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ASSET
PURCHASE AGREEMENT
dated
as of May 2, 2008
by
and among
RADIANT SYSTEMS, INC.,
JADEON, INC.,
VISTA.COM, INC.
and
INNUITY, INC.
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this
“Agreement”) is entered into as of May 2, 2008,
but effective as of the Effective Time (as defined below), by and
among RADIANT SYSTEMS, INC, a Georgia corporation
(“Purchaser”), JADEON, INC., a Nevada corporation
(“Seller”), VISTA.COM, INC., a Washington corporation
(“Shareholder”), and INNUITY, INC., a Utah corporation
(“Parent”).
RECITALS:
WHEREAS, Seller is engaged in the
business (the “Business”) of marketing and selling
systems (consisting of hardware and/or software) used for checkout,
inventory management, labor management, enterprise reporting, and
configuration of point of sale data by end-users in the hospitality
and retail industries, and providing ongoing installation,
training, consulting, maintenance and support services for such
systems; and
WHEREAS, Seller desires to sell,
transfer and assign to Purchaser, and Purchaser desires to purchase
and acquire from Seller, substantially all of the assets of Seller
relating to the operation of the Business, and in connection
therewith, Purchaser has agreed to assume certain of the
liabilities of Seller relating to the Business, all on the terms
set forth herein.
NOW, THEREFORE, in consideration of
the mutual covenants and agreements set forth in this Agreement,
and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
SALE OF ASSETS AND CLOSING
1.01
Assets .
(a)
Assets Transferred . On the terms and subject to the
conditions set forth in this Agreement, Seller will sell, transfer,
convey, assign and deliver to Purchaser, and Purchaser will
purchase and pay for, at the Closing, free and clear of all Liens
other than Permitted Liens, all of Seller’s right, title and
interest in, to and under all of the assets of Seller used in
connection with the Business, as the same shall exist on the
Closing Date (collectively, the “Assets”) including,
without limitation, the following assets used in connection with
the Business, but specifically excluding the Excluded Assets (as
such term is defined in Section 1.01(b) ):
(i) All equipment, machinery,
furniture, fixtures and other tangible personal property used in
connection with the Business (“Tangible Personal
Property”);
(ii) All operating cash, commercial
paper, certificates of deposit and other bank deposits and other
cash equivalents;
(iii) All trade and other accounts
receivable and all rights to receive payments arising out of the
conduct of the Business, including any rights of Seller with
respect to
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any third party
collection procedures or any other Actions or Proceedings which
have been commenced in connection therewith (the “Accounts
Receivable”);
(iv) All Inventory of Seller;
(v) All Contracts to which Seller is
a party and which are utilized in the conduct of the Business, and
all of the Assumed IT Contracts regardless of whether in the name
of Seller or Parent (collectively, the “Assumed
Agreements”);
(vi) All Intellectual Property used
in the conduct of the Business on a worldwide basis, including but
not limited to all rights in and to the name “Jadeon”,
all rights to the domain names www.jadeon.com and
www.jadeonPOS.com , and all rights in and to the website
currently operated by Seller at www.jadeon.com
(collectively, the “Intellectual Property
Assets”);
(vii) All transferable Licenses
(including applications therefor) utilized in the conduct of the
Business;
(viii) All Books and Records used or
held for use in the conduct of the Business or otherwise relating
to the Assets;
(ix) All rights of Seller under any
claims, warranties, guaranties, refunds, causes of action, rights
of recovery, rights of set-off and rights of recoupment of every
kind and nature relating to the Business, other than those relating
to the Excluded Assets or the Retained Liabilities;
(x) All unfilled customer orders
relating to the Business and all deposits and other payments
relating thereto;
(xi) All prepaid assets or advance
payments relating to the Business (including without limitation the
Prepaid Microsoft Licenses (as defined in Section 4.08
below));
(xii) All goodwill of the Business;
and
(xiii) All other assets and
properties of Seller used or held for use in connection with the
Business, excluding the Excluded Assets.
(b)
Excluded Assets . Notwithstanding anything in this Agreement
to the contrary, the following assets and properties of Seller (the
“Excluded Assets”) shall be excluded from and shall not
constitute Assets:
(i) All of Seller’s right,
title and interest in and to the Excluded Employment
Agreements;
(ii) All of Seller’s right,
title and interest in and to: (A) that certain Marketing
Agreement (also referenced as Agent Agreement and Independent
Contractor
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Agreement)
dated August 3, 2005 between Seller and Vista dba Merchant
Partners; (B) that certain SD VAR Agreement dated March 7,
2007 between Seller and Epson America, Inc.; (C) that certain
Reseller Agreement dated June 14, 2006 between Parent and
ProphetLine, Inc; and (D) the license agreement for Sugar
Enterprise On-Site, licensed from Sugar CRM, Inc.
(iii) All license agreements for
software programs licensed from Microsoft Corporation (other than
in connection with the Assumed IT Contracts and the Prepaid
Microsoft Licenses).
(iv) All intercompany notes or other
obligations payable to Seller by Parent, Shareholder or its other
Affiliates;
(v) The minute books, stock transfer
books and corporate seal of Seller;
(vi) All Benefit Plans of Seller
including all assets thereof;
(vii) All casualty, liability or
other policies of insurance maintained by or on behalf of the
Seller and the rights thereunder and all rights under self
insurance programs; and
(viii) Seller’s rights under
this Agreement.
1.02
Liabilities .
(a)
Assumed Liabilities . In connection with the sale, transfer,
conveyance, assignment and delivery of the Assets pursuant to this
Agreement, on the terms and subject to the conditions set forth in
this Agreement, at the Closing, Purchaser will assume and agree to
pay, perform and discharge when due the following obligations of
Seller arising in connection with the operation of the Business, as
the same shall exist on the Closing Date (collectively, the
“Assumed Liabilities”), and no others:
(i) All obligations of Seller under
the Assumed Agreements, so long as such obligations have been
incurred in the ordinary course of business consistent with past
practices (but specifically excluding liabilities for breaches
thereof occurring on or prior to the Closing Date, whether
occurring as a result of the transactions contemplated by this
Agreement or otherwise).
(ii) All liabilities of Seller to
customers of the Business for warranty, maintenance and support
obligations, but only to the extent that such liabilities have been
incurred in the ordinary course of business and are reflected as
liabilities on the Closing Date Statement.
(b)
Retained Liabilities . The parties hereto expressly
acknowledge and agree that, except for the Assumed Liabilities,
Purchaser shall not assume or incur, and Seller shall remain liable
to pay, perform and discharge, all liabilities and obligations of
Seller (collectively, the “Retained Liabilities”),
including, without limitation, liabilities and obligations of
Seller:
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(A) for Taxes owed by Seller to any Governmental Authority,
(B) arising out of or in any way connected with pending or
threatened litigation, resulting from or in any way connected with
the operation of the Business prior to the Closing, whether or not
disclosed to Purchaser (including the matters disclosed in
Section 2.10 of the Disclosure Schedule ), (C) for
violation by Seller of any statute, ordinance, regulation, order,
judgment or decree, (D) all intercompany notes or other
obligations owed by Seller to Parent, Shareholder or any other
Affiliate of Seller, (E) arising from or relating to any claims by
or on behalf of present or former employees of Seller in respect of
severance pay or benefits or termination pay or benefits and
similar obligations relating to such employees’ employment
with the Business through the Closing Date or the termination of
such employees’ employment with Seller, (F) under any
Benefit Plan of Seller; (G) arising from or relating to any
Excluded Asset; (H) arising from or relating to any debt or
liabilities incurred by Seller prior to the Closing Date not
included in the Assumed Liabilities; (I) arising from or
relating to any Excluded Employment Agreement (including without
limitation the Retention Bonus Obligations); (J) arising from
or relating to any of the obligations of Parent, Seller or
Shareholder to Imperium Master Fund, Ltd. (“Imperium”)
or Wells Fargo Bank, N.A. (“Wells Fargo”) and
(K) trade payables.
1.03
Purchase Price . The total purchase price to be paid by
Purchaser to Seller for the Assets (the “Purchase
Price”) shall be the sum of Seven Million Dollars
($7,000,000), subject to adjustment pursuant to
Section 1.04 below. Upon the terms and conditions set
forth in this Agreement, Purchaser shall pay the Purchase Price to
Seller as follows:
(a) At
the Closing, Purchaser shall pay to Seller the Purchase Price
minus the Escrow Amount (as defined below) (the
“Closing Date Payment”). The Closing Date Payment shall
be delivered by Purchaser to Seller in immediately available funds
by wire transfer on the Closing Date to one or more accounts
designated by Seller in a written notice delivered to Purchaser
prior to the Closing Date. Notwithstanding the foregoing, prior to
the Closing, Seller may direct Purchaser to pay a portion of the
Purchase Price to any holder of Indebtedness of Seller on
Seller’s behalf in order to cancel any Liens on the Assets
(other than Permitted Liens).
(b) At
the Closing, Purchaser shall deliver Three Hundred and Seventy-Five
Thousand Dollars ($375,000) (the “Escrow Amount”) by
wire transfer of immediately available funds, to the Escrow Agent,
for the purpose of securing the Seller’s and Parent’s
indemnification obligations pursuant to Article VIII
and to be held and released in accordance with the terms of this
Agreement and the Escrow Agreement.
1.04
Purchase Price Adjustment .
(a) On
or before the Closing Date, Seller and Purchaser shall conduct an
audit of Seller’s Inventory to the extent that it can be
observed without unreasonably disrupting the operation of the
Business. Within thirty (30) days following the Closing Date,
Seller shall prepare a written schedule of all items of Inventory
as of the Closing Date that Purchaser was unable to observe as part
of the foregoing audit (the “Inventory Schedule”). The
Inventory Schedule shall indicate the condition of each item of
Inventory included thereon.
(b) Within
forty five (45) calendar days following the Closing Date,
Seller shall cause to be prepared and shall deliver to Purchaser,
along with the Inventory Schedule, a
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statement of Assets and Assumed Liabilities (the “Closing
Date Statement”) based on the balance sheet of Seller as of
the Effective Time. The Closing Date Statement shall include only
the Assets and the Assumed Liabilities.
(c) Except
as set forth in the following sentence, the Closing Date Statement
shall be prepared in accordance with United States generally
accepted accounting principles (“GAAP”) and, to the
extent not inconsistent therewith, the past practices of Seller
applied on a consistent basis. For purposes of the Closing
Statement: (i) used Inventory that has been fully refurbished
shall be valued based upon the amount that it would sell for
between a willing buyer and a willing seller made at wholesale,
neither being under any compulsion to buy or to sell and both
having reasonable knowledge of relevant facts; (ii) used
Inventory that has been partially refurbished but requires
additional refurbishing by Purchaser shall be valued at fifty
percent (50%) of the amount that it would sell for between a
willing buyer and a willing seller made at wholesale, neither being
under any compulsion to buy or to sell and both having reasonable
knowledge of relevant facts; (iii) used Inventory that has not
been restored to merchantable condition, and is not capable of
being so restored without undue effort, shall be valued at zero;
and (iv) Accounts Receivable aged over ninety (90) days
and not collected on the date that the Closing Date Statement is
actually finalized pursuant to subsection (f) below shall be
valued at zero.
(d) For
purposes of this Agreement, the “Net Assets” means an
amount equal to the difference between the following: (i) the
amount of the current Assets as set forth on the Closing Date
Statement; minus (ii) the Adjusted Assumed Liabilities Amount.
For purposes of this Agreement, the “Adjusted Assumed
Liabilities Amount” means an amount equal to the Assumed
Liabilities, reduced b y fifty percent (50%) of the amount
of liabilities related to deferred revenue, and increased by
the amount of the upfront license fee in the amount of $7,633
required to be paid by Purchaser to obtain a 12-month license
agreement for 17 seats of Sugar Enterprise On-Site from Sugar CRM,
Inc. after Closing.
(e) Based
on the foregoing calculation of Net Assets above, if the amount of
Net Assets is: (i) a positive amount (i.e., greater than
zero), then Purchaser shall pay Seller in cash the amount of the
Net Assets, and (ii) a negative amount (i.e., less than zero),
Seller shall pay Purchaser in cash the amount by which Net Assets
are less than zero.
(f) Purchaser
shall have the right to review fully all work papers relating to
the Closing Date Statement in order to confirm that the Closing
Date Statement has been determined as provided herein. Purchaser
shall complete its review within forty five (45) days after
such determination has been made available for review. If Purchaser
believes that any adjustment should be made to the Closing Date
Statement in order for Net Assets to be determined in accordance
with the requirements of this Section, Purchaser shall give Seller
written notice of such adjustments. If Seller agrees with the
proposed adjustments, the adjustments shall be made to the Closing
Date Statement. If there are proposed adjustments which are
disputed by Seller, then the parties shall negotiate in good faith
to resolve all disputed adjustments. If, after a period of forty
five (45) days following the date on which Purchaser gives written
notice of any proposed adjustments, any such adjustments still
remain disputed, the parties will jointly engage a mutually
acceptable independent accounting firm (the
“Independent
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Accountant”) to resolve any remaining disputed adjustments in
accordance with this Agreement, and the decision of the Independent
Accountant shall be final and binding on the parties hereto and
nonappealable. Any payment required hereunder shall be tendered
within three (3) Business Days after the earlier of the
agreement of the parties on the amount thereof or a written notice
of any resolution of such amount has been given by the Independent
Accountant to the parties hereunder. Purchaser has the right, but
not the obligation, to use the Escrow Amount to satisfy the
obligation of Seller with respect to the Purchase Price adjustment,
if any. All fees and expenses of the Independent Accountant
incurred in connection with such resolution shall be split equally
between the parties.
1.05
Third Party Consents . To the extent that any of the Assets
are not assignable without the consent, waiver or approval of
another Person, this Agreement shall not constitute an assignment
or an attempted assignment of such Asset if such assignment or
attempted assignment would constitute a breach thereof. Seller and
Purchaser shall, for the account of Purchaser, use their respective
commercially reasonable efforts to obtain such consents, waivers
and approvals as soon as practicable following the Closing Date and
Purchaser shall cooperate with and assist Seller to this end;
provided, that Seller shall take no action to seek such consent,
waiver or approval without prior consultation with or approval by
Purchaser. If any such consent, waiver or approval shall not be
obtained despite Seller’s commercially reasonable efforts to
procure such consent, waiver or approval, then Seller shall
cooperate with Purchaser in any reasonable arrangement designed to
provide Purchaser with the benefits intended to be assigned to
Purchaser with respect to the underlying Asset, including, without
limitation, enforcement of any and all rights of Seller against the
other party thereto arising out of the breach or cancellation
thereof by such other party or otherwise. If and only if such
reasonable arrangement can be made, and except as otherwise
provided herein, Purchaser agrees to accept the burdens and perform
the obligations underlying such Asset. Furthermore, if the other
party’s consent is subsequently obtained, Purchaser shall at
such time agree to assume all liabilities and obligations
thereunder, except for Retained Liabilities. If and to the extent
that such arrangement cannot be made, Purchaser shall have no
obligation with respect to any such Asset.
1.06
Allocation of Purchase Price . After the Closing, the
parties agree to negotiate in good faith and determine the
allocation of the Purchase Price for the Assets. Each party hereto
agrees (i) that any such allocation shall be consistent with
the requirements of Section 1060 of the Code and the
regulations thereunder, (ii) to complete jointly and to file
separately Form 8594 with its Federal income tax return
consistent with such allocation for the tax year in which the
Closing Date occurs, and (iii) that no party will take a
position on any Tax return, before any Governmental Authority
charged with the collection of any such Tax or in any judicial
proceeding, that is in any manner inconsistent with the terms of
any such allocation without the consent of the other party.
1.07
Closing; Effective Time .
(a) The
closing of the purchase and sale provided for herein (the
“Closing”) shall take place via facsimile and email
simultaneously with the execution hereof. The date upon which the
Closing occurs shall be referred to herein as the “Closing
Date.”
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(b) Notwithstanding
anything contained herein to the contrary, the Closing shall be
effective at 12:01 a.m. (Atlanta, Georgia time) on May 1,
2008 (the “Effective Time”), with the operation of the
Business from and after the Effective Time being for the account
and benefit of, and at the risk and expense of, Purchaser.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER, SHAREHOLDER AND
PARENT
Seller, Shareholder and Parent hereby
jointly and severally represent and warrant to Purchaser as
follows, subject to the exceptions specifically disclosed in
writing in the Disclosure Schedule, the sections of which
correspond to the Sections of this Agreement (or disclosed in any
other section, subsection or clause of the Disclosure Schedule;
provided , that it is reasonably apparent that such
disclosure would be responsive to such other Section, subsection or
clause of this Article II ):
2.01
Organization of Seller . Each of Seller, Shareholder and
Parent is a corporation duly organized, validly existing and in
good standing under the Laws of the jurisdiction of its
organization. Seller has full corporate power and authority to
conduct the Business as and to the extent now conducted and to own,
use and lease its assets and properties used in the Business.
Seller is duly qualified, licensed or admitted to do business and
is in good standing in all jurisdictions where the Business is
conducted, except where the failure to be so qualified or licensed
would not have a material adverse effect on the Business.
2.02
Authority; Execution . Each of Seller, Shareholder and
Parent has full corporate power and authority to execute and
deliver this Agreement and the Operative Agreements to which they
are a party, to perform their obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby.
The execution and delivery by each of Seller, Shareholder and
Parent of this Agreement and the Operative Agreements to which they
are a party, and the performance by each of Seller, Shareholder and
Parent of their obligations hereunder and thereunder, have been
duly and validly authorized by all requisite corporate action. This
Agreement has been duly and validly executed and delivered by each
of Seller, Shareholder and Parent and constitutes, and upon the
execution and delivery by each of Seller, Shareholder and Parent of
the Operative Agreements to which they are a party, such Operative
Agreements, assuming the due authorization, execution and delivery
of this Agreement and the Operative Agreements by Purchaser, will
constitute legal, valid and binding obligations of Seller,
Shareholder and Parent enforceable against them in accordance with
their respective terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to creditors rights and to general
principles of equity.
2.03
Capitalization; Ownership of Subsidiaries . Parent owns all
of the issued and outstanding capital stock of Shareholder.
Shareholder owns all of the issued and outstanding shares of
capital stock of Seller. The Assets do not include any shares of
capital stock or any other ownership interest in, or securities of,
any corporation, partnership, joint venture or other legal
entity.
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2.04
No Conflicts . The execution and delivery by each of Seller,
Shareholder and Parent of this Agreement do not, and the execution
and delivery by each of Seller, Shareholder and Parent of the
Operative Agreements to which they are parties, the performance by
each of Seller, Shareholder and Parent of their respective
obligations under this Agreement and such Operative Agreements and
the consummation of the transactions contemplated hereby and
thereby will not:
(a) conflict
with or result in a violation or breach of any of the terms,
conditions or provisions of the articles or certificate of
incorporation or bylaws of Seller, Shareholder or Parent;
(b) conflict
with or result in a material violation or breach of any term or
provision of any Law or Order applicable to Seller, Shareholder,
Parent or any of the Assets; or
(c) except
as disclosed in Section 2.04 of the Disclosure Schedule
, (i) conflict with or result in a material violation or
breach of, (ii) constitute (with or without notice or lapse of
time or both) a default under, (iii) require Seller,
Shareholder or Parent to obtain any consent, approval or action of,
make any filing with or give any notice to any Person as a result
or under the terms of, or (iv) result in the creation or
imposition of any Lien upon Seller, Shareholder, Parent or any of
the Assets under, any Contract or License to which Seller,
Shareholder or Parent is a party or by which any of the Assets is
bound.
2.05
Governmental Approvals and Filings . Except as disclosed in
Section 2.05 of the Disclosure Schedule , no consent,
approval or action of, filing with or notice to any Governmental
Authority on the part of Seller, Shareholder or Parent is required
in connection with the execution, delivery and performance of this
Agreement or any of the Operative Agreements to which they are
parties or the consummation of the transactions contemplated hereby
or thereby.
2.06
Financial Information . Section 2.06 of the
Disclosure Schedule sets forth copies of Seller’s
unaudited balance sheets and statements of income as of and for the
fiscal years ended December 31, 2007 and December 31,
2006 and as of and for the three-month period ended March 31, 2008
(collectively, the “Financial Statements”). The
Financial Statements are true and complete in all material respects
and were prepared in accordance with GAAP and, to the extent not
inconsistent therewith, the past practices of Seller, consistently
applied throughout the periods indicated (subject to normal
year-end adjustments and the omission of footnotes and other
presentation items). The Financial Statements were prepared from
the Books and Records of Seller and fairly and accurately set forth
the results of operations and financial positions of the Business,
as of the dates and for the periods indicated. The Books and
Records provided a fair and accurate basis for the preparation of
the Financial Statements delivered to Purchaser in accordance with
this Section.
2.07
Absence of Changes . Except for the execution and delivery
of this Agreement and the transactions to take place pursuant
hereto on or prior to the Closing Date, since the Most Recent
Balance Sheet Date, there has not been any material adverse change,
or
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any
event or development which, individually or together with other
such events, could reasonably be expected to result in a material
adverse change, in the assets, liabilities, financial condition, or
results of operation of the Business. Without limiting the
foregoing, except as disclosed in Section 2.07 of the
Disclosure Schedule , there has not occurred, between the Most
Recent Balance Sheet Date and the date hereof, any of the
following:
(a) any
of the following outside the ordinary course of business,
consistent with past practice for the Business: (i) any
increase in the salary, wages or other compensation of any Employee
whose annual salary is, or after giving effect to such change would
be, $100,000 or more; (ii) any establishment or modification
of (A) targets, goals, pools or similar provisions in respect
of any fiscal year under any employment-related Contract or other
compensation arrangement with or for Employees, or (B) salary
ranges, increase guidelines or similar provisions in respect of any
employment-related Contract or other compensation arrangement with
or for Employees; or (iii) any adoption, entering into or
becoming bound by any Benefit Plan, employment-related Contract or
collective bargaining agreement, or amendment, modification or
termination (partial or complete) of any Benefit Plan,
employment-related Contract or collective bargaining agreement,
except to the extent required by applicable Law;
(b) except
for Indebtedness that will be satisfied on or before the Closing
and set forth on Section 2.04 of the Disclosure
Schedule , the incurrence by Seller of Indebtedness with
respect to the conduct of the Business;
(c) any
physical damage, destruction or other casualty loss (whether or not
covered by insurance) affecting any of the plant, real or personal
property or equipment of any Seller used or held for use in the
conduct of the Business in an aggregate amount exceeding
$25,000;
(d) any
material change in (i) any pricing, investment, accounting,
financial reporting, inventory, credit, allowance or Tax practice
or policy of the Business or (ii) any method of calculating
any bad debt, contingency or other reserve of the Business for
accounting, financial reporting or Tax purposes;
(e) any
write-off or write-down of or any determination to write-off or
write-down of any of the Assets;
(f)
(i) any acquisition or disposition of any Assets, other than
Inventory in the ordinary course of business consistent with the
past practice of the Business; or (ii) any creation or
incurrence of a Lien, other than a Permitted Lien, on any
Assets;
(g) any
entering into, amendment, modification, termination (partial or
complete) or granting of a waiver under or giving any consent with
respect to (i) any Contract which is required (or had it been
in effect on the date hereof would have been required) to be
disclosed in the Disclosure Schedule pursuant to
Section 2.17 or (ii) any License;
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(h) capital
expenditures or commitments for additions to property, plant or
equipment used or held for use in the conduct of the Business
constituting capital assets in an aggregate amount exceeding
$25,000;
(i) any
transaction with any officer, director or Affiliate of
Seller;
(j) any
disposal of any rights to the use of any Intellectual Property, or
disclosure to any Person of any trade secret, formula, process or
know-how not theretofore a matter of public knowledge without
obtaining an appropriate confidentiality agreement from such
person;
(k) any
sale, assignment, transfer or license of any Intellectual Property,
except for nonexclusive licenses granted to customers in the
ordinary course of business;
(l) any
entering into of a Contract to do or engage in any of the foregoing
after the date hereof; or
(m) any
other transaction involving or development affecting the Business
or the Assets outside the ordinary course of business consistent
with past practice.
2.08
No Undisclosed Liabilities . Except as reflected or reserved
against in the Most Recent Balance Sheet or as disclosed in
Section 2.08 of the Disclosure Schedule , there are no
Liabilities against, relating to or affecting the Business or any
of the Assets, other than Liabilities incurred subsequent to the
Most Recent Balance Sheet Date in the ordinary course of business
consistent with past practice which in the aggregate are not
material to the assets, liabilities, financial condition, or
results of operation of the Business.
2.09
Taxes .
(a) Seller
has timely paid all Taxes, and all interest and penalties due
thereon and payable by it for the Pre-Closing Tax Period which will
have been required to be paid on or prior to the Closing Date, the
non-payment of which would result in a Lien on any Asset, would
otherwise adversely affect the Business or would result in
Purchaser becoming liable or responsible therefor.
(b) Seller
has established, in accordance with generally accepted accounting
principles applied on a basis consistent with that of preceding
periods, adequate reserves for the payment of, and will timely pay
all Tax liabilities, assessments, interest and penalties which
arise from or with respect to the Assets or the operation of the
Business and are incurred in or attributable to the Pre-Closing Tax
Period, the non-payment of which would result in a Lien on any
Asset, would otherwise adversely affect the Business or would
result in Purchaser becoming liable therefor.
(c) Except
as set forth on Section 2.09 of the Disclosure Schedule
, Seller and its Affiliates have filed on a timely basis (or have
received a valid extension to file) with the
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appropriate Tax Authorities all Tax Returns applicable to the
Business or the Assets, and all such returns are true, correct, and
complete in all respects.
2.10
Legal Proceedings . Except as disclosed in
Section 2.10 of the Disclosure Schedule :
(a) there are no Actions or Proceedings pending or, to the
Knowledge of Seller, Shareholder or Parent, threatened against,
relating to or affecting Seller with respect to the Business or any
of the Assets; and (b) there are no Orders outstanding against
Seller with respect to the Business or the Assets.
2.11
Compliance With Laws and Orders . Except as disclosed in
Section 2.11 of the Disclosure Schedule , Seller is
not, nor has it at any time been, nor has it received any notice
that it is or has at any time been, in material violation of or in
default under any Law or Order applicable to the Business or the
Assets.
2.12
Employee Benefits; ERISA. Seller does not have any liability
under, nor is it subject to any Lien, restriction or other adverse
right relating to, any “employee benefit plan” (as
defined in Section 3(3) of ERISA), including any multiemployer
plans (as defined in Section 3(37) of ERISA) or any other bonus,
deferred compensation, severance pay, pension, profit-sharing,
retirement, insurance stock purchase, stock option or other fringe
benefit plan, arrangement or practice maintained, or contributed
to, by Seller for the benefit of any current or former employees,
officers or directors (collectively, the “Benefit
Plans”) (i) that would affect in any manner whatsoever
Purchaser’s right, title and interest in, or right to use or
enjoy (free and clear of any Lien, other than Permitted Liens), the
Assets, or (ii) that would result in the assumption by or
imposition on Purchaser of any liability other than liabilities
expressly included as Assumed Liabilities.
2.13
Property .
(a) Seller
does not own any real property which is used in connection with the
Business. Section 2.13(a) of the Disclosure Schedule
lists all leases of real property used in connection with the
Business. Except as set forth on Section 2.13(a) of the
Disclosure Schedule , with respect to all such leased real
property, (i) all of such leases are in full force and effect
and are valid, binding and enforceable in accordance with their
terms, (ii) no consents are required by the landlords under
the applicable leases to the transactions contemplated by this
Agreement and (iii) no default exists under such leases nor
has any event occurred which, with the giving of notice or the
passage of time, or both, would constitute a default under such
leases.
(b) Seller
is in possession of and has good title to, or has valid leasehold
interests in or valid rights under Contract to use, all the
Tangible Personal Property. All the Tangible Personal Property is
owned by Seller free and clear of all Liens, other than Permitted
Liens, and is in good working order and condition, ordinary wear
and tear excepted, and its use complies with all applicable
Laws.
2.14
Intellectual Property
(a)
Section 2.14(a) of the Disclosure Schedule sets forth a
list of all patents, patent applications, copyright registrations
(and applications therefor), and trademark, trade
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name and
domain name registrations (and applications therefor) owned by
Seller and used in the Business. Each of the federal and state
registrations relating to the foregoing Assets is valid and in full
force and effect. Section 2.14(a) of the Disclosure
Schedule also sets forth a list of any unregistered trademarks,
trade names, service marks, brand names, logos or other identifiers
used in the Business.
(b)
Section 2.14(b) of the Disclosure Schedule sets forth a
list of all material Intellectual Property used in the Business and
for which the Seller does not own all right, title and interest
(collectively, the “Third Party Technology”), and all
license agreements or other contracts pursuant to which the Seller
has the right to use the Third Party Technology (the “Third
Party Licenses”). To the Knowledge of Seller, Shareholder or
Parent, Seller has the lawful right to use (free of any material
restriction not expressly set forth in the Third Party Licenses)
all Third Party Technology that is used in the Business, and no
royalties or other compensation is payable for the right to use
such Third Party Technology other than as expressly set forth in
the Third Party Licenses. Seller has not received notice that any
party to any such license intends to cancel, terminate or refuse to
renew (if renewable) such license or to exercise or decline to
exercise any option or right thereunder, and Seller has used the
Third Party Technology in accordance with all of the terms of the
Third Party Licenses. Seller is not in material breach of any Third
Party Licenses.
(c) All
the Intellectual Property Assets are owned by Seller free and clear
of all Liens, other than Permitted Liens. Except as set forth on
Section 2.14(c) of the Disclosure Schedule and other
than nonexclusive licenses granted in the ordinary course of
business, Seller has not granted to any third party any rights or
permissions to use any of the Intellectual Property Assets. Seller
has not received any notice or claim (whether written, oral or
otherwise) challenging Seller’s ownership or rights in the
Intellectual Property Assets or claiming that any other Person has
any legal or beneficial ownership with respect thereto or
challenging the validity or enforceability of the Intellectual
Property Assets. There are no pending or, to the Knowledge of
Seller, Shareholder or Parent, threatened Actions of Proceedings
against Seller or its licensors contesting the validity of, or
Seller’s right to use, any of the Intellectual Property
Assets.
(d) Except
as set forth in Section 2.14(d) of the Disclosure
Schedule , Seller has obtained an enforceable written
assignment of all right, title and interest in and to each item of
the Intellectual Property Assets owned by Seller from each Person
participating in the discovery, development or creation of such
item. Seller has no obligation to compensate, or to obtain the
consent of, any third party for the use of any item of the
Intellectual Property Assets. All employees, independent
contractors, or other Persons who have had access to or
participated in the development in any of the Intellectual Property
Assets owned by Seller have signed appropriate confidentiality and
non-disclosure agreements and, in the case of independent
contractors, appropriate work for hire agreements and assignments,
sufficient to protect Seller’s ownership rights in the
Intellectual Property Assets and the unauthorized use or disclosure
of same.
(e) Neither
Seller’s operation of the Business prior to Closing nor the
Intellectual Property Assets infringe, violate or interfere with or
constitute a misappropriation of any right, title or interest
(including, without limitation, any patent, copyright, trademark or
trade
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secret
right) held by any other Person. Seller has not received any notice
or claim (whether written, oral or otherwise) regarding any
infringement, misappropriation, misuse, abuse or other interference
with any third party intellectual property or proprietary rights
(including, without limitation, infringement of any patent,
copyright, trademark or trade secret right of any third party) by
either Seller’s operation of the Business or the Intellectual
Property Assets.
(f) To
the Knowledge of Seller or Parent, no other Person is infringing or
misappropriating the Intellectual Property Assets.
(g) Parent
has prepaid the Microsoft Corporation Great Plains Version 8.0
software license (but not the fee for the annual maintenance
thereof) on behalf of Purchaser for the balance of the current
12-month term.
2.15
Privacy and Security Commitments . With respect to all
privacy and security commitments for Personally Identifiable
Information or protected payment card information associated with
Seller’s customers (including applicable Laws, agreements,
terms and conditions and privacy certification license agreements
applicable to such information) (collectively, the
“Commitments”): (i) Seller is in compliance with
the Commitments; (ii) Seller has not received inquiries from
the Federal Trade Commission or any other Governmental Authority
regarding the Commitments; (iii) there are no pending or, to
the Knowledge of Seller, Shareholder or Parent, threatened Actions
or Proceedings regarding the Commitments or compliance with the
Commitments; (iv) the Commitments have not been rejected by
any applicable certification organization which has reviewed the
Commitments or to which any of the Commitments have been submitted;
(v) no applicable certification organization has found the
Seller to be out of compliance with the Commitments; (vi) neither
the transactions contemplated hereunder nor the resulting transfers
of Personally Identifiable Information will constitute violations
of the Commitments; (vii) the transactions contemplated
hereunder may be effected in accordance with the Commitments in the
manner as agreed by the parties; (viii) electronic mail
distribution lists have been scrubbed prior to the date hereof to
remove email addresses associated with individuals who have opted
out of receiving commercial electronic mail messages; and
(ix) there have been no security breaches with respect to any
of its products or related data resulting in unauthorized access to
or acquisition of such information.
2.16
Accounts Receivable . All of the Accounts Receivable
(a) represent arm’s length sales actually made in the
ordinary course of business, (b) are collectible in accordance
with their respective terms within six months following the Closing
Date, and (c) are not subject to counterclaim or set-off and
are not in dispute (except, in the case of (b) and (c), for
the amount of any applicable existing reserves for
uncollectibility, counterclaims and set-offs in amounts that are
not individually or in the aggregate material).
2.17
Contracts .
(a)
Section 2.17(a) of the Disclosure Schedule (with
paragraph references corresponding to those set forth below)
contains a true and complete list of each of the following
Contracts or other arrangements related to the Business (true and
complete copies or, if none, reasonably complete and accurate
written descriptions of which, together with all amendments and
supplements thereto and all waivers of any terms thereof, have been
delivered to Purchaser
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prior to
the execution of this Agreement) to which Seller is a party and by
which any of the Assets is bound:
(i) (A) all Contracts (excluding
Benefit Plans) providing for a commitment of employment or
consultation services for a specified or unspecified term to, or
otherwise relating to employment or the termination of employment
of, any Employee, the name, position and rate of compensation of
each Employee party to such a Contract and the expiration date of
each such Contract; and (B) any written or unwritten
representations, commitments, promises, communications or courses
of conduct (excluding Benefit Plans and any such Contracts referred
to in clause (A)) involving an obligation of Seller to make
payments in any year, other than with respect to salary in the
ordinary course of business, to any Employee;
(ii) all Contracts with any Person
containing any provision or covenant prohibiting or limiting the
ability of Seller to engage in any business activity or compete
with any Person in connection with the Business or prohibiting or
limiting the ability of any Person to compete with Seller in
connection with the Business;
(iii) all partnership, joint venture
or other similar Contracts with any Person in connection with the
Business;
(iv) all Contracts with clients or
customers of the Business that involve the payment or potential
payment, pursuant to the terms of any such Contract, to Seller of
$50,000 or more annually;
(v) all Licenses used or held for use
in the Business;
(vi) all Contracts with licensors,
licensees, sales agencies or franchises with whom Seller deals in
connection with the Business;
(vii) all Contracts to which Seller
is a party or by which Seller is bound that relate to the
Intellectual Property Assets;
(viii) all Contracts between or among
Seller, on the one hand, and any officer, director or Affiliate of
Seller, on the other hand;
(ix) all collective bargaining or
similar labor Contracts;
(x) all Contracts relating to
Indebtedness of Seller;
(xi) all Contracts relating to
(A) the future disposition or acquisition of any assets and
(B) any merger or other business combination relating to the
Business;
(xii) all other Contracts with
respect to the Business that (A) involve the payment or
potential payment, pursuant to the terms of any such Contract, by
or to Seller of more than $25,000 annually, and (B) cannot be
terminated within thirty (30) days after giving notice of
termination without resulting in any material cost or penalty to
Seller.
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(b) Each
Contract required to be disclosed in Section 2.17(a) of the
Disclosure Schedule is in full force and effect and constitutes
a legal, valid and binding agreement, enforceable in accordance
with its terms, of each party thereto; and neither Seller nor, to
the Knowledge of Seller, Shareholder or Parent, any other party to
such Contract is, or has received notice that it is, in violation
or breach of or default under any such Contract (or with notice or
lapse of time or both, would be in violation or breach of or
default under any such Contract) in any respect.
(c) Except
for the obligation to reimburse a customer of Seller for the
prepayment of services under an oral Contract with such customer,
Seller is not bound by any oral Contracts with respect to the
Business that cannot be terminated within thirty (30) days
after giving notice of termination without resulting in any cost or
penalty to Seller.
(d) The
Contracts listed as Items 6 and 7 in Section 2.17(a)(iv) of
the Disclosure Schedule : (i) contain only commercially
reasonable terms that are generally consistent with other written
customer agreements of Seller; (ii) do not contain any
economic provisions that are reasonably likely to result in
Purchaser generating a loss in connection with the performance
thereof following the Closing Date; and (iii) do not contain
any exclusivity provisions or any covenants prohibiting or limiting
the ability of Seller or its Affiliates to engage in any business
activity or compete with any Person in connection with the
Business.
2.18
Affiliate Transactions . Except as disclosed in
Section 2.18 of the Disclosure Schedule , no officer,
director or Affiliate of Seller (a) has any ownership
interest, directly or indirectly, in any competitor, supplier or
customer of Seller, (b) has any outstanding loan to or from
Seller, or (c) is a party to or has any interest in any
Contract with Seller.
2.19
Employees; Labor Relations .
(a)
Section 2.19(a) of the Disclosure Schedule contains a
list of the name of each Employee at the date hereof, together with
such Employee’s position or function, annual base salary or
wages and any incentive or bonus arrangement with respect to such
Employee in effect on such date. Except as set forth on
Section 2.19(a) of the Disclosure Schedule each
Employee has executed a nondisclosure agreement in the form
provided to Purchaser. To the Knowledge of Seller, Shareholder or
Parent, no Employee is in violation of any agreement relating to
the relationship of such Employee with Seller.
(b) Except
as disclosed in Section 2.19(b) of the Disclosure
Schedule , (i) no Employee is presently a member of a
collective bargaining unit and, to the Knowledge of Seller,
Shareholder or Parent, there are no threatened or contemplated
attempts to organize for collective bargaining purposes any of the
Employees, and (ii) no unfair labor practice complaint or sex,
age, race or other discrimination claim has been brought against
Seller with respect to the conduct of the Business before the
National Labor Relations Board, the Equal Employment Opportunity
Commission or any other Governmental or Regulatory Authority.
Seller is in material compliance with all applicable Laws relating
to the employment of labor, including, without limitation those
relating t
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