<PAGE>
EXHIBIT 10.1
EXECUTION COPY
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ASSET PURCHASE AGREEMENT
AMONG
S.O.S. COMPUTER SYSTEMS, INC.
THE DUNSTER FAMILY TRUST,
THE CLARK LINDSAY BALLANTYNE TRUST,
THE LAURA BALLANTYNE WARNER TRUST,
DAVID SMART
AND
SHIP ACQUISITION CORP.
CLOSING DATE APRIL 6, 2005
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TABLE OF CONTENTS
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PAGE
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1
DEFINITIONS.....................................................................................
1
2 SALE OF ASSETS;
CLOSING.........................................................................
5
2.1.
Sale of
Assets..........................................................................
5
2.2.
Consideration...........................................................................
5
2.3.
Net
Current Assets Adjustment to Purchase
Price......................................... 5
2.4.
Accounts
Receivable Adjustment to Purchase
Price........................................ 7
2.5.
Buyer's
Assumption of
Liabilities.......................................................
7
2.6.
Closing.................................................................................
8
2.7.
Deliveries by Seller Parties
at Closing.................................................
8
2.8.
Deliveries
by Buyer at
Closing..........................................................
9
3 REPRESENTATIONS
AND WARRANTIES OF THE SELLER
PARTIES............................................ 9
3.1.
Organization and
Power..................................................................
9
3.2.
Authorization...........................................................................
10
3.3.
No
Conflict.............................................................................
10
3.4.
Title to
Purchased
Assets...............................................................
10
3.5.
Condition
of Purchased
Assets...........................................................
10
3.6.
Financial
Statements....................................................................
10
3.7.
Accounts
Receivable;
Credits............................................................
11
3.8.
Pre-Bill................................................................................
11
3.9.
Litigation..............................................................................
11
3.10.
Compliance with
Law.....................................................................
11
3.11.
Absence of
Undisclosed
Liabilities......................................................
12
3.12.
Absence of
Certain
Changes..............................................................
12
3.13.
Contracts...............................................................................
13
3.14.
Intellectual
Property...................................................................
13
3.15.
Real
Property...........................................................................
15
3.16.
Environmental
Matters...................................................................
16
3.17.
Labor;
ERISA............................................................................
17
3.18.
Taxes...................................................................................
17
3.19.
Capitalization;
Relationships with Related
Persons...................................... 18
3.20.
Brokers.................................................................................
18
3.21.
Insurance...............................................................................
18
3.22.
Powers of
Attorney......................................................................
19
3.23.
Debt....................................................................................
19
3.24.
Solvency................................................................................
19
3.25.
Statements not
Misleading...............................................................
19
4 REPRESENTATIONS
AND WARRANTIES OF
BUYER.........................................................
19
4.1.
Organization and Power of
Buyer.........................................................
19
4.2.
Authorization...........................................................................
20
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4.3.
No
Conflict.............................................................................
20
4.4.
No
Creditors............................................................................
20
5
COVENANTS.......................................................................................
20
5.1.
Further
Assurances;
Cooperation.........................................................
20
5.2.
Covenants
not to
Compete................................................................
21
5.3. Use of
Names............................................................................
23
5.4.
Passage of
Title and Risk of
Loss.......................................................
23
5.5.
Transfer
of Goodwill and
Business.......................................................
23
5.6.
Expenses;
Transfer
Taxes................................................................
23
5.7.
Taxes...................................................................................
23
5.8.
Employment
Matters......................................................................
24
5.9.
Agreement
Regarding Lease
Payments......................................................
25
5.10.
Enforcement of
Assignments..............................................................
25
6
INDEMNIFICATION.................................................................................
26
6.1.
Indemnified
Losses......................................................................
26
6.2.
Indemnification by Seller
Parties.......................................................
26
6.3.
Indemnification By
Buyer................................................................
26
6.4.
Third
Party Claims Against
Buyer........................................................
27
6.5
Third Party Claims Against
Seller.......................................................
27
6.6.
Procedures; No Waiver;
Exclusivity......................................................
27
6.7.
Set-Off.................................................................................
28
6.8.
Survival................................................................................
29
6.9.
Limitations on Indemnification by the Seller
Parties.................................... 29
6.10.
Set-Off Against
Lease...................................................................
30
6.11.
Exclusive
Remedy........................................................................
30
7
MISCELLANEOUS...................................................................................
31
7.1.
Notices.................................................................................
31
7.2.
Entire
Agreement........................................................................
31
7.3.
Counterparts............................................................................
31
7.4.
Parties in
Interest;
Assignment.........................................................
32
7.5.
Governing
Law; Fees and
Costs...........................................................
32
7.6.
Schedules
and
Headings..................................................................
32
7.7.
Amendment...............................................................................
32
7.8.
Waiver..................................................................................
32
7.9.
Joint and
Several
Liability.............................................................
32
7.10.
Facsimile
Signatures....................................................................
32
7.11
Press
Release...........................................................................
32
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EXHIBITS AND SCHEDULES
Exhibit A --
Escrow
Agreement
Exhibit B --
Opinion of
Counsel to the Seller Parties
Exhibit C --
Bill of
Sale, Assignment and Conveyance
Exhibit D --
Lease
Exhibit E --
Assumption
of Liabilities
Schedule 1A
-- Assumed
Liabilities
Schedule 1B
-- Purchased
Assets
Schedule 2.3
--
Re-classified Assets
Schedule 2.7(e) --
Consents
Required for Closing
Schedule 3.3
-- Consents,
Etc.
Schedule 3.4
-- Title to
Purchased Assets
Schedule 3.5
-- Condition
of Purchased Assets
Schedule 3.6
-- Reference
Date Balance Sheet
Schedule 3.7
-- Accounts
Receivable; Credits
Schedule 3.8
--
Pre-Bill
Schedule 3.10
-- Compliance
with Law
Schedule 3.11
-- Absence of
Undisclosed Liabilities
Schedule 3.12
-- Absence of
Certain Changes
Schedule 3.13
--
Contracts
Schedule 3.14
--
Intellectual Property
Schedule 3.15
-- Real
Property
Schedule 3.17
-- Labor;
ERISA
Schedule 3.19
--
Capitalization
Schedule 3.20
--
Brokers
Schedule 3.21
--
Insurance
Schedule 3.23
-- Debt
Schedule 5.7
-- Additional
Obligation
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<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET
PURCHASE AGREEMENT (the "Agreement") is executed as of April 6,
2005, by and among S.O.S. COMPUTER SYSTEMS,
INC., a corporation incorporated
under the laws of the State of Utah
("Seller"), and solely for purposes of
Articles 3, 5 and 6 hereof, G. William
Dunster, as trustee of the Clark Lindsay
Ballantyne Trust (the "Clark Trust"), G.
William Dunster, as trustee of the
Laura Ballantyne Warner Trust (the "Warner
Trust"), George William Dunster and
Sondra Jane Dunster as trustees of the
Dunster Family Trust (the "Dunster Trust"
and together with the Clark Trust and the
Warner Trust, each a "Trust" and
collectively, the "Trusts") and David
Smart, an individual ("Smart" and together
with Seller and the Trust the "Seller
Parties") and SHIP ACQUISITION CORP., a
corporation incorporated under the laws of
the State of Delaware ("Buyer")
(collectively, the "parties").
RECITALS
WHEREAS,
Buyer wishes to purchase from Seller, and Seller wishes to sell
to Buyer, the Purchased Assets (as defined
below) upon the terms and conditions
of this Agreement; and
WHEREAS,
in order to induce Buyer to purchase the Purchased Assets,
Smart
and the Trusts, each of whom will receive a
direct, tangible and material
benefit from the transactions contemplated
by this Agreement by virtue of the
fact the Trusts and Smart are equity owners
of Seller, are willing to be parties
to this Agreement as set forth herein.
AGREEMENT
NOW,
THEREFORE, in consideration of the premises and the mutual
covenants
and agreements hereinafter set forth, the
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
For
purposes of this Agreement, the following terms shall have the
following meanings:
"Accounts Receivable"
shall mean (a) all trade accounts receivable and
other rights to payment from customers of
Seller and the full benefit of all
security for such accounts or rights to
payment, including all trade accounts
receivable representing amounts receivable
in respect of goods shipped or
products sold or services rendered to
customers of Seller, (b) all other
accounts or notes receivable of Seller and
the full benefit of all security for
such accounts or notes, and (c) any claim,
remedy or other right related to any
of the foregoing.
"Additional Escrow Funds" shall have the meaning set forth in
Section 5.9
and Section 6.10.
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"Assumed
Liabilities" shall mean only the duties, liabilities or
obligations of Seller, if any, arising
after the Closing Date in connection with
the items identified on Schedule 1A, except
as otherwise noted on Schedule 1A,
and shall specifically exclude, among other
things, (i) any liabilities for
employment, income, sales, property or
other Taxes incurred or accrued by
Seller, including without limitation as a
result of this transaction; (ii) any
fees or expenses incurred by Seller in
connection with this transaction; (iii)
any debt, payables or other liabilities to
Related Persons other than salary and
other payroll related expenses that may be
specifically set forth on Schedule
1A; (iv) any liabilities related to any
employee benefit plan, including,
without limitation, any 401(k), any profit
sharing or pension plan, whether or
not sponsored by Seller, any deferred
compensation payables, accrued bonus
payables, other accrued liabilities, and
any COBRA-related obligations; (v) any
and all liability related to Seller's Real
Property except as specifically set
forth in the Lease; (vi) any litigation
pending against Seller; (vii) any
warranty liability to Seller's customers,
including any liability arising out of
or relating to any breach by Seller of any
obligation to a customer that
occurred prior to the Closing; and (viii)
any liability or obligation
constituting or arising out of any Debt of
Seller.
"Business"
shall mean the business of developing, marketing and providing
data processing software and/or services to
credit unions, including, without
limitation, the licensing or provision of
Seller's "Centryx," "m*teller" and
e*teller software products and related
services.
"Closing"
shall mean the consummation of the purchase, sale, assignment
and assumption transactions described
herein.
"Closing
Date" shall mean the date on which the Closing occurs, as
specified in Section 2.6.
"Contract"
shall have the meaning assigned to it in Section 3.13.
"Current
Assets" shall mean all cash, cash equivalents, marketable
securities, Accounts Receivable, inventory
and prepaid expenses of Seller and
other assets classified as current assets
in accordance with GAAP.
"Current
Liabilities" shall mean all trade accounts payable and deferred
revenue obligations (whether categorized as
deferred revenue or as customer
deposits), accrued sales commissions,
accrued costs of sales and amounts owing
to vendors and suppliers for goods and
services provided before the Closing Date
but invoiced after the Closing Date, and
other debts, liabilities and
obligations that are classified as current
liabilities in accordance with GAAP.
"Debt", as
applied to any Person, means: (a) indebtedness or liability of
such Person for borrowed money, or with
respect to deposits or advances of any
kind, or for the deferred purchase price of
property or services; (b) all
obligations of such Person evidenced by
notes bonds, debentures or similar
instruments, (c) all obligations of such
Person under conditional sale or other
title retention agreements relating to
property or assets purchased by such
Person, (d) all obligations of such Person
for the deferred purchase price of
property or services; (e) all obligations
of such Person as lessee under capital
leases; (f) current liabilities of such
Person in respect of the present value
of unfunded vested benefits under any
employee benefit plan;
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(g) obligations of such Person under
letters of credit, bankers acceptances, or
comparable arrangements; (h) obligations of
such Person arising under acceptance
facilities; (i) guaranties; endorsements
(other than for collection or deposit
in the ordinary course of business), and
other contingent obligations of such
Person to purchase, to provide funds for
payment, to supply funds to invest in
any Persons, or otherwise to assure a
creditor against loss; (j) all obligations
of such Person secured by any Lien on any
of such Person's assets or property,
whether or not the obligations have been
assumed, and (k) all obligations of
such Person in respect of interest rate
protection agreements, foreign currency
exchange agreements or other interest or
exchange rate hedging arrangements.
"Excluded
Assets" shall mean those items listed as such on Schedule 1B
hereto.
"Financial
Statements" shall have the meaning assigned to it in Section
3.6.
"GAAP"
shall mean United States generally accepted accounting
principles
consistently applied.
"Governmental Entity" shall mean any court, administrative
agency,
commission, state, municipality or other
governmental authority or
instrumentality, domestic or foreign,
national or international.
"Knowledge" - an individual will be deemed to have "Knowledge" of a
fact
or other matter if:
(a) such
individual is actually aware of that fact or matter; or
(b) a prudent
individual could be expected to discover or
otherwise
become aware of that fact or matter in the course of conducting
a
reasonably comprehensive investigation regarding the accuracy of
any
representation or warranty contained in this Agreement, provided
however,
that the
Listed Persons (as defined below) shall not be required to make
inquiry of
other employees of Seller.
Seller
will be deemed to have "Knowledge" of a particular fact or
other
matter if David Smart, Richard Verhaaren,
Joseph Shelby, Elizabeth Kinkade,
Clyde Barton, Dennis Madson, Dan Mueller or
Kenny Burgener and/or any other
individual who is serving as a director or
officer of Seller (or in any similar
capacity) (the "Listed Persons") has
Knowledge of that fact or other matter (as
set forth in (a) and (b) above).
"Lease"
shall have the meaning assigned to it in Section 2.7(h).
"Liens"
shall mean all liabilities, claims, liens, charges, pledges,
security interests, options, restrictions
on the use of property or other
encumbrances of any kind.
"Material
Adverse Effect" means any circumstance, change in, or effect
on,
the Business or Seller that, individually
or in the aggregate with any other
circumstances, changes in, or effects on,
Seller or the Business: (a) is
materially adverse to the business,
operations, assets or liabilities
(including, without limitation, contingent
liabilities), employee relationships,
customer
- 3 -
<PAGE>
or supplier relationships, results of
operations or the condition (financial or
otherwise) of the Business, or (b)
materially adversely affects the ability of
Buyer to operate or conduct the Business in
the manner in which it is currently
operated or conducted by Seller, or (c)
impairs the ability of Seller to
consummate the transactions contemplated by
this Agreement; provided, however,
that the parties hereto agree that the
following shall not constitute a Material
Adverse Effect: (i) general economic
conditions; (ii) any changes generally
affecting the industry or industries in
which Seller currently operates the
Business; (iii) any fact, matter or
condition expressly disclosed in the
Disclosure Schedule, to the extent of such
disclosure; or (iv) any material
adverse effect arising out of or resulting
from this Agreement or the
transactions contemplated hereby or any
announcement thereof.
"Net
Current Assets" shall mean the amount of Current Assets included
in
the Purchased Assets minus the amount of
Current Liabilities included in the
Assumed Liabilities.
"Permitted
Liens" shall have the meaning assigned to it in Section 3.4.
"Person"
shall be construed broadly and shall include an individual, a
partnership, a corporation, a limited
liability company, an association, a joint
stock company, a trust, a joint venture, an
unincorporated organization or a
Governmental Entity (or any department,
agency or political subdivision
thereof).
"Primary
Losses" means Losses for which the Seller Parties have agreed
to
indemnify Buyer pursuant to Section 6.2(a),
other than Losses resulting from
breaches of the representations and
warranties set forth in Sections 3.1, 3.2,
3.4, 3.14, 3.16, 3.17 and 3.18.
"Purchase
Price" shall mean the aggregate amount to be paid by Buyer to
Seller for the Purchased Assets and
includes the cash consideration payable
pursuant to Section 2.2(a) and the Escrow
Funds payable pursuant to Section
2.2(b).
"Purchased
Assets" shall mean all of Seller's property and assets as of
the Closing Date, whether real, personal or
mixed, tangible and intangible, of
every kind and description, wherever
located, including without limitation those
items identified on Schedule 1B, but
excluding the Excluded Assets.
"Records"
shall mean all books of account, general, financial and
accounting records, files, invoices,
payment authorizations, correspondence to
and from customers, suppliers and payors,
and other data and information owned
by Seller.
"Reference
Date" shall mean November 30, 2004.
"Reference
Date Balance Sheet" shall mean the unaudited balance sheet for
Seller as of the Reference Date.
"Related
Person" shall mean any officer, director, stockholder or
trustee
of any stockholder of Seller, or any member
of the immediate family of any such
officer, director, stockholder or trustee
or any entity controlled by any such
officer, director, stockholder or trustee
or by a family member of any such
officer, director, stockholder or
trustee.
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"Secondary
Losses" means Losses for which Seller Parties have agreed to
indemnify Buyer which do not constitute
Primary Losses. In the event that a Loss
otherwise satisfies the conditions of both
a Primary Loss and a Secondary Loss,
such Loss shall be deemed to be a Secondary
Loss for all purposes.
"Taxes"
(or "Tax" where the context requires) shall mean all federal,
state, county, city, local, foreign and
other taxes (including, without
limitation, premium, excise, value added,
sales, use, occupancy, gross receipts,
franchise, ad valorem, severance, capital
levy, production, transfer,
withholding, employment, unemployment
compensation, payroll-related and property
taxes, import duties and other governmental
charges and assessments), whether or
not measured in whole or in part by net
income, including deficiencies,
interest, additions to tax or interest or
penalties with respect thereto.
ARTICLE 2
SALE OF ASSETS; CLOSING
SECTION
2.1. SALE OF ASSETS. At the Closing, Seller shall sell, assign,
transfer, convey and deliver to Buyer, free
and clear of all Liens (except
Permitted Liens), good and marketable title
to all of the Purchased Assets. It
is intended that the consummation of the
purchase and sale of the Purchased
Assets will transfer the Business to Buyer
as a going concern with all of the
assets, properties and rights used in or
required for the operation and conduct
of the Business as of the Closing Date.
SECTION
2.2. CONSIDERATION. The Purchase Price shall be $11,400,000.00,
subject to the adjustments set forth in
this Agreement, including without
limitation in Sections 2.3 and 2.4 hereof.
Buyer shall pay the Purchase Price by
delivery in the following manner:
(a)
$10,032,000 in
cash by wire transfer at Closing to Seller; and
(b)
$1,368,000 (the
"Escrow Funds") in cash by wire transfer at Closing
to U.S. Bank National Association (the
"Escrow Agent"), to be held under an
escrow agreement in substantially the form
of Exhibit A (the "Escrow
Agreement"), said Escrow Funds to be paid
to Seller on the two year anniversary
of the Closing Date in accordance with the
Escrow Agreement but subject to the
terms and conditions described in this
Agreement, including, without limitation,
in Sections 2.3, 2.4 and 6.7 hereof.
SECTION
2.3. NET CURRENT ASSETS ADJUSTMENT TO PURCHASE PRICE.
(a)
Estimated Net
Current Assets. Within sixty (60) days following the
Closing Date, Buyer will prepare, or cause
to have prepared, and deliver to
Seller a balance sheet of the Business and
a statement of the Net Current Assets
of the Business as of the Closing Date,
each of which shall include as a Current
Asset as of the Closing Date fixed assets
that are included in the Purchased
Assets and that are properly included as
fixed assets on a balance sheet in
accordance with GAAP (e.g., have not been
sold, transferred or written-off) and
which were
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included on the Reference Date Balance
Sheet as current assets but have since
been re-classified as fixed assets (the
"Re-classified Assets"). Schedule 2.3
lists the assets that Seller believes
constitute the Re-classified Assets as of
Closing, in the aggregate amount of
$153,881. The parties agree that the same
methodology used to calculate the bad debt
reserve for Accounts Receivable in
the preparation of the Reference Date
Balance Sheet shall be used to calculate
the bad debt reserve in the preparation of
the Final Net Current Assets. As
prepared by Buyer, this statement of the
Net Current Assets shall be referred to
as the "Estimated Net Current Assets." The
Estimated Net Current Assets shall be
prepared in accordance with GAAP.
(b)
Objection. The
Estimated Net Current Assets shall be deemed accepted
by Seller and binding unless Seller sends
Buyer a written objection thereto
within thirty (30) days following Seller's
receipt thereof. In the event that
Seller delivers a timely written objection
as aforesaid, and Buyer and Seller
are unable to resolve such objection within
thirty (30) days after Buyer is
notified of Seller's objection, the matters
in dispute shall be submitted for
final and binding determination to a firm
of independent certified public
accountants of national recognition and
standing jointly selected by Buyer and
Seller (the "Accountants"). The Accountants
shall prepare their resolution
statement within forty-five (45) days of
appointment. In the event that the
parties are required to agree on the
identity of the Accountants but are unable
to do so, then the firm to be used shall be
selected by lot from among the "Big
4" accounting firms, other than those firms
which have had a material
relationship with Buyer or Seller. The
Estimated Net Current Assets proposed by
Buyer, as adjusted by agreement of Seller
and Buyer or finally determined by the
Accountants, as applicable, to reflect the
resolution of any timely objections
made thereto by Seller in accordance with
this paragraph, shall constitute the
"Final Net Current Assets" and shall be
binding on the parties hereto. Buyer and
Seller shall each pay their own expenses of
preparing and analyzing the
Estimated Net Current Assets and resolving
objections thereto. The fees and
expenses of the Accountants used to resolve
objections will be borne equally by
Buyer and Seller.
(c)
Access to
Information. Solely in connection with the preparation of
the Estimated Net Current Assets and the
Final Net Current Assets:
(i) Buyer shall
give Seller and its accountants reasonable access
to the
books and records of the Business, and shall cause employees of
the
Business
to cooperate with them and provide them with all relevant
information requested, all after receiving reasonable notice from
them of
their
requirements and reaching agreement as to mutually convenient
times
for
review; and
(ii) Buyer and the
Seller Parties, to the extent within their
respective
control, shall give to each other and their agent's access to
the books,
financial records, work papers and other materials and
documents
used or produced in connection with the preparation of the
Estimated
Net Current Assets and the Final Net Current Assets.
(d)
Final Net
Current Assets. In the event that the Final Net Current
Assets are less than $2,076,000 (the
difference is referred to as a "Reduction
in Net Current Assets"), the Seller Parties
shall be jointly and severally
liable for such difference as a reduction
in the cash portion of the Purchase
Price. Buyer shall first set-off the amount
of such Reduction in Net Current
- 6 -
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Assets from the Escrow Funds and Additional
Escrow Funds, if any, in accordance
with Section 6.7 of this Agreement, and, to
the extent the Reduction in Net
Current Assets exceeds the amount of the
Escrow Funds and Additional Escrow
Funds then available under the Escrow
Agreement, the Seller Parties shall pay
the difference to Buyer within (10) days
after receipt of written demand
therefor. In the event that the Final Net
Current Assets are greater than
$2,076,000 (the excess is referred to as an
"Excess in Net Current Assets"), the
Purchase Price shall be increased by such
difference. Buyer shall pay the Excess
in Net Current Assets to Seller within ten
(10) days following the determination
of Final Net Current Assets.
SECTION
2.4. ACCOUNTS RECEIVABLE ADJUSTMENT TO PURCHASE PRICE.
(a)
Receivable
Shortfall. Buyer and the Seller Parties agree that the
Purchase Price payable to Seller shall be
reduced to the extent that the
Accounts Receivable, less a bad debt
reserve in the amount of $7,600 have not
been collected by Buyer within ninety (90)
days following the Closing Date (the
"Collection Period").
(b)
Adjustment to
Purchase Price. Within sixty (60) days following the
end of the Collection Period, Buyer shall
prepare and furnish to Seller a
statement setting forth the Accounts
Receivable and all payments made thereon,
calculated as of the end of the Collection
Period, and the amount, if any, owing
from the Seller Parties to Buyer pursuant
to Section 2.4(a) (a "Receivable
Shortfall"). The Seller Parties shall be
jointly and severally liable for the
Receivable Shortfall. Buyer shall set-off
the Receivable Shortfall from the
Escrow Funds and Additional Escrow Funds,
if any, in accordance with Section 6.7
and, to the extent the amount of the
Receivable Shortfall exceeds the amount of
the Escrow Funds and Additional Escrow
Funds then available under the Escrow
Agreement, the Seller Parties shall pay the
difference to Buyer within (10) days
after receipt of written demand therefor.
Upon payment of the Receivable
Shortfall, Buyer shall assign to Seller
those Accounts Receivable which were
uncollected at the end of the Collection
Period and Seller may thereafter
collect such re-assigned Accounts
Receivable for Seller's own account.
Notwithstanding anything to the contrary
herein, to the extent an Account
Receivable is excluded from the calculation
of Final Net Current Assets in
Section 2.3, the failure to collect such
Account Receivable within the
Collection Period shall not entitle the
Buyer to any reimbursement under this
Section 2.4(a).
(c)
Collection of
Accounts Receivable. Between the Closing Date and the
end of the Collection Period, Buyer shall
use reasonable efforts consistent with
its usual and customary collection
practices to collect the Accounts Receivable,
provided that Buyer shall not be obligated
to resort to litigation.
(d)
Payments in
Transit after the Closing. Any payments that are
received by Seller after the Closing Date
in respect of Accounts Receivable
shall be owned by and deemed the property
of Buyer, and Seller shall turn over
to Buyer all such amounts within ten (10)
days of receipt thereof.
SECTION
2.5. BUYER'S ASSUMPTION OF LIABILITIES. On the terms and
subject
to the conditions set forth in this
Agreement, and in further consideration of
the transfer of the Purchased Assets, at
the Closing Buyer shall assume, and
thereafter pay, honor and discharge
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when due, only those duties, liabilities or
obligations of Seller included in
the Assumed Liabilities.
SECTION
2.6. CLOSING. The Closing shall take place (via facsimile,
telephone, mail and other mutually
acceptable means of communication and
delivery) simultaneously at the offices of
Buyer's counsel, Shipman & Goodwin
LLP in Hartford, Connecticut and Seller's
counsel, Holme Roberts & Owen LLP in
Salt Lake City, Utah on the date hereof or
at such other time and location as
the parties hereto shall agree in
writing.
SECTION
2.7. DELIVERIES BY SELLER PARTIES AT CLOSING. At the Closing,
Seller shall convey, transfer, assign and
deliver to Buyer all of the Purchased
Assets, including good and merchantable
title to all personal property included
therein, free and clear of all Liens
(except Permitted Liens). At the Closing,
Seller shall deliver to Buyer:
(a)
The Escrow
Agreement fully executed by Seller;
(b)
An opinion of
the Seller's counsel, dated the Closing Date, to the
effect and substantially in the form of
Exhibit B to this Agreement;
(c)
Evidence of
authorization to change Seller's name and documents
sufficient to effectuate such change and to
convey to Buyer all rights in the
names and marks S.O.S. Computer Systems,
Inc., Centryx, m*teller, e*teller,
i*support, SOSystems, member*centric and
personalized*technology;
(d)
Buyer's standard
NDA/invention assignment agreement for all
employees of Seller whom Buyer has
indicated a desire to employ;
(e)
Bill of Sale in
the form of Exhibit C, and such assignments and
other instruments of transfer as may be
reasonably satisfactory to Buyer's
counsel, and with such consents to the
conveyance, transfer and assignment
thereof as may be necessary to effect the
conveyance, transfer, assignment and
delivery of the Purchased Assets and to
vest in Buyer the title specified in
this Section, including without
limitation:
(i) the transfer
of all registered Proprietary Rights of Seller
(as such
term is defined in Section 3.14 hereof) and applications
therefor;
and
(ii) the consents
listed on Schedule 2.7(e);
(f)
Releases of all
Liens (other than Permitted Liens) on the Purchased
Assets;
(g)
A Lease
Agreement between Buyer and Seller with respect to 720 East
Timpanogos Parkway, Orem, Utah 54097, in
the form attached hereto as Exhibit D,
fully executed by Seller (the "Lease");
(h)
Good Standing
Certificate of recent date for Seller from the
Secretary of State of the State of
Utah;
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(i)
A Secretary's
Certificate with respect to Seller's Certificate of
Incorporation, By-laws, director and
stockholder resolutions and officer
incumbency, in form and substance
satisfactory to Buyer;
(j)
Evidence that
David Smart has entered into a proprietary information
and invention assignment agreement in favor
of Seller, in form acceptable to
Buyer;
(k)
A certificate of
the Trustees of each of the Trusts with respect to
certain organizational matters of such
Trusts, in form and substance
satisfactory to Buyer; and
(l)
Such other
documents and instruments as Buyer or Buyer's counsel may
reasonably request to better evidence or
effectuate the transactions
contemplated hereby.
Simultaneously with the delivery referred to in this Section, the
Seller
Parties shall take or cause to be taken all
such actions as may reasonably be
required to put Buyer in actual possession
and operating control of the
Purchased Assets.
SECTION
2.8. DELIVERIES BY BUYER AT CLOSING. At the Closing, Buyer
shall
deliver to Seller:
(a)
The Escrow
Agreement fully executed by Buyer;
(b)
Assumption
Agreement in the form attached hereto as Exhibit E, fully
executed by Buyer, pursuant to which Buyer
assumes, as of the Closing Date, the
Assumed Liabilities;
(c)
The Lease fully
executed by Buyer;
(d)
In accordance
with Section 2.2(a) of this Agreement, Buyer shall
deliver to Seller an amount equal to
$10,032,000, constituting the cash portion
of the Purchase Price; and
(e)
In accordance
with Section 2.2(b) of this Agreement, Buyer shall
deliver to the Escrow Agent the Escrow
Funds.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES
The Seller
Parties hereby jointly and severally represent and warrant to
Buyer as follows as of the Closing Date
(or, as of such other date as is set
forth below with respect to a particular
representation or warranty):
SECTION
3.1. ORGANIZATION AND POWER. Seller is a corporation duly
organized, validly existing and in good
standing under the laws of the State of
Utah. Seller has full power and authority
to own its properties and conduct the
Business as presently being conducted by
it. Each Trust is a duly established
trust and is validly subsisting, the
persons listed on Schedule 3.19 are the
respective trustees of the Trusts, and as
trustees, such persons have all
necessary
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power, authority and capacity to enter into
this Agreement and to consummate the
transactions contemplated by this Agreement
on behalf of the Trusts. Each Seller
Party has full legal power, authority and
capacity to execute this Agreement and
to consummate the transactions contemplated
hereby.
SECTION 3.2.
AUTHORIZATION. The execution, delivery and performance of
this Agreement by Seller have been duly
authorized and approved by all requisite
action on the part of its directors and
stockholders. This Agreement constitutes
the valid and binding obligation of each
Seller Party and is enforceable against
each Seller Party in accordance with its
terms, except as such enforceability
may be limited by bankruptcy, insolvency,
reorganization, moratorium, and other
similar laws relating to or limiting
creditors' rights generally and by
equitable principles.
SECTION
3.3. NO CONFLICT. The execution and delivery of this Agreement
do
not, and the consummation of the
transactions contemplated hereby and the
compliance with the terms hereof will not
(a) violate any law, judgment, order,
decree, statute, ordinance, rule or
regulation applicable to any Seller Party,
or any permit, license or approval of any
Governmental Entity, (b) conflict with
any provision of Seller's Articles of
Incorporation or By-laws, (c) conflict
with any Trust's declaration or agreement
of trust (or equivalent instrument),
(d) except as set forth on Schedule 3.3,
result in any violation of, and will
not conflict with, or result in a breach of
any terms of, or constitute a
default under, any Contract or create any
Lien upon any of the Purchased Assets,
or (e) except as set forth on Schedule 3.3,
require any notice to, or consent,
approval, order or authorization of, or the
registration, declaration or filing
with, any Governmental Entity or other
Person, including, without limitation,
under any Contract.
SECTION
3.4. TITLE TO PURCHASED ASSETS. Seller has good, valid and
marketable title to all of the Purchased
Assets, free and clear of all Liens,
except those Liens set forth on Schedule
3.4 ("Permitted Liens"). Except as set
forth on Schedule 3.4, no other party has
any rights or claims to possession of
any of the Purchased Assets. None of the
Purchased Assets are subject to any
option, contract, arrangement or
understanding that would restrict Seller's
ability to transfer the Purchased Assets to
Buyer as contemplated herein. Except
for the Excluded Assets, the Purchased
Assets constitute all assets, rights and
properties used by Seller to operate, or
necessary to operate the Business as
operated by Seller prior to Closing. Except
as set forth on Schedule 3.4, no
Seller Party and no other Related Person of
Seller, (including without
limitation, Smart and the Trusts) owns,
leases or licenses assets, properties or
other rights used in the conduct of the
Business. All employees engaged in
conducting the Business are employees of
Seller.
SECTION
3.5. CONDITION OF PURCHASED ASSETS. Except as set forth on
Schedule 3.5, all of the tangible property
included in the Purchased Assets is
in good operating condition and repair,
ordinary wear and tear excepted, and, to
Seller Parties' Knowledge, in the state of
maintenance, repair and operating
condition required for the proper operation
and use thereof in the ordinary and
usual course of business by Seller.
SECTION
3.6. FINANCIAL STATEMENTS. Seller has delivered to Buyer
financial
information respecting Seller (the
"Financial Statements"), as follows: (i) the
Reference Date Balance Sheet,
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a copy of which is attached hereto as
Schedule 3.6; (ii) unaudited profit and
loss statements of Seller for the eleven
(11) months ended as of the Reference
Date; (iii) unaudited balance sheet for
Seller as of December 31, 2004; and (iv)
unaudited profit and loss statements for
Seller for the fiscal year ended
December 31, 2004. The Financial Statements
fairly present the financial
position and results of operations of
Seller for the periods then ended and the
financial position of Seller at the dates
thereof, and except as set forth on
Schedule 3.6, were prepared in accordance
with GAAP, provided, however, that the
unaudited Financial Statements (a) are
subject to normal recurring year-end
adjustments and (b) do not contain all
footnote disclosures required by GAAP.
Seller's books of account are and, during
the period covered by the Financial
Statements were, complete in all material
respects, fairly and accurately
reflect or reflected the income, expenses,
assets and liabilities of Seller,
including the nature thereof and the
transactions giving rise thereto, and
provide or provided a fair and accurate
basis for the preparation of the
Financial Statements.
SECTION
3.7. ACCOUNTS RECEIVABLE; CREDITS. The Accounts Receivable
recorded on the books of Seller, less a bad
debt reserve in the amount of $7,600
(which was determined by Seller in
accordance with GAAP applied on a basis
consistent with Seller's prior accounting
practices) are bona fide and good, and
are collectible in the amounts shown on the
books of account of Seller. Except
as set forth on Schedule 3.7, no Account
Receivable has been released by Seller,
in whole or in part, so as to reduce its
value, and there are no outstanding
customer credits or allowances (including
allowances for bad debts) which have
been authorized by Seller prior to the
Closing Date. The uncollectibility of any
Accounts Receivable resulting in an
adjustment to the Purchase Price based on a
Receivable Shortfall in accordance with
Section 2.4 shall not be considered a
breach of the representation and warranty
of collectibility contained in this
Section 3.7.
SECTION
3.8. PRE-BILL. Except as set forth on Schedule 3.8, Seller has
not
pre-billed or received prepayment for
products to be sold, services to be
rendered, or expenses to be incurred
subsequent to the Closing Date, except in
the ordinary course of business and
consistent with Seller's prior practices,
with a corresponding current liability
included on the Reference Date Balance
Sheet.
SECTION
3.9. LITIGATION. There is no suit, action or proceeding pending
against or affecting any Seller Party or,
to the Knowledge of any Seller Party,
the employees of Seller relating to the
Business, the Purchased Assets, or the
transactions contemplated hereby, nor to
Seller Parties' Knowledge is there any
such suit, action or proceeding threatened
against any Seller Party or any of
the employees of Seller. Neither Seller nor
the Business is subject to any order
of a Governmental Entity.
SECTION
3.10. COMPLIANCE WITH LAW. Except as set forth on Schedule
3.10,
Seller has all licenses, permits and other
approvals of Governmental Entities
necessary to operate the Business as now
conducted, each of which is in good
standing, and Seller has conducted the
Business and properly filed all necessary
reports in substantial compliance with
applicable laws and regulations.
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<PAGE>
SECTION
3.11. ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth
on
Schedule 3.11, Seller does not have any
liabilities or obligations, either
accrued, contingent or otherwise, which are
not reflected in (i) the Reference
Date Balance Sheet or (ii) this Agreement
or the Schedules hereto, except as
have been incurred in the ordinary course
of business since the Reference Date.
SECTION
3.12. ABSENCE OF CERTAIN CHANGES. Since the Reference Date and
except as set forth on Schedule 3.12,
neither Seller nor the Business has or
will have as of the Closing:
(a)
suffered any
adverse change in its financial condition, assets,
liabilities, net worth or business from
that shown on the Reference Date Balance
Sheet that, either individually or in the
aggregate, has had a Material Adverse
Effect;
(b)
suffered any
damage, destruction or loss, whether or not covered by
insurance, adversely affecting its
properties or the Business, which could
reasonably be expected to have a Material
Adverse Effect;
(c)
declared or paid
or agreed to declare or pay any dividends or
distributions of any assets of any kind
whatsoever, excluding distributions of
cash consistent with prior practice;
(d)
mortgaged,
pledged, hypothecated or otherwise encumbered any of its
material assets, tangible or
intangible;
(e)
sold or
transferred any of its assets, property or rights, or
canceled or agreed to cancel any of its
debts or claims, except for fair value,
in the ordinary course of business;
(f)
suffered any
Material Adverse Effect with respect to its
relationships with customers or employees,
or with respect to its contracts with
customers;
(g)
incurred any
commitment (through negotiations or otherwise) or any
liability to any labor organization, or
been involved in any labor dispute;
(h)
increased the
amount of its Debt or other obligations or liabilities
by more than $700,000 in the aggregate;
(i)
entered or
agreed to enter into any agreement or arrangement
granting any preferential rights to
purchase a material part of its assets,
property or rights;
(j)
placed any
orders for materials, merchandise or supplies in
exceptional or unusual quantities based
upon past operating practices or
accepted orders from customers under
conditions relating to price, terms or
payment, time or delivery, or like matters
materially different from the
conditions regularly and usually specified
on acceptance of orders for similar
merchandise from customers similarly
situated;
(k)
made any change
in the accounting practices or methods followed by
it;
(l) engaged in any restructuring
or changed its constitutive documents;
or
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<PAGE>
(m)
entered into any
other transaction, or been involved in any event or
experienced any condition of any character,
that, either individually or in the
aggregate, has had a Material Adverse
Effe
