Exhibit 2.1
ASSET PURCHASE
AGREEMENT
This
Asset Purchase
Agreement (“ Agreement ”) is made and
entered into as of March 11, 2005, by and between CyberGuard Corporation
(“ Buyer ”), a Florida corporation, and
Zix SCM, Inc.
(“ Seller ”), a Delaware corporation.
RECITALS
Whereas , Seller is
engaged in the development, marketing, promotion, distribution, and
sale of certain web filtering and content security products
currently marketed by Seller under the names “Web
Inspector” and “Message Inspector” (the “
Inspector Business ”);
Whereas , Seller desires
to sell substantially all of the assets which are related to,
necessary for, or used in connection with, the operation of the
Inspector Business to Buyer, and Buyer desires to purchase such
assets on the terms and conditions as set forth herein; and
Now, Therefore, in
consideration of the foregoing premises and the mutual
representations, warranties, covenants and agreements set forth
herein, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties
hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
PURCHASE OF ASSETS
1.1 Purchase and Sale of
Assets . Upon delivery of all items required by Article V
of this Agreement, Seller shall sell, convey, assign, transfer and
deliver to Buyer all of its right, title and interest in and to the
assets, properties, rights, licenses, contracts and business, of
every kind and description, wherever located, necessary to operate
and primarily used or held for use in, the Inspector Business by
Seller as the same shall exist on the Closing Date, including,
except for the Excluded Assets, the assets listed on Annex A hereto
(collectively, the “ Purchased Assets ”), free
and clear of all mortgages, pledges, claims, obligations, liens,
security interests, defects, charges and encumbrances whatsoever
(“ Encumbrances ”); and Buyer agrees to purchase
and acquire such Purchased Assets.
1.2 Excluded Assets .
Notwithstanding anything to the contrary contained in this
Agreement, the Purchased Assets shall not include, and Seller shall
retain for its own use and benefit, those assets specifically
listed on Annex
B hereto which are used in the Inspector Business.
1.3 Liabilities . At the
Closing, Buyer shall assume and fully satisfy, pay, perform and
discharge when due those Liabilities (as defined herein) of Seller
specifically listed on Annex C hereto (the
“ Assumed Liabilities ”). Buyer shall not assume
any Liabilities of Seller other than the Assumed Liabilities. For
purposes of this Agreement, “ Liabilities ”
shall mean, with respect to any entity, any liability or
obligation, whether known or unknown, asserted or unasserted,
absolute or contingent,
accrued or fixed, liquidated or unliquidated or due or to become
due, including those arising under any law, claim or order and
those arising under contract.
1.4 Purchase Price . The
Purchase Price (the “ Purchase Price ”) for the
Purchased Assets shall be Three Million Six Hundred Twenty Six
Thousand Dollars ($3,626,000) and shall be paid as follows:
(a) At
the Closing, Buyer shall deliver by wire transfer to Seller a cash
payment of $2,126,000, in immediately available funds in accordance
with wire transfer instructions provided to Buyer by Seller.
(b) At
the Closing, Buyer shall deliver to Seller a promissory note in the
form attached as Annex
D hereto (the “ Promissory Note ”) in
the principal amount of $1,500,000, such principal amount to be
paid in cash in three installments of $500,000 each on each of
June 15, 2005, September 15, 2005, and December 15,
2005.
1.5 Transfer Taxes . Buyer and
Seller each agree to deliver to the other party (or to such
governmental or taxing authority as the other party reasonable
directs) any form of document that may be required or reasonably
requested in order to obtain an exemption with respect to any
federal, state, local or other, sales, use or other transfer taxes
that may otherwise be required to be paid on the transfer of the
Purchased Assets or that may otherwise be due with respect to such
transfer, promptly upon the earlier of (i) reasonable demand
by the other party or (ii) learning that such form or document is
required. If any sales or other taxes are payable in connection
with the transfer of any of the Purchased Assets hereunder, Seller
shall be solely responsible therefor and shall hold Buyer harmless
therefrom.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as otherwise set forth in the
Disclosure Schedule attached hereto, Seller makes the following
representations and warranties, each of which is true and correct
on the date hereof :
2.1 Organization and Good
Standing . Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware. Seller has all requisite corporate power and authority to
carry on the Inspector Business as it is currently being conducted.
Seller is duly qualified, is authorized to do business and is in
good standing as a foreign corporation in all jurisdictions in
which it has property or employees, except for those jurisdictions
in which failure to do so would not have a Material Adverse Effect.
For purposes of this Agreement, “ Material Adverse
Effect ” shall mean any material adverse effect on the
condition (financial or otherwise) of the Inspector Business.
2.2 Authority and
Authorization . Seller has the requisite corporate power and
authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement
by Seller, and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action
on the part of Seller, and do not constitute a breach or violation
of or default under the relevant charter documents of Seller. This
Agreement has been duly and validly executed and delivered by
Seller
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and, when this Agreement is
duly executed and delivered by Buyer, it will constitute a valid
and binding obligation of Seller enforceable against Seller in
accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium, or other similar laws or court decisions
relating to or affecting the rights of creditors generally, and by
general principles of equity.
2.3 Absence of Restrictions .
The execution, delivery and performance of this Agreement by Seller
and the consummation by Seller of the transactions contemplated
hereby (a) does not constitute a breach or violation of or
default (or an event which, with or without notice or lapse of time
(or both), could become a violation or default) under any judgment,
decree, order, governmental permit or license to which Seller is a
party, or any law, rule or regulation to which Seller is subject;
(b) does not require the consent or approval of any other
party to, or result in the breach, suspension or termination of any
provision of, or constitute a default under, or result in the
acceleration of the performance of the obligations of Seller under,
or result in the creation of any liens or encumbrances upon all or
any portion of the Purchased Assets pursuant to any contract to
which Seller is a party or by which Seller or any of the Purchased
Assets are bound or any license, permit or approval to which Seller
is subject; and (c) does not and will not require any notice
to, filing or registration with, or permit, authorization, consent
or approval of, any governmental or regulatory organization or
instrumentality.
2.4 Intellectual Property
.
(a)
Definition . For the purposes of this Agreement, “
Intellectual Property ” means any or all of the
following and all rights in, arising out of, or associated
therewith: (A) United States, international and foreign
patents and applications therefor and all reissues, divisions,
renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (B) all inventions (whether
patentable or not), invention disclosures, improvements, trade
secrets, proprietary information, know-how, technology, technical
data and customer lists, and all documentation relating to any of
the foregoing; (C) all copyrights (whether registered or
unregistered), mask work rights, copyright registrations and
applications therefor; (D) all industrial designs and any
registrations and applications therefor throughout the world;
(E) all trade names, logos, common law trademarks and service
marks, trademark and service mark registrations and applications
therefor throughout the world; (F) all databases and data
collections and all rights therein throughout the world;
(G) all web sites, domain names and URLs; and (H) any
similar, corresponding or equivalent rights to any of the
foregoing.
(b)
Section 2.4(b) of the Disclosure Schedule sets forth a
list of all Purchased Assets that are used in the Inspector
Business and constitute statutory Intellectual Property and domain
names. The items listed on Schedule 2.4(b) as well as
all other assets used in the operation of the Inspector Business
that constitute Intellectual Property as defined in Section
2.4(a) (including, without limitation, the software listed on
Annex A-3 hereto and trade secrets, know-how and goodwill
attendant to Intellectual Property not readily reducible to
schedule form) shall be referred to herein as the “
Intellectual Property Assets ”. Seller owns or has
enforceable rights to use all such Intellectual Property
Assets.
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(c)
Section 2.4(c) of the Disclosure Schedule sets forth a
list of all Intellectual Property licensed from third parties to
Seller and used in the Inspector Business. To the knowledge of
Seller, each such license is valid and in full force and effect,
and is enforceable by Seller in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, arrangement, moratorium, or other
similar laws or court decisions relating to or affecting the rights
of creditors generally.
(d) Seller
has not (i) entered into any exclusive licensing agreements
relating to any Intellectual Property Assets; or (ii) entered
into any arrangements or agreements that would cause an encumbrance
or impairment of Intellectual Property Assets.
(e) To
Seller’s knowledge, other than as set forth in
Section 2.4(e) of the Disclosure Schedule, the
Intellectual Property Assets do not infringe, and are not based on
a misappropriation of, any Intellectual Property of any third
party. No proceeding charging Seller with, or an allegation of,
infringement or misappropriation of the Intellectual Property
Assets has been filed or, to the knowledge of Seller, is threatened
by any person. Seller is not making any unauthorized use of any
confidential information or Intellectual Property of any third
party in connection with the conduct of the Inspector Business.
(f) To
the knowledge of Seller, there has not been any unauthorized use,
disclosure, infringement or misappropriation of the Intellectual
Property Assets.
(g) Seller
has secured valid written assignments from all consultants and
employees who contributed to the creation or development of the
Intellectual Property Assets used in the Inspector Business, of all
rights to such contributions that Seller does not already own by
operation of law, and Seller has obtained waivers of any moral
rights existing in such contributions.
(h) Seller
has taken steps consistent with prevailing industry practice to
protect and preserve confidential information of all its
Intellectual Property used in the Inspector Business not otherwise
protected by issued patents or published in whole by virtue of any
copyright registration (“ Confidential Information
”). To the knowledge of Seller, no present or former employee
or consultant is in material violation of any written agreement
with Seller relating to Confidential Information. All use,
disclosure or appropriation of Confidential Information owned by
Seller by or to a third party has been pursuant to the terms of a
written agreement between Seller and such third party. All use,
disclosure or appropriation by Seller of Confidential Information
not owned by it has been pursuant to and in accordance with the
terms of a written agreement between Seller and the owner of such
Confidential Information, or is otherwise lawful.
(i) Other
than as set forth in Section 2.4(i) of the Disclosure
Schedule, the Intellectual Property Assets are adequate for the
operation of the Inspector Business as currently conducted.
2.5 Compliance with Laws and
Regulations . Seller is in compliance in all material respects
with all laws, statutes, ordinances, rules, regulations, decrees,
orders, permits and other similar legal and regulatory requirements
applicable to the Inspector Business, and has obtained
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all material
authorizations, consents, approvals, orders, licenses and permits
that are necessary for or applicable to the conduct of the
Inspector Business from, and has accomplished all material filings,
registrations and qualifications with, or obtained exemptions from,
all appropriate federal, state, local or foreign governmental
agencies or quasi-governmental agencies. There is no pending or, to
the knowledge of Seller, threatened investigation concerning the
possible violation by Seller of any such laws, regulations,
statutes or the like in connection with the Inspector Business.
Seller is not in violation with any term of any judgment, writ,
decree, injunction or order entered by any court or governmental
authority (domestic or foreign) and outstanding against Seller with
respect to the Inspector Business. All material licenses and
permits to conduct the Inspector Business are in full force and
effect and, except as set forth on Section 2.5 of the
Disclosure Schedule, are freely transferable to Buyer.
2.6 Legal Proceedings . There
are no actions, suits, claims, investigations, complaints,
arbitrations or other proceedings or investigations pending or, to
the knowledge of Seller, threatened against Seller with respect to
the Inspector Business, before any court, governmental,
administrative or other regulatory organization or instrumentality
or before any arbitrator, mediator or other body of competent
jurisdiction. There are no proceedings pending or, to the knowledge
of Seller, threatened which seek to restrain, rescind or in any way
restrict, delay or prohibit or which may have the effect of
restricting, delaying or prohibiting Seller’s ability to
consummate the transactions contemplated by this Agreement. Seller
is not subject to any judgment, injunction, order, decree, ruling,
charge or arbitration decision or award outstanding against it
relating to the Purchased Assets.
2.7 Agreements, Contracts and
Commitments . Set forth in Section 2.7 of the
Disclosure Schedule is a true and complete list of all material
agreements, contracts and commitments to which Seller is a party or
by which the Seller is bound and which relate to the Inspector
Business and are to be assigned to Buyer (except for customer
contracts that are memorialized only via the customer executing a
“click through” license), (collectively, the “
Inspector Business Agreements ”). All of the Inspector
Business Agreements are legal, valid, binding and enforceable
against the parties in accordance with their respective terms
(except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium, or
other similar laws or court decisions relating to or affecting the
rights of creditors generally, and by general principles of equity)
and in full force and effect. No default (or event or condition
which, upon notice, passage of time or both, would become a default
or would cause the acceleration of any obligation of any party
thereto or the creation of any encumbrance on any Purchased Asset)
currently exists on the part of the Seller or on the part of any
third party, with respect to any Inspector Business Agreement.
Except as set forth on Schedule 2.7 , all amounts due
and owing by Seller under the Inspector Business Agreements have
been paid in full. Seller has delivered to Buyer a correct and
complete copy of each agreement listed in Section 2.7
of the Disclosure Schedule. Subject to obtaining any necessary
consents, each agreement will be duly assigned to Buyer on the
Closing Date and upon such assignment, Buyer will acquire all
right, title, and interest of Seller in and to such contract and
will be substituted for Seller under the terms of such agreement.
Except as set forth on Section 2.7 of the Disclosure
Schedule, no consent is required for such assignment.
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2.8 Labor Matters . No work
stoppage or labor strike against Seller is pending, or to the
knowledge of Seller, threatened, or reasonably anticipated with
respect to the Inspector Business. There are no actions, suits,
claims, labor disputes or grievances pending, or to the knowledge
of Seller, threatened, or reasonably anticipated relating to any
labor, safety or discrimination matters involving any Seller
employee with respect to the Inspector Business, including, without
limitation, charges of unfair practices within the meaning of the
National Labor Relations Act. Seller is not presently, nor has it
been in the past, a party to, or bound by, any collective
bargaining agreement or union contract with respect to its
employees of the Inspector Business, and no collective bargaining
agreement is being negotiated by Seller.
2.9 Employees .
Section 2.9 of the Disclosure Schedule lists each
employee or consultant of Seller used in the Inspector Business and
describes such employee’s title, annual compensation, bonus
or profit-sharing arrangements and accrued vacation (as of
December 31, 2004), and the date his or her employment
commenced. No Schedule 4.2 Employee (as hereinafter defined)
has any claim against Seller on account of or for (a) overtime
pay (other than for the current payroll period), (b) wages or
salary (excluding current bonuses or accruals) for any period other
than the current pay period, (c) vacation, time off or pay in
lieu of vacation or time off, other than earned in respect of the
current fiscal year, or (d) any violation of any law relating
to minimum wages, child labor or maximum hours of work.
2.10 Fees . Other than as set
forth on Section 2.10 of the Disclosure Schedule,
Seller has not paid or become obligated to pay any broker’s,
finder’s or other intermediary’s fees in connection
with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby. Buyer shall
have no liability for any such fees.
2.11 Taxes . The Purchased
Assets will not be subject to any Encumbrances arising out of any
unpaid Taxes and there are no grounds for the assertion or
assessment of any Encumbrances against the Purchased Assets in
respect of any Taxes. For the purposes of this Agreement “
Tax ” means any federal, state, local, or foreign
income, gross receipts, ad valorem, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Section 59A), customs
duties, capital stock, net worth, franchise, profits, withholding,
social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration,
value added, workers compensation, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever imposed by any
federal, state, local or foreign government or any agency or
political subdivision of any such government, including any
interest, penalty, or addition thereto, without regard to whether
such tax is disputed or not or arose before, on or after the
Closing Date.
2.12 Necessary Property . The
Purchased Assets and Assumed Liabilities constitute all of
Seller’s material property and property rights now used,
useful or necessary for the conduct of the Inspector Business in
the manner and to the extent presently conducted by Seller.
2.13 Financial Statements
.
(a) Attached
to Section 2.13 of the Disclosure Schedule is selected
financial data relating to the Inspector Business (the “
Financial Schedule ”).
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(b) The
Financial Schedule was derived from the books and records of the
Inspector Business and (i) is true and correct with respect to
the data presented therein, (ii) presents fairly, in all material
respects, the information set forth thereon, and (iii) has
been prepared in accordance with GAAP.
2.14 Events Subsequent to
December 31, 2004. Since December 31, 2004, except as
set forth in Section 2.14 of the Disclosure Schedule,
there has been no:
(a) adverse
change in the condition of the Inspector Business other than
changes in the ordinary course;
(b) loss
or threatened loss of a material customer account of the Inspector
Business;
(c) material
damage, destruction or loss, whether covered by insurance or not,
affecting the Purchased Assets;
(d) transaction
entered into or carried out by Seller related to the Inspector
Business other than in the ordinary course of the business;
(e) grant
of any Encumbrance with respect to the Purchased Assets;
(f) transfer
of any material assets related to the Inspector Business other than
arm’s-length sales, leases, or dispositions in the ordinary
course of the business;
(g) modification
or termination of any contract or any material term thereof related
to the Inspector Business;
(h) any
increase in the compensation payable to employees of the Inspector
Business or any increase in, or institution of, any bonus,
insurance, pension, profit-sharing or other employee benefit plan,
for or with such employees, or any change in any benefit plan,
other than in the ordinary course of business; or
(i) commitment
or agreement by Seller to do any of the foregoing items.
2.15 Use and Condition of
Property . All of the Purchased Assets are in good operating
condition and repair as required for their use in the Inspector
Business as presently conducted, and conform in all material
respects to all applicable laws, and no notice of any violation of
any law relating to any of the Purchased Assets has been received
by Seller except such as have been fully complied with. There is no
proposed, pending or threatened condemnation proceeding or similar
action affecting the Purchased Assets or with respect to any
streets or public amenities appurtenant thereto or in the vicinity
thereof which would adversely affect the Inspector Business or the
use of the Purchased Assets.
2.16 No Breach of Law or Governing
Documents . Seller, in connection with the Inspector Business,
has complied with and is not in default under or in breach or
violation of any applicable law of any government body, or the
provisions of any franchise or license, or in default under or in
breach or violation of any provision of its certificate of
incorporation or its
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bylaws. Neither the
execution of this Agreement nor the Closing do or will constitute
or result in any such default, breach or violation. No government
permits or consents are necessary to effect the transactions
contemplated hereby.
2.17 Product Warranties. Set
forth on Section 2.17 of the Disclosure Schedule are
the written standard forms of product warranties and guarantees
used in the Inspector Business, and copies of all other material
product warranties and guarantees, and a summary of all material
oral product warranties used by Seller if different from the
foregoing. Except as specifically described on
Section 2.17 of the Disclosure Schedule, since
December 31, 2004, no product warranty or similar claims have
been made against Seller in connection with the Inspector Business
except routine claims as to which, in the aggregate, losses and
expenses in respect of repair or replacement of merchandise do not
and will not exceed $10,000. The aggregate loss and expense
attributable to all product, warranty and similar claims now
pending or hereafter asserted with respect to the Purchased Assets
sold on or prior to the Closing Date will not exceed $10,000. To
Seller’s knowledge, no person or party (including, but not
limited to, government agencies of any kind) has any claim, or
basis for any action or proceeding, against Seller under any Law
relating to unfair competition, false advertising or other similar
claims arising out of product warranties, guarantees,
specifications, manuals or brochures used in the Inspector
Business.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and
warrants to Seller that:
3.1 Organization . Buyer is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Florida. Buyer has the requisite
corporate power and all necessary governmental authority to conduct
its business as currently being conducted and is duly qualified, is
authorized to do business and is in good standing as a foreign
corporation in all jurisdictions in which the nature of its
activities and of its properties makes such qualification
necessary, except for those jurisdictions in which failure to do so
would not have a material adverse effect on Buyer’s business,
financial condition or operations, taken as a whole.
3.2 Authority and
Authorization . Buyer has the requisite corporate power to
enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Buyer
and do not and will not constitute a breach or violation of or
default under the relevant charter documents of Buyer. This
Agreement has been duly and validly executed and delivered by Buyer
and, when this Agreement is duly executed and delivered by Seller,
it will constitute a valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, arrangement, moratorium, or other
similar laws or court decisions relating to or affecting the rights
of creditors generally.
3.3 Absence of Restrictions .
The execution, delivery and performance of this Agreement by Buyer
and the consummation by Buyer of the transactions contemplated
hereby
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(a) does not and will
not constitute a breach or violation of or default (or an event
which, with or without notice or lapse of time (or both), could
become a breach, violation or default) under any judgment, decree,
order, governmental permit or license to which Buyer is a party, or
any law, rule or regulation to which Buyer is subject;
(b) does not and will not require the consent or approval of
any other party to any contract to which Buyer is a party; and
(c) does not and will not require any notice to, filing or
registration with or permit, authorization, consent or approval of,
any governmental or regulatory organization or instrumentality
3.4 Legal Proceedings . There
are no proceedings pending or, to the knowledge of Buyer,
threatened which seek to restrain, rescind or in any way restrict,
delay or prohibit or which may have the effect of restricting,
delaying or prohibiting Buyer’s ability to consummate the
transactions contemplat
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