Exhibit 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
CIC ACQUISITION CORP.,
AS BUYER,
AND
PENOP LIMITED AND PENOP INC.,
AS SELLERS
DATED AS OF SEPTEMBER 29, 2000
TABLE OF CONTENTS
PAGE
1. DEFINITIONS............................................................1
1.1 Terms Defined in this Section....................................1
1.2 Other Definitions................................................5
2. SALE OF ASSETS; ASSUMPTION OF CERTAIN OBLIGATIONS......................6
2.1 Sales of Assets..................................................6
2.2 Assumed Obligations..............................................7
3. PURCHASE PRICE; CLOSING................................................8
3.1 Purchase Price...................................................8
3.2 Manner and Time of Closing; Delivery of Purchase Price
Shares...........................................................9
3.3 Allocation of Purchase Price.....................................9
3.4 Tax Deferred Reorganization......................................9
3.5 Liquidation of Sellers...........................................9
4. REPRESENTATIONS AND WARRANTIES OF SELLERS..............................9
4.1 Incorporation; Qualification; Corporate Power...................10
4.2 Capacity; Due Authorization; Enforceability.....................10
4.3 Absence of Conflicting Agreements...............................10
4.4 Affiliates......................................................11
4.5 Financial Statements; Absence of Undisclosed Liabilities;
Accounts Receivable.............................................11
4.6 Absence of Certain Changes......................................12
4.7 Intellectual Property...........................................12
4.8 Personal Property...............................................14
4.9 Governmental Authorizations.....................................14
4.10 Contracts.......................................................15
4.11 Products........................................................16
4.12 Service Records.................................................16
4.13 Litigation......................................................17
4.14 Compliance with Laws............................................17
4.15 Taxes; Tax Returns..............................................17
4.16 Insurance and Bonds.............................................17
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TABLE OF CONTENTS
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4.17 Absence of Certain Payments.....................................17
4.18 Interested Party Transactions...................................18
4.19 Customers.......................................................18
4.20 Sufficiency of Assets...........................................18
4.21 Year 2000.......................................................18
4.22 Brokers and Finders.............................................18
4.23 Disclosure......................................................18
5. REPRESENTATIONS AND WARRANTIES OF BUYER...............................20
5.1 Organization; Corporate Power...................................20
5.2 Due Authorization; Enforceability...............................21
5.3 Absence of Conflicting Agreements...............................21
5.4 Purchase Price Shares...........................................21
5.5 SEC Filings.....................................................21
5.6 Brokers and Finders.............................................22
5.7 Disclosure......................................................22
5.8 U.S. Business Establishment.....................................22
5.9 No General Solicitation.........................................22
5.10 Exempt Transaction..............................................22
6. COVENANTS AND OTHER AGREEMENTS OF SELLERS AND BUYER...................23
6.1 Continuity and Maintenance of Operations........................23
6.2 Access to Sellers and Business..................................23
6.3 Confidentiality.................................................24
6.4 Certain Changes; Notification; Updated Schedules................25
6.5 No Public Announcement..........................................25
6.6 SEC Compliance; Purchase Price Shares; Registration
Statement ......................................................25
6.7 Required Consents...............................................27
6.8 Delivery of Financial Information...............................28
6.9 Non-Competition Agreements......................................28
6.10 Taxes...........................................................28
6.11 Sellers' Premises...............................................29
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TABLE OF CONTENTS
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PAGE
6.12 Reimbursement of Certain Expenses...............................29
6.13 No-Shop Covenant................................................29
6.14 Further Assurances; Satisfaction of Covenants...................29
6.15 Change of Business Name.........................................30
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS...........................30
7.1 Representations and Warranties of Sellers.......................30
7.2 Covenants.......................................................30
7.3 Material Consents...............................................30
7.4 Judgments.......................................................30
7.5 Material Adverse Change.........................................30
7.6 Opinion of Sellers' Counsel.....................................30
7.7 Due Diligence...................................................30
7.8 Bankruptcy Proceedings..........................................30
7.9 Delivery of Certificates and Documents..........................31
7.10 Third Party Agreements..........................................31
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS..........................32
8.1 Representations and Warranties of Buyer.........................32
8.2 Covenants.......................................................32
8.3 Judgments.......................................................32
8.4 Payment for Assets..............................................32
8.5 Opinion of Buyer's Counsel......................................32
8.6 Delivery of Certificates and Documents..........................32
8.7 Guaranty........................................................32
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY HOLDBACK........33
9.1 Survival........................................................33
9.2 Indemnification.................................................33
9.3 Indemnity Shares; Assertion of Claims...........................34
9.4 Notice of and Right to Defend Third Party Claims................34
9.5 Limitations of Liability........................................34
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TABLE OF CONTENTS
(CONTINUED)
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10. TERMINATION...........................................................35
10.1 Termination.....................................................35
10.2 Surviving Obligations...........................................36
10.3 Attorney's Fees.................................................36
11. EXPENSES..............................................................36
12. FINANCIAL STATEMENTS..................................................36
13. ENTIRE AGREEMENT......................................................36
14. PARTIES OBLIGATED AND BENEFITED.......................................37
15. NOTICES...............................................................37
16. AMENDMENTS AND WAIVERS................................................38
17. SEVERABILITY..........................................................38
18. SECTION HEADINGS AND TERMS............................................39
19. COUNTERPARTS..........................................................39
20. GOVERNING LAW; CONSENT IN JURISDICTION................................39
21. SPECIFIC PERFORMANCE; PERFORMANCE BY SELLERS..........................39
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LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
A Form of Escrow Agreement
B-1 Form of Non-Competition Agreement Being Delivered by Sellers
B-2 Form of Non-Competition Agreement Being Delivered by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇
B-3 Form of Non-Competition Agreement Being Delivered by ▇▇▇▇▇▇▇▇ ▇▇▇
C Form of Consulting and Reimbursement Agreement
D-1 Form of Opinion of Sellers' Counsel
D-2 Form of Opinion of Sellers' Counsel
D-3 Form of Opinion of Sellers' Counsel
E Form of ▇▇▇▇ of Sale and Assignment
F Form of Assumption Agreement
G Form of Independent Contractor Agreement
H Form of Consulting Services Agreement
I Form of Opinion of Buyer's Counsel
J Form of Guaranty
SCHEDULES
1.1A Assumed Instruments
1.1B Management Personnel for Purposes of "Sellers' Knowledge"
1.1C Required Consents
2.1(a)(ii) Excluded Tangible Personal Property
3.2 Purchase Price Shares
3.3 Allocation of Purchase Price
4.6 Absence of Changes
4.7(a) Intellectual Property
4.7(b) Exceptions to Title to Intellectual Property
4.7(c) Intellectual Property Licenses and Sublicenses
4.7(d) Infringement; Violations of Law
4.7(e) Validity of Seller Intellectual Property
4.7(f) Legal Proceedings Involving Intellectual Property
4.7(g) Professional Services Agreements
4.8(a) Tangible Personal Property
4.8(b) Tangible Personal Property Leases
4.9 Governmental Authorizations
4.10 Contracts
4.11(a) Products
4.11(b) Product Warranties, Guaranties and Indemnities
4.12 Product Guaranties and Warranties; Continuing Obligations
4.13 Litigation
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4.19 Customers
4.20 Exceptions to Sufficiency of Assets
6.5 Form of Press Release
6.6(a) Restrictive Legend
6.11 Sellers' Premises
7.10 Individuals Executing Non-Competition Agreements
12 Financial Statements Being Paid for by Buyer
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of this 29th day of
September, 2000, by and between CIC Acquisition Corp., a Delaware corporation
("BUYER"), and PenOp Limited, a company organized under the laws of England and
Wales ("PENOP UK"), and PenOp Inc., a Delaware corporation ("PENOP"; PenOp UK
and PenOp each being referred to herein as a "SELLER," and being referred to
together as "SELLERS").
W I T N E S S E T H:
WHEREAS, Sellers have agreed to convey to Buyer, and Buyer has
agreed to acquire from Sellers, certain of the assets used or usable in
connection with Sellers' business (the "BUSINESS"), as set forth herein, upon
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the representations and
warranties and the mutual covenants and agreements herein contained, and other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Sellers and Buyer do hereby agree as follows:
1. DEFINITIONS.
1.1 TERMS DEFINED IN THIS SECTION. In addition to the terms defined
elsewhere in this Agreement, the following terms shall have the following
meanings when used herein with initial capital letters:
"Affiliate" means, with respect to any Person, any other Person
controlling, controlled by or under common control with, such Person, with
"control" for such purpose meaning the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or voting interests,
by contract or otherwise.
"Assumed Instruments" means the Contracts and Governmental
Authorizations, if any, set forth in SCHEDULE 1.1A.
"Business Day" means any day other than a Saturday, Sunday or a day
on which commercial banks in New York, New York are required by law to be
closed.
"CIC" means Communication Intelligence Corporation, a Delaware
corporation and the parent corporation of Buyer.
"Commercial Software Rights" means packaged commercially available
software programs that are generally available to the public through retail
dealers in computer software.
"Developments" means, collectively, any and all developments,
enhancements, refinements, upgrades and documentation with respect to ideas,
inventions, products, services,
know-how, trade secrets, programs, procedures, strategies and other works of
authorship and other proprietary rights.
"Employee" means any person employed by a Seller.
"Escrow Agent" means Citibank, N.A., or such other bank, brokerage
firm or trust company on which Sellers and Buyer shall agree.
"Escrow Agreement" means the Escrow Agreement to be entered into at
Closing among Sellers, Buyer and the Escrow Agent, substantially in the form of
EXHIBIT A.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Governmental Authority" means (i) the United States of America or
any other country or nation, (ii) any state, commonwealth, territory or
possession of the United States of America or any other country or nation, and
any political subdivision thereof, including counties, municipalities and the
like or (iii) any agency, authority or instrumentality of any of the foregoing,
including any court, tribunal, department, bureau, commission or board.
"Governmental Authorization" means any authorization, agreement,
License or permit relating to the operation of any part of the Business or any
of the Assets that is obtained from or issued by any Governmental Authority and
is used or useful in the operation of the Business, including any amendment or
modification thereof or any supplement thereto.
"Indemnity Shares" means 940,000 Shares, to be withheld from the
Shares delivered in respect of the Purchase Price and deposited with the Escrow
Agent pursuant to Section 3.2(b)(ii).
"Intellectual Property" means any or all of the following and all
rights in, arising out of, or associated therewith, including goodwill with
respect thereto, anywhere in the world: (i) Patent Rights; (ii) trade secrets
and other proprietary information; (iii) copyrights, mask work rights, copyright
registrations and applications therefor; (iv) web addresses, sites and domain
names; (v) industrial designs and any registrations and applications therefor
throughout the world; (vi) Trademarks; and (vii) any similar, corresponding or
equivalent rights to any of the foregoing, including any Developments and
Related Technology with respect thereto.
"Knowledge of Seller," "Sellers' Knowledge" or similar words shall
mean the actual knowledge of any of Sellers' officers or directors or the other
persons identified in SCHEDULE 1.1B.
"Legal Requirement" means any statute, ordinance, code, law, rule,
regulation, permit or permit condition, administrative or judicial decree, order
or other requirement, standard or procedure enacted, adopted or applied by any
Governmental Authority, including judicial decisions applying common law or
interpreting any other Legal Requirement.
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"License" means any license or other authorization (other than a
license solely with respect to Commercial Software Rights) issued or granted by
a Person other than a Governmental Authority that authorizes the use of any
Seller Intellectual Property.
"Lien" means any lien, security interest, mortgage, pledge, charge,
claim, equity, encumbrance, restriction on transfer, conditional sale, or other
title retention device or arrangement (including, without limitation, a capital
lease), transfer for the purpose of subjection to the payment of any
indebtedness, or restriction on the creation of any of the foregoing, whether
relating to any property or right or the income or profits therefrom.
"Material Adverse Effect" means a material adverse effect on the
business, financial condition, results of operations, assets or liabilities of
any Seller or any of the Assets.
"Material Consents" means the Required Consents marked with
asterisks in SCHEDULE 1.1C.
"Nasdaq SmallCap Market" means a tier of the electronic securities
market operated by The Nasdaq Stock Market, Inc. that is comprised of competing
market makers whose trading is supported by a communications network linking
them to quotation dissemination, trade reporting and order execution systems,
which tier is comprised of securities that meet the requirements of and are
authorized as "Nasdaq SmallCap Market" securities (as defined under the
regulations promulgated by the National Association of Securities Dealers).
"Outside Closing Date" means October 6, 2000.
"Patent Rights" means (i) all patents and patent applications and
any inventions disclosed in any of the foregoing patents and patent
applications; (ii) any and all counterpart U.S., international and foreign
patents, applications and certificates of invention based upon or covering any
portion of the foregoing patents, applications and inventions; (iii) all
divisions, continuations, continuations-in-part, and substitutions of any of the
preceding patents and patent applications; (iv) all foreign or international
applications corresponding to any of the preceding applications or patents; (v)
all divisions, continuations, continuations-in-part, and substitutions of any of
such foreign or international applications described in (iv); and (vi) all U.S.,
international and foreign patents issuing on any of the preceding applications,
including extensions, reissues and re-examinations.
"Person" means any natural person, corporation, partnership, trust,
unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
"Product Liability" shall mean any liability or other obligation
(whether alleged or otherwise) of a Seller or any agent or affiliate thereof
respecting any express or implied representation, warranty, guaranty, agreement,
arrangement or understanding made (or claimed to have been made), or imposed (or
claimed to have been imposed) by operation of applicable law, in respect of the
Assets or Products.
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"Products" means (except with respect to Commercial Software Rights)
all products and services sold, licensed, developed or otherwise provided by
Sellers to customers or other third parties, or supported by Sellers, in
connection with the Business.
"Related Agreements" means all written agreements, instruments,
affidavits, certificates and other documents, other than this Agreement, that
are executed and delivered by Buyer or either Seller pursuant to this Agreement.
"Related Technology" means any or all of the following and all
rights in, arising out of, or associated therewith anywhere in the world: (i)
all inventions (regardless of whether patentable), invention disclosures,
improvements, derivatives, know-how, technology, technical data; (ii) all
schematics, drawings, net lists, notes and notebooks, specifications, bills of
material, and tooling; (iii) all computer software, including all source code,
object code, firmware, development tools, flow charts, annotations, files,
records and data, and all media in which any of the foregoing is recorded; (iv)
all customer lists; (v) all databases and data collections and all rights
therein throughout the world; and (vii) all documentation relating to any of the
foregoing.
"Required Consents" means all consents, approvals, authorizations,
waivers and other acts of Governmental Authorities and other Persons under
Contracts, Governmental Authorizations and other instruments and pursuant to
Legal Requirements and otherwise that are necessary in connection with the
consummation of the transactions contemplated by this Agreement and the Related
Agreements, all of which Required Consents are set forth in SCHEDULE 1.1C.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of CIC's common voting stock, having a par
value of $0.01 per share.
"Taxes" or "Tax" means and includes, without limitation, all net
income, capital gains, gross income, gross receipt, property, franchise, sales,
use, excise, withholding and other taxes, assessments, levies, fees, duties,
tariffs and other charges of any kind imposed upon a Seller or any of the
Assets, as applicable, by federal, foreign, state or local law, together with
any interest and any penalties, or additions to tax and additional amounts,
validly imposed with respect to such taxes.
"Trademarks" means all trademarks, trade names, service marks, trade
dress and logos, together with all translations, adaptations, derivations and
combinations thereof, regardless of whether any of the foregoing is registered
or is the subject of a pending application, and including all goodwill
associated therewith, existing or arising anywhere in the world.
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1.2 OTHER DEFINITIONS. The following terms are defined in the Sections
indicated:
Term Section
---- -------
Assets 2.1(a)
Assumed Obligations 2.2(a)
Assumption Agreement 7.9(e)
Books and Records 2.1(a)(iv)
Business Recital
Buyer Financial Statements 5.5
Buyer Indemnitees 9.2(a)
Claim 9.2(c)
Claim Notice 9.3(b)
Closing 3.2(a)
Closing Date 3.2(a)
Code 3.4
Confidential Information 6.3(b)
Consulting and Reimbursement 6.12
Agreement
Contracts 4.10(a)(ix)
GAAP 5.5
Excluded Assets 2.1(b)
Financial Statements 4.5(a)
Indemnitee 9.3(b)
Indemnitor 9.3(b)
1999 Financial Statements 6.8(b)
Non-Competition Agreements 6.9
Personal Property Leases 4.8
Post-Closing Payment 6.10
Premises 6.11
Purchase Price 3.1
Purchase Price Shares 6.6(b)(i)
Registration Statement 6.6(b)(i)
Resale Period 6.6(b)(i)
SEC Documents 5.5
Seller Indemnitees 9.2(b)
Seller Intellectual Property 2.1(a)(i)
Service Records 4.12
Subsequent Purchasers 6.6(b)(ii)
Tangible Personal Property 2.1(a)(ii)
UK Auditing Standards 4.5(a)
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2. SALE OF ASSETS; ASSUMPTION OF CERTAIN OBLIGATIONS
2.1 SALES OF ASSETS.
(a) Subject to the terms, provisions and conditions contained in
this Agreement, Sellers agree to sell, assign, transfer, convey and deliver to
Buyer, and Buyer agrees to purchase and acquire from Sellers, at the Closing,
all right, title and interest of Sellers in the Assets (as defined herein), free
and clear of all Liens. The "ASSETS" shall mean, collectively, the following:
(i) all of Sellers' rights in, to and with respect to the
Intellectual Property that is owned by Sellers or that is otherwise used or held
for use in the Business ("SELLER INTELLECTUAL PROPERTY");
(ii) all of Sellers' rights in and to the equipment, supplies
and other tangible personal property, including inventories thereof, that is
necessary for or is being used in the use and operation (including testing) of
the Seller Intellectual Property as it is or has been used or operated in the
Business ("TANGIBLE PERSONAL PROPERTY"), other than such property as is listed
in SCHEDULE 2.1(A)(II);
(iii) Sellers' rights under the Assumed Instruments, other
than accounts receivable in respect of obligations discharged by Sellers prior
to the Closing;
(iv) all books, records (except financial records and
ledgers), customer, supplier and vendor lists, databases and other information
and data (except, subject to Section 6.2(c), (A) e-mail and (B) any other
records containing information of third parties that is protected by a current,
valid nondisclosure agreement that is binding upon Sellers), credit records,
competitor information, marketing, advertising and promotional literature and
other materials and plans relating to the Business ("BOOKS AND RECORDS"),
subject to a Seller's right, at any time and from time to time, on reasonable
notice and during normal business hours, to make and retain copies of and have
access to the foregoing solely to the extent reasonably necessary to enable
Sellers to wind up the Business, prepare and file all necessary tax returns,
comply with any other Legal Requirements and comply with or enforce any
contractual or other obligation or right, including without limitation under
this Agreement, the Related Agreements, the Assumed Obligations or those
agreements listed in SCHEDULE 4.10 and Sellers' right to defend with respect to
any of the foregoing; PROVIDED, that Sellers shall have no such rights with
respect to source code or software documentation (except as necessary in
connection with Sellers' participation in any legal proceedings to which a
Seller is a party) or with respect to any other records generally considered to
constitute intellectual property or proprietary information (except to the
extent necessary for Sellers' preparation of tax returns and financial
statements and participation in any legal proceeding to which a Seller is a
party);
(v) all intangible rights and claims relating to or arising
out of the Seller Intellectual Property, the Assumed Instruments and the
Tangible Personal Property, including all rights in and with respect to goodwill
relating thereto and all inchoate rights with respect thereto and claims against
other Persons in connection therewith.
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(b) Buyer shall not acquire any assets, rights or properties of
Sellers other than as expressly set forth in Section 2.1(a). Without limiting
the generality of the foregoing, the Assets shall not include, and Buyer shall
not acquire any interest in or to, any of the following (all assets, rights and
properties not acquired by Buyer under this Agreement being referred to
collectively as the "EXCLUDED ASSETS"):
(i) insurance policies of Sellers and rights and claims
thereunder;
(ii) bonds, letters of credit, surety instruments and other
similar items and any stocks, bonds, certificates of deposit and similar
investments of Sellers;
(iii) accounts receivable, cash and cash equivalents and notes
receivable of Sellers;
(iv) prepaid expenses;
(v) security deposits;
(vi) Sellers' accounting software and financial records
software and all data related to such software;
(vii) Sellers' minute books and stock ledgers;
(viii) Sellers' employee benefits plans and employment-related
contracts;
(ix) Sellers' rights under this Agreement and the Related
Agreements;
(x) Sellers' worldwide financial, U.S. financial and
management databases;
(xi) the legal opinion of White & Case LLP addressed to
Sellers, dated September 6, 2000; and
(xii) all rights of Sellers to the cash deposit made in
connection with the Letters of Intent dated June 7 and June 8, 2000, by and
between PenOp Limited and CyberSign Japan Incorporated.
2.2 ASSUMED OBLIGATIONS.
(a) Subject to the terms, provisions and conditions contained in
this Agreement, at the Closing, Buyer shall assume and shall fulfill, perform or
otherwise discharge only those obligations of Sellers arising under the Assumed
Instruments that are to be performed from and after the Closing Date ("ASSUMED
OBLIGATIONS").
(b) Other than the Assumed Obligations, Buyer shall not assume or be
bound by or otherwise be responsible for any duties, responsibilities,
obligations or liabilities of any
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kind or nature, known, unknown, contingent or otherwise of Sellers relating to
the Business or otherwise, whether arising prior to, on or after the Closing.
Subject to but without limiting the generality of the foregoing, Buyer shall not
assume, undertake or accept any duty, responsibility, obligation or liability of
either Seller (whether existing as of the date hereof, at the Closing or arising
in the future) with respect to:
(i) any liability or obligation of Sellers or any of their
Affiliates relating to the operation of the Business;
(ii) any liability or obligation of Sellers or any of their
Affiliates relating to the ownership or operation of the Assets on or prior to
the Closing Date;
(iii) any liability or obligation of Sellers or any of their
Affiliates relating to the Excluded Assets;
(iv) any accounts payable of Sellers relating to the Assets
incurred on or prior to the Closing Date;
(v) any liability or obligation under Contracts that are not
Assumed Instruments;
(vi) any liability or obligation arising out of a breach or
default by a Seller at or prior to the Closing (including any event occurring
prior to the Closing that with the passage of time or giving of notice, or both,
would become a breach or default under any Assumed Instrument);
(vii) any liability or obligation with respect to any claim or
governmental proceeding or investigation, whether existing on the date hereof or
arising hereafter, arising out of ownership of the Assets by Sellers on or prior
to the Closing Date;
(viii) any liability or obligation of Sellers to any Employee;
(ix) any liability or obligation with respect to (A) any Tax
related to Sellers, (B) any Tax related to the Business that is attributable to
a period on or prior to the Closing Date or (C) any Tax arising out the
ownership of the Assets by Sellers on or prior to the Closing Date;
(x) any liability in respect of any indebtedness of Sellers or
the Business; or
(xi) any liability in respect of any interest in real property
of Sellers.
3. PURCHASE PRICE; CLOSING.
3.1 PURCHASE PRICE. The aggregate purchase price for the Assets shall be
4,700,000 Shares (the "PURCHASE PRICE").
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3.2 MANNER AND TIME OF CLOSING; DELIVERY OF PURCHASE PRICE SHARES.
(a) Subject to the satisfaction or waiver of all conditions to
closing set forth in Sections 7 and 8, the closing of the transactions
contemplated herein (the "CLOSING") shall take place at 10:00 a.m. at the
offices of ▇▇▇▇ Marks & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
or at such other time and location mutually determined by Sellers and Buyer, on
the second Business Day following the satisfaction or waiver of the conditions
set forth in Articles 7 and 8 hereof (other than those conditions set forth in
Section 7.9 (other than Subsection (b) or (i) thereof) and Section 8.6 (other
than Subsection (b) thereof), but in no event later than the Outside Closing
Date (such date on which the Closing actually occurs, the "CLOSING DATE").
(b) At Closing,
(i) Buyer shall deliver to Sellers certificates representing
the Purchase Price, which Shares shall be registered on CIC's books in the names
and percentage denominations set forth in SCHEDULE 3.2; and
(ii) Buyer, Sellers and the Escrow Agent shall enter into the
Escrow Agreement, pursuant to which Sellers shall deposit in escrow with the
Escrow Agent the Indemnity Shares, together with executed stock powers, endorsed
in blank, to enable the Escrow Agent to transfer such Shares to Buyer. The
Indemnity Shares shall be held, sold and otherwise disbursed by the Escrow Agent
in accordance with the terms of the Escrow Agreement in order for such Indemnity
Shares and/or the proceeds of sales thereof to provide a fund for the payment of
indemnification to Buyer, subject to Section 9.
3.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
among the Assets and the covenant contained in Section 6.9 as set forth in
SCHEDULE 3.3, and each party shall make all appropriate tax and other filings on
a basis consistent with such allocation.
3.4 TAX DEFERRED REORGANIZATION. The acquisition of Assets from PenOp
hereunder is intended to be a "reorganization" within the meaning of Section
368(a)(1)(C) of the Internal Revenue Code (the "CODE"), and this Agreement is
intended to constitute a "plan of reorganization" within the meaning of the
regulations promulgated under Section 368 of the Code, and Buyer and Sellers
agree to prepare and file tax returns that are consistent with such intentions.
3.5 LIQUIDATION OF SELLERS. Sellers agree that PenOp shall not be
liquidated earlier than one year following the Closing Date, and Sellers agree
that upon such liquidation, all of the obligations and liabilities of PenOp
shall be assumed by, and all of the assets of PenOp shall be transferred to,
PenOp UK. Sellers agree that PenOp UK shall not be liquidated earlier than two
(2) years following the Closing Date.
4. REPRESENTATIONS AND WARRANTIES OF SELLERS. Sellers, jointly and severally,
hereby represent and warrant to Buyer as follows:
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4.1 INCORPORATION; QUALIFICATION; CORPORATE POWER. PenOp is a corporation,
and PenOp UK is a limited liability company, each duly incorporated, validly
existing and in good standing (or the equivalent, as may be appropriate under
U.K. law) under the laws of the jurisdiction of its respective incorporation,
with full corporate or limited liability company power, as the case may be, and
authority to own, lease or license its properties and assets and to carry on the
Business and any other businesses in which it is engaged in the manner in which
such businesses are now carried on. Each Seller is duly qualified to transact
business in all other jurisdictions where the ownership, leasing or licensing of
its properties and assets and the carrying on of its businesses as a foreign
corporation requires such qualification (or the equivalent, as may be
appropriate under U.K. law), except for any failure to so qualify that is not
reasonably likely to have a Material Adverse Effect.
4.2 CAPACITY; DUE AUTHORIZATION; ENFORCEABILITY. All requisite corporate
or limited liability company actions, as the case may be, required to be taken
by each Seller for the execution, delivery and performance by such Seller of
this Agreement and each of the Related Agreements to which it is a party have
been duly taken. Each Seller has the full legal capacity and legal right, power
and authority to enter into this Agreement and the Related Agreements to which
it is a party and to consummate the transactions contemplated hereby and
thereby. This Agreement has been duly executed and delivered by each Seller, and
this Agreement and each of the Related Agreements to which each Seller is a
party, upon execution and delivery, will be, a legal, valid and binding
obligation of such Seller enforceable in accordance with their respective terms,
except in each case to the extent that such enforcement may be subject to
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws of
general application affecting the rights and remedies of creditors or secured
parties, and that the availability of equitable remedies, including specific
performance, injunctive relief and reformation, may be subject to equitable
defenses and the discretion of the court before which any proceeding therefor
may be brought.
4.3 ABSENCE OF CONFLICTING AGREEMENTS. SCHEDULE 1.1C sets forth all of the
Required Consents. Provided that all of the Required Consents are obtained, the
execution and delivery of this Agreement and the Related Agreements and the
consummation of the transactions contemplated hereby and thereby by Sellers will
not (a) violate PenOp's Certificate of Incorporation or Bylaws or PenOp UK's
Certificate of Incorporation and Memorandum and Articles of Association, or
other applicable constituent documents; (b) violate any Legal Requirements
applicable to Sellers, the Assets, the Business or the Assumed Obligations; (c)
conflict with, result in any breach of or default, event creating rights of
acceleration, termination or cancellation or a loss of rights under, or require
any payment to or confer any material rights upon any third party under or
pursuant to any Governmental Authorization, Contract or other instrument or
judgment, order, award or decree to which a Seller is a party or by which any of
the Assets, the Business or a Seller is bound or affected, or any statute, law,
regulatory provision or other Legal Requirement to which a Seller, the Assets or
the Business is subject or by which it is bound; (d) require either Seller to
pay damages, termination fees or similar penalties to any Person; (e) result in
the creation or imposition of any Lien on any of the Assets; or (f) result in
the acceleration of the due date of any material obligation of either Seller.
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4.4 AFFILIATES. Other than PenOp and two other subsidiaries that are
dormant (namely, Peripheral Vision Ltd. and Peripheral Vision Inc.), PenOp UK
has no subsidiaries, and neither Seller has any other Affiliate (other than each
other and its respective officers, directors and shareholders) or holds any
interest in any other Person. Neither Signature One Inc. (or any other Affiliate
of Sellers with a similar name), Peripheral Vision Ltd. or Peripheral Vision
Inc. holds any assets.
4.5 FINANCIAL STATEMENTS; ABSENCE OF UNDISCLOSED LIABILITIES; ACCOUNTS
RECEIVABLE.
(a) Sellers have delivered to Buyer true and correct copies of the
following financial statements: (i) an audited consolidated balance sheet of
Sellers as of December 31, 1998 and unaudited consolidated balance sheets of
Sellers as of December 31, 1999, and June 30, 2000; (ii) audited statements of
income for the 12-month period ended December 31, 1998; and (iii) unaudited
statements of income and cash flows for the 12- and six-month periods ended
December 31, 1999, and June 30, 2000, respectively (collectively, the "FINANCIAL
STATEMENTS"). Sellers have also delivered to Buyer copies of all audit response
letters relating to Sellers and the Business that are in final form for the
12-month period ended December 31, 1998. Except as set forth in SCHEDULE 4.5, no
audit response letters relating to Sellers or the Business have been prepared
with respect to the 12-month period ended December 31, 1999, and no audit
letters to management have been prepared in respect of Sellers or the Business
for the 12-month periods ended December 31, 1998, and December 31, 1999. The
Financial Statements have been prepared in accordance with the books and records
of the respective Sellers and have been prepared in accordance with the U.K.
Companies Act of 1985 and Auditing Standards issued by the U.K. Auditing
Practices Board, each as in effect from time to time (collectively, "UK AUDITING
STANDARDS"), consistently applied throughout the periods covered thereby. The
Financial Statements present fairly the consolidated and consolidating financial
position, results of operations and cash flows of Sellers and the Business at
the respective dates thereof and throughout the respective periods covered
thereby (except that the Financial Statements as of December 31, 1998, and for
the 12-month period then ended do not cover cash flows) subject, in the case of
unaudited Financial Statements, to normal year-end accruals and audit
adjustments and to the absence of footnotes thereto, none of which is material.
There has been no change in Sellers' accounting policies except as described in
the notes to the Financial Statements.
(b) Except as otherwise expressly disclosed in any of the Schedules
hereto or in the unaudited Financial Statements covering any period or as of any
date after December 31, 1999, there has been no change since December 31, 1999
with respect to Sellers, their respective assets or, to Sellers' Knowledge,
their respective businesses that would materially affect the Assets, other than
changes in general economic and business conditions that do not relate
specifically to Sellers or the Assets.
(c) Except as set forth in the Financial Statements, and except for
liabilities and obligations incurred in the ordinary course of Sellers' business
consistent with past practices, since December 31, 1999, neither Seller has
incurred any liability or obligation of any nature (whether accrued, absolute,
contingent or otherwise) with respect to the Assets or the Business for which
Buyer may become liable, other than the Assumed Obligations, or that may
adversely affect the Assets in any material respect.
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4.6 ABSENCE OF CERTAIN CHANGES. Except as set forth in SCHEDULE 4.6,
during the period from December 31, 1999, to the date as of which this
representation is made, inclusive, Sellers have operated the Business in the
ordinary course, consistent with past practices, and no event, transaction or
circumstance has occurred with respect to Sellers, the Assets or the Business
that could result in a liability to Buyer after the Closing, other than the
Assumed Obligations and general economic and business conditions that do not
relate specifically to Sellers or the Assets.
4.7 INTELLECTUAL PROPERTY.
(a) Schedule 4.7(a) sets forth, by Seller, each Patent Right,
trademark, trade name, service ▇▇▇▇, service name, registered copyright, and
applications for registration of the foregoing, and each web address, web site
and domain name and all software (other than Commercial Software Rights)
included within the Seller Intellectual Property, together, where applicable,
with all application and registration numbers with respect thereto, the
identities of the owner(s) thereof and of any of Sellers' licensees and
sublicensees thereof and a description of any Licenses by which Sellers have
acquired rights with respect thereto. SCHEDULE 4.7(A) also describes any
proceedings and actions to which either Seller is a party before any court or
other tribunal (including the United States Patent and Trademark Office,
Trademark Trials and Appeals Board or equivalent authority anywhere in the
world) related to any of the Seller Intellectual Property.
(b) Except as set forth in Schedule 4.7(b), and except for
Commercial Software Rights, (i) Sellers own and have good and exclusive title
to, or have the exclusive legal rights to use in the Business, each item of
Seller Intellectual Property, free and clear of any Liens (other than licenses
to Seller Intellectual Property granted by Sellers in the ordinary course of
business); (ii) have exclusive rights (and are not contractually obligated to
pay any compensation to any third party in respect thereof under any license,
covenant not to ▇▇▇, settlement, or other agreement) to the use thereof or the
material covered thereby; (iii) to the extent that any work, invention, or
material has been developed or created by a third party for a Seller, such
Seller has entered into a written "work for hire" or similar agreement with, or
has received a written assignment or exclusive license from, such third party
with respect thereto whereby such Seller has obtained exclusive ownership of or
rights to all Intellectual Property in such work, material or invention; and
(iv) no Person who has licensed Seller Intellectual Property to a Seller has
ownership rights or license rights to Developments or Related Technology created
by either Seller in connection with such Seller Intellectual Property.
(c) Except as set forth in SCHEDULE 4.7(c), and except with respect
to Commercial Software Rights, neither Seller has transferred ownership of,
granted any license or other right to use or authorized the retention of any
right to use any Intellectual Property to any Person. SCHEDULE 4.7(c) sets forth
a complete list of all licenses, sublicenses and other instruments limiting or
otherwise affecting Sellers' rights in any of the Seller Intellectual Property,
including the identity of all parties thereto, the Seller Intellectual Property
covered thereby, a description of the nature and subject matter thereof, any
applicable royalty and the term thereof. Except as set forth in SCHEDULE 4.7(c),
the execution and delivery of this Agreement by Sellers, and the consummation of
the transactions contemplated hereby, will not
12
result in Buyer (as a result of its assumption of the Assumed Instruments) or
either Seller granting any rights or licenses with respect to any Intellectual
Property to any third party or any third party otherwise obtaining any rights
(by operation of law or otherwise) in any of the Seller Intellectual Property.
(d) The Products (including the same or modified Products used,
licensed or sold by Buyer after the Closing Date) have not, do not and will not
directly or contributorily infringe or misappropriate any Person's Intellectual
Property existing as of or prior to the Closing Date, violate any Person's other
rights (including rights to privacy and publicity) existing as of or prior to
the Closing Date or violate any Legal Requirements (including Legal Requirements
relating to unfair trade practices, false advertising and defamation) existing
as of or prior to the Closing Date. However, Sellers make no warranty in this
Section 4.7(d) that the future use, license or sale of any Products by Buyer or
any Person will not infringe any Person's Intellectual Property existing as of
or prior to the Closing Date, violate any Person's other rights (including
rights to privacy or publicity) existing as of or prior to the Closing Date or
violate any Legal Requirement (including Legal Requirements relating to unfair
trade practices, false advertising and defamation) existing as of or prior to
the Closing Date, if such Products are modified and such modification results in
such infringement, misappropriation or violation. Except as set forth in
SCHEDULE 4.7(d), neither Seller has received any notice of, and no claim has
been asserted or threatened against either Seller, or, to Seller's Knowledge,
any of their respective customers, from any Person claiming that such operation
or any act, Product, technology or service (including Products, technology or
services currently under development) of such Seller infringes or
misappropriates the Intellectual Property or any right of any Person or violates
any Legal Requirements.
(e) Except as set forth in Schedule 4.7(e), (i) each item of owned
Seller Intellectual Property, and to Sellers' Knowledge each item of Seller
Intellectual Property licensed to a Seller, is valid and subsisting, (ii) all
necessary registration, maintenance and renewal fees in connection with owned
Seller Intellectual Property have been paid to the extent necessary so as not to
impair the enforceability of the patent and trademark registrations set forth in
SCHEDULE 4.7(a), other than those registrations indicated in SCHEDULE 4.7(a) as
abandoned or possibly abandoned; and (iii) all necessary documents and
certificates in connection with owned Seller Intellectual Property have been
filed with the relevant patent, copyright, trademark or other Governmental
Authorities for the purposes of maintaining Sellers' rights in such owned Seller
Intellectual Property. Each Seller has taken all steps reasonably required to
protect such Seller's rights in any owned Seller Intellectual Property
consisting of trade secrets and other confidential information, it being
understood that "reasonable steps" shall include, without limitation, entering
into written confidentiality agreements with consultants and/or other third
parties that have access to Sellers' confidential information and entering into
written employee invention disclosure agreements with Employees.
(f) There is no contract, license or agreement between any Seller
and any other Person with respect to any Seller Intellectual Property under
which there is any dispute regarding the scope of such agreement or performance
under such agreement. Except as set forth in SCHEDULE 4.7(F), (i) neither Seller
has any currently pending claim against any Person for infringing or
misappropriating any Seller Intellectual Property; and (ii) no Seller
Intellectual
13
Property or any Product of either Seller is subject to any legal proceeding or
any outstanding decree, order, judgment, agreement or stipulation, to which
either Seller is a party or by which either Seller is bound or, to Sellers'
Knowledge, affected, that restricts in any manner the use, transfer or licensing
thereof by Sellers or may affect the validity, use or enforceability of such
Seller Intellectual Property or Product, other than patent and trademark
prosecution proceedings in the ordinary course of business, all of which are set
forth in SCHEDULE 4.7(a).
(g) Except as set forth in Schedule 4.7(g), none of Sellers'
professional services agreements with their end-user customers, agreements with
outside consultants for the performance of professional services on behalf of
Sellers or customers of Sellers, or any agreements or licenses with any
end-users or resellers of Sellers' Products, confers upon any party (other than
a Seller) any ownership right with respect to any Seller Intellectual Property
developed in connection with such agreement or license.
(h) Neither Sellers' failure to deliver the Seller Intellectual
Property described in clauses (A) and (B) of the second parenthetical in Section
2.1(a)(iv), individually or taken as a whole, nor Sellers' failure to comply
with Section 6.2(c), will materially adversely affect Buyer's ability to use and
operate the Products or the Seller Intellectual Property acquired by Buyer
hereunder following the Closing; nor will such failure materially adversely
affect Buyer's rights in or to the Seller Intellectual Property acquired by
Buyer hereunder or result in any liability or obligation to Buyer following the
Closing.
4.8 PERSONAL PROPERTY. SCHEDULE 4.8(A) contains a list of all of the
Tangible Personal Property included within the Assets. Except as set forth in
SCHEDULE 4.8(b), Sellers own and have good title to all of the Tangible Personal
Property included within the Assets free and clear of all Liens. The Assets do
not include any Tangible Personal Property that is leased or subleased by either
Seller. All of the Tangible Personal Property included within the Assets is in
good operating condition and repair in all material respects, except for
ordinary wear and tear, and is adequate in all material respects for the
purposes for which it is intended.
4.9 GOVERNMENTAL AUTHORIZATIONS. SCHEDULE 4.9 sets forth each Governmental
Authorization held by Sellers and issued or used in connection with the Business
and for each, (i) the name of the issuing body or authority, (ii) the expiration
date and (iii) the subject matter and any material terms thereof. Sellers have
delivered to Buyer complete and correct copies of all the Governmental
Authorizations required to be set forth in SCHEDULE 4.9. Each Governmental
Authorization is valid, subsisting and in full force and effect and is not
subject to any material restriction or condition and, except as set forth in
SCHEDULE 4.9, will continue in full force and effect in accordance with its
terms after the Closing. Sellers, and to Sellers' Knowledge each other party
thereto, are in compliance with the terms and conditions of all the Governmental
Authorizations, and Sellers have not received any notice that they are or are
alleged to be in breach or default under, or that there is or is alleged to be
any basis for the termination of, any Governmental Authorization.
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4.10 CONTRACTS.
(a) Schedule 4.10 sets forth, by Seller, each of the following to
which either Seller is a party or by which any of the Assets, the Business or
either Seller is bound or affected:
(i) all Licenses, other than those set forth in Schedule
4.7(c), as to which a Seller has any executory or unperformed obligation, or
with respect to which Buyer's failure to comply with the terms thereof, or
Buyer's use or operation of any of the Products or the Seller Intellectual
Property in violation thereof or inconsistent with the terms thereof, could
result in a liability to Buyer;
(ii) all contracts for Sellers' provision of Products to any
Person as to which a Seller has any executory or unperformed obligation, or with
respect to which Buyer's failure to comply with the terms thereof, or Buyer's
use or operation of any of the Products or the Seller Intellectual Property in
violation thereof or inconsistent with the terms thereof, could result in a
liability to Buyer;
(iii) all contracts for the purchase or development of any
Intellectual Property to be used in the Business as to which a Seller has any
executory or unperformed obligation, or with respect to which Buyer's failure to
comply with the terms thereof, or Buyer's use or operation of any of the
Products or the Seller Intellectual Property in violation thereof or
inconsistent with the terms thereof, could result in a liability to Buyer;
(iv) any outstanding purchase order, agreement or commitment
obligating Sellers to purchase products or services or acquire, obtain or
dispose of any intangible rights in connection with the Business;
(v) any indebtedness, installment sale agreement or liability
for the deferred purchase price relating to any of the Assets;
(vi) any joint venture or partnership agreement to which a
Seller is a party or by which it is bound, or any other arrangement involving a
sharing of profits or joint development of Seller Intellectual Property;
(vii) any agreement limiting Sellers' or the Business' ability
to compete in any business anywhere in the world;
(viii) any confidentiality, nondisclosure or similar agreement
to which either Seller is a party and in respect of which Buyer's use of the
Assets could cause a breach of such agreement or could result in a liability to
Buyer following the Closing; or
(ix) any other outstanding contract, agreement, commitment,
understanding or instrument relating to Sellers, the Business or the Assets that
involves or could involve, individually or in the aggregate, payments pursuant
to their terms of $25,000 or more, other than those contracts and other
instruments included in SCHEDULE 1.1A or referred to in Sections 4.7(a), 4.7(b),
4.7(c), 4.7(f) and 4.8 (collectively, with such other contracts and
15
instruments referred to in clauses (a)(i) through (ix) and in Sections 4.7(a),
4.7(b), 4.7(c), 4.7(f) and 4.8, and the instruments included in SCHEDULE 1.1A,
the "CONTRACTS").
(b) Sellers have delivered to Buyer complete and correct copies of
all written Contracts and written summaries of all such Contracts that are oral
that relate to the Assets or the Assumed Obligations. All of the Contracts are
valid and binding and enforceable in accordance with their respective terms on
all parties thereto, except in each case to the extent that such enforcement may
be subject to applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws of general application and that the availability of equitable
remedies, including specific performance and injunctive relief, may be subject
to equitable defenses and the discretion of the court before which any
proceeding therefor may be brought. Each Seller, and to Sellers' Knowledge each
other party thereto, has fulfilled and performed in all material respects its
respective obligations under each of the Contracts to which it is a party or by
which it or any of the Assets or the Business is bound, and no event has
occurred, and no condition or state of facts exists that constitutes, or after
notice or lapse of time or both would constitute, a material breach or default
thereof by Sellers, or to Sellers' Knowledge, any other party thereto, or which
permits, or after notice or lapse of time or both would permit, a revocation or
termination of any such Contract by Sellers, or to Sellers' Knowledge, by any
other party thereto, or that may adversely affect in any material respect the
rights of the respective Seller thereunder. No notice of cancellation or default
concerning any Contract or of any event, condition or state of facts described
in this Section 4.10 has been received by either Seller.
4.11 PRODUCTS. SCHEDULE 4.11(A) lists and describes each of the Products
of the Business. Except to the extent that Sellers have obtained, by license,
the right to sell, license, develop or otherwise provide any Product under
sublicense or other agreement with a third party (in which case, this
representation and warranty is based solely on Sellers' Knowledge), each of the
Products has been and is in conformity with all applicable contractual
commitments, all express and implied warranties with respect thereto and all
Legal Requirements applicable thereto. Neither Seller has any liability for, and
to Sellers' Knowledge no basis exists for any liability for, any replacement,
repair or remediation of any Product or for any other damages or refunds in
connection with any Product. Except as set forth in SCHEDULE 4.11(b), none of
the Products is subject to any guaranty, warranty or other indemnity other than
Sellers' applicable standard terms and conditions of sale and standard
guaranties and warranties, copies of which are set forth in SCHEDULE 4.11(b).
4.12 SERVICE RECORDS. The Books and Records contain true and complete
copies of all service records with respect to all Contracts ("SERVICE Records"),
which Service Records have been maintained in the ordinary course consistent
with Sellers' past practices. The Service Records contain (i) an accurate
description of the Products covered by the relevant Contracts and Sellers'
obligations with respect thereto; (ii) the identities of the customers and
descriptions of the Contracts with respect thereto; (iii) all payments received
with respect to the Products covered thereby and the dates of such payments; and
(iv) all refunds, repairs and other remediation made with respect to such
Products, and all claims with respect to Products Liability or other
deficiencies with respect to such Products, and the dates thereof. Except as
expressly set forth in SCHEDULE 4.12, all Products are provided by Sellers on an
"as is" basis without continuing service or maintenance obligations on the part
of Sellers.
16
4.13 LITIGATION. Except as set forth in SCHEDULE 4.13, there is no claim,
legal action, arbitration or other legal, governmental, administrative or tax
proceeding, or any order, complaint, decree or judgment, or any dispute or
controversy in progress, pending or, to Sellers' Knowledge, threatened against
or relating to Sellers or any of their directors, officers, employees or agents
with respect to Sellers, the Assets or the Business; nor, to Sellers' Knowledge,
is any investigation of such nature pending or threatened.
4.14 COMPLIANCE WITH LAWS. Sellers are and have been, and the Assets and
the Business are and have been operated, in compliance in all material respects
with all Legal Requirements applicable to them, and neither Seller has received
any notice, or has any Knowledge of any claim by any Person, that Sellers, any
of the Assets or the Business has not been or is not in compliance with any
applicable Legal Requirement; PROVIDED, that this Section 4.14 shall not apply
to matters addressed in Sections 4.1, 4.2, 4.3, 4.7(d), 4.7(e), 4.7(f), 4.9,
4.10(b), 4.11, 4.13, 4.15, 4.16, 4.17 and 4.23.
4.15 TAXES; TAX RETURNS. Sellers have duly and timely filed in correct
form all federal, state, local and non-U.S. Tax returns and other Tax reports
required to be filed by Sellers and have timely paid all Taxes that have become
due and payable, regardless of whether shown on any such return or report.
Sellers have received no written notice of, and Sellers have no Knowledge of,
any deficiency, assessment or audit, or proposed deficiency, assessment or audit
by any taxing authority of any nation, state or locality that could materially
adversely affect, or result in the imposition of a Lien upon, any of the Assets.
4.16 INSURANCE AND BONDS. There is no claim by either Seller pending under
any insurance policy or fidelity bond covering any of the Assets or otherwise
relating to the Business. All premiums due and payable under all such policies
and bonds have been paid, and Sellers are otherwise in compliance with the terms
of such policies and bonds.
4.17 ABSENCE OF CERTAIN PAYMENTS. Neither Sellers nor any officer,
director, agent, Employee or Affiliate of either Seller acting on behalf of
either Seller has paid any bribe or used any of the Assets unlawfully to obtain
advantage for any Person or otherwise taken any action that would result in a
violation by either Seller of the United States Foreign Corrupt Practices Act of
1977 or any similar Legal Requirement applicable to Sellers or any Employees,
agents or Affiliates thereof in respect of its actions on behalf of either
Seller. Without limiting the foregoing, to Sellers' Knowledge, neither Sellers
nor any of their respective officers, directors, agents, Employees or Affiliates
has (i) directly or indirectly given or agreed to give any illegal gift,
contribution, payment or similar benefit to any supplier, customer, governmental
official or employee or other Person who was or may have been, or is or may be,
in a position to help or hinder the use of the Assets or conduct of the Business
as conducted by either Seller (or assist in connection with any actual
transaction), made or agreed to make any illegal contribution, or reimbursed any
illegal political gift or contribution made by any other Person, to any
candidate for United States or foreign governmental office, in any event (A)
which may subject either Seller to any damage or penalty in any civil, criminal
or governmental litigation or proceeding or (B) the non-continuation of which
has had or could have, individually or in the aggregate, a Material Adverse
Effect on the Business or Assets. To Sellers' Knowledge, neither Seller or any
of Sellers' officers, directors, Employees, agents or Affiliates acting on
behalf of either Seller
17
has established or maintained any unrecorded fund or asset or intentionally made
any materially false entry on any of Sellers' books or records for any purpose.
4.18 INTERESTED PARTY TRANSACTIONS. Other than as a minority shareholder
of a public company holding less than five percent (5%) of the stock of such
company, neither Sellers nor any Affiliate thereof or any trust, partnership or
corporation in which a Seller or any such Person has an economic interest, has,
directly or indirectly, (i) an economic interest in any entity that furnishes or
sells services or products to either Seller; or (ii) an economic interest in any
entity that is a customer of Sellers or the Business or that otherwise purchases
from or sells or furnishes to either Seller any goods or services related to the
Business.
4.19 CUSTOMERS. SCHEDULE 4.19 lists each Person that is or, during the
three (3) years preceding the date hereof, has been a customer of the Business.
4.20 SUFFICIENCY OF ASSETS. With the exception of the services of certain
personnel, all of which services and personnel (excluding marketing, sales and
advocacy personnel) are described in SCHEDULE 4.20, the Assets constitute all of
the assets, rights and properties necessary to use and operate the Seller
Intellectual Property as used and operated in the Business, including without
limitation in the discharge of the Assumed Obligations in accordance with the
terms of the Assumed Instruments and other Legal Requirements applicable
thereto.
4.21 YEAR 2000. Sellers have not received any claim or notice, and have no
Knowledge, that (i) any of the Products is not designed to or does not manage,
calculate, sequence, compare and manipulate data involving dates, including
single century formulas and multi-century formulas and including leap years, or
does not cause an abnormally ending scenario within the application or generate
incorrect values or invalid results involving such dates; or (ii) any
date-related user interface functionalities, date-related data interface
functionalities or data fields associated with the Assets do not include the
indication of century.
4.22 BROKERS AND FINDERS. Neither Sellers nor any Person acting on behalf
of Sellers (or either of them) has dealt with any broker or finder in connection
with the transactions contemplated by this Agreement or incurred any liability
for any finder's or broker's fees or commissions in connection with the
transactions contemplated by this Agreement for which Buyer may be liable or
that may result in any claim against any of the Assets.
4.23 DISCLOSURE. The statements made by Sellers in this Agreement and in
any of the Related Agreements (including without limitation the representations
and warranties made by Sellers herein and therein and in the Schedules and
Exhibits hereto and thereto, which are incorporated by reference herein and
which constitute an integral part of this Agreement), when taken as a whole, do
not include or contain (and on the Closing Date shall not include or contain)
any untrue statement of a material fact, and do not omit (and on the Closing
Date shall not omit) to state any material fact required to be included in order
for the statements made to not be materially misleading. To Sellers' Knowledge,
there is no fact that is not in the public domain that would materially
adversely affect, in relation to the Purchase Price, the value a willing buyer
in Buyer's position would pay for the Assets, that (i) has not been set forth
herein or in any Related Agreement or in any Exhibit or Schedule hereto or
thereto, (ii) is not known by Buyer on
18
the date hereof or on the Closing Date, as the case may be, or (iii) in the
exercise of reasonable diligence should not have been known by Buyer, on the
date hereof or on the Closing Date, as the case may be, based upon the
information set forth herein or in any Related Agreement or in any Exhibit or
Schedule hereto or thereto.
4.24 INVESTMENT REPRESENTATIONS. Each Seller represents and warrants to
and covenants with the Buyer that:
(a) Seller is knowledgeable, sophisticated and experienced in
making, and is qualified to make, decisions with respect to investments in
shares representing an investment decision like that involved in the purchase of
the Shares, including investments in securities issued by CIC pursuant hereto,
and has requested, received, reviewed and considered all information Seller
deems relevant (including the SEC Documents) in making an informed decision with
respect to the Purchase Price Shares.
(b) Seller is purchasing the Purchase Price Shares for its own
account for investment only and with no present intention of distributing the
Purchase Price Shares or any arrangement or understanding with any other persons
regarding the distribution of the Purchase Price Shares.
(c) Seller shall not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) any of the securities purchased hereunder
except in compliance with the Securities Act, applicable blue sky laws, and the
rules and regulations promulgated thereunder.
(d) Seller has, in connection with its decision to purchase the
Purchase Price Shares, relied with respect to CIC and its affairs solely upon
the SEC Documents and the representations and warranties of CIC contained
herein.
(e) Seller is an "accredited investor" within the meaning of Rule
501 of Regulation D promulgated under the Securities Act.
4.25 ABILITY TO BEAR RISK. Seller is able to bear the economic risk of
holding the Purchase Price Shares for an indefinite period, including the loss
of Seller's entire investment. The Purchase Price Shares were not offered or
sold to Seller by any form of general solicitation or advertising.
4.26 NO TRANSFERABILITY. Seller understands that: (a) subject to Section
6.6, the Purchase Price Shares shall not be transferable in the absence of
registration under the Securities Act or an exemption therefrom (b) CIC shall
provide stop transfer instructions to its transfer agent with respect to the
Purchase Price Shares in order to enforce the restrictions contained in this
Section 4.26; and (c) each certificate representing the Purchase Price Shares
shall be in the name of Seller or a Subsequent Purchaser and shall bear
substantially the following legends (in addition to any legends required
pursuant to a Related Agreement or under applicable securities laws):
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"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED DIRECTLY OR
INDIRECTLY FROM THE ISSUER WITHOUT BEING REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS, AND
ARE RESTRICTED SECURITIES, AS THAT TERM IS DEFINED UNDER RULE 144 PROMULGATED
UNDER THE ACT. THE SHARES MAY NOT BE SOLD, PLEDGED, TRANSFERRED, DISTRIBUTED
OR OTHERWISE DISPOSED OF IN ANY MANNER (A "TRANSFER") UNLESS THEY ARE
REGISTERED UNDER THE ACT AND ANY OTHER APPLICABLE SECURITIES LAWS, OR UNLESS
THE REQUEST FOR TRANSFER IS ACCOMPANIED BY A FAVORABLE OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE ISSUER, STATING THAT THE TRANSFER WILL NOT
RESULT IN A VIOLATION OF THE ACT OR ANY OTHER APPLICABLE SECURITIES LAW."
Buyer shall cause the legend contained in this Section 4.26 to be removed from a
stock certificate promptly after the receipt by the Company's transfer agent of
a certificate of Seller or a Subsequent Purchaser, whichever the case may be,
certifying that the sale of the Purchase Price Shares shall be consummated in
accordance with an effective Registration Statement and the requirement of
delivering a current prospectus of CIC in connection with such sale.
Notwithstanding the foregoing, such Shares must be held by Sellers and
Subsequent Purchaser in certificated form until all restrictive legends required
by applicable law may be removed in accordance with applicable law.
5. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents and warrants
to Sellers as follows:
5.1 ORGANIZATION; CORPORATE POWER. Each of Buyer and CIC is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, with full corporate power and authority to own, lease or
license its properties and assets and to carry on its respective business in the
manner in which such business is now carried on. Each of Buyer and CIC is duly
qualified to transact business in all other jurisdictions where the ownership,
leasing, licensing of its properties and assets and the carrying on of its
business as a foreign corporation requires such qualification, except for any
failure to so qualify that is not reasonably likely to have a Material Adverse
Effect.
5.2 DUE AUTHORIZATION; ENFORCEABILITY. All requisite corporate actions for
the execution, delivery and performance by Buyer and CIC of this Agreement
and/or all Related Agreements to which Buyer or CIC is a party have been duly
performed. Buyer and CIC each has the full legal capacity and legal right, power
and authority to enter into this Agreement and each of the Related Agreements to
which it is a party and to consummate the transactions contemplated hereby and
thereby. This Agreement has been duly executed and delivered by Buyer and/or
CIC, as the case may be, and this Agreement and each of the Related Agreements
to which Buyer and/or CIC, as the case may be, is a party, upon execution and
delivery, will be, a legal, valid and binding obligation of Buyer and/or CIC, as
the case may be, enforceable in accordance with their respective terms, except
in each case to the extent that such enforcement may be subject to applicable
bankruptcy, reorganization, insolvency, moratorium or similar laws of general
application affecting the rights and remedies of creditors or secured parties,
and that
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the availability of equitable remedies, including specific performance,
injunctive relief and reformation, may be subject to equitable defenses and the
discretion of the court before which any proceeding therefor may be brought.
5.3 ABSENCE OF CONFLICTING AGREEMENTS. The execution and delivery of this
Agreement and the Related Agreements to which Buyer and/or CIC is a party and
the consummation of the transactions contemplated hereby and thereby (provided
all of the Required Consents are obtained) will not (a) violate Buyer's or CIC's
certificate of formation and bylaws; (b) violate any Legal Requirement
applicable to Buyer or CIC; (c) conflict with, result in any breach of or
default, event creating rights of acceleration, termination or cancellation or a
loss of rights under, or require any payment to or confer any material rights
upon any third party under or pursuant to any Governmental Authorization,
contract, note, mortgage, instrument, agreement, judgment, order, award or
decree to which Buyer and/or CIC is a party or by which Buyer and/or CIC or any
of its respective assets is bound or affected, or any statute, other law or
regulatory provision affecting Buyer other than any such conflict, breach,
default or event that is not reasonably likely to have a material adverse effect
on Buyer's ability to consummate the transactions contemplated hereby; (d)
require Buyer and/or CIC to obtain the approval, consent, authorization or act
of or make any declaration, filing or registration with any Person or any
foreign, federal, state or local court or Governmental Authority, other than any
such approval, consent, authorization, act, declaration, filing or registration,
the failure of which to be obtained or made is not reasonably likely to have a
material adverse effect on Buyer's ability to consummate the transactions
contemplated hereby; (e) require Buyer and/or CIC to pay material damages,
termination fees or similar penalties to any Person; (f) result in the creation
or imposition of any Lien on any of the Assets, other than any such Lien that is
not reasonably likely to have a material adverse effect on Buyer's ability to
consummate the transactions contemplated by this Agreement; or (g) result in the
acceleration of the due date of any material obligation of Buyer.
5.4 PURCHASE PRICE SHARES. The Shares representing the Purchase Price,
when issued and delivered in accordance with this Agreement, will be duly
authorized, validly issued, fully paid and non-assessable and free from any
preemptive right or Lien created by statute, CIC's certificate of incorporation
or bylaws or any agreement to which CIC is a party and from any Lien, other than
any Lien created pursuant to this Agreement or by any action of either Seller.
Notwithstanding the foregoing, such Shares will be subject to certain
restrictions on transfer pursuant to applicable Legal Requirements.
5.5 SEC FILINGS. CIC has made available to Sellers true and complete
copies of its Annual Report on Form 10-K for the fiscal year ended December 31,
1999, and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2000
(together, the "SEC DOCUMENTS"), which CIC has filed with the SEC pursuant to
the Exchange Act. As of their respective filing dates, the SEC Documents
complied in all material respects with the requirements of the Exchange Act, and
none of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading. The consolidated financial statements of CIC,
including the notes thereto, included in the SEC Documents ("BUYER FINANCIAL
STATEMENTS") have been prepared in accordance with the books
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and records of CIC, have been prepared in accordance with generally accepted
accounting principles, as in effect from time to time in the United States
("GAAP"), consistently applied throughout the periods covered thereby. The Buyer
Financial Statements present fairly the consolidated financial position, results
of operations and cash flows of CIC at the respective dates thereof and
throughout the respective periods covered thereby subject, in the case of
unaudited Buyer Financial Statements, to normal year-end accruals and audit
adjustments and to the absence of footnotes thereto, none of which is material.
CIC has filed all reports with the SEC required to be filed by it pursuant to
applicable Legal Requirements during the preceding two (2) years. CIC may use
Form S-3 to register the Shares to be issued to Sellers hereunder, and neither
Buyer nor CIC is aware of any reason why such Registration Statement would be
delayed in becoming effective.
5.6 BROKERS AND FINDERS. Neither Buyer nor any Person acting or its behalf
has dealt with any broker or finder in connection with the transactions
contemplated by this Agreement or incurred any liability for any finder's or
broker's fees or commissions in connection with the transactions contemplated by
this Agreement for which either Seller may be liable.
5.7 DISCLOSURE. The statements made by Buyer in this Agreement and in any
of the Related Agreements (including without limitation the representations and
warranties made by Buyer herein and therein and in the Schedules and Exhibits
hereto and thereto, which are incorporated by reference herein and which
constitute an integral part of this Agreement), when taken as a whole, do not
include or contain (and on the Closing Date shall not include or contain) any
untrue statement of a material fact, and do not omit (and on the Closing Date
shall not omit) to state any material fact required to be included in order for
the statements made to not be materially misleading.
5.8 U.S. BUSINESS ESTABLISHMENT. Buyer's acquisition of the Seller
Intellectual Property hereunder is most directly concerned with a business
establishment or fixed establishment of Buyer in the United States.
5.9 NO GENERAL SOLICITATION. Neither Buyer nor CIC has offered or sold
Shares during the six months preceding the date hereof by means of general
solicitation or general advertising (as those terms are used in Regulation D
promulgated under the Securities Act of 1933, as amended), or in any manner
involving a public offering within the meaning of Section 4(2) thereof, except
pursuant to an effective registration statement or in a manner such that such
offers and sales would not be integrated with the offer and sale of the Purchase
Price Shares to Sellers pursuant to this Agreement for purposes of determining
whether such offer and sale are exempt from registration under such Act.
5.10 EXEMPT TRANSACTION. The offer, sale and transfer of the Purchase
Price Shares to Sellers by Buyer pursuant to this Agreement is exempt from the
registration requirements of the Securities Act of 1933, as amended.
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6. COVENANTS AND OTHER AGREEMENTS OF SELLERS AND BUYER.
6.1 CONTINUITY AND MAINTENANCE OF OPERATIONS. Except as Buyer may
otherwise agree in writing, until the Closing:
(a) Sellers shall continue to (i) maintain (A) Sellers' respective
rights in the Seller Intellectual Property (including all applications,
registrations and other filings with respect thereto), (B) the Tangible Personal
Property in good operating condition and repair, ordinary wear and tear
excepted, (C) Sellers' insurance as in effect on the date of this Agreement, (D)
Sellers' inventories of equipment and supplies included within the Assets at
levels consistent with past practices, (E) all of Sellers' business books,
records and files, including Service Records, consistent with past practices,
and (ii) operate the Business in compliance in all material respects with all
Legal Requirements. Sellers shall use commercially reasonable efforts to keep
available the services of the Employees and Sellers' contractors and to preserve
any business relationships with customers, suppliers and others having business
dealings with Sellers in connection with the Business.
(b) Without limiting the generality of the foregoing, and except as
expressly contemplated hereunder, Sellers shall not, prior to Closing, without
Buyer's prior written consent: (i) sell, transfer, lease, assign, license or
otherwise dispose of any of the Assets, including any right in any Seller
Intellectual Property, except sales in the ordinary course of business; (ii)
create, assume or permit to exist any Lien on any Asset; (iii) amend, terminate
or allow to expire any Governmental Authorization, Contract or other instrument;
(iv) subject to (v), enter into any contract or commitment of any kind relating
to the Business except in the ordinary course of business consistent with past
practices and except for the renewal on their existing terms of Contracts that
would, but for such renewal, terminate in accordance with their terms prior to
Closing; (v) modify, amend or incur any obligation, agreement or other
arrangement that is reasonably likely to adversely affect Buyer's ability to
discharge the Assumed Obligations or use or operate any of the Assets or
Products; (vi) delay payment of any account payable or other liability beyond
its due date or the date when such liability would have been paid in the
ordinary course of business consistent with past practices, which delay could
adversely affect the value of the Assets; or (vii) take or omit to take any
action, which action or omission could materially adversely affect the value of
the Assets.
6.2 ACCESS TO SELLERS AND BUSINESS.
(a) Sellers shall afford to Buyer's officers, employees and other
authorized representatives complete access during normal business hours to the
Business and Assets and to the facilities, offices, computer systems, Products,
properties, Employees, business documents, business and financial records,
Service Records, customers, suppliers and vendors of Sellers to the extent Buyer
deems necessary or desirable to complete its due diligence investigation, and
shall furnish to such individuals such additional information concerning
Sellers, the Assets and the Business as shall be reasonably requested. No
investigation by Buyer or its representatives hereunder shall affect or limit
the scope or substance of Seller's representations and warranties under this
Agreement.
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(b) For a period of one (1) year following the Closing, upon
reasonable notice by Buyer, Sellers shall, at Buyer's expense, afford Buyer's
officers, employees, accountants and other authorized representatives complete
access during normal business hours to Sellers' business and financial records
and accountants to enable Buyer to obtain any information and data required in
connection with the preparation of Buyer's and its Affiliates' financial
statements and any regulatory filings relating to the Business or this
Agreement.
(c) For a period of six (6) months following the Closing, upon
written request of Buyer, each Seller shall diligently search its e-mail files
for information requested by Buyer (via subject or key word query formulated by
Buyer after consultation with such Seller), and shall disclose to Buyer all
e-mails responsive to such query, except to the extent that any such e-mail
contains third party information that such Seller is prohibited from disclosing
to Buyer pursuant to a current, valid and enforceable nondisclosure agreement
with a third party. Each Seller shall redact from any e-mail located pursuant to
this Section 6.2(c) any such third party information and shall promptly deliver
to Buyer each such e-mail with such third party confidential information
redacted. If, during any such search, a Seller discovers information that
relates to Seller Intellectual Property but is not responsive to the query upon
which such search is made, such Seller shall disclose such information to Buyer,
except to the extent Sellers are prohibited from disclosing such information to
Buyer pursuant to a current, valid and enforceable nondisclosure agreement with
a third party.
6.3 CONFIDENTIALITY.
(a) From and after the date hereof, (i) except with Buyer's prior
written consent, and subject to Section 6.5 or as otherwise required by
applicable law, Sellers shall, and shall cause their respective officers,
directors, shareholders, Employees, independent contractors, consultants and
other agents and representatives, to maintain the confidentiality of the
Confidential Information (as defined herein) relating to Sellers, the Assets,
the Products and the Business; and (ii) until the Closing Date, except with
Sellers' prior written consent, Buyer shall, and shall cause its officers,
directors, shareholders, employees and other agents and representatives, to
maintain the confidentiality of the Confidential Information regarding Sellers
and the Business that Buyer obtains in connection with this Agreement.
(b) For purposes hereof, "Confidential Information" means trade
secrets, know-how, inventions, ideas, concepts, prices, customer and marketing
information and plans, prospective customer information, competitor information,
financial information, business opportunities, employee- and other
personnel-related information, research and any other non-public technical or
business information; PROVIDED, that Confidential Information shall not include
information that: (i) is as of the date hereof, or subsequently becomes,
generally available to the public through no fault of, or breach of any
confidentiality obligation by, a party hereto, (ii) the Person to whom such
information is disclosed can demonstrate to have had such information in its
possession without any breach of any Legal Requirement or other obligation of
confidentiality of such Person, (iii) is independently developed by a third
party without the use of any Confidential Information disclosed in violation
hereof, which independent development shall be documented in writing or (iv) a
third party lawfully obtains from a Person that has the right to
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transfer or disclose such information and disclosed such information without any
breach of any confidentiality obligation with respect thereto.
6.4 CERTAIN CHANGES; NOTIFICATION; UPDATED SCHEDULES. Except as permitted
or contemplated by this Agreement, none of the parties hereto shall knowingly
take any action that would render any representation or warranty made by it in
this Agreement to be inaccurate as of the Closing Date. Each party shall
promptly notify the others of any action, suit, proceeding or investigation that
is instituted or threatened against such party to restrain, prohibit or
otherwise challenge the legality or propriety of any transaction contemplated by
this Agreement. Sellers shall notify Buyer, promptly upon becoming aware
thereof, of any lawsuit, claim, proceeding or investigation that may be
threatened, brought, asserted or commenced after the date hereof against a
Seller with respect to any of the Assets or the Business. Each party hereto
shall notify the others of any fact or circumstance as to which it obtains
knowledge that causes any of its respective representations and warranties made
by it in this Agreement to be untrue in any material respect as of the date
hereof or as of any other date on or prior to the Closing Date.
6.5 NO PUBLIC ANNOUNCEMENT. Prior to the Closing Date, neither Buyer nor
Sellers shall, without the other's prior approval, make any press release or
other public announcement concerning the transactions contemplated by this
Agreement, except as and to the extent that any such party shall be so obligated
by law, in which case the other party shall be advised and the parties shall use
their reasonable efforts to cause a mutually agreeable release or announcement
to be issued; PROVIDED, that notwithstanding the foregoing, upon execution of
this Agreement, Buyer shall be entitled to issue a press release and file with
the SEC and the Nasdaq SmallCap Market a Current Report on Form 8-K with respect
to the transactions contemplated by this Agreement, in accordance with all
applicable Legal Requirements. Upon the execution of this Agreement, Buyer and
Sellers will issue a joint press release in such form as set forth in SCHEDULE
6.5. Buyer shall be entitled to issue a press release upon the occurrence of the
Closing, provided, that Sellers shall have been afforded an opportunity to
review and comment thereon.
6.6 SEC COMPLIANCE; PURCHASE PRICE SHARES; REGISTRATION STATEMENT .
(a) Sellers acknowledge that the Shares to be issued to Sellers
hereunder will not be registered under the Securities Act and will be issued in
reliance Section 4(2) of the Securities Act. Each of the certificates
representing such Shares will contain a restrictive legend in the form set forth
in SCHEDULE 6.6(A). Buyer shall use its reasonable best efforts to cause the
additional restrictive legend provided for in SCHEDULE 6.6(A) to be removed
within five (5) business days after a Seller's request therefor in respect of
Purchase Price Shares delivered to such Seller out of escrow in conformity with
the terms and provisions of the Escrow Agreement and this Agreement.
(b) (i) As soon as reasonably practicable, but not more than thirty
(30) days following the Closing Date, Buyer shall cause CIC to file at CIC's
expense a registration statement on Form S-3 (or such other form as CIC shall be
eligible to use) with the SEC ("REGISTRATION STATEMENT") covering the resale of
the Shares representing the Purchase Price (the "PURCHASE PRICE SHARES"). Buyer
shall cause CIC to use its reasonable best efforts to cause the Registration
Statement to be declared effective by the SEC as soon as reasonably practicable.
It
25
is intended that pursuant to the Registration Statement Sellers and Subsequent
Purchasers (as defined herein), may resell the Purchase Price Shares to the
public during the Resale Period (as defined below) without restriction except
for prospectus delivery requirements and other applicable requirements under
federal and state securities laws. Buyer shall cause CIC to file and use its
reasonable best efforts to cause to become effective as soon as reasonably
practicable all amendments, post-effective amendments and supplements to the
extent legally required to enable the resale of the Purchase Price Shares to be
made by the foregoing pursuant to all U.S. Legal Requirements during the two (2)
year period following the date hereof (the "RESALE PERIOD"). Buyer shall cause
CIC to deliver to Sellers and Subsequent Purchasers such number of copies of any
prospectus (as amended and supplemented) required by such Legal Requirements to
be delivered upon resale of the Purchase Price Shares during the Resale Period
as Sellers or Subsequent Purchasers, as the case may be, may reasonably request.
Buyer shall cause CIC to take such action as shall be reasonably necessary to
register the Purchase Price Shares under Section 12 of the Securities Exchange
Act of 1934, as amended, to maintain such registration and to list and keep
continually listed the Purchase Price Shares on the Nasdaq SmallCap Market
during the Resale Period. Buyer shall cause CIC to use its reasonable best
efforts to qualify and maintain the qualification of the Purchase Price Shares
under such state Legal Requirements, including blue sky laws, for offer and
resale to the public during the Resale Period as Sellers and Subsequent
Purchasers shall reasonably request.
(ii) Prior to the effectiveness of the Registration Statement,
(A) Sellers shall not sell or otherwise transfer any of the Purchase Price
Shares to any Persons other than Persons who are institutional or accredited
investors and who are not engaged in businesses that compete, directly or
indirectly, with Buyer or any of its Affiliates (such Persons, "SUBSEQUENT
PURCHASERS"), (B) Sellers shall not sell or otherwise transfer the Purchase
Price Shares to more than fifteen (15) Subsequent Purchasers who agree to comply
with all applicable securities laws and to accept legended securities, (C)
Sellers shall not sell or transfer the Purchase Price Shares in block trades of
less than 100,000 Shares and (D) Sellers shall notify Buyer thereof within five
(5) Business Days following a sale of any of the Purchase Price Shares, which
notice shall include the name, address and telephone and facsimile numbers for
such Subsequent Purchaser, as well as the number of Purchase Price Shares
purchased by such Subsequent Purchaser.
(iii) Prior to the effectiveness of the Registration
Statement, one Subsequent Purchaser may transfer, in a manner that would comply
with the requirements of Section 6.6(b)(ii) as applicable to Sellers, all of its
Purchase Price Shares to not more than one transferee which transferee shall
agree not to sell or otherwise transfer any of the Purchase Price Shares prior
to the effectiveness of the Registration Statement. Such transferee shall be
deemed to be a Subsequent Purchaser for purposes of Section 6.6 and 4.26.
Notwithstanding the foregoing, at all times prior to the effectiveness of the
Registration Statement, there shall be no more than fifteen (15) Subsequent
Purchasers.
(c) From the date hereof through the Closing Date, Sellers shall not
sell short any shares of the stock of CIC.
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(d) Buyer shall cause CIC to make generally available to its
security holders (and deliver to Sellers), in the manner contemplated by Rule
158(b) under the Securities Act or otherwise, as soon as practicable but in any
event not later than 120 days after the end of CIC's fiscal quarter in which the
first anniversary date of the Closing Date occurs if the end of such fiscal
quarter is the end of CIC's fiscal year (and if the end of such fiscal quarter
is not the end of CIC's fiscal year, then such period shall be reduced to 50
days), an earnings statement of CIC satisfying the requirements of Section 11(a)
of the Securities Act and covering a period of at least twelve (12) consecutive
months beginning after the Closing Date.
(e) Buyer shall indemnify, defend and hold harmless each Seller and
Subsequent Purchaser, and each of their respective officers, directors, agents
and employees, against and in respect of any losses, claims, damages or
liabilities, joint or several (including legal or other fees and expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage or liability), to which such Seller or Subsequent
Purchaser, or any of them, may become subject under any applicable Legal
Requirement insofar as such losses, claims, damages or liabilities (or actions
with respect thereto) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except to the extent that any such untrue
information is based upon written information supplied by such Seller or
Subsequent Purchaser, or any of them, or by any of their respective
representatives, as the case may be, for use in the Registration Statement.
(f) Sellers and Subsequent Purchasers shall comply with all U.S.
Legal Requirements with respect to the sale of the Shares issued hereunder. Each
of Sellers (jointly and severally in respect of each other) and each Subsequent
Purchaser shall indemnify, defend and hold harmless Buyer, its officers and
directors and any controlling persons of Buyer against and in respect of any
losses, claims, damages or liabilities, joint or several (including legal or
other fees and expenses reasonable incurred by any of them in connection with
investigating or defending any such loss, claim, damage or liability), to which
Buyer or any such persons may become subject under applicable Legal Requirements
insofar as such losses, claims, damages or liabilities (or actions with respect
thereto) arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, but only to the extent that any such
untrue statement or omission is based upon written information supplied by such
Seller or Subsequent Purchaser or its respective representatives for use in the
Registration Statement.
6.7 REQUIRED CONSENTS. From and after the execution hereof, Sellers shall
use their best efforts to obtain as expeditiously as possible all of the
Required Consents, in form and substance acceptable to Buyer. Nothing herein
shall require the expenditure or payment of any funds (other than in respect of
normal and usual attorneys' fees) or the giving of any other consideration by
Buyer in connection with obtaining the Required Consents.
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6.8 DELIVERY OF FINANCIAL INFORMATION.
(a) Between the date hereof and the Closing Date, promptly after the
preparation thereof, Sellers shall deliver to Buyer true, correct and complete
copies of any financial statements prepared by Sellers in the ordinary course of
business during such time.
(b) In addition to, and without limiting the generality of Section
6.8(a), (i) not later than October 16, 2000, Sellers shall have delivered or
caused to be delivered to Buyer true and complete copies of (A) an audited
consolidated balance sheet of Sellers as of December 31, 1999, and a reviewed
unaudited consolidated balance sheet of Sellers as of June 30, 2000, (B) audited
statements of income and cash flows for Sellers for the 12-month period ended
December 31, 1999, and reviewed unaudited statements of income and cash flows
for Sellers for the six-month period ended June 30, 2000, (C) audited statements
of cash flows for Sellers for the 12-month period ended December 31, 1998 and
(D) footnotes with respect to all of the foregoing in accordance with UK
Auditing Standards, and all of the foregoing reconciled to GAAP; and (ii) not
later than October 31, 2000, Sellers shall have delivered or caused to be
delivered to Buyer a reviewed unaudited consolidated balance sheet of Sellers as
of September 30, 2000, and reviewed unaudited statements of income and cash
flows for Sellers for the nine-month period ended September 30, 2000, and
footnotes with respect thereto all of the foregoing reconciled to GAAP (all of
the foregoing financial statements, collectively, "1999 FINANCIAL STATEMENTS").
Sellers shall be liable to and shall pay to Buyer damages in the amount of (X)
$250,000 in cash, if Sellers shall not have delivered all of the 1999 Financial
Statements described in clauses (A), (B), (C) and (D) by October 16, 2000 or the
1999 Financial Statements described in clause (ii) hereof by October 31, 2000;
and (Y) an additional $100,000 for each month following the applicable due date
set forth herein during which Sellers shall not have delivered any of the 1999
Financial Statements. Sellers agree and acknowledge that the failure to deliver
the 1999 Financial Statements to Buyer by the applicable due dates set forth
herein will cause Buyer to be damaged, and that the damages set forth herein
constitute a reasonable estimate of the amount of such damages.
6.9 NON-COMPETITION AGREEMENTS. On the Closing Date, Sellers shall execute
and deliver a Non-Competition Agreement, in the form of EXHIBIT B-1 (the
"NON-COMPETITION AGREEMENT").
6.10 TAXES. All Taxes (other than V.A.T.) incurred in connection with the
transactions contemplated by this Agreement shall be paid by Buyer, and all
V.A.T. incurred in connection with the transactions contemplated by this
Agreement shall be shared equally by Sellers and Buyer.
6.11 SELLERS' PREMISES. For a period of up to six (6) months following the
Closing, Sellers shall make available to Buyer complete, exclusive and
unrestricted access to and use of Sellers' offices, located at the address set
forth in SCHEDULE 6.11 (including all equipment and facilities located at such
offices, regardless of whether included within the Assets) (the "Premises"), for
the purpose of performing the Assumed Obligations in accordance with their
terms, providing the Products and otherwise using and operating the Assets.
Buyer shall reimburse Sellers, pursuant to a Consulting and Reimbursement
Agreement in the form of
28
EXHIBIT C (the "CONSULTING AND REIMBURSEMENT AGREEMENT"), for Sellers' actual
and reasonable costs of maintaining the Premises, which reimbursable costs shall
include rent, utility charges and rental charges for any personal property not
included within the Assets, subject to the terms of the Consulting and
Reimbursement Agreement. It is expressly understood that Buyer shall not assume
or sublease, or otherwise become a party to or liable with respect to, any real
property lease with respect to the Premises. In the event that Buyer intends to
vacate the Premises prior to the expiration of such six (6) month period, Buyer
shall notify the applicable Seller in writing at least ten (10) business days
prior to the date on which Buyer intends to vacate the Premises. From the date
hereof through the date Buyer vacates the Premises, Sellers shall not remove any
material item of personal property from, or otherwise alter, the Premises in any
manner that would prevent or interfere with Buyer's use of the Premises as
contemplated herein.
6.12 REIMBURSEMENT OF CERTAIN EXPENSES. From and after the Closing Date,
Buyer shall or shall cause CIC to reimburse Sellers for certain specified costs
incurred by Sellers in the operation of the Business, in accordance with the
terms of the Consulting and Reimbursement Agreement, which reimbursable items
shall include Sellers' reasonable costs and expenses incurred in operating the
Premises and such other costs and expenses as are set forth in the Consulting
and Reimbursement Agreement.
6.13 NO-SHOP COVENANT. Subject to Sellers' fiduciary duties, from the date
hereof until the earlier of the Closing or the termination of this Agreement in
accordance with its terms, (a) Sellers shall not, and shall cause their
respective officers, directors, shareholders, agents and representatives not to,
directly or indirectly, (i) solicit any offer from any Person other than Buyer
for any form of business combination or acquisition or disposition of all or any
of the Assets or the Business, or initiate or participate in any negotiation or
provide confidential information with respect to any such business combination
or acquisition, (ii) solicit any offer from any Person other than Buyer for any
transaction involving a Seller that would preclude or in any way interfere with
the consummation of the transactions contemplated by this Agreement, or initiate
or participate in any negotiation or provide confidential information with
respect to any such transaction, or (iii) authorize any of their representative,
agents, officers, directors or shareholders to take any of the actions
prohibited in this Section 6.13, and (b) Sellers shall use reasonable efforts to
prevent any such person or entity from taking any of the actions prohibited in
this Section 6.13; PROVIDED, that notwithstanding the foregoing, Sellers shall
promptly notify Buyer in writing of the occurrence of any of the events
described in clause (a) hereof, regardless of whether prohibited by this Section
6.13.
6.14 FURTHER ASSURANCES; SATISFACTION OF COVENANTS. Sellers and Buyer each
shall execute such additional documents and other papers and take or cause to be
taken such further action as may be reasonably required to carry out the
provisions hereof and to consummate and effectuate the transactions contemplated
hereby. Sellers and Buyer shall each use, and Buyer shall cause CIC to use,
commercially reasonable efforts to satisfy each of its covenants and obligations
under this Agreement and to satisfy each of the conditions to Closing imposed on
it hereunder.
6.15 CHANGE OF BUSINESS NAME. PenOp agrees that within one (1) Business
Day following the Closing, and PenOp UK agrees that by November 30, 2000, it
will change its
29
corporate name (and if applicable any trade or fictitious names it is entitled
to use), and, if necessary, those of any of any of its Affiliates, such that
none of Sellers' or their Affiliates' corporate, trade or fictitious names will
contain the terms "PenOp," "Signature One," "Peripheral Vision," "CIC,"
"Communication Intelligence Corporation" or any other term incorporating or
confusingly similar with such terms. Sellers agree that from and after the
Closing neither they nor any of their Affiliates will use or conduct business
using any of such names other than to notify Persons of their name changes in
connection with winding up their respective businesses and their respective
dissolution proceedings.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. The obligations of Buyer to
purchase and acquire the Assets and to assume the Assumed Obligations are
subject to the satisfaction or waiver, at or prior to the Closing Date (as
provided herein), of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES OF SELLERS. Each of the representations
and warranties made by Sellers herein shall be true and correct in all material
respects (without regard to any "materiality" or "material adverse effect"
qualifications set forth therein) as of the Closing Date or, if made as of a
specific date, as of such date.
7.2 COVENANTS. Each Seller shall have performed and complied in all
material respects with all covenants and agreements required by this Agreement
to be performed or complied with by it prior to or at the Closing.
7.3 MATERIAL CONSENTS. The Material Consents shall have been obtained.
7.4 JUDGMENTS. There shall not be in effect on the Closing Date any
judgment, decree, order or other prohibition having the force of law that would
prevent or make unlawful the Closing, and no judgment or judgments in the
aggregate amount of $250,000 or more shall have been entered against Sellers or
either Seller by any court or other tribunal.
7.5 MATERIAL ADVERSE CHANGE. No event shall have occurred between the date
of this Agreement and the date on which the Closing is to occur that has had a
material adverse effect on the Assets, taken as a whole, or the ability of
Sellers to consummate the transactions contemplated hereby.
7.6 OPINION OF SELLERS' COUNSEL. Sellers shall have furnished Buyer with
opinions of the law firms of White & Case LLP, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇▇, each counsel for Sellers, in the forms set forth in EXHIBITS ▇-▇, ▇-▇
AND D-3, respectively, which opinions will be dated the Closing Date.
7.7 DUE DILIGENCE. Buyer shall have completed and shall be satisfied with
the results of its due diligence investigation of the Business and the Assets.
7.8 BANKRUPTCY PROCEEDINGS. Neither Seller shall have entered into or
become subject to voluntary or involuntary bankruptcy or reorganization
proceedings or shall have filed a petition for dissolution.
30
7.9 DELIVERY OF CERTIFICATES AND DOCUMENTS. Sellers shall have furnished
to Buyer the following:
(a) a certificate of each Seller's Secretary as to (i) such Seller's
articles of incorporation and bylaws (or other constituent documents), (ii) all
actions taken by and on behalf of such Seller to authorize the execution,
delivery and performance of this Agreement and the Related Agreements and (iii)
the incumbency of officers signing this Agreement and any Related Agreement on
behalf of such Seller;
(b) a certificate of legal existence and long-form good standing
certificate (or the equivalent as may be appropriate under U.K. law) of each
Seller from the Secretary of State (or comparable official) of its respective
state or jurisdiction of formation;
(c) a certificate of an executive officer of each Seller, certifying
on behalf of such Seller that the conditions set forth in Sections 7.1, 7.2,
7.4, 7.5 and 7.8 have been met as to such Seller;
(d) a ▇▇▇▇ of Sale and Assignment, in the form of Exhibit E, duly
executed by each Seller;
(e) an Assumption Agreement, in the form of Exhibit F (the
"Assumption AGREEMENT"), duly executed by Sellers;
(f) the Escrow Agreement, duly executed by Sellers;
(g) the Non-Competition Agreement, duly executed by each of Sellers;
(h) all other instruments of assignment, powers of attorney and
other documents and instruments as are necessary or are reasonably requested by
Buyer to effect the transfer of the Assets, including all Seller Intellectual
Property (including without limitation Patent Rights, Trademarks and domain
names), to Buyer and to the extent applicable the vesting of title thereto in
Buyer, all in accordance with any applicable Legal Requirements and in form
reasonably acceptable to Buyer; and
(i) evidence satisfactory to Buyer that all Liens affecting or
encumbering the Assets shall have been terminated, released or waived, effective
as of the Closing, including without limitation executed pay-off letters in form
satisfactory to Buyer with respect to any indebtedness of Sellers being paid off
at Closing that is secured by any of the Assets.
7.10 THIRD PARTY AGREEMENTS. (i) Each of the individuals listed in
SCHEDULE 7.10 shall have duly executed and delivered a Non-Competition
Agreement, in the form of EXHIBIT B-2 OR B-3, as applicable; (ii) ▇▇▇▇ ▇▇▇▇▇▇▇▇
shall have duly executed and delivered an Independent Contractor Agreement, in
the form of EXHIBIT G; and (iii) Florentis Ltd. shall have duly executed and
delivered the Consulting Services Agreement, in the form of EXHIBIT H.
31
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS. The obligations of Sellers to
convey the Assets to Buyer hereunder are subject to the satisfaction or waiver
at or prior to the Closing Date (as provided herein) of the following
conditions:
8.1 REPRESENTATIONS AND WARRANTIES OF BUYER. Each of the representations
and warranties made by Buyer herein shall be true and correct in all material
respects (without regard to any "materiality" or "material adverse effect"
qualifications set forth therein) as of the Closing Date or, if made as of a
specific date, as of such date.
8.2 COVENANTS. Buyer shall have performed and complied in all material
respects with all covenants and agreements required by this Agreement to be
performed or complied with by it prior to or at the Closing.
8.3 JUDGMENTS. There shall not be in effect on the Closing Date any
judgment, decree, order or other prohibition having the force of law that would
prevent or make unlawful the Closing.
8.4 PAYMENT FOR ASSETS. Buyer shall have delivered the Shares to be
delivered by it pursuant to Section 3.2(b).
8.5 OPINION OF BUYER'S COUNSEL. Buyer shall have furnished Sellers with
the opinion of the law firm of ▇▇▇▇ Marks & ▇▇▇▇▇ LLP, counsel for Buyer, in the
form set forth in EXHIBIT I, which opinion will be dated the Closing Date.
8.6 DELIVERY OF CERTIFICATES AND DOCUMENTS. Buyer shall have furnished to
Sellers the following:
(a) a certificate of Buyer's and CIC's Secretary as to (i) Buyer's
and CIC's certificates of formation and bylaws, (ii) resolutions of Buyer and,
to the extent applicable, CIC, authorizing the execution, delivery and
performance of this Agreement and the Related Agreements; and (iii) the
incumbency of officers signing this Agreement and the Related Agreements on
behalf of Buyer and, to the extent applicable, CIC;
(b) a certificate of legal existence and good standing of each of
Buyer and CIC from the Secretary of State of Buyer's and CIC's state of
incorporation;
(c) a certificate of an executive officer of each of Buyer and CIC
certifying that the conditions set forth in Sections 8.1, 8.2 and 8.3 have been
met;
(d) the Assumption Agreement, duly executed by Buyer; and
(e) the Consulting and Reimbursement Agreement, duly executed by
Buyer.
8.7 GUARANTY. CIC shall have duly executed and delivered a Guaranty, in
the form of EXHIBIT J.
32
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY HOLDBACK.
9.1 SURVIVAL. The representations and warranties of the parties contained
in this Agreement (including obligations with respect to indemnification under
this Section 9) shall survive the Closing for a period of one (1) year following
the Closing Date, except that (i) subject to Clause (ii), representations and
warranties relating to Seller Intellectual Property shall survive the Closing
for a period of two (2) years following the Closing Date; and (ii) the
representations and warranties set forth in Section 4.7(b)(i) and in the first
sentence of Section 4.7(c), inclusive, and representations and warranties
relating to Taxes, as well as the parties' respective covenants and other
obligations hereunder, shall survive for the duration of the statute of
limitations applicable thereto; PROVIDED, that a party's timely delivery of a
Claim Notice (as defined in Section 9.3(b)) hereunder shall extend the period of
survival applicable to any claim set forth therein through the date such claim
is conclusively resolved. No investigation by either party shall relieve the
other party from any liability for any misrepresentation, misleading statement
or omission made by such other party in this Agreement or any Related Agreement.
9.2 INDEMNIFICATION.
(a) Sellers, jointly and severally, agree to indemnify and hold
harmless Buyer and its Affiliates, and their respective stockholders, directors,
officers, employees, agents, successors and assigns ("BUYER INDEMNITEES") from
and against any and all Claims (as hereinafter defined) to the extent such
Claims are based upon, arise out of or relate to (i) a breach of any
representation or warranty, or any failure to perform or comply with any of
Sellers' covenants or agreements set forth in this Agreement or in any Related
Agreement; (ii) the assertion of any Claim or legal action against Buyer or any
other Buyer Indemnitee by any Governmental Authority or other Person based upon,
arising out of or relating to the ownership of the Assets or operation of the
Business or any act, omission, obligation or liability of Sellers or any of
their respective agents and occurring, arising or accruing on or prior to, or
existing on, the Closing Date; (iii) any obligation or liability relating to the
ownership or operation of the Business or Assets by Sellers, other than the
Assumed Obligations; or (iv) any obligation to any broker or finder employed or
alleged to have been employed by it.
(b) Buyer agrees to indemnify and hold harmless Sellers and their
respective stockholders, directors, officers, employees, agents, successors and
assigns ("SELLER INDEMNITEES") from and against any and all Claims to the extent
such Claims are based upon, arise out of or are related to (i) a breach of any
representation or warranty, or any failure to perform or comply with any of
Buyer's covenants or agreements contained in this Agreement or in any Related
Agreement; (ii) the assertion of any Claim or legal action against Sellers or a
Seller Indemnitee by any Person or Governmental Authority based upon, arising
out of or relating to the ownership of the Assets by Buyer occurring, arising or
accruing after the Closing Date (other than any Product Liability with respect
to any Product sold or provided prior to the Closing Date), provided that such
Claim or legal action is not based upon an act or omission which occurred on or
before the Closing Date; or (iii) any obligation to any broker or finder
employed or alleged to have been employed by it.
33
(c) For purposes of this Agreement, a "Claim" shall include any and
all liabilities, obligations, losses, damages, deficiencies, demands, claims,
fines, penalties, interest, assessments, judgments, actions, proceedings and
suits of whatever kind and nature and all costs and expenses relating thereto
(including without limitation reasonable attorneys' fees incurred in connection
with the investigation, defense and/or prosecution thereof).
9.3 INDEMNITY SHARES; ASSERTION OF CLAIMS.
(a) At the Closing, Buyer shall deposit the Indemnity Shares with
the Escrow Agent, pursuant to the terms of the Escrow Agreement, which Shares
and/or the proceeds thereof shall provide a fund for the payment of Claims to
Buyer Indemnitees in accordance with the terms hereof and the terms of the
Escrow Agreement.
(b) In the event that either party believes it has an
indemnification Claim under Section 9.2, such party (the "INDEMNITEE") shall
notify the other (the "INDEMNITOR") in writing thereof ("CLAIM NOTICE"), which
Claim Notice shall set forth the Indemnitee's estimate of the dollar value of
the indemnification sought by it, but no such estimate shall have any effect on
the extent to which the Indemnitor shall have an obligation to indemnify the
Indemnitee. All indemnification Claims paid out of the Indemnity Shares shall be
paid in accordance with the terms of the Escrow Agreement.
9.4 NOTICE OF AND RIGHT TO DEFEND THIRD PARTY CLAIMS. Promptly upon
receipt of a Claim Notice or the commencement of any suit, action or proceeding
by a third party in respect of which indemnification may be sought on account of
an indemnity agreement contained in Section 9.2, the Indemnitee with respect to
such Claim shall give notice in writing to the Indemnitor with respect thereto.
The omission by such Indemnitee to so notify promptly such Indemnitor of any
such claim or action shall not relieve such Indemnitor from any liability which
it may have to such Indemnitee in connection therewith, except to the extent
such Indemnitor has been prejudiced by such omission. In case any claim shall be
asserted or suit, action or proceeding commenced against an Indemnitee, the
Indemnitor will be entitled to participate therein, and, to the extent that it
may wish, to assume the defense or conduct the settlement thereof. Anything
herein to the contrary notwithstanding, Indemnitor shall not be entitled to
settle any such suit, action or proceeding without Indemnitee's consent, which
consent shall be not unreasonably withheld, unless the sole relief provided is
monetary damages. After notice from the Indemnitor to the Indemnitee of its
election to so assume the defense, conduct or settlement thereof, the Indemnitor
will not be liable to the Indemnitee for any legal or other expenses
subsequently incurred by the Indemnitee in connection with the defense, conduct
or settlement thereof following such notice. The Indemnitee will reasonably
cooperate with the Indemnitor in connection with any such claim assumed by the
Indemnitor to make available to the Indemnitor all pertinent information under
the Indemnitee's control.
9.5 LIMITATIONS OF LIABILITY.
(a) No amount shall be payable by Sellers to Buyer or by Buyer to
Sellers with respect to indemnification of Claims for breaches of
representations and warranties pursuant to this Section 9 unless and until the
aggregate amount of such Claims required to be indemnified
34
by the respective Indemnitor pursuant hereto exceeds $75,000, in which case the
Indemnitor shall be liable to the Indemnitee for the entire amount of all such
Claims by Indemnitee; PROVIDED, that the foregoing limitation shall not apply to
Claims arising out of representations and warranties relating to authority,
Taxes or the matters set forth in Section 4.7(b)(i) or in the first sentence of
Section 4.7(c).
(b) Sellers' and Buyer's respective liability for indemnification
for breaches of representations and warranties pursuant to this Section 9 shall
be limited (i) until the first anniversary of the Closing Date, to the amount of
$10,600,000, and (ii) from the first anniversary of the Closing Date through the
date two (2) years following the Closing Date, to the amount of $3,290,000;
PROVIDED, that the foregoing limitations shall not apply to Claims for breach of
representations and warranties relating to authority, Taxes or the matters set
forth in Section 4.7(b)(i) or in the first sentence of Section 4.7(c). An
Indemnitor's liability for indemnification under this Section 9 shall be
satisfied by payment of cash or delivery of Shares.
(c) The amount of any Claim indemnifiable by either Buyer or Sellers
pursuant to this Section 9 shall be reduced by the amount of any insurance
proceeds received by the Indemnitee in respect of such Claims (and if such
proceeds are received following an indemnification payment in respect of the
relevant Claim, the Indemnitee shall pay to the Indemnitor an amount equal to
the lesser of (i) the amount of such proceeds and (ii) the amount of the
indemnification payment made by the Indemnitor).
(d) No amount shall be payable by Sellers to Buyer or by Buyer to
Sellers pursuant to this Section 9 in respect of punitive damages or
consequential damages.
(e) Nothing herein shall be deemed to relieve any party hereto from
any common law duty to mitigate any Claim.
(f) No party shall be entitled to be indemnified more than once
under this Agreement for the same Claim.
(g) Subject to any other express provision of this Agreement, this
Section 9 shall provide the sole remedy for any misrepresentation, breach of
representation or warranty or breach of covenant or other agreement contained in
this Agreement, except in the case of fraud.
10. TERMINATION.
10.1 TERMINATION. This Agreement may be terminated prior to the Closing
only in accordance with the following:
(a) at any time by mutual consent of Sellers and Buyer;
(b) by either Sellers or Buyer if the Closing hereunder has not
taken place on or before the Outside Closing Date (unless otherwise extended by
agreement of all parties) other than by reason of a breach or default of any of
the covenants or agreements contained in this Agreement by the party seeking to
terminate; or
35
(c) by either Sellers or Buyer, at any time, if the other party is
in material breach or material default of its covenants and agreements under
this Agreement, or if any of its representations or warranties are not true in
all material respects, and the party in breach or default does not cure such
breach or default within twenty (20) days after notice thereof is delivered in
writing, provided that the terminating party is not also in material breach or
material default hereunder; PROVIDED, that such twenty (20) day cure period
shall not extend past the Outside Closing Date.
10.2 SURVIVING OBLIGATIONS. In the event of termination of this Agreement
by Buyer or Sellers pursuant to this Section 10, prompt written notice thereof
shall be given to the other party; and this Agreement shall terminate, without
further action by any of the parties hereto, and all obligations of the parties
hereunder shall terminate, except for the obligations set forth in Sections 6.3,
9.2(a)(i) (as to breaches of covenants only), 9.2(a)(iv), 9.2(b)(i) (as to
breaches of covenants only), 9.2(b)(iii), 9.2(c) (insofar as related to breaches
of covenants only), 9.3(b), 9.4, 9.5, this Section 10.2, 10.3, 11, 13, 14, 15,
17, 18, 20 and 21.
10.3 ATTORNEY'S FEES. Notwithstanding any provision in this Agreement that
may limit or qualify a party's remedies, in the event of a default by any party
that results in a lawsuit or other proceeding for any remedy available under
this Agreement, the prevailing party shall be entitled to reimbursement from the
defaulting party of its reasonable legal fees and expenses.
11. EXPENSEs. Except as expressly provided herein, each party shall pay its own
expenses incurred in connection with the authorization, preparation, execution
and performance of this Agreement, including all fees and expenses of counsel,
accountants, agents and other representatives.
12. FINANCIAL STATEMENTS. Sellers hereby consent to the inclusion by Buyer of
the Financial Statements and the 1999 Financial Statements, if required to be so
included by Buyer, in any report required to be filed by Buyer with the SEC, the
Nasdaq SmallCap Market or any stock exchange pursuant to applicable law, rule or
regulation, including the Securities Act or the Exchange Act. Subject to Section
6.8(b), upon the request of Buyer, Sellers agree to promptly prepare (not later
than thirty (30) days after the date of such request) such financial statements
relating to the Sellers, the Assets or the Business (in addition to the 1999
Financial Statements) as may be required to be filed by Buyer with the SEC, the
Nasdaq SmallCap Market or any stock exchange. All reasonable accounting costs
other reasonable fees and expenses incurred by reason of the preparation of the
financial statements set forth in SCHEDULE 12 shall be borne by Buyer; PROVIDED,
that Buyer shall not be required to reimburse Sellers for any amount exceeding
the aggregate amount of (pound)36,000 with respect to preparation of such
financial statements. Sellers shall use commercially reasonable efforts to
obtain the consent of their independent public accountants who prepared the
Financial Statements and the 1999 Financial Statements to the inclusion of the
Financial Statements and the 1999 Financial Statements in any report required to
be filed by Buyer with the SEC, the Nasdaq SmallCap Market or any stock
exchange.
13. ENTIRE AGREEMENT. Buyer and Sellers agree that this Agreement and the
Related Agreements, including the Schedules and all Exhibits hereto and any
other written document or instrument delivered pursuant hereto or thereto,
constitutes the entire agreement between the
36
parties with respect to the subject matter hereof and supersedes all prior
understandings and agreements with respect thereto.
14. PARTIES OBLIGATED AND BENEFITED. This Agreement will be binding upon the
parties and their respective assigns and successors in interest and will inure
solely to the benefit of the parties and their respective assigns and successors
in interest, and no other Person will be entitled to any of the benefits
conferred by this Agreement. Without the prior written consent of the other,
neither Buyer nor either Seller will assign any of its rights under this
Agreement or delegate any of its duties under this Agreement, except that Buyer
shall have the right to assign this Agreement to any Affiliate of Buyer without
Sellers' prior consent, PROVIDED, that such Affiliate of Buyer becomes a party
to this Agreement.
15. NOTICES. All notices, requests, consents and other communications under this
Agreement shall be in writing and shall be delivered in person or mailed by
first-class certified or registered mail, return receipt requested, postage
prepaid, by reputable overnight mail or courier or by telecopier, in either
case, with receipt confirmed, addressed as follows:
If to Buyer:
Communication Intelligence Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, President and Chief Executive
Officer
With a copy to:
▇▇▇▇ Marks & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
and
If to Sellers:
PenOp Limited
PenOp Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: ▇▇▇ ▇▇ ▇▇▇▇ 452 744 (? ▇▇▇▇ ▇▇▇)
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
37
With a copy to:
White & Case LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
And
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: ▇▇▇ ▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇
Telecopy: 011 44 117 917 4205
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
or at such other address or addresses as may have been furnished in writing by
any party to the others in accordance with the provisions of this Section 15.
Sellers expressly acknowledge that any notice to be delivered to Sellers
hereunder shall be deemed delivered when delivered to PenOp, as set forth
herein.
Notices and other communications provided in accordance with this Section 15
shall be deemed delivered upon receipt. The furnishing of any notice or
communication required hereunder may be waived in writing by the party entitled
to receive such notice. Failure or delay in delivering copies of any notice to
persons designated above to receive copies shall in no way adversely affect the
effectiveness of such notice or communication.
16. AMENDMENTS AND WAIVERS. Except as otherwise expressly set forth herein, any
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of Sellers and
Buyer. No waivers of or exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be deemed to be or construed as a
further or continuing waiver of any such term, condition or provision.
17. SEVERABILITY. If any provision of this Agreement shall be held or deemed, by
a court or other tribunal of competent jurisdiction, to be invalid, inoperative
or unenforceable because of the conflict of such provision with any constitution
or statute or rule of public policy or for any other reason, such circumstance
shall not have the effect of rendering any other provision invalid, inoperative
or unenforceable, and this Agreement shall be reformed and construed as if such
invalid, inoperative or unenforceable provision had never been contained herein
and such provision reformed so that it is valid, operative and enforceable to
the maximum extent permitted.
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18. SECTION HEADINGS AND TERMS. The section headings in this Agreement are for
convenience and reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
19. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument, and this Agreement shall become
effective when counterparts that together contain the signatures of each party
hereto shall have been delivered to Sellers and Buyer.
20. GOVERNING LAW; CONSENT IN JURISDICTION. This Agreement shall be governed by
and construed and enforced in accordance with the law (without giving effect to
the law governing the principles of conflicts of law) of the State of New York.
Any action to enforce, or arising out of or relating in any way to, any of the
provisions of this Agreement shall be brought and prosecuted in the appropriate
court or courts located within New York County, State of New York, and the
parties consent to the jurisdiction of said court or courts and to service of
process by registered mail, return receipt requested, or by any other manner
permitted by law. Each party hereto agrees to not assert, by way of motion, as a
defense or otherwise, in any such action, suit or proceeding any claim that it
is not subject personally to the jurisdiction of such court, that the action,
suit or proceeding is brought in an inconvenient forum, that the venue of the
action, suit or proceeding is improper or that this Agreement, or any other
agreement or transaction related hereto or the subject matter hereof or thereof
may not be enforced in or by such court. 21. SPECIFIC PERFORMANCE; PERFORMANCE
BY SELLERS. The parties hereto acknowledge that money damages are not an
adequate remedy for violations of this Agreement and that any party may, in its
sole discretion, apply to a court of competent jurisdiction for specific
performance or injunctive or other relief (without the posting of any bond or
other security) as such court may deem just and proper in order to enforce this
Agreement or prevent any violation hereof by any of the parties hereto and, to
the extent permitted by applicable Legal Requirements, each party hereof waives
any objection to the imposition of such relief. Any such specific or equitable
relief granted shall not be exclusive, and an Indemnitee shall also be entitled
to seek money damages. Anything herein to the contrary notwithstanding, a
Seller's breach of any obligation or covenant or failure to satisfy any
condition hereunder shall not relieve the other Seller of any obligation of it
hereunder to or failure to perform any obligation or covenant or to satisfy any
condition hereunder.
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IN WITNESS WHEREOF, the parties have executed this Asset Purchase
Agreement as of the date and year first above written.
BUYER:
CIC ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
SELLERS:
PENOP LIMITED
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Director
PENOP INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
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