EXHIBIT 2.1
ALADDIN SYSTEMS, INC.
STOCK PURCHASE AGREEMENT
BETWEEN
ALADDIN SYSTEMS HOLDINGS, INC.,
AND
INTERNATIONAL MICROCOMPUTER SOFTWARE, INC.
DATED AS OF JANUARY 20, 2004
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS ...........................................................................................1
Section 1.1. Definitions..........................................................................1
Section 1.2. Accounting Terms and Determinations.................................................10
ARTICLE II. SALE AND PURCHASE....................................................................................11
Section 2.1. Agreement to Sell and to Purchase...................................................11
Section 2.2. Purchase Price......................................................................11
Section 2.3. Earn-Out Payments...................................................................11
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SELLER........................................................15
Section 3.1. Authority of the Seller.............................................................15
Section 3.2. Organization of the Company.........................................................16
Section 3.3. Capitalization of the Company.......................................................16
Section 3.4. No Conflict or Violation; Consents..................................................16
Section 3.5. Subsidiaries and Investments........................................................17
Section 3.6. Financial Statements................................................................17
Section 3.7. Undisclosed Liabilities.............................................................17
Section 3.8. Material Adverse Effect.............................................................18
Section 3.9. Accounts Receivable.................................................................18
Section 3.10. Inventory...........................................................................18
Section 3.11. Real Property.......................................................................18
Section 3.12. Condition and Compliance of Property................................................20
Section 3.13. Compliance with Legal Requirements..................................................20
Section 3.14. Affiliate Agreements and Liabilities................................................21
Section 3.15. Contracts...........................................................................22
Section 3.16. Intellectual Property...............................................................23
Section 3.17. Software Products...................................................................25
Section 3.18. Labor Relations.....................................................................26
Section 3.19. Employee Benefits...................................................................26
Section 3.20. Insurance...........................................................................28
Section 3.21. Litigation..........................................................................28
Section 3.22. Environmental Matters...............................................................29
Section 3.23. Tax Matters.........................................................................29
Section 3.24. Interim Operations..................................................................30
Section 3.25. Brokers.............................................................................31
Section 3.26. Product Liability...................................................................32
Section 3.27. Books and Records of the Company....................................................32
Section 3.28. Suppliers...........................................................................32
Section 3.29. Certain Payments....................................................................33
Section 3.30. Accounts............................................................................33
Section 3.31. Disclosure..........................................................................33
Section 3.32. Investment Intent; Status...........................................................33
Section 3.33. No Change to Business...............................................................34
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER..........................................................34
Section 4.1. Authority of Purchaser..............................................................34
Section 4.2. No Conflict or Violation............................................................34
Section 4.3. Litigation..........................................................................35
Section 4.4. Brokers.............................................................................35
Section 4.5. Stock Consideration.................................................................35
Section 4.6. SEC Reports and Financial Statements................................................35
Section 4.7. Investment Intent; Status...........................................................36
ARTICLE V. CERTAIN COVENANTS OF THE SELLER.......................................................................36
Section 5.1. Conduct of Business.................................................................36
Section 5.2. Information and Access..............................................................37
Section 5.3. Confidentiality Agreements..........................................................37
Section 5.4. Best Efforts........................................................................38
Section 5.5. No Shop.............................................................................38
Section 5.6. Notices of Certain Events...........................................................38
Section 5.7. No Duplicates.......................................................................39
ARTICLE VI. CERTAIN COVENANTS AND AGREEMENTS.....................................................................39
Section 6.1. Transfer Taxes......................................................................39
Section 6.2. Obligation to File Tax Returns......................................................39
Section 6.3. Certain Provisions Relating to Consents.............................................39
Section 6.4. Nondisclosure; Noncompetition; Non-solicitation.....................................40
Section 6.5. Section 338(h)(10) Election.........................................................40
Section 6.6. Ongoing Tax/Audit Cooperation.......................................................42
Section 6.7. Tax Related Covenants...............................................................43
Section 6.8. Further Assurances..................................................................43
Section 6.9. Purchaser Conduct of Business.......................................................43
Section 6.10. Management of Seller................................................................44
Section 6.11. Use of Aladdin Name.................................................................44
Section 6.12. Transfer of Purchaser Products......................................................44
ARTICLE VII. CONDITIONS TO SELLER'S OBLIGATIONS..................................................................45
Section 7.1. Representations and Warranties......................................................45
Section 7.2. Compliance with Agreement...........................................................45
Section 7.3. No Violation of Orders..............................................................46
Section 7.4. Corporate Documents.................................................................46
Section 7.5. Transaction Documents...............................................................46
Section 7.6. Employment Agreements...............................................................46
Section 7.7. Opinion of Counsel..................................................................46
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ARTICLE VIII. CONDITIONS TO PURCHASER'S OBLIGATIONS..............................................................46
Section 8.1. Representations and Warranties......................................................47
Section 8.2. Compliance with Agreement...........................................................47
Section 8.3. Consents............................................................................47
Section 8.4. Corporate Documents.................................................................47
Section 8.5. Employees...........................................................................47
Section 8.6. Material Adverse Effect.............................................................48
Section 8.7. No Claim Regarding Stock Ownership or Sale Proceeds.................................48
Section 8.8. Opinion of Counsel..................................................................48
Section 8.9. No Violation of Orders..............................................................48
Section 8.10. Due Diligence.......................................................................48
Section 8.11. Transaction Documents...............................................................48
Section 8.12. Resignations........................................................................49
Section 8.13. Options and Warrants................................................................49
Section 8.14. No Liens............................................................................49
Section 8.15. Tax Sharing Agreements..............................................................49
ARTICLE IX. THE CLOSING .........................................................................................49
Section 9.1. The Closing.........................................................................49
Section 9.2. Deliveries by the Seller at the Closing.............................................49
Section 9.3. Deliveries by the Purchaser at the Closing..........................................50
Section 9.4. Establishment of Escrow.............................................................50
ARTICLE X. INDEMNIFICATION.......................................................................................51
Section 10.1. Survival............................................................................51
Section 10.2. Indemnification Provisions for Benefit of Purchaser.................................51
Section 10.3. Matters Involving Third Parties.....................................................52
Section 10.4. Certain Additional Provisions Relating to Indemnification...........................53
Section 10.5. Procedures Relating to Tax Claims...................................................54
Section 10.6. Purchaser's Indemnification of Seller...............................................54
ARTICLE XI. TERMINATION .........................................................................................55
Section 11.1. Termination.........................................................................55
Section 11.2. Effect of Termination; Termination Fee..............................................55
ARTICLE XII. MISCELLANEOUS PROVISIONS............................................................................56
Section 12.1. Notices.............................................................................56
Section 12.2. Amendments..........................................................................57
Section 12.3. Announcements.......................................................................57
Section 12.4. Expenses............................................................................57
Section 12.5. Entire Agreement....................................................................57
Section 12.6. Descriptive Headings................................................................58
Section 12.7. Counterparts........................................................................58
Section 12.8. Governing Law; Jurisdiction.........................................................58
Section 12.9. Construction........................................................................58
Section 12.10. Severability........................................................................59
Section 12.11. Specific Performance................................................................59
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SCHEDULE
NUMBER SCHEDULE NAME
------ -------------
1.1 Certain Officers
1.2 Permitted Liens
3.2 Certificate and Foreign Qualifications
3.3 Capitalization
3.4 Conflicts or Violations
3.5 Subsidiaries
3.6 Financial Statements of the Company
3.7 Undisclosed Liabilities
3.8 Material Adverse Effect on Balance Sheet
3.9 Accounts Receivable Aging
3.10 Material Adverse Effect
3.11(b) Lease Obligations
3.12(a) Personal Property; Liens
3.12(b) Leased Personal Property
3.13(a) Compliance with Laws
3.13(b) Permits
3.14 Affiliate Agreements
3.15 Contracts
3.16 Intellectual Property
3.17 Software
3.18 Collective Bargaining Agreements
3.19(a) Employee Benefit Plans
3.19(c) Multiemployer Plans
3.19(d) ERISA Liabilities
3.19(j) Post-retirement medical or life insurance benefits or coverage Liabilities
3.19(k) Compensation Increases due to Transaction Documents
3.20(a) Insurance
3.20(b) Insurance Claims Made
3.21 Litigation
3.22 Environmental Matters
3.23(a) Tax Matters
3.24 Interim Operations
3.26 Products Liability
3.28 Major Customers and Major Suppliers
3.30 Accounts
8.3 Required Consents
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EXHIBIT EXHIBIT NAME
------- ------------
K Form of Promissory Note
L Form of Promissory Note
M Form of Pledge Agreement
N Form of Earn-Out Report
O Form of Escrow Agreement
P Form of Registration Rights Agreement
Q Form of Executive Employment Agreement- ▇▇▇▇▇▇▇▇ ▇▇▇▇
R Form of Executive Employment Agreement- ▇▇▇▇▇▇ ▇▇▇▇▇▇
S Form of Purchaser's Counsel Opinion
T Form of Seller's Counsel Opinion
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") is made and entered into
as of January 20, 2004, between Aladdin Systems Holdings, Inc., a Nevada
corporation (the "SELLER") and International Microcomputer Software, Inc., a
California corporation (the "PURCHASER").
RECITALS
WHEREAS, the Seller owns 100% of the outstanding shares of capital stock
(the "STOCK") of Aladdin Systems, Inc., a Delaware corporation (the "COMPANY");
WHEREAS, the Purchaser desires to purchase the Stock from the Seller, and
the Seller desires to sell the Stock to the Purchaser, in each case upon the
terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1. DEFINITIONS.
In addition to the terms defined elsewhere herein, the terms defined in
the introductory paragraph and the Recitals to this Agreement shall have the
respective meanings specified therein, and the following terms shall have the
meanings specified below when used herein with initial capital letters:
"ACCOUNTS RECEIVABLE" has the meaning set forth in Section 3.9.
"AFFILIATE" means "affiliate" as defined in Rule 405 promulgated
under the Securities Act.
"AFFILIATED GROUP" means any affiliated group within the meaning of
Code ss.1504(a) or any similar group defined under a similar provision of
state, local or foreign law.
"AGREEMENT" has the meaning set forth in the preamble, and shall
include all Schedules and Exhibits hereto.
"AKS LITIGATION" shall mean the Trademark Opposition and the Federal
District Court for the Northern District of Illinois, civ. No. 03 C 8330.
"ARBITER" has the meaning set forth in Section 2.3(h)(ii).
"ALADDIN REVENUE" has the meaning set forth in Section 2.3(b).
"ACQUIRED PRODUCTS" has the meaning set forth in Section 2.3(b).
"BALANCE SHEET" has the meaning set forth in Section 3.6.
"BALANCE SHEET DATE" means December 31, 2003.
"BASIS" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that could reasonably be expected
to result in any specified consequence.
"BUSINESS" means the business and operations of the Company and its
Subsidiaries as conducted on the Closing Date, including but not limited
to the development, sale and distribution (electronically or otherwise) of
utility and spam management software for the Windows, Macintosh, Palm
operating environments and other computer systems, including, but not
limited to the StuffIt line of products, Spring Cleaning, Internet
Cleanup, SpamCatcher and other software products.
"BUSINESS COMBINATION" has the meaning set forth in Section 11.2(b).
"BUSINESS DAY" means a day, other than a Saturday or a Sunday, on
which commercial banks are not required or authorized to close.
"CASH CONSIDERATION" has the meaning set forth in Section 2.2(a).
"CASH ESCROW AMOUNT" has the meaning set forth in Section 9.3(a).
"CLOSING" has the meaning set forth in Section 9.1.
"CLOSING DATE" has the meaning set forth in Section 9.1.
"CLOSING DATE CASH PAYMENT" has the meaning set forth in Section
9.3(a).
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the Recitals hereto and,
except where the context otherwise requires includes the Company and the
Company's Subsidiaries.
"COMPETITIVE BUSINESS ACTIVITIES" means developing, selling or
distributing utility software and/or spam management programs for Windows,
MacOS, Palm and other computer environments as well as the resale of
similar products developed by third parties and bundled or sold separately
through a distribution network.
"CONTRACTS" as of any date means, collectively, all contracts,
agreements, commitments, instruments and guaranties to which the Company
is a party as of such date, including those listed or required to be
listed on Schedule 3.15, all unfilled orders outstanding as of such date
for the purchase of raw materials, goods or services by the Company, and
all unfilled orders outstanding as of such date for the sale of goods or
services by the Company.
"COSTS OF REMEDIATION" means all losses, amounts paid in settlement,
investigation, removal, remediation, monitoring and reporting costs and
expenses, Taxes, claims, Damages, Liabilities, obligations, judgments,
settlements and out-of-pocket costs (including, without limitation, costs
of investigation or enforcement), expenses and attorneys' fees including,
without limitation, fees for services of attorneys, consultants,
contractors, experts, engineers and laboratories, and all other
out-of-pocket costs, incurred in connection with investigation,
characterization, remediation, monitoring, reporting or mitigation,
arising out of or related to the presence or Release of any Hazardous
Materials existing as of or prior to the Closing Date at, on, or emanating
from any of the Leased Property or any real property at or to which the
Company, any Subsidiary or predecessor of any of the foregoing disposed,
Released, transported, stored, emitted, treated, or arranged to dispose of
Hazardous Materials prior to the Closing Date including, without
limitation, off-site liability under any Environmental Law arising from or
in connection with transportation, treatment, storage, disposal, Release,
or arranging for disposal of Hazardous Materials.
"DAMAGES" means any losses, amounts paid in settlement, claims,
damages, Liabilities, obligations, judgments, settlements and reasonable
out-of-pocket costs (including, without limitation, costs of investigation
or enforcement), expenses and attorneys' fees, including, without
limitation, (i) any consequential damages or (ii) any special or punitive
damages which are assessed against an Indemnified Party as a result of a
third party action.
"EARN-OUT CALCULATION" has the meaning set forth in Section 2.3(h).
"EARN-OUT OBJECTION NOTICE" has the meaning set forth in Section
2.3(h).
"EARN-OUT PAYMENT" has the meaning set forth in Section 2.3(a).
"EARN-OUT PERIOD" means any one of the First Earn-Out Period, the
Second Earn-Out Period or the Third Earn-Out Period, as defined in Section
2.3(a).
"EMPLOYEE BENEFIT PLAN" means an Employee Pension Benefit Plan or an
Employee Welfare Benefit Plan, where no distinction is required by the
context in which the term is used.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in Section
3(2) of ERISA.
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in Section
3(1) of ERISA.
"EMPLOYEES" means each individual who, on the applicable date,
performs services as an employee primarily for the Company or any of its
Subsidiaries (including such persons who are on an approved leave of
absence, vacation, short-term disability or otherwise treated as an active
employee of the Company or its Subsidiaries).
"ENVIRONMENTAL LAWS" means any Legal Requirement with respect to the
protection of the public health, safety or the environment, including,
without limitation, with respect to any Hazardous Materials, drinking
water, groundwater, wetlands, landfills, open dumps, storage tanks, solid
waste, or waste water, water, soil, air, pollution, the protection,
preservation or restoration of natural resources, plant and animal life or
human health or the environment, or waste management, regulation or
control. Without limiting the generality of the foregoing, the term shall
encompass each of the following statutes, and the regulations promulgated
thereunder, in each case as in effect as of Closing: (a) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (codified
in scattered sections of 26 U.S.C., 33 U.S.C., 42 U.S.C. and 42
U.S.C.ss.9601 et seq.); (b) the Resource Conservation and Recovery Act of
1976 (42 U.S.C.ss.6901 et seq.); (c) the Hazardous Materials
Transportation Act (49 U.S.C.ss.1801 et seq.); (d) the Toxic Substances
Control Act (15 ▇.▇.▇.▇▇. 2061 et seq.); (e) the Federal Water Pollution
Control Act (33 U.S.C.ss.1251 et seq.); (f) the Clean Air Act and
Amendments (42 U.S.C.ss.7401 et seq.); (g) the Safe Drinking Water Act (21
U.S.C.ss.349; 42 U.S.C.ss.201 andss. 300 et seq.); (h) the Superfund
Amendment and Reauthorization Act of 1986 (codified in scattered sections
of 10 U.S.C., 29 U.S.C., 33 U.S.C. and 42 U.S.C.); and (i) the
Occupational, Health and Safety Act (29 ▇.▇.▇.▇▇. 651 et seq.).
"ENVIRONMENTAL REFERENCE DATE" has the meaning set forth in Section
3.22 .
"EQUITY DISTRIBUTIONS" as of any date means the following: (i) all
dividends, distributions, forgiveness of debt, transfer of value or
similar transactions with respect to the Stock, and (ii) with respect to
each transaction between the Company on the one hand and the Seller, its
Affiliates, or advisors on the other hand, the amount (measured on a
transaction by transaction basis, which amount shall never be deemed to be
less than zero) by which the cash value of the goods or services received
by the Company was less than the greater of (x) the amount which the
Company would have had to pay in a comparable transaction with an
unaffiliated third party entered into on an arm's length basis, or (y) the
cash value of the goods and services paid by the Company in the
transactions.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) which has been under common control or treated as a single
employer with the Company under Section 414(b), (c) or (m) of the Code.
"ESCROW AGREEMENT" has the meaning set forth in Section 9.3(a).
"EXCLUDED COSTS" has the meaning set forth in Section 3.6.
"FIRST EARN-OUT PERIOD" has the meaning set forth in Section 2.3(a).
"FIRST EARN-OUT MAXIMUM" means eight million five hundred thousand
dollars ($8,500,000).
"FIRST EARN-OUT THRESHOLD" has the meaning set forth in Section
2.3(a).
"FIRST NOTE" has the meaning set forth in Section 2.2(a)(iii).
"FINANCIAL STATEMENTS" has the meaning set forth in Section 3.6.
"FORMER EMPLOYEE" means each individual other than an Employee on
the Closing Date who at any time prior to the Closing Date performed
services as an employee primarily for the Company or any Subsidiary of the
Company.
"GAAP" has the meaning set forth in Section 1.2.
"GOVERNMENTAL AGENCY" means (a) any international, foreign, federal,
state, county, local or municipal government or administrative agency or
political subdivision thereof, (b) any governmental agency, authority,
board, bureau, commission, department or instrumentality, (c) any court or
administrative tribunal, (d) any non-governmental agency, tribunal or
entity that is vested by a governmental agency with applicable
jurisdiction, or (e) any arbitration tribunal or other non-governmental
authority with applicable jurisdiction.
"HAZARDOUS MATERIALS" means each and every element, compound,
chemical mixture, pollutant, contaminant, material, waste or other
substance which is defined, designated, regulated, determined, classified
or identified as of the Closing Date as hazardous, radioactive, harmful or
toxic under any Environmental Law, or the Release of which is prohibited
or regulated under any Environmental Law, or which to the knowledge of the
Seller could reasonably be expected to cause, whether now or with the
passage of time, damage to Persons, property, flora, fauna or the
environment. Without limiting the generality of the foregoing, the term
shall include any "toxic substance," "hazardous substance," "hazardous
waste," or "hazardous material" as defined in any Environmental Law as
amended to date, and any explosive or radioactive material, asbestos,
asbestos-containing material, waste water, sludge, untreated dye, other
effluent, coal ash, polychlorinated biphenyls, special waste, petroleum or
any derivative or byproduct thereof, and toxic waste.
"INDEBTEDNESS" means (without duplication), with respect to any
Person, whether recourse is to all or a portion of the assets of such
Person, (i) the principal of and premium, if any, in respect of any
indebtedness of such Person for money borrowed, (ii) the principal,
premium, if any, and interest of such Person with respect to obligations
evidenced by bonds, debentures, notes or, except for accrued liabilities
arising in the Ordinary Course of Business, other similar instruments,
including obligations incurred in connection with the acquisition of
property, assets or businesses (other than trade payables which are not
overdue or in default), (iii) all obligations of such Person in respect of
letters of credit or other similar instruments (including reimbursement
obligations with respect thereto) but only to the extent of drawings
thereunder, (iv) every obligation of such Person issued or assumed as the
deferred purchase price of property or services (excluding trade accounts
payable or accrued liabilities arising in the Ordinary Course of Business
which are not overdue or in default), (v) every capital lease obligation
(determined in accordance with GAAP) of such Person, (vi) all Indebtedness
of other Persons secured by a Lien on any asset of such Person, whether or
not such Indebtedness is assumed by such Person; provided, however, that
the amount of such Indebtedness shall be the lesser of (A) the fair market
value of such asset at such date of determination and (B) the amount of
such Indebtedness of such other Persons, (vii) the present value
(discounted using an interest rate of 5% per annum) as of the date of
determination of every obligation to pay rent or other payment amounts of
such Person with respect to any sale-leaseback transaction to which such
Person is a party, payable through the stated maturity of such
sale-leaseback transaction, and (viii) every obligation of the type
referred to in clauses (i) through (vii) of another Person the payment of
which, in any case, such Person has guaranteed or is responsible or
liable, directly or indirectly, as obligor, guarantor or otherwise.
"INDEMNIFIED PARTY" has the meaning set forth in Section 10.3(a) and
in the case of Purchaser shall also include the Company and its
Subsidiaries.
"INDEMNIFYING PARTY" has the meaning set forth in Section 10.3(a).
"INSURANCE POLICIES" has the meaning set forth in Section 3.20.
"INTELLECTUAL PROPERTY" shall mean all of the following, owned, used
or licensed by the Company as licensee or licensor: (i) the names Aladdin,
Aladdin Systems, Installermaker, StuffIt, StuffIt Deluxe, Spring Cleaning,
iClean, Aladdin Tuner, Gobar, SpamCatcher, Aladdin Expander, all fictional
business names, trademarks and service marks (registered or unregistered),
trade dress, trade names and other names and slogans embodying business or
product goodwill or indications of origin, all applications or
registrations in any jurisdiction pertaining to the foregoing and all
goodwill associated therewith (collectively "MARKS"); (ii) patents,
patentable inventions, discoveries, improvements, ideas, know-how, formula
methodology, processes, technology and computer programs, software and
databases (including source code, object code, development documentation,
programming tools, drawings, specifications and data) and all applications
or registrations in any jurisdiction pertaining to the foregoing,
including all reissues, continuations, divisions, continuations-in-part,
renewals or extensions thereof (collectively "PATENTS"); (iii) trade
secrets, know-how, including confidential and other non-public
information, and the right in any jurisdiction to limit the use or
disclosure thereof (collectively, "TRADE SECRETS"), (iv) copyrights in
writings, artwork, clipart, webart, sounds, graphics, photographs,
animations, images, designs, mask works or other works, and registrations
or applications for registration of copyrights in any jurisdiction; (v)
licenses, immunities, covenants not to ▇▇▇ and the like relating to any of
the foregoing; (vi) Internet Web sites, domain names and registrations or
applications for registration thereof; (vii) books and records describing
or used in connection with any of the foregoing; and (viii) claims or
causes of action arising out of or related to infringement or
misappropriation of any of the foregoing.
"INTELLECTUAL PROPERTY LICENSES" has the meaning set forth in
Section 3.16.
"IRS" means the Internal Revenue Service of the U.S. Department of
the Treasury.
"KNOWLEDGE" as applied to the Seller, means the actual knowledge,
after reasonable inquiry, of any person listed on Schedule 1.1 hereto.
"LEASED PROPERTY" has the meaning set forth in Section 3.11(b).
"LEASES" has the meaning set forth in Section 3.11(b).
"LEGAL REQUIREMENT" means any federal, state, local, municipal,
foreign, international, multinational, or other administrative Order,
constitution, law, rule, ordinance, permit, principle of common law,
regulation, statute, or treaty.
"LIABILITY" means any liability or obligation (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated and
whether due or to become due), including, without limitation, any
liability for Taxes.
"LIEN" means any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest,
right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or exercise of
any other attribute of ownership.
"LISTED INTELLECTUAL PROPERTY" has the meaning set forth in Section
3.16.
"MAJOR SUPPLIERS" has the meaning set forth in Section 3.28.
"▇▇▇▇" has the meaning set forth in this Section 1.1 in the
definition of "Intellectual Property."
"MATERIAL ADVERSE EFFECT" means a material adverse change in or
effect with respect to the business, results of operations, properties,
financial condition or prospects of the Company and its subsidiaries.
"MULTIEMPLOYER PLAN" has the meaning set forth in Section 3(37) of
ERISA.
"ORDER" means any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any
court, administrative agency, or other Governmental Agency or by any
arbitrator.
"ORDINARY COURSE OF BUSINESS" means an action which is both: (a)
consistent with the past practices of the Company and is taken in the
ordinary course of the normal day-to-day operations of the Company; and
(b) similar in nature and magnitude to actions customarily taken, without
any authorization by the board of directors, in the ordinary course of the
normal day-to-day operations of other Persons that are in a similar line
of business as the Company.
"PATENT" has the meaning set forth in this Section 1.1 in the
definition of "INTELLECTUAL PROPERTY".
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMIT" means any permit, approval, consent, authorization,
license, variance, or permission required by a Governmental Agency under
any Legal Requirement.
"PERMITTED LIENS" means, with respect to any asset, (i) covenants,
conditions, restrictions, encroachments, encumbrances, easements, rights
of way, licenses, grants, building or use restrictions, exceptions,
reservations, limitations or other imperfections of title (other than a
Lien securing any Indebtedness) with respect to such asset which,
individually or in the aggregate, does not materially detract from the
value of, or materially interfere with the present occupancy or use of,
such asset and the continuation of the present occupancy or use of such
asset; (ii) the matters set forth on Schedule 1.2 hereto; (iii) unfiled
mechanic's, materialmen's and similar liens with respect to amounts not
yet due and payable or which are being contested in good faith through
appropriate proceedings and, for those existing on the Balance Sheet, for
which adequate reserves in accordance with GAAP are reflected on the
Balance Sheet, as the case may be; (iv) liens for Taxes not yet delinquent
or which are being contested in good faith through appropriate proceedings
and, for those existing on the Balance Sheet, for which adequate reserves
in accordance with GAAP are reflected on the Balance Sheet, as the case
may be; and (v) liens securing rental payments under capital lease
arrangements, which capital lease arrangements existing as of the Closing
Date are in accordance with GAAP reflected as Indebtedness on the Balance
Sheet.
"PERSON" means any individual, partnership, corporation, trust,
association, limited liability company, Governmental Agency or any other
entity.
"PLAN" has the meaning set forth in Section 3.19(a).
"PRE-CLOSING TAXES" has the meaning set forth in Section
10.2(b)(ii).
"PRODUCT" has the meaning set forth in Section 3.26.
"PRODUCT CLAIM" has the meaning set forth in Section 3.26.
"PURCHASE PRICE" has the meaning set forth in Section 2.2.
"PURCHASER" has the meaning set forth in the preamble hereto.
"PURCHASER SEC DOCUMENTS" has the meaning set forth in Section 4.6.
"RECALLS" has the meaning set forth in Section 3.26(b).
"REGISTRATION RIGHTS AGREEMENT" has the meaning set forth in Section
7.5.
"RELEASE" means any spilling, leaking, pumping, releasing,
depositing, pouring, emitting, emptying, migrating, discharging,
injecting, storing, escaping, leaching, dumping, burying, abandoning,
disposing or moving into the environment.
"SALARIED EMPLOYEE" has the meaning set forth in Section 3.24(h).
"SCHEDULES" means, collectively, the various Schedules referred to
in this Agreement delivered separately to Purchaser on or before the date
of this Agreement.
"SECOND EARN-OUT PERIOD" has the meaning set forth in Section
2.3(a).
"SECOND EARN-OUT MAXIMUM" means nine million five hundred thousand
dollars ($9,500,000).
"SECOND EARN-OUT THRESHOLD" has the meaning set forth in Section
2.3(a).
"SECOND NOTE" has the meaning set forth in Section 2.2(a)(iii).
"SECTION 338(H)(10) ELECTION" has the meaning set forth in Section
6.5(f).
"SECTION 338 FORMS" has the meaning set forth in Section 6.5(d).
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
"SELLER ENTITY" means the Seller and its respective Affiliates
(other than the Company and its Subsidiaries).
"SELLER" has the meaning set forth in the preamble hereto.
"SELLER'S OPINION OF COUNSEL" has the meaning set forth in Section
8.8.
"SINGLE-EMPLOYER PLAN" means an Employee Pension Benefit Plan which
is described in Section 4001(a)(15) of ERISA and which is subject to Title
IV of ERISA.
"SOFTWARE PRODUCTS" has the meaning set forth in Section 3.17.
"STOCK" has the meaning set forth in the Recitals hereto.
"STOCK CONSIDERATION" has the meaning set forth in Section 2.2(a).
"SUBSIDIARY" means "subsidiary" as defined in Rule 405 promulgated
under the Securities Act.
"TAX CLAIM" has the meaning set forth in Section 10.5.
"TAX RETURN" means any report, return, information return, forms,
declarations, claims for refund, statements or other information
(including any amendments thereto and including any schedule or statement
thereto) required to be supplied to a Governmental Agency in connection
with Taxes.
"TAXES" means all federal, state, local, foreign and other taxes,
assessments and water and sewer charges and rents, including without
limitation, income, gross receipts, excise, employment, sales, use,
transfer, license, payroll, franchise, severance, stamp, withholding,
Social Security, unemployment, real property, personal property, property
gains, registration, capital stock, value added, single business,
occupation, workers' compensation, alternative or add-on minimum,
estimated, or other tax, including without limitation any interest,
penalties or additions thereto.
"THIRD EARN-OUT PERIOD" has the meaning set forth in Section 2.3(a).
"THIRD EARN-OUT MAXIMUM" means eleven million five hundred thousand
dollars ($11,500,000).
"THIRD EARN-OUT THRESHOLD" has the meaning set forth in Section
2.3(a).
"THIRD PARTY" has the meaning set forth in Section 11.2(b).
"TRADE SECRET" has the meaning set forth in this Section 1.1 in the
definition of "Intellectual Property."
"TRADEMARK OPPOSITION" means opposition no. 91155736 brought before
the Trademark Trial and Appeal Board in opposition to the Company's
efforts to register the ▇▇▇▇ "Aladdin" pursuant to application no.
76144215.
"TRANSACTION DOCUMENTS" means this Agreement, the Registration
Rights Agreement, the Escrow Agreement, the Note, the Pledge Agreement and
the Security Agreement .
SECTION 1.2. ACCOUNTING TERMS AND DETERMINATIONS.
All references in this Agreement to "generally accepted accounting
principles" or "GAAP" shall mean generally accepted accounting principles in
effect in the United States of America at the time of application thereof,
applied on a consistent basis. Unless otherwise specified herein, all accounting
terms used herein shall be interpreted, all determinations with respect to
accounting matters hereunder shall be made, and all financial statements and
certificates and reports as to financial matters required to be furnished
hereunder shall be prepared, in accordance with generally accepted accounting
principles, applied on a consistent basis.
ARTICLE II.
SALE AND PURCHASE
SECTION 2.1. AGREEMENT TO SELL AND TO PURCHASE.
On the terms and subject to the conditions set forth in this Agreement, at
the Closing, the Purchaser shall purchase from the Seller, and the Seller shall
sell, transfer, assign, convey and deliver to the Purchaser, the Stock. At the
Closing, the Seller shall deliver to the Purchaser or its designees a
certificate or certificates representing the Stock, duly endorsed in blank for
transfer or accompanied by appropriate powers duly executed in blank.
SECTION 2.2. PURCHASE PRICE.
(a) The purchase price (the "PURCHASE PRICE") for the Stock shall
consist of the following:
(i) $1,500,000, in immediately available funds (the "CASH
CONSIDERATION");
(ii) the number of shares of the restricted common stock, no
par value, of the Purchaser as shall be equal to $3,500,000 divided
by the average of the closing "bid" price of the Purchaser's stock
on the twenty (20) trading days prior to the Closing as reported by
the OTCBB, rounded up or down to the nearest whole share (the "STOCK
CONSIDERATION");
(iii) A convertible three year Promissory Note in the
principal amount of $2,650,000 (the "FIRST NOTE"), and a
non-negotiable convertible three year Promissory Note in the
principal amount of $350,000 (the "SECOND NOTE"), in the forms
attached as Exhibits A and B hereto, both secured by a pledge of the
Stock, as provided in the Pledge Agreement attached as Exhibit C.
(iv) Earn-Out Payments, if any, as set forth in Section 2.3
herein.
SECTION 2.3. EARN-OUT PAYMENTS
(a) The Purchaser shall pay to the Seller the following amounts
(each, an "EARN-OUT PAYMENT" and collectively, the "EARN-OUT PAYMENTS"),
subject to achievement of the minimum revenue amounts set forth below:
(i) In respect of the twelve (12) consecutive months
commencing on the first day of the month in which the Closing
occurs, or the first day of the next succeeding month, whichever
date shall be closest to the Closing Date (the "FIRST EARN-OUT
PERIOD"), one Dollar ($1.00) for each twelve Dollars and
seventy-five cents ($12.75) of Aladdin Revenue, up to a maximum
payment in respect of such period of six hundred sixty-six thousand
six hundred sixty-six Dollars and sixty-seven cents ($666,666.67).
No payment shall be made during or for the First Earn-Out Period
until the Aladdin Revenue equal or exceeds four million two hundred
fifty thousand Dollars ($4,250,000) (the "FIRST EARN-OUT
THRESHOLD"), and in the event that the Aladdin Revenue during the
First Earn-Out Period shall not equal or exceed the First Earn-Out
Threshold, no Earn-Out Payment shall be made to Aladdin for the
First Earn-Out Period.
(ii) In respect of the twelve (12) month period following the
First Earn-Out Period (the "SECOND EARN-OUT PERIOD"), one Dollar
($1.00) for each fourteen Dollars and twenty-five cents ($14.25) of
Aladdin Revenue, up to a maximum payment in respect of such period
of six hundred sixty-six thousand six hundred sixty-six Dollars and
sixty-seven cents ($666,666.67). No payment shall be made during or
for the Second Earn-Out Period until the Aladdin Revenue equal or
exceeds four million seven hundred fifty thousand Dollars
($4,750,000) (the "SECOND EARN-OUT Threshold"), and in the event
that the Aladdin Revenue during the Second Earn-Out Period shall not
equal or exceed the Second Earn-Out Threshold, no Earn-Out Payment
shall be made to Aladdin for the Second Earn-Out Period.
(iii) In respect of the twelve (12) month period following the
Second Earn-Out Period (the "THIRD EARN-OUT PERIOD"), One Dollar
($1.00) for each seventeen Dollars and twenty-five cents ($17.25) of
Aladdin Revenue, up to a maximum payment in respect of such period
of six hundred sixty-six thousand six hundred sixty-six Dollars and
sixty-seven cents ($666,666.67). No payment shall be made during or
for the Third Earn-Out Period until the Aladdin Revenue for the
Third Earn-Out Period is below five million seven hundred fifty
thousand Dollars ($5,750,000) (the "THIRD EARN-OUT THRESHOLD"), and
in the event that the Aladdin Revenue during the Third Earn-Out
Period shall not equal or exceed the Third Earn-Out Threshold, no
Earn-Out Payment shall be made to Aladdin for the Third Earn-Out
Period.
(iv) Any payments to be made to the Seller pursuant to
paragraphs (a), (b) or (c) above shall be made forty five (45) days
following the end of each Earn-Out Period. Unpaid Earn-Out Payments
shall accrue interest at the rate of six percent (6%) simple
interest per year from the 60th day from the end of each Earn-Out
Period until paid. Potential, but unearned, Earn-Out Payments from
an Earn-Out Period may not be carried forward and earned in a
subsequent Earn-Out Period.
(b) Aladdin Revenue.
(i) For the purposes of this Section 2.3, "ALADDIN REVENUE"
shall mean, for any Earn-Out Period, the revenue of the Business as
calculated by the Purchaser in accordance with GAAP (for purposes
hereof, "GAAP" shall mean the Purchaser's treatment of revenues,
except that revenues derived from sales to Digital River shall be
treated using the Seller's historical methods) and adjusted as
necessary for sales returns, allowances and bad debts, for the sales
or licensing (including subscription fees) of: (i) all of the
Company's products existing as of the Closing, including all
upgrades and updates thereto made after the Closing Date; (ii) third
party products resold by the Company, including products owned by
Purchaser; (iii) all new products developed by the Company after the
Closing; (iv) all new products which the Company sells pursuant to
publishing or license agreement for which the Company pays a royalty
or licensing fee to the licensee; (v) all existing products owned by
Purchaser and transferred to the Company; provided, however, that
prior to the inclusion of such products, they shall be valued in
accordance with a formula to be provided by Baytree Capital
Associates, LLC ("Baytree"); and provided further that following
such valuation, no revenue derived from such products shall be
included as Aladdin Revenue until the Purchaser has reported
earnings from such products equal to Baytree's valuation; (vi) all
new products ("ACQUIRED PRODUCTS") acquired (whether by acquisition
of such products individually, in groups or through the acquisition
of whole businesses, and considering as an "acquisition" the payment
of the purchase price in a single transaction or a group of
transactions effectively constituting a single transaction) or
licensed by the Company or the Purchaser for a fee less than
$200,000; and (vii) revenue from the sales or licensing by the
Company of products acquired (as defined above) for amounts in
excess of $200,000 shall be included in the Aladdin Revenue after
the Purchaser has reported earnings from each such product equal to
the aggregate purchase price or license fee paid for it.
(c) In the event that the Purchaser enters into a transaction with a
non-Affiliate of the Purchaser prior to termination of the Third Earn-Out
Period regarding the sale or transfer to such third party of the Company
or substantially all of the assets of the Company (either in a single or a
series of transactions), then upon the closing date of such transaction or
transactions all Earn-Out Payments for Earn-Out Periods not completed as
of such closing date shall be deemed earned, and shall be paid to the
Seller as of the applicable payment dates described in Section 2.3(a)(iv)
above; and in the event that any of the assets of the Company are
transferred to an affiliate of the Purchaser pursuant to a reorganization,
Aladdin Revenue will continue to be calculated as though all products sold
by the Company prior to such reorganization continue to be held by the
Company. In the further event that the Purchaser sells or transfers to a
non-Affiliate any product or portion of a product sold by the Company
prior to termination of the Third Earn-Out Period, the Purchaser shall
reduce the Earn-Out Maximum for the Earn-Out Period during which the
product or portion of a product was sold, and each subsequent Earn-Out
Period, by the total amount of revenue reported by the Company during the
Earn-Out Period in which such sale is consummated (and the ratios of
Aladdin Revenue to Earn-Out expressed in paragraphs Section 2.3(a)(i) -
(iii) for each affected Earn-Out Period shall be adjusted accordingly),
and the Earn-Out Threshold for each such Earn-Out Period shall be reduced
by one-half of such revenue.
(d) The parties hereto acknowledge that the Earn-Out Payments
payable to the Sellers pursuant to this Section 2.3 have been negotiated
by the parties based on their inability to agree as to the valuation of
the Company as of the Closing Date, and such Earn-Out Payments are
intended by the parties to be treated as part of the consideration for the
Stock. The Purchaser and the Seller agree not to take any position,
including, without limitation, for federal, state, foreign or local tax
purposes, that is inconsistent with the intent expressed in this clause
(c).
(e) The Purchaser agrees to keep true and accurate books and records
containing sufficiently detailed information to enable the Seller to
accurately determine the amount of the Earn-Out Payment due to the Seller
for each Earn-Out Period. The Purchaser further agrees to permit the
Seller and/or its designated agent access to such books and records at a
reasonable time at the Purchaser's principal offices (or at such other
location at which such books and records may be located) upon reasonable
request by the Seller commencing as of the Closing Date and ending on the
third anniversary of the Closing Date in order to inspect and audit such
books and records.
(f) Within forty-five (45) days after the end of each quarter during
any Earn-Out Period, the Purchaser shall provide the Seller with a report
of the Aladdin Revenue for such quarter, together with a report of the
bookings during such quarter of all sales that will at any time be
included as Aladdin Revenue (both in the form set forth as Exhibit D
hereto), and the amount of Earn-Out Payment due to Seller, if any, for
such quarter.
(g) At any time prior to payment of the Third Earn-Out, if any
Earn-Out Payment shall cause the aggregate amount of cash to be received
by the Seller pursuant to this Agreement to exceed sixty percent (60%) of
the total consideration to be received by the Seller pursuant to this
Agreement, then the portion of such Earn-Out Payment in excess of such 60%
threshold shall be paid to the Seller in shares of the Purchaser's Common
Stock. The number of shares to be issued in such event shall be equal to
the portion of the Earn-Out which the Seller wishes to receive in Common
Stock divided by the average of the closing "bid" price of the Purchaser's
stock on the twenty (20) trading days prior to the end of the applicable
Earn-Out Period as reported by the OTCBB, rounded up or down to the
nearest whole share.
(h) Disputes Regarding Earn-Out Payments.
(i) In the event the Seller and the Purchaser shall not reach
agreement on all aspects of an Earn-Out Payment, within forty-five
(45) days following the Seller's receipt of the Earn-Out Payment,
the Seller shall deliver to the Purchaser a written notice of its
objections (the "EARN-OUT OBJECTION NOTICE"): (i) objecting in good
faith to amount or basis for calculating the Earn-Out Payment, (ii)
setting forth the items being disputed and the reasons therefor, and
(iii) specifying the Seller's calculation of the disputed item(s)
and the adjustment of the Earn-Out Payment to be made accordingly.
In connection with the preparation of the Earn-Out Objection Notice,
the Purchaser shall grant the Seller's accountants and other
representatives reasonable access to all of the books and records of
the Company. If the Seller fails to deliver timely its Earn-Out
Objection Notice, the Earn-Out Payment shall be considered final and
binding upon the Purchaser and the Seller.
(ii) The matters in dispute shall be determined by a
nationally recognized arbitration firm mutually satisfactory to the
Purchaser and the Seller (the "ARBITER") in accordance with such
firm's rules, and the Purchaser and the Seller shall promptly
deliver to the Arbiter Seller's Earn-Out Objection Notice, together
with all materials relating to the Purchaser's calculation of the
Earn-Out Payment (the "EARN-OUT CALCULATION") for the disputed
Earn-Out Period. Promptly, but not later than thirty (30) days after
the acceptance of its appointment, the Arbiter shall determine
(based solely on presentations by the Seller and the Purchaser to
the Arbiter and not by independent review) only those items in
dispute and shall render a report as to its resolution of such items
and the resulting calculation of the applicable Earn-Out Payment.
For purposes of the Arbiter's determination, the amounts to be
included shall be the appropriate amounts from the Earn-Out
Calculation, as to items that are not in dispute, and the amounts
determined by the Arbiter, as to items that are submitted for
resolution by the Arbiter. In resolving any disputed item, the
Arbiter may not assign a value to such item greater than the
greatest value for such item claimed by either party in the Earn-Out
Calculation or Earn-Out Objection Notice or less than the lowest
value for such item claimed by either party in the Earn-Out
Calculation or Earn-Out Objection Notice. The Purchaser and the
Seller shall cooperate with the Arbiter in making its determination
and such determination shall be conclusive and binding upon the
Purchaser and the Seller.
(iii) The Seller shall bear the cost of the Arbiter unless the
Seller's inspection and audit reveals an underpayment of the
Earn-Out Payment by the Purchaser of five percent (5%) or more, in
which case the Purchaser shall bear the reasonable costs of the
Arbiter and shall reimburse Seller therefor.
(iv) Within five Business Days after the final determination
of a disputed Earn-Out Payment, if such determination is made in
favor of the Seller, the Purchaser shall pay the Seller by wire
transfer of immediately available funds the amount, if any, by which
the Earn-Out Payment is adjusted by the Arbiter's determination.
(v) Nothing in this Section 2.3 or in the statements, reports
or documents contemplated hereby shall affect the parties' rights
and obligations in respect of a breach or alleged breach of any
representation or warranty herein.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Purchaser as set forth in this
Article III:
SECTION 3.1. AUTHORITY OF THE SELLER.
The Seller is a corporation duly organized, validly existing and before
the Closing will be in good standing under the laws of the State of Nevada. The
Seller has full corporate power and authority to execute and deliver the
Transaction Documents, and the execution and delivery by the Seller of the
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate action on the part of the Seller, including the consent or approval of
the holders of the requisite majority(ies) of the Seller's common stock and each
other class and series of equity securities of the Seller. This Agreement
constitutes, and the other Transaction Documents when executed and delivered by
the parties thereto will constitute, the legal, valid and binding obligations of
the Seller enforceable against the Seller in accordance with their terms, except
as such enforcement may be limited by applicable bankruptcy, insolvency,
moratorium, or similar laws from time to time in effect which affect creditors'
rights generally and by legal and equitable limitations on the enforceability of
specific remedies.
SECTION 3.2. ORGANIZATION OF THE COMPANY.
As of the date hereof: (i) the Company is a corporation duly organized,
validly existing, and before the Closing will be in good standing under the laws
of the State of Delaware (ii) the Company is duly qualified to do business and
is in good standing in California, such states being each jurisdiction in which
the ownership of its properties or the conduct of its business requires such
qualification, except where the failure to so qualify, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect and (iii) the Company has the requisite corporate power and authority to
own its properties and to conduct its business as presently conducted. Schedule
3.2 includes true and correct copies of the Articles of Incorporation and
By-Laws of the Company as in effect on the date hereof.
SECTION 3.3. CAPITALIZATION OF THE COMPANY.
As of the date hereof, the authorized capital stock of the Company
consists of (i) twenty million (20,000,000) shares of common stock, par value
$0.01 per share, of which one (1) share is outstanding and owned by the Seller
and (ii) no shares of preferred stock. There are or will be at Closing no
outstanding options, warrants, agreements, conversion rights, preemptive rights
or other rights to subscribe for, purchase or otherwise acquire shares of
capital stock of the Company.
SECTION 3.4. NO CONFLICT OR VIOLATION; CONSENTS.
Except as set forth on Schedule 3.4, neither the execution and delivery of
this Agreement or any other Transaction Document nor the consummation or
performance of any of the transactions contemplated hereby or thereby will,
directly or indirectly (with or without notice or lapse of time):
(a) contravene, conflict with, or result in a violation of (i) any
provision of the Articles of Incorporation or By-Laws of either the Seller
or the Company, or (ii) any resolution adopted by the board of directors
or the stockholders of either the Seller or the Company;
(b) contravene, conflict with, or result in a violation of, or give
any Governmental Agency or other Person the right to challenge any of the
transactions contemplated hereby or by any other Transaction Document or
to exercise any remedy or obtain any relief under, any Legal Requirement
to which the Company or the Seller, or any of the assets owned or used by
the Company, may be subject;
(c) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Agency the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Permit that
is held by the Company or that otherwise relates to the business of, or
any of the assets owned or used by, the Company;
(d) cause any of the assets owned by the Company to be reassessed or
revalued by any taxing authority or other Governmental Agency;
(e) contravene, conflict with, or result in a violation or breach of
any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance
of, or to cancel, terminate, or modify, any Contract, Lease or Permit;
(f) result in the imposition or creation of any Lien upon or with
respect to any of the assets owned or used by the Company; or
(g) except for filings under the Securities Act, and the Securities
Exchange Act, require the consent, approval, or authorization of, or
registration or filing with, any Governmental Agency or any other Person.
SECTION 3.5. SUBSIDIARIES AND INVESTMENTS.
Except as set forth in Schedule 3.5, the Company does not own any stock
of, or any equity participation in, any Person and has no Subsidiaries.
SECTION 3.6. FINANCIAL STATEMENTS.
The unaudited balance sheet of the Company as of the Balance Sheet Date
(the "BALANCE SHEET"), and related statements of income, retained earnings and
cash flow for the periods then ended and the notes thereto (collectively, the
"FINANCIAL STATEMENTS"), (i) are included as Schedule 3.6: (ii) were prepared in
accordance with GAAP, (iii) present fairly the financial condition and the
results of operations of the Company as of the dates and for the periods
indicated thereon, (iv) are complete, correct and in accordance with the books
of account and records of the Company, (v) can be legitimately reconciled with
the financial statements and the financial records maintained and the accounting
methods applied by the Company for federal income tax purposes, and (vi) reflect
accurately all costs and expenses which the Company incurred, but not
necessarily all of the costs, or a pro-rata portion of the costs, incurred by
the Seller which may have been expenses of the Company if the Company were
independent and not affiliated with any other corporation or business ("EXCLUDED
Costs", all of which are set forth in Schedule 3.6).
SECTION 3.7. UNDISCLOSED LIABILITIES.
As of the Balance Sheet Date, the Company has and will have no material
Liabilities, except for Liabilities: (a) reflected or reserved for on the
Balance Sheet, as the case may be, (b) relating to performance obligations,
under Leases, Contracts and Permitted Liens in accordance with the terms and
conditions thereof which are not required by GAAP to be reflected on the Balance
Sheet, or (c) as set forth on Schedule 3.7.
SECTION 3.8. MATERIAL ADVERSE EFFECT.
Other than changes resulting from general economic conditions and except
as provided on Schedule 3.8, since the Balance Sheet Date, there has not been
any Material Adverse Effect or Basis therefor, nor have any events occurred nor
do any circumstances exist which, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.9. ACCOUNTS RECEIVABLE.
All accounts receivable of the Company that are reflected on the Balance
Sheet or on the accounting records of the Company as of the Closing Date
(collectively, the "ACCOUNTS RECEIVABLE") represent or will represent valid
obligations arising from sales actually made or services actually performed in
the Ordinary Course of Business. There is no contest, claim, or right of
set-off, other than returns or other set-offs in the Ordinary Course of
Business, under any Contract with any obligor of an Accounts Receivable relating
to the amount or validity of such Accounts Receivable. Schedule 3.9 contains a
complete and accurate list of all Accounts Receivable as of the Balance Sheet
Date, which list sets forth the aging of such Accounts Receivable.
SECTION 3.10. INVENTORY.
The materials, supplies and work-in-process included in the inventory of
the Company as set forth on the Balance Sheet were (a) substantially equivalent
in quality and quantity, subject to seasonality, to the materials, supplies and
work-in-process, and additions thereto, generally included in such inventory in
the past; (b) reasonably suitable for the manufacture and distribution of the
Company's products in a manner substantially equivalent in quality to that
achieved generally by the Company in the past and (c) valued in accordance with
GAAP, in each case, subject to all reserves reflected in the Balance Sheet with
respect to such inventory existing on the Balance Sheet Date. Such reserves on
the Balance Sheet are adequate under GAAP and are established in accordance with
GAAP.
SECTION 3.11. REAL PROPERTY.
(a) The Company does not own any real property.
(b) Schedule 3.11(b) contains a list of all leases and subleases,
together with any amendments thereto and any subordination, nondisturbance
and attornment agreements (the "LEASES"), with respect to all real
property leased by the Company (the "LEASED PROPERTY"). Each Lease is in
full force and effect, the Company has performed all material obligations
required to be performed by it to date under each of the Leases and
neither the Company nor, to the Seller's Knowledge, any other party
thereto is in material default under any of the Leases (and no event has
occurred which, with due notice or lapse of time or both, would constitute
such a lapse or default). No amount due under the Leases remains unpaid,
no material controversy, claim, dispute or disagreement exists between the
parties to any of the Leases. The Seller has delivered to the Purchaser a
copy of each Lease, and all amendments thereto, listed in Schedule
3.11(b), except to the extent otherwise noted therein.
(c) The covenants, conditions, restrictions, encroachments,
encumbrances, easements, rights of way, licenses, grants, building or use
restrictions, exceptions, reservations, limitations or other impediments
affecting the Leased Property do not and will not, with respect to each
Leased Property, materially impair the Company's ability to use any such
Leased Property in the operation of the Company's business as presently
conducted. To Seller's Knowledge there are no pending or threatened
condemnation or similar proceedings affecting the Leased Property. The
Company has access to public roads, streets or the like or valid easements
over private streets, roads or other private property for such ingress to
and egress from the Leased Property, except as would not materially impair
the Company's ability to use any such Leased Property in the operation of
the Company's business as presently conducted.
(d) All brokerage commissions and other compensation and fees
payable by reason of the Leases have been paid in full or are reflected in
the Balance Sheet except for such commissions and other compensation
related to options or extensions in the Leases which are not yet
exercised.
(e) To the Seller's Knowledge, all improvements on the Leased
Property and the operations therein conducted conform in all material
respects to all applicable Legal Requirements, including without
limitation, health, fire, environmental, safety, zoning and building laws,
ordinances and administrative regulations, except for possible
nonconforming uses or violations which do not and will not expose any
person or property to injury or damage, materially and adversely affect
any insurance coverage, give rise to strict liability, penalties or fines,
jeopardize any Permit or materially interfere with the present use,
operation or maintenance thereof by the Company as now used, operated or
maintained, and which do not and will not materially and adversely affect
the value thereof. To the Seller's Knowledge, all buildings, structures,
improvements and fixtures owned, leased or used by the Company in the
conduct of its business at the Leased Property conform in all material
respects to all applicable codes and rules adopted by national and local
associations and boards of insurance underwriters; and all such buildings,
structures, improvements and fixtures are in good operating condition and
repair.
(f) There are no outstanding requirements or recommendations by any
insurance company which has issued to the Company a policy covering the
Leased Property, or by any board of fire underwriters or other body
exercising similar functions, requiring or recommending any repairs or
work to be done on such property.
(g) All public utilities required for the operation of the Leased
Property and necessary for the conduct of the business of the Company are
installed and operating, and all installation and connection charges, to
the Seller's Knowledge, are paid in full.
(h) Except as set forth in Schedule 3.11(b), the Leased Property is
not subject to any lease, sublease, license or other agreement granting to
any Person any right to the use, occupancy or enjoyment of such property
or any portion thereof.
(i) The plumbing, electrical, heating, air conditioning, elevator,
ventilating and all other mechanical or structural systems for which the
Company is responsible under the Leases in the buildings or improvements
are in good working order and condition, and the roof, basement and
foundation walls of such buildings and improvements for which the Company
is responsible under said Leases are in good condition and free of leaks
and other material defects. All such mechanical and structural systems and
such roofs, basement and foundation walls for which others are responsible
under said Leases are, to the Seller's Knowledge, in good working order
and condition and free of leaks and other material defects.
SECTION 3.12. CONDITION AND COMPLIANCE OF PROPERTY.
(a) Schedule 3.12(a) contains a list of owned computers, information
technology, hardware, software, facsimile machines and copier machines
with a value of over $500. As of such date, the Company owned outright and
had good and marketable title to all such personal property subject to no
Lien except Permitted Liens and except as set forth on Schedule 3.12(a).
(b) Schedule 3.12(b) sets forth the name, parties and date of all
personal property leases to which the Company is a party or in respect of
the Business. Except as set forth in Schedule 3.12(b), the Company holds
good leaseholds in all of the personal property shown or required to be
shown on Schedule 3.12(b) as leased by the Company, in each case under
valid and enforceable leases. The Company is not, and to Seller's
Knowledge no other party to any such personal property lease is, in
material breach of or default under any lease of any item of personal
property listed on Schedule 3.12(b) (and no event has occurred which, with
due notice or lapse of time or both, would constitute such a lapse or
default).
(c) The assets of the Company: (i) in the aggregate are adequate to
conduct the operations of the Company in substantially the manner
currently conducted, (ii) are suitable for the purposes for which they are
currently used, (iii) have been maintained in accordance with the
Company's historical practices since January 1, 2001, and (iv) are in good
condition, ordinary wear and tear excepted. Each plant, building, office,
shop and other structure and each item of personal property is in good
operating condition and is suitable and sufficient for the operation of
the business of the Company, as currently conducted and currently proposed
to be conducted.
SECTION 3.13. COMPLIANCE WITH LEGAL REQUIREMENTS.
(a) Except as set forth on Schedule 3.13(a), the Company has
complied with, has not received any notice of violation of, and has no
Knowledge of any Basis which with or without notice could reasonably be
expected to constitute a violation of, any material Legal Requirements.
Since January 1, 2001, except as set forth on Schedule 3.13(a), neither
the Seller nor the Company has received any notice or other communication
(whether oral or written) from any Governmental Agency 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 or
the Company to undertake, or to bear all or any portion of the cost of,
any remedial action of any nature, nor is there any Basis for any such
notice or other communication.
(b) Schedule 3.13(b) sets forth a list of each Permit that is
necessary or appropriate for the operations of the Company as currently
conducted or currently proposed to be conducted, including the issuing
Governmental Agency, the expiration date, and the permit number. All
Permits included on Schedule 3.13(b), except as noted therein, are in full
force and effect and no proceeding is pending or, to the Knowledge of the
Seller, threatened, to revoke or limit any such Permit, nor is there a
Basis for any such revocation. Except as set forth in Schedule 3.13(b):
(i) the Company is, and at all times since January 1, 2001 has
been, in full compliance with all of the terms and requirements of
each Permit listed in Schedule 3.13(b);
(ii) since January 1, 2001, neither the Seller nor the Company
has received any notice or other communication (whether oral or
written) from any Governmental Agency 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 Permit, or (B)
any actual, proposed, possible, or potential revocation, withdrawal,
suspension, cancellation, termination of, or modification to any
Permit, nor is there any Basis for such notice or other
communication; and
(iii) all applications required to have been filed for the
renewal of the Permits have been duly filed on a timely basis with
the appropriate Governmental Agencies, and all other filings
required to have been made with respect to such Permits have been
duly made on a timely basis with the appropriate Governmental
Agencies.
SECTION 3.14. AFFILIATE AGREEMENTS AND LIABILITIES.
Except as set forth on Schedule 3.14:
(a) there are no written or oral Contracts between the Company and
any Seller Entity including, without limitation, any such Contracts
relating to the provision of any services by the Company to any such
Seller Entity, or by any such Seller Entity to the Company; and
(b) (i) since the Balance Sheet Date, there have been, (ii) from the
date hereof to the Closing Date there will be, and (iii) after the Closing
Date there will be, no transactions, agreements, arrangements or
indebtedness between the Company and (x) any Seller Entity, (y) any
director or officer of the Company or (z) any member of the immediate
family of any individual described in clause (x) or (y) of this sentence.
SECTION 3.15. CONTRACTS.
(a) Schedule 3.15 hereto lists all of the Contracts, commitments,
arrangements and understandings which are material to the properties,
conduct, operations or financial condition of the Company or are otherwise
material.
(b) Except as set forth on Schedule 3.15 (and for Leases and
Permitted Liens), the Company is not a party to or bound by any of the
following, which are material to the properties, conduct, operations or
financial condition of the Company or are otherwise material:
(i) mortgage, indenture, note, or installment obligation, or
other instrument for or relating to Indebtedness;
(ii) guaranty of any obligation for borrowings or performance,
or guaranty or warranty of products or services, excluding
endorsements or guaranties of instruments made in the Ordinary
Course of Business in connection with the deposit of items for
collection, and statutory warranties;
(iii) agreement or arrangement for the sale or lease of any of
its assets other than in the usual, regular and Ordinary Course of
Business;
(iv) agreement or other arrangement for the purchase of any
real estate, machinery, equipment, or other capital assets;
(v) Contract for the future purchase of materials, supplies,
services, merchandise, or equipment parts;
(vi) Contract pursuant to which it is or may be obligated to
make payments, contingent or otherwise, on account of or arising out
of prior acquisitions or sales of businesses, assets, or stock of
other companies;
(vii) distribution, dealership, representative, broker, sales
agency, advertising or consulting Contract excepting any such
contract that is terminable at will, or by giving notice of 30 days
or less, without Liability;
(viii) lease or other agreement for the use of real or
personal property;
(ix) agreement imposing non-competition or exclusive dealing
obligations on it;
(x) agreement providing for payments to or by any Person based
on sales, purchases, or profits, other than direct payments for
goods;
(xi) license or royalty agreement with obligations payable by
or to the Company;
(xii) Contract or agreement for the employment of any
stockholder, director, officer, consultant or key employee not
terminable without penalty or Liability arising from such
termination or any severance or change-in-control contract or
arrangement;
(xiii) Contract relating to cleanup, abatement or other
actions in connection with environmental liabilities; or
(xiv) Contract which (A) involves future payment by or to the
Company or (B) is otherwise material to the extent relating to the
conduct of the business of the Company.
(c) Each Contract, including the Contracts listed or required to be
listed on Schedule 3.15, is valid, binding and enforceable against the
Company, and to the Seller's Knowledge the other parties thereto in
accordance with its terms, and is in full force and effect. The Company
has performed all material obligations required to be performed by it to
date under each of the Contracts. Except as set forth in Schedule 3.15,
neither the Company nor, to the Seller's Knowledge, any other party
thereto is in material breach of or default under any Contract to which
the Company is a party or by which it is bound or to which its assets are
subject (and no event has occurred which, with due notice or lapse of time
or both, would constitute such a lapse or default). The Seller has
delivered to the Purchaser a copy of each Contract or other written
evidence of the obligations, and all amendments thereto, listed or
required to be listed in Schedule 3.15, except to the extent otherwise
noted thereon.
SECTION 3.16. INTELLECTUAL PROPERTY.
(a) Set forth on Schedule 3.16(a) is a true and complete list of all
Intellectual Property and Software Products (as defined in Section 3.17
below) (collectively, the "LISTED INTELLECTUAL PROPERTY") now used in the
business of the Company except the mass- market third-party software
described in Section 3.16(d).
(b) Set forth on Schedule 3.16(b) is a complete list of all licenses
or agreements which in any way affect the rights of the Company to any of
the Listed Intellectual Property (the "Intellectual Property Licenses");
such list indicates the specific Listed Intellectual Property affected by
each such Intellectual Property License.
(c) Except as set forth on Schedules 3.16(a) and Schedule 3.16(b),
neither the Listed Intellectual Property nor any Intellectual Property
License infringes or provides any basis to believe that the Company's
operations or any Listed Intellectual Property or Intellectual Property
License would infringe upon any validly issued trademark, trade name,
service ▇▇▇▇, copyright or, any validly issued patent or other right of
any other third party. The manner in which the Company has manufactured,
packaged, shipped, advertised, labeled and sold its products complies with
all applicable laws and regulations pertaining thereto, the failure to
comply with which would have a Material Adverse Effect.
(d) The Company has a valid license to use each copy of mass-market
third-party software used by it.
(e) Except as set forth on Schedule 3.16(a) and Schedule 3.16(b),
each of the Intellectual Property Licenses is valid, binding and
enforceable in accordance with its terms against the parties thereto, the
Company has performed all obligations imposed upon it thereunder, and
neither the Company nor any other party thereto is in default thereunder,
nor is there any event which with notice or lapse of time, or both, would
constitute a default thereunder.
(f) All Marks, Patents and registered copyrights are valid,
subsisting, unexpired, in proper form and enforceable and all renewal fees
and other maintenance fees which have fallen due on or prior to the
effective date of this Agreement have been paid. The grants, registrations
and applications for such Marks, Patents and registered copyrights have
not lapsed, expired or been abandoned and, except for the Trademark
Opposition, no application or registration thereof is the subject of any
legal or governmental proceeding before any governmental, registration or
other authority in any jurisdiction. All products and materials containing
a ▇▇▇▇ ▇▇▇▇ the proper notice where permitted by law.
(g) Trade Secrets
(i) With respect to each Trade Secret, the documentation
relating to such Trade Secret is current, accurate, and sufficient
in detail and content to identify and explain it and to allow its
full and proper use without reliance on the knowledge or memory of
any individual.
(ii) The Seller and the Company has taken all reasonable
precautions to protect the secrecy, confidentiality, and value of
the Trade Secrets.
(iii) The Company has good title and an absolute (but not
necessarily exclusive) right to use the Trade Secrets. The Trade
Secrets are not part of the public knowledge or literature, and, to
the Seller's Knowledge, have not been used, divulged, or
appropriated either for the benefit of any Person (other than the
Company) or to the detriment of the Company. No Trade Secret is
subject to any adverse claim or has been challenged or threatened in
any way.
(h) Except as set forth in Schedule 3.16, to the Knowledge of the
Seller, there are no conflicts with or infringements of any Intellectual
Property by any third party. Apart from the AKS Litigation, no ▇▇▇▇ has
been or is now involved in any opposition, invalidation or cancellation
and, to the Seller's Knowledge, no such action is threatened with respect
to any of the Marks. Except as set forth in Schedule 3.16, the conduct of
the Company's business as currently conducted does not conflict with or
infringe in any way with any proprietary right of any third party, which
conflict or infringement could have a material adverse effect on the
Company, the Intellectual Property or the business of the Company. Except
as set forth in Schedule 3.16, there is no claim, suit, action or
proceeding pending or threatened against the Company (i) alleging any such
conflict or infringement with any third party's proprietary rights or (ii)
challenging the ownership, use, validity or enforceability of the
Intellectual Property.
(i) No consents, filings or authorizations by or with Governmental
Agencies or third parties in respect of the Listed Intellectual Property
are necessary to consummate the transactions contemplated hereby.
(j) Neither the Seller nor the Company has entered into any material
consent, indemnification, forbearance to ▇▇▇, settlement agreement or
cross-licensing arrangement with any person relating to the Intellectual
Property or the intellectual property of any third party other than as may
be contained in the license agreements listed in Schedule 3.16. Except as
set forth in Schedule 3.16, the Company is not under any obligation to pay
royalties or similar payments in connection with any license to any of its
Affiliates.
(k) No former or present employees, officers or directors of the
Company hold any right, title or interest directly or indirectly, in whole
or in part, in or to any Intellectual Property.
SECTION 3.17. SOFTWARE PRODUCTS.
Except as specifically set forth on Schedule 3.17, the Company is the sole
and exclusive owner or licensee of:
(a) the Listed Intellectual Property, the Intellectual Property
Licenses and the technology, know-how and processes now used by the
Company, or used in connection with any product now being manufactured and
sold by the Company, in the manner that such product is now being
manufactured and sold; and
(b) all rights, title and interest of whatever kind or nature
throughout the world in and to the fully or partially developed computer
software products listed on Schedule 3.16(a) and Schedule 3.16(b), with
all modifications, enhancements and additions thereto, including, without
limitation, all rights in and to all versions thereof and all source code,
object code, manuals and other documentation and related materials thereof
(collectively, the "SOFTWARE PRODUCTS"). Without limiting the generality
of the above, the Software Products shall also include all of the
Company's related programs, trade secrets, algorithms and processes
relating to the Software Products or such programs, the Company's
copyright in and to each of the Software Products and all works derivative
therefrom, all current, previous, enhanced and developmental versions of
the source and object code and any variations thereof, all user and
programmer documentation, all design specifications, all maintenance and
installation routines, all system documentation (including all flow
charts, systems procedures and program component descriptions), all
procedures for modification and preparation for the release of enhanced
versions and all test data available (excluding all proprietary
information of third parties) with respect to the Software Products.
(c) The transactions contemplated hereby will not result in the
termination of any publishing or license agreements with respect to
products or materials incorporated in the Software Products or otherwise
alter the Company's ability to sell the Software Products.
(d) The Software Products are free from any significant software
defect or programming or documentation error, conform to the
specifications thereof, and, with respect to owned Software Products, the
applications can be recreated from their associated source code.
(e) Except as set forth on Schedule 3.17 hereto, the Seller has no
Knowledge of the existence of any bugs or viruses contained in CD-ROMs or
in downloadable files on which the Software Products are distributed which
cause the Software Products to be uninstallable.
SECTION 3.18. LABOR RELATIONS.
Except as set forth on Schedule 3.18, the Company is not a party to any
collective bargaining agreement covering Employees, there are no controversies
or unfair labor practice proceedings pending or, to the Seller's Knowledge,
threatened between the Company and any of its current or former Employees or any
labor or other collective bargaining unit representing any current or former
Employee of the Company that could reasonably be expected to result in a labor
strike, dispute, slow-down or work stoppage or otherwise have a Material Adverse
Effect. To the Seller's Knowledge, except as set forth on Schedule 3.18, no
organizational effort is presently being made or to the Knowledge of the Seller,
threatened by or on behalf of any labor union.
SECTION 3.19. EMPLOYEE BENEFITS.
(a) Schedule 3.19(a) sets forth all Employee Benefit Plans and all
other employee benefit arrangements or payroll practices, including,
without limitation, any such arrangements or payroll practices providing
severance pay, sick leave, vacation pay, salary continuation for
disability, retirement benefits, deferred compensation, bonus pay,
incentive pay, stock options, hospitalization insurance, medical
insurance, life insurance, scholarships or tuition reimbursements,
maintained by the Company or to which the Company is obligated to
contribute for Employees or Former Employees. Each of the employee benefit
plans, practices and arrangements set forth on Schedule 3.19(a) shall
hereafter be referred to as a "Plan" (or "PLANS" as the context may
require).
(b) Except with respect to any Multiemployer Plan, copies of the
following documents, with respect to each of the Plans as applicable, have
been delivered to Purchaser by the Seller: (i) all plan and related trust
documents, and amendments thereto; (ii) the most recent IRS Form 5500;
(iii) the last IRS determination letter; (iv) summary plan descriptions;
and (v) the most recent actuarial report.
(c) Except as set forth on Schedule 3.19(c), none of the Plans is a
Multiemployer Plan. Neither the Company nor any ERISA Affiliate has
incurred any Liability resulting from a complete or partial withdrawal
from any Multiemployer Plan, and none of them has incurred, or is
reasonably likely to incur, any Liability due to the termination or
reorganization of a Multiemployer Plan which has not been satisfied in
full, and to the Knowledge of the Seller, no event has occurred that would
subject the Company or any ERISA Affiliate to any such liability.
(d) Neither the Company nor any ERISA Affiliate has incurred, or is
reasonably likely to incur, any Liability under Section 4062, 4063 or 4064
of ERISA to the PBGC or to a trustee appointed under Section 4042 of ERISA
with respect to any Single-Employer Plan, and to the Knowledge of the
Seller, no event has occurred that would subject the Company or any ERISA
Affiliate to any such Liability. All premiums due the PBGC with respect to
all Single-Employer Plans maintained by the Company and its ERISA
Affiliates have been timely paid. Neither the Company nor any ERISA
Affiliate has engaged in any transaction described in Section 4069 of
ERISA. Except as set forth on Schedule 3.19(d), there has been no
"reportable event", within the meaning of Section 4043 of ERISA, with
respect to any Single-Employer Plan maintained by the Company or its ERISA
Affiliates which would require the giving of notice to the PBGC. No
Single-Employer Plan maintained by the Company or its ERISA Affiliates has
incurred an accumulated funding deficiency within the meaning of Section
412 of the Code.
(e) Except with respect to any Multiemployer Plan, each Plan
complies with, and has been established, operated and administered in
accordance with its terms and the requirements of, ERISA, the Code and
other applicable laws.
(f) Except with respect to any Multiemployer Plan, there are no
material pending or, to Seller's Knowledge, threatened claims by, on
behalf of or involving any Plan Administrator or any Plan Trustee (other
than routine claims for benefits).
(g) Neither the Company nor any ERISA Affiliate has incurred any
liability for any tax or penalty imposed by Section 4975 of the Code or
Section 502(i) of ERISA with respect to any Plan.
(h) With respect to each Plan that is a Single-Employer Plan, the
most recent actuarial report prepared by the Plan's actuary, using the
actuarial methods and assumptions contained in such report, fairly
presents the fair market value of the assets of each such Plan and the
present value of the Liabilities in respect of the benefits accrued under
each such Plan, and since the date of such actuarial report there has been
no material adverse change in the funded status of any such Plan after
taking into account the additional accrual of benefits by participants
since the date of such actuarial report through the Closing Date.
(i) Each Plan which is intended to qualify under Section 401(a) of
the Code has received an IRS determination letter concluding that such
Plan so qualifies in form, and no event has occurred and no condition
exists that, to the Seller's Knowledge, would cause such Plan to lose its
qualified status.
(j) Except as set forth on Schedule 3.19(j) or as may be required
under Section 4980B of the Code, Section 601 of ERISA or other applicable
foreign, state or local law, the Company does not have any Liability for
post-retirement medical or life insurance benefits or coverage for any
Employee or Former Employee or any dependent of any such employee. The
reserve reflected in the Balance Sheet will be adequate in accordance with
GAAP for the payment or provision of all such benefits.
(k) Except as set forth on Schedule 3.19(k), the consummation of the
transactions contemplated by the Transaction Documents will not result in
any increase in the amount of compensation or benefits or accelerate the
vesting or timing of payment of any compensation or benefits payable by
the Company to or in respect of any Employee or Former Employee or the
beneficiary or dependent of any such employee under any Plan.
(l) All payments (including all employer contributions and employee
contributions with respect to the Employee Benefit Plans) required to have
been made under the Plans or by law (without regard to any waivers granted
under Section 412 of the Code) have been made by the due date thereof
(including any valid extension), and all payments for any period ending on
or before the Closing which are not yet due will have been paid or accrued
by the Closing Date.
SECTION 3.20. INSURANCE.
Schedule 3.20(a) sets forth a list of all insurance policies and all
material fidelity bonds or other insurance service contracts (the "INSURANCE
POLICIES") providing coverage for the properties or operations of the Company,
the type and amount of coverage, and the expiration dates of the Insurance
Policies. Except as set forth on Schedule 3.20(b), there is no claim by the
Company pending under any of the Insurance Policies as to which coverage has
been questioned, denied or disputed by the underwriters of such policies. All
premiums payable under all Insurance Policies have been paid, and the Company
has otherwise complied in all material respects with the terms and conditions of
all the Insurance Policies. The Insurance Policies are valid and enforceable in
accordance with their terms, are issued by an insurer that is reputable, are in
full force and effect and insure against risk and liabilities customary in the
industry and as required by Legal Requirements and the Contracts. Neither the
Seller nor the Company has received notice from any insurance carrier: (i)
threatening a suspension, revocation, modification or cancellation of any
Insurance Policy or a material increase in any premium in connection therewith,
or (ii) informing Seller that any coverage listed on Schedule 3.20 will or may
not be available in the future on substantially the same terms as now in effect.
SECTION 3.21. LITIGATION.
Except as set forth in Schedule 3.21, there are no claims, actions, suits,
proceedings, labor disputes or investigations pending or to the Seller's
Knowledge threatened before any Governmental Agency brought by or against the
Seller, the Company or any of their respective officers, directors, Employees,
agents or Affiliates involving, affecting or relating to any assets, properties
or operations of the Company or the transactions contemplated by the Transaction
Documents, nor to the Seller's Knowledge is there any Basis for any such action,
suit, proceeding or investigation. Schedule 3.21 sets forth a list and a summary
description of all such pending actions, suits, proceedings, disputes or
investigations. Neither the Company nor any of its assets or properties is
subject to any Order that affects or might affect its assets, properties,
operations, prospects, net income or financial condition or which would or might
interfere with the transactions contemplated by the Transaction Documents.
SECTION 3.22. ENVIRONMENTAL MATTERS.
Except as set forth on Schedule 3.22, to its Knowledge:
(a) the Company is, and since January 1, 2001 (the "ENVIRONMENTAL
REFERENCE DATE"), has been in compliance with all Environmental Laws;
(b) the Company has no Liability, whether contingent or otherwise,
under any Environmental Law;
(c) no request for information, notice, Governmental Agency inquiry,
demand letter, notice of violation or alleged violation of, non-compliance
or alleged non-compliance with or any Liability under, any Environmental
Law by or relating to operations or properties of the Company has been
received by or threatened in writing against the Company since the
Environmental Reference Date, or, to Seller's Knowledge, before the
Environmental Reference Date;
(d) the Company has not entered into or been subject to, and is not
currently a party or respondent to, any Orders nor are any administrative,
civil or criminal actions, suits, proceedings or investigations pending
or, to Seller's Knowledge, threatened, relating to any Environmental Law
affecting the Company;
(e) the Company has neither expressly nor by operation of law,
assumed or undertaken any Liability, including without limitation any
obligation for Costs of Remediation, of any other Person;
(f) the Company has not, and the Seller has no Knowledge of any
other Person who has, caused any Release or threatened Release of any
Hazardous Material on, in, under, or from the Leased Property nor does the
Seller have Knowledge of any such Release; and
(g) the Company has not received any written or, to the Seller's
Knowledge, other communication indicating or claiming potential Liability
for Damages or Costs of Remediation with respect to a Release or
threatened Release of any Hazardous Material.
SECTION 3.23. TAX MATTERS.
(a) Except as otherwise disclosed in Schedule 3.23(a), (i) the
Company has filed (or joined in the filing of) when due all Tax Returns
required by applicable law to be filed with respect to the Company and all
Taxes shown to be due on such Tax Returns have been paid; (ii) all such
Tax Returns were true, correct and complete as of the time of each such
filing; (iii) all Taxes relating to periods ending on or before the
Closing Date owed by the Company (whether or not shown on any Tax Return)
or to which the Company may be liable under Treasury Regulationsss.
1.1502-6 (or analogous state or foreign provisions) by virtue of having
been a member of any Affiliated Group (or other group filing on a combined
or unitary basis) at any time on or prior to the Closing Date, if required
to have been paid, have been paid (except for Taxes which are being
contested in good faith); (iv) any liability of the Company for Taxes not
yet due and payable, or which are being contested in good faith, has been
provided for on the financial statements of the Company in accordance with
generally accepted accounting principles; (v) there is no action, suit,
proceeding, investigation, audit or claim now pending against, or with
respect to, the Company in respect of any Tax or assessment, nor is any
claim for additional Tax or assessment asserted by any Governmental
Agency; (vi) since January 1, 2001, no claim has been made by any
Governmental Agency in a jurisdiction where the Company does not currently
file a Tax Return that it is or may be subject to Tax by such
jurisdiction, nor to the Seller's Knowledge is any such assertion
threatened; (vii) there is no outstanding request for any extension of
time within which to pay any Taxes or file any Tax Returns (viii) there
has been no waiver or extension of any applicable statute of limitations
for the assessment or collection of any Taxes of the Company; (ix) the
Company is not a party to any agreement, whether written or unwritten,
providing for the payment of Taxes, payment for Tax losses, entitlements
to refunds or similar Tax matters; (x) no ruling with respect to Taxes
(other than a request for determination of the status of a qualified
pension plan) has been requested by or on behalf of the Company; and (xi)
the Company has withheld and paid all material Taxes required to be
withheld in connection with any amounts paid or owing to any employee,
creditor, independent contractor or other third party.
(b) (i) no property of the Company is "tax-exempt use property"
within the meaning of Section 168(h) of the Code; (ii) the Company is not
a party to any lease made pursuant to former Section 168(f)(8) of the
Internal Revenue Code of 1954; (iii) the Company has not filed any
agreement or consent under Section 341(f) of the Code; (iv) the Seller is
not a "foreign person" within the meaning of Section 1445 of the Code; (v)
the Company has not been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code; and (vi) the
Company has withheld and paid all material Taxes required to be withheld
in connection with any amounts paid or owing to any employee, creditor,
independent contractor or other third party.
SECTION 3.24. INTERIM OPERATIONS.
Since the Balance Sheet Date, the Company has operated only in the
Ordinary Course of Business, and except as set forth in Schedule 3.24 the
Company has not:
(a) suffered any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of the
Company or any Basis therefor;
(b) changed its authorized or issued capital stock; granted any
stock option or right to purchase shares of capital stock; issued any
security convertible into such capital stock; or made any Equity
Distributions;
(c) incurred or become subject to, or agreed to incur or become
subject to, any material obligation or Liability, except in the Ordinary
Course of Business;
(d) mortgaged or pledged any of its assets, tangible or intangible,
except for Permitted Liens;
(e) sold or transferred or agreed to sell or transfer any of its
assets, or canceled or agreed to cancel any debts or claims except in the
Ordinary Course of Business;
(f) suffered any extraordinary losses or, except in the Ordinary
Course of Business, waived any material rights;
(g) terminated any contract, agreement, license, or other instrument
to which it is a party, except in the Ordinary Course of Business;
(h) increased the rate of compensation payable by it to any
employee, whose compensation is determined other than by multiplying the
number of hours worked by an hourly rate (a "SALARIED EMPLOYEE"), over the
rate being paid or accrued to them as of the Balance Sheet Date;
(i) made or agreed to make any accrual or arrangement for or payment
of bonuses or special compensation of any kind to any of its Salaried
Employees; or general increase in the salary or bonus payable or to become
payable by the Company to any Employee other than Salaried Employees
(other than increases granted to individual employees for merit, length of
service, change in position or responsibility or other reasons applicable
to specific Employees and not generally to a class or group thereof);
(j) entered into any agreement, written or oral, providing for the
employment of any Employee or any severance or termination benefits
payable or to become payable by the Company to any Employee;
(k) taken any action which would have constituted a breach of any
negative covenant of the Seller set forth in Article V or VI if such
negative covenant had applied since the Balance Sheet Date; or
(l) suffered any shortages of materials or supplies or any casualty
that individually or in the aggregate has had or could reasonably be
expected to have a Material Adverse Effect.
SECTION 3.25. BROKERS.
All negotiations relative to the Transaction Documents and the
transactions contemplated hereby and thereby have been carried on by the Seller
without the intervention of any other Person acting on their behalf in such
manner as to give rise to any valid claim by any such Person against the Company
or Purchaser for a finder's fee, brokerage commission or other similar payment
based on an arrangement with the Seller, with the exception of Baytree Capital
Associates, LLC.
SECTION 3.26. PRODUCT LIABILITY.
Except as disclosed in Schedule 3.26:
(a) to the Company's knowledge (without the requirement of due
inquiry) there has not been during the past six (6) years and there is no
notice, demand, claim, action, suit, inquiry, hearing, proceeding, notice
of violation or investigation of a civil, criminal or administrative
nature by or before any Governmental Agency against or involving any
product, substance or material (collectively, a "PRODUCT"), or class of
claims or lawsuits involving a Product manufactured, produced, distributed
or sold by or on behalf of the Company which is pending or, to the
Seller's Knowledge (without the requirement of due inquiry), threatened,
on behalf of the ultimate retail purchaser of any Product, resulting from
an alleged defect in design, manufacture, materials or workmanship of any
Product manufactured, produced, distributed or sold by or on behalf of the
Company, or any alleged failure to warn, or from any breach of express or
implied specifications or warranties or representations (a "PRODUCT
CLAIM");
(b) there has not been, nor is there under consideration or
investigation by the Company, any Product recall, rework, retrofit or
post-sale warning (collectively, "RECALLS") conducted by or on behalf of
the Company concerning any Products manufactured, produced, distributed or
sold by or on behalf of the Company or, to the Knowledge of the Seller,
any Recall conducted by or on behalf of any entity as a result of any
alleged defect in any Product supplied by the Company; and
(c) there is no Product Claim pending or, to the Seller's Knowledge
threatened, on behalf of a customer of the Company or any Governmental
Agency which individually or in the aggregate has had or could reasonably
be expected to have a Material Adverse Effect.
SECTION 3.27. BOOKS AND RECORDS OF THE COMPANY.
The books of account, minute books, stock record books, and other records
of the Company, all of which have been made available to the Purchaser, are
complete and correct, accurately reflect in reasonable detail the transactions
to which the Company is a party or by which its properties are bound in
accordance with GAAP and have been maintained in accordance with sound business
practices and the requirements of Section 13(b)(2) of the Securities Exchange
Act (regardless of the fact that the Company is not subject to that Section),
including the maintenance of an adequate system of internal controls. The minute
books of the Company contain accurate and complete records of all meetings held
of, and corporate action taken by, the stockholders, the boards of directors,
and committees of the board of directors of the Company, and no meeting of any
such stockholders, board of directors, or committee has been held for which
minutes have not been prepared and are not contained in such minute books. At
the Closing, all of those books and records will be delivered to the Purchaser.
SECTION 3.28. SUPPLIERS.
Schedule 3.28 lists the ten largest suppliers (measured by dollar volume)
of the Company during the last fiscal year ("MAJOR SUPPLIERS") and the amount of
business done with each Major Supplier in such year. As of the date of this
Agreement, except as set forth on Schedule 3.28, (a) the Company is not engaged
in a material dispute with any Major Supplier, (b) there has been no material
adverse change in the business relationship of the Company with any Major
Supplier since December 31, 2002, and (d) no Major Supplier has threatened in
writing any material modification or change in the business relationship with
the Company.
SECTION 3.29. CERTAIN PAYMENTS.
Since January 1, 2001, neither the Seller nor the Company nor any of their
respective directors, officers, agents, or Employees, or to the Seller's
Knowledge any other Person associated with or acting for or on behalf of the
Seller or the Company, has directly or indirectly (a) made any contribution,
gift, bribe, rebate, payoff, influence payment, kickback, or other payment to
any Person, private or public, regardless of form, whether in money, property,
or services (i) to obtain favorable treatment in securing business, (ii) to pay
for favorable treatment for business secured, (iii) to obtain special
concessions or for special concessions already obtained, for or in respect of
the Company, or (iv) in violation of any Legal Requirement, or (b) established
or maintained any fund or asset that has not been recorded in the books and
records of the Company.
SECTION 3.30. ACCOUNTS .
Schedule 3.30 hereto correctly identifies each bank account, brokerage
account and safety deposit box maintained by or on behalf or for the benefit of
the Company and the name of each person with any power or authority to act with
respect thereto.
SECTION 3.31. DISCLOSURE.
(a) No representation or warranty of the Seller in this Agreement
omits to state a material fact necessary to make the statements herein or
therein, in light of the circumstances in which they were made, not
misleading.
(b) There is no fact known to the Seller that has specific
application to either the Seller or the Company (other than general
economic or industry conditions) and that materially adversely affects or,
as far as the Seller can reasonably foresee, materially threatens the
assets, business, prospects, financial condition, or results of operations
of the Company that has not been set forth in this Agreement or the
Schedules hereto.
SECTION 3.32. INVESTMENT INTENT; STATUS.
The Stock Consideration will be acquired hereunder solely for the account
of the Seller for investment, and not with a view to the resale or distribution
thereof in violation of the Securities Act, subject to the right of the Seller
to sell, assign, transfer or distribute any or all of the Stock Consideration to
any Person which is an Affiliate of the Seller. Seller is an "accredited
investor" within the meaning of Regulation 501 promulgated under the Securities
Act.
SECTION 3.33. NO CHANGE TO BUSINESS.
Since the date of the Balance Sheet, there has been no material change to
the conduct or operation of the Business.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Seller as follows:
SECTION 4.1. AUTHORITY OF PURCHASER.
The Purchaser is a corporation duly organized, validly existing, and in
good standing under the laws of the State of California. The Purchaser has full
corporate power and authority to execute and deliver the Transaction Documents,
the execution and delivery by Purchaser of the Transaction Documents and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action on the part of the
Purchaser, and this Agreement constitutes, and the other Transaction Documents
when executed and delivered by the parties thereto will constitute, the legal,
valid and binding obligation of the Purchaser enforceable against the Purchaser
in accordance with their terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws from time to time
in effect which affect creditors' rights generally, and by legal and equitable
limitations on the enforceability of specific remedies. The Purchaser has the
requisite corporate power and authority to own its properties and to carry on
the business presently being conducted by it.
SECTION 4.2. NO CONFLICT OR VIOLATION.
Neither the execution and delivery of the Transaction Documents by the
Purchaser, nor the consummation or performance of any of the transactions
contemplated hereby or thereby will, directly or indirectly (with or without
notice or lapse of time):
(a) contravene, conflict with, or result in a violation of (i) any
provision of the Articles of Incorporation or By-Laws of the Purchaser, or
(ii) any resolution adopted by the board of directors or the stockholders
of the Purchaser;
(b) contravene, conflict with, or result in a violation of, or give
any Governmental Agency or other Person the right to challenge any of the
transactions contemplated hereby or to exercise any remedy or obtain any
relief under, any Legal Requirement to which the Purchaser may be subject;
(c) contravene, conflict with, or result in a violation or breach of
any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance
of, or to cancel, terminate, or modify, any material contract, lease, or
permit of the Purchaser; or
(d) except for filings under the Securities Act, and the Securities
Exchange Act, require the consent, approval, or authorization of, or
registration or filing with, any Governmental Agency or any other Person
on behalf of Purchaser;
provided, however, that no representation or warranty is made hereby by the
Purchaser with respect to the effect of antitrust laws or regulations.
SECTION 4.3. LITIGATION.
There are no actions, causes of action, claims, suits, proceedings or
Orders pending or, to the actual knowledge, after reasonable inquiry, of the
executive officers of the Purchaser, threatened against the Purchaser at law, in
equity, in admiralty or otherwise, or before or by any Governmental Agency,
which seek to restrain or enjoin the consummation of the transactions
contemplated hereby.
SECTION 4.4. BROKERS.
All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried on by the Purchaser without the
intervention of any other Person acting on its behalf in such manner as to give
rise to any valid claim by any such Person against the Seller or its Affiliates
(other than, after the Closing, the Company) for a finder's fee, brokerage
commission or other similar payment based on an arrangement with the Purchaser.
SECTION 4.5. STOCK CONSIDERATION.
The issuance of the Stock Consideration to the Seller has been duly
authorized and, when issued in accordance with the terms of this Agreement, will
be validly issued, fully paid and nonassessable.
SECTION 4.6. SEC REPORTS AND FINANCIAL STATEMENTS.
The Purchaser has filed with the Securities and Exchange Commission true
and complete copies of the Purchaser's Annual Report on Form 10-KSB for the year
ended June 30, 2003 and all forms, reports, schedules, statements and other
documents required to be filed by the Purchaser under the Securities Act, or the
Securities Exchange Act, from and after the filing thereof (such annual report,
forms, reports, schedules, statements and other documents, including any
financial statements or schedules included therein, the "PURCHASER SEC
Documents"). The Purchaser SEC documents, at the time filed, (a) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and (b) complied in all material respects with the applicable
requirements of the Securities Exchange Act, and the Securities Act, as the case
may be, and the applicable rules and regulations promulgated thereunder. There
have not been any amendments to the Purchaser SEC Documents since the initial
filing thereof. The financial statements of the Purchaser contained in the
Purchaser SEC Documents have been prepared in accordance with GAAP applied on a
consistent basis during the period involved (except as may be indicated in the
notes thereto or, in the case of the unaudited statements, as permitted by Rule
10-01 of Regulation S-X promulgated by the Securities and Exchange Commission)
and fairly present (subject, in the case of the unaudited statements, to normal,
recurring audit adjustments) the consolidated financial position of the
Purchaser and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended.
SECTION 4.7. INVESTMENT INTENT; STATUS.
The Stock will be acquired hereunder solely for the account of the
Purchaser for investment, and not with a view to the resale or distribution
thereof in violation of the Securities Act, subject to the right of the
Purchaser and any such designees to sell, assign, transfer or distribute any or
all of the Stock to any Person which is an Affiliate of the Purchaser. Purchaser
is an "accredited investor" within the meaning of Regulation 501 promulgated
under the Securities Act.
ARTICLE V.
CERTAIN COVENANTS OF THE SELLER
The Seller covenants with the Purchaser that from and after the date
hereof through the Closing Date (except as consented to or approved by the
Purchaser in writing):
SECTION 5.1. CONDUCT OF BUSINESS.
The Seller shall cause the Company:
(a) to operate only in the Ordinary Course of Business and to
continue to maintain, in all material respects, its properties in
accordance with present practices in a condition suitable for their
current use. For purposes hereof, any transfer of funds from the Company
to the Seller for the purposes of paying expenses related to the AKS
Litigation shall be considered out of the Ordinary Course of Business
except to the extent that an equivalent receivable is recorded on the
books of the Company;
(b) to use commercially reasonable efforts to keep available
generally the services of its present officers and Employees, and preserve
generally the present relationships with Persons having business dealings
with it;
(c) not to make any sale, assignment, transfer, abandonment, or
other conveyance of any of its assets or any part thereof;
(d) to keep in full force and effect insurance comparable in amount
and scope to coverage maintained by it (or on behalf of it) on the date
hereof;
(e) not to settle, release or forgive any material claim or
litigation or waive any material right; provided, however, that the
Purchaser shall negotiate in good faith to permit the Company to resolve
the AKS Litigation; provided further that the Company may settle the AKS
Litigation without the consent of the Purchaser so long as such settlement
does not impact in any way the Company's right to use the "Aladdin" ▇▇▇▇;
(f) not to make, change or revoke, or permit to be made, changed or
revoked, without the consent of the Purchaser, which shall not be
unreasonably withheld, any material election or method of accounting with
respect to Taxes;
(g) not to enter into, or permit to be entered into, without the
consent of the Purchaser any closing or other agreement or settlement with
respect to Taxes affecting or relating to the Company;
(h) not to enter into or amend any Plan and not to grant any
increase in the salary or other compensation of any Employee, except as
would not constitute a breach of Section 3.24;
(i) Except as set forth in Schedule 5.1, not to enter into any
employment Contract with any director, executive officer or Employee of
the Company or make any loan to, or enter into any material transaction of
any other nature with, any director, executive officer or Employee of the
Company;
(j) Except as set forth in Schedule 5.1, not to acquire, lease or
dispose or agree to acquire, lease or dispose of any capital assets;
(k) not to change its authorized or issued capital stock; grant any
stock option or right to purchase shares of capital stock; issue any
security convertible into such capital stock; or make any Equity
Distribution;
(l) not to incur any Indebtedness other than working capital
borrowings in the Ordinary Course of Business;
(m) not to incur, or suffer to exist, any Lien on the assets of the
Company other than Permitted Liens;
(n) not to take any action that would cause any of the
representations and warranties made by the Seller in this Agreement not to
remain true and correct; and
(o) to inform the Purchaser of the occurrence of any event which
could reasonably be expected to result in a breach of any representation
or warranty contained in Article III.
SECTION 5.2. INFORMATION AND ACCESS.
The Seller shall permit and cause the Company to permit representatives of
the Purchaser to have reasonable access during normal business hours, and in a
manner so as not to interfere with the normal operations of the Company, to all
premises, properties, personnel, accountants, books, records, contracts and
documents of the Company.
SECTION 5.3. CONFIDENTIALITY AGREEMENTS.
At the Closing, the Seller shall assign to the Purchaser the benefits of
all confidentiality agreements, if any, relating to the possible sale of the
Company or any material portion of the assets thereof to the extent such
assignment is not expressly prohibited by the terms of such agreements.
SECTION 5.4. BEST EFFORTS.
Upon the terms and subject to the conditions of this Agreement, each of
the parties hereto shall use reasonable best efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary, proper
or advisable consistent with applicable law to consummate and make effective in
the most expeditious manner practicable the transactions contemplated hereby;
provided, however, that nothing in this covenant or any other provision of this
Agreement or any other Transaction Document shall require the Purchaser to agree
to any divestiture, hold-separate or other similar agreement or requirement.
SECTION 5.5. NO SHOP.
(a) The Seller shall not and shall cause the Company not to,
directly or indirectly, through any representative or otherwise, solicit
or entertain offers from, negotiate with or in any manner encourage,
discuss, accept, or consider any proposal of any other Person relating to
the acquisition of the Stock or the Company, its assets or business, in
whole or in part, whether directly or indirectly, through purchase,
merger, consolidation, or otherwise (other than sales of inventory in the
ordinary course); and
(b) The Seller shall immediately notify the Purchaser regarding any
contact between the Seller, the Company or their respective
representatives and any other Person regarding any such offer or proposal
or any related inquiry.
SECTION 5.6. NOTICES OF CERTAIN EVENTS.
The Seller shall promptly notify the Purchaser of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement or any other Transaction
Document;
(b) any notice or other communication from any Governmental Agency
in connection with the transactions contemplated by this Agreement or any
other Transaction Document; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge, threatened against, relating to or
involving or otherwise affecting the Seller or the Company if pending on
the date of this Agreement, would have been required to have been
disclosed pursuant to Section 3.21 or that relate to the consummation of
the transactions contemplated by this Agreement or any other Transaction
Document.
SECTION 5.7. NO DUPLICATES.
Neither the Seller nor any of its Affiliates shall directly or indirectly
retain, use or transfer any copies, duplicates or derivative versions of any of
the Company's databases or mailing lists (whether in postal or e-mail form) from
and after the Closing Date without the Purchaser's prior express written
consent; provided, however that the Seller may continue to use the Seller's own
databases and mailing lists which contain some limited overlap of information
with that contained in the Company's databases and mailing lists, so long as the
Seller does not take any action inconsistent with the Purchaser's sole rights in
the Company's databases and mailing lists.
ARTICLE VI.
CERTAIN COVENANTS AND AGREEMENTS
SECTION 6.1. TRANSFER TAXES.
All sales, recording, transfer, stamp, registration, conveyance, value
added, use, or other similar Taxes, duties, excise, governmental charges or fees
(including penalties and interest) imposed as a result of the sale of the Stock
to the Purchaser or the issuance of the Stock Consideration to the Seller
pursuant to this Agreement shall be borne by the Seller. The Purchaser shall
promptly remit any refunds of such items to the Seller. The Seller and the
Purchaser, to the extent required by Legal Requirements, shall prepare and file
all Tax Returns and other documentation on a timely basis with respect to any
such Taxes or fees.
SECTION 6.2. OBLIGATION TO FILE TAX RETURNS.
The Seller shall cause to be prepared and filed all Tax Returns with the
appropriate federal, state, local and foreign Governmental Agencies relating to
the Company for periods ending on or prior to the Closing Date and shall pay all
Taxes due with respect to such Tax Returns. The Purchaser shall cause to be
prepared and filed all Tax Returns required to be filed by the Company for
periods after to the Closing Date and shall pay all Taxes due with respect to
such Tax Returns.
SECTION 6.3. CERTAIN PROVISIONS RELATING TO CONSENTS.
The Seller shall use commercially reasonable efforts prior to and after
the Closing Date to obtain all consents that are required in connection with the
transactions contemplated by this Agreement and the other Transaction Documents.
The Seller shall not obtain any consent that will affect the Purchaser or the
Company to the economic detriment of either, including any modification of any
Contract, Lease or Permit. The Purchaser shall cooperate as reasonably necessary
or desirable to secure the third party consents, including, without limitation,
providing to such third party information, including financial information;
provided, however, that neither the Purchaser nor the Company shall be required
to incur any liability or obligation in connection therewith, other than for the
underlying matter for which such consent was obtained as in effect immediately
prior to such consent.
SECTION 6.4. NONDISCLOSURE; NONCOMPETITION; NON-SOLICITATION.
(a) Except as required by law, from and after the Closing Date, the
Seller shall not use, divulge, furnish or make accessible to anyone any
proprietary, material non-public, confidential or secret information to
the extent relating to the Company (including, without limitation,
customer lists, supplier lists and pricing and marketing arrangements with
customers or suppliers) or the Business, and the Seller shall cooperate
reasonably with the Purchaser in preserving such proprietary, confidential
or secret aspects of the Company and the Business. Notwithstanding the
foregoing, nothing in this Agreement shall prohibit the disclosure of the
tax treatment and tax structure, each as defined in Treasury Regulations
Section 1.6011-4, of the transaction (but no other details about the
matters covered by this Agreement, including, without limitation, the
identities of the parties except as may be required by legal rule,
regulation or legal process).
(b) Prior to the end of the Third Earn-Out Period, Seller shall not
engage in Competitive Business Activities. Subject to Section 6.9, the
Seller shall not, directly or indirectly, for a period of three (3) years
from the Closing Date, (i) solicit for hire or enter into any contractual
arrangement with any Employee without the prior written consent of the
Purchaser unless such Employee has not been employed by the Company or the
Purchaser for a period of two (2) years; or (ii) call on or solicit any of
the customers or suppliers of the Business or make known the names and
addresses of such customers or suppliers or any information relating in
any manner to the Business or the Company's relationships with such
customers or suppliers. The Seller agrees that a violation of this Section
will cause irreparable injury to the Purchaser, and the Purchaser shall be
entitled, in addition to any other rights and remedies it may have at law
or in equity, to an injunction enjoining and restraining the Seller from
doing or continuing to do any such violation and any other violations or
threatened violations of this Section.
(c) The Seller acknowledges and agrees that the covenants set forth
in this Section are reasonable and valid in scope and in all other
respects. If any of such covenants is found to be invalid or unenforceable
by a final determination of a court of competent jurisdiction (i) the
remaining terms and provisions hereof shall be unimpaired and (ii) the
invalid or unenforceable term or provision shall be deemed replaced by a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or
provision. In the event that, notwithstanding the first sentence of this
paragraph (c), any of the provisions of this Section relating to scope of
the covenants contained therein or the nature of the business restricted
thereby shall be declared by a court of competent jurisdiction to exceed
the maximum restrictiveness such court deems enforceable, such provision
shall be deemed to be replaced herein by the maximum restriction deemed
enforceable by such court.
SECTION 6.5. SECTION 338(H)(10) ELECTION.
(a) With respect to the sale of the Stock, in the event that Seller
is unable to obtain assurances from its tax advisors and if so requested
by the Purchaser upon notice to the Seller on or before the Closing Date,
the Seller and the Purchaser shall jointly make a Section 338(h)(10)
Election (as hereinafter defined) in accordance with applicable laws and
under any comparable provision of state, local or foreign law for which a
separate election is permissible and as set forth herein. The Purchaser
and the Seller shall take all necessary steps to properly make a Section
338(h)(10) Election in accordance with applicable laws and under any
comparable provision of state, local or foreign law for which a separate
election is permissible. The Purchaser and the Seller agree to cooperate
in good faith with each other in the preparation and timely filing of any
Tax Returns required to be filed in connection with the making of such an
election, including the exchange of information and the joint preparation
and filing of Form 8023 and related schedules. The Purchaser and the
Seller agree to report the transfers under this Agreement consistent with
such elections and shall take no position contrary thereto unless required
to do so by applicable tax law pursuant to a determination as defined in
Section 1313(a) of the Code.
(b) The Purchaser shall be responsible for the preparation and
filing of all Section 388 Forms (as hereinafter defined) in accordance
with applicable tax laws and the terms of this Agreement and shall deliver
such Section 338 Forms to the Seller at least 30 days prior to the date
such Section 338 Forms are required to be filed. Seller shall execute and
deliver to the Purchaser such documents or forms (including executed
Section 338 Forms) as are requested and are required by any laws in order
to properly complete the Section 338 Forms at least 20 days prior to the
date such Section 338 Forms are required to be filed. The Seller shall
provide the Purchaser with such information as the Purchaser reasonably
requests in order to prepare the Section 338 Forms by the later of 30 days
after the Purchaser's request for such information or 30 days prior to the
date on which the Purchaser is required to deliver such forms to the
Seller.
(c) The Purchase Price, liabilities of the Company and other
relevant items shall be allocated in accordance with Section 338(b)(5) of
the Code and the Treasury Regulations thereunder. Purchaser shall, at its
option, determine the fair market value of the assets of the Company (the
"VALUATION"). The Valuation shall be binding on the Purchaser and the
Seller unless the Seller shall, within 10 days of delivery to the Seller
of the Valuation, conclude in good faith that the Valuation is manifestly
unreasonable. The Purchaser shall be under no obligation to have such
Valuation prepared by an independent appraiser. All values contained in
the Valuation shall be used by each party in preparing the forms referred
to in Section 6.5(b) above and all other relevant Tax Returns.
(d) "SECTION 338 FORMS" means all returns, documents, statements,
and other forms that are required to be submitted to any federal, state,
county or other local Tax authority in connection with a Section
338(h)(10) Election. Section 338 Forms shall include, without limitation,
any "statement of section 338 election" and IRS Form 8023 (together with
any schedules or attachments thereto) that are required pursuant to Treas.
Regs. Section 1.338-1 or Treas. Regs. Section 1.338(h)(10)-1 or any
successor provisions.
(e) Notwithstanding any other provision of this Agreement to the
contrary, the Seller agrees that any income and gain recognized as a
result of, and in accordance with, the making of the Section 338(h)(10)
Election will be included in the consolidated federal income tax return of
the Seller's consolidated group and any resulting tax liability will be
paid by the Seller, as the common parent of the Seller's consolidated
group. The Purchaser agrees that it will pay and be responsible for, and
will indemnify and save the Seller harmless from, any reasonable costs
incurred by the Seller (including but not limited to costs incurred in
connection with the preparation or restatement of any Tax Return) or Taxes
imposed on the Seller by any federal, state or local Tax authority, in
each case resulting from the Purchaser's election to treat the purchase of
the Stock as an asset acquisition under the statutes of any such Tax
authority.
(f) "SECTION 338(H)(10) ELECTION" means an election described in
Section 338(h)(10) of the Code with respect to Purchaser's acquisition of
Shares pursuant to this Agreement. Section 338(h)(10) Election shall
include any corresponding election under state or local law pursuant to
which a separate election is permissible with respect to Purchaser's
acquisition of Shares pursuant to this Agreement.
SECTION 6.6. ONGOING TAX/AUDIT COOPERATION.
(a) If the Closing occurs, the Seller and the Purchaser shall
cooperate fully with each other and make available or cause to be made
available to each other in a timely fashion such Tax data, prior Tax
Returns and filings and other information as may be reasonably required
for the preparation by the Purchaser or the Seller of any Tax Returns,
elections, consents or certificates required to be prepared and filed by
the Purchaser or the Seller and any audit or other examination by any
Governmental Agency, or judicial or administrative proceeding relating to
liability for Taxes. Without limiting the generality of the foregoing,
each of the Purchaser and the Seller shall retain copies of all Tax
Returns, supporting work schedules and other records relating to tax
periods or portions thereof ending prior to or including the Closing Date
until the later of (i) the expiration of the statute of limitations for
the taxable periods to which such Tax Returns and other documents relate,
without regard to extensions except for extensions obtained by that party
or its Affiliates or extensions regarding which such party has received
written notice from another party, or (ii) six years following the due
date (without extensions) for such Tax Returns; provided, however, that no
party will dispose of its copies without first notifying the other parties
and providing such other parties with a reasonable period of time to
assume possession of such copies. In addition, without limiting the
generality of the foregoing, each party shall make its personnel and those
of its Affiliates reasonably available for deposition and testimony in any
tax controversy or proceeding. The Purchaser shall cooperate with the
Seller to the extent reasonably necessary for the Seller's preparation of
its financial statements and Tax Returns and in the sharing of financial
and accounting information with respect thereto or with respect to any
audit, examination, or other proceeding with respect thereto.
(b) If the Closing occurs, the Seller and the Purchaser shall
cooperate fully with each other and make available or cause to be made
available to each other in a timely fashion such financial data and other
information as may be reasonably required for the preparation by the
Purchaser and the Seller of their year-end audits and Form 10-KSB filings
for their fiscal year ended December 31, 2003 and June 30, 2004,
respectively, and any other filings required to be prepared and filed by
the Seller or Purchaser by any Governmental Agency. Without limiting the
generality of the foregoing, the Purchaser and the Seller shall retain
copies of all financial data and other financial records relating to the
Company. The Purchaser and Seller shall cooperate to the extent reasonably
necessary for the preparation of its financial statements and accounting
information with respect thereto or with respect to any audit.
(c) No information or documentation provided pursuant to this
Section 6.6 shall be disclosed by the recipient thereof to any Person
except its accountants and relevant tax authorities or as required by
applicable law (in which case the disclosing party shall consult in good
faith with the other party prior to making any such disclosure).
SECTION 6.7. TAX RELATED COVENANTS.
Without the prior written consent of the Purchaser, neither the Company
nor any of its Subsidiaries shall make or change any election, change an annual
accounting period, adopt or change any accounting method, file any amended Tax
Return, enter into any closing agreement, settle any Tax claim or assessment
relating to the Company or any of its Subsidiaries, surrender any right to claim
a refund of Taxes, consent to any extension or waiver of the limitation period
applicable to any Tax claim or assessment relating to the Company or any of its
Subsidiaries, or take any other similar action relating to the filing of any Tax
Return or the payment of any Tax, if such election, adoption, change, amendment,
agreement, settlement, surrender, consent or other action would have the effect
of increasing the Tax liability of the Company or any of its Subsidiaries for
any period ending after the Closing Date or decreasing any Tax attribute of the
Company or any of its Subsidiaries existing on the Closing Date.
SECTION 6.8. FURTHER ASSURANCES.
Upon the request of the Purchaser at any time after the Closing Date, the
Seller shall forthwith execute and deliver such further instruments of
assignment, transfer, conveyance, endorsement, direction or authorization and
other documents as the Purchaser may reasonably request in order to perfect
title of the Purchaser and its successors and assigns to the Stock or otherwise
to effectuate the purposes of this Agreement.
SECTION 6.9. PURCHASER CONDUCT OF BUSINESS.
(a) Purchaser agrees to take all reasonable steps necessary and
required to allow the Company to meet the applicable maximum Earn-Out
Payment for each of the Earn-Out Periods. In furtherance thereof and not
in limitation thereto, except as otherwise agreed to by Seller, the
Purchaser, until the termination of the Third Earn-Out Period, covenants:
(i) to continue to operate the Business and maintain the
Company as a separate subsidiary, allowing it to conduct its
business in the ordinary course and not to materially change its
operations, including, but not limited to, not discontinuing any of
the Company's products, services, business models or development
efforts.
(ii) to not take any action which would materially adversely
affect the ability of the Company to earn and realize the Aladdin
Revenue, including, but not limited to, (A) changing pricing or
business models, (B) not properly staffing the Company, in
accordance with historical staffing levels and with current revenue
levels, and (C) not providing sufficient marketing resources or
advertising budgets, in accordance with historical level and with
current revenue levels.
(iii) to use its best efforts to preserve the Company's
business organization, sales channel and distribution network, to
keep available the services of the Company's present officers and
key employees, to preserve the good will of those having business
relationships with the Company and to continue its existing
relationships with the Company's lenders, suppliers, customers and
key employees.
(b) Seller shall provide notice to Purchaser promptly upon the
occurrence of any breach of this Section 6.9, whereupon the Purchaser
shall have a period of 30 days to correct such breach. In the event the
breach is not cured within such 30 day period, the balance of the Earn-Out
Payments not yet earned during then-current and future Earn-Out Periods
shall be deemed earned, and shall be paid to the Seller immediately.
(c) Notwithstanding anything to the contrary herein, Seller and
Purchaser may, from time to time, agree in writing, to modify the
provisions of this so that it better reflects, in light of changing
business circumstances, the intent of the parties to allow the Company to
achieve the maximum amount of the Earn Out Payment.
SECTION 6.10. MANAGEMENT OF SELLER.
Notwithstanding any other provision in this Agreement or the Transaction
Documents, Purchaser acknowledges that ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ may continue to provide services to Seller as related to (a)
serving on Seller's Board of Directors, (b) Seller's on-going Securities Act
reporting requirements, (c) management of the assets of the Seller, (d) any
activities necessarily related to the AKS Litigation, (e) the sale of Seller's
Aladdin Enterprise Systems subsidiary, and (f) distribution of the assets of the
Seller (including the establishment of a trust for the benefit of Seller's
stockholders. Purchaser agrees that no such acts on the part of ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall be deemed to be a breach of this
Agreement, any of the Transaction Documents or a breach of any duty any of the
foregoing might owe to Purchaser or the Company as employees.
SECTION 6.11. USE OF ALADDIN NAME.
Notwithstanding anything to the contrary contained herein, Seller may
continue to use the name "Aladdin" as part of its corporate name for a
reasonable period of time, as solely determined by the Seller.
SECTION 6.12. TRANSFER OF PURCHASER PRODUCTS.
On the Closing Date, Purchaser shall assign to the Company, Purchaser's
HiJaak and Net Accelerator software lines for sale by the Company, along with
such other product lines as may be mutually agreed by the parties.
SECTION 6.13. RESOLUTION OF AKS LITIGATION.
The parties agree that conduct and resolution of the AKS Litigation shall
be as follows:
(a) Seller shall bear all of its costs, and the costs of the
Company, incurred in the course of the AKS Litigation until the Closing
Date. Thereafter, notwithstanding Sections 10.1 and 10.2 herein, Purchaser
shall bear all costs of the AKS Litigation.
(b) Upon a settlement of the AKS Litigation, the proceeds of such
settlement shall be distributed:
(i) First, to payment of Seller's reasonable costs and
expenses (including the reasonable costs and expenses of the Company
prior to the Closing), incurred in the course of the AKS Litigation;
(ii) Second, to payment of Purchaser's reasonable costs and
expenses (including the reasonable costs and expenses of the Company
after to the Closing) incurred in the course of the AKS Litigation;
and
(iii) Third, any remaining proceeds shall be divided evenly
between Seller and Purchaser.
ARTICLE VII.
CONDITIONS TO SELLER'S OBLIGATIONS
The obligation of the Seller to consummate the transactions contemplated
by this Agreement is subject to the satisfaction (unless waived in writing by
the Seller) of each of the following conditions on or prior to the Closing Date:
SECTION 7.1. REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Purchaser contained in this
Agreement which are qualified as to materiality shall be true and correct on and
as of the Closing Date as though such representations and warranties were made
anew on and as of the Closing Date, and all other representations and warranties
of the Purchaser contained in this Agreement shall be true and correct in all
material respects on and as of the Closing Date as though such representations
and warranties were made anew on and as of the Closing Date. The Purchaser shall
have delivered to the Seller a certificate of its President or a Vice President,
dated the Closing Date, to the foregoing effect.
SECTION 7.2. COMPLIANCE WITH AGREEMENT.
The Purchaser shall have performed and complied with all covenants to be
performed or complied with by it on or prior to the Closing Date. The Purchaser
shall have delivered to the Seller a certificate of its President or a Vice
President, dated the Closing Date, to the foregoing effect.
SECTION 7.3. NO VIOLATION OF ORDERS.
No preliminary or permanent injunction or other order issued by any court
or Governmental Agency, nor any statute, rule, regulation, decree or executive
order promulgated or enacted by any Governmental Agency that declares this
Agreement or any other Transaction Document invalid or unenforceable in any
respect or which prevents the consummation of the transactions contemplated
hereby or thereby shall be in effect; and no action or proceeding before any
court or Governmental Agency, shall have been instituted or threatened by any
Governmental Agency or by any other person or entity, which seeks to prevent or
delay the consummation of the transactions contemplated by this Agreement or any
other Transaction Document or which challenges the validity or enforceability
hereof or thereof.
SECTION 7.4. CORPORATE DOCUMENTS.
The Seller shall have received from the Purchaser certified copies of the
resolutions duly adopted by the board of directors of the Purchaser approving
the execution and delivery of this Agreement and the other Transaction Documents
and the consummation of the transactions contemplated hereby and thereby, and
such resolutions shall be in full force and effect as of the Closing Date.
SECTION 7.5. TRANSACTION DOCUMENTS.
The Purchaser shall have executed and delivered to the Seller an Escrow
Agreement in substantially the form set forth in Exhibit E (the "ESCROW
AGREEMENT"), and a Registration Rights Agreement in substantially the form
attached hereto as Exhibit F (the "REGISTRATION RIGHTS AGREEMENT").
SECTION 7.6. EMPLOYMENT AGREEMENTS.
The Purchaser shall have agreed to engage ▇▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇
on substantially the terms set forth in those Executive Employment Agreements
set forth as Exhibit G and H.
SECTION 7.7. OPINION OF COUNSEL.
Seller shall have received an opinion of ▇▇▇▇▇▇ & Diamond LLP, counsel to
the Purchaser, in the form of Exhibit I, with such customary changes and
modifications as the Purchaser shall reasonably request in light of the nature
of the transactions contemplated hereby.
ARTICLE VIII.
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligation of the Purchaser to consummate the transactions
contemplated by this Agreement is subject to the satisfaction (unless waived in
writing by the Purchaser) of each of the following conditions on or prior to the
Closing Date:
SECTION 8.1. REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Seller contained in this
Agreement which are qualified as to materiality or Material Adverse Effect shall
be true and correct on and as of the Closing Date as though such representations
and warranties were made anew on and as of the Closing Date (unless such
representations are expressly made as of some other date, in which case they
shall be true and correct as of such date), and all other representations and
warranties of the Seller contained in this Agreement shall be true and correct
in all material respects on and as of the Closing Date as though such
representations and warranties were made anew on and as of the Closing Date
(unless such representations are expressly made as of some other date, in which
case they shall be true and correct as of such date). The Seller shall have
delivered to the Purchaser a certificate of its President or Vice President,
dated the Closing Date, to the foregoing effect.
SECTION 8.2. COMPLIANCE WITH AGREEMENT.
The Seller shall have performed and complied with all covenants to be
performed or complied with by it on or prior to the Closing Date. The Seller
shall have delivered to the Purchaser a certificate of its President or Vice
President, dated the Closing Date, to the foregoing effect.
SECTION 8.3. CONSENTS.
All consents, Permits, authorizations, approvals, waivers and amendments
which are listed on Schedule 8.3 hereto shall have been obtained.
SECTION 8.4. CORPORATE DOCUMENTS.
The Purchaser shall have received from the Seller certified copies of the
resolutions duly adopted by the board of directors of the Seller approving the
execution and delivery of this Agreement and the other Transaction Documents and
the consummation of the transactions contemplated hereby and thereby, and such
resolutions shall be in full force and effect as of the Closing Date.
SECTION 8.5. EMPLOYEES.
At least 50% of the persons employed by the Company on the date first set
forth above shall continue to be employed by the Company as of the Closing Date.
Mssrs. ▇▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall have agreed to accept employment by
Purchaser on substantially the terms set forth in those Executive Employment
Agreements set forth as Exhibit G and H.
SECTION 8.6. MATERIAL ADVERSE EFFECT.
Since the date of this Agreement, there shall not have occurred (i) a
Material Adverse Effect or (ii) any event which could reasonably be expected to
result in a Material Adverse Effect.
SECTION 8.7. NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS.
There must not have been made or threatened by any Person any claim
asserting that such Person (a) is the holder or the beneficial owner of, or has
the right to acquire or to obtain beneficial ownership of, any Stock of, or any
other voting, equity, or ownership interest in, the Company, or (b) is entitled
to all or any portion of the Purchase Price payable for the Stock.
SECTION 8.8. OPINION OF COUNSEL.
Purchaser shall have received an opinion of Cyruli ▇▇▇▇▇▇ & Zizmor, LLP,
counsel to the Seller, in the form attached as Exhibit J, with such customary
changes and modifications as the Seller shall reasonably request in light of the
nature of the transactions contemplated hereby ("SELLER'S OPINION OF COUNSEL").
SECTION 8.9. NO VIOLATION OF ORDERS.
No preliminary or permanent injunction or other order issued by any court
or Governmental Agency, nor any statute, rule, regulation, decree or executive
order promulgated or enacted by any Governmental Agency that declares this
Agreement or any other Transaction Document invalid or unenforceable in any
respect or which prevents the consummation of the transactions contemplated
hereby or thereby shall be in effect; and no action or proceeding before any
court or Governmental Agency, shall have been instituted or threatened by any
Governmental Agency or by any other person or entity, which seeks to prevent or
delay the consummation of the transactions contemplated by this Agreement or any
other Transaction Document or which challenges the validity or enforceability
hereof or thereof.
SECTION 8.10. DUE DILIGENCE.
The Purchaser shall have received all business, legal, accounting and
other due diligence materials requested from the Company and the Seller, shall
have completed the review of said due diligence to its satisfaction, and such
due diligence shall be reasonably satisfactory to the Purchaser in its sole
discretion.
SECTION 8.11. TRANSACTION DOCUMENTS.
The Seller shall have executed and delivered to the Purchaser the
Registration Rights Agreement, the Pledge Agreement and the Escrow Agreement.
SECTION 8.12. RESIGNATIONS.
The Purchaser shall have received the resignations, effective as of the
Closing Date, of each of the directors of the Company.
SECTION 8.13. OPTIONS AND WARRANTS.
The Seller shall have caused any and all outstanding options and warrants
to purchase capital stock of the Company or any of its subsidiaries to have been
(i) cancelled in accordance with their terms or (ii) exercised in accordance
with their terms, and in the case of (ii) the Seller shall have repurchased all
shares of its capital stock underlying such exercised options.
SECTION 8.14. NO LIENS.
There shall be no outstanding Liens on or in respect of any assets of the
Company or the Business, and the Seller shall have provided evidence of such
absence of Liens to the Purchaser in form acceptable to the Purchaser in its
sole discretion.
SECTION 8.15. TAX SHARING AGREEMENTS.
Any tax sharing agreements among the Company or any Subsidiaries and any
other Person shall have been terminated as of the Closing Date with no further
liability to the Purchaser, the Company or any such Subsidiary.
ARTICLE IX.
THE CLOSING
SECTION 9.1. THE CLOSING.
The Closing of the transactions contemplated hereby (the "CLOSING") shall
be held two Business Days after each of the conditions precedent set forth in
Articles VII and VIII have been satisfied or waived by the party entitled to the
benefit thereof and in any event within 35 days following the date first set
forth above (the "CLOSING DATE") or at such other time as the parties may
mutually agree. The Closing shall be held at the offices of ▇▇▇▇▇▇ & Diamond
LLP, ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ or at such
other place as the parties may mutually agree. At the Closing, all of the
transactions provided for in Article II hereof shall be consummated on a
substantially concurrent basis.
SECTION 9.2. DELIVERIES BY THE SELLER AT THE CLOSING.
At the Closing, the Seller shall deliver, or cause to be delivered, to the
Purchaser, the following items:
(a) the duly executed officer's certificates and certified
resolutions referred to in Sections 8.1, 8.2, and 8.4;
(b) the consents listed on Schedule 8.3;
(c) Seller's Opinion of Counsel;
(d) the resignations referred to in Section 8.12.
(e) the Escrow Agreement, the Pledge Agreement and the Registration
Rights Agreement duly executed by the Seller;
(f) a certificate or certificates representing the Stock, duly
endorsed in blank for transfer or accompanied by appropriate powers duly
executed in blank; and
(g) all other previously undelivered documents that the Seller is
required to deliver to the Purchaser pursuant to this Agreement.
SECTION 9.3. DELIVERIES BY THE PURCHASER AT THE CLOSING.
At the Closing, the Purchaser shall deliver, or cause to be delivered, to
the Seller, the following items:
(a) by wire transfer of immediately available funds the amount equal
to one million three hundred fifty thousand Dollars ($1,350,000) (the
"CLOSING DATE CASH PAYMENT");
(b) the originally executed First Note;
(c) the duly executed officer's certificates referred to in Sections
7.1, 7.2, and 7.4;
(d) duly executed and acknowledged transfer tax and other required
tax forms reasonably required by the Seller to consummate the transactions
contemplated hereby, all in the form required by applicable law;
(e) the Escrow Agreement, the Pledge Agreement and the Registration
Rights Agreement duly executed by the Purchaser;
(f) evidence of receipt by the Escrow Agent of the Cash Escrow
Amount and the Second Note; and
(g) all other previously undelivered documents that the Purchaser is
required to deliver to the Seller pursuant to this Agreement.
SECTION 9.4. ESTABLISHMENT OF ESCROW.
Immediately upon the Closing, the Purchase shall cause to be delivered to
the Escrow Agent, by wire transfer of immediately available funds, the remaining
amount of the Cash Consideration, constituting $150,000 (the "CASH ESCROW
AMOUNT") and the Second Note, to be held in escrow in accordance with the terms
of the Escrow Agreement.
ARTICLE X.
INDEMNIFICATION
SECTION 10.1. SURVIVAL.
Except as otherwise set forth in Section 10.2(b), all of the
representations and warranties of the Seller contained in Article III of this
Agreement or in any certificate delivered by the Seller pursuant to this
Agreement shall survive the Closing and continue in full force and effect as
follows: (a) in the case of the representations and warranties of the Seller
contained in Section 3.23 (Tax Matters), until six months after the expiration
of the statute of limitations with respect to the matter to which the claim
relates (including any extension of the statute of limitation consented to by or
on behalf of the Company), (b) in the case of the representations and warranties
of the Seller contained in Section 3.22 (Environmental Matters), until the fifth
anniversary of the Closing Date, and (c) in the case of any other representation
or warranty of the Seller contained in this Agreement and any certificate
delivered by the Seller pursuant to this Agreement pertaining to any of the
Seller's representations and warranties, until the second anniversary of the
Closing Date. Notwithstanding the foregoing, any notice given in accordance with
Section 12.1 of this Agreement claiming an alleged breach of any representation
or warranty hereunder shall without further action extend the survival period
for the representation or warranty alleged to have been breached as applied to
the circumstances set forth in such notice until immediately after the final
resolution of the matter. All of the representations and warranties of the
Purchaser contained in Article IV of this Agreement or in any certificate
delivered by the Purchaser pursuant to this Agreement pertaining thereto shall
survive the Closing and continue in full force and effect until the second
anniversary of the Closing Date.
SECTION 10.2. INDEMNIFICATION PROVISIONS FOR BENEFIT OF PURCHASER.
(a) In the event that the Seller breaches any of its
representations, warranties or covenants contained in this Agreement or in
any certificate delivered by the Seller pursuant hereto and provided that,
as to any claim for breach of representations or warranties, the Purchaser
makes a written claim for indemnification against the Seller within the
applicable survival period, if applicable, then the Seller agrees to
indemnify the Purchaser and its Affiliates from and against all Damages
the Purchaser and its Affiliates suffer resulting from or arising out of
such event; provided, however, that the Seller shall not have any
obligation to indemnify the Purchaser from and against any Damages
resulting from the breach of any representation or warranty of the Seller
(as opposed to any covenant of the Seller) contained in Article III of
this Agreement until the Purchaser has suffered aggregate Damages, by
reason of all such breaches in excess of $25,000; provided further that
(i) and Seller shall have no obligation to indemnify the Purchaser for the
initial $25,000 in Damages, and (ii) no claim may be made by Purchaser
under this Section 10.2(a) unless such claim exceeds $10,000 in value. In
any event, the maximum amount that Seller shall be required to pay as to
all claims made under this Section 10.2(a) shall be equal to the amount of
unpaid Earn-Out Payments as of the date on which each claim is made.
(b) Without limiting the generality or effect of the foregoing, the
Seller shall indemnify, defend and hold harmless the Company, the
Purchaser and any of their respective Affiliates from and against any and
all Damages resulting from or arising out of any of the following (which
indemnification, defense and hold harmless shall not be subject to any of
the limitations set forth in Section 10.2(a)):
(i) Any claim of any creditor or beneficiary of the Seller or
any of its Affiliates (other than the Company), whether arising
prior to, on or after the Closing Date.
(ii) Pre-Closing Taxes. For purposes of this Agreement,
"PRE-CLOSING TAXES" shall mean, except to the extent included in the
determination of Adjusted Net Assets, (a) all liability for Taxes of
the Company for tax periods ending prior to the Closing Date; (b)
all liability for Taxes described in Section 6.1; (c) all liability
attributable to any misrepresentation or breach of warranty made by
the Seller in Section 3.23 of this Agreement; (d) all liability for
Taxes attributable to any failure to comply with any of the
covenants or agreements of the Seller or the Company under this
Agreement; and (e) all liability for Taxes of any other person
pursuant to any contractual agreement entered into on or before the
Closing Date.
SECTION 10.3. MATTERS INVOLVING THIRD PARTIES.
(a) If any third party notifies the Purchaser (the "INDEMNIFIED
PARTY") with respect to any matter which may give rise to a claim (other
than a Tax Claim) for indemnification against the Seller (the
"INDEMNIFYING PARTY") under Section 10.2, then the Indemnified Party shall
use reasonable efforts to notify the Indemnifying Party thereof promptly
and in any event within ten days after receiving any written notice from a
third party; provided, however, that no delay on the part of the
Indemnified Party in notifying the Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless, and then solely
to the extent that, the Indemnifying Party is actually prejudiced thereby.
(b) Once the Indemnified Party has given notice of the matter to the
Indemnifying Party, the Indemnified Party may, subject to the Indemnifying
Party's rights to assume the defense of such matter pursuant to paragraph
(c) below, defend against the matter in any manner it deems appropriate.
(c) The Indemnifying Party may at any point in time choose to assume
the defense of all of such matter, in which event:
(i) the Indemnifying Party shall defend the Indemnified Party
against the matter with counsel of its choice reasonably
satisfactory to the Indemnified Party,
(ii) the Indemnified Party may retain separate counsel at its
sole cost and expense (except that the Indemnifying Party shall be
responsible for the fees and expenses of one separate co-counsel for
all Indemnified Parties to the extent the Indemnified Party is
advised, in writing by its counsel, that either (x) the counsel the
Indemnifying Party has selected has a conflict of interest, or (y)
there are legal defenses available to the Indemnified Party that are
different from or additional to those available to the Indemnifying
Party), and
(iii) the Indemnifying Party shall reimburse the Indemnified
Party for the reasonable costs of defense or investigation for the
period prior to the assumption of the defense.
(d) Assumption of the defense of any matter by the Indemnifying
Party shall without further action constitute an irrevocable waiver by the
Indemnifying Party of its right to claim at a later date that such third
party action for which the defense was assumed is not a proper matter for
indemnification pursuant to this Article X.
(e) The Indemnified Party shall not consent to the entry of a
judgment or enter into any settlement with respect to any matter which may
give rise to a claim for indemnification without the written consent of
the Indemnifying Party, which consent may not be unreasonably withheld or
delayed; provided, however, that if the Indemnifying Party has failed to
provide indemnification required to be provided pursuant to this Article X
for fifteen days after a request therefor, then the Indemnified Party may
take any such action without the consent of the Indemnifying Party.
(f) The Indemnifying Party shall not consent to the entry of a
judgment with respect to any matter which may give rise to a claim for
indemnification or enter into any settlement which does not include a
provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all liability with respect thereto, without the
written consent of the Indemnified Party (not to be unreasonably withheld
or delayed).
SECTION 10.4. CERTAIN ADDITIONAL PROVISIONS RELATING TO INDEMNIFICATION.
(a) Notwithstanding Section 12.11, after the Closing Date, the
indemnification provisions set forth in this Article X shall constitute
the sole and exclusive recourse and remedy available to the Purchaser with
respect to the breach of any representation or warranty contained in this
Agreement or in any certificate delivered pursuant to this Agreement
except for actual fraud.
(b) Notwithstanding anything in this Agreement to the contrary, for
purposes of this Article X, in determining the existence of a breach of
any representation, warranty, covenant or agreement and the amount of
Damages, no effect shall be given to any qualification as to materiality
or Material Adverse Effect.
(c) All payments by an Indemnifying Party under Article X shall be
treated as an adjustment to the Purchase Price for all foreign, federal,
state and local income tax purposes.
(d) The Indemnification provided for in this Article X shall survive
any investigation at any time made by or on behalf of the Purchaser or any
knowledge or information that the Purchaser may have.
SECTION 10.5. PROCEDURES RELATING TO TAX CLAIMS.
If a claim is made by any Tax authority which, if successful, is likely to
result in an indemnity payment to the Purchaser or any of its Affiliates
pursuant to this Article X, the Purchaser shall notify the Seller of such claim
(a "TAX CLAIM"), stating the nature and basis of such claim and the amount
thereof, to the extent known. Failure to give such notice shall not relieve the
Seller from any liability which it may have on account of this indemnification
or otherwise, except to the extent that the Seller is materially prejudiced
thereby. The Seller will have the right, at its option, upon timely notice to
the Purchaser, to assume control of any defense of any Tax Claim (other than a
Tax Claim relating solely to Taxes of the Company for a Straddle Period) with
its own counsel, provided, however, such counsel is reasonable satisfactory to
the Purchaser. The Seller's right to control a Tax Claim will be limited to
amounts in dispute which would be paid by the Seller or for which the Seller
would be liable pursuant to this Article X. Costs of such Tax Claims are to be
borne by the Seller unless the Tax Claim relates to taxable periods ending after
the Closing Date, in which event such costs will be fairly apportioned. The
Purchaser and the Company shall cooperate with the Seller in contesting any Tax
Claim, which cooperation shall include the retention and, upon the Seller's
request, the provision of records and information which are reasonably relevant
to such Tax Claim and making employees available on a mutually convenient basis
to provide additional information or explanation of any material provided
hereunder. Notwithstanding the foregoing, the Seller shall neither consent nor
agree (nor cause the Company to consent or agree) to the settlement of any Tax
Claim with respect to any liability for Taxes that may affect the liability for
any state or federal income tax of the Company or any Affiliated Group of which
the Company is a member for any taxable period ending subsequent to the Closing
Date without the prior written consent of the Purchaser, and neither the Seller,
nor any Seller Entity, shall file an amended Tax Return that may affect the
liability for Taxes of the Company without the prior written consent of the
Purchaser. The Purchaser and the Seller shall jointly control all proceedings
taken in connection with any claims for Taxes relating solely to a Straddle
Period of the Company.
SECTION 10.6. PURCHASER'S INDEMNIFICATION OF SELLER.
In the event that the Purchaser breaches any of its representations,
warranties or covenants contained in this Agreement or in any certificate
delivered by the Purchaser pursuant hereto and provided that, as to any claim
for breach of representations or warranties, the Seller makes a written claim
for indemnification against the Purchaser within the applicable survival period,
if applicable, then the Purchaser agrees to indemnify the Seller and its
Affiliates from and against all Damages the Seller and its Affiliates suffer
resulting from or arising out of such event; provided, however, that the Seller
shall not have any obligation to indemnify the Purchaser from and against any
Damages resulting from the breach of any representation or warranty of the
Purchaser (as opposed to any covenant of the Purchaser) contained in Article IV
of this Agreement until the Seller has suffered aggregate Damages, by reason of
all such breaches in excess of $25,000; provided further that (i) and Purchaser
shall have no obligation to indemnify the Seller for the initial $25,000 in
Damages, and (ii) no claim may be made by Seller under this Section unless such
claim exceeds $10,000 in value. In any event, the maximum amount that Purchaser
shall be required to pay as to all claims made under this Section shall be the
maximum indemnification amount set forth in Section 10.2(a) for Seller's
indemnification of Purchaser. For the purposes of this Section 10.5, the
representations and warranties of Purchaser hereunder shall survive for a period
of two (2) years after the Closing Date.
ARTICLE XI.
TERMINATION
SECTION 11.1. TERMINATION.
Anything in this Agreement to the contrary notwithstanding, this Agreement
and the transactions contemplated hereby may be terminated in any of the
following ways at any time before the Closing and in no other manner:
(a) By mutual written consent of the Purchaser and the Seller;
(b) By the Purchaser upon five (5) Business Days notice if, at or
before the Closing Date, satisfaction of any condition set forth in
Article VIII is or becomes impossible (other than through the breach by
the Purchaser of any of its representations or warranties or the failure
of the Purchaser to perform any of its obligations pursuant to this
Agreement) and the Purchaser shall not have waived such condition in
writing at or before the Closing Date;
(c) By the Seller upon five (5) Business Days notice if, at or
before the Closing Date, satisfaction of any condition set forth in
Article VII is or becomes impossible (other than through the breach by the
Seller of any of its representations or warranties or the failure of the
Seller to perform any of its obligations pursuant to this Agreement) and
the Seller shall not have waived such condition in writing at or before
the Closing Date;
(d) By the Purchaser or the Seller (if such terminating party is not
then in default of any obligation hereunder), if the Closing has not
occurred within 40 days following the date first set forth above;
provided, however, that such date shall be extended for ten (10) Business
Days after any notice given pursuant to Section 11.1(b) on or prior to
such date; and provided that such date shall be further extended as
required to enable Seller to respond in good faith and in timely fashion
to comments from the SEC regarding the preliminary information statement
to be sent to Seller's shareholders advising them of the transactions
contemplated hereby; or
(e) By the Purchaser if the Purchaser has reasonable grounds to
believe that the Seller has violated the terms of Section 5.5.
SECTION 11.2. EFFECT OF TERMINATION; TERMINATION FEE.
(a) In the event this Agreement is terminated pursuant to Section
11.1, all further obligations of the parties hereunder shall terminate,
except for the obligations set forth in Article X and in Sections 11.2(b),
12.3, 12.4, and 12.8, and except that nothing in this Section 11.2 shall
relieve any party hereto of any liability for breach of any of the
covenants or any of the representations or warranties contained in this
Agreement prior to such termination.
(b) If (i) this Agreement is terminated pursuant to Section 11.1(e),
and (ii) a Business Combination shall occur within eighteen months after
the date this Agreement is terminated, then the Seller shall immediately,
upon consummation of such Business Combination, pay to the Purchaser in
same day funds all reasonable, documented attorneys', accountants',
consultants' and other out-of-pocket expenses incurred by Purchaser in
connection with the transactions contemplated by this Agreement. For
purposes of this Agreement, the term "BUSINESS COMBINATION" means any of
the following events: (i) the Company, directly or indirectly, is acquired
by merger or otherwise by any person or group, including, without
limitation, any officer or director or any group which includes such
officer or director as a member (a "THIRD Party"); (ii) the Company or the
Seller enters into an agreement with a Third Party which contemplates the
acquisition, directly or indirectly, of 30% or more of the total assets of
the Company; (iii) the Company or the Seller enters into a stock purchase,
subscription, merger, consolidation, share exchange or other agreement
with a Third Party which contemplates the acquisition, directly or
indirectly, of 30% or more of the outstanding shares of the Company's
capital stock; (iv) a Third Party directly or indirectly acquires 30% or
more of the total assets of the Company; (v) a Third Party directly or
indirectly acquires 30% or more of the outstanding shares of the Company's
capital stock; or (vi) the Company or the Seller adopts a plan of
liquidation relating to 30% or more of the total assets of the Company.
ARTICLE XII.
MISCELLANEOUS PROVISIONS
SECTION 12.1. NOTICES.
All notices, demands or other communications to be given or delivered
under or by reason of the provisions of this Agreement shall be in writing and
shall be deemed to have been given (a) when delivered personally to the
recipient, (b) when sent to the recipient by telecopy (receipt electronically
confirmed by sender's telecopy machine) if during normal business hours of the
recipient, otherwise on the next Business Day, (c) one Business Day after the
date when sent to the recipient by reputable express courier service (charges
prepaid), or (d) seven Business Days after the date when mailed to the recipient
by certified or registered mail, return receipt requested and postage prepaid.
Such notices, demands and other communications shall be sent to the Seller and
to the Purchaser at the addresses indicated below:
If to the Seller: Aladdin Systems Holdings, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Cyruli ▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
(which shall not constitute notice) ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇-▇▇▇-▇▇▇▇ (Fax)
If to the Purchaser: International Microcomputer Software, Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ & Diamond LLP
(which shall not constitute notice) ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as either party hereto may, from time to time,
designate in writing delivered pursuant to the terms of this Section.
SECTION 12.2. AMENDMENTS.
The terms, provisions and conditions of this Agreement may not be changed,
modified or amended in any manner except by an instrument in writing duly
executed by both of the parties hereto.
SECTION 12.3. ANNOUNCEMENTS.
All press releases, notices to customers and suppliers and similar public
announcements prior to or within five days after the Closing Date with respect
to this Agreement and the transactions contemplated by this Agreement shall be
approved by both the Purchaser and the Seller prior to the issuance thereof;
provided that either party may make any public disclosure it believes in good
faith is required by law, regulation or rule of any stock exchange on which its
securities are traded (in which case the disclosing party shall use reasonable
efforts to advise the other party prior to making such disclosure and to provide
the other party a reasonable opportunity to review the proposed disclosure).
SECTION 12.4. EXPENSES.
Except as expressly set forth in this Agreement, each party to this
Agreement shall bear all of its legal, accounting, investment banking, and other
expenses incurred by it or on its behalf in connection with the transactions
contemplated by this Agreement, whether or not such transactions are
consummated.
SECTION 12.5. ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement among the parties hereto
with respect to the subject matter hereof, supersedes and is in full
substitution for any and all prior agreements and understandings among them
relating to such subject matter, and no party shall be liable or bound to the
other party hereto in any manner with respect to such subject matter by any
warranties, representations, indemnities, covenants, or agreements except as
specifically set forth herein. The Exhibits and Schedules to this Agreement are
hereby incorporated and made a part hereof and are an integral part of this
Agreement.
SECTION 12.6. DESCRIPTIVE HEADINGS.
The descriptive headings of the several sections of this Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
SECTION 12.7. COUNTERPARTS.
For the convenience of the parties, any number of counterparts of this
Agreement may be executed by any one or more parties hereto, and each such
executed counterpart shall be, and shall be deemed to be, an original, but all
of which shall constitute, and shall be deemed to constitute, in the aggregate
but one and the same instrument.
SECTION 12.8. GOVERNING LAW; JURISDICTION.
(a) This Agreement and the legal relations between the parties
hereto shall be governed by and construed in accordance with the laws of
the State of California applicable to contracts made and performed therein
without regard to principles of conflicts of law.
(b) Any legal action or proceeding with respect to this Agreement
shall be brought in the courts of the State of California or of the United
States of America for the Northern District of California, and, by
execution and delivery of this Agreement, the parties hereto hereby accept
for themselves and in respect of their property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The parties
hereto hereby irrevocably waive any objection, including any objection to
the laying of venue or based on the grounds of forum non conveniens, which
any of them may now or hereafter have to the bringing of any such action
or proceeding in such respective jurisdictions.
SECTION 12.9. CONSTRUCTION.
The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rule of strict
construction will be applied against any party. Any references to any federal,
state, local or foreign statute or law will also refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
Unless the context otherwise requires: (a) a term has the meaning assigned to it
by this Agreement; (b) including means "including but not limited to"; (c) "or"
is disjunctive but not exclusive; (d) words in the singular include the plural,
and in the plural include the singular; and (e) "$" means the currency of the
United States of America.
SECTION 12.10. SEVERABILITY.
In the event that any one or more of the provisions contained in this
Agreement or in any other instrument referred to herein, shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, then to the
maximum extent permitted by law, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement or any other such
instrument. Furthermore, in lieu of any such invalid or unenforceable term or
provision, the parties hereto intend that there shall be added as a part of this
Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
SECTION 12.11. SPECIFIC PERFORMANCE.
Without limiting or waiving in any respect any rights or remedies of
Purchaser under this Agreement now or hereinafter existing at law or in equity
or by statute, each of the parties hereto shall be entitled to seek specific
performance of the obligations to be performed by the other in accordance with
the provisions of this Agreement.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, the Seller and the Purchaser have executed and
delivered this Agreement as of the day and year first written above.
SELLER ALADDIN SYSTEMS HOLDINGS, INC.
BY: /S/ ▇▇▇▇▇▇▇▇ ▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇
Title: President
PURCHASER INTERNATIONAL MICROCOMPUTER SOFTWARE, INC.
BY: /S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
Stock Purchase Agreement Signature Page