ASSET PURCHASE AGREEMENT

EXHIBIT 10.1

 

ASSET PURCHASE AGREEMENT

 

This Asset Purchase Agreement (the “ Agreement ”) is entered into effective as of January 1, 2009 (the “ Effective Date ”), by and among Primal Solutions, Inc., a Delaware corporation (“ Primal ”), Wireless Billing Systems, a California corporation (“ WBS ”; together with Primal, “ Sellers ” and each is a “ Seller ”) and BillWise, Inc., a California corporation (“ Purchaser ”).  Purchaser, on the one hand, and Sellers, on the other hand, shall hereinafter individually be referred to as a “ Party ” and collectively be referred to as the “ Parties .”

 

RECITALS

 

WHEREAS, Sellers are engaged in the business of providing innovative managed solutions for turning data into revenue, including through its IPC platform which captures, correlates, tracks, manages, monetizes, and analyzes clients’ communications transactions data (the “ Business ”); and

 

WHEREAS, Purchaser desires to purchase from Sellers, and Sellers desire to sell and transfer to Purchaser, certain of Sellers’ assets necessary for operation of the Business on the terms and subject to the conditions of this Agreement.

 

NOW, THEREFORE, in consideration of the premises, and the representations, warranties, covenants, and agreements contained in the Transaction Documents (as hereinafter defined), and for such other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

 

ARTICLE 1

PURCHASE AND SALE OF ASSETS

 

 

1.1   Purchase and Sale of Acquired Assets .  On the Closing Date but effective as of the Effective Date, each Seller shall sell, transfer, deliver, convey and assign to Purchaser, and Purchaser shall purchase, acquire, and accept from such Seller, upon the terms and conditions stated herein, all of such Seller’s right, title and interest in and to the following:

 

(a)   All hardware, third-party software licenses, documentation, third-party trademark licenses, fixtures, furniture, equipment and other assets of such Seller, in each case, which is necessary to satisfy such Seller’s obligations under the Assumed Contracts, as identified on Schedule 1.1 attached hereto (the “ Transferred Resources ”), to the fullest extent transferable by such Seller to Purchaser (or if not at all transferable, a mutually acceptable arrangement shall be structured as provided in Section 8.4);

 

(b)   All right, title, and interest of such Seller in and to the source code, object code, schematics, design tools, and all associated documentation for all of such Seller’s past or present software products (including but not limited to Connect CCB, Connect IXC, Access IM, Connect RTR, IPC, WPM, Marketing Dashboard, Revenue Assurance Suite, Communications Resources Manager (CRM), and EBP&P), and all of such Seller’s software tools, subroutines, and other components, whether completed or under development, all prior or unreleased versions thereof, and all tangible embodiments (and all copies, extracts, or analyses thereof) in any medium whatsoever, and all right, title, and interest of such Seller in and to its copyrights, patents, trademarks, service marks, trade dress, and any applications therefor (including U.S. patent application number 12055933), and any related Intellectual Property Rights (as defined in Section 2.2) of such Seller, and all rights under any and all contracts for

 

 

the acquisition or development of any of the foregoing, including without limitation assignments to such Seller, covenants to assign inventions to such Seller (including without limitation those assignments contained in subcontractor agreements), covenants to cooperate with such Seller’s obtaining protections of intellectual property, other provisions for ownership by such Seller of a work-for-hire, any and all confidentiality and non-disclosure agreements in favor of a Seller and all agreements similar to the foregoing, in each case to the fullest extent transferable by such Seller to Purchaser (or if not at all transferable, a mutually acceptable arrangement shall be structured as provided in Section 8.4) (collectively, the “ Intellectual Property ”);

 

(c)   All right, title, and interest (including rights to payment for customer services which services were rendered on or following the Effective Date or for Software (as hereinafter defined) for periods on or following the Effective Date) of such Seller in and under the Assumed Contracts (as hereinafter defined) on and after the Effective Date, including any successor agreements to the Assumed Contracts which are entered into by such Seller with respect to the Business prior to the Closing Date (the “ Contract Rights ”);

 

(d)   Cash in an amount, when all such payments made by Sellers are aggregated, equal to Ninety Seven Thousand Three Hundred Seventy-Four Dollars and 52/100 ($97,374.52) (“ Prepaid Customer Funds ” and, together with the Transferred Resources, Intellectual Property, and Contract Rights, the “ Acquired Assets ”), which amount represents prepaid but undelivered maintenance obligations under the Assumed Contracts with Bresnan (in an amount equal to $7,760); Hutchinson (in an amount equal to $40,000); Westel (in an amount equal to $6,533); and Page One (in an amount equal to $43,081.52);

 

(e)   All receivables and rights to payment arising with respect to customer services provided on or after the Effective Date or Software for periods on or following the Effective Date relating to any Acquired Assets;

 

(f)   Copies of those books and records of such Seller directly related to the Acquired Assets, including invoices, purchase orders, and vendor and customer correspondence; and

 

(g)   All goodwill and other intangible assets associated with the foregoing;

 

in each case wherever located, but specifically excluding those assets described in Section 1.2.

 

1.2   Excluded Assets .  Notwithstanding any term herein to the contrary, neither Seller is selling, assigning, transferring, or delivering to Purchaser, and Purchaser is not purchasing, accepting, or acquiring from Sellers, any assets other than those assets specifically set forth in Section 1.1 herein.  Specifically, the Acquired Assets exclude without limitation:

 

(a)   any cash, cash equivalents, or short-term investments of Sellers, except as specifically set forth in Section 1.1(d);

 

(b)   any rights of either Seller under this Agreement (or any other agreement between Purchaser and a Seller entered into on or after the Effective Date);

 

(c)   any capital stock of either Seller or its subsidiaries;

 

(d)   all of each Seller’s corporate minute books and related records (including its Certificate or Articles of Incorporation, qualifications to conduct business as a foreign corporation, arrangements with registered agents relating to foreign qualifications, taxpayer and other

 

 

identification numbers, seals, stock transfer books, blank stock certificates, and other documents relating to the organization, maintenance and existence of Seller as a corporation);

 

(e)   all of the intercompany loans and accounts receivable between Sellers;

 

(f)   any receivable or payable of either Seller relating to state or federal taxes and any rights of either Seller under any tax returns and related tax records;

 

(g)   any other receivable of either Seller, except to the extent (i) of receivables or amounts due and unpaid which relate to customer services which services were rendered on or after the Effective Date or Software for periods on or after the Effective Date under the Assumed Contracts or Acquired Assets or (ii) as expressly provided in Section 8.3(b);

 

(h)   any corporate names of either Seller (for use as corporate names rather than in trademarks or service marks) and Primal’s “Primal Solutions No IP Transaction Left Behind” trademark (Serial No. 78729753), starburst design (Serial No. 78729726), and “No IP Transaction Left Behind” trademark (Serial No. 78725977);

 

(i)   any computer software used by either Seller in its accounting or general administrative functions, software relating to commercially available software developer licenses for various third-party products, and software licensed from a third-party which is not transferable;

 

(j)   all permits and governmental licenses of the Business (including but not limited to Seller’s City of Irvine, California business permit; and its permit with the Orange County Fire Authority);

 

(k)   all personnel records and other records that either Seller is required by law to retain in its possession;

 

(l)   all insurance policies and rights thereunder; and

 

(m)   all rights in connection with and assets of any employee benefit plans or programs maintained for employees of either Seller.

 

1.3   Free and Clear of All Liens and Liabilities .  The Acquired Assets shall be free and clear of all liens, liabilities, claims, and encumbrances, except as set forth on Schedule 1.3 attached hereto.

 

1.4   Delivery of Acquired Assets .  At the Closing, but effective as of the Effective Date, Purchaser shall take physical possession of the Acquired Assets at Sellers’ principal place of business in Irvine, California.

 

ARTICLE 2

PURCHASE PRICE

 

 

2.1   Satisfaction of Obligations .  The consideration for this Agreement and the transactions contemplated hereby is (a) Purchaser’s execution, delivery, and full satisfaction of the License Agreement, (b) Purchaser’s full satisfaction of (i) the Assumed Liabilities, (ii) any indemnification obligations arising hereunder, and (iii) each of its other obligation hereunder, and (c) payment of Royalties in accordance with Section 2.2, below (collectively, the “ Purchase Price ”).

 

 

2.2   Royalties .

 

(a)   Royalties .  Provided that the Closing occurs, for a period of three (3) years beginning on the Effective Date (“ Royalty Period ”), Purchaser shall pay to Sellers, without offset or deduction of any kind or manner whatsoever, royalties equal to four percent (4%) of Net License Sales (“ Royalties ”).  If a Product is sold in combination with one or more other products that are not Products, the portion of the license revenue attributable to the Product will be deemed to be a reasonable portion of the license revenue received for the combination of the products.  Further, to the extent that such products are invoiced as separate line items, Purchaser shall ensure that the stated prices for such Products are reasonable.

 

(b)   Payment Terms .  Within sixty (60) days after the end of each quarter during the Royalty Period, Purchaser shall provide a statement setting forth the gross revenues, Net License Sales, and other information reasonably requested by Sellers, and the corresponding Royalties.  All Royalties payable to Sellers will be paid by Purchaser to Sellers concurrently with each such statement.  Outstanding amounts not paid when due will accrue interest at the lower of one and one-half percent (1½%) per month or the highest monthly rate allowed by applicable law.  The obligation to pay and the payment of any such interest will not operate to extend any payment due date, and Sellers waive no rights by accepting late payment with interest.

 

(c)   Taxes .  Purchaser shall pay, or upon receipt of an invoice from Sellers, shall reimburse Sellers for, all Taxes imposed on Purchaser, or required to be collected by Sellers, imposed on the transactions contemplated by this Section 2.2; provided, however, that Purchaser shall not be responsible for any Taxes based on Sellers’ net income.

 

(d)   Records and Audit .  Purchaser agrees to maintain and keep accurate books of account and records in connection with Royalties payable to Sellers under this Section 2.2 (including, without limitation, true and correct copies of relevant agreements).  Sellers shall have the right, upon reasonable notice, during normal business hours, subject to reasonable confidentiality requirements, and in a manner not unreasonably disruptive to Purchaser’s operations, to engage an independent auditor to examine and otherwise audit said books of account, records and all other documents and materials in the possession or under the control of Purchaser for purposes of verifying the Royalties payable to Sellers under this Section 2.2.  Purchaser shall maintain and keep all such books of accounts and records available for at least three (3) years after the year in which the applicable Royalties are due.  All costs and expenses incurred in performing any such audit will be paid by Sellers unless the audit discloses at least a five percent (5%) shortfall in the amounts paid to Sellers, in which case Purchaser will bear the full cost of the audit.

 

(e)   Confidentiality of Software .  At all times after the Effective Date, Sellers shall comply with the confidentiality provisions of the License Agreement (as hereinafter defined) to maintain the confidentiality of the Software.

 

(f)   Definitions .  For purposes of this Section 2.2, the following terms shall have the meanings set forth below:

 

(i)            “Affiliate” means, with respect to an entity, any other entity that controls, is controlled by, or is under common control with such entity.  For the purposes of this Agreement, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of any such person whether through the ownership of voting securities, by contract, or otherwise.

 

 

(ii)            “Derivative Works” means any modifications, additions, or extensions made by Purchaser to the Software and any other works whatsoever based on or containing any portion of the Software.

 

(iii)            “Intellectual Property Rights” means any and all of the following (by whatever name or term known or designated) now known or hereafter existing anywhere in the world:  (i) rights associated with works of authorship, including, without limitation, all exclusive exploitation rights, copyrights, moral rights, and mask work rights; (ii) trade secret rights and other confidential or proprietary information; (iii) patents (including, without limitation, reissues, divisions, reexaminations, extensions, provisionals, continuations, and continuations-in-part thereof), designs, and other industrial property rights; (iv) source code, object code, formulas, ideas, concepts, mask works, methods, know-how, processes, devices, and the like, whether or not any of the foregoing are subject to protection under law; (v) all registrations, applications, renewals, extensions, continuations, divisions, reissues, and the like; and (vi) all other intellectual property and proprietary rights of every kind and nature whether arising by operation of law, contract, license, or otherwise, including trademark, service mark, trade dress, and other marks based on designation of source or origin.

 

(iv)           “ Net License Sales ” mean all revenues received by Purchaser (or any of its Affiliates) from the Assumed Contracts (including the license portion of fees collected from Brighthouse Networks in 2009) and any new agreements (or amendments to existing agreements) with third parties (including existing customers and resellers) with respect to any Products, net of third-party costs as follows: (A) amounts expended, repaid or credited by reasons of defects or returns; (B) commissions paid to resellers; and (C) sales and other taxes or similar amounts paid to a governmental entity (other than Sellers’ income taxes).  Net License Sales shall not include any of the following:  (I) license revenues solely from sales of software products or modules that are not Products, (II) services revenues, and (III) maintenance revenues; provided, however, that in negotiating and entering into contracts with customers, Purchaser will reasonably allocate revenues between Products and those items for which Purchaser has no obligation to pay Royalties.  Purchaser shall pay Royalties on revenues that are substantively license revenues from Products, irrespective of how such revenues are characterized in any customer contract.

 

(v)           “ Products ” means present and future versions of the Software and all Derivative Works.

 

(vi)            “Software” means all of Sellers’ software products immediately prior to the Effective Date (including Connect CCB, Connect IXC, Access IM, Connect RTR, IPC, WPM, Marketing Dashboard, Revenue Assurance Suite, Communications Resources Manager (CRM), and EBP&P) as further described in Schedule 2.2 attached hereto, including all associated source code, object code, documentation, and related Intellectual Property Rights.

 

(vii)            “Tax” means foreign, federal, state, provincial, local (including, without limitation, sales, use, excise, value-added, and goods-and-services taxes) and all other taxes, fees, levies, and the like, however designated.

 

(g)   Consent to Assignment .  Purchaser hereby acknowledges that Sellers have assigned to certain creditors of Sellers (the “ SSF Entities ”) all of Sellers’ respective rights in and to (i) all Royalties, (ii) reimbursement and payment of all other sums described in this Section 2.2, (iii) preserve, protect and enforce the payment and reimbursement obligations under this Section 2.2, and (iv) all indemnification rights under Article 12 of this Agreement to the extent pertaining to any of the foregoing (the “ SSF Assignment ”) in part in consideration of the SSF Entities’ consent to the

 

 

transactions contemplated hereby and a waiver of their rights in the Acquired Assets.  Purchaser hereby expressly consents to such assignment, agrees to pay the Royalties to the SSF Entities or as the SSF Entities may direct, without offset or deduction of any kind or manner whatsoever, and confirms that the SSF Entities shall have the sole and exclusive right, in their own name, to enforce the provisions of this Section 2.2 directly against Purchaser.

 

2.3   Allocation of Purchase Price .  The Parties agree to allocate the Purchase Price among the Acquired Assets in accordance with Section 1060 of the Internal Revenue Code of 1986, as amended, and to cooperate in the preparation of Internal Revenue Service Form 8594 (and any similar required state or local tax forms).

 

ARTICLE 3

ASSUMPTION OF SPECIFIED LIABILITIES

 

 

3.1   No Assumption of Liabilities Unless Expressly Assumed .  Except as specifically provided in Section 3.2 below, Purchaser does not assume and shall not have any duty or obligation with respect to any liability, duty, contract, agreement, or obligation of either Seller, whether by the terms of this Agreement, by operation of law, or otherwise, whether or not associated with the Business or any of the Acquired Assets.  The Assumed Liabilities shall not include the Retained Liabilities.  The Retained Liabilities shall remain the sole responsibility of and shall be retained, paid, performed, and discharged solely by Sellers.  “ Retained Liabilities ” means every liability and obligation of Sellers other than the Assumed Liabilities and Purchaser’s liabilities and obligations arising hereunder, and such term includes, without limitation:

 

(a)   Any liability for taxes, including (i) any taxes arising as a result of Sellers’ operation of the Business or ownership of the Acquired Assets prior to the Effective Date, and (ii) any taxes that will arise as a result of the sale of the Acquired Assets pursuant to this Agreement (except as provided in Section 14.2);

 

(b)   Any liability or obligation of either Seller under this Agreement or the other Transaction Documents;

 

(c)   Any liability or obligation of either Seller relating to any Excluded Asset or any contract or agreement not assumed by Purchaser under Section 3.2;

 

(d)   Any liability or obligation arising out of or relating to services provided by Sellers prior to the Effective Date (including any warranty claims relating thereto) other than to the extent assumed under Section 3.2;

 

(e)   Any liability or obligation under any Assumed Contract that arises on or after the Effective Date but that arises out of or relates to any breach, nonperformance or other event or circumstance that occurred prior to the Effective Date;

 

(f)   Any liability or obligation arising under any Seller employee benefit plan or any employment, severance, retention, or termination agreement with any employee of either Seller or relating to payroll, vacation, sick leave, workers’ compensation, unemployment benefits, employee stock option or profit-sharing plans, health care plans or benefits or any other employee plan or benefit of any kind for either Seller’s employees or former employees or both;

 

 

(g)   Any liability arising out of or relating to any employee grievance relating to such employee’s employment with either Seller whether or not the affected employees are hired by Purchaser;

 

(h)   Any liability arising out of or related to Primal’s termination of its real estate lease or possession of real property; and

 

(i)   Any liability or obligation related to any indebtedness or payable of Seller other than as specifically assumed by Purchaser pursuant to Section 3.2.

 

3.2   Specification of Liabilities Assumed .  On and subject to the terms and conditions of this Agreement, Purchaser agrees to assume and become responsible for all of the Assumed Liabilities on the Closing Date but effective as of the Effective Date.  “ Assumed Liabilities ” means the following liabilities and obligations of Sellers:

 

(a)   All existing and future liabilities and obligations of Sellers under the Assumed Contracts (as defined on Schedule 3.2 attached hereto), including without limitation all liabilities and obligations arising on or after the Effective Date (but excluding any liability or obligation arising out of or relating to a breach of any Assumed Contract that occurred or, with the giving of notice or lapse of time, or both, would have occurred prior to the Effective Date);

 

(b)   All liabilities and obligations of Sellers arising out of, relating to, or in connection with its prepaid but undelivered maintenance obligations due for periods after the Effective Date under the Assumed Contracts with Bresnan, Hutchinson, and Westel, it being understood and agreed that the fees for such services have already been paid by such customers to either or both Sellers and Sellers are transferring the fees to Purchaser as the Prepaid Customer Funds;

 

(c)   All liabilities resulting from the ownership, use, operation or maintenance of the Acquired Assets by Purchaser, or the conduct of the Business by Purchaser, arising on or after the Effective Date, except to the extent otherwise provided for under this Agreement; and

 

(d)   All liabilities and obligations arising on or after the Effective Date in connection with the Transferred Resources, other than office rent, utilities, and other normal recurring costs and expenses incurred to March 31, 2009 in connection with Sellers’ providing any of the Transferred Resources in accordance with this Agreement.

 

ARTICLE 4

CLOSING DATE

 

 

4.1   Closing Date .  Provided that all conditions precedent set forth in this Agreement have been satisfied or waived, the closing of the transactions contemplated hereby (the “ Closing ”) shall occur on January 15, 2009 (the “ Closing Date ”) or such other date mutually agreed upon by the Parties.  The Closing shall be held on the Closing Date at 10:00 a.m. PST at the offices of Bryan Cave LLP, located at 3161 Michelson Drive, Suite 1500, Irvine, California 92612, unless another time or place is mutually agreed upon by the Parties.

 

4.2   Date of Transfer .  Provided that the Closing occurs, it is the intent of the Parties that the Acquired Assets be transferred to Purchaser effective as of 12:00:01 a.m. on the Effective Date.  Further,

 

 

the Assumed Liabilities shall be transferred to and assumed by Purchaser effective as of 12:00:01 a.m. on the Effective Date.

 

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF SELLERS

 

 

5.1   Organization and Qualification .  Primal is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, with all necessary corporate power and authority to own or use its property that it now owns or uses in connection with Primal’s Business as it is now being conducted.

 

5.2   Authorization and Validity .  Each Seller has the requisite power and is (or shall be as of the Closing) duly authorized to execute, deliver and perform the terms of this Agreement and to execute, deliver and perform its obligations under the documents required at the Closing pursuant to Article 11 and any other documents executed and/or delivered in connection herewith or therewith, including without limitation any exhibits or schedules hereto or thereto (collectively, the “ Transaction Documents ”).  This Agreement and the other Transaction Documents to which each Seller is a party are, or will be upon execution, legal, valid and binding obligations of such Seller, duly enforceable against such Seller according to their respective terms, except as such enforcement may be limited by the application of bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditors’ rights generally and as such enforcement may be limited by the availability of specific performance and the application of equitable principles, regardless of whether enforcement is sought in a proceeding at law or in equity.

 

5.3   Title to Trademarks .  Primal owns and possesses good title to the following trademarks:  Connect CCB (Serial No. 76089883); Out Front (Serial No. 75694432); Primal Access IM (Serial No. 76037945); Primal Connect CCB (Serial No. 76088999); KPIPAK (Serial No. 78638828); and Primal (Serial No. 75694434).  WBS owns and possesses good title to the following trademarks:  Creditwatch  (Serial Nos. 74358508 and 74358507).  Sellers have complied, in all material respects, with all currently outstanding source license requirements.  Sellers have not assigned, transferred, or conveyed any of their respective rights in and to any of the Intellectual Property, except in favor of Purchaser under this Agreement and except as set forth on Section 5.3(a) of the Disclosure Schedules .  Sellers have not assigned, transferred, conveyed or encumbered, or suffered any encumbrance of their respective rights in and to any of the Acquired Assets (other than the Intellectual Property) except in favor of Purchaser under this Agreement and except as set forth on Section 5.3(b) of the Disclosure Schedules .

 

5.4   Approval by Special Committee of the Board and Shareholders . A special committee of Primal’s Board of Directors, the holders of at least a majority of Primal’s voting stock, and the holders of at least a majority of WBS’ voting stock have (or, with respect to such stockholders, prior to the Closing

 

 

Date will have) duly and validly authorized and approved the Transaction Documents.  In its deliberations, the special committee has sought advice of qualified experts, has carefully deliberated and has independently arrived at its conclusions that the transactions contemplated in this Agreement are fair and reasonable to the Sellers and their respective stakeholders and that the consideration described in Section 2 constitutes full and fair value for the Acquired Assets.

 

5.5   Creditors .  To Sellers’ current actual knowledge, no creditor of either Seller has claimed, orally or in writing, that any default, breach or nonperformance has occurred or shall occur on account of the anticipated purchase and sale of the Acquired Assets.

 

5.6   Disclaimer of Other Representations and Warranties .  Except as expressly set forth in this Article 5, neither Seller makes any representation or warranty, express or implied, at law or in equity, in respect of any of its assets (including without limitation the Acquired Assets), liabilities or operations (including without limitation the Assumed Liabilities), with respect to the condition, merchantability, suitability or fitness for a particular purpose, with respect to its rights, title, and interest in and to any of its assets (including without limitation the Acquired Assets), with respect to the accuracy or completeness of any information regarding either Seller, the Business, Acquired Assets or Assumed Liabilities, or with respect to the enforceability, validity, legality or authorization of this Agreement, the other Transaction Documents, and the transactions contemplated hereby and thereby, and any such other representations or warranties are hereby expressly disclaimed.  Purchaser hereby acknowledges that, except to the extent specifically set forth in this Article 5, Purchaser is purchasing the Acquired Assets on a “as-is, where-is” basis.  Without limiting the generality of the foregoing, neither Seller makes any representation or warranty regarding any assets other than the Acquired Assets or any liabilities other than the Assumed Liabilities, and none shall be implied at law or in equity.

 

ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

 

6.1   Organization .  Purchaser is a corporation duly organized, validly existing, and in good standing under the laws of the State of California, with all necessary corporate power and authority to own or use its property that it now owns or uses and to carry on its business as it is now being conducted.

 

6.2   Authorization and Validity .  Purchaser has the requisite power and is duly authorized to execute, deliver and perform the terms of this Agreement and to execute, deliver and perform its obligations under the Transaction Documents.  This Agreement and the other Transaction Documents are, or will be upon execution, legal, valid and binding obligations of Purchaser, duly enforceable against Purchaser according to their respective terms, except as such enforcement may be limited by the application of bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditors’ rights generally and as such enforcement may be limited by the availability of specific performance and the application of equitable principles, regardless of whether enforcement is sought in a proceeding at law or in equity.

 

6.3   Purchaser’s Due Diligence .  Purchaser represents, warrants, covenants and agrees that (a) certain founders and officers of Purchaser were, through and including the Closing Date, long-standing executive officers of Sellers who had access to and were intimately familiar with financial and

 

 

other material information regarding Sellers; (b) therefore, Purchaser has (i) a preexisting personal or business relationship with the Company or one or more of its officers, directors, or control persons and (ii) by reason of the business or financial experience of Purchaser’s founders, officers, and advisors who are unaffiliated with and who are not compensated, directly or indirectly, by either Seller, Purchaser is capable of evaluating the risks and merits of this investment and of protecting Purchaser’s own interests in connection with the Transaction Documents; (c) Purchaser has received and reviewed all information that Purchaser considers necessary or appropriate for deciding whether to execute, deliver, and perform the Transaction Documents and the transactions contemplated thereby; and (d) Purchaser has had an opportunity to ask questions and receive answers from Sellers and their respective officers and employees regarding the Business, financial affairs and other aspects of Seller and has further had the opportunity to obtain any information (to the extent either Seller possesses or can acquire such information without unreasonable effort or expense) which Purchaser deems necessary to evaluate the Transaction Documents and the transactions contemplated thereby and to verify the accuracy of the representations, warranties, covenants, and agreements set forth in the Transaction Documents and of information otherwise provided to Purchaser.

 

6.4   Adequate Capitalization .  Purchaser represents, warrants, and agrees that it is willing and able (financially and otherwise) to, and hereby does, assume all of the Assumed Liabilities.  Purchaser further represents, warrants, and agrees that it has the financial means to satisfy all obligations reasonably and ordinarily relating to the Acquired Assets and Assumed Liabilities and to fully and timely satisfy its obligations under the Transaction Documents, and that, as of the Effective Date and also immediately after giving effect to the transactions contemplated by the Transaction Documents (the “ Contemplated Transactions ”), Purchaser, to its actual knowledge, shall have adequate capital resources to carry on its businesses.

 

ARTICLE 7

PRE-CLOSING COVENANTS

 

 

7.1   General .  Each of the Parties will use its commercially reasonable efforts to take all actions and to do all things necessary, proper, or advisable in order to consummate and make effective the Contemplated Transactions (including satisfaction, but not waiver, of the Closing conditions set forth in Articles 9 and 10 , below).

 

7.2   Full Access .  Sellers will permit representatives of Purchaser (including legal counsel and accountants) to have full access at all reasonable times, and in a manner so as not to interfere with the normal business operations of Sellers, to all premises, properties, personnel, books, records (including tax records), contracts, and documents of or pertaining to the Acquired Assets and Assumed Liabilities.  Purchaser will treat and hold as such any Confidential Information it receives from either Seller in the course of the reviews contemplated by this Section 7.2 , will not use any of the Confidential Information except in connection with this Agreement, and, if this Agreement is terminated for any reason whatsoever, will return to Sellers all tangible embodiments (and all copies) of the Confidential Information that are in its possession.  Restrictions on use or disclosure by Purchaser of such Confidential Information shall terminate on and as of the Closing Date.  “Confidential Information” means all information regarding a Party’s business or affairs, including, without limitation, the Software, business concepts, processes, methods, systems, know-how, devices, formulas, product specifications, marketing methods, prices, customer lists, methods of operation, or other information, whether in oral, written, or electronic form, that is either designated as confidential or that is disclosed under circumstances such that a reasonable person would know it is confidential.  The following information will not be deemed Confidential Information:  (i) information that is or becomes publicly available

 

 

through no fault of the Party obligated to keep it confidential; (ii) information with regard to the other Party that was rightfully known by a Party prior to commencement of discussions regarding the subject matter of the Agreement; (iii) information that was independently developed by a Party without use of the Confidential Information; and (iv) information rightfully disclosed to a Party by a third party without continuing restrictions on its use or disclosure.

 

7.3   Notice of Developments .  Sellers may elect at any time to notify Purchaser of any development causing a breach of any of the representations and warranties in Article 5 above.  Unless Purchaser has the right to terminate this Agreement pursuant to Section 13.1(b) below by reason of the development and exercises that right within the period of ten (10) business days referred to in Section 13.1(b) below, the written notice pursuant to this Section 7.3 will be deemed to have amended the Disclosure Schedule, to have qualified the representations and warranties contained in Article 5 above, and to have cured any misrepresentation or breach of warranty that otherwise might have existed hereunder by reason of the development.

 

7.4   Employees; Indemnification; Directors’ and Officers’ Insurance .  Prior to the Closing, Purchaser shall offer employment to those employees of either Seller listed on Schedule 7.4 attached hereto, effective upon the Closing and Purchaser shall not restrict or withdraw any such offer of employment on or prior to the Closing.  Such employment for all such employees other than Joseph Simrell and Bob Richardson shall be at not less than each employee’s respective monthly salary as in effect in connection with his/her employment with either Seller on the Closing Date.  To the extent the persons listed on Schedule 7.4 attached hereto become employees of Purchaser effective upon the Closing (the “ Transferred Employees ”), the Parties agree that all of Sellers’ obligations with respect to such persons shall terminate effective as of the Closing, subject to payment by Sellers of all compensation of such employees accrued up to and including the Closing Date which remains unpaid thereat (e.g., accrued but unpaid salary, incentive compensation, and expense reimbursements and accrued but unused vacation).  Each Seller also agrees that (a) such Seller remains responsible for (i) all currently existing contractual indemnification obligations of such Seller in favor of Joseph Simrell and Bob Richardson and (ii) all statutory indemnification obligations which exist under applicable law for Joseph Simrell, Bob Richardson, and all other Transferred Employees, in each case relating to, arising out of, or in connection with acts or omissions by such persons prior to the Closing Date and while a director or employee of such Seller and (b) such Seller shall use commercially reasonable efforts to maintain tail directors’ and officers’ liability insurance coverage in effect for a reasonable period following the Closing Date as reasonably determined by such Seller.

 

ARTICLE 8

POST-CLOSING COVENANTS

 

 

8.1   Taxes .  Except as otherwise specifically provided in Section 14.2, all taxes incurred by each respective Party shall be payable only by that Party; provided that Sellers shall include the income of the Business (including income relating to services or Software provided by Sellers under the Assumed Contracts or relating to the Acquired Assets prior to the Effective Date) on their income tax returns, and Purchaser shall include the income of its business (including income relating to services or Software provided by Purchaser under Assumed Contracts or relating to the Acquired Assets on or after the Effective Date) on its income tax returns, except to the extent such income is remitted to the other Party pursuant to the terms of this Agreement.  Purchaser and Sellers shall each be responsible for their own tax liabilities, if any, for payments received and retained by it.  If revenues are received by one Party and then remitted to the other Party in accordance with this Agreement, the Party ultimately receiving and retaining the payment shall incur tax liability to the extent of the amount of the payment it receives and retains.  If one Party incurs an expense and the other reimburses the first Party in accordance with this Agreement, the reimbursing Party shall be entitled to any tax deduction for the expense.  The Parties shall consult from time to time and cooperate to appropriately account for the tax liabilities.