EXHIBIT 2.1
===============================================================================
ASSET PURCHASE AGREEMENT
AMONG
eGAMES, INC.
AND
CINEMAWARE, INC.
AND
LARS FUHRKEN-BATISTA
OCTOBER 6, 2005
===============================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE I -
Definitions...................................................1
ARTICLE II - PURCHASE AND SALE OF
ASSETS..................................5
2.1 Purchase and Sale of
Assets..........................................5
(a)
Personal
Property..............................................5
(b)
Contract
Rights................................................6
(c)
Intellectual
Property..........................................6
(d)
Governmental Licenses,
Permits and Approvals...................6
(e)
Books and
Records..............................................6
(f)
Goodwill.......................................................6
2.2 Excluded
Assets.....................................................6
2.3 Purchase
Price......................................................7
2.4 Payment of Purchase
Price...........................................7
2.5
Closing.............................................................7
2.6 Ad Valorem Tax
Adjustment...........................................8
2.7 Allocation of Purchase
Price........................................8
2.8 Assumed
Liabilities.................................................8
2.9 Retained
Liabilities................................................9
ARTICLE III - Representations and
Warranties of Seller....................9
3.1 Organization and Good
Standing......................................9
3.2 Authorization and Effect of
Agreement...............................9
3.3 No Restrictions Against Sale
of the Assets.........................10
3.4 Financial
Statements...............................................10
3.5 Operation of the Business
Since December 31, 2004..................10
3.6 Title to Assets;
Licenses..........................................11
3.7 No
Litigation......................................................11
3.8 Income and Other
Taxes.............................................12
3.9 Employee Benefit
Matters...........................................12
3.10 Governmental
Approvals.............................................13
3.11 Assumed
Contracts..................................................13
3.12 Employee and Labor
Matters.........................................14
3.13 Principal Customers and
Suppliers..................................14
3.14 Compliance with
Law................................................14
3.15 Product
Warranties.................................................15
3.16 Intellectual
Property..............................................15
(a)
Title.........................................................15
(b)
Development...................................................15
(c)
Transfer......................................................15
(d)
No
Infringement...............................................15
(e)
Licensing
Arrangements........................................16
(f)
No Intellectual
Property Litigation or Disputes...............16
<PAGE>
(g)
Due Registration,
Etc.........................................16
(h)
Use of Name and
Mark..........................................17
(i)
Protection of
Information.....................................17
(j)
Effect of
Agreement...........................................17
3.17 Operation of the
Business..........................................17
3.18 Brokers'
Fees......................................................17
3.19
Disclosure.........................................................17
3.20 Transactions with
Affiliates.......................................18
3.21 Capitalization of
Seller...........................................18
3.22 No Liquidation or Winding-Up;
Fairness of Consideration............18
3.23 Unregistered
Securities............................................18
3.24 Risk of
Loss.......................................................19
3.25 Investment
Experience..............................................19
3.26
Disclosure.........................................................19
ARTICLE IV - Representations and Warranties
of Purchaser.................19
4.1 Organization and Good
Standing.....................................19
4.2 Execution and
Delivery.............................................20
4.3 No
Conflicts.......................................................20
4.4 Compliance with
Law................................................20
4.5 No restrictions Against
Purchase of the Assets.....................20
4.6 SEC
Filings........................................................20
4.7 Absence of Material Adverse
Change.................................21
4.8 No
Litigation......................................................21
4.9 Valid Issuance of Stock
Consideration..............................21
4.10 Capitalization of
Purchaser........................................21
ARTICLE V - Additional
Covenants.........................................21
5.1 Covenants of
Seller................................................21
5.2 Covenants of
Purchaser.............................................22
5.3
Expenses...........................................................22
5.4 Further
Assurances.................................................22
5.5 Inconsistent
Action................................................22
5.6 Employee
Matters...................................................22
5.7 Assignments;
Consents..............................................23
5.8 Sufficiency of
Assets..............................................23
5.9
Waiver.............................................................24
5.10 Tax Assessment and
Audits..........................................24
5.11 Restrictions on
Transfer...........................................24
5.12
Legend.............................................................24
5.13 Prohibition on Short
Sales.........................................25
ARTICLE VI - Conditions Precedent to
Closing.............................25
6.1 Conditions of
Purchaser............................................25
6.2 Conditions of
Seller...............................................26
<PAGE>
ARTICLE VII -
Indemnification............................................27
7.1 Survival
..........................................................27
7.2
Indemnification....................................................27
7.3
Procedures.........................................................27
7.4 Third Party
Claims.................................................28
7.5 Indemnification
Exclusive..........................................29
ARTICLE VIII - General
Provisions........................................29
8.1
Notices............................................................29
8.2
Severability.......................................................30
8.3 Entire
Agreement...................................................30
8.4 Successors and
Assigns.............................................30
8.5
Counterparts.......................................................30
8.6 Recitals, Schedules,
Exhibits and Annexes..........................30
8.7
Construction.......................................................31
8.8 Governing
Law......................................................31
8.9 Passage of Title and Risk of
Loss..................................31
8.10 Bulk
Sales.........................................................31
8.11
Records............................................................31
8.12
Arbitration........................................................31
<PAGE>
INDEX OF EXHIBITS
Exhibit A
Escrow Agreement
Exhibit B
Noncompetition Agreement
Exhibit B-1
Noncompetition Agreement (Batista)
Exhibit C
$.50 Per Share Warrant
Exhibit C-1
$.75 Per Share Warrant
Exhibit D
Seller's Counsel's Opinion
INDEX OF SCHEDULES
Schedule 3.6(a) - Liens
Schedule 3.6(b) - Licenses
Schedule 3.6(d) - Other Persons Who have
rights/interests in Assets
Schedule 3.7 - Litigation
Schedule 3.9 - Employee
Plans
Schedule 3.10(a) - Approvals
Schedule 3.10(b) - Exceptions to
Transferability of Approvals
Schedule 3.11(a) - Assumed Contracts
Schedule 3.11(b) - Exceptions to
enforceability/validity of Assumed Contracts
Schedule 3.12(a) - Labor Agreements
Schedule 3.12(a) and (b) - Obligations to
continue employment/consultant
arrangements
Schedule 3.15 - Product
Warranties
Schedule 3.16(a) - Intellectual
Property
Schedule 3.1(c) - Exceptions to Transfer of
Intellectual Property
Schedule 3.16(d) - Notice of
Infringement
Schedule 3.16(e) - Licensing
Arrangements
Schedule 3.16(f) - Intellectual Property
Litigation or Disputes
Schedule 3.16(g) - Exceptions to
Registration of Intellectual Property
Schedule 3.16(h) - Exceptions to use of
Name and Mark
Schedule 3.17 - Operation of
Business
Schedule 3.20 - Transactions with
Affiliates
Schedule 3.21 - Capitalization of
Seller
Schedule 4.5 - Restrictions
Against Purchase of Assets
Schedule 5.6(a) - Employment of Lars
Fuhrken-Batista by eGames
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as
of
October 6, 2005 among eGAMES, INC., a
Pennsylvania corporation ("Purchaser"),
CINEMAWARE, INC., a California corporation
("Seller"), and LARS FUHRKEN-BATISTA,
the principal shareholder of Seller
("Shareholder").
RECITALS
A. Seller is presently engaged in the business of designing,
developing, distributing and selling
interactive entertainment software products
for game platforms and the Internet.
B. Seller desires to Transfer (as hereinafter defined) to
Purchaser,
and Purchaser desires to purchase from
Seller, all of the assets owned or held
for use by Seller or used by Seller in
connection with acquiring, designing,
developing, distributing, promoting and/or
selling interactive entertainment
software products for various game
platforms and the Internet (referred to
herein as the "Products" or the
"Business"), other than the Excluded Assets (as
hereinafter defined), on the terms and
subject to the conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the premises and the
respective
representations, warranties, covenants,
agreements and conditions hereinafter
set forth, and other good and valuable
consideration, the receipt and
sufficiency of which are hereby
acknowledged, and intending to be legally bound,
the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
-----------
Unless otherwise defined herein or the context otherwise requires,
the
terms defined in this Article I shall have
the meanings herein specified for all
purposes of this Agreement, applicable to
both the singular and plural forms of
any of the terms herein defined. Unless
otherwise indicated, any reference
herein to a Section, Article, Exhibit or
Schedule shall mean the applicable
section, article, annex or schedule of or
to this Agreement. All accounting
terms used in this Agreement not defined in
this Article I shall, except as
otherwise provided for herein, be construed
in accordance with generally
accepted accounting principles,
consistently applied.
"Action" shall mean any actual or threatened claim, action,
suit,
arbitration, hearing, inquiry, proceeding,
complaint, charge or investigation by
or before any Person, Governmental Entity
or arbitrator and any appeal from any
of the foregoing.
"Affiliate" of a Person shall mean any Person that directly or
indirectly controls, is controlled by, or
is under common control with, the
indicated Person.
"Agreement" shall mean this Asset Purchase Agreement, together with
all
Schedules and Exhibits hereto.
<PAGE>
"Approvals" shall have the meaning given to such term in Section
2.1(d)
hereof.
"Assets" shall have the meaning given to such term in Section
2.1
hereof.
"Assumed Contract" shall have the meaning given to such term in
Section
2.8(a) hereof.
"Assumed Liabilities" shall have the meaning given to such term
in
Section 2.8 hereof.
"Balance Sheet Date" shall have the meaning given to such term
in
Section 3.5 hereof.
"Business" shall have the meaning given to such term in the
preamble of
this Agreement.
"Claim" shall have the meaning given to such term in Section
7.3
hereof.
"Claim Notice" shall have the meaning given to such term in Section
7.3
hereof.
"Closing" shall have the meaning given to such term in Section
2.5
hereof.
"Closing Date" shall have the meaning given to such term in Section
2.5
hereof.
"Closing Stock Payment" shall have the meaning given to such term
in
Section 2.4(a) hereof.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Contracts" shall have the meaning given to such term in Section
2.1(b)
hereof.
"Damages" shall mean any and all losses, liabilities,
obligations,
costs, expenses, damages or judgments of
any kind or nature whatsoever
(including reasonable attorneys',
accountants' and experts' fees, disbursements
of counsel, and other costs and expenses
incurred pursuing indemnification
claims under Article IX hereof).
"eGames Stock"
shall have the meaning given to such term in Section 2.3
hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974,
as amended from time to time.
"ERISA Affiliate" shall mean any Person which is (or at any
relevant
time was) a member of a controlled group of
corporations within the meaning of
Code Section 414(b), all trades or
businesses under common control within the
meaning of Code Section 414(c), and all
affiliated service groups within the
meaning of Code Section 414(m), of which
Seller is (or at any relevant time was)
a member.
"Escrow Account" shall have the meaning given to such term in
Section
2.4(b) hereof.
<PAGE>
"Escrow Agent" shall have the meaning given to such term in
Section
2.4(b) hereof.
"Escrow Agreement" shall have the meaning given to such term in
Section
2.4(b) hereof.
"Escrow Stock" shall have the meaning given to such term in
Section
2.4(b) hereof.
"Exchange Act" shall have the meaning given to such term in Section
4.3
hereof.
"Excluded Assets" shall have the meaning given to such term in
Section
2.2 hereof.
"$.50 Per Share Warrant" shall have the meaning given to such term
in
Section 2.3 hereof and shall be in the form
attached hereto as Exhibit C.
"Financial Statements" shall have the meaning given to such term
in
Section 3.4(a) hereof.
"Governmental Entity" shall mean any local, state, federal or
foreign
(i) court, (ii) government or (iii)
governmental department, commission,
instrumentality, board, agency or
authority, including, without limitation, the
IRS and other taxing authorities.
"Intellectual Property" shall have the meaning given to such term
in
Section 2.1(c).
"Knowledge" shall mean (a) knowledge of any of the senior
management of
Seller, including Lars Batista, and (b) the
knowledge that any of such persons
would be reasonably expected to have after
making inquiry of those persons
employed by such party who would reasonably
be expected to have knowledge of the
issue in question.
"Legal Requirement" shall mean any statute, law, ordinance,
rule,
regulation, permit, order, writ, judgment,
injunction, decree or award issued,
enacted or promulgated by any Governmental
Entity or any arbitrator.
"Lien" shall mean all liens (including judgment and mechanics'
liens,
regardless of whether liquidated),
mortgages, assessments, security interests,
easements, claims, pledges, trusts
(constructive or other), deeds of trust,
options or other charges, encumbrances or
restrictions.
"Material Adverse Effect" shall mean any event, change or effect
that
is (or could reasonably be expected to be)
materially adverse to the Assets or
the Business or to Purchaser's ability to
continue to operate the Business as
operated prior to the Closing.
"Noncompetition Agreements" shall mean the Noncompetition
Agreements in
the forms attached hereto as Exhibit B and
Exhibit B-1.
"Ordinary Course" shall mean, when used with reference to Seller,
the
ordinary and normal course of the operation
of the Business, consistent with
past practices.
<PAGE>
"Owned Tangible Personal Property" shall have the meaning given to
such
term in Section 2.1(a) hereof.
"Pennsylvania Law" shall mean the Pennsylvania Business
Corporation
Law.
"Person" shall mean all natural persons, corporations, business
trusts,
associations, companies, partnerships and
joint ventures.
"Plan" shall mean any employee benefit plan within the meaning
of
Section 3(3) of ERISA and any other written
or oral employee plan (other than
arrangements merely involving the payment
of wages) which are or at any time
have been established, maintained, or
contributed to by Seller or any ERISA
Affiliate for the benefit of current or
former employees, with respect to which
Seller or an ERISA Affiliate has or may in
the future have any liability or
obligation to contribute or make payments
of any kind.
"Products" shall have the meaning given to such term in the
preamble of
this Agreement.
"Purchase Price" shall have the meaning given to such term in
Section
2.3 hereof.
"Purchaser's Financial Statements" shall have the meaning given to
such
term in Section 4.6(b) hereof.
"Retained Liabilities" shall have the meaning given to such term
in
Section 2.9 hereof.
"Rule 144" shall have the meaning given to such term in Section
5.11
hereof.
"SEC" shall have the meaning given to such term in Section 4.6
hereof.
"SEC Filings" shall have the meaning given to such term in Section
4.6
hereof.
"$.75 Per Share Warrant" shall have the meaning given to such term
in
Section 2.3 hereof and shall be in the form
attached hereto as Exhibit C-1.
"Shareholder" shall have the meaning given to such term in the
preamble
of this Agreement.
"Stock Consideration" shall have the meaning given to such term
in
Section 2.3 hereof.
"Subsidiary of a Person" shall mean any corporation,
partnership,
limited liability company, association or
other business entity at least 50% of
the outstanding voting power of which is at
the time owned or controlled
directly or indirectly by such Person or by
one or more of such subsidiary
entities, or both.
"Tax" shall mean all taxes, including without limitation all
Federal,
state, local or foreign income, gross
receipts, license, payroll, unemployment,
<PAGE>
excise, severance, stamp, occupation,
premium, windfall profits, environmental
(including, without limitation, taxes under
Code Section 59A), customs duties,
capital stock, franchise, profits,
withholding, social security (or similar),
employment, disability, real property,
personal property, ad valorem, sales,
use, transfer, registration, value added,
alternative or add-on minimum,
estimated tax or other tax, assessment or
charge of any kind whatsoever, and any
interest, fine, penalty or addition
thereto, whether disputed or not.
"Tax Return" shall mean any return, declaration, report, claim
for
refund or information, or statement
relating to Taxes, and any exhibit,
schedule, attachment or amendment
thereto.
"Third Party Claim" shall have the meaning given to such term
in
Section 7.3 hereof.
"Transfer" shall have the meaning given to such term in Section
2.1
hereof.
"Warrant Consideration" shall have the meaning given to such term
in
Section 2.3 hereof.
ARTICLE II
PURCHASE AND SALE OF ASSETS
---------------------------
2.1 Purchase and
Sale of Assets. On the terms and subject to the
conditions hereof, at the Closing, Seller
will sell, transfer, grant, convey,
assign and deliver ("Transfer") to
Purchaser, and Purchaser will purchase and
accept from Seller, the rights, properties
and assets owned by Seller in
connection with the operation or conduct of
the Business as of the date hereof,
or acquired by Seller in connection with
the operation of the Business between
the date hereof and the Closing Date,
including, but not limited to, the rights,
properties and assets described in this
Section 2.1 (collectively the "Assets"):
(a) Personal Property.
The software, files, books and
records, and all other tangible personal
property owned by Seller in connection
with the operation of the Business as of
the date hereof or acquired by Seller
in connection with the operation of the
Business between the date hereof and the
Closing Date, including those items listed
or described on Schedule 2.1(a),
except for property excluded under Section
2.2 (collectively, the "Owned
Tangible Personal Property");
(b) Contract Rights.
All rights and incidents of interest
of Seller existing as of the date hereof or
acquired by Seller between the date
hereof and the Closing Date in, to or under
all licenses, leases, agreements,
customer orders, contracts, written or
verbal (including product warranty
claims, rebates and indemnity or other
rights of action against any person
arising out of acts, omissions or
occurrences before, at or after the Closing),
prepaid items, deposits and refunds
relating to the Business, including those
items listed on Schedule 2.1(a)
(collectively, the "Contracts");
(c) Intellectual
Property. The entire right, title and
interest of Seller existing as of the date
hereof or acquired by Seller between
<PAGE>
the date hereof and the Closing Date in
connection with the operation of the
Business or used by Seller in connection
with the operation of the Business in,
to or under (i) all United States,
international and foreign patents and
applications therefor and all reissues,
divisions, renewals, extensions,
provisionals, continuations and
continuations-in-part thereof, (ii) all
software, licenses, artwork, drawings and
renderings, inventions (whether
patentable or not), invention disclosures,
improvements, trade secrets,
proprietary information, know how,
technology, technical data and customer
lists, and all documentation relating to
any of the foregoing, (iii) all
copyrights, copyright registrations and
applications therefor, and all other
rights corresponding thereto throughout the
world, (iv) all industrial designs
and any registrations and applications
therefor, (v) all trade names, logos,
common law trademarks and service marks,
trademark and service mark
registrations and applications therefor,
(vi) all databases and data collections
and all rights therein, (vii) Seller's list
of customer prospects pertaining to
the Business, (viii) all moral and economic
rights of authors, musicians,
composers and inventors, however
denominated, and (ix) any similar or equivalent
rights to any of the foregoing (as
applicable) (collectively, the "Intellectual
Property");
(d) Governmental
Licenses, Permits and Approvals. To the
extent transferable, all rights and
incidents of interest of Seller existing as
of the date hereof or acquired by Seller
between the date hereof and the Closing
Date in, to or under all licenses, permits
and authorizations (collectively, the
"Approvals") issued or requested to be
issued by any Governmental Entity or
other board or agency (e.g. the
Entertainment Software Rating Board) in
connection with the operation of the
Business;
(e) Books and Records.
Copies of all books, records,
ledgers, files, documents, correspondence,
studies, reports and other documents
of Seller relating to the Business or the
Assets; and
(f) Goodwill. The
goodwill of the Business.
2.2 Excluded
Assets. Notwithstanding anything contained in this
Agreement to the contrary, the following
rights, properties and assets
(collectively, the "Excluded Assets") will
not be included in the Assets: any
and all rights to future royalties that may
be payable under (i) the May 28,
2004 agreement between Seller and Zoo
Digital Publishing Ltd. relating to
exclusive distribution rights in certain
territories for the Game Boy Advance
versions of Defender of the Crown and (ii)
the April 8, 2004 agreement between
Bethesda Softworks LLC and Seller relating
to a casino title for PS2 and Xbox
developed by Seller for Bethesda Softworks
LLC.
2.3 Purchase
Price. Purchaser will pay for the Assets and Business an
aggregate purchase price of (i) such number
of shares of restricted common stock
of Purchaser (the "eGames Stock") equal to
$300,000 divided by the average
closing "ask" quotation of a share of
eGames Stock on the OTC BB for (i) the
five (5) trading days prior to the date of
this Agreement and (ii) the five (5)
trading days ending one trading day prior
to the Closing, but in no event less
than 600,000 shares or more than 855,000
shares (the "Stock Consideration"),
(ii) a warrant for the purchase of 150,000
shares of Purchaser's common stock at
an exercise price of $.50 per share (the
"$.50 Per Share Warrant") and (iii) a
warrant for the purchase of 150,000 shares
of Purchaser's common stock at an
exercise price of $.75 per share (the "$.75
Per Share Warrant"; together with
the $.50 Per Share Warrant, the "Warrant
Consideration" and, together with the
Stock Consideration, the "Purchase
Price").
<PAGE>
2.4 Payment of
Purchase Price. At the
Closing (as defined in
Section 2.5):
(a) Purchaser shall
pay to Seller two-thirds of the Stock
Consideration (the "Closing Stock
Payment"), plus the Warrant Consideration.
(b) Purchaser shall
deposit into an escrow account (the
"Escrow Account") the remaining one-third
of the Stock Consideration (the
"Escrow Stock"), to be held and disbursed
by Hudson United Bank (or if Hudson
United Bank is unable to serve, by another
party appointed by the parties), as
escrow agent (the "Escrow Agent"). The
Escrow Stock shall be held by the Escrow
Agent pursuant to an escrow agreement (the
"Escrow Agreement"), in the form of
Exhibit A. The Escrow Stock will be subject
to set-off for any indemnification
claims arising during the one-year period
commencing on the date hereof.
The Escrow Agreement shall terminate one
year after the date hereof, unless
there are any unresolved indemnification
claims on such date pursuant to which
Purchaser may be entitled to all or a
portion of the Escrow Stock. In the event
of any such unresolved claims or disputes,
the Escrow Agreement will continue in
force, but any portion of the Escrow Stock
which exceeds the amount for which a
claim has been made or a dispute exists
shall be released to Seller. Seller's
liability for the claims identified in this
Section 2.4(b), or any other claims
of Purchaser hereunder, shall not be
limited to the Escrow Stock.
2.5 Closing. The
purchase and sale of the Assets and the consummation
of the other transactions contemplated by
this Agreement (the "Closing") shall
occur at 10:00 a.m., local time, on October
13, 2005 at the offices of
Purchaser or at such other time or on such
other date as shall be agreed by
Seller and Purchaser upon fulfillment of
all conditions precedent to the
Closing, such hour and date being herein
generally referred to as the "Closing
Date." At the Closing:
(a) Seller shall
deliver or cause to be delivered to
Purchaser, against payment by Purchaser to
Seller of the Closing Payment:
(i) all of the
agreements, documents,
certificates and
instruments required to be delivered by
Seller pursuant to Section 6.1 hereof.
(b) Purchaser shall
deliver or cause to be delivered to
Seller against delivery of the agreements,
documents, certificates and
instruments required to be delivered by
Seller pursuant to Section 6.1:
(i) a
certificate representing the Closing Stock
Payment;
(ii) the $.50 Per
Share Warrant;
(iii) the $.75 Per Share Warrant; and
<PAGE>
(iv) all of the
documents, if any, required to be
delivered by Purchaser pursuant to Section
6.2 hereof.
2.6 Ad Valorem
Tax Adjustment. All ad valorem Taxes imposed by any
taxing authority upon the Assets will be
prorated between Seller and Purchaser
as of the Closing Date based on the most
current available tax rates and
assessed values (such prorations to be
adjusted when final rates and assessed
values are established). All such Taxes
attributable to the period up to the
Closing Date and which remain unpaid as of
the Closing Date shall be deducted
from the Purchase Price. All such Taxes, if
any, attributable to the period
following the Closing Date and which have
been paid by Seller prior to the
Closing Date shall be added to the Purchase
Price. All adjustments to the
Purchase Price will be calculated as of
11:59 p.m. on the Closing Date.
2.7 Allocation
of Purchase Price. The Purchase Price represents the
amount agreed upon by Purchaser and Seller
to be the aggregate fair market value
of the Assets. Purchaser and Seller have
agreed that the Purchase Price will be
allocated in accordance with Section 1060
of the Code on the basis of the actual
results of operations of Seller through the
Closing Date. Purchaser and Seller
will allocate the Purchase Price to the
Assets in such manner consistently for
all purposes, including in connection with
all federal, foreign, state, local
and other Tax Returns and reports prepared
and filed by or for either of
Purchaser or Seller.
2.8 Assumed
Liabilities. On the terms and subject to the conditions
hereof, as of the Closing, Purchaser will
assume only and thereafter in due
course pay, perform and discharge the
following, and only the following,
liabilities and obligations of Seller (the
"Assumed Liabilities"):
(a) all liabilities
and obligations of Seller arising
under the terms of the Contracts that are
included in the Assets and listed or
described on Schedule 3.11(a) (the "Assumed
Contracts"), but only to the extent
such liabilities and obligations arise
after the Closing Date (and are not based
on events occurring on or prior to the
Closing Date) under the terms of such
Assumed Contracts, provided, however, that
Purchaser will not assume or be
responsible for any such liabilities or
obligations which arise under or in
relation to any Plan or from any breach or
default by Seller under any Contract,
all of which liabilities and obligations
will constitute Retained Liabilities
(as defined in Section 2.9);
(b) the obligation to
provide customer support and
service through Seller's website as it
relates to the Intellectual Property
purchased by Purchaser; and
(c) such liabilities
and obligations as are listed on
Schedule 2.8(c).
2.9 Retained
Liabilities. Except as provided in Section 2.8, Seller
will retain, and Purchaser will not assume
or be responsible or liable with
respect to, any liabilities or obligations
of Seller or its Affiliates or their
respective predecessors-in-interest,
whether or not arising out of or relating
to the operation of the Business or
associated with or arising from any of the
<PAGE>
Assets or any other rights, properties or
assets used in or associated with the
Business at any time, and whether fixed or
contingent, direct or indirect, or
known or unknown, including, but not
limited to, liabilities relating to
warranties and service obligations relating
to the operation of the Business by
the Seller, liabilities for Taxes relating
to the sale of the Assets and
liabilities with respect to any of Seller's
employees (collectively the
"Retained Liabilities"). Except for the
Assumed Liabilities, Seller agrees to
pay or discharge when due any and all
liabilities of Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER
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Seller and Shareholder, jointly and severally, hereby represent
and
warrant to, and covenant and agree with,
Purchaser that as of the date hereof
and as of the Closing Date:
3.1 Organization
and Good Standing.
(a) Seller has been
duly organized and is existing as a
corporation in good standing under the laws
of the jurisdiction of its
incorporation with full power and authority
(corporate and other) to own and
lease its assets and properties and to
conduct its business and the operation of
the Business as currently conducted. Seller
has been duly qualified as a foreign
corporation for the transaction of business
and is in good standing under the
laws of each jurisdiction set forth on
Schedule 3.1(a), such jurisdictions
comprising all jurisdictions in which
Seller owns or leases any property, or
conducts any business, so as to require
such qualification, except where any
failure to qualify would not have a
Material Adverse Effect, as defined in
Article I.
(b) Except as set
forth in Schedule 3.1(b), Seller has no
Subsidiary nor owns or controls, or has any
other equity investment or other
interest in, directly or indirectly, any
corporation, joint venture,
partnership, association or other
entity.
3.2
Authorization and Effect of Agreement. Seller has the requisite
corporate power to execute and deliver this
Agreement and, subject to obtaining
the approval of Seller's stockholders in
accordance with applicable California
law, to perform the transactions
contemplated hereby to be performed by Seller.
The execution and delivery by Seller of
this Agreement and the performance by
Seller of the transactions contemplated
hereby to be performed by Seller have
been duly and validly authorized by all
necessary action on the part of Seller's
board of directors and no other corporate
proceedings on the part of Seller are
necessary to authorize this Agreement and
to consummate the transactions
contemplated hereby (other than the
approval of this Agreement by Seller's
stockholders as required under applicable
California law) and, if applicable,
holders of Seller's indebtedness. This
Agreement has been duly executed and
delivered by Seller and, assuming the due
execution and delivery of this
Agreement by Purchaser, constitutes a valid
and binding obligation of Seller
enforceable in accordance with its
terms.
3.3 No
Restrictions Against Sale of the Assets. Except as listed or
described on Schedule 3.3, the execution
and delivery of this Agreement by
<PAGE>
Seller does not, and the performance by
Seller of the transactions contemplated
hereby to be performed by it will not,
conflict with, or result in any violation
of, or constitute a default (with or
without notice or lapse of time, or both)
under, or give rise to a right of
termination, cancellation or acceleration of
any obligation or to loss of a material
benefit under, (a) the certificate of
incorporation or bylaws of Seller, (b) any
Legal Requirement to which Seller or
any of the Assets is subject, (c) any
Contract or other material agreement,
instrument or obligation of Seller, or (d)
any licenses of Seller. No consent,
approval, order or authorization of, or
registration, declaration or filing
with, any Governmental Entity or any Person
is required to be obtained or made
by or with respect to Seller under any
Legal Requirement in connection with the
execution and delivery of this Agreement by
Seller or the performance by Seller
of the transactions contemplated hereby to
be performed by it.
3.4 Financial
Statements.
(a) Schedule 3.4
hereto contains true and complete copies
of the unaudited balance sheets of Seller
at December 31, 2003 and 2004, and the
related unaudited income statement for the
years then ended (collectively, the
"Financial Statements").
(b) The Financial
Statements fairly present, in all
material respects, the financial condition
of the Seller and the Business as of
the dates indicated therein and the results
of operations and changes in
financial position of the Seller and the
Business for the periods specified
therein, have been prepared in conformity
with Seller's past practices applied
on a consistent basis during the periods
covered thereby and prior periods.
(c) The Seller has no
liabilities or obligations which
would be required under Seller's past
practices to be reflected on a balance
sheet of the Seller as of the date of this
Agreement, except for liabilities and
obligations (i) incurred or arising in the
ordinary course of business since
June 30, 2005, (ii) incurred or arising
other than in the ordinary course of
business since June 30, 2005 and not,
individually or in the aggregate,
material, or (iii) described on Schedule
3.4(c).
3.5 Operation of
the Business Since December 31, 2004. Except as
described on Schedule 3.5, since December
31, 2004 (the "Balance Sheet Date"),
Seller has conducted the operation of the
Business in the Ordinary Course, and,
other than has been disclosed to Purchaser
on Schedule 3.5, no change has
occurred which materially and adversely
affects the Assets or the condition
(financial or otherwise), results of
operations or prospects of the Business,
nor, to Seller's knowledge, have any events
occurred nor do there exist any
circumstances which might reasonably be
expected to result, either before or
after the Closing Date, in any such
change.
3.6 Title to
Assets; Licenses.
(a) Seller has, and at
Closing will have, good,
marketable and exclusive title to all of
the Assets reflected on the Balance
Sheet as owned by Seller and all of the
Assets acquired by Seller since the
Balance Sheet Date, in each case free and
clear of all Liens except as set forth
on Schedule 3.6(a). Seller has the valid
and enforceable power and unqualified
right to use and Transfer to Purchaser, the
Assets.
<PAGE>
(b) Schedule 3.6(b)
contains a list of all licenses
relating to the Business under which Seller
is the licensee, together with (i)
the nature of each of the licensed Assets,
(ii) the termination date of each
such license, (iii) the name of the
licensor, (iv) all payments made or required
to be made for the fiscal years ended
December 31, 2003 and December 31, 2004,
and (v) all prepaid payments made
thereunder. All licenses pursuant to which
Seller licenses property from others are
valid, subsisting in full force and
effect in accordance with their respective
terms, and there is not, under any
license, any existing default or event of
default (or event that, with notice or
passage of time, or both, would constitute
a default, or would constitute a
basis of force majeure or other claim of
excusable delay or nonperformance).
Seller has the valid and enforceable right
to use and Transfer to Purchaser
Seller's rights in and to the licensed
Assets. True and complete copies of all
licenses listed on Schedule 3.6(b) have
been delivered to Purchaser heretofore.
Except as set forth on Schedule 3.6(b), no
such license will require the consent
of the licensor to, or as a result of, the
consummation of the transactions
contemplated by this Agreement.
(c) The delivery to
Purchaser at Closing of the
instruments of Transfer contemplated by
this Agreement will vest in Purchaser
good, marketable and exclusive title to the
Assets, free and clear of all Liens,
except for Liens listed or described on
Schedule 3.6(a).
(d) Except as set
forth in Schedule 3.6(d), no Person,
other than Seller, has any rights or
interests in the Assets or the Business.
(e) The Assets include
all of the assets, property and
rights, tangible or intangible, required by
Purchaser to operate the Business,
as currently operated, and to produce,
sell, distribute, maintain, design,
enhance and license, and design and develop
derivatives of, the Products, or
derivatives thereof.
3.7 No
Litigation. Except as set forth on Schedule 3.7, to Seller's
Knowledge, there is no outstanding
judgment, order, decree, award, stipulation
or injunction of any Person, Governmental
Entity or arbitrator against or Action
pending or, to Seller's Knowledge,
threatened, against Seller relating to or
affecting the Business or the Assets or
affecting Seller's ability to perform
its obligations under this Agreement or
under any agreement or instrument
contemplated by this Agreement. Any Action
for defective or allegedly defective
products or workmanship pending or
threatened against Seller, and the details of
such Action, are described on Schedule
3.7.
3.8 Income and
Other Taxes. Except as
set forth on Schedule 3.8:
(a) All Tax Returns
required to be filed through and
including the date hereof in connection
with the operations of the Seller's
business are true, complete and correct in
all respects and have been properly
and timely filed. Seller has not requested
any extension of time within which to
file any Tax Return, which Tax Return has
not since been filed. No Liens have
been imposed on or asserted against any of
the Assets as a result of or in
connection with any failure to pay any
Taxes;
<PAGE>
(b) All Taxes required
to be paid or withheld and
deposited through and including the date
hereof in connection with the Business
have been duly and timely paid or deposited
by Seller. Seller has properly
withheld or collected all amounts required
by law for income Taxes and
employment Taxes relating to its employees,
creditors, independent contractors
and other third parties, and for sales
Taxes on sales, and has properly and
timely remitted such withheld or collected
amounts to the appropriate
Governmental Entity. Seller has no
liabilities for any T
