Exhibit 10.1
ASSET PURCHASE AGREEMENT
By And Among
INX
INC.,
ACCESS FLOW, INC.
STEVE KAPLAN
AND
GARY LAMB
JUNE 6, 2008
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement
(“ Agreement ”) is made this 6 th day of June,
2008 (the “ Agreement Date ”), by and among INX
Inc., a Delaware corporation (“ Buyer ”), Access
Flow, Inc., a California corporation (“ Seller
”), and Steve Kaplan and Gary Lamb, each individuals
(together, the “ Shareholders ” and each,
individually, a “ Shareholder ”).
WHEREAS, Seller is engaged in the
business of designing, installing and supporting datacenter,
computer server and data storage systems and related technology in
selected cities in the United States (the “ Seller’s
Business ”);
WHEREAS, Seller desires to sell to
Buyer and Buyer desires to purchase from Seller, certain assets,
properties and rights of Seller utilized by it in connection with
the operation of Seller’s Business upon the terms and
conditions of this Agreement;
WHEREAS, Shareholders, collectively,
are the owners of 100% of the outstanding capital stock of
Seller;
WHEREAS, as an inducement to Buyer to
enter into this Agreement, Shareholders have approved this
Agreement and desire to become a party to this Agreement pursuant
to the terms hereof; and
WHEREAS, Seller has provided the
Seller disclosure letter dated the same date as this Agreement,
together with related schedules, attachments and exhibits thereto
the “ Seller Disclosure Letter ”), which is
attached hereto as Exhibit A and incorporated by
reference.
NOW,
THEREFORE, in consideration of the foregoing recitals, the mutual
covenants contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I.
PURCHASE AND SALE OF ASSETS
1.1 Purchase and Sale
of Assets . Pursuant to the terms and subject to the
conditions set forth in this Agreement, at the Closing (defined
Section 1.8 below), Seller shall sell, assign, transfer,
convey and deliver to Buyer, free and clear of all mortgages,
pledges, liens, claims, charges, encumbrances and other security
interests (collectively, “ Security Interests ”)
other than Permitted Liens (as defined in 3.1(d) below), and Buyer
shall purchase only the assets, properties, and rights of Seller
described below (all of such specifically described assets,
properties and rights being hereinafter collectively referred to as
the “ Purchased Assets ”):
(a)
Personal Property . All of the equipment, computer hardware,
furniture, fixtures, appliances, furnishings, all computer and
telecommunications equipment, appliances and systems which are
owned by Seller, leasehold improvements and other personal property
listed on Schedule 1.1(a) to the Seller Disclosure Letter;
(b)
Intellectual Property . (i) All inventions (whether
patentable or unpatentable and whether or not reduced to practice),
all improvements thereto, and all patents, patent applications, and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations
thereof, including the right to enforce any rights embodied therein
and to collect damages for any past, infringement of such rights by
third parties, (ii) ideas and conceptions to the extent that
such are legally recognized as a proprietary intangible right under
common law or by a
national
(including the United States) or multinational statutory invention
registrations, patents, patent registrations and patent
applications (including all reissues, divisions, continuations,
continuations-in-part, extensions and reexaminations) and all
rights therein provided by international treaties or conventions
and all improvements to the inventions disclosed in each such
registration, patent or application, (iii) all trademarks,
service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations,
and combinations thereof and including all goodwill associated
therewith, all applications, registrations, and renewals in
connection therewith, and the right to register, perfect and
enforce any rights embodied therein and to collect damages for any
past, infringement of such rights by third parties, (iv) all
copyrightable works (other than the Authored Publications), all
copyrights (other than those relating to the Authored
Publications), and all applications, registrations, and renewals in
connection therewith, (v) all mask works and all applications,
registrations, and renewals in connection therewith, (vi) all
trade secrets and confidential business information (including
ideas, research and development, know-how, formulas, techniques,
technical data, designs, drawings, specifications, customer,
supplier and vendor lists, pricing and cost information, and
business and marketing plans and proposals), (vi) all computer
software (including data and related documentation) developed or
owned by Seller, including source code, operating systems and
specifications, data, databases files, documentation and other
materials and documentation related thereto, (vii) all other
proprietary rights, (viii) all licenses, and (ix) all copies
and tangible embodiments thereof (in whatever form or medium)
(collectively, (i) through (ix) above, the “
Intellectual Property ”);
(c)
Domain Names . All of Seller’s right, title and
interest in and to each domain name and the registration thereof,
all associated universal resource locators, whether registered in
the name of Seller or by any other person on behalf of Seller,
together with all goodwill connected with and symbolized by such
domain names or locators, and any intellectual property rights
relating thereto, including, but not limited to, e-mail addresses,
websites, translations, adaptations, derivations, copyrights, and
combinations thereof, all applications, registrations, and renewals
in connection therewith, and the right to register, perfect and
enforce any rights embodied therein, including the right to collect
damages for any past, infringement of such rights by third parties
to the extent any such intellectual property rights exist (the
“ Domain Names ”), each of which is listed on
Schedule 1.1(c) to the Seller Disclosure Letter;
(d)
Documents . A copy of all of Seller’s books, records,
papers and documents which relate to the Purchased Assets,
including all purchase and sales records and customer and supplier
records;
(e)
Inventory . All inventories of product including raw
material, work-in-process, finished products, packing materials,
stores and supplies, spare parts, samples, point of sale material
and merchandise of Seller held for resale by Seller, but only to
the extent listed on Schedule 1.1(e) to the Seller Disclosure
Letter (the “ Inventory ”);
(f)
Contract Rights.
(i) All rights under the uncompleted
portion of the Acquired Partially Completed Contracts (as defined
in Section 2.21);
(ii) All rights whatsoever to all
contracts, agreements, joint ventures, commitments, leases,
licenses, purchase orders and other agreements, whether oral or
written arising out of the operation of Seller’s Business
other than the Retained Partially Completed Contracts and the
Acquired Partially Completed Contracts, including but not limited
to those listed on Schedule 1.1(f)(iii) to the Seller
Disclosure Letter (the “ Acquired Contracts
”)
(g)
Name . The right to use the name “Access Flow,
Inc.” and all variants thereof;
(h)
Manufactures’ and Vendors’ Warranties. All
rights under manufacturers’ and vendors’ warranties
related to items included in the Purchased Assets, including but
not limited to such of the foregoing as are listed on
Schedule 1.1(h) to the Seller Disclosure Letter.
(i)
[THIS SECTION INTENTIONALLY LEFT BLANK].
(j)
Supplier Rebates. All rights to vendor rebates and credits
relating to periods before or after the Closing; provided, however,
that such rights shall not include any rights to rebates or credits
relating to (A) defective products or inventory for which
Seller has, prior to the Closing (i) submitted a written
claim, (ii) returned such defective product or inventory and
(iii) recorded a receivable on Seller’s financial
records or (B) vendor marketing or quota rebates earned by or
accrued to Seller prior to the Closing.
(k)
Deposits. All cash and collateral deposits made under the
terms of leases and other contracts included in clauses
(a) through (j) above.
1.2 Assets Excluded
from Sale . Other than the Purchased Assets, Buyer
is not purchasing and Seller is not selling any other asset or
right of Seller and the parties hereby expressly exclude
(i) all whitepapers, articles, books and other publications
authored by the Shareholder or owned or published by Seller and all
spreadsheets and methodologies developed by Steve Kaplan which
relate to “return on investment” analysis
(collectively, the “ Authored Publications ”)
and (ii) the assets set forth on Schedule 1.2 to the
Seller Disclosure Letter.
1.3 Transfer of
Purchased Assets . Seller shall deliver or cause to
be delivered to Buyer such other good and sufficient instruments
reasonably requested by Buyer transferring to Buyer title to all of
the Purchased Assets or Seller’s interest therein, all in
accordance with this Agreement. Such instruments of transfer
(a) shall be in the form which is usual and customary for
transferring the type of property involved under the laws of the
jurisdictions applicable to such transfers, (b) shall be in
form and substance reasonably satisfactory to Buyer and its
counsel, (c) shall effectively vest in Buyer good and
marketable title, or Seller’s interest therein as provided in
this Agreement, to all of the Purchased Assets, free and clear of
all Security Interests other than Permitted Liens, and
(d) where applicable, shall be accompanied by evidence of the
discharge of all Security Interests against the Purchased
Assets.
1.4 Retained
Liabilities . Buyer shall not assume and shall not
be liable for any Liabilities (as defined below) of Seller other
than the Assumed Liabilities (as defined in Section 1.5 below)
(collectively, the “ Retained Liabilities ”),
and all such Retained Liabilities shall be and remain the
responsibility of Seller, including, without limitation, any
Liabilities arising out of or the result of any activity associated
with the Purchased Assets prior to the Closing, Liabilities under
any contract to which Seller is a party, Liabilities with respect
to all Taxes (as defined in Section 2.12 below), Liabilities
relating to, or arising under or in connection with, any Employee
Benefit Plan (as defined in Section 3.1(p) below), or any
Liabilities related to any Environmental Law (as defined in
Section 3.1(t) below). Seller shall discharge in a timely
manner or shall make adequate provision for all Retained
Liabilities, Shareholders and Seller shall jointly and severally
indemnify Buyer and hold it harmless against all Retained
Liabilities. As used in this Agreement, the term “
Liability ” and “ Liabilities ”
shall mean and include any direct or indirect indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, fixed or unfixed, known or
unknown, asserted or unasserted, liquidated or unliquidated,
secured or unsecured.
1.5 Assumed
Liabilities. As of the Closing, Buyer will assume and
thereafter in due course pay and fully satisfy, as and when the
same shall become due and payable, the following liabilities and
obligations (the “ Assumed Liabilities ”):
(a) the
liabilities and obligations of Seller arising in the regular and
ordinary course of the conduct of Seller’s Business
consistent with past practice prior to the Closing Date, under (i)
the Acquired Contracts and (ii) the obligations remaining
after the Closing under the Acquired Partially Completed Contracts,
but excluding any liabilities resulting from (A) the Retained
Partially Completed Contracts or (B) any warranty claim or
breach of any contract prior to the Closing Date;
(b) all
payment liabilities arising under the promissory notes made payable
by the Seller which are directly associated with Tangible Personal
Property included in the Purchased Assets, with such liabilities
not to exceed $19,000, as set forth on Schedule 1.5(b) to the
Seller Disclosure Letter;
(c) all
payment liabilities arising under the vendor accounts listed on
Schedule 1.5(c) to the Seller Disclosure Letter;
(d) all
obligations arising after the Closing Date under the office space
lease contracts for the office space located at 1100 N. Market
Blvd., Suite 204, Sacramento, CA 95834 and 5115 Arnold Avenue,
Building 20, McClellan Park, Sacramento, CA 95652, which property
lease contracts are set forth on Schedule 3.1(j)(ii) to the
Seller Disclosure Letter; provided, however, that all rent payment
obligations paid by Seller prior to Closing for any period after
the Closing shall be prorated between Seller and Buyer based on the
time period the lease space was occupied by Seller prior to
Closing;
(e) all
obligations arising after the Closing Date under the equipment
lease contracts listed on Schedule 1.5(e) to the Seller
Disclosure Letter, with an aggregate remaining balance of
approximately $350,000.
1.6 Purchase
Price . The purchase price for the Purchased Assets
and the covenants of Shareholders and Seller included herein, is an
aggregate purchase price of Five Million Seventy-Six Thousand Nine
Hundred Twenty Dollars ($5,076,920), consisting of (i) Two
Million Four Hundred Fifty Thousand Dollars ($2,450,000) in cash
(the “ Cash Consideration ”) plus
(ii) certificates representing 262,692 shares (the “
Stock Consideration ”) of the Buyer’s common
stock, $0.001 par value, (“ Buyer Common Stock
”) which number of shares was determined by dividing
$2,626,920 by the average closing price per share for the Buyer
Common Stock, as reported by the NASDAQ for the five
(5) consecutive trading days ending prior to the second day
before the Closing Date, which is $12.96 per share (the “
Closing Stock Price ”); provided, however, under no
circumstance shall the Closing Stock Price be higher than $10.00
per share for purposes of calculating the number of shares of Stock
Consideration. The Stock Consideration shall be issued and
delivered to Seller at the Closing; provided, however, that Buyer
shall retain and hold in escrow in accordance with
Section 2.19 below, 24,000 shares of Stock Consideration (the
“ Holdback Shares ”) which has a value of
$240,000 based on the calculations set forth above.
1.7 Additional Purchase
Consideration . As additional consideration for the
Purchase, the Buyer will pay additional purchase consideration to
the Seller following the Closing Date based on and contingent upon
certain post-Closing financial performance beginning on the first
day of the first full calendar month after the Closing (the “
Additional Purchase Consideration ”) as set forth in
this section 1.7.
(a)
Seller Sacramento Business Performance . Buyer will pay
Seller a variable contingent payment based on and contingent upon
the financial performance of the Buyer’s business unit
that is
comprised, after the Closing Date, solely of the Seller’s
business activities at its location in Sacramento, California
acquired in connection with the Purchase Transaction, but excluding
the Hosting Business (defined below) (the “ Sacramento
Business” ). As used in this Agreement, this component of
the Additional Purchase Consideration shall be referred to as the
“ Sacramento Business Earnout ”. For purposes of
this Agreement, the term “ Sacramento Business Operating
Income Contribution ” means the Operating Income (as
defined by GAAP as applied by Buyer in operating its business)
contribution attributable to the Sacramento Business which includes
all business (except business conducted with any US federal
government entity) that is conducted in a United States state or
United States territory where Buyer has no offices as of the
Agreement Date and all business conducted in San Diego County,
Fresno County and all California counties north of Fresno county
before any allocation of the Buyer’s corporate-level
operations and administrative expenses, all as determined by the
Buyer using its normal accounting methodologies and processes, and
in accordance with Generally Accepted Accounting Principles
(“ GAAP ”). The parties hereby agree that costs
including salary costs related to personnel from the Sacramento
Business that are assisting Buyer on opportunities other than
Sacramento Business sales opportunities will be assigned to
practice development. The Sacramento Business Earnout will be
calculated and paid in two components, the first based on the first
12-month period following the Closing Date (the “ First
Year Measurement Period ”) and the second based on the
second 12-month period following the Closing Date (the “
Second Year Measurement Period ”), as set forth
below.
(i) First Year. The first year
component will be based on achievement of Sacramento Business
Operating Income Contribution during the First Year Measurement
Period and will be equal to $270,000 times the Attainment
Percentage (defined below). As used in this Section 1.7(a)(i),
the term “ Performance Ratio ” shall mean the
percentage resulting from dividing actual Operating Income
Contribution From Sacramento Business during the First Year
Measurement Period by $1,400,000. After establishing the
Performance Ratio, the percentage used to calculate this component
of the Additional Purchase Consideration shall be calculated (as
used in this Section 1.7(a)(i), the “ Attainment
Percentage ”) as follows: The Attainment Percentage shall
be equal to the Performance Ratio if the Performance Ratio is 100%,
however, if the Performance Ratio is less than 100%, the Attainment
Percentage shall be reduced by 2% for each 1% that the Performance
Ratio is less than 100%, and if the Performance Ratio is more than
100%, the Attainment Percentage shall be increased by 1% for each
2% that the Performance Ratio exceeds 100%; provided, however, if
the above calculation results in an Attainment Percentage that is
less than 50%, then the Attainment Percentage shall be zero, and if
such calculation results in an Attainment Percentage that is
greater than 150%, the Attainment Percentage shall be 150%.
(ii) Second Year. The second
year component will be based on achievement of Sacramento Business
Operating Income Contribution during the Second Year Measurement
Period and will be equal to $270,000 times the Attainment
Percentage (defined below). As used in this
Section 1.7(a)(ii), the term “ Performance Ratio
” shall mean the percentage resulting from dividing actual
Operating Income Contribution from Sacramento Business during the
Second Year Measurement Period by $2,300,000. After establishing
the Performance Ratio, the percentage used to calculate this
component of the Additional Purchase Consideration shall be
calculated (as used in this Section 1.7(a)(ii), the “
Attainment Percentage ”) as follows: The Attainment
Percentage shall be equal to the Performance Ratio if the
Performance Ratio is 100%, however, if the Performance Ratio is
less than 100%, the Attainment Percentage shall be reduced by 2%
for each 1% that the Performance Ratio is less than 100%, and if
the Performance Ratio is more than 100%, the Attainment Percentage
shall be increased by 1% for each 2% that the Performance Ratio
exceeds 100%; provided, however, if the above calculation
results
in an
Attainment Percentage that is less than 50%, then the Attainment
Percentage shall be zero, and if such calculation results in an
Attainment Percentage that is greater than 150%, the Attainment
Percentage shall be 150%.
(b)
Seller Hosting Business Performance. Buyer will pay Seller a
variable contingent payment based on and contingent upon the
financial performance of the Buyer’s business unit that is
comprised, after the Closing Date, solely of the Seller’s
“hosting business” acquired in connection with the
Purchase, which “hosting business” shall exclude the
Sacramento Business (the “ Hosting Business ”),
but shall include the virtual data center hosting business operated
and performed by the “hosting business” acquired in
connection with the Purchase that is sold by all of Buyer’s
branch offices. As used in this Agreement, this component of the
Additional Purchase Consideration shall be referred to as the
“ Hosting Business Earnout ” For purposes of
this Agreement, the term “ Hosting Business Operating
Income Contribution ” means the Operating Income
contribution attributable to the Hosting Business before any
allocation of the Buyer’s corporate-level operations and
administrative expenses, all as determined by the Buyer using its
normal accounting methodologies and processes, and in accordance
with GAAP as applied by Buyer. This component of the Additional
Purchase Consideration will be calculated and paid in two
components, the first based on performance during the First Year
Measurement Period and the second based on performance during the
Second Year Measurement Period, as set forth below.
(i) First Year. The first year
component will be based on achievement of Hosting Business
Operating Income Contribution during the First Year Measurement
Period and will be equal to $270,000 times the Attainment
Percentage (defined below). As used in this Section 1.7(b)(i),
the term “ Performance Ratio ” shall mean the
percentage resulting from dividing actual Operating Income
Contribution From Hosting Business during the First Year
Measurement Period by $160,000. After establishing the Performance
Ratio, the percentage used to calculate this component of the
Additional Purchase Consideration shall be calculated (as used in
this Section 1.7(b)(i), the “ Attainment
Percentage ”) as follows: The Attainment Percentage shall
be equal to the Performance Ratio if the Performance Ratio is 100%,
however, if the Performance Ratio is less than 100%, the Attainment
Percentage shall be reduced by 2% for each 1% that the Performance
Ratio is less than 100%, and if the Performance Ratio is more than
100%, the Attainment Percentage shall be increased by 1% for each
2% that the Performance Ratio exceeds 100%provided, however, if the
above calculation results in an Attainment Percentage that is less
than 50%, then the Attainment Percentage shall be zero, and if such
calculation results in an Attainment Percentage that is greater
than 150%, the Attainment Percentage shall be 150%.
(ii) Second Year. The second
year component will be based on achievement of Hosting Business
Operating Income Contribution during the Second Year Measurement
Period and will be equal to $270,000 times the Attainment
Percentage (defined below). As used in this
Section 1.7(b)(ii), the term “ Performance Ratio
” shall mean the percentage resulting from dividing actual
Operating Income Contribution From Hosting Business during the
Second Year Measurement Period by $370,000. After establishing the
Performance Ratio, the percentage used to calculate this component
of the Additional Purchase Consideration shall be calculated (as
used in this Section 1.7(b)(ii), the “ Attainment
Percentage ”) as follows: The Attainment Percentage shall
be equal to the Performance Ratio if the Performance Ratio is 100%,
however, if the Performance Ratio is less than 100%, the Attainment
Percentage shall be reduced by 2% for each 1% that the Performance
Ratio is less than 100%, and if the Performance Ratio is more than
100%, the Attainment Percentage shall be increased by 1% for each
2% that
the Performance
Ratio exceeds 100%; provided, however, if the above calculation
results in an Attainment Percentage that is less than 50%, then the
Attainment Percentage shall be zero, and if such calculation
results in an Attainment Percentage that is greater than 150%, the
Attainment Percentage shall be 150%.
(c)
Qualifying Billings Revenue Performance . Buyer will pay
Seller a variable contingent payment based on and contingent upon
the amount of billings to customers made by the Buyer’s
branch offices that exist immediately prior to the Closing Date,
and excluding the Sacramento Business and the Hosting Business, of
the products and services listed on Exhibit B hereto (the
“ Qualifying Billings ”). As used in this
Agreement, this component of the Additional Purchase Consideration
shall be referred to as the “Qualifying Billings
Earnout ”. The Qualifying Billings component of the
Additional Purchase Consideration will be calculated and paid in
two components, the first based on Qualifying Billings during the
First Year Measurement Period and the second based on Qualifying
Billings during the Second Year Measurement Period, as set forth
below.
(i) First Year. The first year
component will be based on achievement of Qualifying Billings
during the First Year Measurement Period and will be equal to
$360,000 times the Attainment Percentage (defined below). As used
in this Section 1.7(c)(i), the term “ Performance
Ratio ” shall mean the percentage resulting from dividing
actual Qualifying Billings during the First Year Measurement Period
by $9,500,000. After establishing the Performance Ratio, the
percentage used to calculate this component of the Additional
Purchase Consideration shall be calculated (as used in this
Section 1.7(c)(i), the “ Attainment Percentage
”) as follows: The Attainment Percentage shall be equal to
the Performance Ratio if the Performance Ratio is 100%, however, if
the Performance Ratio is less than 100%, the Attainment Percentage
shall be reduced by 2% for each 1% that the Performance Ratio is
less than 100%, and if the Performance Ratio is more than 100%, the
Attainment Percentage shall be increased by 1% for each 2% that the
Performance Ratio exceeds 100%;provided, however, if the above
calculation results in an Attainment Percentage that is less than
50%, then the Attainment Percentage shall be zero, and if such
calculation results in an Attainment Percentage that is greater
than 150%, the Attainment Percentage shall be 150%.
(ii) Second Year. The second
year component will be based on achievement of Qualifying Billings
during the Second Year Measurement Period and will be equal to
$360,000 times the Attainment Percentage (defined below). As used
in this Section 1.7(c)(ii), the term “ Performance
Ratio ” shall mean the percentage resulting from dividing
actual Qualifying Billings during the First Year Measurement Period
by $22,500,000. After establishing the Performance Ratio, the
percentage used to calculate this component of the Additional
Purchase Consideration shall be calculated (as used in this
Section 1.7(c)(ii), the “ Attainment Percentage
”) as follows: The Attainment Percentage shall be equal to
the Performance Ratio if the Performance Ratio is 100%, however, if
the Performance Ratio is less than 100%, the Attainment Percentage
shall be reduced by 2% for each 1% that the Performance Ratio is
less than 100%, and if the Performance Ratio is more than 100%, the
Attainment Percentage shall be increased by 1% for each 2% that the
Performance Ratio exceeds 100%; provided, however, if the above
calculation results in an Attainment Percentage that is less than
50%, then the Attainment Percentage shall be zero, and if such
calculation results in an Attainment Percentage that is greater
than 150%, the Attainment Percentage shall be 150%.
(d) Each
payment of Additional Purchase Consideration shall be calculated
and paid by Buyer to Seller within ninety (90) days of the end
of the measurement period for which such payment
relates.
In addition, 50% of all Additional Purchase Consideration shall be
paid in cash and the remainder shall be paid to the Seller, at the
Buyers option, by either cash or the issuance to Seller of such
number of shares of Buyer Common Stock determined by dividing fifty
percent (50%) of the Additional Purchase Consideration payable for
such payment by the price of Buyer’s Common Stock using the
average closing price per share for the Common Stock as reported by
the NASDAQ for the five (5) consecutive trading days ending
prior to the second day before the date of funding of such payment
of Additional Purchase Consideration.
1.8 Closing
. The consummation of the transactions contemplated by this
Agreement (the “ Closing ”) shall take place at
the offices of INX Inc. 6401 Southwest Freeway, 3 rd Floor, Houston,
Texas 77074 on the later of (a) the Agreement Date, or
(b) the first business day after all of the conditions set
forth in Articles VI and VII hereof have been satisfied or waived,
or such other place and time as the parties may mutually agree (the
“ Closing Date ”). All of the deliveries and
other transactions required to take place at the Closing and all
documents relating thereto shall be interdependent and none shall
be effective unless and until all are effective (except to the
extent that the party entitled to the benefit thereof has waived
satisfaction or performance thereof in writing as a condition
precedent hereto).
1.9 Deliveries at the
Closing . At the Closing, (a) Seller shall
deliver to Buyer the various certificates, instruments and
documents referred to in Article VI below, and (b) Buyer
will deliver to Seller the various certificates, instruments, and
documents referred to in Article VII below.
1.10 Consummation of
Closing . All acts, deliveries, and confirmations
comprising the Closing, regardless of chronological sequence, shall
be deemed to occur contemporaneously and simultaneously upon the
occurrence of the last act, delivery, or confirmation of the
Closing and none of such acts, deliveries, or confirmations shall
be effective unless and until the last of the same shall have
occurred.
ARTICLE II.
ADDITIONAL AGREEMENTS
2.1 Noncompetition,
Nonsolicitation and Confidentiality . For purposes
of this Agreement, the following definitions shall apply:
(a)
“ Affiliate ” with respect to any Person, shall
mean and include any Person controlling, controlled by or under
common control with such Person either as of or following the date
of this Agreement;
(b)
“ Company Activities ” shall mean either
(i) designing, installing or supporting computer data
networks, IP telephony systems and/or datacenter virtualization
projects, (ii) promoting, marketing or selling computer data
network equipment, IP telephony systems and/or datacenter related
equipment (including servers and data storage equipment),
(iii) designing, implementing, promoting, marketing or selling
software applications for IP telephony applications and/or
virtualization software, or (iv) engaging in any other
business activities which are conducted, offered or provided by
Seller, Buyer or any Affiliate of either of them at any time during
the 12-month period prior to the date of this Agreement, including,
without limitation, all activities associated with Seller’s
Business but expressly excluding (A) any of these activities
if performed in conjunction with employment duties for a
manufacturer rather than a consulting company, (B) any duties
if performed as part of an organization’s internal IT staff,
(C) authoring any articles, white papers, books or other
publications regardless of content and (D) consulting relating
specifically to ROI analysis as long as such consulting is not
specifically on behalf of a competitor of Buyer or its
affiliates.
(c)
“ Confidential Information ” shall mean any data
or information (whether written or not, tangible or intangible), of
Buyer, Seller or any Affiliate of either of them, other than Trade
Secrets (as defined below), which is valuable to Buyer, Seller or
any Affiliate of either of them and not generally known to
competitors or which by its nature is generally treated as
confidential or proprietary;
(d)
“ Noncompete Period ” shall mean from the
Closing Date through the date five years after the Closing
Date;
(e)
“ Nonsolicitation Period ” shall mean from the
Closing Date through the date five years after the Closing
Date;
(f)
“ Person ” shall mean any individual,
corporation, partnership, limited liability company, firm, joint
venture, association, joint-stock company, trust, unincorporated
organization or other entity;
(g)
“ Protected Area ” shall mean the states of
California, Nevada and Hawaii; and
(h)
“ Trade Secrets ” shall mean information related
to the Company Activities, including, but not limited to, technical
or nontechnical data, formulas, patterns, compilations, or
programs, including, without limitation, computer software and
related source codes, devices, methods, techniques, drawings,
processes, financial data, financial plans, product plans, lists of
actual or potential customers or suppliers, or other information
similar to any of the foregoing, which derives economic value,
actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by, other persons who
can derive economic value from its disclosure or use.
2.2
Confidentiality . Buyer, Seller and
Shareholders shall keep confidential the existence of this
Agreement, the transactions described herein and all Trade Secrets
and Confidential Information relating to the Company Activities;
provided, however, that Seller and Shareholders may, upon obtaining
the prior written consent of the Buyer, disclose the existence of
this Agreement and the terms hereof, but solely in the manner and
subject to any restrictions or limitations imposed on such
disclosure by Buyer in connection with granting such prior written
consent. The provisions of this Section 2.2 shall not apply
with respect to any information which (a) was already known by
one party when such information was received from the other party,
(b) was available to the general public at the time of such
receipt, (c) subsequently becomes known to the general public
through no fault or omission by a party hereto, (d) is
subsequently disclosed by a third party which has the bona fide
right to make such disclosure, (e) is disclosed by either in
confidence to its professional advisors or by Buyer to potential
lenders and investors who agree to keep such information
confidential, (f) is required to be disclosed by law or a
governmental agency, including for income tax reporting purposes
(and the filing of this Agreement by Buyer with the Securities and
Exchange Commission is expected), or (g) is required to be
disclosed in order to enforce this Agreement.
2.3 Trade
Secrets . Seller and Shareholders, as well as the
officers, directors and employees of Seller shall hold in
confidence at all times after the date hereof all Trade Secrets and
Confidential Information related to Seller, Buyer and any of either
of their Affiliates and shall not disclose, publish or make use of
those Trade Secrets or Confidential Information at any time after
the date hereof, without the prior written consent of Buyer, except
(a) any information or document required to be disclosed by
law or (b) information that becomes public knowledge through
means other than an act of Shareholders or Seller. Nothing in this
Agreement shall diminish the rights of Seller or Buyer regarding
the protection of Trade Secrets, Confidential Information and other
intellectual property pursuant to applicable law.
2.4 Trade Name and
Confidential Information.
(a) Seller
and Shareholders shall not, directly or by assisting others, own,
manage, operate, join, control or participate in the ownership,
management, operation or control of any business conducted under
the corporate or trade name of Seller (or any variation thereof) or
any of its Affiliates (other than as an employee of Buyer or one of
its Affiliates) without the prior written consent of Buyer;
and
(b) Seller
and Shareholders shall hold in confidence all Confidential
Information related to Seller, Buyer or any of either of their
Affiliates and shall not disclose, publish or make use of that
Confidential Information without the prior written consent of
Buyer, except (i) any information or document required to be
disclosed by law or (ii) information that becomes public
knowledge through means other than an act of Seller or
Shareholders.
2.5
Non-Competition .
(a)
Coverage . Seller and Shareholders hereby acknowledge that
Buyer, either directly or indirectly through one or more of its
Affiliates, conducts or will conduct Company Activities throughout
the Protected Area, and acknowledges that to protect adequately the
interest of Buyer in the operation of each Person through which it
will engage in Company Activities after the date of this Agreement,
it is essential that any noncompete covenant with respect thereto
cover all Company Activities in the Protected Area except as
specifically provided in Section 2.5(b) below.
(b)
Covenant . During the Noncompete Period, neither Seller nor
Shareholders shall in any manner, directly or indirectly, engage in
or have an equity or profit interest in, or render services to any
business that conducts any Company Activities in the Protected
Area. Notwithstanding anything herein to the contrary, nothing in
this Agreement shall prevent or prohibit Seller or Shareholders
from owning not more than 5% of a class of equity securities issued
by any entity listed on any national securities exchange or
interdealer quotation system.
2.6 Nonsolicitation of
and Noninterference with Employees, Customers and Vendors
. During the Nonsolicitation Period, neither Seller nor
Shareholders shall, in any manner, directly or indirectly:
(a) solicit
or attempt to solicit, any business from any customers or
prospective customers of Buyer or any of its Affiliates for
purposes of engaging in any Company Activities in any Protected
Area;
(b) recruit
or hire away or attempt to recruit or hire away, on its behalf or
on behalf of any other person, firm or corporation, any employee of
Buyer or any of its Affiliates; or
(c) interfere
with or otherwise attempt to affect Buyer’s relationship with
any employee, customer, or prospective customer, supplier or vendor
of Buyer or any of its Affiliates.
2.7
Acknowledgment . Seller, Shareholders and
Buyer each acknowledge and agree that the covenants set forth in
Sections 2.2, 2.3, 2.4, 2.5 and 2.6 are reasonable as to time,
scope and territory given Buyer’s need to protect its Trade
Secrets, Confidential Information and its substantial investment in
the Purchased Assets, its employees, customers and vendors,
particularly given the complexity and competitive nature of
Buyer’s and its Affiliate’s business. Seller and
Shareholders further acknowledge that (a) it would be
difficult to calculate damages to Buyer and its Affiliates from any
breach of Seller’s or Shareholders’ obligations under
either of Sections 2.2, 2.3, 2.4, 2.5 or 2.6, (b) that
injuries to Buyer and
its
Affiliates from any such breach would be irreparable and impossible
to measure, and (c) that the remedy at law for any breach or
threatened breach of Seller’s or Shareholders’
obligations under either of Sections 2.2, 2.3, 2.4, 2.5 or 2.6
of this Agreement would therefore be an inadequate remedy, and
accordingly, Buyer shall, in addition to all other available
remedies (including without limitation seeking such damages as it
can show it and its Affiliates have sustained by reason of such
breach or the exercise of all other rights it has under this
Agreement), be entitled to injunctive and other similar equitable
remedies. Each Shareholder acknowledges that he will be subject to
separate noncompete and nonsolicitation provisions in connection
with his employment by Buyer following the Closing. Accordingly, if
the duration or scope of the noncompete or nonsolicitation
applicable to Shareholders under the terms of Buyer’s
standard employment documents is for any reason shorter than the
duration of the Noncompete Period or Nonsolicitation Period or
narrower in scope than as set forth in this Agreement or if any
term or condition set forth in Section 7 of the Employment
Agreement (as defined in Section 3.1(u) below) conflicts with
any term or condition in contained in this Article II,
Shareholders hereby acknowledges that he shall be subject to the
Noncompete Period and Nonsolicitation Period set forth in this
Agreement and the terms and conditions of this Article II
shall be given precedence over any conflicting term or condition
set forth in Section 7 of the Employment Agreement,
notwithstanding any of the terms of his employment terms with
Buyer.
2.8 Further
Assurances . Each party hereto from time to time
hereafter at any other party’s request and without further
consideration shall execute and deliver to such other party such
instruments of transfer, conveyance and assignment in addition to
those delivered pursuant to this Agreement as shall be reasonably
requested to transfer, convey and assign more effectively the
Purchased Assets to Buyer, the costs of which shall be paid by the
requesting party.
2.9 Expenses
. Except as otherwise provided herein, Buyer, Seller and
Shareholders shall each be responsible for their own expenses
incurred in connection with the negotiations among the parties, and
the authorization, preparation, execution and performance of this
Agreement and the transactions contemplated hereby. In addition,
Seller shall be responsible for all costs associated with
terminating any Employee Benefit Plan of Seller (e.g., 401(k),
pension, profit sharing plans) prior to or at Closing.
2.10 Brokers
. Buyer shall indemnify Seller and hold it harmless from and
against all claims or demands for commissions or other compensation
by any broker, finder, or similar agent claiming to have been
employed by or on behalf of Buyer. Seller and Shareholders shall
jointly and severally indemnify Buyer and hold it harmless from and
against all claims or demands for commissions or other compensation
by any broker, finder or similar agent claiming to have been
employed by or on behalf of Seller.
2.11 Publicity
. After the Closing Date, all press releases and other
public announcements respecting the subject matter hereof shall be
made only by Buyer; provided, however, that Seller may make any
disclosure required to be made under applicable law if it has
determined in good faith that it is necessary to do so and used its
best efforts, prior to the issuance of the disclosure, to provide
Buyer with a copy of the proposed disclosure and to discuss the
proposed disclosure with Buyer.
2.12 Liability for
Taxes.
(a) Definition . As used herein, “
Tax ” or “ Taxes ” means all taxes,
however denominated, including any interest or penalties or
additions thereto whether disputed or not, including any obligation
to indemnify or otherwise assume or succeed to the tax Liability of
any other Person that may become payable in respect thereof,
imposed by any federal, state, local or foreign government or any
agency or political subdivision of any such government, which taxes
shall include, without limiting the
generality of the foregoing, all income taxes (including, but not
limited to, United States federal income taxes and state income
Taxes), payroll and employee withholding taxes, unemployment
insurance, social security, sales and use taxes, excise taxes,
environmental taxes, franchise taxes, gross receipts taxes,
occupation taxes, real and personal property taxes, stamp taxes,
transfer taxes, withholding taxes, workers’ compensation
taxes, escheat, value-added taxes, alternative or add-on minimum
taxes and other obligations of the same or of a similar nature,
whether discovered before, on or after the Closing.
(b) Taxes Before the Closing . Seller shall be
liable for, and shall together with Shareholders, jointly and
severally, indemnify and hold Buyer harmless from, (a) all
Taxes (as defined above) and Security Interests relating to any
Taxes that are imposed on (either before or after the Closing Date)
or incurred with respect to the Purchased Assets for any period
ending on or before the Closing Date, (b) any Taxes payable as
a result of a breach by Seller or Shareholders of any of the
representations set forth in Section 3.1(i) hereof, and
(c) any necessary and reasonable attorneys’ fees or
other costs incurred by Buyer or its Affiliates in connection with
any payment from Seller under this Section 2.12(b). Buyer and
Seller agree to provide assistance to one another and to cooperate
fully with one another after the Closing Date to account for all
Taxes that may be imposed on or incurred with respect to the
Purchased Assets during any period prior to the Closing Date.
(c)
Taxes Following the Closing . Buyer shall be liable for, and
shall indemnify and hold Seller and Shareholders harmless from,
(a) all Taxes (as defined above) and Security Interests
relating to any Taxes that are imposed on or incurred with respect
to the Purchased Assets for any period commencing and ending after
the Closing Date, and (b) any necessary and reasonable
attorneys’ fees or other costs incurred by Seller or
Shareholders in connection with any payment from Buyer under this
Section 2.12(c).
(d)
Sales, Transfer and Excise Taxes . Buyer shall pay directly
all excise, sales, transfer and other similar Taxes, levies and
charges from the California State Board of Equalization and any
similar California state taxing authority, (including all bulk
sales taxes, if any), that may be imposed upon, or payable or
collectible or incurred in connection with, this Agreement and the
transactions contemplated herein. All obligations under this
Section 2.12 shall survive the Closing hereunder and continue
until 30 days following the expiration of the statute of
limitations on assessment of the relevant Tax.
2.13 Right to
Refunds . If Seller, on the one hand, or Buyer, on
the other hand, receives a refund of any Taxes for which the other
has paid such Taxes, then the party receiving such refund shall,
within 30 days after its receipt, remit such refund to the
party who paid such Taxes; provided, however, that this section
shall not affect the Liability of the parties for Taxes as set
forth in Section 2.12(b) or 2.12(c) hereof.
2.14 Intercompany
Transactions. Prior to the Closing, all intercompany
payables and receivables between Seller and Shareholders and
between Seller and any of its Affiliates that in any way are
related to or otherwise affect any Purchased Asset shall be
released by Seller, Shareholders or any Affiliate of either of
them, as the case may be, and Shareholders hereby release any
claims or other rights he or she may have in and to any of the
Purchased Assets.
2.15 Allocation of
Purchase Price . For all income tax purposes, each
of the parties shall report the transactions contemplated by this
Agreement as an “applicable asset acquisition” by Buyer
within the meaning of Section 1060 of the Internal Revenue
Code of 1986, as amended. In connection therewith, each of the
parties hereby agrees that the fair market value of any
Class I, Class II, Class III, Class IV or
Class V assets (as described in Section 1.1060-1(c)(2) of
the Treasury Regulations) of Seller at the Closing will be equal to
their respective federal income tax bases to Seller immediately
prior
thereto,
and the excess of the total consideration (as determined pursuant
to Section 1.1060-1(c)(1) of the Treasury Regulations) paid
for the Purchased Assets by Buyer over such aggregate tax bases
shall be allocable to Class VI and Class VII assets as
described in such Treasury Regulations. Buyer and Seller shall
cooperate in good faith to mutually agree upon and complete IRS
Form 8594 (Asset Acquisition Statement Under
Section 1060). Buyer shall prepare and deliver a draft IRS
Form 8594 (Asset Acquisition Statement Under
Section 1060) to Seller within 180 days after the Closing Date
and unless Seller objects to such draft IRS Form 8594 within
ten day of its receipt from Buyer, Seller shall be deemed to have
agreed to such draft IRS Form 8594. Seller shall timely file
such Form 8594 with the IRS reporting the transaction in
compliance with this Section 2.15. In any proceeding related
to the determination of any Tax, no party may contend or represent
that the allocation is not a current allocation.
2.16 Name
Change . Seller shall execute and deliver an
amendment to its Articles of Incorporation to change its name to a
name other than Access Flow, Inc. or any variant thereof in
acceptable form to be filed with the California Secretary of State
office and any other jurisdiction where Seller is qualified to do
business within 180 days following the date of this Agreement;
provided, however, that for a period of one year following the
Closing Date, Buyer hereby grants to Seller the non-exclusive and
terminable right and license to use the name “Access Flow,
Inc.” solely for purposes of facilitating invoicing and
billing of customers party to any Retained Partially Completed
Contract.
2.17 Employees
. The term “ Key Employees ” shall be
defined as those individuals listed on Schedule 2.17 to the
Seller Disclosure Letter. Other than the Key Employees, Buyer shall
have no obligation to offer employment to any of Seller’s
existing employees.
2.18 Consent of Third
Parties.
(a) Despite
anything to the contrary in this Agreement, this Agreement shall
not constitute an assignment or transfer of, or an agreement to
assign or transfer, any Governmental Approval (defined below),
contract, instrument, lease, permit or other agreement or
arrangement or any claim, right or benefit arising thereunder or
resulting therefrom if an assignment or transfer or an attempt to
make such an assignment or transfer without the consent of a third
party would constitute a breach or violation thereof or would
violate any applicable law or regulation, or would otherwise affect
adversely the rights of Seller or Buyer thereunder; and any
transfer or assignment by Seller of any interest under any such
Governmental Approval, contract, instrument, lease, permit or other
agreement or arrangement that requires the consent or approval of a
third party shall be made subject to such consent or approval being
first obtained. As used herein, “ Governmental
Approval ” means any consent, approval, authorization,
waiver, permit, grant, franchise, concession, agreement, license,
exemption or order of, registration, certificate, declaration or
filing with, or report or notice to, any federal, state or local
government, or any political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, including,
without limitation, any governmental authority, agency, department,
board, commission or instrumentality of the United States, any
state of the United States or any political subdivision thereof,
and any tribunal or arbitrator(s) of competent jurisdiction, and
any self-regulatory organization.
(b) Seller
will give any required notices, and Buyer and Seller will cooperate
following the Closing, using their respective commercially
reasonable best efforts, in order to obtain necessary third party
consents to the sale and transfer of the Purchased Assets as
contemplated by this Agreement.
(c) Seller
and Buyer will give any notices to, make any filings with, and use
its commercially reasonable efforts to obtain any Governmental
Approval in connection with the consummation of the transactions
contemplated by this Agreement.
(d) With
respect to any consents or approvals that have not been obtained on
or before the Closing Date, Seller and Buyer shall cooperate in any
lawful arrangement that is reasonable for both Buyer and Seller
(considering all relevant factors including practicality, financial
burden and risk) to provide that Buyer shall receive the interest
of Seller in the net benefits under any such Governmental Approval,
contract, instrument, lease, permit or other agreement or
arrangement or any claim, right or benefit arising thereunder or
resulting therefrom. Such arrangements may include (if lawful and
reasonable considering all relevant factors) the performance by
Buyer as agent for Seller such that Buyer will derive the benefit
of such agreement to the extent that Buyer would have benefited if
the necessary third party consent or approval had been obtained.
Seller and Buyer agree to use their respective good faith,
commercially reasonable efforts to negotiate and document any such
arrangements.
2.19 Holdback
Shares . On the Closing Date the Buyer shall retain the
Holdback Shares to be held by the Buyer (“ Escrow
Agent ”) in escrow to satisfy any claims by Buyer against
Seller or Shareholders for a period of up to one (1) year
after the Closing Date (the “ Escrow Period ”),
in accordance with the terms of this Agreement. At the end of each
calendar month during the Escrow Period Buyer shall, in good faith,
determine the amount of any claims under this Agreement and deliver
to the Seller notice of the number of Holdback Shares to be
disbursed to address any such claims by Buyer. Following the
expiration of the Escrow Period, Buyer shall cause the remaining
balance of the Holdback Shares, after the payment of all such
claims and reservation of amounts reasonably deemed sufficient to
satisfy unresolved claims, to be distributed by the Escrow Agent to
Seller within five (5) Business Days in accordance with the
terms of this Agreement. The costs and expenses associated with the
establishment and maintenance of the Holdback Shares shall be borne
by the Buyer.
2.20 Retained Partially
Completed Contracts . There will be certain uncompleted
customer contracts of Seller that will be retained by Seller after
Closing, either because such contracts were already substantially
fulfilled and billed by Seller prior to Closing, or because the
consent to assignment of the contract cannot be obtained from the
customer, or for other reasons. These retained partially completed
customer contracts (the “ Retained Partially Completed
Contracts ”) are listed on Schedule 2.20 to the
Seller Disclosure Letter. Seller shall retain the Retained
Partially Completed Contracts following the Closing, and will
retain the obligations and duties under the Retained Partially
Completed Contracts following Closing, but shall utilize Buyer
exclusively as Seller’s agent to perform the services to the
customer required to complete the Retained Partially Completed
Contracts following Closing. Seller and Buyer shall cooperate with
each other in good faith to ensure that customers party to a
Retained Partially Completed Contract, properly direct to Seller
all payments owed to Seller thereunder. In the event that through
error or mistake, any customer party to a Retained Partially
Completed Contract, directly pays Buyer for any amount owed by such
customer to Seller under a party to a Retained Partially Completed
Contract, Buyer shall promptly forward such misdirected amounts to
Seller.
(a) In
order to fulfill any obligation or duty under the Retained
Partially Completed Contracts to deliver products to the customer
following the Closing, Seller shall acquire such products
exclusively from Buyer, at a price equal to the price to be billed
to the customer under the Retained Partially Completed Contract,
such that any gross profit generated from deliveries of products to
the customer under the Retained Partially Completed Contracts after
the Closing is fully realized by Buyer and no gross profit is
realized by Seller following the Closing.
(b) Seller
shall engage Buyer, as Seller’s exclusive agent, to perform
any and all services that are required to complete the Retained
Partially Completed Contracts, billing Seller for such services at
Buyer’s Service Billing Rates (defined below) for such
services. Buyer’s hourly billing rates for service work,
which shall apply for all purposes under this Agreement, are set
forth on Schedule 2.20(b) to the Seller Disclosure Letter (the
“ Buyer’s Service Billing Rates ”).
2.21 Acquired Partially
Completed Contracts . There will be certain partially
completed customer contracts of Seller that will be assigned or
conveyed to Buyer by Seller pursuant to this Agreement for which
Seller has already performed a certain portion of such contracts
prior to closing, and/or Seller has already billed the customer
prior to Closing for a portion of such contracts, which acquired
partially completed contracts are listed on Schedule 2.21 to
the Seller Disclosure Letter (the “ Acquired Partially
Completed Contracts ”). Following the Closing, Seller and
Buyer shall cooperate to ensure that Buyer and Seller share in the
Economic Benefit (defined below) of each of the Acquired Partially
Completed Contracts based on the percentage of the total contract
that was completed by Seller prior to the Closing as compared to
the total percentage of the contract that was completed by Buyer
following the Closing. For this purpose, the percentage of
completion of each such Acquired Partially Completed Contract shall
be calculated based upon the total Direct Cost (defined below) of
performing such contract incurred by Seller prior to the Closing,
as compared to the total Direct Cost of performing such contract by
Buyer following the Closing, calculated after the Acquired
Partially Completed Contract is completed by Buyer following the
Closing. As used in this Section 2.21, the term “
Direct Cost ” shall mean any (a) direct cost of
inventory, goods and equipment, including freight and shipping
costs, (b) direct, unburdened labor cost of technician and/or
engineering employees, and (c) direct cost of a subcontractor
used to perform the contract; provided that Seller’s Direct
Cost shall be reduced by the amount of any warranty claim by
customer or rejection of deliverables by customer that occur after
the Closing but relate to goods or services provided by Seller
prior to the Closing. Buyer shall incur no Direct Cost of
performing such contracts prior to the Closing and Seller shall
incur no Direct Cost of performing such contracts after the
Closing. Schedule 2.21 to the Seller Disclosure Letter sets
forth all of the Direct Cost that Seller has incurred in performing
the Acquired Partially Completed Contracts as of the Closing Date
and shall be the Direct Cost used following the Closing to
calculate the percentage of total Direct Cost incurred by Seller
prior to the Closing as compared to the percentage of total Direct
Cost incurred by Buyer following the Closing. After each of the
Acquired Partially Completed Contracts has been completed by Buyer
following the Closing, Buyer shall, as soon as practicable, provide
Seller with a complete accounting of the cost incurred by Buyer in
performing such contract, and Buyer shall pay Seller, or Seller
shall pay Buyer, as the case may be, in order to ensure that Buyer
and Seller each receive their appropriate percentage of the total
Economic Benefit from each such contract. As used in this
Section 2.21, the term “ Economic Benefit ”
shall mean the total contract amount less the total of all combined
Direct Costs incurred by Seller and Buyer in the performance of
such contract, and shall take into consideration which party (Buyer
or Seller) received funds from the customer in payment of such
contract.
2.22 Warranty
Matters. Buyer is not assuming any liability to perform
warranty work for equipment or
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