ASSET PURCHASE AGREEMENT

 

Exhibit 2.1

 

REDACTED – OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE

COMMISSION AND IS DENOTED HEREIN BY * * * * *

 

ASSET PURCHASE AGREEMENT

 

BY AND AMONG

 

NETSCAPE COMMUNICATIONS CORPORATION,

 

AMERICA ONLINE INC.

 

AND

 

RED HAT, INC.

 

DATED AS OF

 

SEPTEMBER 29, 2004

 

TABLE OF CONTENTS

 

 

ii

 

iii

 

iv

INDEX OF SCHEDULES AND EXHIBITS

 

SCHEDULES

 

 

v

EXHIBITS

 

 

vi

INDEX OF DEFINITIONS

 

 

vii

 

viii

 

ix

 

ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT (together with all Schedules and Exhibits hereto, this “ Agreement ”), dated as of September 29, 2004, is entered into by and among Netscape Communications Corporation, a Delaware corporation (“ Netscape ”) and America Online, Inc., a Delaware Corporation (“ AOL ” and, together with Netscape, collectively, “ Sellers ” and, each, a “ Seller ”), and Red Hat, Inc., a Delaware corporation (“ Buyer ”).

 

STATEMENT OF PURPOSE

 

WHEREAS, Sellers are the owners and operators of certain assets used in connection with the operation of their Netscape Security Solutions unit (the “ Security Solutions ”); and

 

WHEREAS, Sellers desire to sell, and Buyer desires to buy, certain assets of Sellers used in or relating to the operation of the Security Solutions, on the terms and conditions set forth in this Agreement.

 

THEREFORE, Sellers and Buyer agree as follows:

 

ARTICLE I

SALE AND PURCHASE OF ASSETS

 

1.1 Transfer of Assets . Subject to the terms and conditions of this Agreement, Sellers agree to sell, assign, transfer and deliver to Buyer, and Buyer agrees to purchase and accept from Sellers, at the Closing (as defined below), certain assets of Sellers used in the Security Solutions described in Section 1.2. The assets being sold hereunder are collectively referred to as the “ Purchased Assets .” The assets described in Section 1.3 are not being sold pursuant to this Agreement and are collectively referred to as the “ Excluded Assets .”

 

1.2 Purchased Assets . Subject to Section 1.3, the Purchased Assets specifically include the following assets of the Security Solutions:

 

(a) Owned Intellectual Property . All Owned Intellectual Property, it being understood that Buyer shall not purchase or acquire any Patent Assets or Trademark Assets of Netscape or AOL. As used in this Agreement, “ Owned Intellectual Property ” means all of the Intellectual Property owned by Sellers that is embodied in the Customer Deliverables and all other Intellectual Property owned by Sellers that is used exclusively in connection with the Security Solutions, in each case excluding (i) the Excluded Patents, (ii) the Excluded Trademarks and (iii) all software owned or licensed by Netscape or Mozilla identified in Schedule 1.2(b)(i) . For the purposes of this Agreement and the schedules attached hereto, all software owned by Netscape or Mozilla and listed on Schedule 1.2(b)(i) shall be treated as licensed third party Intellectual Property listed in Schedule 1.2(b)(i) . Material items of Owned Intellectual Property are described on Schedule 1.2(a) hereto. As used in this Agreement, “ Intellectual Property ” shall mean all (i) patents, patent applications, patent disclosures and all related continuation, continuation-in-part, divisional, reissue, reexamination, utility model,

 

certificate of invention and design patents, patent applications, registrations and applications for registrations (collectively, the “ Patent Assets ”); (ii) trademarks, service marks, trade dress, Internet domain names, logos, trade names and corporate names and registrations and applications for registration thereof (collectively, the “ Trademark Assets ”); (iii) works of authorship and copyrights and registrations and applications for registration thereof; (iv) mask works and registrations and applications for registration thereof; (v) computer software (including source code and object code), build scripts, bug reports, quality data, benchmarking information, translations and translation kits, test suites, test tools, test plans, data and internal and external documentation (including user’s manuals, specifications, architectural documents, product requirement documents, product roadmaps, notes from technical support, flow charts, system diagrams, input/output layouts); (vi) inventions, trade secrets and confidential business information, whether patentable or nonpatentable and whether or not reduced to practice, know-how, manufacturing and product processes and techniques, research and development information, copyrightable works, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information; (vii) any other proprietary rights (including claims for past infringements thereof, remedies against infringements thereof and rights of protection of interest therein under the laws of all jurisdictions); and (viii) copies and tangible embodiments thereof.

 

(b) Licensed Intellectual Property and Seller In-License Agreements . Except for the SDMA Intellectual Property used by Sellers pursuant to the SDMA and the Intellectual Property identified in Schedule 1.2(b)(i) , all of Sellers’ interest in the Intellectual Property rightfully used by Sellers that is embodied in the Customer Deliverables and all of Sellers’ interest in other Intellectual Property rightfully used by Sellers exclusively in connection with the Security Solutions, in each case pursuant to a Contract that is or contains a valid license, including without limitation off-the-shelf software programs licensed pursuant to “shrinkwrap” or “click-thru” licenses (“ Licensed Intellectual Property ”), and such Contracts pursuant to which the Licensed Intellectual Property is licensed to Sellers (the “ Seller In-License Agreements ”), all of which items of Licensed Intellectual Property and Seller In-License Agreements are described on Schedule 1.2(b)(ii) hereto.

 

(c) Contracts . All of Sellers’ interest in the Contracts described on Schedule 1.2(c) (the “ Scheduled Contracts ” and, together with the Seller In-License Agreements, “ Purchased Contracts ”).

 

(d) Accounts Receivable . All accounts receivable and trade accounts due to Sellers exclusively in connection with the Security Solutions (the “ Receivables ”), and the full benefit of any security therefor, including without limitation those set forth on Schedule 1.2(d) .

 

(e) Tangible Personal Property . All computers, servers, equipment, test kits, tools, prototypes, technical documentation and other items of tangible personal property owned or leased by Sellers and used in connection with the Security Solutions (wherever located and whether or not carried on Sellers’ books) that are set forth on Schedule 1.2(e) (the “ Tangible Personal Property ”), and any additions, improvements,

 

2

replacements and alterations thereto made between the date of this Agreement and the Closing Date, together with any express or implied warranty by the manufacturers or sellers of any item or component part thereof, and all maintenance records and other documents relating thereto.

 

(f) Permits . All permits, authorizations, certificates, approvals and licenses relating exclusively to the operation of the Security Solutions, including without limitation those listed on Schedule 1.2(f) (the “ Permits ”).

 

(g) Records . All records, technical data, asset ledgers, books of account, inventory records, budgets, customer and supplier lists, sales literature, catalogues, trade lists, advertising and promotional materials, payroll and personnel records, computer programs, correspondence and other files of Sellers created or maintained exclusively in connection with the Security Solutions.

 

(h) Claims . All of Sellers’ rights to any choses in action, claims, causes or rights of action arising exclusively in connection with the Security Solutions.

 

(i) Net Cash . All Net Cash, which in no event shall be less than $1.00. As used in this Agreement, “ Net Cash ” equals (i) all cash and cash equivalents collected by Sellers between September 15, 2004 and the Closing Date in connection with the Purchased Contracts and Receivables of Sellers (including, without limitation, the approximately $787,500 payment due from Hewlett-Packard Company on or about September 21, 2004 pursuant to the certain iPlanet Directory Server Porting and Distribution Agreement between Netscape and Hewlett-Packard Company dated as of April 25, 2000, as amended), minus (ii) the total salaries of employees of the Security Solutions unit actually paid in connection with the Security Solutions of Sellers between September 15, 2004 and the Closing Date (including, without limitation, the approximately $200,000 payable to Bozeman Pass, if any payment is made to Bozeman Pass during this period), or, solely in the case of salaries of employees of the Security Solutions unit, unpaid salaries of such employees accrued between September 15, 2004 and the Closing Date consistent with past practices; provided that any benefits and indirect costs and any extraordinary expenses incurred in connection with the transactions contemplated by this Agreement shall not be included in the calculation of “Net Cash.”

 

(j) Prepaid Items; Deposits . All prepaid expenses and deposits paid by Sellers exclusively with respect to the Security Solutions unit, including without limitation deposits and prepayments under any Purchased Contracts.

 

(k) Goodwill . Any and all of Sellers’ goodwill in the Purchased Assets.

 

(l) Other Intangibles . All other intangible assets of any kind or description, wherever located, which are owned by Sellers and exclusively used in or exclusively relating to the operations of the Security Solutions and which are not Excluded Assets.

 

3

1.3 Excluded Assets . The following assets of the Security Solutions unit shall be excluded from the Purchased Assets and shall be retained by Sellers:

 

(a) Patent Assets . Any and all Patent Assets of Netscape and/or AOL (the “ Excluded Patents ”), it being understood that Buyer shall not purchase or acquire any Patent Assets of Netscape or AOL or any license, right or interest in, to or under such Patent Assets except for the express license granted pursuant to the Patent License.

 

(b) Trademark Assets . Any and all Trademark Assets of Netscape and/or AOL (the “ Excluded Trademarks ”), it being understood that Buyer shall not purchase or acquire any Trademark Assets of Netscape or AOL or any license, right or interest in, to or under such Trademark Assets except for the express license granted pursuant to the Trademark License.

 

(c) Certain Seller In-License Agreements . The SDMA and the license agreements identified in Schedule 1.2(b)(i) . “ SDMA ” means the Strategic Development and Marketing Agreement, dated as of November 23, 1998, by and between Sun Microsystems, Inc. (“ Sun ”) and AOL, as amended pursuant to that certain First Amendment to Strategic Development and Marketing Agreement, dated as of September 25, 2001, by and between Sun and AOL and that certain Second Amendment to Strategic Development and Marketing Agreement, dated as of March 15, 2002, by and between Sun and AOL.

 

(d) Certain Personal Property . All Tangible Personal Property set forth on Schedule 1.2(e) disposed of or consumed in the ordinary course of business of the Security Solutions unit or with the written consent of Buyer between the date hereof and the Closing Date and all other tangible personal property used in connection with the Security Solutions unit not listed on Schedule 1.2(e) .

 

(e) Real Property . All real property of Sellers, whether owned or leased, together with all easements and appurtenances thereto and all buildings, fixtures and other improvements therein.

 

(f) Employees . All employees of the Sellers, other than as expressly provided for in Section 8.8.

 

(g) Insurance . All insurance policies relating to the Security Solutions unit, including without limitation policies relating to property, liability, business interruption, health and workers’ compensation and lives of officers of Sellers.

 

(h) Benefit Plans . Pension, profit sharing or savings plans and trusts and the assets thereof.

 

(i) Certain Records . Minute books and stock books of Sellers or any of its predecessors in interest.

 

(j) Certain Contracts . Any contracts, agreements, commitments, leases, licenses, loans, purchase orders, work orders, notes, mortgages, indentures,

 

4

instruments, understandings, arrangements and obligations entered into by either Seller or by which either Seller or any of the Purchased Assets is bound, other than the Purchased Contracts.

 

(k) Excluded Materials . The Excluded Materials.

 

(l) Other Assets . The assets and properties of Sellers relating exclusively to the Security Solutions which are specifically listed on Schedule 1.3(l) .

 

1.4 Liabilities .

 

(a) Excluded Liabilities . The Purchased Assets shall be sold and conveyed to Buyer free and clear of any and all liabilities, obligations, claims, charges, liens, security interests, mortgages, pledges, hypothecations and encumbrances whatsoever; provided, however, that Buyer will assume at Closing only the obligations of Sellers described in Section 1.4(b) below. Notwithstanding anything in this Agreement to the contrary, Buyer shall in no event assume or be liable for any liability or obligation of Sellers not specifically assumed pursuant to this Section and in instruments of assumption delivered by it at Closing, and Sellers shall retain responsibility for all liabilities and obligations with respect to Sellers, whether or not accrued and whether or not disclosed, other than as expressly set forth in Section 1.4(b). Specifically, but without limiting the generality of the foregoing, Buyer shall not assume any liability or obligation of Sellers with respect to employees or former employees of Sellers, including without limitation any liability for accrued salaries, wages, payroll taxes, severance pay entitlements, health, medical, retirement, vacation or deferred compensation benefits or any other obligations or expenses arising out of or relating to the employment by Sellers of its respective employees or either Seller’s termination of such employees, including the terminations effected by Sellers pursuant to this Agreement. Sellers shall retain and shall assume and discharge all liabilities and costs under the Consolidated Omnibus Budget Reconciliation Act, as amended (“ COBRA ”) (including liabilities for violations thereof) for all “qualifying events” (as defined in COBRA) occurring with respect to employees and their dependents prior to and on the Closing Date, including qualifying events that occur as a result of the sale of the Purchased Assets contemplated by this Agreement.

 

(b) Assumed Liabilities . Notwithstanding anything in this Agreement to the contrary, Buyer will assume at Closing only the following liabilities of Sellers: (i) the obligations of Sellers under the Purchased Contracts, to the extent that such obligations are not performed prior to the Effective Time, are disclosed in the text of such Purchased Contracts and accrued subsequent to the Effective Time and (ii)(x) liabilities for payments due to independent contractors of the Security Solutions under the terms of the Purchased Contracts between September 15, 2004 and the Closing Date to the extent not actually paid prior to Closing by Sellers as contemplated by Section 1.2(i) , and (y) liabilities for payments due to Bozeman Pass to the extent not actually paid prior to Closing by Sellers as contemplated by Section 1.2(i), which liabilities in the case of clause (ii) only shall in no event whatsoever exceed the amount of Net Cash actually received by Buyer (clauses (i) and (ii) the “ Assumed Liabilities ”).

 

5

ARTICLE II

CONSIDERATION

 

2.1 Purchase Price . The aggregate purchase price (the “ Purchase Price ”) for the Purchased Assets shall be $20,500,000. The Purchase Price shall be payable as follows: (a) $19,000,000 shall be paid on the Closing Date by wire transfer of immediately available funds to a single account designated by Sellers in writing; and (b) the remaining $1,500,000 (the “ Escrow Funds ”) shall be paid by wire transfer of immediately available funds to First-Citizens Bank and Trust Company (the “ Escrow Agent ”), who shall hold such amount in escrow for a period of twelve (12) months following the Closing Date in accordance with an escrow agreement substantially in the form of Exhibit A attached hereto (the “ Escrow Agreement ”), which will be executed and delivered at the Closing. Sellers shall provide wire transfer instructions to Buyer at least two (2) business days prior to the Closing Date.

 

2.2 Additional Contingent Consideration .

 

(a) Buyer shall pay to Sellers additional contingent consideration of $2,500,000 (the “ Additional Consideration ”) if Revenue Bookings pursuant to the DOD Contract as determined in good faith by Buyer equals at least $3,000,000. Upon Revenue Bookings equaling $3,000,000, Buyer shall notify Sellers promptly in writing and shall pay the Additional Consideration within thirty (30) days thereafter. Additional Consideration shall be payable by wire transfer of immediately available funds to a single account designated by Sellers in writing. Sellers shall provide wire transfer instructions to Buyer at least two (2) business days prior to such transfer. If Buyer does not pay Sellers the Additional Consideration, Buyer must permit an independent auditor selected by Sellers, upon reasonable prior notice, to examine the records relating to Revenue Bookings and the DOD Contract. As used in this Agreement, “ DOD Contract ” shall mean that certain Strategic VAR Agreement between Netscape and Intelligent Decisions, Inc. dated as of November 28, 2001 relating to Sellers’ products and services provided to the Department of Defense as the same may be extended or renewed, (y) any new agreement between Buyer and Intelligent Decisions or any other reseller or directly or indirectly with the Department of Defense or any of its associated agencies for Buyer to provide products, services or software based upon, incorporating or including any Customer Deliverables or any portion thereof (“ Buyer Customer Deliverables ”) or (z) any existing agreements, or extension or renewal thereof, between Buyer and the Department of Defense or any of its associated agencies or any reseller to the Department of Defense or any of its associated agencies pursuant to which Buyer sells Buyer Customer Deliverables; and “ Revenue Bookings ” shall mean the purchase price for Buyer Customer Deliverables purchased pursuant to DOD Contract that are for software licenses for orders placed on or before April 30, 2005, and the aggregate fees for services to be performed within one year of the effective date of any order related to Buyer Customer Deliverables for orders placed on or before April 30, 2005, in each case which the contracting party will be obligated to pay to Buyer as consideration for Buyer’s performance thereunder.

 

(b) Buyer shall use all commercially reasonable efforts to obtain at least $3,000,000 of Revenue Bookings with respect to the DOD Contract on or before

 

6

April 30, 2005. Sellers shall have the right to reasonably participate in discussions and negotiations with DOD personnel as they relate to the DOD Contract and work orders placed under the DOD Contract until the earlier of (i) the date Buyer notifies Sellers the Additional Consideration will be paid in accordance with Section 2.2(a) or (ii) April 30, 2005. Sellers shall have the right to review, prior to submission or execution, as the case may be, to the DOD, any proposals by Buyer to be made with respect to the DOD Contract or work orders thereunder or the execution of the DOD Contract or any work order thereunder, until the earlier of (i) the date Buyer notifies Sellers the Additional Consideration will be paid in accordance with Section 2.2(a) or (ii) April 30, 2005.

 

2.3 Allocation . Buyer and Seller shall cooperate to agree prior to the Effective Time with respect to the allocation of the total consideration (including any post-closing adjustments) among the Purchased Assets for all purposes (including federal and state tax reporting purposes). Each of the parties acknowledges its understanding of the requirement under Section 1060 of the Internal Revenue Code of 1986, as amended (“ Code ”) for the filing by each of Form 8594 for their respective tax years in which the Closing occurs. Sellers and Buyer agree to allocate the consideration among the Purchased Assets in accordance with the agreed upon allocations, if such allocation agreement is reached.

 

2.4 Proration of Certain Items . Subject to the specific provisions of this Section and Section 1.4 and 1.2(i) above, Sellers shall be responsible for all costs and expenses attributable to the operation of the Security Solutions or the ownership of the Purchased Assets up to the Effective Time, and Buyer shall become responsible for all costs and expenses attributable to the operation of the Security Solutions or ownership of the Purchased Assets from and after the Effective Time. Sellers and Buyer shall prorate all expenses of the Security Solutions, including without limitation such items as ad valorem personal property taxes, as of the Effective Time. Such prorations shall be made and paid insofar as is possible at the Closing and, in any event, no later than thirty (30) days thereafter.

 

2.5 Non-Competition Agreement . At Closing, Buyer and Sellers shall execute and deliver a Non-Competition Agreement substantially in the form of Exhibit C attached hereto (the “ Non-Competition Agreement ”).

 

2.6 SDMA Sublicense . At Closing, Buyer and AOL shall execute and deliver a SDMA Sublicense substantially in the form of Exhibit D attached hereto (the “ SDMA Sublicense ”).

 

2.7 Patent License . At Closing, Buyer and Sellers shall execute and deliver a Patent License substantially in the form of Exhibit E attached hereto (the “ Patent License ”).

 

2.8 Grant-Back License . At Closing, Buyer and Sellers shall execute and deliver a Grant-Back License substantially in the form of Exhibit F attached hereto (the “ Grant-Back License ”).

 

2.9 Trademark License . At Closing, Buyer and Netscape shall execute and deliver a Trademark License substantially in the form of Exhibit G attached hereto (the “ Trademark License ”).

 

7

2.10 Maintenance and Support Services Agreement . At Closing, Buyer and AOL shall execute and deliver a Maintenance and Support Services Agreement and Work Order substantially in the form of Exhibit J attached hereto (the “ Maintenance and Support Services Agreement ”).

 

2.11 Customer Deliverables Escrow Agreement . At Closing, Buyer and Sellers shall execute and deliver a Customer Deliverables Escrow Agreement substantially in the form of Exhibit K attached hereto (the “ Customer Deliverables Escrow Agreement ”).

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLERS

 

Except as specifically set forth on the Sellers Disclosure Schedule set forth on Exhibit H attached hereto, each Seller, jointly and severally, represents and warrants to Buyer as follows:

 

3.1 Organization and Good Standing . Each Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Sellers have the requisite corporate power and authority to own, operate and lease the Purchased Assets and to conduct the operations of the Security Solutions as presently conducted. Each Seller is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions in which the character of the property owned, leased or operated by it in connection with the Security Solutions or the nature of the Security Solutions conducted by it makes such qualification necessary and in which failure to be so qualified and in good standing could reasonably be expected to cause a Material Adverse Change, and such jurisdictions are listed on Schedule 3.1 . Netscape is a wholly-owned subsidiary of AOL.

 

3.2 Authority . Each Seller has the requisite corporate power and authority to execute and deliver this Agreement and all other agreements, certificates, instruments and documents to be executed and delivered by such Seller pursuant to this Agreement (collectively, the “ Seller Agreements ”) and to perform the transactions contemplated hereby and thereby. The execution, delivery and performance by each Seller of their respective Seller Agreements and the consummation of the transactions contemplated hereby and thereby, have been, or will be by the Closing, duly and validly authorized by all necessary corporate action on the part of each Seller. The Seller Agreements have been or, with respect to Seller Agreements to be executed at the Closing, will be duly executed and delivered by the applicable Seller and each constitutes, or will constitute when executed and delivered, a legal, valid and binding obligation of such Seller, enforceable against such Seller in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the rights and remedies of creditors, and subject to the further qualification that the remedy of specific performance or injunctive relief is discretionary with the court before which any proceeding therefor may be brought.

 

3.3 No Conflict or Breach . The execution, delivery and performance by each Seller of their respective Seller Agreements do not and will not (a) conflict with, contravene or constitute a violation of the certificate of incorporation or bylaws of such Seller; (b) conflict with, contravene or constitute a violation of any law, statute, judgment, order, decree, rule or

 

8

regulation of any legislative body, court, administrative agency, governmental authority or arbitrator applicable to or relating to the Security Solutions or the Purchased Assets; (c) conflict with, contravene, constitute a material default under or violation of, result in a material breach or acceleration of or, except as set forth on Schedule 3.4 , require notice to or the consent of any third party under any Purchased Contract to which such Seller is party or by which such Seller is bound and by which the Security Solutions or the Purchased Assets are affected; (d) cause the Buyer or any of its affiliates or representatives to become subject to, or liable for the payment of, any Taxes, or (e) result in the creation or imposition of any lien, claim, charge, security interest, mortgage, pledge, hypothecation, easement, restrictive covenant, restriction or other encumbrance of any kind or nature whatsoever (each, a “ Lien ” and, collectively, “ Liens ”) on any portion of the Security Solutions or any of the Purchased Assets.

 

3.4 Consents and Approvals . Schedule 3.4 describes (a) each consent, approval, authorization, registration or filing with any federal, state, local or foreign judicial, legislative, executive, administrative or other governmental authority, body or agency (each, a “ Governmental Authority ”); and (b) each consent, approval, authorization of or notice to any other third party, which is required in connection with the valid execution and delivery by each Seller of their respective Seller Agreements or the consummation by each Seller of the transactions contemplated herein or therein, including without limitation the assignment of the Seller In-License Agreements and Purchased Contracts as provided herein (the items described in clauses (a) and (b), collectively, the “ Required Consents ”).

 

3.5 Statement of Income .

 

(a) Schedule 3.5 contains true, correct and complete copies of the unaudited, non - GAAP statement of operations for the fiscal year ended December 31, 2003 (the “ Statement of Income ”) and true, correct and complete copies of the unaudited, non - GAAP statement of operations for the six month period ended on June 30, 2004 (the “ Interim Statement of Income ”) (collectively the “ Statements of Income ”). The Statements of Income (a) are true and correct based on internal costs and revenue allocations where necessary and complete in all material respects, (b) are in accordance with the records of Sellers and (c) accurately present the results of operations for the periods presented consistent with the basis on which the Statements of Income were prepared.

 

(b) Carve-Out Financial Statements . If and when delivered to Buyer as provided in Section 8.17, the audited balance sheet, statement of income and statement of cash flows as of and for the 12-month period ended December 31, 2003 and unaudited income statement for the six month period ended June 30, 2004 (the “Carve-Out Financial Statements”) will: (i) be true, correct and complete; (ii) be in accordance with the books and records of Sellers; (iii) present fairly the assets, liabilities and financial condition of the Security Solutions unit as of December 31, 2003 and as of June 30, 2004, and the results of operations for the 12-month period ended December 31, 2003 and 6-month period ended June 30, 2004; and (iv) have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis (“GAAP”) and the requirements of Regulation S-X.

 

3.6 Records . Each Seller has previously delivered to Buyer true, correct and complete copies of the records of such Seller relating to the Purchased Assets.

 

9

3.7 Tangible Personal Property . Sellers have good and marketable title to all of the Tangible Personal Property, free and clear of all Liens, other than the Liens described on Schedule 3.7 , all of which will be removed at or prior to Closing. Each item of Tangible Personal Property is (a) in good operating order, condition and repair, ordinary wear and tear excepted; (b) suitable for immediate use in the ordinary course of business of the Security Solutions; (c) structurally sound and free from defects; (d) merchantable; and (e) of a quality and quantity presently usable in the ordinary course of business of the Security Solutions. No item of Tangible Personal Property is in need of repair or replacement other than as part of routine maintenance in the ordinary course of business.

 

3.8 Contracts . Schedule 3.8 lists all material contracts (including the Purchased Contracts), agreements, commitments, leases, licenses (including the Seller In-License Agreements and the Seller Out-License Agreements), loans, purchase orders, work orders, notes, mortgages, indentures, instruments, understandings, arrangements and obligations, whether written or oral, to which either Seller or any of its respective affiliates or subsidiaries is a party and by which the Purchased Assets or the Security Solutions are bound (the “ Contracts ”). Sellers have delivered to Buyer true, correct and complete copies of all written Contracts and true, correct and complete memoranda describing all oral Contracts, including any and all amendments and other modifications thereto. Each of the Purchased Contracts is valid, binding and enforceable in accordance with its terms and is in full force and effect. Neither Seller has waived any of its rights under, or modified the terms of, any Purchased Contract orally or by a pattern of practice or otherwise. Neither Seller, and, to Sellers’ Knowledge, no other party, is in material breach, default or violation of, and no events or circumstances have occurred which, with or without notice or lapse of time or both, would constitute breaches, defaults or violations, under any of the Purchased Contracts. The assignment of the Purchased Contracts by Sellers to Buyer will not, with respect to any Purchased Contract, (i) constitute a breach, default or violation, or accelerate the obligations, thereunder; (ii) require the consent of any person or party, except for the Required Consents; or (iii) affect the continuation, validity and effectiveness thereof or the terms thereof. There are no renegotiations of, attempts to renegotiate, or outstanding rights to renegotiate any material amounts paid or payable to either Seller under any Purchased Contract, and neither Seller has received any demands for such renegotiation.

 

3.9 Receivables . All Receivables reflected on Schedule 1.2(d) and all Receivables presently owing and to be owing at the Effective Time will be legal, valid and binding obligations, and are collectible in full at face value. All such Receivables represent or will represent sales actually made or services actually performed in the ordinary course of business of the Security Solutions. There are no set-offs, counterclaims or disputes available or asserted with respect to any Receivable, and no discount or allowance from any Receivable has been made or agreed to by either Seller.

 

3.10 Intellectual Property .

 

(a) As used in this Agreement, “ Security Solutions Intellectual Property ” shall mean all Owned Intellectual Property, Licensed Intellectual Property, the Excluded Patents licensed to Buyer pursuant to the Patent License, the Excluded Trademarks licensed to Buyer pursuant to the Trademark License, and the Intellectual Property licensed to AOL pursuant to the SDMA (the “ SDMA Intellectual Property ”).

 

10

(b) Except as otherwise provided for in Section 3.10(c), Sellers own or have the valid right to use all Security Solutions Intellectual Property necessary (i) to use, reproduce, display, perform, modify, create derivative works of, support, manufacture, have manufactured, market and distribute the object code and source code of its Current Customer Deliverables in the Security Solutions as such Security Solutions activities are conducted by Sellers immediately prior to Closing and (ii) to operate its Internal Systems in the Security Solutions unit as such Security Solutions unit is conducted by Sellers immediately prior to Closing. Except as otherwise specified in Schedule 3.10(b)(i) , each item of Owned Intellectual Property, SDMA Intellectual Property and Licensed Intellectual Property will be owned or available for use by Buyer immediately following the Closing on substantially identical terms and conditions as it was used by Sellers in connection with the Security Solutions immediately prior to the Closing without transfer fees or similar payments. Sellers have taken reasonable measures to protect the proprietary nature of each item of Owned Intellectual Property, and to maintain in confidence trade secrets and confidential information, that it owns and uses in the Security Solutions. No other person or entity has any rights to any of the Owned Intellectual Property (except pursuant to Seller Out-License Agreements specified in Schedule 3.10(d) ), and, to Sellers’ Knowledge, no other person or entity is infringing, violating or misappropriating any of the Owned Intellectual Property. As used in this Agreement, “ Current Customer Deliverables ” shall mean, in connection with the Security Solutions, (a) the products listed in Schedule 3.10(b)(ii) that either Seller (i) manufactures, markets, sells or licenses immediately prior to the Closing, including those that either Seller has developed prior to the Closing (even if such products have not yet been commercially released), or (ii) has developed, manufactured, marketed, sold or licensed within the three years prior to the Closing, and (b) the services listed in Schedule 3.10(b)(ii) that either Seller (i) provides immediately prior to the Closing, or (ii) has provided within the three years prior to the Closing; “ Discontinued Customer Deliverables ” shall mean, in connection with the Security Solutions, (x) the products listed in Schedule 3.10(b)(iii) that Netscape has manufactured, marketed, sold or licensed within the t