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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.
13
(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.
14
(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;
15
(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
simil
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