ASSET PURCHASE AGREEMENT By and among: Intelli-Site Inc., Integrated Security Systems, Inc., VUANCE, Inc. And VUANCE, Ltd. Dated as of March 6, 2009
Exhibit
4.5
EXECUTION
COPY
By and
among:
Intelli-Site
Inc.,
Integrated
Security Systems, Inc.,
VUANCE,
Inc.
And
VUANCE,
Ltd.
Dated as
of March 6, 2009
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This Asset
Purchase Agreement is entered into as of March 6, 2009, by and among
Intelli-Site
Inc., a Texas corporation (the “Seller”),
Integrated Security Systems, Inc., a Delaware corporation and the holder of all
the issued and outstanding stock of the Seller (the “Stockholder”),
VUANCE Ltd., an Israeli
company (“VUANCE”),
and VUANCE,
Inc., a Delaware corporation and subsidiary of VUANCE (the “Purchaser”). Certain
capitalized terms used in this Agreement are defined in Exhibit A.
Recitals
WHEREAS, the Seller is engaged
in the business of developing, manufacturing and marketing software relating to
integrated security building management and providing customer support and
training relating to such products (collectively, the “Business”);
WHEREAS, the Purchaser wishes to purchase or acquire from the
Seller, and the Seller wishes to sell, assign and transfer to the Purchaser
substantially all the assets of the Business, for the purchase price and upon
the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, the Stockholder owns all of the
issued and outstanding shares of the capital stock of the
Seller;
WHEREAS, the Seller’s board of
directors and the Stockholder have approved and declared it to be advisable and
in the best interest of the Seller to sell substantially all of the assets of
the Seller used in or relating to the Business to the Purchaser upon the terms
and subject to the conditions set forth herein;
NOW, THEREFORE, in
consideration of the premises and the initial covenants, representations and
warranties contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby mutually acknowledged, the parties
to this Agreement, intending to be legally bound, agree as follows:
Agreement
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1.
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Sale
of Assets; Related Transactions.
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1.1 Sale of Assets.
(a) Purchased
Assets. Upon the terms and subject to the conditions set forth
in this Agreement, at the Closing, the Seller shall sell, assign, transfer,
convey and deliver to the Purchaser pursuant to a ▇▇▇▇ of Sale (the “▇▇▇▇ of
Sale”) in substantially the form of Exhibit B attached hereto, and
the Purchaser agrees to purchase from the Seller, good and valid title to the
Assets, free of any Encumbrances, on the terms and subject to the conditions set
forth in this Agreement. For purposes of this Agreement, “Assets”
shall mean and include: (a) all of the properties, rights, interests and
other tangible and intangible assets of the Seller relating to the Business
(other than the Excluded Assets) that are described below (wherever located and
whether or not required to be reflected on a balance sheet prepared in
accordance with U.S. GAAP). Without limiting the generality of the
foregoing, the Assets shall include:
(i)
all United States and foreign patents, patent
applications, trademarks (whether registered or unregistered), service marks,
trade names, brand names, logos, copyrights and any applications therefore and
any other proprietary rights, including, without limitation, software code,
know-how, inventions, discoveries and improvements, test data, shop rights,
processes, methods and formulae, trade secrets, product drawings,
specifications, designs and other technical information, owned by or licensed to
the Seller relating exclusively to the Business, including the Intellectual
Property and Intellectual Property Rights identified on Schedule 1.1(a)(i) attached
hereto, (collectively, the “Intellectual
Property Assets”);
(ii) all
inventories of the Seller relating exclusively to the Business, including,
without limitation, finished goods, work-in process, raw materials, supplies and
other materials;
(iii) all
books and records relating to the Business (other than those required by law to
be retained by the Seller, copies of which will be made available to the
Purchaser) including, without limitation, customer lists, sales records, price
lists and catalogues, sales literature, advertising material, manufacturing
data, production records, employee manuals, personnel records, supply records,
inventory records and correspondence files (together with, in the case of any
such information which is stored electronically, the media on which the same is
stored);
(iv) all
of the Seller’s rights and interests under the contracts pertaining to the
Business (the “Contracts”) that are listed on Schedule 1.1(a)(iv) attached
hereto, together with all of the Seller’s claims or rights of action now
existing or hereinafter arising thereunder, including, without limitation, all
rights and interests under purchase orders, license agreements, maintenance
agreements and development agreements as listed on Schedule 1.1(a)(iv) attached
hereto;
(v)
all equipment, furniture, and other items of tangible personal
property owned by the Seller and exclusively used or held for use in, or for the
benefit of, the Business, except to the extent otherwise specified on Schedule 1.1(a)(v) attached
hereto (collectively, the “Equipment”);
(vi) all
of the Seller’s rights and interests under the personal property leases
identified on Schedule
1.1(a)(vi);
(vii) all
franchises, approvals, permits, orders, certificates, variances and product
licenses and license applications, permits and other Governmental Authorizations
held by the Seller and used and/or related to the Business, including the
Governmental Authorizations identified in Part 2.10 of the Disclosure
Schedule (collectively, the “Licenses and
Permits”);
(viii) all
claims relating to the Business (including (i) claims for past infringement or
misappropriation of Intellectual Property or Intellectual Property Rights
relating to the Intellectual Property Assets and (ii) rights to insurance
proceeds and rights under and pursuant to all warranties, representations and
guarantees made by suppliers of products, materials or equipment, or components
thereof) and causes of action of the Seller against other Persons relating to
the Business (regardless of whether or not such claims and causes of action have
been asserted by the Seller), and all rights of indemnity, warranty rights,
rights of contribution, rights to refunds, rights of reimbursement and other
rights of recovery possessed by the Seller relating to the Business (regardless
of whether such rights are currently exercisable) together with any and all
liens granted or otherwise available to the Seller as security for collection of
any of the foregoing;
(ix) except
as set forth in Section 1.1(b)(iii),
any and all Receivables;
(x)
all trucks, cars and other vehicles owned or held by the Seller at the Closing
Date (as defined below) for use in conduct of the Business;
(xi) the
goodwill of the Seller relating to the Business together with the exclusive
right for the Purchaser to represent itself as carrying on the Business in
succession to the Seller and the right to use any words indicating that the
Business is so carried on;
(xii) all
prepaid expenses of the Seller;
(xiii) all
securities owned legally or beneficially by the Seller including, without
limitation, capital stock and all other equity securities of the
Seller;
(xiv) Seller’s
equity interest related to the joint venture established by that certain
Operating Agreement of Surelock Seals, LLC dated as of June 30, 2007 (the “Joint
Venture”), including any and all documents, books and records, contracts,
intellectual property or other assets related to the Joint Venture, all as set
forth on Schedule
1.1(a)(xiv).
(xv) all
of the Seller’s Information Systems and other Hardware, Software and Databases,
including, without limitation, all rights under licenses and other agreements or
instruments related thereto;
(xvi) to
extent transferable, all Approvals held or used by the Seller in connection
with, or required for or useful for, the Business; and
(xvii) all
Working Capital of the Seller as of the Closing Date.
(b)
Excluded
Assets. Notwithstanding the provisions of Section 1.1(a), the
Assets shall not include the following items of the Seller which are not to be
acquired by the Purchaser hereunder (the “Excluded
Assets”):
(i) the
Seller’s cash on hand on the Closing Date, including all cash equivalents and
deposits, all interest payable in connection with any such items and rights in
and to bank accounts, marketable and other securities and similar investments of
the Seller as of the Closing;
(ii) the
Equipment set forth on Schedule
1.1(a)(v); and
(iii)
the Seller’s Receivables set forth on Schedule 1.1(b)(iii), existing
as the Closing Date that are at least 90 days in arrears.
1.2 Assumption
of Liabilities.
(a) Except
as provided in the following paragraph (b), the Purchaser will assume at the
Closing, and agrees to timely pay, all liabilities of the Seller of any nature
whatsoever (fixed or contingent, known or unknown), including but not limited to
(i) all of the Seller’s obligations under the Contracts that arise out of or
relate to the period after the Closing Date, (ii) all warranty claims against
the Seller for products manufactured prior to the Closing Date, (iii) all
liabilities related to the Joint Venture as set forth in Schedule 1.2(a), and (iv) all
nondelinquent earned but unpaid compensation of any kind payable after the
Closing Date to any employees of the Seller that are subsequently hired by the
Purchaser, including salaries, commission payments, and paid time off, as set
forth on Schedule 1.2(a)
(all such liabilities are referred to as the “Assumed
Liabilities”). Notwithstanding the foregoing, there are no current
material warranty claims, and, to the Seller’s Knowledge, any expected warranty
claims against the Seller.
(b) Notwithstanding
the foregoing paragraph (a), the Seller shall remain responsible for the
following (collectively, the “Retained
Liabilities”), none of which shall be a part of the Assumed
Liabilities:
(i) all
of the Seller’s accounts payable existing as of the Closing Date that are at
least 90 days in arrears, as set forth on Schedule 1.2(b);
(ii) any
indebtedness of the Seller to any of the Seller’s Affiliates;
(iii) any
Liability of any Person other than the Seller;
(iv) any
Liability of the Seller arising out of or relating to the execution, delivery or
performance of any of the Transactional Agreements;
(v) any
Liability of the Seller arising from or relating to any action taken by the
Seller, or any failure on the part of the Seller to take any action, at any time
after the Closing Date;
(vi) any
Liability of the Seller arising from or relating to any Proceeding against the
Seller relating to any occurrence or event happening prior to the
Closing;
(vii) any
Liability of the Seller for the payment of any Tax (except as set forth in Section
1.4);
(viii) any
Liability of the Seller to any employee or former employee of the Seller under
or with respect to any Seller Employee Plan, profit sharing plan or dental plan
or for severance pay not included in Schedule 1.2(a);
(ix)
any Liability of the Seller to any shareholder or any other Related
Party;
(x) any
Liability under any Contract, if the Seller shall not have obtained, prior to
the Closing Date, any Consent required to be obtained from any Person with
respect to the assignment or delegation to the Purchaser of any rights or
obligations under such Contract;
(xi) any
Liability that is inconsistent with or constitutes an inaccuracy in, or that
arises or exists by virtue of any Breach of, (x) any representation or
warranty made by the Seller in any of the Transactional Agreements, or
(y) any covenant or obligation of the Seller contained in any of the
Transactional Agreements; and
(xii) all
real property leases of the Seller.
1.3 Purchase Price. As consideration for the
sale of the Assets to the Purchaser (the “Purchase
Price”):
(a) the
Purchaser shall pay to the Seller, in cash, a total of Two Hundred Sixty-Two
Thousand Dollars ($262,000.00) payable in twenty-five (25) consecutive, monthly
installments. The first twelve (12) monthly installments shall be
equal to Eleven Thousand Dollars ($11,000.00) each and thereafter, the remaining
thirteen (13) monthly installments shall be equal to Ten Thousand Dollars
($10,000) each (the “Cash
Consideration”). The first monthly installment shall commence
on the Closing Date. Notwithstanding the foregoing, in the event that
(i) the actual Working Capital is less than $40,000, then the Cash Consideration
shall be reduced by an amount equal to $40,000 less the actual Working Capital,
or (ii) the actual Working Capital is more than $50,000, then the Cash
Consideration shall be increased by an amount equal to the actual Working
Capital less $50,000;
(i)
Within 60 days after the Closing Date, the Purchaser shall calculate (and
deliver to the Seller) the actual Working Capital of the Seller that existed on
the Closing Date.
(ii) If
within 60 days following delivery to the Seller of the calculation of the actual
Working Capital the Seller has not provided to the Purchaser written notice
objecting to the Purchaser’s calculation of the actual Working Capital (which
notice shall state the basis of the Seller’s objection), then the Purchaser’s
calculation shall be final. If the Seller timely gives the Purchaser
such notice of objection, and if the Seller and the Purchaser fail to resolve
the issues outstanding with respect to the calculation of the actual Working
Capital within 30 days of the Purchaser’s receipt of the Seller’s objection
notice, then the Seller and the Purchaser shall submit the issues remaining in
dispute to an independent public accounting firm to be mutually agreed upon, for
calculation of the actual Working Capital, using the same accounting principles
and practices referred to above. The accounting firm’s determination
shall be final and binding. The parties shall cooperate with such
accounting firm in making its determination, and shall supply such working
papers and other documentation as may be reasonably required by such accounting
firm. The Seller and the Purchaser will each bear 50% of the fees and
costs of the accounting firm for such determination.
(b) the
Purchaser will issue to the Stockholder as soon as practicable after the
Closing, a number of ordinary shares of VUANCE (the “Consideration
Shares”) equal to the quotient obtained by dividing (a) $250,000.00, by
(b) the weighted average closing price of VUANCE’s ordinary shares for the
fifteen (15) trading days preceding the Closing Date (the “Weighted
Average”), provided that in no event shall the divisor be smaller than
$1.25 or greater than $2.00. As an example, and for avoidance of
doubt, in the event that the Weighted Average is $0.75, the Stockholder shall
receive Consideration Shares equal to the quotient obtained by dividing
$250,000.00 by $1.25, equaling 200,000 shares;
(c) the
Purchaser will pay to the Stockholder, in royalty payments, an amount of up to
Six Hundred Thousand Dollars ($600,000.00) in the aggregate (the “Royalty
Payments”). The Royalty Payments shall be equal to six percent (6%) of
the Net Revenues actually received by the Purchaser during the period commencing
on the Closing Date and ending on the third (3rd)
anniversary thereof (the “Royalty
Period”). Notwithstanding the foregoing, the last Royalty
Payment of the Royalty Period shall include Royalty Payments for any Royalty
Product sold during the Royalty Period for which payment has not yet been
received by the Purchaser. The Royalty Payments will be paid on a
quarterly basis, within thirty (30) days of the close of each quarter, and will
be made 50% in cash and 50% in VUANCE’s ordinary shares (“Royalty
Shares”). The number of Royalty Shares to be issued to the
Stockholder shall be calculated on the basis of the weighted average closing
price of VUANCE’s ordinary shares for the fifteen (15) trading days preceding
the quarterly payment, subject to a minimum of $1.25. The Royalty
Shares will be subject to the same rights and restrictions as the Consideration
Shares. During the Royalty Period and for any period of time
thereafter until the Purchaser has received payment for all Royalty Product sold
during the Royalty Period, the Purchaser shall supply the Stockholder with
quarterly reports of invoices and cash receipts that relate directly to the
Royalty Payments. During the Royalty Period and for one (1) year
following the Royalty Period, (i) the Purchaser shall maintain complete and
accurate records at its principal place of business relating to the performance
of its obligations hereunder and all of the Purchaser’s sales, distribution and
sales activity relating to the Royalty Products, and (ii) the Stockholder or its
designated representative shall have the right, upon fifteen (15) days written
notice and during normal business hours, to inspect such records to insure
compliance with the Purchaser’s obligations under this Section. In
the event such audit reveals a discrepancy between the Royalty Payments paid to
the Stockholder and the fees actually received by the Stockholder (the “Discrepancy”),
then, Stockholder shall provide Purchaser with written notice of such
Discrepancy and Purchaser shall have thirty (30) days to cure such Discrepancy
from the date the written notice is received. Notwithstanding the
foregoing, in the event that any audit performed under this section reveals
underpayments exceeding fifteen percent (15%) of the Royalty Payment for such
quarterly period, the Purchaser shall bear the full cost of such
audit. If the audit performed under this section reveals
underpayments less than fifteen percent (15%) of the Royalty Payment for such
quarterly period, the Stockholder shall bear the full cost of such
audit.
(d) Collection of
Receivables. Except as set forth in Section 1.2(b), the
Seller agrees that, from and after the Closing Date, the Purchaser shall have
the right and authority to collect for its own account the Receivables, subject
to the provisions hereof. If the Seller shall receive payment in
respect of Receivables that are included in the Assets, then the Seller shall
forward such payment to the Purchaser within five (5) business days of receipt
thereof.
(e) License Back. The
Purchaser hereby grants the Seller a royalty-free, worldwide, irrevocable,
sublicensable, nonexclusive license to make, have made, use, sell, have sold,
import, reproduce, distribute, display, perform, create derivative work of, and
digitally transmit the Intellectual Property Assets. The Seller may
retain a copy of, and the Purchaser agrees to make available for copying by the
Seller during the Royalty Period, any Asset that the Seller believes is
necessary to fully exercise this license. The Seller agrees not to
exercise this license unless and until (i) the Purchaser files or has filed
against it a petition in bankruptcy, has a receiver appointed to handle its
assets or affairs or admits that it is insolvent, or (ii) the Purchaser fails to
timely pay the Cash Consideration when and if due (a “Failure of
Payment”). Notwithstanding the foregoing, in the event a
Failure of Payment occurs, then the Seller shall provide the Purchaser with
written notice of such Failure of Payment and the Purchaser shall have forty
five (45) days to cure such Failure of Payment from the date the written notice
is received (the “Cure
Period”). If the Purchaser timely makes all payments due under
this Agreement or within the Cure Period specified in this Section 1.3(e), this
license will expire and be of no further force or effect, and any copy of any
Asset that was made by the Seller pursuant to this paragraph shall immediately
be returned to the Purchaser or destroyed, in the sole discretion of the
Purchaser. If the Seller exercises the license in accordance with
this Agreement, the Purchaser hereby agrees to (i) cease using the Intellectual
Property Assets, (ii) not transfer the Intellectual Property Assets to any other
Person and (iii) keep all Intellectual Property Assets
confidential. If for any reason the Intellectual Property Assets are
transferred to a third party, the obligations and restrictions set forth in this
Section 1.3(e)
shall be applicable to such third party. Notwithstanding the
foregoing, this license will expire and be of no further force or effect upon
the Purchaser’s payment in full of the Cash Consideration to the
Seller.
(f) VUANCE
hereby guarantees the payment and performance of all of the obligations of the
Purchaser set forth in Section
1.3.
1.4 Taxes.
(a) Taxes for Sale of Assets. The
Seller and Purchaser shall equally bear and pay, any sales taxes, use taxes,
transfer taxes, value added, documentary charges, recording fees or similar
taxes, charges, fees or expenses that may become payable in connection with the
sale of the Assets to the Purchaser or in connection with any of the other
Transactions.
(b) Prorations. All
personal property taxes, ad valorem obligations and similar taxes imposed on a
periodic basis, in each case levied with respect to the Assets, other than
transfer taxes provided for in Section 1.4(a), for a
taxable period which includes (but does not end on) the Closing Date shall be
apportioned between the Seller and the Purchaser as of the Closing Date based on
the number of days of such taxable period included in the Pre-Closing Tax Period
and the number of days of such taxable period included in the Post-Closing Tax
Period. The Seller shall be liable for the proportionate amount of
such taxes that are attributable to the Pre-Closing Tax Period and the Purchaser
shall be liable for the proportionate amount of such taxes that are attributable
to the Post-Closing Period. Within one hundred and eighty (180) days
after the Closing, the Seller and the Purchaser shall present a reimbursement to
which each is entitled under this Section 1.4(b)
together with such supporting evidence as is reasonably necessary to calculate
the proration amount. The proration amount shall be paid by the party
owing it to the other within ten (10) days after delivery of such
statement. Thereafter, each party shall notify the other party
promptly following receipt of any ▇▇▇▇ for taxes relating to the Assets, part or
all of which are attributable to the Post-Closing Tax Period, and shall promptly
forward a copy of such ▇▇▇▇ to the other party; who shall pay the same to the
appropriate taxing authority. The party originally receiving such
▇▇▇▇ shall also remit to the other party prior to the due date of payment for
its proportionate amount of such ▇▇▇▇. In the event that either the
Seller or the Purchaser shall thereafter make a payment for which it is entitled
to reimbursement under this Section 1.4(b), the
other party shall make such reimbursement promptly but in no event later than
thirty (30) days after the presentation of a statement setting forth the amount
of reimbursement to which the presenting party is entitled along with such
supporting evidence as is reasonably necessary to calculate the amount of
reimbursement.
1.5 Nonassignable Contracts and
Authorizations. To the extent that the assignment of any
Contract or any license, permit, approval or qualification issued or to be
issued by any government or agency or instrumentality thereof relating to the
Business or the Assets, including, without limitation, the Contracts and
Licenses and Permits, to be assigned to the Purchaser pursuant to this Agreement
shall require the consent of any other party, this Agreement shall not
constitute a contract to assign the same if an attempted assignment would
constitute a breach thereof. The Seller shall use its best commercial
efforts and at its expense, and the Purchaser shall cooperate where reasonable
and appropriate, to obtain any consent necessary to any such
assignment. If any such consent is not obtained, then the Seller
shall cooperate with the Purchaser in any reasonable arrangement requested by
the Purchaser designed to provide to the Purchaser the benefits under any such
Contract, license, permit, approval or qualification, including enforcement of
any and all rights of the Seller against the other party thereto arising out of
breach or cancellation thereof by such other party or otherwise, as long as such
arrangement would not otherwise breach such Contract, license, permit, approval
or qualification pursuant to its terms; provided, however that if the
Purchaser receives the benefits under any such Contract, license, permit,
approval or qualification pursuant to this Section 1.5, the
Purchaser shall perform the Seller’s obligations, if any, set forth in such
Contract, license, permit, approval or qualification.
1.6 Closing.
(a) The
closing of the sale of the Assets to and the assumption of the Assumed
Liabilities by the Purchaser (the “Closing”)
shall take place at the offices of Shelowitz & Associates, PLLC, at 10:00
a.m. on March 16, 2009 unless another date or place is agreed to in writing by
the parties. For purposes of this Agreement, “Closing
Date” shall mean the time and date as of which the Closing actually takes
place.
(b) At
the Closing:
(i) the
Seller shall execute and deliver to the Purchaser such bills of sale,
endorsements, assignments and other documents as may (in the reasonable judgment
of the Purchaser and its counsel) be necessary or appropriate to assign, convey,
transfer and deliver to the Purchaser good and valid title to the Assets free of
any Encumbrances;
(ii)
the Seller and the Stockholder shall execute and deliver to the Purchaser
a Noncompetition Agreement in the form of Exhibit C;
(iii) the
Purchaser shall assume the Assumed Liabilities by executing and delivering to
the Seller an Assumption Agreement in substantially the form of Exhibit D (the “Assumption
Agreement”);
(iv) the
Purchaser will enter into an offer letter with the employees set forth on Schedule 1.2(a) on such terms
and as would be negotiated and agreed by the Purchaser and such employees,
including mutually agreeable provisions regarding term, base and incentive
compensation and confidentiality (the “Offer
Letter”). The employees of the Seller listed on Schedule 1.2(a) shall have
delivered to the Purchaser an executed Offer Letter in substantially the form of
Exhibit E, which
agreements shall not have been anticipatorily breached or repudiated by such
employees; and
(v) any
additional documents as set forth in Section 4.5
hereof.
1.7 Purchase Price
Allocation. The Purchase Price shall be allocated as set forth
in Schedule 1.7 hereto
in accordance with Code §1060 and the Treasury regulations thereunder (and any
similar provision of state, local or foreign law, as appropriate), which
allocation shall be binding upon the Seller and the Purchaser. The
Seller and the Purchaser acknowledge that Schedule 1.7 hereto is a
correct allocation of the Purchase Price to the best of their Knowledge and
belief. The Seller and Purchaser and their Affiliates shall report
and file Tax Returns (including, but not limited to Internal Revenue Service
Form 8594), and shall act, in all respects and for all purposes consistent with
such allocation. Neither the Seller nor Purchaser shall take any
position (whether in audits, Tax Returns or otherwise) which is inconsistent
with such allocation unless required to do so by applicable law.
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2.
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Representations
and Warranties of the
Seller.
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As an
inducement to the Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, the Seller and the Stockholder, jointly and
severally hereby represent and warrant, to and for the benefit of the Purchaser,
as follows:
2.1 Due Organization; No Subsidiaries;
Capitalization.
(a) The
Seller is a corporation duly organized, validly existing and in good standing
under the laws of the State of Texas. The Seller is not required to be
qualified, authorized, registered or licensed to do business as a foreign
corporation in any jurisdiction other than the jurisdictions listed in Part 2.1
of the Disclosure Schedule. The Seller is in good standing as a
foreign corporation in each of the jurisdictions listed in Part 2.1 of the
Disclosure Schedule. Except for the equity interest it owns in the
Joint Venture as set forth on Schedule 1.1(a)(xiv), the
Seller does not have any subsidiaries, and does not own, beneficially or
otherwise, any shares or other securities of, or any direct or indirect interest
of any nature in, any other Entity. The Seller has never conducted
any business under or otherwise used, for any purpose or in any jurisdiction,
any fictitious name, assumed name, trade name or other name, other than
“Intelli-Site Inc.” and is in possession of all Approvals.
(b) All
of the issued and outstanding equity securities of the Seller are beneficially
and legally owned by the Stockholder.
2.2 Absence of
Changes. Except as set forth in Part 2.2 of the
Disclosure Schedule, since December 31, 2008, the Seller has not:
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a)
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issued,
sold, redeemed or repurchased any shares, bonds or other corporate
securities or any rights, options or warrants with respect thereto (except
pursuant to the conversion or exercise of convertible securities, options
or warrants outstanding on the date hereof), or amended any of the terms
(including without limitation the vesting of) any such convertible
securities, options or warrants;
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b)
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split,
combined or reclassified any shares of its capital stock, or declared, set
aside or paid any dividend or other distribution with respect to any
shares of capital stock of Seller, whether in cash, stock or property, or
any combination thereof;
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c)
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made
any loan, advance or capital contribution to or investment in any person
other than loans or advances to employees of Seller made in the Ordinary
Course of Business;
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d)
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borrowed
any amount or incurred or become subject to any liabilities (absolute or
contingent) except current liabilities incurred in the Ordinary
Course of Business;
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e)
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discharged
or satisfied any claim or encumbrance or paid any obligation or liability
(absolute or contingent), other than current liabilities paid in the
Ordinary Course of Business;
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f)
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amended
its Certificate of Incorporation, By-laws or other organizational
document;
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g)
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instituted
or settled any Litigation;
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h)
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mortgaged
or pledged any of the Assets, tangible or intangible, or subjected itself
or any portion of the Assets, tangible or intangible, to any claim, except
claims for current property taxes not yet due and
payable;
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i)
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acquired
or sold, assigned, transferred or otherwise disposed of any amount of
tangible assets, except in the Ordinary Course of Business, or canceled
any debts or claims;
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j)
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sold,
assigned, licensed, sublicensed or transferred any intangible asset or
intellectual property right, or disclosed any proprietary or confidential
information to any person or entity not associated with the Seller, unless
such person or entity, prior to such disclosure executed and delivered a
non-disclosure agreement in favor of the
Seller;
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k)
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suffered
any non-operating loss in excess of $10,000, or aggregate non-operating
losses in excess of $20,000, in either case regardless of whether in the
Ordinary Course of Business or covered by
insurance;
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l)
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waived
any right of value in excess of $10,000, or aggregate rights in excess of
$20,000 (including any insurance policy naming it as a beneficiary or a
loss payable payee);
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m)
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suffered
any labor trouble, or any event or condition of any character, having a
Material Adverse Effect on the business or plans of the
Seller;
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n)
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materially
decreased expenditures with respect to maintenance and
repairs;
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o)
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made
any single capital expenditure or commitment therefor in excess of
$10,000, or aggregate capital expenditures or commitments therefor in
excess of $20,000;
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p)
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done
any of the following: (A) entered into, adopted or amended any employee
benefit plan, (B) made any grant of any severance or termination pay to
any director, officer, employee or individual providing services to
Seller, (C) entered into any employment, deferred compensation, change in
control or other similar agreement (or any amendment to any such existing
agreement) with any director, officer, employee or individual providing
services to Seller, (D) increased benefits payable under any existing
severance or termination pay policies or employment agreements, or (E)
increased compensation, bonus or other benefits payable to directors,
officers, employees or individuals providing services to Seller, other
than, in the case of clause (B), with respect to non-executive employees,
and in the case of clause (E), in the Ordinary Course of
Business;
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q)
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entered
into any joint venture, partnership or similar
arrangement;
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r)
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amended,
modified or terminated any Contract identified on Schedule 1.1(a)(iv),
other than in the Ordinary Course of Business, except for any such item
that terminated in accordance with its terms, or taken any action that
would constitute a violation of or default under any material
Contract;
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s)
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changed
its accounting methods, principles or practices, or revalued any of the
Assets (including without limitation the writing down of the value of
inventory or the writing off of notes or accounts receivable other than in
the Ordinary Course of Business);
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t)
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taken,
or failed to take, any action which could reasonably be expected to
prevent, hinder or materially delay the ability of the Seller to
consummate the transactions contemplated by this Agreement or the
Ancillary Agreements to which it is a
party;
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u)
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entered
into any other transaction other than in the Ordinary Course of Business
or entered into any other material transaction, whether or not in the
Ordinary Course of Business; or
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v)
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agreed
in writing or otherwise to take any of the foregoing
actions.
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2.3 Title to
Assets. Except as set forth in Part 2.3 of the Disclosure
Schedule, the Seller owns, and has good and valid title to, all of the Assets,
free and clear of all Encumbrances, and without incurring any penalty or other
adverse consequence, including, without limitation, any increase in rents,
royalties, or license or other fees imposed as a result of, or arising from, the
consummation of the transactions contemplated by this
Agreement. Part 2.3 of the Disclosure Schedule identifies all of
the Assets that are being leased or licensed to the Seller. The
Assets will collectively constitute, as of the Closing Date, all of the
properties, rights, interests and other tangible and intangible assets necessary
to enable the Seller to conduct the Business as currently
conducted. In addition, the Seller is not subject to any
non-competition or similar restriction on the Business.
2.4 Customers. Part 2.4
of the Disclosure Schedule accurately identifies, and provides an accurate and
complete breakdown of the revenues received from its five largest customers in
2008 and 2007. The Seller has not received any notice or other
communication (in writing or otherwise) indicating that the any of the said
customers may cease dealing with the Seller or may otherwise reduce the volume
of business transacted by such Person with the Seller below historical
levels. Except as set forth on Part 2.4 of the Disclosure Schedule,
the Seller has not received any notice or other communication (in writing or
otherwise), and has no other information, indicating that any distributor of any
of the Seller’s Intellectual Property Assets may cease acting as a distributor
of such products or otherwise dealing with the Seller.
2.5 Equipment,
Etc. Part 2.5 of the Disclosure Schedule accurately
identifies all equipment, materials, prototypes, tools, supplies, vehicles,
furniture, fixtures, improvements and other tangible Assets owned by the
Seller. Each Asset (other than the Equipment) identified or required
to be identified in Part 2.5 of the Disclosure Schedule: (i) is
structurally sound, free of defects and deficiencies and in good condition and
repair (ordinary wear and tear excepted); (ii) complies in all respects with,
and is being operated and otherwise used in full compliance with, all applicable
Legal Requirements; and (iii) is adequate and appropriate for the uses to which
it is being put. Except as provided in Section 2.3, Seller
makes no representation or warranty concerning the condition or repair of the
Equipment, such Equipment being delivered “AS IS, WHERE IS”, without any express
or implied warranties whatsoever, including without limitation warranties of
merchantability or fitness for a particular purpose.
2.6 Intellectual
Property; Privacy.
(a) Products and
Services. Part 2.6(a) of the Disclosure Schedule accurately
identifies and describes each Seller Product currently being designed,
developed, manufactured, marketed, distributed, provided, licensed, or sold by
the Seller.
(b) Registered
IP. Part 2.6(b) of the Disclosure Schedule accurately
identifies: (a) each item of Registered IP in which the Seller has or purports
to have an ownership interest of any nature (whether exclusively, jointly with
another Person, or otherwise); (b) the jurisdiction in which such item of
Registered IP has been registered or filed and the applicable registration or
serial number; (c) any other Person that has an ownership interest in such item
of Registered IP and the nature of such ownership interest; and (d) each Seller
Product identified in Part 2.6(a) of the Disclosure Schedule that embodies,
utilizes, or is based upon or derived from (or, with respect to Seller Products
currently under development, that is expected to embody, utilize, or be based
upon or derived from) such item of Registered IP. The Seller has
provided to the Purchaser complete and accurate copies of all applications,
correspondence with any Governmental Body, and other material documents related
to each such item of Registered IP.
(c) Inbound
Licenses. Part 2.6(c) of the Disclosure Schedule accurately
identifies: (a) each Contract pursuant to which any Intellectual Property Asset
is or has been licensed, sold, assigned, or otherwise conveyed or provided to
the Seller (other than (i) agreements between the Seller and its employees in
the Seller’s standard form thereof and (ii) non-exclusive licenses to
third-party software that is not incorporated into, or used in the development,
manufacturing, testing, distribution, maintenance, or support of, any Seller
Product and that is not otherwise material to the Business); and (b) whether the
licenses or rights granted to the Seller in each such Contract are exclusive or
non-exclusive.
(d) Outbound
Licenses. Part 2.6(d) of the Disclosure Schedule accurately
identifies each Contract pursuant to which any Person has been granted any
license under, or otherwise has received or acquired any right (whether or not
currently exercisable) or interest in, any Seller IP. The Seller is
not bound by, and no Seller IP is subject to, any Contract containing any
covenant or other provision that in any way limits or restricts the ability of
the Seller to use, exploit, assert, or enforce any Seller IP anywhere in the
world.
(e) Royalty
Obligations. Part 2.6(e) of the Disclosure Schedule contains a
complete and accurate list and summary of all royalties, fees, commissions, and
other amounts payable by the Seller to any other Person (other than sales
commissions paid to employees according to the Seller’s standard commissions
plan) upon or for the manufacture, sale, or distribution of any Seller Product
or the use of any Seller IP.
(f) Standard Form IP
Agreements. The Seller has provided to the Purchaser a
complete and accurate copy of each standard form of Seller IP Contract used by
the Seller at any time since 2006, including each standard form of (a) employee
agreement containing any assignment or license of Intellectual Property Rights;
(b) consulting or independent contractor agreement containing any intellectual
property assignment or license of Intellectual Property Rights; and (c)
confidentiality or nondisclosure agreement. Part 2.6(f) of the
Disclosure Schedule accurately identifies each Seller IP Contract that deviates
in any material respect from the corresponding standard form agreement provided
to the Purchaser, including any agreement with an employee, consultant, or
independent contractor in which the employee, consultant, or independent
contractor expressly reserved or retained rights in any Intellectual Property or
Intellectual Property Rights incorporated into or used in connection with any
Seller Product or otherwise related to the Seller’s business, research, or
development.
(g) Ownership Free and
Clear. The Seller exclusively owns all right, title, and
interest to and in the Seller IP (other than Intellectual Property Rights
exclusively licensed to the Seller, as identified in Part 2.6(c) of the
Disclosure Schedule) free and clear of any Encumbrances (other than licenses and
rights granted pursuant to the Contracts identified in Part 2.6(d) of the
Disclosure Schedule). Without limiting the generality of the
foregoing:
(i) Perfection of
Rights. As of the Closing Date, all documents and
instruments necessary to establish, perfect, and maintain the rights of
the Seller in the Registered IP have been validly
executed, delivered, and filed in a timely manner with the appropriate
Governmental Body.
(ii) Employees and
Contractors. Each Person who is or was an employee or
contractor of the Seller and who is or was involved in the creation or
development of any Seller Product or Seller IP has signed a valid, enforceable
agreement containing an assignment of Intellectual Property Rights pertaining to
such Seller Product or Seller IP to the Seller and confidentiality provisions
protecting the Seller IP. No current or former shareholder, officer,
director, or employee of the Seller has any claim, right (whether or not
currently exercisable), or interest to or in any Seller IP. No
employee of the Seller is (a) bound by or otherwise subject to any Contract
restricting him from performing his duties for the Seller or (b) in breach of
any Contract with any former employer or other Person concerning Intellectual
Property Rights or confidentiality due to his activities as an employee of the
Seller.
(iii) Government
Rights. No funding, facilities or personnel of any
Governmental Body or any public or private university, college, or other
educational or research institution were used, directly or indirectly, to
develop or create, in whole or in part, any Seller IP.
(iv) Protection of Proprietary
Information. The Seller has taken all reasonable steps to
maintain the confidentiality of and otherwise protect and enforce its rights in
all proprietary information pertaining to the Seller or any Seller
Product. Without limiting the generality of the foregoing, except for
those escrow agents identified in Seller’s customer agreements, no portion of
the source code for any software ever owned or developed by the Seller has been
disclosed or licensed to any escrow agent or other Person.
(v) Sufficiency. The
Seller owns or otherwise has, and after the Closing the Purchaser will have, all
Intellectual Property Rights needed to conduct the Business as currently
conducted.
(h) Valid and
Enforceable. All Seller IP is valid, subsisting,
and enforceable. Without limiting the generality of the
foregoing:
(i) Misuse and Inequitable
Conduct. The Seller has not engaged in patent or copyright
misuse or any fraud or inequitable conduct in connection with any Seller IP that
is Registered IP.
(ii) Trademarks. To
the Knowledge of the Seller, no trademark or trade name owned, used, or applied
for by the Seller conflicts or interferes with any trademark or trade name
owned, used, or applied for by any other Person. To the Knowledge of
the Seller, no event or circumstance (including a failure to exercise adequate
quality controls and an assignment in gross without the accompanying goodwill)
has occurred or exists that has resulted in, or could reasonably be expected to
result in, the abandonment of any trademark (whether registered or unregistered)
owned, used, or applied for by the Seller.
(iii) Legal Requirements and
Deadlines. Except as set forth on Part 2.6(h)(iii) of the
Disclosure Schedule, no application for a patent or a copyright, mask work, or
trademark registration or any other type of Registered IP filed by or on behalf
of the Seller has been abandoned, allowed to lapse, or rejected. Part
2.6(h)(iii) of the Disclosure Schedule accurately identifies and describes each
action, filing and payment that must be taken or made within ninety (90) days
after the date of this Agreement in order to maintain such item of Seller IP in
full force and effect.
(iv) Interference Proceedings and
Similar Claims. No interference, opposition, reissue,
reexamination, or other Proceeding is or since 2002 has been pending or, to the
best of the Seller’s Knowledge, threatened, in which the scope, validity, or
enforceability of any Seller IP is being, has been, or could reasonably be
expected to be contested or challenged. To the best of the Seller’s
Knowledge, there is no basis for a claim that any Seller IP is invalid or
unenforceable.
(i) Third-Party Infringement of
Company IP. To the best of the Seller’s Knowledge, no Person
has infringed, misappropriated, or otherwise violated, and no Person is
currently infringing, misappropriating, or otherwise violating, any Seller
IP. Part 2.6(i) of the Disclosure Schedule accurately identifies (and
the Seller has provided to the Purchaser a complete and accurate copy of) each
letter or other written or electronic communication or correspondence that has
been sent or otherwise delivered by or to the Seller or any representative of
the Seller regarding any actual, alleged, or suspected infringement or
misappropriation of any Seller IP, and provides a brief description of the
current status of the matter referred to in such letter, communication, or
correspondence.
(j) Effects of This
Transaction. Neither the execution, delivery, or performance
of this Agreement (or any of the ancillary agreements) nor the consummation of
any of the transactions contemplated by this Agreement (or any of the ancillary
agreements) will, with or without notice or lapse of time, result in, or give
any other Person the right or option to cause or declare, (a) a loss of, or
Encumbrance on, any Seller IP; (b) a breach of or default under any Seller IP
Contract; (c) the release, disclosure, or delivery of any Seller IP by or to any
escrow agent or other Person; or (d) the grant, assignment, or transfer to any
other Person of any license or other right or interest under, to, or in any of
the Seller IP.
(k) No Infringement of Third
Party IP Rights. To the Knowledge of the Seller, the Seller
has never infringed (directly, contributorily, by inducement, or otherwise),
misappropriated, or otherwise violated or made unlawful use of any Intellectual
Property Right of any other Person or engaged in unfair
competition. To the Knowledge of the Seller, no Seller Product, and
no method or process used in the manufacturing of any Seller Product, infringes,
violates, or makes unlawful use of any Intellectual Property Right of, or
contains any Intellectual Property misappropriated from, any other
Person.
(l) Infringement
Claims. No infringement, misappropriation, or similar claim or
Proceeding is pending or, to the best of the Seller’s Knowledge, threatened
against the Seller or against any other Person who is or may be entitled to be
indemnified, defended, held harmless, or reimbursed by the Seller with respect
to such claim or Proceeding. The Seller has never received
any notice or other communication (in writing or otherwise) relating to any
actual, alleged, or suspected infringement, misappropriation, or violation by
the Seller, any of its employees or agents, or any Seller Product of any
Intellectual Property Rights of another Person.
(m) Other Infringement
Liability. The Seller is not bound by any Contract to
indemnify, defend, hold harmless, or reimburse any other Person with respect to,
or otherwise assumed or agreed to discharge or otherwise take responsibility
for, any existing or potential intellectual property infringement,
misappropriation, or similar claim (other than indemnification provisions in the
Seller’s standard forms or Seller IP Contracts).
(n) Infringement Claims
Affecting In-Licensed IP. To the best of the Seller’s
Knowledge, no claim or Proceeding involving any Intellectual Property or
Intellectual Property Right licensed to the Seller is pending or has been
threatened, except for any such claim or Proceeding that, if adversely
determined, would not adversely affect (a) the use or exploitation of such
Intellectual Property or Intellectual Property Right by the Seller, or (b) the
design, development, manufacturing, marketing, distribution, provision,
licensing or sale of any Seller Product.
(o) Source
Code. Except for those escrow agents identified in Seller’s
customer agreements, no source code for any Seller Software has been delivered,
licensed, or made available to any escrow agent or other Person who is not, as
of the date of this Agreement, an employee of the Seller. The Seller
has no duty or obligation (whether present, contingent, or otherwise) to
deliver, license, or make available the source code for any Seller Software to
any escrow agent or other Person. No event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time)
will, or could reasonably be expected to, result in the delivery, license, or
disclosure of the source code for any Seller Software to any other
Person.
(p) Open
Source. Part 2.6(p) of the Disclosure Schedule accurately
identifies and describes (i) each item of Open Source Code that is contained in,
distributed with, or used in the development of the Seller Products or from
which any part of any Seller Product is derived. No Seller Product is
derived from, is distributed with, or is being or was developed using Open
Source Code.
(q) The
Seller has complied at all times and in all respects with all of the Seller
Privacy Policies and with all applicable Legal Requirements pertaining to
privacy, User Data or Personal Data.
(r) Neither
the execution, delivery, or performance of this Agreement (or any of the
ancillary agreements) nor the consummation of any of the transactions
contemplated by this Agreement (or any of the ancillary agreements), nor the
Purchaser’s possession or use of the User Data or any data or information in the
Seller Databases, will result in any violation of any Seller Privacy Policy or
any Legal Requirement pertaining to privacy, User Data or Personal
Data.
2.7 Contracts. The
Seller has delivered to the Purchaser accurate and complete copies of all
Contracts identified on Schedule
1.1(a)(iv). Each such Contract is valid and in full force and
effect and constitutes in all material respects the valid and binding obligation
of the Seller and, to the Seller’s Knowledge, of each other party thereto,
enforceable in accordance with its respective terms, subject to laws affecting
generally the enforcement of creditor’s rights and to general principles of
equity. To its Knowledge, Seller has performed all obligations
required to be performed by it prior to the Closing Date under the Contracts and
is not in breach or default thereunder nor has any event occurred which, with
the giving of notice or the passage of time or both, would constitute a breach
or default. Seller has not received notice of any plan or intention
of any other party under any of the Contracts to exercise any right to cancel or
terminate any such Contract.
(a)
The Seller has no Knowledge of any basis upon which any party to any Contract to
be assumed by the Purchaser hereunder may object to (i) the assignment to
the Purchaser of any right under such Contract, or (ii) the delegation to
or performance by the Purchaser of any obligation under such
Contract.
2.8 Liabilities. The
Seller has not, at any time, (i) made a general assignment for the benefit
of creditors, (ii) filed, or had filed against it, any bankruptcy petition
or similar filing, (iii) suffered the attachment or other judicial seizure
of all or a substantial portion of its assets, (iv) admitted in writing its
inability to pay its debts as they become due, (v) been convicted of, or
pleaded guilty or no contest to, any felony, or (vi) taken or been the
subject of any action that may have an adverse effect on its ability to comply
with or perform any of its covenants or obligations under any of the
Transactional Agreements.
2.9 Compliance with Legal
Requirements. Except as set forth in Part 2.9 of the
Disclosure Schedule: (a) the Seller is in material compliance with each Legal
Requirement that is applicable to it or to the conduct of its Business or the
ownership or use of any of its Assets; (b) the Seller has at all times been in
full compliance with each Legal Requirement that is or was applicable to it or,
to the Seller’s Knowledge, to conduct of the Business or the ownership or use of
the Assets; (c) no event has occurred, and no condition or circumstance exists,
that might (with or without notice or lapse of time) constitute or result
directly or indirectly in a violation by the Seller of, or a failure on the part
of Seller to comply with, any Legal Requirement which would materially and
adversely affect Purchaser’s use of the Assets; and (d) the Seller has not
received, at any time, any notice or other communication (in writing or
otherwise) from any Governmental Body or any other Person regarding (i) any
actual, alleged, possible or potential violation of, or failure to comply with,
any Legal Requirement, or (ii) any actual, alleged, possible or potential
obligation on the part of the Seller to undertake, or to bear all or any portion
of the cost of, any cleanup or any remedial, corrective or response action of
any nature.
2.10 Governmental
Authorizations. Part 2.10 of the Disclosure Schedule
identifies: (a) each Governmental Authorization that is held by the Seller; and
(b) each other Governmental Authorization that, to the Knowledge of the Seller,
is held by any employee of the Seller and relates to the
Business. The Seller has delivered to the Purchaser accurate and
complete copies of all of the Governmental Authorizations identified in
Part 2.10 of the Disclosure Schedule, including all renewals thereof and
all amendments thereto. Each Governmental Authorization identified or
required to be identified in Part 2.10 of the Disclosure Schedule, and to
the Seller’s Knowledge, is valid and in full force and effect. Except
as set forth in Part 2.10 of the Disclosure Schedule: (i) the Seller is and
has at all times been in full compliance with all of the terms and requirements
of each Governmental Authorization identified or required to be identified in
Part 2.10 of the Disclosure Schedule; (ii) no event has occurred, and no
condition or circumstance exists, that might (with or without notice or lapse of
time) (A) constitute or result directly or indirectly in a violation of or
a failure to comply with any term or requirement of any Governmental
Authorization identified or required to be identified in Part 2.10 of the
Disclosure Schedule, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, termination or modification of
any Governmental Authorization identified or required to be identified in
Part 2.10 of the Disclosure Schedule; (iii) the Seller has never received
any notice or other communication (in writing or otherwise) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible or potential violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (B) any actual, proposed,
possible or potential revocation, withdrawal, suspension, cancellation,
termination or modification of any Governmental Authorization; and (iv) all
applications required to have been filed for the renewal of the Governmental
Authorizations required to be identified in Part 2.10 of the Disclosure
Schedule have been duly filed on a timely basis with the appropriate
Governmental Bodies, and each other notice or filing required to have been given
or made with respect to such Governmental Authorizations has been duly given or
made on a timely basis with the appropriate Governmental Body. The
Governmental Authorizations identified in Part 2.10 of the Disclosure
Schedule constitute all of the Governmental Authorizations necessary (i) to
enable the Seller to conduct its Business as currently conducted, and
(ii) to permit the Seller to own and use the Assets in the manner in which
they are currently owned and used.
2.11 Tax
Matters. Except as set forth in Part 2.11 of
the Disclosure Schedule:
(a) The
Seller has timely, completely and accurately prepared and filed all federal,
state, local and foreign Tax Returns required to be filed (taking into account
extensions) by or on behalf of the Seller that relate to the Business or the
Assets, and all such Tax Returns are true, complete and correct.
(b) No
deficiency for any Taxes relating to the Business or the Assets has been
proposed, asserted or assessed either orally or in writing against the Seller
that is not adequately reserved for in accordance with U.S. GAAP on the Seller
Financial Statements (as defined below), nor has the Seller received any written
notice of any outstanding Tax audits or inquiries relating to the Business or
the Assets.
(c) No
unsatisfied deficiency, delinquency or default for any Tax has been claimed,
proposed or assessed in writing against or with respect to Seller, nor has
Seller received notice of any such deficiency, delinquency or default, and there
is no administrative or court proceeding or, to Seller’s Knowledge, any audit or
investigation pending with respect to any liability of Seller for
Taxes.
(d) Seller
has complied with all applicable Laws relating to the payment and withholding of
Taxes (including, but not limited to, withholding of Taxes pursuant to Sections
1441, 1442 and 3406 of the Code or similar provisions under any foreign Laws)
and have, within the time and in the manner required by Law, withheld from
employee wages and paid over to the proper Governmental Body all amounts
required to be so withheld and paid over under all applicable Laws.
(e) There
are no Liens with respect to Taxes upon any of the Assets, other than with
respect to Taxes arising in the Ordinary Course of Business and not yet due and
payable.
2.12 Performance of
Services. All services that have been performed on behalf of
the Seller in connection with the Business were performed properly and in full
conformity with the terms and requirements of all applicable warranties and
other Contracts and with all applicable Legal Requirements. There is
no claim pending or being threatened against the Seller relating to any services
performed by the Seller, and, to the Knowledge of the Seller, there is no basis
for the assertion of any such claim.
2.13
Related Party
Transactions. Except as set forth in Part 2.13 of the
Disclosure Schedule, no Related Party has entered into, or has had any direct or
indirect financial interest in, any Asset or Contract.
2.14
Proceedings;
Orders. Except as set forth in Part 2.14 of the Disclosure
Schedule, there is no pending Proceeding, and no Person has threatened to
commence any Proceeding that relates to or might affect the Business or any of
the Assets. Except as set forth in Part 2.14 of the Disclosure
Schedule, to the Seller’s Knowledge, no event has occurred, and no claim,
dispute or other condition or circumstance exists, that might directly or
indirectly give rise to or serve as a basis for the commencement of any such
Proceeding. Except as set forth in Part 2.14 of the Disclosure
Schedule, no Proceeding has ever been commenced by or against the Seller. The
Seller has delivered to the Purchaser accurate and complete copies of all
pleadings, correspondence and other written materials (to which the Seller has
access) that relate to the Proceedings identified in Part 2.14 of the
Disclosure Schedule. There is no Order to which any of the Assets is
subject. To the Knowledge of the Seller, no employee of the Seller is
subject to any Order that may prohibit such employee from engaging in or
continuing any conduct, activity or practice relating to the
Business.
2.15
Authority; Binding Nature of
Agreements. Each of the Seller and the Stockholder has the absolute and
unrestricted right, power and authority to enter into and to perform its
obligations under each of the Transactional Agreements to which it is or may
become a party; and the execution, delivery and performance by each of the
Seller and the Stockholder of the Transactional Agreements to which it is or may
become a party have been duly authorized by all necessary action on the part of
the Seller and the Stockholder. Upon the execution of each of the
Transactional Agreements at the Closing, each of such Transactional Agreements
to which each of the Seller or the Stockholder is a party will constitute the
legal, valid and binding obligation of the Seller or the Stockholder, as the
case may be, and will be enforceable against the Seller or the Stockholder, as
the case may be, in accordance with its terms.
2.16
Non-Contravention;
Consents. Except as set forth in Part 2.16 of the Disclosure
Schedule, the Seller was not, is not and will not be required to make any filing
with or give any notice to, or to obtain any Consent from, any Person in
connection with the execution and delivery of any of the Transactional
Agreements or the consummation or performance of any of the
Transactions. The consummation or performance of any of the
Transactions will not contravene, conflict or result in a violation or default
of, any Contract.
2.17
Brokers. Except as
set forth in Part 2.17 of the Disclosure Schedule, the Seller has not agreed or
become obligated to pay, or has taken any action that might result in any Person
claiming to be entitled to receive, any brokerage commission, finder’s fee or
similar commission or fee in connection with any of the
Transactions.
2.18 Full
Disclosure. The Seller has provided the Purchaser with all
information reasonably requested by the Purchaser in connection with its
decision to purchase the Assets. None of the Transactional Agreements
contains any untrue statement of fact; and none of the Transactional Agreements
omits to state any fact necessary to make any of the representations, warranties
or other statements or information contained therein not
misleading.
2.19 Real Property.
(a) Seller does not own
any real property.
(b) No real property
leases of the Seller are being conveyed.
2.20 Purchased
Assets. Except as set forth in Part 2.20 of the Disclosure
Schedule, the Seller has the complete and unrestricted power and unqualified
right to sell, assign, transfer, convey and deliver the Assets to the Purchaser
without penalty or other adverse consequences.
2.21 Purchase For
Investment. The Seller is acquiring the Consideration Shares
and Royalty Shares for investment for its own account and not with a view to the
distribution or public offering thereof within the meaning of the Securities Act
of 1933, as amended (the “Securities
Act”). The Seller understands that the Consideration Shares
and Royalty Shares have not been registered under the Securities Act and may not
be sold or transferred without such registration or an exemption
therefrom. The Seller is sufficiently experienced in financial and
business matters to be capable of evaluating the risk of investment in the
Consideration Shares and Royalty Shares and to make an informed decision
relating thereto. The Seller has the financial capability for making
the investment in the Consideration Shares and Royalty Shares, can afford a
complete loss of such investment, and such investment is a suitable one for the
Seller. The Seller is an “Accredited Investor” as defined in
Regulation D under the Securities Act. Prior to the execution and
delivery of this Agreement, the Seller has had the opportunity to ask questions
of and receive answers from representatives of VUANCE.
2.22 Financial
Statements.
(a) The
Seller has delivered to the Purchaser (i) the unaudited Balance Sheets of Seller
as of June 30, 2008 and 2007, Income Statements of the Seller for the years
ended June 30, 2008 and 2007, and the Statements of Cash Flows of the Seller for
the years ending June 30, 2008 and 2007, and (ii) the unaudited Balance Sheet of
the Seller as of December 31, 2008, Income Statement of the Seller for the 6
months ended December 31, 2008, and the Statement of Cash Flows of the Seller
for the 6 months ended December 31, 2008 (together, the “Seller Financial
Statements”), all of which statements (including the notes thereto, if
any) are complete and correct in all material respects and present fairly the
assets, liabilities and financial position of the Seller on the date of such
statements, and the results of operations and changes in the financial condition
of the Seller for the periods covered thereby, subject, to normal recurring
year-end adjustments (the effect of which shall not, individually or in the
aggregate, have a Material Adverse Effect on the Seller) and the absence of
notes. Each of the Seller Financial Statements was prepared in
accordance with U.S. GAAP applied on a consistent basis throughout the periods
involved.
(b) Part
2.22(b) of the Disclosure Schedule contains an aged list of the Receivables as
of February 28, 2009.
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3.
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Representations
and Warranties of the
Purchaser.
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The
Purchaser hereby represents and warrants, to and for the benefit of the Seller
and the Stockholder, as follows:
3.1 Authority; Binding Nature of
Agreements. The Purchaser has the absolute and unrestricted
right, power and authority to enter into and perform its obligations under this
Agreement, and the execution and delivery of this Agreement by the Purchaser
have been duly authorized by all necessary action on the part of the Purchaser
and its board of directors. This Agreement constitutes the legal,
valid and binding obligation of the Purchaser, enforceable against it in
accordance with its terms.
3.2 Issuance of VUANCE Shares. The
Consideration Shares and the Royalty Shares, when issued and paid for in
accordance with this Agreement, will be duly authorized and validly issued,
fully paid and nonassessable, free and clear of all Encumbrances other than
restrictions on transfer provided for in this Agreement.
3.3 Private Placement. No
registration under the Securities Act is required for the offer and sale of the
Consideration Shares or the Royalty Shares by VUANCE to the Seller as
contemplated hereby. The issuance and sale of the Consideration
Shares and the Royalty Shares hereunder do not contravene the rules and
regulations of the Trading Market. The issuance of the Consideration
Shares and the Royalty Shares pursuant to this Agreement will not require any
registration or qualification under any non-U.S. jurisdiction.
3.4 Investment Company.
VUANCE is not, and is not an Affiliate of, an “investment company” within the
meaning of the Investment Company Act of 1940, as amended. VUANCE
shall conduct its business in a manner so that it will not become subject to the
Investment Company Act of 1940, as amended.
3.5 Listing and Maintenance
Requirements.
VUANCE ordinary shares are registered pursuant to 12(g) of the Securities
Exchange Act of 1934 (the “Exchange
Act”), and VUANCE has taken no action designed to, or which to its
Knowledge is likely to have the effect of, terminating the registration of
VUANCE’s ordinary shares under the Exchange Act nor has VUANCE received any
notification that the Securities and Exchange Commission is contemplating
terminating such registration. VUANCE has received a letter from the
Trading Market notifying VUANCE that it was not in compliance with the Trading
Market’s continued listing requirements under Marketplace Rule
4310(c)(3). VUANCE has responded to the Trading Market letter
accordingly, and is waiting for a response from the Trading Market
thereto.
3.6 Brokers. Other than
to Oberon Securities, LLC, the Purchaser has not become obligated to pay, and
has not taken any action that might result in any Person claiming to be entitled
to receive, any brokerage commission, finder’s fee or similar commission or fee
in connection with any of the Transactions.
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4.
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Conditions
Precedent to the Purchaser’s Obligation to
Close.
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The
Purchaser’s obligation to purchase the Assets and to take the other actions
required to be taken by the Purchaser at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions by
the Seller (any of which may be waived by the Purchaser in its sole discretion,
in whole or in part, in writing):
4.1 Accuracy of
Representations. All of the representations and warranties
made by the Seller and the Stockholder in this Agreement (considered
collectively), and each of said representations and warranties (considered
individually), shall have been accurate in all material respects as of the date
of this Agreement.
4.2 Performance of
Obligations.
(a) Each
of the documents referred to in Section 1.6(b) shall
have been executed by each of the parties thereto and delivered to the
Purchaser.
(b) All
of the covenants and obligations that the Seller is required to comply with or
to perform at or prior to the Closing (considered collectively), and each of
said covenants and obligations (considered individually), shall have been duly
complied with and performed in all material respects.
4.3 Consents. Each of
the Consents identified in Part 2.16 of the Disclosure Schedule shall have
been obtained and shall be in full force and effect.
4.4 No Material Adverse
Effect. There shall have been no Material Adverse Effect in
the Business or the Assets since the date of this Agreement, and no event shall
have occurred and no condition or circumstance shall exist that could be
expected to give rise to any such Material Adverse Effect.
4.5 Additional
Documents. The Purchaser shall have received the following
documents:
(a) each
of the Ancillary Agreements to which it is a party;
(b) a
copy of the resolutions duly and validly adopted by the Seller’s board of
directors and the Stockholder certified by Seller’s Secretary and
Stockholder’s Secretary, respectively, authorizing and approving the execution
and delivery and performance of this Agreement, the Ancillary Agreements and the
other Transactional Agreements and the transactions contemplated hereby and
thereby and the acts of the officers and employees of the Seller in carrying out
the terms and provisions hereof;
(c) all
of the books, data, documents, instruments and other records relating to the
Business referred to in Section 1.1(a)(iii)
that have not been provided prior to the Closing Date;
(d) certificates
issued by the Secretary of State or other similar appropriate governmental
department, as of a reasonable date prior to the Closing, as to the good
standing of the Seller in its jurisdiction of incorporation and in each other
jurisdiction in which it is qualified to do business, and, as to its
jurisdiction of incorporation, certifying its Articles of
Incorporation;
(e) a
certificate of the Secretary or an Assistant Secretary of the Seller certifying
the names and signatures of the officers of the Seller authorized to sign the
Transactional Agreements;
(f)
executed Noncompetition Agreements which agreements shall not have
been anticipatorily breached or repudiated by such parties;
(g)
executed Confidentiality and Assignment of Inventions Agreements as set
forth in Section
4.8; and
(h)
such other documents and instruments as the Purchaser or its counsel may
reasonably request.
4.6 No
Proceedings. Since the date of this Agreement, there shall not
have been commenced or threatened against the Purchaser, or against any Person
affiliated with the Purchaser, any Proceeding (a) involving any material
challenge to, or seeking material damages or other material relief in connection
with, any of the Transactions, or (b) that may have the effect of
preventing, delaying, making illegal or otherwise interfering with any of the
Transactions.
4.7 No
Prohibition. Neither the consummation nor the performance of
any the Transactions will, directly or indirectly (with or without notice or
lapse of time), contravene or conflict with or result in a violation of, or
cause the Purchaser or any Person affiliated with the Purchaser to suffer any
adverse consequence under, any applicable Legal Requirement or
Order.
4.8 Confidentiality and Assignment of
Inventions Agreements. The former key employees of the Seller
identified by the Purchaser and set forth on Schedule 4.8 hereto shall have
executed and delivered to the Purchaser the Confidentiality and Assignment of
Inventions Agreement in the form as set forth on Exhibit F attached
hereto.
4.9 Completion of Purchaser Due Diligence
Review. The Purchaser shall have completed its due diligence
investigation of the Seller and the Business with results satisfactory to the
Purchaser, in its sole discretion.
4.10 Noncompete
Agreements. The Seller shall have provided the Purchaser with
evidence reasonably satisfactory to the Purchaser that is has terminated its
noncompete agreements with each of the Seller’s former employees listed on Schedule 1.2(a).
4.11
Governmental
Approvals. All approvals from Governmental Bodies
required for lawful consummation of the Transactions shall have been
obtained.
4.12 Joint
Venture. The Seller shall have delivered possession of
all of the assets related to the Joint Venture to the Purchaser, and the Seller
shall have received a waiver from ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ with
regard to the right of first refusal in Section 8.1 of the operating agreement
of the Joint Venture, as well as any applicable consents required to assign the
Joint Venture to the Purchaser.
4.13 Schedule 1.7. The
Seller shall agree with the Purchaser on the Purchase Price allocation in
Section 1.7 of this Agreement.
4.14 Delivery of
Assets. The Seller shall have delivered possession
of the tangible Assets to the Purchaser, and shall have made all intangible
Assets available to Purchaser.
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5.
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Conditions
Precedent to the Obligations of Seller and
Stockholder.
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The
Seller’s and Stockholder’s obligation to sell the Assets and to take the other
actions required to be taken by the Seller at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions by
the Purchaser (any of which may be waived by the Seller and Stockholder, in
whole or in part, in writing):
5.1 Accuracy of
Representations. All of the representations and warranties
made by the Purchaser in this Agreement (considered collectively), and each of
said representations and warranties (considered individually), shall have been
accurate in all material respects as of the date of this Agreement and shall be
accurate in all material respects as of the Closing as if made at the
Closing.
5.2 Purchaser’s Performance. All
of the other covenants and obligations that the Purchaser is required to comply
with or to perform pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of said covenants and obligations
(considered individually), shall have been complied with and performed in all
material respects.
5.3 Consideration
Shares. The Purchaser shall have delivered or caused to be
delivered, the Consideration Shares as provided in Section
1.2(b).
5.4 Cash
Consideration. The Purchaser shall have delivered the Cash
Consideration as provided in Section
1.2(a).
5.5 Completion of Seller Due Diligence
Review. The Seller shall have completed its due diligence
investigation of the Purchaser with results satisfactory to the Seller, in its
sole discretion.
5.6 No
Proceedings. Since the date of this Agreement, there shall not
have been commenced or threatened against the Seller, or against any Person
affiliated with the Seller, any Proceeding (a) involving any material
challenge to, or seeking material damages or other material relief in connection
with, any of the Transactions, or (b) that may have the effect of
preventing, delaying, making illegal or otherwise interfering with any of the
Transactions.
5.7 Schedule 1.7. The
Purchaser shall agree with the Seller on the Purchase Price allocation in
Section 1.7 of this Agreement.
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6.
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Indemnification,
Etc.
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6.1 Survival of Representations and
Covenants.
(a) The
representations, warranties, covenants and obligations of each party to this
Agreement shall survive (without limitation): (i) the Closing and the
sale of the Assets to the Purchaser; (ii) any sale or other disposition of any
or all of the Assets by the Purchaser; and (iii) the dissolution of either party
to this Agreement. Except as set forth in Section 6.1(b), all
of said representations, warranties, covenants and obligations shall remain in
full force and effect and shall survive for a period of twenty four (24) months
following the Closing. Notwithstanding anything contained herein to
the contrary, if any claims for indemnification have been asserted in good faith
and in accordance with this Agreement with respect to an inaccuracy or breach of
such representations, warranties, covenants and obligations prior to the end of
the applicable survival period, such claims shall survive and continue in effect
until final resolution of such claims.
(b) The
representations and warranties set forth in Sections 2.3, 2.11, 2.15, 3.2 and 3.3 shall survive
for an unlimited period of time.
(c) For
purposes of this Agreement, each statement or other item of information set
forth in the Disclosure Schedule or in any update to the Disclosure Schedule
shall be deemed to be a representation and warranty made by the Seller in this
Agreement.
6.2 Indemnification by the
Seller.
(a) The
Seller and the Stockholder, jointly and severally, shall hold harmless and
indemnify the Purchaser and its shareholders, officers, directors, Affiliates,
employees, agents, successors and assigns (collectively, “Purchaser
Indemnitees”) from and against, and shall compensate and reimburse each
of the Purchaser Indemnitees for any Damages that are directly or indirectly
suffered or incurred by any of the Indemnitees or to which any of the
Indemnitees may otherwise become subject at any time (regardless of whether or
not such Damages relate to any third-party claim) and that arise directly or
indirectly from or as a direct or indirect result of, or are directly or
indirectly connected with:
(i) any
Breach of any representation or warranty made by the Seller or the Stockholder
in this Agreement;
(ii) except
as set forth in Section 7.7, any
Breach of any representation, warranty, statement, information or provision
contained in the Disclosure Schedule delivered to the Purchaser by or on behalf
of the Seller or any Representative of the Seller;
(iii) any
Breach of any covenant or obligation of the Seller or the Stockholder contained
in any of the Transactional Agreements;
(iv) any
Liability of the Seller or of any Related Party of the Seller, other than the
Assumed Liabilities; or
(v) any
claim made against the Purchaser or other Liability arising out of conduct of
the Business or the ownership or operation of the Assets prior to the Closing,
that results in the imposition on the Purchaser of any Liability of the Seller
other than the Assumed Liabilities; provided, however, that this
Section
6.2(a)(iv) shall not apply to the extent that the Purchaser seeks
indemnification for its own conduct of the Business or its ownership or
operation of the Assets after the Closing.
(b) Except
in the case of the Seller’s Breach of the representations and warranties in
Sections 2.3, 2.11 and
2.15, the Seller’s indemnification obligation for Damages shall be
limited, in the aggregate, to an amount equal to the aggregate Purchase Price
actually paid by the Purchaser. Any amounts payable by the Seller
pursuant to this Section 6.2 shall be
paid by the pro-rata return of the Cash Consideration, the Consideration Shares
and the Royalty Shares to the Purchaser. The portion of the amounts
payable in the Consideration Shares and the Royalty Shares shall be paid at a
per share price equal to the weighted average closing price of VUANCE’s ordinary
shares for the fifteen (15) trading days preceding such payment, subject to a
minimum of $1.25
6.3 Indemnification by the
Purchaser.
(a) The
Purchaser shall hold harmless and indemnify the Seller and its shareholders,
officers, directors, Affiliates, employees, agents, successors and assigns
(collectively, “Seller
Indemnitees”) from and against, and shall compensate and reimburse each
of the Seller Indemnitees for any Damages arising from or in connection with
(regardless of whether or not such Damages relate to any third-party
claim):
(i) any
Breach of any representation or warranty made by the Purchaser in this
Agreement;
(ii)
any Breach of any covenant or
obligation of the Purchaser contained in any of the Transactional
Agreements;
(iii) any
Liability of the Purchaser or of any Related Party of the Purchaser, other than
the Retained Liabilities; or
(iv) any
claim made against the Seller or other Liability arising out of conduct of the
Business or the ownership or operation of the Assets following the Closing, that
results in the imposition on the Seller of any Liability of the Purchaser other
than the Excluded Liabilities; provided, however, that this
Section
6.3(a)(iv) shall not apply to the extent that the Seller seeks
indemnification for its own conduct of the Business or its ownership or
operation of the Assets prior to the Closing.
(b) Except
in the case of willful or intentional misrepresentation or fraud by the
Purchaser, and except as set forth in Section 6.3(a)(ii) and 6.3(a)(iii) above
(to the extent such Proceeding relates to a Breach referred to in Section
6.3(a)( ii) above), the total amount of the indemnity payments that the
Purchaser may be required to make under or in connection with this Agreement
will be limited in the aggregate to $250,000.
(c) VUANCE
hereby guarantees the payment and performance of all of the obligations of the
Purchaser set forth in Section
6.
6.4 Setoff.
(a) In
addition to any rights of setoff or other rights that the Purchaser or any of
the other Purchaser Indemnitees may have at common law or otherwise, the
Purchaser shall have the right to withhold and deduct any sum that may be owed
to any Purchaser Indemnitee under this Section 6 from
any amount otherwise payable by any Purchaser Indemnitee to the Seller or the
Stockholder. The withholding and deduction of any such sum shall
operate for all purposes as a complete discharge (to the extent of such sum) of
the obligation to pay the amount from which such sum was withheld and
deducted.
(b) In
addition to any rights of setoff or other rights that the Seller or any of the
other Seller Indemnitees may have at common law or otherwise, the Seller shall
have the right to withhold and deduct any sum that may be owed to any Seller
Indemnitee under this Section 6 from
any amount otherwise payable by any Seller Indemnitee to the
Purchaer. The withholding and deduction of any such sum shall operate
for all purposes as a complete discharge (to the extent of such sum) of the
obligation to pay the amount from which such sum was withheld and
deducted.
6.5 Exclusivity of Remedies; Limitation
of Damages. Except as specifically set forth in this Section 6 or
elsewhere in this Agreement, from and after the Closing, the sole and exclusive
remedy of any Purchaser Indemnitee or Seller Indemnitee for any Damages with
respect to any and all claims arising out of or in connection with the
Transactions shall be pursuant and subject to the provisions set forth in this
Section
6. No indemnified party shall be entitled to recover from the
indemnifying party any incidental, consequential, special or punitive damages;
provided that any
incidental, consequential, special or punitive damages actually recovered by a
third party from an indemnified party entitled to indemnification under this
Section 6 shall
be included in the losses recoverable by such indemnified party.
6.6 Notice of
Claim. Upon obtaining Knowledge of facts giving rise to a
claim for indemnity, the indemnified party shall promptly notify the
indemnifying party in writing of the facts giving rise to such
claim. Such notice shall contain a brief description of the nature
and estimated amount of any claim for indemnification.
6.7 Defense of Third Party
Claims. With respect to any claim or demand set forth in a
notice of claim relating to a third party claim, the indemnifying party may
defend (in good faith and at its expense) any such claim or demand, and the
indemnified party (at its expense) shall have the right to participate in the
defense of any such claim. So long as the indemnifying party is
defending such claim in good faith, the indemnified party shall not settle or
compromise such third party claim. If the indemnifying party does not
elect to defend any such claim, the indemnified party shall have no obligation
to do so.
6.8 Exercise of Remedies by Purchaser
Indemnitees other than the Purchaser. No Purchaser Indemnitee
(other than the Purchaser or any of its successors or assigns) shall be
permitted to assert any indemnification claim or exercise any other remedy under
this Agreement unless the Purchaser (or any of its successors or assigns) shall
have consented to the assertion of such indemnification claim or the exercise of
such other remedy.
7.
Certain
Covenants.
7.1 Further
Actions. From and after the Closing Date, each party shall
execute and deliver such documents and take such other actions which may be
reasonably necessary or advisable to carry out any of the provisions hereof,
including without limitation, putting the Purchaser in possession and control of
all of the Assets, except for Sellers Receivables existing as of the Closing
Date that are at least 90 days in arrears and listed on Schedule
1.1(b)(iii). Without limiting the generality of the foregoing,
from and after the Closing Date, the Seller shall promptly remit to the
Purchaser any funds that are received by the Seller and that are included in, or
that represent payment of receivables included in, the Assets. Except
with regard to Seller’s Receivables set forth on Schedule 1.1(b)(iii), the
Seller: (a) hereby irrevocably authorizes the Purchaser, at all times on and
after the Closing Date, to endorse in the name of the Seller any check or other
instrument that is made payable to the Seller and that represents funds included
in, or that represents the payment of any receivable included in, the Assets;
and (b) hereby irrevocably nominates, constitutes and appoints the Purchaser as
the true and lawful attorney-in-fact of the Seller (with full power of
substitution) effective as of the Closing Date, and hereby authorizes the
Purchaser, in the name of and on behalf of the Seller, to execute, deliver,
acknowledge, certify, file and record any document, to institute and prosecute
any Proceeding and to take any other action (on or at any time after the Closing
Date) that the Purchaser may deem appropriate for the purpose of
(i) collecting, asserting, enforcing or perfecting any claim, right or
interest of any kind that is included in or relates to any of the Assets,
(ii) defending or compromising any claim or Proceeding relating to any of
the Assets, or (iii) otherwise carrying out or facilitating any of the
Transactions. The power of attorney referred to in the preceding
sentence is and shall be coupled with an interest and shall be irrevocable, and
shall survive the dissolution or insolvency of the Seller. From and
after the Closing Date, the Purchaser shall reasonably cooperate with the Seller
to assist the Seller with the collection of the Seller’s Receivables set forth
on Schedule
1.1(b)(iii).
7.2 Publicity;
Confidentiality. Each party shall ensure that, on and at all
times after the date of this Agreement: (a) no press release or other publicity
concerning any of the Transactions is issued or otherwise disseminated without
the other party’s prior written consent (except as otherwise required by law or
regulation); (b) each party continues to keep the terms of this Agreement and
the other Transactional Agreements strictly confidential; and (c) each party
keeps strictly confidential, and does not disclose to any other Person, any
non-public document or other information that relates directly or indirectly to
the business of the Seller, the Stockholder, the Purchaser or any Affiliate of
the Seller, the Stockholder or the Purchaser.
7.3 Lock-Up.
(a) Other
than as set forth herein, the Stockholder will not offer, sell, contract to
sell, hypothecate, pledge or otherwise dispose of (or enter into any transaction
which is designed to, or might reasonably be expected to, result in the
disposition (whether by actual disposition or effective economic disposition due
to cash settlement or otherwise) by the Seller or any Affiliate of the Seller or
any person in privity with the Seller or any Affiliate of the Seller), directly
or indirectly, or establish or increase a put equivalent position or liquidate
or decrease a call equivalent position within the meaning of Section 16 of the
Securities Exchange Act of 1934 (the “Exchange
Act”) with respect to, any Consideration Shares or Royalty Shares
beneficially owned, held or hereafter acquired by the
Stockholder. Beneficial ownership shall be calculated in accordance
with Section 13(d) of the Exchange Act. The prohibition under this
Section 7.3
shall not apply to a transfer by the Stockholder of the Consideration Shares or
the Royalty Shares to ▇▇▇▇ Capital Group, Renaissance Capital Growth &
Income Fund, III, Renaissance US Growth Investment Trust PLC, Global Special
Opportunities Trust PLC, Premier ▇▇▇▇ U.S. Entrepreneurial Fund Limited, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, or to other entities controlled by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (each, a “Permitted
Transferee”), provided that the such Permitted Transferee(s) agree to be
subject to the terms and conditions as set forth in this Section 7.3, Section 7.4 and
Section 7.5. The Stockholder and, if transferred pursuant to
the terms and conditions set forth herein, each Permitted Transferee, agree to
execute a Share Issuance and Lockup Agreement, in the form attached hereto as
Exhibit G, with (i)
prohibitions identical to those contained in Section 7.3, (ii)
piggyback registration rights identical to those contained in Section 7.4, and
(iii) rights of first refusal identical to those contained in Section 7.5 of this
Agreement, and that such Persons represent that they are “accredited investors”
as such term is defined under Rule 501 under the Securities Act. The
Stockholder acknowledges and agrees that VUANCE will impose irrevocable
stop-transfer instructions preventing its transfer agent from effecting any
actions in violation of this Section
7.3.
(b) The
restrictions on the transfer of the Consideration Shares and the Royalty Shares
set forth in Section
7.3(a) will expire in eight equal installments, commencing with the end
of the first calendar quarter following the Closing Date and each of the seven
following calendar quarters thereafter. If any Consideration Shares
or Royalty Shares are issued after the last day of the eighth calendar quarter
following the Closing Date, such shares shall not be subject to any transfer
restrictions set forth in Section
7.3(a).
(c) Following
expiration of the restrictions under Section 7.3(a)
pursuant to Section
7.3(b), the Consideration Shares and the Royalty Shares may be
transferred in accordance with the limitations under Rule 144 under the
Securities Act, provided that in no event may the Stockholder transfer any of
such Consideration Shares to any of its shareholders or creditors, except as
otherwise provided herein.
7.4 Piggyback Registration
Rights. If at any time or times after the Closing, VUANCE
shall seek to register any of its ordinary shares under the Securities Act for
sale to the public for its own account or on the account of others (except with
respect to registration statements on Form ▇-▇, ▇▇▇▇ ▇-▇ or another form not
available for registering the Consideration Shares or the Royalty Shares for
sale to the public), the Purchaser shall cause VUANCE to promptly give written
notice thereof to the holder(s) of the Consideration Shares and the Royalty
Shares. If within twenty (20) days after their receipt of such notice the
Stockholder requests the inclusion of some or all of the Consideration Shares or
the Royalty Shares owned by it in such registration, the Purchaser shall cause
VUANCE to use its reasonable best efforts to effect the registration under the
Securities Act of such shares. In the case of the registration of
ordinary shares by VUANCE in connection with any underwritten public offering to
which this Section
7.4 applies, if the underwriter(s) determines that reasonable and
customary marketing factors require a limitation on the number of ordinary
shares of VUANCE to be offered, then VUANCE shall not be required to register
the Consideration Shares and the Royalty Shares in excess of the amount, if any,
of ordinary shares which the principal underwriter of such underwritten offering
shall reasonably and in good faith agree to include in such offering in addition
to any amount to be registered for the account of VUANCE.
7.5 Right of First
Refusal. To the extent that and as long as the Consideration
Shares or Royalty Shares remain subject to the restrictions set forth in Section 7.3(a), (i)
in the event the Stockholder wishes to sell, contract to sell, hypothecate,
pledge or otherwise dispose of (or enter into any transaction which is designed
to, or might reasonably be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash settlement or
otherwise) any or all of the Consideration Shares or Royalty Shares in a private
transaction (outside the Trading Market) (a “Voluntary
Sale”) or (ii) upon the occurrence of any sale by the Stockholder of such
shares due to the Stockholder's bankruptcy, insolvency or otherwise by operation
of law (together with a Voluntary Sale, a “Sale”),
the Purchaser or its Affiliates will have the right to purchase all (but not
less than all) the Consideration Shares and the Royalty Shares subject to such
Sale on the following terms and conditions:
(a) The
Stockholder will give the Purchaser prompt written notice (the “Sale
Notice”) of any pending Sale and the Purchaser or its Affiliates will
have ten (10) days to elect to purchase such shares. The purchase of
the Consideration Shares and the Royalty Shares held by the Stockholder must
occur within five (5) Business Days of such election at a purchase price per
share equal to the average closing price of VUANCE's ordinary shares on the
Trading Market for the fifteen (15) trading days prior to the purchase
date. The purchase price for shares acquired pursuant to this Section 7.5(a) must
be paid in immediately available funds.
(b) This
Section 7.5
shall not apply to any transfers by the Stockholder of the Consideration Shares
or the Royalty Shares to a Permitted Transferee. Notwithstanding the
foregoing, and for avoidance of doubt, in the event the Consideration Shares or
the Royalty Shares are transferred by the Stockholder pursuant to this Section 7.5 to a
Permitted Transferee, then such Permitted Transferee shall be subject to the
terms and conditions set forth herein with respect to the Consideration Shares
and the Royalty Shares.
7.6 Access. In order to
facilitate the resolution of any claims made by or against or incurred by the
Purchaser after the Closing or for any other reasonable purpose, for a period of
three (3) years following the Closing, the Seller shall (i) retain all books and
records of the Seller which are not transferred to the Purchaser pursuant to
this Agreement and which relate to the Business for periods prior to the Closing
and which shall not otherwise have been delivered to the Purchaser; and (ii)
upon reasonable notice, afford the Representatives of the Purchaser, reasonable
access (including the right to make photocopies at the expense of the
Purchaser), during normal business hours, to such books and
records.
7.7 Supplements to the Disclosure
Schedule. Between the date hereof and the Closing Date, each
of the Seller and the Buyer shall, promptly upon becoming aware of any breach or
violation of any of its representations, warranties, covenants or agreements
contained in this Agreement, give notice to such other party with respect
thereto and supplement or amend the Disclosure Schedule provided by such party
(including adding new schedules if necessary) to reflect any fact, matter,
circumstance or event occurring after the date of this Agreement, which, if
existing or occurring prior to the date of this Agreement, would have been
required to be set forth or described in the Disclosure Schedule. Any
such notification, supplement or amendment shall be effective to amend any
representation or warranty, covenant or agreement of such party contained in
this Agreement for purposes of the indemnification rights under Section 6, but shall
not be taken into account in determining whether the conditions to the parties’
obligation to consummate the transactions contemplated hereunder contained in
Section 4.1 and
Section 5.1
have been fulfilled.
7.8 Reporting
Status. So long as the Stockholder or any subsequent
transferee beneficially own an aggregate of at least 25% of the Consideration
Shares and Royalty Shares purchased pursuant to this Agreement, VUANCE shall
timely file (or obtain proper and timely extensions in respect thereof and file
within the applicable grace period under the Exchange Act) all reports required
to be filed with the Securities and Exchange Commission pursuant to the Exchange
Act, and VUANCE shall not terminate its status as an issuer required to file
reports under the Exchange Act even if the Exchange Act or the rules and
regulations thereunder would permit such termination; provided, however, that the
provisions of this Section 7.8 shall
terminate and be of no further force and effect in the event of the acquisition
of VUANCE.
7.9 Bulk Transfer
Laws. Prior to Closing, the Seller
shall have complied with the requirements of all applicable bulk sale, bulk
transfer or similar laws in the State of Texas.
8.
Right to
Terminate.
8.1 This
Agreement may be terminated and the transactions contemplated hereby may be
abandoned at any time prior to the Closing as follows:
(a) by
mutual written consent duly authorized by the parties hereto;
(b) by
either the Purchaser or the Seller if the Closing shall not have occurred on or
before April 3, 2009, provided, however, that the
right to terminate this Agreement under this Section 8.1(b)
shall not be available to any party whose failure to fulfill any material
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to have occurred on or before such date;
(c) by
either the Purchaser or the Seller, if a Court or Governmental Body shall have
issued an Order or taken any other action, in each case, which has become final
and non-appealable and which restrains, enjoins or otherwise prohibits the
consummation of the transactions contemplated by this Agreement;
(d) by
the Purchaser, if the Purchaser is not in material breach of its obligations
under this Agreement, if at any time any of the representations and warranties
of the Seller or the Stockholder herein are or become untrue or inaccurate such
that Section 4.1
would not be satisfied (treating such time as if it were the Closing for
purposes of this Section 8.1(d))
and such breach (if curable) has not been cured within 15 days after notice to
the Seller;
(e) by
the Seller, if the Seller is not in material breach of its obligations under
this Agreement, and if at any time the representations and warranties of the
Purchaser herein become untrue or inaccurate such that Section 5.1
would not be satisfied (treating such time as if it were the Closing for
purposes of this Section 8.1(e)),
and such breach (if curable) has not been cured within 15 days after notice to
the Purchaser;
(f) by
the Purchaser if, between the date hereof and the time scheduled for the
Closing: (A) an event or condition occurs that has resulted in or that may be
expected to result in a Material Adverse Effect on the Seller; or (B) the Seller
makes a general assignment of the Assets for the benefit of creditors, or any
proceeding shall be instituted by or against the Seller seeking to adjudicate it
a bankrupt or insolvent, or seeking liquidation, winding up or reorganization,
arrangement, adjustment, protection, relief or composition of its debts under
any Law relating to bankruptcy, insolvency or reorganization.
8.2 Effect of
Termination. Except as provided in this Section 8.2, in
the event of the termination of this Agreement pursuant to Section 8, this
Agreement (other than this Section 8, Section 6 and Section 9, which
shall survive such termination) will forthwith become void, and there will be no
liability on the part of the Purchaser, on the other hand, or the Seller and the
Stockholder, on the other hand, or any of their respective officers or directors
(as the case may be), to the other parties, and all rights and obligations of
any party hereto will cease, provided, that nothing contained in this Section 8.2 shall
relieve any party from liability for any breach of any representation, warranty,
covenant or agreement contained in this Agreement which occurred prior to
termination of this Agreement in accordance with its terms.
9.
Miscellaneous
Provisions.
9.1 Survival. Each party’s
obligations and liability under this Agreement and the other Transactional
Agreements shall not be limited in any way by (i) the dissolution or insolvency
of, or the appointment of any receiver, conservator or liquidator for, or the
commencement of any bankruptcy, reorganization, moratorium, arrangement or other
proceeding by, against or with respect to, such party; (iii) any merger or
consolidation of such party with or into any other Entity; or (iv) any failure
on the part of such party to exercise any right or assert any claim against the
other party.
9.2 Attorneys’ Fees. If
any legal action or other legal proceeding relating to any of the Transactional
Agreements or the enforcement of any provision of any of the Transactional
Agreements is brought against either party to this Agreement, the prevailing
party shall be entitled to recover reasonable attorneys’ fees, costs and
disbursements (in addition to any other relief to which the prevailing party may
be entitled).
9.3 Notices. Any notice
or other communication required or permitted to be delivered to any party under
this Agreement shall be in writing and shall be deemed properly delivered, given
and received when delivered (by hand, by registered mail, by courier or express
delivery service or by facsimile) to the address or facsimile telephone number
set forth beneath the name of such party below (or to such other address or
facsimile telephone number as such party shall have specified in a written
notice given to the other parties hereto):
if to the
Seller:
Intelli-Site
Ltd.
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention:
President
if to the
Purchaser:
VUANCE,
Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
Attention:
President
9.4 Time of the
Essence. Time is of the essence of this
Agreement.
9.5 Headings. The
underlined headings contained in this Agreement are for convenience of reference
only, shall not be deemed to be a part of this Agreement and shall not be
referred to in connection with the construction or interpretation of this
Agreement.
9.6 Counterparts. This
Agreement may be executed in several counterparts, each of which shall
constitute an original and all of which, when taken together, shall constitute
one agreement.
9.7 Governing Law.
This Agreement shall be construed in accordance with, and governed in all
respects by, the internal laws of the State of Texas (without giving effect to
principles of conflicts of laws). Any legal action brought to enforce
or construe this Agreement shall be brought in the courts located in the State
of Texas, and the Purchaser and the Seller hereby agree to the jurisdiction of
such courts and agree that they will not invoke the doctrine of forum non-conveniens or other
similar defenses.
9.8 Successors and Assigns; Parties in
Interest.
(a) This
Agreement shall be binding upon: the Seller and its successors and
assigns (if any) and the Purchaser and its successors and assigns (if
any). This Agreement shall inure to the benefit of the Seller, the
Purchaser, the other Seller Indemnitees and Purchaser Indemnitees and the
respective successors and assigns (if any) of the foregoing.
(b) The
Purchaser may freely assign any or all of its rights under this Agreement
(including its indemnification rights under Section 6) in whole or in part,
to any other Person whose total shareholders’ equity is equal to or greater than
the Purchaser, without obtaining the consent or approval of any other
Person. No such assignment shall relieve the Purchaser or VUANCE of
its obligations hereunder. The Seller shall not be permitted to
assign any of his or its rights or delegate any of his or its obligations under
this Agreement without the Purchaser’s prior written consent.
(c) Except
for the provisions of Section 6
hereof, none of the provisions of this Agreement is intended to provide any
rights or remedies to any Person other than the parties to this Agreement and
their respective successors and assigns (if any).
9.9 Remedies Cumulative; Specific
Performance. The rights and remedies of the parties hereto
shall be cumulative (and not alternative). In the event of any Breach
or threatened Breach by a party of any covenant, obligation or other provision
set forth in this Agreement, the other party shall be entitled (in addition to
any other remedy that may be available to it) to (i) a decree or order of
specific performance or mandamus to enforce the observance and performance of
such covenant, obligation or other provision, and (ii) an injunction
restraining such Breach or threatened Breach. Neither party shall be
required to provide any bond or other security in connection with any such
decree, order or injunction or in connection with any related action or
Proceeding.
9.10 Waiver.
(a) No
failure on the part of any Person to exercise any power, right, privilege or
remedy under this Agreement, and no delay on the part of any Person in
exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy.
(b) No
Person shall be deemed to have waived any claim arising out of this Agreement,
or any power, right, privilege or remedy under this Agreement, unless the waiver
of such claim, power, right, privilege or remedy is expressly set forth in a
written instrument duly executed and delivered on behalf of such Person; and any
such waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
9.11 Amendments. This
Agreement may not be amended, modified, altered or supplemented other than by
means of a written instrument duly executed and delivered on behalf of the
Purchaser and the Seller.
9.12 Severability. Any
term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability of
the remaining terms and provisions hereof.
9.13 Entire
Agreement. The Transactional Agreements set forth the entire
understanding of the parties relating to the subject matter thereof and
supersede all prior agreements and understandings among or between any of the
parties relating to the subject matter thereof.
9.14 Knowledge. For
purposes of this Agreement, the term “Knowledge” means (a) in the case of an
individual, knowledge of a particular fact or other matter if (i) such
individual is actually aware of such fact or other matter, or (ii) a prudent
individual could be expected to discover or otherwise become aware of such fact
or other matter in the course of conducting a reasonable investigation
concerning the existence of such fact or other matter, and (b) in the case of a
Person (other than an individual), such Person will be deemed to have Knowledge
of a particular fact or other matter if any individual who is serving, or has at
any time served, as a director, officer, partner, executor, or trustee of such
Person (or in any similar capacity) has, or at any time had, Knowledge of such
fact or other matter.
9.15 Expenses. Except as
otherwise specified in this Agreement, all costs and expenses, including,
without limitation, fees and disbursements of counsel, brokers, financial
advisors and accountants, incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such costs
and expenses, whether or not the Closing shall have occurred.
9.16 Construction.
(a) For
purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the masculine gender
shall include the feminine and neuter genders; the feminine gender shall include
the masculine and neuter genders; and the neuter gender shall include the
masculine and feminine genders.
(b) The
parties hereto agree that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be applied
in the construction or interpretation of this Agreement.
(c) As
used in this Agreement, the words “include” and “including,” and variations
thereof, shall not be deemed to be terms of limitation, but rather shall be
deemed to be followed by the words “without limitation.”
(d) Except
as otherwise indicated, all references in this Agreement to “Sections” and
“Exhibits” are intended to refer to Sections of this Agreement and Exhibits to
this Agreement.
IN
WITNESS WHEREOF, the parties to this Agreement have caused this Agreement to be
executed and delivered as of March 6th, 2009.
|
SELLER:
|
Intelli-Site
Ltd.
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By:
|
/s/
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
|
|
|
Name:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
|
||
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Title:
President and
CEO, Secretary
|
||
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PURCHASER:
|
VUANCE,
Inc.
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|
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By:
|
/s/
▇▇▇▇ ▇▇▇▇▇▇▇
|
|
|
Name:
▇▇▇▇ ▇▇▇▇▇▇▇
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||
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Title:
Chief Executive
Officer
|
||
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STOCKHOLDER:
|
Integrated
Security Systems, Inc.
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By:
|
/s/
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
|
|
|
Name:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
|
||
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Title:
Chief Executive
Officer
|
||
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VUANCE
LTD.
|
VUANCE
Ltd.
|
|
|
By:
|
/s/
▇▇▇▇ ▇▇▇▇▇▇▇
|
|
|
Name:
▇▇▇▇ ▇▇▇▇▇▇▇
|
||
|
Title:
Chief
Executive
Officer
|
||
Exhibit
A
CERTAIN
DEFINITIONS
In
addition to terms defined elsewhere in the Agreement, the following terms when
used in the Agreement shall have the respective meanings set forth
below:
Affiliate. "Affiliate"
shall mean, with respect to a Person other than a natural Person, any Person
that directly or indirectly Controls, is directly or indirectly Controlled by or
is directly or indirectly under common Control with such specified
Person.
Agreement. “Agreement”
shall mean the Asset Purchase Agreement to which this Exhibit A is attached
(including the Disclosure Schedule), as it may be amended from time to
time.
Ancillary
Agreements. “Ancillary Agreements” shall mean the ▇▇▇▇ of
Sale, the Non-Competition Agreement, the Assumption Agreement, the Offer
Letters, the Confidentiality and Assignment of Inventions Agreement and such
additional documents as set forth in Section 4.5 of the
Agreement.
Approvals. “Approvals”
shall mean all franchises, grants, authorizations, licenses, permits, easements,
consents, waivers, qualifications, certificates, and approvals necessary to own,
lease and operate the Seller’s properties and to carry on the
Business.
Breach. There shall
be deemed to be a “Breach” of a representation, warranty, covenant, obligation
or other provision if there is or has been (a) any inaccuracy in or breach
(including any inadvertent or innocent breach) of, or any failure (including any
inadvertent failure) to comply with or perform, such representation, warranty,
covenant, obligation or other provision, or (b) any claim (by any Person)
or other circumstance that is inconsistent with such representation, warranty,
covenant, obligation or other provision; and the term “Breach” shall be deemed
to refer to any such inaccuracy, breach, failure, claim or
circumstance.
Business
Day. “Business Day” means any day other than a Saturday,
Sunday or other day on which banks are required or authorized to be closed in
the State of Delaware.
Code. “Code” shall
mean the Internal Revenue Code of 1986, as amended.
Consent. “Consent”
shall mean any approval, consent, ratification, permission, waiver or
authorization (including any Governmental Authorization).
Contract. “Contract”
shall mean any written, oral, implied or other agreement, contract,
understanding, arrangement, instrument, note, guaranty, indemnity,
representation, warranty, deed, assignment, power of attorney, certificate,
purchase order, work order, insurance policy, benefit plan, commitment,
covenant, assurance or undertaking of any nature set forth on Schedule
1.1(a)(iv).
Control. "Control"
(including the terms “Controlled by” and “under common Control with”) means
possession, directly or indirectly, of the power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or
otherwise).
Damages. “Damages”
shall include any loss, damage, injury, decline in value, lost opportunity,
Liability, claim, demand, settlement, judgment, award, fine, penalty, Tax, fee
(including any legal fee, expert fee, accounting fee or advisory fee), charge,
cost (including any cost of investigation) or expense of any
nature.
Disclosure
Schedule. “Disclosure Schedule” shall mean the schedule (dated
as of the date of the Agreement and as amended from time to time pursuant to
Section 7.7)
delivered to the Purchaser on behalf of the Seller, a copy of which is attached
to the Agreement and incorporated in the Agreement by reference.
Encumbrance. “Encumbrance”
shall mean any lien, pledge, hypothecation, charge, mortgage, security interest,
encumbrance, equity, trust, equitable interest, claim, preference, right of
possession, lease, tenancy, license, encroachment, covenant, infringement,
interference, Order, proxy, option, right of first refusal, preemptive right,
community property interest, legend, defect, impediment, exception, reservation,
limitation, impairment, imperfection of title, condition or restriction of any
nature (including any restriction on the transfer of any asset, any restriction
on the receipt of any income derived from any asset, any restriction on the use
of any asset and any restriction on the possession, exercise or transfer of any
other attribute of ownership of any asset).
Entity. “Entity”
shall mean any corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, cooperative, foundation, society, political party, union, company
(including any limited liability company or joint stock company), firm or other
enterprise, association, organization or entity.
GAAP. “GAAP” shall
mean generally accepted accounting principles.
Governmental
Authorization. “Governmental Authorization” shall mean any:
(a) permit, license, certificate, franchise, concession, approval, consent,
ratification, permission, clearance, confirmation, endorsement, waiver,
certification, designation, rating, registration, qualification or authorization
issued, granted, given or otherwise made available by or under the authority of
any Governmental Body or pursuant to any Legal Requirement; or (b) right under
any Contract with any Governmental Body.
Governmental
Body. “Governmental Body” shall mean any: (a) nation,
principality, state, commonwealth, province, territory, county, municipality,
district or other jurisdiction of any nature; (b) federal, state, local,
municipal, foreign or other government; (c) governmental or quasi-governmental
authority of any nature (including any governmental division, subdivision,
department, agency, bureau, branch, office, commission, council, board,
instrumentality, officer, official, representative, organization, unit, body or
Entity and any court or other tribunal); (d) multi-national organization or
body; or (e) individual, Entity or body exercising, or entitled to exercise, any
executive, legislative, judicial, administrative, regulatory, police, military
or taxing authority or power of any nature.
Hardware. “Hardware”
means all mainframes, midrange computers, personal computers, notebooks,
servers, switches, printers, modems, drives, peripherals and any component of
any of the foregoing.
Immaterial
Contract. “Immaterial Contract” shall mean any Contract
that: (a) was entered into by the Seller in the Ordinary Course
of Business; (b) has a term of less than ninety (90) days or may be
terminated by the Seller (without penalty) within thirty (30) days after the
delivery of a termination notice by the Seller to the other party thereto; and
(b) does not contemplate or involve the payment of cash or other
consideration in an amount or having a value in excess of $5,000.
Information
Systems. “Information Systems” means any combination of
Hardware, Software and/or Database(s) employed primarily for the creation,
manipulation, storage, retrieval, display and use of information in electronic
form or media.
Intellectual
Property. “Intellectual Property” shall mean and include all
algorithms, application programming interfaces, apparatus, assay components,
biological materials, cell lines, clinical data, chemical compositions or
structures, circuit designs and assemblies, databases and data collections,
diagrams, formulae, gate arrays, IP cores, inventions (whether or not
patentable), know-how, logos, marks (including brand names, product names,
logos, and slogans), methods, network configurations and architectures, net
lists, photomasks, processes, proprietary information, protocols, schematics,
specifications, software, software code (in any form including source code and
executable or object code), subroutines, test results, test vectors, user
interfaces, techniques, URLs, web sites, works of authorship, and other forms of
technology (whether or not embodied in any tangible form and including all
tangible embodiments of the foregoing such as instruction manuals, laboratory
notebooks, prototypes, samples, studies, and summaries).
Intellectual Property
Rights. “Intellectual Property Rights” shall mean and include
all rights of the following types, which may exist or be created under the laws
of any jurisdiction in the world: (a) rights associated with works of
authorship, including exclusive exploitation rights, copyrights, moral rights,
and mask works; (b) trademark and trade name rights and similar rights; (c)
trade secret rights; (d) patents and industrial property rights; (e) other
proprietary rights in Intellectual Property of every kind and nature; and (f)
all registrations, renewals, extensions, continuations, divisions, or reissues
of, and applications for, any of the rights referred to in clauses (a) through
(e) above.
Intelli-Site Software.
"Intelli-Site Software" shall mean any Software that incorporates, uses,
or is derived from the Seller IP.
Legal
Requirement. “Legal Requirement” shall mean any federal,
state, local, municipal, foreign or other law, statute, legislation,
constitution, principle of common law, resolution, ordinance, code, edict,
decree, proclamation, treaty, convention, rule, regulation, ruling, directive,
pronouncement, requirement, specification, determination, decision, opinion or
interpretation issued, enacted, adopted, passed, approved, promulgated, made,
implemented or otherwise put into effect by or under the authority of any
Governmental Body.
Liability. “Liability”
shall mean any debt, obligation, duty or liability of any nature (including any
unknown, undisclosed, unmatured, unaccrued, unasserted, contingent, indirect,
conditional, implied, vicarious, derivative, joint, several or secondary
liability), regardless of whether such debt, obligation, duty or liability would
be required to be disclosed on a balance sheet prepared in accordance with
generally accepted accounting principles and regardless of whether such debt,
obligation, duty or liability is immediately due and payable.
Material Adverse
Effect. “Material Adverse Effect” means, with respect to any
Person, any fact, event, change, circumstance or effect that is materially
adverse to the business, condition (financial or otherwise), operations, results
of operations, assets, liabilities or prospects of such Person.
Net Revenues. “Net Revenues”
shall mean shall mean gross sales revenues and fees received by the Purchaser
from sales of the Royalty Product, determined in accordance with U.S. GAAP, less
(i) customary trade, quantity, or cash discounts to the extent actually allowed
and taken; (ii) amounts repaid or credited by reason of rejection or return; and
(iii) to the extent separately stated on purchase orders, invoices, or other
documents of sale, any taxes or other governmental charges levied on the
production, sale, transportation, delivery, or use of a Royalty
Product. In the event that the Purchaser sells a Royalty Product in
combination with another one of its products (“Other
Items”), the Net Revenues for purposes of royalty payments under Section
1.2(c) shall be calculated as follows:
(a) If
all Royalty Products and Other Items contained in the combination are available
separately, the Net Revenues for purposes of royalty payments will be calculated
by multiplying the Net Revenues of the combination by the fraction A/A+B, where
A is the separately available price of all Royalty Products in the combination,
and B is the separately available price for all Other Items in the
combination.
(b) If
the combination includes Other Items which are not sold separately (but all
Royalty Products contained in the combination are available separately), the Net
Revenues for purposes of royalty payments will be calculated by multiplying the
Net Revenues of the combination by A/C, where A is as defined above and C is the
invoiced price of the combination.
(c) If
the Royalty Products contained in the combination are not sold separately, the
parties agree to negotiate a reduction in the royalty rate to reflect the fair
value that the Royalty Product attributed to the overall product sold, but in no
event shall the royalty rates be reduced by greater than fifty percent
(50%).
Open Source Code. “Open Source
Code” shall mean any software code that is licensed under any terms (including,
without limitation, any “copyleft” terms related to licenses such as the GNU
Public License, Lesser GNU Public License, or Mozilla Public License) that (i)
impose or could impose a requirement or condition that any Seller Product or
part thereof (A) be disclosed or distributed in source code form, (B) be
licensed for the purpose of making modifications or derivative works, or (C) be
redistributable at no charge, or (ii) otherwise impose or could impose any other
material limitation, restriction, or condition on the right or ability of the
Seller to use or distribute any Seller Product.
Order. “Order”
shall mean any: (a) order, judgment, injunction, edict, decree, ruling,
pronouncement, determination, decision, opinion, verdict, sentence, subpoena,
writ or award issued, made, entered, rendered or otherwise put into effect by or
under the authority of any court, administrative agency or other Governmental
Body or any arbitrator or arbitration panel; or (b) Contract with any
Governmental Body entered into in connection with any Proceeding.
Ordinary Course of
Business. An action taken by or on behalf of the Seller shall
not be deemed to have been taken in the “Ordinary Course of Business”
unless:
(a) such
action is recurring in nature, is consistent with the past practices of the
Seller and is taken in the ordinary course of the normal day-to-day operations
of the Seller;
(b) such
action is taken in accordance with sound and prudent business practices;
and
(c) such
action is not required to be authorized by the shareholders of the Seller, the
board of directors of the Seller or any committee of the board of directors of
the Seller and does not require any other separate or special authorization of
any nature.
Person. “Person”
shall mean any individual, Entity or Governmental Body.
Personal
Data. “Personal Data” shall mean a natural person’s name,
street address, telephone number, e-mail address, photograph, social security
number, driver’s license number, passport number, or customer or account number,
or any other piece of information that allows the identification of a natural
person.
Post-Closing Tax
Period. “Post-Closing Tax Period” shall mean the period
beginning at 12:01 am EST on the day immediately following the Closing Date and
continuing thereafter.
Pre-Closing
Period. “Pre-Closing Period” shall mean the period from the
date of the Agreement through the Closing Date.
Pre-Closing Tax
Period. “Pre-Closing Tax Period” shall mean the period
beginning with the date of incorporation of the Seller, and ending at midnight
EST on the Closing Date.
Proceeding. “Proceeding”
shall mean any action, suit, litigation, arbitration, proceeding (including any
civil, criminal, administrative, investigative or appellate proceeding and any
informal proceeding), prosecution, contest, hearing, inquiry, inquest, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any Governmental Body or any arbitrator or
arbitration panel.
Receivables. “Receivables”
means any and all accounts receivable, notes, book debts and other amounts due
or accruing due to the Seller in connection with the Business, whether or not in
the ordinary course, together with any unpaid financing charges accrued thereon
and the benefit of all security for such accounts, notes and debts.
Registered
IP. “Registered IP” shall mean all Intellectual Property
Rights that are registered, filed, or issued under the authority of any
Governmental Body, including all patents, registered copyrights, registered mask
works, and registered trademarks and all applications for any of the
foregoing.
Related Party. Each
of the following shall be deemed to be a “Related Party”: (a) each individual
who is, or who has at any time been, an officer of the Seller; (b) each member
of the family of each of the individuals referred to in clause “(a)” above; and
(c) any Entity (other than the Seller) in which any one of the individuals
referred to in clauses “(a)” and “(b)” above holds or held (or in which more
than one of such individuals collectively hold or held), beneficially or
otherwise, a controlling interest or a material voting, proprietary or equity
interest.
Representatives. “Representatives”
shall mean officers, directors, employees, agents, attorneys, accountants,
advisors and representatives.
Royalty Products. "Royalty
Products" shall mean MASC products and any other products that incorporate,
utilize, or are derived from the Intelli-Site Software, except for products
represented by purchase orders received prior to the Closing Date but not
delivered to the customer until after the Closing Date in which the customer has
already purchased the Intelli-Site Software. Notwithstanding the foregoing,
Royalty Products shall not include revenues received from sales of Hardware or
Software purchased by Purchaser or VUANCE from third parties, which were neither
designed by VUANCE, nor developed or produced solely for Purchaser or VUANCE,
and resold to customers by Purchaser or VUANCE without material
modification.
Seller Employee
Plan. “Seller Employee Plan” shall mean any plan, program,
policy, practice, Contract or other arrangement providing for compensation,
severance, termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written, unwritten or otherwise, funded or unfunded,
including each “employee benefit plan,” within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended (whether or not
such Act is applicable to such plan), that is or has been maintained,
contributed to, or required to be contributed to, by the Seller or any Affiliate
of the Seller for the benefit of any current or former employee, independent
contractor or director of the Seller or any Affiliate of the Seller, or with
respect to which the Seller or any Affiliate of the Seller has or may have any
liability or obligation.
Seller IP. “Seller
IP” shall mean (a) all
Intellectual Property Rights in or pertaining to the Seller Products or methods
or processes used to manufacture the Seller Products, and (b) all other
Intellectual Property Rights owned by or exclusively licensed to the Seller that
relate to the Business.
Seller IP Contract. “Seller IP
Contract” shall mean any Contract to which the Seller is a party or by which the
Seller is bound, that contains any assignment or license of, or covenant not to
assert or enforce, any Intellectual Property Right or that otherwise relates to
any Seller IP or any Intellectual Property developed by, with, or for the
Seller.
Seller Privacy Policy. “Seller
Privacy Policy” shall mean each external or internal, past or present privacy
policy of the Seller, including any policy relating to (i) the privacy of users
of the Seller Products or of any Seller Website, (ii) the collection, storage,
disclosure, and transfer of any User Data or Personal Data, and (iii) any
employee information.
Seller
Product. “Seller Product” shall mean any product or service
designed, developed, manufactured, marketed, distributed, provided, licensed, or
sold at any time by the Seller that relates to the Business.
Seller WebSite. “Seller
WebSite” shall mean any public or private website owned, maintained, or operated
at any time by or on behalf of the Seller.
Software. “Software”
means any and all (a) computer programs, including any and all software
implementations of algorithms, models and methodologies, whether in source code
or object code, (b) databases and compilations, including any and all data and
collections of data, whether machine readable or otherwise, (c) descriptions,
flow-charts and other work product used to design, plan, organize and develop
any of the foregoing, (d) the technology supporting any Internet site(s)
operated by or on behalf of Seller and (e) all documentation, including user
manuals and training materials, relating to any of the foregoing.
Tax. “Tax” shall
mean any tax (including any income tax, franchise tax, capital gains tax,
estimated tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, occupation tax, inventory tax, occupancy tax, withholding tax or payroll
tax), levy, assessment, tariff, impost, imposition, toll, duty (including any
customs duty), deficiency or fee, and any related charge or amount (including
any fine, penalty or interest), that is, has been or may in the future be
(a) imposed, assessed or collected by or under the authority of any
Governmental Body, or (b) payable pursuant to any tax-sharing agreement or
similar contract.
Tax Return. “Tax
Return” shall mean any return (including any information return), report,
statement, declaration, estimate, schedule, notice, notification, form,
election, certificate or other document or information that is, has been or may
in the future be filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Legal
Requirement relating to any Tax.
Trading Market. “Trading
Market” shall mean the NASDAQ Capital Market.
Transactional
Agreements. “Transactional Agreements” shall mean: (a) the
Agreement; (b) the Noncompetition Agreement referred to in Section 1.7(b)(ii);
and (c) any other agreements attached to or referenced as an Exhibit to the
Agreement.
Transactions. “Transactions”
shall mean (a) the execution and delivery of the respective Transactional
Agreements, (b) any of the Ancillary Agreements and the Schedules and
Exhibits hereto and thereto, (c) the Disclosure Schedules, and (d) the other
agreements, documents and instruments executed in connection
herewith.
User Data. “User
Data” shall mean any Personal Data or other data or information collected by or
on behalf of the Seller from users of the Seller Products or of any Seller
Website.
Working
Capital. “Working Capital” shall mean all accounts receivable
relating to the Business (excluding any accounts receivable set forth on Schedule 1.1(b)(iii)) plus
other current assets relating to the Business (excluding assets relating to the
Joint Venture) less all accounts payable relating to the Business (excluding any
accounts payable set forth on Schedule 1.2(b) and any
accounts payable relating to the Joint Venture) less current accrued liabilities
relating to the Business.
EXHIBIT
LIST
EXHIBIT A
– DEFINITIONS
EXHIBIT B
– FORM OF ▇▇▇▇ OF SALE
EXHIBIT C
- FORM OF NONCOMPETITION AGREEMENT
EXHIBIT D
- FORM OF ASSUMPTION AGREEMENT
EXHIBIT E
– FORM OF OFFER LETTER
EXHIBIT F
– FORM OF CONFIDENTIALITY AND ASSIGNMENT OF INVENTIONS AGREEMENT
EXHIBIT G
– FORM OF LOCKUP AGREEMENT
SCHEDULE
LIST
Schedule
1.1(a)(i) – Intellectual Property
Schedule
1.1(a)(iv) - Contracts
Schedule
1.1(a)(v) – Excepted Equipment
Schedule
1.1(a)(vi) – Personal Property Leases
Schedule
1.1(a)(xiv) – Joint Venture
Schedule
1.1(b)(iii) – Seller’s Receivables
Schedule
1.2(a) – Employee Information and liabilities of the Joint Venture
Schedule
1.2(b) – Accounts Payable
Schedule
1.7 – Purchase Price Allocation
Schedule
4.8 – Former Key Employees