer or supplier, no material customer or supplier has cancelled or otherwise terminated, or to Seller's knowledge, threatened to cancel or otherwise terminate, its relationship with the Stomp Business since December 31, 2005.  Seller has no agreements or arrangements establishing, creating or relating to any rebate, promotion or other allowance that involves any obligation or liability to any customer that is material.

 

4.20     Contracts . Set forth on Schedule 4.20 is a list of the following Contracts to which Seller is a party or by which or to which any of the assets of Seller is bound or subject, in effect on the date hereof (collectively, the “ Material Contracts ”), true and complete copies of which have been provided or made available to Buyer:

 

(a)    distributor, sales, marketing, vendor, advertising, financial advisory, broker-dealer, agency or manufacturer’s representative Contracts involving more than $25,000;

 

(b)    continuing Contracts for the purchase or provision of materials, supplies, equipment or services involving in the case of any such Contract more than $25,000 over the life of the Contract;

 

(c)    Contracts that expire, or may be renewed at the option of any Person (as defined herein) other than Seller so as to expire, more than one year after the date of this Agreement and involving more than $25,000 in the aggregate;

 

(d)    trust indentures, mortgages, promissory notes, loan agreements or other Contracts for the borrowing of money, any currency exchange, commodities or other hedging arrangement or any leasing transaction of the type required to be capitalized in accordance with GAAP;

 

(e)    Contracts for capital expenditures in excess of $25,000 in the aggregate;

 

(f)    Contracts currently in effect that were entered into in the ordinary course of business and that involve the payment or receipt of consideration in excess of $25,000;

 

(g)    Contracts for the sale, lease or sublease of real property;

 

(h)    Contracts for the sale of any material assets or properties of Seller or for the grant to any Person any preferential rights to purchase any material assets or properties of Seller, other than in the ordinary course of business;

 

(i)    Contracts establishing joint ventures or partnerships;

 

(j)    Contracts containing any material obligations or liabilities of any kind to holders of ownership interests of Seller except for contracts for the sale or purchase of such ownership interests which have been fully performed;

 

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(k)    Contracts relating to the acquisition by Seller of any operating business or any capital stock of any other Person;

 

(l)    Contracts requiring the payment to any Person of any material override or simi


 
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