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Execution Version
ASSET PURCHASE AGREEMENT
By and Between
Cryptek, Inc.
and
ION Networks, Inc.
November 19, 2007
A/72217637.12
TABLE OF CONTENTS
Page
1.
PURCHASE AND SALE
1
1.1.
Acquired Assets
1
1.2.
Excluded Assets
3
1.3.
Assumed Liabilities
4
2.
PURCHASE PRICE
5
2.1.
Purchase Price
5
2.2.
Purchase Price Adjustment
5
2.3.
Payment of the Purchase Price at Closing
7
2.4.
Allocation of Purchase Price
8
3.
CLOSING
8
3.1.
Time and Place
8
3.2.
Seller’s Deliveries
8
3.3.
Buyer’s Deliveries
9
4.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
9
4.1.
Organization of Seller; Authority
10
4.2.
Qualification
10
4.3.
Corporate Approval; Binding Effect
10
4.4.
Subsidiaries
10
4.5.
Non-Contravention
10
4.6.
Governmental Consents
11
4.7.
Financial Statements
11
4.8.
Absence of Certain Changes
11
4.9.
Litigation
13
4.10.
Conformity to Law
13
4.11.
Title to Acquired Assets; Sufficiency of the Acquired Assets
13
4.12.
Environmental Matters
14
4.13.
Equipment
14
4.14.
Territorial Restrictions
14
4.15.
Inventories
15
4.16.
Insurance
15
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TABLE OF CONTENTS
(continued)
Page
4.17.
Contracts
15
4.18.
Employment Matters
17
4.19.
Employee Benefit Plans
17
4.20.
Labor Relations
18
4.21.
Intellectual Property
19
4.22.
Suppliers and Customers
21
4.23.
Collectibility of Accounts Receivable
21
4.24.
No Undisclosed Liabilities
22
4.25.
Taxes
22
4.26.
Broker
22
4.27.
Conflicts of Interest
22
4.28.
Indebtedness
22
4.29.
Absence of Certain Business Practices
23
4.30.
Warranties
23
4.31.
Real Property
23
4.32.
Solvency
23
4.33.
Disclosure
23
5.
REPRESENTATIONS AND WARRANTIES OF THE BUYER
23
5.1.
Organization of Buyer; Authority
24
5.2.
Corporate Approval; Binding Effect
24
5.3.
Non-Contravention
24
5.4.
Broker
24
5.5.
Governmental Consents
24
5.6.
Funds to Close
24
6.
CERTAIN COVENANTS
25
6.1.
Conduct of the Business by the Seller Pending Closing
25
6.2.
Confidential Information
28
6.3.
Stockholders Meeting; Proxy Statement
28
6.4.
Use of Name
29
6.5.
Employees
29
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TABLE OF CONTENTS
(continued)
Page
6.6.
Liability for Transfer Taxes and Related Matters
30
6.7.
Collection of Accounts Receivable
30
6.8.
Notice of Developments
31
6.9.
Further Agreements
31
6.10.
Communication with Acquired Customers
31
6.11.
Further Assurances
32
7.
CONDITIONS PRECEDENT TO EACH PARTY’S OBLIGATIONS
32
7.1.
Stockholder Approval
32
7.2.
No Litigation
32
8.
CONDITIONS PRECEDENT TO THE BUYER’S OBLIGATIONS
32
8.1.
Representations and Warranties True at Closing
32
8.2.
Compliance with Agreement
32
8.3.
No Material Adverse Effect
32
8.4.
Certificate
32
8.5.
Approvals
32
8.6.
Resignations from Administaff
33
8.7.
Inventions Assignment Agreement
33
8.8.
Discharge of Indebtedness
33
8.9.
Discharge of Encumbrances
33
8.10.
Intellectual Property Documentation
33
8.11.
Payment of Past Royalties to Wind River
33
8.12.
Transferred Employees
33
8.13.
Delivery of Documents and Other Items
33
9.
CONDITIONS PRECEDENT TO SELLER’S OBLIGATIONS
33
9.1.
Representations and Warranties True at Closing
33
9.2.
Compliance with Agreement
34
9.3.
Certificate
34
9.4.
Delivery of Documents and Other Items
34
10.
SURVIVAL; INDEMNIFICATION
34
10.1.
Survival of Representations and Warranties
34
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TABLE OF CONTENTS
(continued)
Page
10.2.
Indemnity by the Seller
34
10.3.
Indemnity by the Buyer
34
10.4.
Claims
34
10.5.
Method and Manner of Paying Claims
35
11.
TERMINATION
36
11.1.
Termination
36
11.2.
Effect of Termination
37
12.
DEFINITIONS
38
13.
GENERAL
44
13.1.
Expenses
44
13.2.
Notices
44
13.3.
Entire Agreement
45
13.4.
Governing Law
46
13.5.
Section Headings
46
13.6.
Assigns
46
13.7.
Severability
46
13.8.
Further Assurances
46
13.9.
No Implied Rights or Remedies
46
13.10.
Counterparts
46
13.11.
Satisfaction of Conditions Precedent
46
13.12.
Public Statements or Releases
46
13.13.
Business Records
46
13.14.
Knowledge
47
Exhibit A:
Other Assumed Liabilities (to be delivered at Closing)
Exhibit B:
Form of Escrow Agreement
Exhibit C:
Form of Bill of Sale
Exhibit D:
Form of Assignment and Assumption Agreement
Exhibit E:
Form of Confidentiality Agreement
Exhibit F:
Form of Offer Letter
Exhibit G:
Disclosure Schedules
Exhibit H:
Retained Accounts Receivable (to be delivered at Closing)
A/72217637.12
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this “
Agreement ”) is made as of the 19th day of
November, 2007, by and between Cryptek, Inc., a Delaware
corporation (the “ Buyer ”), and ION
Networks, Inc., a Delaware corporation (the “
Seller ”). The Buyer and the Seller are
sometimes referred to herein each individually as a “
Party ” and collectively as the “
Parties ”.
WHEREAS, the Seller is engaged in the business
of remote services delivery and secure access technology which
enable service providers, government and military agencies, and
corporate IT departments to remotely access, manage, monitor and
secure critical devices on voice and data networks (the “
Business ”);
WHEREAS, the Buyer desires to purchase the
Business by acquiring substantially all of the assets owned by
the Seller and used in the Business, subject to certain
obligations, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual
promises and agreements set forth herein, the Buyer and the
Seller hereby agree as follows:
1.
PURCHASE AND SALE.
1.1.
Acquired Assets . Subject to the
terms and conditions set forth in this Agreement, at the Closing
referred to in Section 3 hereof, the Seller shall sell, assign,
transfer and deliver to the Buyer, and the Buyer shall purchase,
acquire and take assignment and delivery of, free and clear of
all Encumbrances, all of Seller’s right, title and
interest in all of the assets (other than the Excluded Assets
specified in Section 1.2) of the Seller used in or related to
the Business (all of which assets are hereinafter referred to
collectively as the “ Acquired Assets ”),
including without limitation the following assets:
a)
all products marketed, licensed, developed or
sold by the Seller, including, without limitation, those set
forth on Schedule 1.1(a) (the “
Products ”);
b)
all trademarks, service marks, trade names,
business and doing business names, slogans, logos, trade dress,
internet domain names and other similar designations of source
or origin, together with all goodwill, registrations and
applications related to the foregoing; all mask works rights and
trade secrets and other confidential information, technology,
know-how, proprietary processes, products, formulae, algorithms,
models, and methodologies; all patents, technical information,
engineering and technical data, unpatented inventions,
discoveries, research and development data, designs, techniques,
drawings, plans and specifications, utility, models, test
procedures and industrial design registrations or applications
(including without limitation any continuations, divisionals,
continuations-in-part, provisionals, renewals, reissues,
re-examinations and applications for any of the foregoing); all
copyrights and copyrightable subject matter (including without
limitation any registration and applications for any of the
foregoing); and Software as developed or currently being
developed (collectively, the “ Intellectual
Property ”), in each case in which the Seller has a
proprietary interest, whether such Intellectual Property is
owned or licensed (as licensor or licensee) by the Seller,
including, without limitation, the Intellectual Property listed
on Schedule 1.1(b) ;
A/72217637.12
c)
all relationships or arrangements of the Seller
with its customers for the provision of products (including,
without limitation, the Products) or services, all customer and
supplier lists and information, including contact persons and
contact information, and all records and databases relating to
the Seller’s customers;
d)
the subscriptions, agreements, contracts and
purchase orders listed on Schedule 1.1(d ) (which
schedule shall include, without limitation, all subscriptions,
agreements, contracts and purchase orders relating to the
customers of Seller (collectively, the “ Transferred
Contracts ”), and all claims or causes of action
arising under or in connection therewith (including all benefits
and rights under all open purchase orders and/or sales contracts
respecting sales to customers of the Business);
e)
all inventory, including, without limitation,
the inventory set forth on Schedule 1.1(e) , work
in process, raw materials, labeling and packaging materials,
finished goods, parts and supplies used or held for use in the
conduct of the Business, including, without limitation, those
relating to the Products (the “ Inventories
”);
f)
all plants, fixtures, machinery, installations,
furniture, equipment, tools, personal computers (other than the
two (2) laptop computers currently used by each of Messrs.
Norman Corn and Patrick Delaney), computer systems, computer
hardware, manufacturing tables and other tangible personal
property owned by the Seller and used or held for use in
connection with the Business (the “ Equipment
”), including, without limitation, that set forth on
Schedule 1.1(f) ;
g)
any and all of the trade accounts receivable,
notes receivable and miscellaneous receivables of the Business
(collectively, the “ Accounts Receivable ”),
other than the Retained Accounts Receivable except as provided
in Section 6.7;
h)
all rights of the Seller, if any, under any
non-compete, nonsolicitation, nondisclosure or similar contract
between the Seller on the one hand, and other persons or
entities (including former and present employees, customers and
vendors), on the other hand, relating to the Business;
i)
all potential and existing claims or causes of
action, if any, of the Seller against any person or entity
arising out of or related to the operation of Business (other
than claims and causes of action arising out of or related to
the Excluded Assets);
j)
all books, records and ledgers related to the
operation of the Business, all product descriptions and
configurations, cost and pricing information, business plans,
quality control records and manuals, bills of material and
manufacturing documentation, blueprints, research and
development files, employment and personnel records of the
Transferred Employees and all other records of the Seller
related to or used in the operation of the Business other than
those included in the Excluded Assets;
k)
all advertising or promotional materials of the
Seller to the extent related to the other Acquired Assets;
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l)
all manufacturer’s warranties to the
extent related to the Acquired Assets and all claims under such
warranties;
m)
all rights to the telephone numbers (and related
directory listings) used by the Seller;
n)
all of the Seller’s transferable rights
under the licenses, permits and approvals, both governmental and
private, described on Schedule 1.1(n) hereto
(collectively, the “ Permits ”);
o)
all of the Seller’s title to, interest in
and rights under the leases of personal property described on
Schedule 1.1(o) hereto (the “ Personal
Property Leases ”);
p)
all of the Seller’s title to, interest in
and rights under the lease of real property described on
Schedule 1.1(p) hereto (the “ Real Estate
Lease ”);
q)
all Intellectual Property which the Seller is
licensed or authorized by others to use in connection with the
Business (the “ Licensed Intellectual Property
”);
r)
all of the Seller’s rights under the
insurance policies listed on Schedule 4.16 ;
s)
all of the Seller’s right, title and
interest in and to its site on the World Wide Web; and
t)
all of the Seller’s rights under the
agreements with respect to employees described on Schedule
1.1(t) .
1.2.
Excluded Assets . Notwithstanding
the foregoing, the Seller is not selling, transferring or
conveying to the Buyer, and the term “ Acquired
Assets ” shall not include, any of the following
assets (collectively, the “ Excluded Assets
”):
a)
the consideration received by the Seller
pursuant to this Agreement;
b)
the rights of the Seller under this
Agreement;
c)
all of the cash, commercial paper or cash
equivalents of the Business, on hand or in the Seller’s
bank accounts or any lock box maintained for the benefit of the
Seller as of the Closing Date;
d)
the assets associated with, or held as plan
assets by, any Employee Benefit Plan;
e)
the Retained Accounts Receivable;
f)
any refund claims of the Seller for Taxes and
any overpaid Tax accounts of the Seller;
g)
any Federal or state net operating loss
carryforwards of the Seller;
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h)
the directors and officers insurance policy of
the Seller;
i)
any claims against Wind River arising prior to
the Closing; and
j)
all minute books, stock records and corporate
seals of the Seller, as well as any records and filings related
to Seller’s status as a public company, including transfer
agent records and agreements with transfer agents.
1.3.
Assumed Liabilities .
a)
Except for the liabilities set forth in Section
1.3(b), the Buyer shall not assume or be obligated to pay,
perform or otherwise discharge any liability or obligation of
the Seller of any kind or nature, whether direct or indirect,
known or unknown, absolute or contingent, including but not
limited to any liabilities arising out of the Seller’s
relationship with Wind River.
b)
Anything in this Agreement to the contrary
notwithstanding, at the Closing the Buyer shall not assume any
liability or obligation of any nature of the Seller whatsoever,
except for the following liabilities (the “ Assumed
Liabilities ”):
(i)
other than liabilities related to Taxes, all
obligations and liabilities of the Seller related to the
Inventories that remain unpaid as of the Closing (the “
Assumed Inventory Liabilities ”);
(ii)
all obligations and liabilities of the Seller
for payment of earned but unpaid sick pay, bonuses and vacation
pay payable to the Transferred Employees incurred by the Seller
in the ordinary course of business that remain unpaid as of the
Closing (the “ Assumed Transferred Employees
Liabilities ”);
(iii)
all obligations and liabilities of the Seller
for payment of commissions incurred in connection with the
Transferred Employees in the ordinary course of business that
remain unpaid as of the Closing (the “ Assumed
Commissions ”);
(iv)
all obligations and liabilities under the
Transferred Contracts, the Real Estate Lease, the Personal
Property Leases and the Licensed Intellectual Property that
arise after the Closing (other than any liability or obligation
arising out of or relating to a breach by the Seller that
occurred prior to the Closing);
(v)
those certain day-to-day Business operation
expenses arising in connection with the Acquired Assets (which,
by way of example, shall include expenses for office supplies);
provided that such expenses do not exceed $1,000 individually or
$5,000 in the aggregate (the “ Day-to-Day Expenses
”); and
(vi)
those certain other obligations and liabilities
expressly approved by Buyer (including the amounts thereof) in
writing in advance of the Closing and set forth on Exhibit
A , which Exhibit shall be delivered by the Parties at
Closing (the “ Other Assumed Liabilities
”).
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2.
PURCHASE PRICE.
2.1.
Purchase Price . The aggregate
purchase price to be paid by the Buyer to the Seller for the
Acquired Assets shall be $3,200,000, minus any Net Tangible
Asset Reduction (as defined below), and subject to adjustment in
accordance with Section 2.2(e) (the “ Purchase
Price ”).
2.2.
Purchase Price Adjustment .
a)
Closing Statement . No later than
five (5) Business Days prior to the Closing Date, the Seller
shall prepare and deliver to the Buyer a closing statement
setting forth a written estimate of (i) the Net Tangible Asset
Value (the “ Estimated Net Tangible Asset Value
”), (ii) the Assumed Inventory Liabilities, (iii) the
Assumed Transferred Employees Liabilities, (iv) the Assumed
Commissions, (iv) the Day-to-Day Expenses, and (v) the Other
Assumed Liabilities, all prepared in good faith, in accordance
with generally accepted accounting principles (“
GAAP ”) applied on a reasonable basis consistent
with past practice, and on a reasonable basis using the
Seller’s then available financial information as of such
date. The Buyer shall review such written estimates and
the parties shall use commercially reasonable efforts to resolve
in good faith any disagreements concerning such estimates (which
disagreements related to the Estimated Net Tangible Asset Value
shall be limited to conformity to GAAP and consistency with past
practices) no later than two (2) Business Days prior to the
Closing Date. If the parties are unable to resolve any
such disagreements, the Seller’s written estimates shall
be utilized for the purposes of the calculations set forth in
this Section 2.2(a). Any amounts that are the subject of
disagreement within the guidelines described herein shall be
subject to the dispute resolution procedures set forth herein.
Any amounts that are not the subject of disagreement shall
be immediately remitted by Seller to Buyer or Buyer to Seller,
as applicable, by wire transfer to an account designated by the
applicable party. To the extent that the Estimated Net
Tangible Asset Value is less than $0.00, the Purchase Price
shall be reduced on a dollar for dollar basis for such negative
amount, and such negative amount shall be referred to herein as
the “ Net Tangible Asset Reduction ”.
b)
Final Closing Statement . No later
than sixty (60) days after the Closing Date, the Seller shall,
at the Seller’s expense, prepare and deliver to the
Buyer:
(i)
An internally-developed balance sheet of the
Seller as of the Closing Date, immediately prior to giving
effect to the transactions contemplated by the Closing, prepared
in accordance with GAAP applied on a basis consistent with the
Audited Balance Sheets, except for normal recurring year-end
adjustments and the absence of footnotes (the “ Final
Closing Statement ”); and
(ii)
a certificate of an officer of the Seller (A)
certifying that the Final Closing Statement was prepared in
accordance with GAAP and in accordance with the procedures set
forth in clause (i) above and (B) containing the Seller’s
calculations of the Net Tangible Asset Value, the Assumed
Inventory Liabilities, the Assumed Transferred Employees
Liabilities, the Assumed Commissions, the Day-to-Day Expenses,
and the Other Assumed Liabilities, all based on the Final
Closing Statement (the “ Seller’s
Calculations ”).
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c)
The Buyer’s Review .
(i)
After delivery to the Buyer of the Final Closing
Statement, the Buyer shall have the right to, and the right to
direct its representatives to, at the Buyer’s expense,
review the Final Closing Statement, the Seller’s
Calculations and the Seller Calculation Materials (defined
below) and the Seller shall permit the Buyer and its
representatives to consult with the Seller and its
representatives in connection with the preparation of the Final
Closing Statement and the Seller’s Calculation and shall
permit the Buyer and its representatives at the earliest
practicable date to review and make copies of all work papers,
schedules and calculations (the “ Seller Calculation
Materials ”) used in the preparation thereof (subject
to the execution and delivery to the Seller of mutually
acceptable confidentiality and indemnification agreements by
Buyer’s representatives). Inventories included on
the Final Closing Statement shall be valued on the basis of a
physical inventory conducted by the Seller and the Buyer on or
about the Closing Date.
(ii)
No later than thirty (30) days after the later
of (A) the date the Buyer receives the Final Closing Statement
and the accompanying certificate, and (B) the date the Buyer is
first permitted to review and make copies of the Seller
Calculation Materials, the Buyer shall notify the Seller in
writing of its agreement or disagreement with the Final Closing
Statement and the accuracy of any of the Seller’s
Calculations (which notice shall state the basis of
Buyer’s disagreements, if any). Any disputes by
Buyer of any aspect of the Final Closing Statement shall be
limited to conformity to GAAP and consistency with past
practices and any disputes by Buyer with respect to the
Estimated Net Tangible Asset Value shall be limited to
conformity to GAAP and consistency with past practices. If
the Buyer does not dispute any aspect of the Final Closing
Statement or the amount of any of the Seller’s
Calculations, the Final Closing Statement and the Seller’s
Calculations shall be final and binding on the parties effective
as of the first Business Day after the later of the expiration
of (i) the Buyer’s thirty (30) day review period or (ii)
the review conducted by the Buyer and/or its
representatives.
d)
Resolution of Disputes . If, after
the Buyer’s review provided for in subsection (c) above,
the Buyer and its representatives still disagree with the
Seller’s Calculations, Buyer shall present Seller with the
Buyer’s proposed alternative calculations (the “
Buyer’s Calculations ”) and shall make
available to Seller and Seller’s representatives the work
papers, schedules and calculations used in the preparation of
the Buyer’s Calculations. If Seller does not accept
the Buyer’s Calculations, the Buyer and the Seller shall
promptly select a mutually acceptable independent accounting
firm (other than the Seller’s independent accountants and
the Buyer’s independent accountants) (such accounting firm
being the “ Independent Accounting Firm ”) to
resolve the remaining disputed items (the “ Remaining
Disputed Items ”) within thirty (30) days after the
date of the Buyer’s rejection of the Seller’s
Calculations by conducting its own review of the Final Closing
Statement (along with the Seller Calculation Materials and the
work papers, schedules and calculations used in the preparation
of the Buyer’s Calculations) and thereafter selecting
either the Seller’s Calculations of the Remaining Disputed
Items or the Buyer’s Calculations of the Remaining
Disputed Items or an amount in between the two. Each of
the Seller and the Buyer agrees that it shall be bound by the
Independent Accounting Firm’s determination of the
Remaining Disputed Items. The fees and expenses of the
Independent Accounting Firm (which shall be required to execute
a
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confidentiality agreement) shall be paid fifty
percent (50%) by the Seller and fifty percent (50%) by the
Buyer, provided that the total amount shall not exceed
$40,000.
e)
Final Settlement .
(i)
As used in this Section 2.2, the Net Tangible
Asset Value as of the Closing Date, as finally determined
pursuant to subsection (c) or (d) shall be referred to as the
“ Actual Net Tangible Asset Value ”. If
the Actual Net Tangible Asset Value is (1) less than $0.00 and
(2) less than the Estimated Net Tangible Asset Value, then the
Seller shall, no later than five (5) Business Days after the
date of such final determination, pay to the Buyer an amount
equal to the difference between the Actual Net Tangible Asset
Value and the lesser of the Estimated Net Tangible Asset Value
or $0.00, together with interest on the amount of such
difference at the interest rate of the Escrow Funds in the
Escrow Account (the “ Escrow Rate ”) from the
Closing Date to the date of payment (the “ Deficiency
True Up Payment ”). The Deficiency True Up
Payment shall be made out of the Escrow Funds to the Buyer
pursuant to the Escrow Agreement upon final determination.
If the Actual Net Tangible Asset Value is less than $0.00
but greater than the Estimated Net Tangible Asset Value, the
Buyer shall, no later than five (5) Business Days after the date
of such final determination, refund to the Seller an amount
equal to the difference between such Actual Net Tangible Asset
Value and the Estimated Net Tangible Asset Value, together with
interest on the amount of such difference at the Escrow Rate
from the Closing Date to the date of payment, such payment to be
made by wire transfer of immediately available funds to such
bank account as the Seller may designate (or, in the absence of
any such designation, by corporate check mailed to the
Seller).
(ii)
The amounts of the Assumed Inventory
Liabilities, the Assumed Transferred Employees Liabilities, the
Assumed Commissions, the Day-to-Day Expenses, and the Other
Assumed Liabilities as of the Closing Date assumed by the Buyer
shall be the amounts finally determined pursuant to this Section
2.2.
2.3.
Payment of the Purchase Price at Closing
. At Closing, the Buyer shall pay the Purchase Price as
follows:
a)
$320,000 (the “ Escrow Funds
”) shall be paid by the Buyer to the Escrow Agent named in
the escrow agreement substantially in the form attached hereto
as Exhibit B with such changes as shall be
mutually acceptable to the Escrow Agent, Buyer and Seller (the
“ Escrow Agreement ”), and shall be available
to the Buyer to fund, to the extent of such Escrow Funds, any
indemnification obligation of the Seller to the Buyer under
Section 10 hereof and the Deficiency True Up Payment (it being
understood that in no event shall the aggregate of the amounts
of the Deficiency True Up Payment and Seller’s
indemnification obligation under Section 10 exceed the Escrow
Funds). The Escrow Agent shall deliver the Escrow Funds to
the Seller on the twelve (12) month anniversary of the Closing
Date, unless (i) the final amount of the Deficiency True Up
Payment has not been determined or (ii) Buyer in good faith has
notified the Seller of one or more Losses or Claims (including
Third Party Claims) on or prior to such date in accordance with
Section 10, in which case the portion of Escrow Funds equal to
such Deficiency True Up Payment or Losses or Claims shall be
retained by the Escrow Agent until the liability of Seller shall
have been finally determined pursuant to Section 10;
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b)
on behalf of the Seller, the Debt Amount
(defined below), by wire transfer of immediately available funds
to the bank account(s) designated in the payoff letters
described in Section 3.2(c); and
c)
the balance of the Purchase Price by wire
transfer of immediately available funds to the bank account
designated by Seller on Schedule 2.3 .
2.4.
Allocation of Purchase Price . The
Buyer shall prepare an allocation of the Purchase Price and the
Assumed Liabilities (and all other capitalized costs) among the
Acquired Assets in accordance with Section 1060 of the Code and
the Treasury regulations thereunder (and any similar provision
of state, local or foreign law, as appropriate), which
allocation shall be binding upon the Seller and Buyer.
Buyer shall deliver such allocation to Seller within sixty
(60) days after the final determination of the Purchase Price
pursuant to Section 2.2 hereof, Buyer and Seller and their
Affiliates shall report, act and file Tax Returns (including,
but not limited to Internal Revenue Service Form 8594) in all
respects and for all purposes consistent with such allocation
prepared by the Buyer. The Seller shall timely and
properly prepare, execute, file and deliver all such documents,
forms and other information as the Buyer may reasonably request
to prepare such allocation. Neither the Buyer nor the
Seller shall take any position (whether in audits, Tax Returns
or otherwise) that is inconsistent with such allocation unless
required to do so by applicable law.
3.
CLOSING.
3.1.
Time and Place . The closing of the
transactions contemplated by this Agreement (the “
Closing ”) shall be held at the offices of Bingham
McCutchen LLP, 2020 K Street, NW, Washington, D.C., at
10:00 a.m., or at such other place as may be mutually
agreed upon by the Parties. The Closing shall take place
within (a) three (3) Business Days after all of the conditions
set forth in Sections 7, 8 and 9 have been satisfied or waived,
or (b) at such other time as may be fixed by agreement between
the Parties (the “ Closing Date ”). The
effective time of the Closing shall be the close of business on
the Closing Date (i.e., 5:00 p.m. prevailing Eastern Time).
3.2.
Seller’s Deliveries . At the
Closing, the Seller shall deliver to the Buyer:
a)
possession of all tangible assets comprising the
Acquired Assets;
b)
a Bill of Sale substantially in the form
attached hereto as Exhibit C (the “ Bill
of Sale ”), duly executed by the Seller;
c)
all appropriate payoff letters or other
documentation sufficient to evidence satisfaction and payment of
the outstanding balances under any indebtedness for borrowed
money of the Seller listed in Schedule 3.2(c) and
any interest therein or thereon (the “ Debt Amount
”) and all applicable Encumbrance releases, cancelled
notes or other evidence of indebtedness duly marked as
cancelled;
d)
the Assignment and Assumption Agreement in the
form attached hereto as Exhibit D (the “
Assignment and Assumption Agreement ”), executed by
the Seller;
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e)
the Escrow Agreement, executed by the Seller and
the Escrow Agent;
f)
copies of the resolutions adopted by each of the
Board of Directors and either the action by written consent of
the stockholders of the Seller holding not less than a majority
of the voting power of Seller’s outstanding shares or
minutes of a meeting of stockholders authorizing (i) this
Agreement and (ii) the name change of Seller contemplated by
Section 6.4; either of the foregoing as required under Section
271 and 242 of the Delaware General Corporation Law, and such
further resolutions of the Board of Directors as may be
necessary to authorize the consummation by the Seller of the
transactions contemplated hereby, in each case certified by the
Secretary of Seller;
g)
the Non-Compete and Confidentiality Agreement in
the form attached hereto as Exhibit E executed by
each of Norman Corn and Patrick Delaney;
h)
a certificate of the Seller, substantially in
the form set forth in Treasury Regulation Section
1.1445-2(b)(2);
i)
such other certificates, instruments or
documents as Buyer may reasonably request in order to effect and
document the transactions contemplated hereby; and
j)
all such other general instruments of transfer,
assignment and conveyance, assignments, evidences of consent,
waiver or other approval, and other instruments or documents in
form and substance reasonably satisfactory to the Buyer, as
shall be reasonably necessary (x) to evidence or perfect the
sale, assignment, transfer and conveyance of the Acquired Assets
to the Buyer (including assignments in respect of the
Transferred Contracts and the Intellectual Property) and
effectively vest in the Buyer all of the Seller’s right,
title and interest in the Acquired Assets free and clear of any
and all Encumbrances, together with possession (or constructive
possession, in the case of intangibles) thereof, all in
accordance with the terms and conditions of this Agreement and
(y) to evidence the assumption by the Buyer of the Assumed
Liabilities.
3.3.
Buyer’s Deliveries . At the
Closing, the Buyer shall deliver to the Seller:
a)
the Purchase Price in accordance with Section
2.1 and Section 2.3;
b)
the Assignment and Assumption Agreement,
executed by the Buyer;
c)
the Escrow Agreement, executed by the Buyer and
the Escrow Agent;
d)
a copy of the resolutions adopted by the Board
of Directors of the Buyer authorizing this Agreement and
authorizing the consummation by the Buyer of the transactions
contemplated hereby, certified by the Secretary of the Buyer;
and
e)
such other certificates, instruments or
documents as Seller may reasonably request in order to effect
and document the transactions contemplated hereby.
4.
REPRESENTATIONS AND WARRANTIES OF THE SELLER.
As a material inducement to the Buyer to enter into this
Agreement and consummate the transactions
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contemplated hereby, the Seller represents and
warrants to the Buyer, as of the date hereof, and as of the
Closing Date (as though made then and as though the Closing Date
were substituted for the date of this Agreement throughout this
Section 4) as follows:
4.1.
Organization of Seller; Authority .
The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware. The Seller has delivered to the Buyer complete
and correct copies of its Certificate of Incorporation and
By-Laws and all amendments thereto, and no amendments thereto
are pending or under consideration by the Seller, other than an
amendment to its Certificate of Incorporation to change
Seller’s name and possibly increase its capitalization.
The Seller is not in violation of any term of its
Certificate of Incorporation. The Seller has all requisite
corporate power and authority to own and hold the Acquired
Assets, to carry on the Business as such business is now
conducted and to execute and deliver this Agreement and the
other documents, instruments and agreements contemplated hereby
or thereby to which it is a party (collectively, the “
Transaction Documents ”) and to carry out all
actions required of it pursuant to the terms of the Transaction
Documents.
4.2.
Qualification . The Seller is
qualified to do business as a foreign corporation in, and is in
good standing under the laws of, the State of New Jersey.
The Seller is qualified to do business as a foreign
corporation in, and is in good standing under the laws of, each
other jurisdiction in which the conduct of the Business or the
ownership of the Acquired Assets makes such qualification
necessary, all of which are set forth on Schedule
4.2 of the Disclosure Schedules, except in any such
jurisdiction where the failure to be so qualified and in good
standing would not reasonably be expected to have a Material
Adverse Effect.
4.3.
Corporate Approval; Binding Effect .
The Seller has obtained all necessary authorizations and
approvals from its Board of Directors required for the execution
and delivery of the Transaction Documents to which it is a party
and the consummation of the transactions contemplated hereby and
thereby. As of the Closing, the Seller shall have obtained
all necessary authorizations and approvals, if any, from its
stockholders required for the execution and delivery of the
Transaction Documents to which it is a party and the
consummation of the transactions contemplated hereby and
thereby. Each of the Transaction Documents to which the
Seller is a party has been duly executed and delivered by the
Seller and, assuming the due execution and delivery by the other
parties thereto, constitutes the legal, valid and binding
obligation of the Seller enforceable against the Seller in
accordance with its terms, except as the enforceability thereof
may be limited by any applicable bankruptcy, reorganization,
insolvency or other laws affecting creditors’ rights
generally or by general principles of equity.
4.4.
Subsidiaries . Except as set forth
in Schedule 4.4 of the Disclosure Schedules, the
Seller has no Affiliates or subsidiaries which own any assets
used in the Business.
4.5.
Non-Contravention . The execution
and delivery by the Seller of the Transaction Documents to which
it is a party and the consummation by the Seller of the
transactions contemplated hereby and thereby will not (a)
violate or conflict with any provision of the Certificate of
Incorporation or By-Laws of the Seller, each as amended to date;
(b) assuming the requisite approval of Seller’s
stockholders noted in Section 3.2(f) is obtained, result in the
violation in any material respect of any law, rule, regulation,
order, judgment or decree of
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any court or governmental or regulatory
authority to which the Seller or any of its property is subject;
(c) except as set forth on Schedule 4.5 of the
Disclosure Schedules, constitute a violation of, or be in
conflict with, or constitute or create a default under, or
result in the breach of, or create in any person or entity the
right to accelerate, modify or cancel or require any notice
under, or result in the creation or imposition of any
Encumbrance upon any property of the Seller (including without
limitation any of the Acquired Assets) pursuant to any agreement
or instrument to which the Seller is a party or by which the
Seller or any of its properties (including without limitation
any of the Acquired Assets) is bound or to which the Seller or
any of such properties is subject.
4.6.
Governmental Consents . Except as
set forth on Schedule 4.6 of the Disclosure
Schedules and as contemplated by this Agreement in connection
with the change of the Seller’s corporate name, no
material consent, approval or authorization of, or registration,
qualification or filing with, any governmental agency or
authority is required for the execution and delivery by the
Seller of the Transaction Documents to which it is a party or
for the consummation by the Seller of the transactions
contemplated hereby or thereby. The Seller has and
maintains, and the Permits listed on Schedule
1.1(n) hereto include, all material licenses, permits
and other authorizations from all governmental authorities
needed for the conduct of the Business as conducted at present,
or in connection with the ownership or use of the Acquired
Assets. Except as designated on Schedule 4.6
of the Disclosure Schedules, the Seller has delivered to the
Buyer true and complete copies of the Permits, if any, together
with any material information known to the Seller with respect
to the transferability of each Permit.
4.7.
Financial Statements . The Seller
has delivered the following financial statements (the “
Financial Statements ”) to the Buyer: (i) the
audited balance sheets of the Seller as of December 31,
2005 and 2006 (the “ Audited Balance Sheets
”), and the related statements of income, retained
earnings and cash flows of the Seller for the fiscal years then
ended (together with the Audited Balance Sheets, collectively,
the “ Audited Financials ”) and (ii) the
unaudited balance sheet of the Business as of September 30, 2007
(the “ Interim Balance Sheet ”) and the
related unaudited statements of income, retained earnings and
cash flows of the Business for the nine (9) month period then
ended (together with the Interim Balance Sheet, collectively,
the “ Interim Financials ”). Each of
the Financial Statements has been prepared in accordance with
GAAP, consistently applied, subject to year end adjustments and
the absence of notes in the case of the Interim Financials.
Each of the Financial Statements fairly presents the
financial condition and the results of operations, the changes
in shareholders equity and cash flows as at the respective dates
and for the respective period referred to in such Financial
Statement. The Financial Statements have been prepared
from and are in accordance with the books and records of the
Seller. The books of account and other financial records
of the Seller represent actual, bona fide transactions.
4.8.
Absence of Certain Changes . Except
as set forth on Schedule 4.8 of the Disclosure
Schedules, since September 30, 2007, the Seller has carried on
the Business as it relates to the Acquired Assets only in the
ordinary course consistent with past practice, and has not:
a)
made any change in its assets, liabilities,
sales, income or business, or in its relationships with
suppliers, customers or lessors, other than changes which were
both in the
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ordinary course of business and have not been,
either individually or in the aggregate, materially adverse;
b)
acquired or disposed of any asset or property
valued in excess of $1,000 other than in the ordinary course of
business;
c)
received any notice of termination of any
Transferred Contract or suffered any damage, destruction or
loss, whether or not covered by insurance;
d)
declared, set aside or paid any dividend or made
any other distributions in respect of its capital stock;
e)
directly or indirectly redeemed, purchased or
acquired any of its capital stock or options to acquire its
capital stock;
f)
increased the compensation, pension or other
benefits payable or to become payable to any of its directors,
officers, employees or consultants of the Business, or increased
any bonus payments or arrangements made to or with any of them
(other than pursuant to the terms of any existing written
agreement or plan of which the Buyer has been supplied complete
and correct copies);
g)
discharged or canceled any debt or claim in
excess of $1,000 or waived any right of material value of the
Business other than compromises of accounts receivable and
accounts payable in the ordinary course of business;
h)
entered into any transaction or contract other
than in the ordinary course of business (except for this
Agreement);
i)
incurred any severance pay obligations by reason
of this Agreement or the transactions contemplated hereby;
j)
incurred any obligations, liabilities or
commitments whether absolute, accrued, contingent or otherwise
(including, without limitation, liabilities as a guarantor or
otherwise with respect to obligations of others) with respect to
the Business, other than obligations and liabilities incurred in
the ordinary course of business;
k)
incurred any mortgage, pledge, lien, lease,
security interest or other charge or encumbrance on any of its
assets, tangible or intangible except for existing indebtedness
to Bridge Bank, N.A.;
l)
discharged or satisfied any lien or encumbrance
or paid any obligation or liability (fixed or contingent) with
respect to the Business other than (A) current liabilities
included in the Interim Balance Sheet and (B) current
liabilities incurred since the date of the Interim Balance Sheet
in the ordinary course of the business;
m)
failed to replenish inventory and supplies in a
normal and customary manner consistent with prior practice, or
any commitment to purchase in excess of the normal, ordinary and
usual requirements of the Business or at any price in excess of
the then current
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market price or upon terms and conditions more
onerous than those usual and customary for the Seller in
accordance with prior practice, or made any change in its
selling, pricing, advertising or personnel practices
inconsistent with prior practice;
n)
made or agreed or committed to make any capital
expenditure or capital additions or improvements in excess of
$5,000 individually or $15,000 in the aggregate;
o)
made any material change in any accounting
procedures or practices applied in keeping its books and
records; or
p)
taken any action or omitted to take any action
that would result in the occurrence of any of the foregoing.
4.9.
Litigation . Except as set forth in
Schedule 4.9 of the Disclosure Schedules, there is
no action, suit, proceeding or investigation pending or, to the
knowledge of the Seller, threatened, relating to or affecting
any of the Acquired Assets or the Business. There is no
action, suit, proceeding or investigation pending or, to the
knowledge of the Seller, threatened, or which questions the
validity of the Transaction Documents or challenges any of the
transactions contemplated hereby or thereby, nor, to the
knowledge of the Seller, is there any basis for any such action,
suit, proceeding or investigation.
4.10.
Conformity to Law . The Seller has
complied with, and is in compliance with, in all material
respects, all laws, statutes, governmental regulations and all
judicial or administrative tribunal orders, judgments, writs,
injunctions, decrees or similar commands applicable to the
Business or any of the Acquired Assets (including, without
limitation, any labor or other law, regulation or ordinance).
Except as set forth on Schedule 4.10 of the
Disclosure Schedules, the Seller has not committed, been charged
with or, to the knowledge of the Seller, is or has been under
investigation with respect to, nor does there exist, any
violation of any provision of any federal, state or local law or
administrative regulation in respect of the Seller, and with
respect to the Business or any of the Acquired Assets.
4.11.
Title to Acquired Assets; Sufficiency of the
Acquired Assets . The Seller has good and marketable
title to or, in the case of leased or licensed Acquired Assets,
a valid and binding leasehold interest in or license to or
rights under (as the case may be), all of the Acquired Assets.
Except as set forth on Schedule 4.11 of the
Disclosure Schedules, the Seller has the full right to sell,
convey, transfer, assign and deliver the Acquired Assets,
without the need to obtain the consent or approval of any third
party. Except for liens described on Schedule
4.11 of the Disclosure Schedules and Permitted Liens,
all of the Acquired Assets are entirely free and clear of
Encumbrances. All of the Acquired Assets are in good
condition and repair (reasonable wear and tear excepted).
At and as of the Closing, the Seller will convey the
Acquired Assets to the Buyer, and the Buyer will then have,
subject to Buyer paying the Debt Amount on behalf of the Seller
as described herein, good and marketable title to all of the
Acquired Assets, free and clear of all Encumbrances other than
Permitted Liens. The Acquired Assets include all tangible
assets and Intellectual Property that are necessary for the
conduct of the Business immediately prior to the Closing and are
adequate to conduct the Business as currently conducted by the
Seller.
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4.12.
Environmental Matters . Except as
set forth on Schedule 4.12 of the Disclosure
Schedules,
a)
the Seller (as it relates to the Business) is in
material compliance with all applicable federal, state, local
and foreign laws, orders, rules and regulations pertaining to
environmental matters, including without limitation those
arising under the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980 as amended, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Water Pollution Control
Act, the Solid Waste Disposal Act, as amended, the Federal Clean
Water Act, the Federal Clean Air Act, the Toxic Substances
Control Act, or any state or local statute, regulation,
ordinance, order or decree relating to the protection of health,
safety or the environment (collectively, “
Environmental Laws ”), which compliance includes,
but is not limited to, the possession by the Seller of material
permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and
conditions thereof, if applicable;
b)
there have been no environmental significant
releases (except for releases in accordance with valid
environmental permits or remediated through negotiated
agreements with regulatory agencies) of any “ Hazardous
Substances ” (which term shall mean collectively
contaminants; pollutants, toxic, radioactive or hazardous waste,
chemicals, substances, materials and constituents; petroleum and
petroleum products; polychlorinated biphenyls; medical waste;
infectious waste; asbestos; and urea formaldehyde) into the
soil, surface water or ground water at the Leased Property, and
no known soil, air, surface water or ground water contamination
exists at the Leased Property;
c)
to the knowledge of the Seller, Seller has no
liability under any Environmental Law for any Hazardous
Substances manufactured, generated, transported, used, stored,
refined, processed, treated recycled or disposed of by Seller
that have come to be located at any property other than the
property leased by Seller; and
d)
the Seller has not received written notice of,
nor, to the knowledge of the Seller, is Seller the subject of,
any actions, causes of action, claims, investigations, demands
or notices by any person alleging liability under or
noncompliance with any Environmental Law relating to the
property leased by Seller.
4.13.
Equipment . Schedule
1.1(f) sets forth a complete and accurate list of all of
the Equipment of the Seller other than items having a book or
market value individually of less than $1,000. The
Personal Property Leases listed on Schedule 1.1(o) hereto
include all leases by the Seller of any item of personal
property used in the Business with annual lease payments in
excess of $2,500. The Equipment held by the Seller is
utilized by the Seller in the ordinary course of business and is
in good condition and repair for its present use in the
Business, ordinary wear and tear excepted.
4.14.
Territorial Restrictions . Except
as set forth in Schedule 4.14 of the Disclosure
Schedules, the Seller has not entered into any agreement which
would restrict it from carrying on the Business anywhere in the
world. No action or inaction on the part of the Seller in
respect of the Business or the Assumed Liabilities, to the
knowledge of the Seller without any
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independent investigation or knowledge of the
Buyer’s intentions or operations, will result in the Buyer
being restricted from carrying on the Business anywhere in the
world (other than those restrictions imposed by any applicable
law) upon the Buyer’s purchase of the Business from the
Seller pursuant hereto or the assumption the of Assumed
Liabilities.
4.15.
Inventories . The Inventories
consist solely of, and the Inventories to be purchased by the
Buyer hereunder will consist solely of, material and goods of a
quality and quantity which are usable or saleable in the
ordinary course of operation of the Business, net of any reserve
for excessive or obsolete inventories reflected on the Interim
Balance Sheet. The Inventories are adequate for present
needs of the Business, are fairly reflected on the books of
account of the Seller, stating items of Inventory at the lower
of cost or market value in accordance with GAAP, consistently
applied, with adequate allowance for excessive or obsolete
inventories.
4.16.
Insurance . Schedule
4.16 of the Disclosure Schedules lists all policies of
fire, liability, workmen’s compensation, life, property
and casualty and other insurance owned or held by the Seller in
connection with the Business. To the knowledge of the
Seller, such policies of insurance provide adequate insurance
coverage for the Acquired Assets for all risks to which the
Seller is normally exposed. All such policies (a) are in
full force and effect and (b) will remain in full force and
effect through the Closing Date. The Seller is not in
default with respect to any of its obligations under any of such
insurance policies and has not received any notification of
cancellation of any such insurance policies. No insurance
carrier has denied coverage for any claim asserted by the Seller
since August 15, 2003, nor has any insurance carrier declined to
provide any coverage to the Seller since August 15, 2003 except
for denials which did not materially adversely affect the
Business.
4.17.
Contracts .
a)
Schedule 4.17 of the Disclosure
Schedules sets forth a complete and accurate list of all
existing contracts with respect to or relating to the Business
to which the Seller is a party or by which the Seller is bound
or to which the Seller or any of the Acquired Assets is subject,
except (x) contracts entered into in the ordinary course of
business after the date hereof and prior to the Closing, which
will be identified to the Buyer in writing prior to the Closing,
and (y) contracts with payments due or from Seller in an amount
less than $10,000 per year terminable by the Seller upon thirty
(30) days’ notice or less without the payment of any
termination fee or penalty. As used in this Section 4.17,
the word “ contract ” means the following
(with respect to or relating to the Business):
(i)
for the last four years, contracts and other
agreements with any current or former officer, director,
employee, consultant or shareholder or any partnership,
corporation, limited liability company, joint venture or any
other entity in which any such person has an interest;
(ii)
agreements with any labor union or association
representing any employee;
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(iii)
contracts with customers or clients of the
Business in excess of $10,000;
(iv)
performance bonds or other security agreements
provided by any party in connection with the Business;
(v)
except for this Agreement, contracts and other
agreements for the sale of any of the Seller’s assets or
properties other than in the ordinary course of business or for
the grant to any Person of any preferential rights to purchase
any of the Seller’s assets or properties;
(vi)
joint venture agreements relating to the
Business or by or to which any of the Acquired Assets are
affected or subject;
(vii)
except for this Agreement, contracts or other
agreements under which the Seller agrees to indemnify any party
(other than indemnification clauses that are set forth in any
contracts that are part of the Acquired Assets or in invoices
entered into in the ordinary course consistent with past
practice, the forms of which have been provided to the Buyer),
to pay liquidated damages, to share tax liability of any party,
or to refrain from competing with any party;
(viii)
contracts or other agreements with regard to
Indebtedness;
(ix)
agreements under which the Seller has granted a
lien or Encumbrance upon any of the Acquired Assets;
(x)
distribution, marketing, sales representative or
dealership agreements;
(xi)
agreements for the lease of personal
property;
(xii)
agreements for the lease of real property;
or
(xiii)
other contracts or other agreements whether or
not made in the ordinary course of business to the extent that
the amount payable by or to the Seller thereunder is more than
$10,000 in the aggregate per year.
b)
The Seller has delivered to the Buyer true,
correct and complete copies of all such contracts, together with
all modifications and supplements thereto. Each of the
contracts listed on Schedule 4.17 of the
Disclosure Schedules or any of the other Disclosure Schedules is
in full force and effect, the Seller is not in breach in any
material respect of any of the provisions of any such contract
(including, without limitation, any insurance obligations
thereunder), nor, to the knowledge of the Seller, is any other
party to any such contract in default thereunder in any material
respect, nor does any event or condition exist which with notice
or the passage of time or both would constitute a default
thereunder. Except as set forth in Schedule
4.17 of the Disclosure Schedules, the Seller has in all
material respects performed all obligations required to be
performed by it to date under each such contract.
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4.18.
Employment Matters .
a)
Employees. Schedule
4.18(a) of the Disclosure Schedules sets forth a
complete and accurate list of (i) each consultant, employee,
manager, officer and director of the Seller employed in the
Business who are Transferred Employees and (ii) each such
person’s title, current salary and any other relevant
compensation and benefits. There have been no changes in
the rate or character of such compensation since July 31, 2007.
b)
Contracts with Employees .
(i)
Schedule 4.18(b)(i) of the
Disclosure Schedules sets forth a true, correct and complete
list of all of the agreements between the Seller and any and all
of the Transferred Employees.
(ii)
Except as set forth on Schedule
4.18(b)(ii) of the Disclosure Schedules, the Seller has
no employment agreement, written or oral, with any currently
active employee employed in the Business, including any
agreement to provide any bonus or benefit to any such
employee.
(iii)
Except as set forth on Schedule
4.18(b)(iii) of the Disclosure Schedules, since December
31, 2006, the Seller has not made any pension payment which has
not been disclosed to the Buyer prior to the date hereof, or
paid any bonus or made any other payment, other than base
salary, or become obligated to make any such payment, to any
consultant, employee, manager, officer or director of the Seller
employed in the Business. Except as set forth on
Schedule 4.18(b)(iii) of the Disclosure Schedules,
the Seller has no outstanding loans or advances to employees
employed in the Business.
4.19.
Employee Benefit Plans .
a)
Schedule 4.19 of the Disclosure
Schedules lists all benefit and compensation plans including,
but not limited to, “employee benefit plans” within
the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended (“ ERISA ”),
and deferred compensation, stock option, stock purchase, stock
appreciation rights, stock based, incentive and bonus plans
maintained or contributed to by the Seller for the benefit of
any employee or former employees of the Business (the “
Plans ”). True and complete copies of the
Plans, including, but not limited to, any trust instruments and
insurance contracts forming a part of any Plans, all amendments
thereto and any other documents related to the Plans reasonably
requested by Buyer, have been provided or made available to
Buyer. The Seller does not now maintain or contribute to,
and has no liability with respect to or obligation under, any
employee benefit plans other than the Plans.
b)
Each of the Plans has been administered in all
material respects in compliance with its terms and with
applicable law (including, where applicable, ERISA and the
Internal Revenue Code of 1986, as amended (the “
Code ”)).
c)
Each of the Plans intended to be
“qualified” within the meaning of Section 401(a) of
the Code has been determined by the IRS to be so qualified and,
to the Seller’s knowledge, there is no fact or set of
circumstances that has adversely affected, or is reasonably
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likely to affect adversely, the qualification of
such Plan prior to the Closing or which requires or could
require action under compliance resolution programs of the IRS
to preserve such qualification.
d)
Except as set forth on Schedule
4.19 of the Disclosure Schedules, no Plan provides
medical, surgical, hospitalization, death or similar benefits
(whether or not insured) for employees or former employees of
the Business for periods extending beyond their termination of
service (by retirement or otherwise), other than (i) coverage
mandated by applicable law, (ii) death benefits under any
“pension plan,” as that term is defined in Section
3(2) of ERISA, or (iii) benefits the full cost of which is borne
by the current or former employee (or his beneficiary).
e)
Each group health plan benefiting any current or
former employee of the Business, the Seller or each member of
any trade or business (whether or not incorporated) (i) under
common control with the Seller within the meaning of Section
4001(b)(1) of ERISA or (ii) which together with the Seller is
treated as a single employer under Section 414(t) of the Code,
that is subject to the continuation coverage requirements of
Section 4980B of the Code and Part 6 of Subtitle B of Title I of
ERISA or applicable state insurance law has been operated in all
material respects in compliance with such requirements.
f)
There are no pending or, to the Seller’s
knowledge, threatened claims (other than routine claims for
benefits) by, on behalf of or against any of the Plans or any
trusts related thereto or any fiduciary or service provider
thereof.
g)
No liability (contingent or otherwise) to the
Pension Benefit Guaranty Corporation (“ PBGC
”) or any multi-employer plan (as defined in ERISA) has
been incurred by either the Seller or any entity which under
Section 414 of the Code is treated as a single employer with the
Seller.
h)
With respect to each Plan for which a separate
fund of assets is or is required to be maintained, full payment
has been made of all amounts that the Seller is required, under
the terms of each such Plan or applicable law, to have paid as
contributions to that Plan as of the Closing Date.
i)
The execution of this Agreement and the
consummation of the transactions contemplated hereby will not,
by itself or in combination in any other event (regardless of
whether that other event has or will occur), result in any
payment (whether of severance pay or otherwise) becoming due
from any Plan to any current or former director, officer,
consultant or employee of the Seller or result in the vesting,
acceleration of payment or increases in the amount of any
benefit payable to or in respect of any such current or former
director, officer, consultant or employee.
4.20.
Labor Relations . The Seller is not
a party to any collective bargaining or similar agreement.
There is no strike, labor dispute, slowdown, stoppage or
other material interference with or impairment by labor of the
Business actually pending or, to the Seller’s knowledge,
threatened, against Seller.
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4.21.
Intellectual Property .
a)
Except as set forth on Schedule
4.21(a) of the Disclosure Schedules (which noncompliance
shall be remedied prior to Closing pursuant to Section 8.10),
the Seller owns, or has valid rights to use, all of the
Intellectual Property used in the conduct of the Business as
currently conducted, used or held for use by it in connection
with the Business as currently conducted, or currently being
developed by the Seller for the Business, including without
limitation the Seller’s design, development, reproduction,
manufacture, branding, marketing, use, distribution, import,
licensing, provision and sale of the Products.
b)
Schedule 1.1(b) sets forth a
complete and accurate list of the (i) Registered
Intellectual Property; (ii) the following categories of Owned
Intellectual Property: all Owned Software, domain names,
trademarks, service marks and patents; (iii) the Licensed
Intellectual Property; and (iv) the Licensor Intellectual
Property not otherwise described above.
c)
Subject to any applicable Licensed Intellectual
Property (including, but not limited to Open Source Software
licenses) set forth on Schedule 4.21(c) of the
Disclosure Schedules, the Seller is the exclusive owner of the
entire and unencumbered right, title and interest in and to the
Owned Intellectual Property, and has a valid right to use the
Owned Intellectual Property and the Licensed Intellectual
Property used in or necessary for the Business as presently
conducted, and the consummation of the transactions contemplated
hereby will not alter or impair any such right, except as set
forth on Schedule 4.21(c) of the Disclosure
Schedules. No claims are pending and, to the knowledge of
the Seller no claims are threatened, by any Person (i) regarding
the use of any such Owned Intellectual Property or Licensed
Intellectual Property, (ii) alleging that any services provided
by, processes used by or the Products of the Seller infringe or
misappropriate any intellectual property right of any third
party or (iii) challenging or questioning the validity or
effectiveness of any license or agreement, and, to the knowledge
of the Seller, there is no basis for such claim. The use
by the Seller of the Owned Intellectual Property and the
Licensed Intellectual Property in the ordinary course of
business does not infringe on the rights of any Person. As
of the Closing Date, the Seller will be in full compliance with
all provisions of all licenses included in the Licensed
Intellectual Property.
d)
Except as set forth on Schedule
4.21(d) of the Disclosure Schedules, (i) the Seller has
the legal right to license, assign and transfer all the Licensor
Intellectual Property that the Seller has licensed to third
parties or authorized third parties to use; (ii) all licenses or
other agreements pursuant to which the Seller has licensed or
authorized others to use any Licensor Intellectual Property are
in full force and effect and, to the knowledge of Seller, there
is no default by any party thereto; and (iii) the license or
transfer of any Licensor Intellectual Property does not infringe
on the rights of any Person.
e)
All of the Registered Intellectual Property has
been duly registered in, filed in or issued by the United States
Patent and Trademark Office, the United States Register of
Copyrights, or the corresponding offices of other jurisdictions
as identified on Schedule 4.21(e) of the
Disclosure Schedules, and has been properly maintained and
renewed in accordance with all applicable provisions of law and
administrative regulations of the United States and each such
other jurisdiction.
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f)
Except as set forth on Schedule
4.21(f) of the Disclosure Schedules, the Seller has
taken all steps reasonably required to establish and preserve
its ownership of all Owned Intellectual Property rights with
respect to the Business. The Seller has not made any such
information that it reasonably deems to be confidential or
proprietary information available to any Person, other than
employees or consultants of the Seller, except pursuant to
written agreements requiring the recipients to maintain the
confidentiality of such information and appropriately
restricting the use thereof.
g)
Except with respect to Open Source Software set
forth on Schedule 4.21(g) of the Disclosure
Schedules, none of the Seller’s current or former
employees (including any such employees who have designed,
written, tested or worked on any software code contained in any
Products or otherwise materially contributed to the development
of any Products), or the consultants and independent contractors
currently or previously engaged by the Seller who have written,
tested or worked on any software code contained in any Products
or otherwise materially contributed to the development of any
Products, have any claim or ownership interest in the Products
as they relate to the Acquired Assets or any of the
Seller’s Intellectual Property. Other than under a
confidentiality or nondisclosure agreement or contractual
provision relating to confidentiality and nondisclosure, there
has been no disclosure to any third party of material
confidential information or trade secrets of the Seller related
to any Products as they relate to the Acquired Assets.
Neither the Seller, or to the Seller’s knowledge,
any employee or agent of the Seller has developed or assisted in
the development by any third party of any product or computer
program based on the Products as they relate to the Acquired
Assets (except with respect to Seller’s customization of
the Products for its customers and clients).
h)
Except as set forth on Schedule
4.21(h) of the Disclosure Schedules, the Seller has not
granted nor is it obligated to grant access or a license to any
of its source code to any Owned Intellectual Property
(including, without limitation, in any such case any conditional
right to access or under which Seller has established any escrow
arrangement for the storage and conditional release of any of
its source code).
i)
Except as set forth on Schedule
4.21(i) of the Disclosure Schedules, the Seller does not
have any obligation to pay any third party any future royalties
or other fees for the continued use of Intellectual Property and
will not have any obligation to pay such royalties or other fees
arising from the consummation of the transactions contemplated
by this Agreement.
j)
The Owned Software and the Products conform to
the specifications identified on Schedule 4.21(j)
of the Disclosure Schedules applicable to such Owned Software
and Products. Except as described on Schedule
4.21(j) of the Disclosure Schedules, the Owned Software
and the Products are free of defects in programming and
operation and do not contain any passwords, keys, security
devices, trap doors or, to the knowledge of the Seller, any
instructions commonly referred to as Trojan horses, worms,
self-destruct mechanisms, or time/logic bombs that (1) interfere
with the functionality described in the applicable
specifications or (2) interfere with the use of the Owned
Software or the Products or have an adverse impact on the
operation of other software programs or operating systems with
which such Owned Software or Products have interfaced in the
past.
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k)
Except as set forth in Schedule
4.21(k) of the Disclosure Schedules, no Open Source
Software is, forms part of, has been used in connection with the
development of, is incorporated into or has been distributed
with, in whole or in part, any Owned Software or Product.
With respect to any such items of Open Source Software,
Schedule 4.21(k) of the Disclosure Schedules
identifies the underlying Open Source Software, the agreement
governing the use of such Open Source Software, the particular
Owned Software and/or Products in which such Open Source
Software is present, the general nature of any modifications to
such Open Source Software in the Owned Software and/or Products,
and whether such modifications were made by the Seller or by its
agent. Except as set forth in Schedule
4.21(k) of the Disclosure Schedules, with respect to any
such items of Open Source Software, no such use, development,
incorporation or distribution of such Open Source Software as
part of the Products, or any other use of or activities with
respect to such Open Source Software by the Seller (i) requires
the licensing, disclosure or distribution of any source code for
Seller Software or Products (other than source code that is a
part of such Open Source Software) or Intellectual Property
Rights of the Seller to licensees or any other Person, (ii)
prohibits or limits the receipt of consideration in connection
with licensing, sublicensing or distributing any other Seller
Software or Seller Products, (iii) except as specifically
permitted by applicable law, allows any Person to decompile,
disassemble or otherwise reverse-engineer any other Seller
Software, or (iv) requires the licensing of any other Seller
Software or Seller Products to any other Person for the purpose
of making derivative works, all as such would affect the
Acquired Assets.
4.22.
Suppliers and Customers .
Schedule 4.22 of the Disclosure Schedules sets
forth the ten (10) largest suppliers of the Business based on
purchases by the Business, and the ten (10) largest customers of
the Business based on sales by the Business, for the year ended
on December 31, 2006 and the nine (9) month period ending on
September 30, 2007. The relationships of the Seller with
such suppliers and customers are good commercial working
relationships and, except as set forth on Schedule
4.22 of the Disclosure Schedules, no supplier or
customer of material importance to the Business has cancelled or
otherwise terminated, or notified the Seller of its intent to
cancel or otherwise to terminate, its relationship with the
Seller or has during the last twelve (12) months decreased
materially, or threatened in writing to decrease or limit
materially, its services, supplies or materials for use in the
Business or its usage or purchase of the services or products of
the Seller, except for normal cyclical changes related to such
suppliers’ or customers’ businesses. To the
knowledge of Seller, as of the date hereof, no such supplier or
customer intends to cancel or otherwise substantially modify its
relationship with the Seller or to decrease materially or limit
its services, supplies or materials to the Seller, or its usage
or purchase of the Seller’s services or products, and to
the knowledge of the Seller, the consummation of the
transactions contemplated hereby will not adversely affect the
Seller’s relationship with any such supplier or customer,
or the ability of the Buyer to conduct business with any such
supplier or customer after Closing in substantially the same
manner and on substantially the same terms as the Seller
currently enjoys.
4.23.
Collectibility of Accounts Receivable.
All of the Accounts Receivable (less the reserve for bad
debts set forth on the Interim Balance Sheet as updated at
Closing, to the extent reasonably deemed necessary by Seller, in
a manner consistent with GAAP and past practices) are or will be
at the Closing Date valid and enforceable claims, fully
collectible and subject to no setoff or counterclaim. The
Seller has no accounts or loans receivable from any Person which
is affiliated with the Seller or from any director, officer or
employee of the Seller.
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4.24.
No Undisclosed Liabilities . Except
to the extent (a) reflected or reserved against in the Interim
Balance Sheet, (b) incurred in the ordinary course of the
Business after the date of the Interim Balance Sheet, or (c)
described on any Schedule hereto, the Seller does not have any
liabilities or obligations of any nature, whether accrued,
absolute or contingent, matured or unmatured or otherwise in
connection with the Business (including without limitation as
guarantors or otherwise with respect to obligations of others),
other than performance obligations with respect to the
Seller’s contracts in connection with the Business that
would not be required to be reflected or reserved against on a
balance sheet prepared in accordance with generally accepted
accounting principles.
4.25.
Taxes . The Seller has filed all
Tax Returns that it was required to file with respect to the
Business and the Acquired Assets. All such Tax Returns
were, when filed, and continue to be, true correct and complete,
and the Seller has paid all Taxes shown thereon as owing.
No action, suit, proceeding, or audit is pending against
or with respect to Seller regarding Taxes of the Business or
with respect to the Acquired Assets that could result in a lien
on the Acquired Assets or any liability for such Taxes by Buyer.
Seller has not waived any statute of limitations or agreed
to any extension of time with respect to Taxes of the Business
or with respect to the Acquired Assets. Seller is not a
“foreign person” within the meaning of Section
1445(f)(2) of the Code. Seller has no liability for the
Taxes of any other Person pursuant to Treasury Regulation
Section 1.1502-6, as a transferee or successor, by contract, or
otherwise, which Taxes could result in a lien on the Acquired
Assets or any liability of Buyer for such Taxes. There are
no liens for Taxes on any of the Acquired Assets, other than
liens for Taxes not yet due and payable.
4.26.
Broker . The Seller has not
retained, utilized or been represented by any broker, agent,
finder or intermediary in connection with the negotiation or
consummation of the transactions contemplated by this Agreement,
and the Seller has not incurred or become liable for any
broker’s commission or finder’s fee relating to or
in connection with the transactions contemplated by this
Agreement.
4.27.
Conflicts of Interest . Except as
set forth on Schedule 4.27 of the Disclosure
Schedules, no present or former officer, director or stockholder
(or affiliate thereof) of the Seller (a) is currently a party to
any transaction or agreement with Seller, (b) owns, directly or
indirectly, any interest in (excepting not more than a one
percent (1%) stock holding for investment purposes in securities
of publicly held and traded companies) or is an officer,
director, manager, employee or consultant of any Person which is
a competitor, lessor, lessee, customer or supplier of the
Business; (c) owns, directly or indirectly, in whole or in part,
any tangible or intangible property which the Seller is using in
the Business or the use of which is necessary for the Business;
or (d) has any cause of action or other claim whatsoever
against, or owes any amount to, the Seller with respect to the
Business, except for claims in the ordinary course of business,
such as for accrued vacation pay, accrued benefits under
Employee Benefit Plans and similar matters and agreements.
4.28.
Indebtedness . Except as set forth
on Schedule 4.28 of the Disclosure Schedules, the
Seller has no Indebtedness outstanding at the date hereof with
respect to the Acquired Assets. As of the Closing Date,
the Seller will have no Indebtedness outstanding with respect to
the Acquired Assets, subject to payment of the Debt Amount.
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4.29.
Absence of Certain Business Practices .
Neither the Seller nor any officer, employee or agent of
the Seller, nor any other Person acting on its behalf, has,
directly or indirectly, within the past five (5) years given or
agreed to give any gift or payment to or for the benefit of any
official or employee of any governmental authority of any
country or subdivision thereof, or any person acting in an
official capacity on behalf of such governmental authority, or
any political party or official thereof, or any candidate for
political office, (i) for the purposes of illegally influencing
any act or decision of such person or party in his or its
official capacity, or inducing such person or party to use his
or its influence to affect or influence any act or decision of
such governmental authority, in order to assist the Seller in
obtaining or retaining business for or with, or directing
business to, any person or entity, (ii) which subjected the
Seller to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, or (iii) for the purpose
of establishing or maintaining any co
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