ASSET PURCHASE AGREEMENT
BETWEEN
ARI NETWORK SERVICES, INC.
AND
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ CORPORATION
September 15, 1998
TABLE OF CONTENTS
Page
ARTICLE I - Assets to Be Purchased 1
1.1. Subject Assets 1
1.2. Retained Assets 3
ARTICLE II - Consideration 4
2.1. Consideration; Payment 4
2.2. Assumption of Liabilities 4
2.3. Non-Transferable and Non-Assignable
Assets 4
ARTICLE III - Closing 5
3.1. Time And Place of Closing 5
3.2. Conditions Precedent to Buyer's
Performance 5
3.3. Conditions Precedent to Seller's
Performance 6
3.4. Deliveries of Seller 6
3.5. Deliveries of Buyer 7
ARTICLE IV - Warranties and Representations of
Seller 8
4.1. Corporate Matters 8
4.2. No Violation 9
4.3. No Consent 9
4.4. Title to and Condition of Subject
Assets 9
4.5. Software and Licensed Software 9
4.6. Accounts Receivable 10
4.7. Litigation 10
4.8. Intangible Assets 11
4.9. Financial Statements 11
4.10. Taxes 11
4.11. Contracts and Other Agreements 12
4.12. Customization Projects 13
4.13. Employees 13
4.14. Labor Practices 13
4.15. ERISA 14
4.16. Conduct Out of Ordinary Course 14
4.17. No Transfer of Assets 14
4.18. Insurance 14
4.19. Brokers and Agents 14
4.20. Warranties 14
4.21. Permits 15
4.22. Customers 15
4.23. Investment Intent 15
4.24. Warranties True and Correct 15
4.25. Warranties Survive Closing 15
4.26. Knowledge of Seller 16
ARTICLE V - Warranties and Representations of
Buyer 16
5.1. Corporate Matters 16
5.2. No Violation 16
5.3. No Consent 16
5.4. No Litigation 17
5.5. Brokers and Agents 17
5.6. SEC Documents 17
5.7. Financial Statements 17
5.8. Capitalization 17
5.9. Registration Rights 18
5.10. Subject Shares 18
5.11. Warranties True and Correct 18
5.12. Warranties Survive Closing 18
5.13. Knowledge of the Buyer 18
ARTICLE VI - [Reserved] 19
ARTICLE VII - Conduct Prior to and Subsequent to
Closing 19
7.1. Execution and Delivery of Further
Instruments by Seller 19
7.2. Access to Business Records After
Closing 19
7.3. Seller's Customers 19
7.4 Sale of BMS Business 19
7.5. Conduct of Subject Business Prior to
the Closing 20
7.6. Access to Information 20
7.7. Consummation of Agreement 21
7.8. Noncompetition 21
7.9. Termination of Dealings 21
7.10. Confidentiality 22
7.11. COBRA 22
ARTICLE VIII - Indemnification 22
8.1. Indemnification of Buyer 22
8.2. Indemnification of Seller 23
8.3. Procedure Relative to Indemnification 23
8.4. Certain Limits 24
ARTICLE IX - Bulk Sales 25
ARTICLE X - [Reserved] 25
ARTICLE XI - Miscellaneous 25
11.1. Expenses 25
11.2. Notices 25
11.3. Confidentiality and Public
Announcements 26
11.4. Entire Agreement 26
11.5. Legends 27
11.6. Binding Effect 27
11.7. Paragraph Headings 27
11.8. Severability 27
11.9. Terminology 27
11.10. Applicable Law 27
11.11. Dispute Resolution 27
LIST OF SCHEDULES AND EXHIBITS
Schedule 1(b) Software
Schedule 1(c) Licensed Software
Schedule 1(d) Fixed Assets
Schedule 1(h) Registrations
Schedule 1(l) Assumed Contracts
Schedule 1.2 Retained Assets
Schedule 2.1 Allocation of Purchase
Price
Schedule 2.2 Assumed Liabilities
Schedule 4.1 Foreign Subsidiaries
Schedule 4.7 Litigation
Schedule 4.8 Intangible Assets
Schedule 4.9 Financial Statements
Schedule 4.11 Material Contracts
Schedule 4.12 Customization Projects
Schedule 4.18 Insurance
Schedule 4.20 Warranties
Schedule 4.21 Permits
Schedule 4.22 Customers
Schedule 5.8 Capitalization
Schedule 5.9 Registration Rights
Schedule 7.4 BMS Assets
Exhibit A ▇▇▇▇ of Sale
Exhibit B Assignment and Assumption
Agreement
Exhibit C Registration Rights
Agreement
Exhibit D Customer Contract
Exhibit E-1 - E-9 Assignments of Trademark
Exhibit F Registration Name Change
Agreement
Exhibit G Opinion of Seller's
Counsel
Exhibit H Opinion of Buyer's Counsel
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of
September 15, 1998 (the "Effective Date"), by and
between ARI NETWORK SERVICES, INC., a Wisconsin
corporation ("Buyer"), with a principal place of
business at ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, and ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
CORPORATION, a Wisconsin corporation ("Seller"), with a
principal place of business at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
BACKGROUND:
A. Seller, directly, since the dissolution of its
wholly-owned subsidiary POWERCOM-2000, Inc. in June
1998, and indirectly through its wholly-owned
subsidiaries POWERCOM-2000 Australia PTY Ltd., POWERCOM-
2000, Ltd., POWERCOM-2000 Canada, Inc., POWERCOM-2000
Germany Gmbh, and POWERCOM-2000 UK Limited (such
subsidiaries, collectively, the "Foreign Subsidiaries")
is engaged in the business of providing electronic
commerce software and services to companies primarily
in the outdoor power, power tool and power sports
industries (the "Subject Business").
B. Buyer desires to purchase from Seller and the
Foreign Subsidiaries all of the Subject Assets (as
hereafter defined) and to assume the Assumed
Liabilities (as hereafter defined) related to, used or
held for use in the Subject Business, and Seller
desires to sell to Buyer the Subject Assets and to have
Buyer assume the Assumed Liabilities in accordance with
the terms and conditions set forth in this Agreement;
NOW, THEREFORE, the parties hereby agree as
follows:
ARTICLE I
Assets to Be Purchased
1.1. Subject Assets. Subject to the terms and
conditions set forth in this Agreement, at the Closing
(as defined in Paragraph 3.1, below), Seller will, and
will cause the Foreign Subsidiaries to, sell, transfer,
convey, assign and deliver to Buyer, and Buyer will
acquire and purchase from Seller and the Foreign
Subsidiaries, all right, title and interest of Seller
and the Foreign Subsidiaries in and to the properties,
assets and rights of every nature, kind and
description, tangible and intangible, whether accrued,
contingent or otherwise and whether now existing or
after this date acquired primarily relating to, or used
or held for use primarily in connection with the
operation of the Subject Business, excluding the
Retained Assets as hereinafter defined (the "Subject
Assets"), including, without limitation, those items in
the following categories:
(a) the lock boxes and post office boxes pertaining to
the Subject Business;
(b) the software programs identified in Schedule 1(b),
including the source and object code thereof and any
and all existing documentation (regardless of whether
such documentation is provided on a commercial basis)
including flow charts, program descriptions, program
listings, layouts, schematics, engineering and design
drawings, technical support documentation, diagrams and
other documentation depicting or specifying the designs
and components of such software programs, libraries,
logs, reports, drafts, models, prototypes, technical
and other data, test and other data and programs, any
and all proceeding versions, works in process, fixes,
enhancements, future releases or other developments by
Seller or any of the Foreign Subsidiaries which may be
combined or embodied in any medium or format
whatsoever, and for all language versions and hardware
platforms, software platforms and operating
environments and whether sold separately or bundled
with other applications, consisting of a set of logical
instructions and information which guide the
functioning of a processor, and which shall include all
information, electronic form content, so-called "look &
feel", graphic design, electronic form user
methodologies, user interface design, software tools
primarily related to the Subject Business and owned by
the Seller or any of the Foreign Subsidiaries, know-
how, systems, and processes concerning such computer
programs but excluding the Licensed Software
(collectively, the "Software");
(c) Seller's or any of the Foreign Subsidiaries'
rights in the third party software licensed for use by
Seller or any of the Foreign Subsidiaries and contained
in or necessary for the operation or development of the
Software or otherwise used in the Subject Business as
listed in Schedule 1(c) (the "Licensed Software");
(d) the fixed assets primarily used in the Subject
Business, including, without limitation, the furniture,
furnishings, fixtures, machinery, computers, printers,
copiers, phone systems and other equipment, wherever
located ("Fixed Assets") described on Schedule 1(d);
(e) all accounts receivable (whether billed or
unbilled) and other receivables pertaining to the
Subject Business (the "Accounts Receivable");
(f) all credits, prepaid expenses, advance payments
and deposits pertaining to the Subject Business;
(g) all of the supplies, consumable materials and
other similar assets held for use in the Subject
Business, including without limitation, supplies of
sales literature, catalogs and brochures;
(h) all of the following assets or rights pertaining
primarily to the Subject Business (collectively, with
the Software and the Licensed Software, the "Intangible
Assets"):
(1) patents, patent applications, trade names,
trademarks, service marks, trademark registrations and
any applications for trademark registrations,
copyrights, copyright registrations and applications
for copyright registrations, whether issued or pending,
and whether registered or unregistered
("Registrations") including those items listed on
Schedule 1(h);
(2) all inventions, improvements,
product specifications, secret
processes, formulas, technologies, trade
secrets, know-how, and technical
knowledge;
(3) the name "Powercom-2000" and all
names similar to such name used by
Seller or any Foreign Subsidiary
primarily in the Subject Business and
all rights to the World Wide Web site
with the URLs "▇▇▇▇.▇▇▇" and any other
URL registered (whether or not now used)
for use primarily by the Subject
Business; and
(4) all other intellectual property
and other similar interests;
(i) all sales, manufacturing, supplier and customer
lists and records, personnel and payroll records,
accounting records, purchasing and sales records, and
all other records, wherever located, pertaining
primarily to the Subject Business;
(j) all inventories of the Subject Business, whether
on hand or in transit (the "Inventory");
(k) all causes of action, judgments, claims and
demands of whatever nature relating primarily to the
Subject Business;
(l) all nondisclosure and confidentiality agreements
or nondisclosure and confidentiality provisions of
other agreements and all other agreements pertaining
primarily to the Subject Business and listed on
Schedule 1.1(l) (the "Assumed Contracts");
(m) all rights to phone numbers of the Subject
Business; and
(n) the goodwill, if any, and all other miscellaneous
assets used primarily in the operation of the Subject
Business.
1.2. Retained Assets. Notwithstanding the
foregoing, the assets and other property of Seller and
the Foreign Subsidiaries set forth on Schedule 1.2
hereto shall not be Subject Assets and are to be
retained by Seller and the Foreign Subsidiaries,
although they may relate to the Subject Business (the
"Retained Assets").
ARTICLE II
Consideration
2.1. Consideration; Payment. As consideration
for the Subject Assets, Buyer will issue and deliver to
Seller Eight Hundred Forty Thousand (840,000) shares
(the "Subject Shares") of the $.001 par value common
stock ("Common Stock") of Buyer, as adjusted for any
stock dividends, stock splits, reverse stock splits or
the like that become effective or which have a record
date prior to Closing. At the Closing, Buyer will
issue and deliver to Seller a certificate or
certificates representing the Subject Shares. In
addition, following Closing, Buyer will pay the amount,
if any, set forth in Paragraph 7.4. The purchase price
shall be allocated among all of the Subject Assets in
accordance with Schedule 2.1.
2.2. Assumption of Liabilities. As of the
Closing Date, Buyer will assume and will pay and
perform when due (a) all liabilities and obligations of
Seller or any of the Foreign Subsidiaries arising from
and after the Closing Date under the Assumed Contracts
to the extent relating to the period from and after the
Closing Date (but excluding liabilities and obligations
caused by actions or omissions which occurred prior to
the Closing Date), and (b) the liabilities of Seller or
any of the Foreign Subsidiaries on the Closing Date
primarily pertaining to the Subject Business and
arising in the ordinary course of the Subject Business
including without limitation the items listed on
Schedule 2.2, exclusive, however, of liabilities owed
to Seller, any Foreign Subsidiary or any other
affiliate of Seller. The liabilities assumed by Buyer
in accordance with this Paragraph 2.2 are referred to
in this Agreement as the "Assumed Liabilities." Except
for the Assumed Liabilities, Buyer will assume no
obligations or liabilities of Seller or any of the
Foreign Subsidiaries and Seller will pay, perform and
discharge all liabilities and obligations of Seller or
any of the Foreign Subsidiaries which are not
specifically assumed by Buyer under this Agreement,
including without limitation, payroll obligations,
severance obligations and liabilities in respect of
expenses accrued.
2.3. Non-Transferable and Non-Assignable Assets.
To the extent that any of the Subject Assets, or any
claim, right or benefit arising under or resulting from
such Subject Assets (collectively, the "Rights") is not
capable of being transferred without the approval,
consent or waiver of any third person, or if the
transfer of a Right would constitute a breach of any
obligation under, or a violation of, any applicable law
unless the approval, consent or waiver of such third
person is obtained, then, except as expressly otherwise
provided in this Agreement and without limiting the
rights and remedies of the Buyer contained elsewhere in
this Agreement, this Agreement shall not constitute an
agreement to transfer such Rights unless and until such
approval, consent or waiver has been obtained. After
the Closing and until all such Rights are transferred
to Buyer, Seller shall:
(a) maintain its existence and hold the
Rights in trust for Buyer;
(b) comply with the terms and provisions of
the Rights as agent for the Buyer at the Buyer's
cost and for the Buyer's benefit;
(c) cooperate with the Buyer in any
reasonable and lawful arrangements designed to
provide the benefits of such Rights to the Buyer;
and
(d) enforce, at the request of the Buyer and
at the expense and for the account of the Buyer,
any rights of the Seller arising from such Rights
against any third person, including the right to
elect to terminate any such rights in accordance
with the terms of such rights upon the written
direction of the Buyer.
In order that the full value of the Rights may be
realized for the benefit of the Buyer, the Seller
shall, at the request and expense and under the
direction of the Buyer, in the name of the Seller or
otherwise as the Buyer may specify, take all such
action and do or cause to be done all such things as
are reasonable and necessary or proper in order that
the obligations of the Seller under such Rights may be
performed in such manner that the value of such Rights
is preserved and inures to the benefit of the Buyer,
and that any moneys due and payable and to become due
and payable to the Buyer in and under the Rights are
received by the Buyer. The Seller shall promptly pay
to the Buyer all moneys collected by or paid to the
Seller in respect of every such Right. The Buyer shall
indemnify and hold the Seller harmless from and against
any payment, claim or liability under or in respect of
such Rights arising because of any action of the Seller
taken pursuant to this Section excluding any costs of
transfer which shall be the obligation of the Seller.
ARTICLE III
Closing
3.1. Time And Place of Closing. The closing of
the purchase and sale contemplated in this Agreement
(the "Closing") will take place at 9:00 a.m. on
September 15, 1998 (the "Closing Date") at the offices
of ▇▇▇▇▇▇▇ & ▇▇▇▇, S.C., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ or at such other time or
place as Seller and Buyer mutually agree.
3.2. Conditions Precedent to Buyer's Performance.
The obligations of Buyer to purchase the Subject Assets
and assume the Assumed Liabilities under this Agreement
are subject to the satisfaction, at or before the
Closing, of all the following conditions, any or all of
which may be waived by Buyer in whole or in part
without prior notice:
(a) All representations and warranties of Seller
hereunder and in all certificates delivered by Seller
to Buyer pursuant to this Agreement shall be true and
accurate in all material respects on and as of the
Closing Date as though made at that time.
(b) Seller shall have performed, satisfied and
complied with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied
or complied with by Seller on or before the Closing
Date.
(c) No litigation or proceeding will be threatened or
pending against Seller, any of the Foreign Subsidiaries
or Buyer (i) for the purpose or with the probable
effect of enjoining or preventing the consummation of
any of the transactions contemplated by this Agreement
or (ii) which, if adversely determined, could
reasonably be expected to have a material adverse
effect on the Subject Assets or the Subject Business.
(d) No material adverse changes shall have occurred to
the Subject Assets or in the business, prospects,
liabilities, financial condition or operations of the
Subject Business since June 28, 1998.
3.3. Conditions Precedent to Seller's
Performance. The obligations of Seller to sell and
transfer the Subject Assets under this Agreement are
subject to the satisfaction, at or before the Closing,
of all the following conditions, any or all of which
may be waived by Seller in whole or in part without
prior notice:
(a) All representations and warranties of Buyer
hereunder and in all certificates delivered by Buyer to
Seller pursuant to this Agreement shall be true and
accurate in all material respects on and as of the
Closing Date as though made at that time.
(b) Buyer shall have performed, satisfied and complied
with all covenants, agreements and conditions required
by this Agreement to be performed, satisfied or
complied with by Buyer on or before the Closing Date.
(c) No litigation or proceeding will be threatened or
pending against Seller, any of the Foreign Subsidiaries
or Buyer for the purpose or with the probable effect of
enjoining or preventing the consummation of any of the
transactions contemplated by this Agreement.
(d) No material adverse change shall have occurred in
the business, prospects, liabilities, financial
condition or operations of Buyer since April 30, 1998.
3.4. Deliveries of Seller. At the Closing,
Seller will deliver or cause to be delivered to Buyer
the following:
(a) a ▇▇▇▇ of sale in the form attached hereto as
Exhibit A, and such other assignments, certificates of
title and instruments of conveyance as Buyer may
reasonably require, in a form reasonably satisfactory
to Buyer, duly executed by Seller and the Foreign
Subsidiaries;
(b) an Assignment and Assumption Agreement, in the
form attached hereto as Exhibit B (the "Assignment and
Assumption Agreement"), duly executed by Seller,
assigning to Buyer all of Seller's right, title and
interest in and to the Assumed Contracts;
(c) the Registration Rights Agreement, in the form
attached hereto as Exhibit C (the "Registration Rights
Agreement"), duly executed by Seller;
(d) the Customer Contract, in the form attached hereto
as Exhibit D (the "Customer Contract"), duly executed
by Seller;
(e) the Assignments of Trademark, in the forms
attached hereto as Exhibits E-1 - E-9, duly executed by
Seller;
(f) the Registration Name Change Agreement, in the
form attached hereto as Exhibit F (the "Registration of
Name Change Agreement"), duly executed by Seller;
(g) a certificate from the Secretary of Seller, in a
form reasonably satisfactory to Buyer, setting forth
the resolutions adopted by the Board of Directors of
Seller authorizing the execution and delivery by Seller
of this Agreement and all documents to be executed in
connection with this Agreement and the taking by Seller
of any and all actions necessary or advisable to
consummate the transactions contemplated in this
Agreement;
(h) a certificate dated the Closing Date signed by an
authorized officer of Seller certifying that the
conditions specified in Paragraphs 3.2(a), (b) and (d)
have been fulfilled and that there is no litigation
under Paragraph 3.2(c) threatened or pending against
Seller or any of the Foreign Subsidiaries;
(i) actual or constructive possession of the complete
books and records relating to the Subject Business;
(j) a copy of the current version of the source code
for the Software on mutually agreeable electronic
medium;
(k) a certificate from the Secretary of each of the
Foreign Subsidiaries, in form reasonably satisfactory
to Buyer, setting forth the resolutions adopted by the
Board of Directors of such Foreign Subsidiary
authorizing the disposition of such Foreign
Subsidiary's Subject Assets to the Buyer pursuant to
this Agreement;
(l) possession of the Subject Assets;
(m) the opinion of ▇▇▇▇▇ ▇▇▇▇, senior counsel of
Seller, dated the Closing Date, in substantially the
form of Exhibit G;
(n) nondisclosure and confidentiality agreements in
the customary form of the Subject Business, executed by
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇.
3.5. Deliveries of Buyer. At the Closing, Buyer
will deliver or cause to be delivered to Seller the
following:
(a) the Subject Shares as specified in Article II,
above;
(b) the Assignment and Assumption Agreement, duly
executed by Buyer;
(c) the Registration Rights Agreement, duly executed
by Buyer;
(d) the Customer Contract, duly executed by Buyer;
(e) the Registration Name Change Agreement, duly
executed by Buyer;
(f) a certificate from the Secretary of Buyer, in a
form reasonably satisfactory to Seller, setting forth
the resolutions duly adopted by the Board of Directors
of Buyer authorizing the execution and delivery by
Buyer of this Agreement and all documents to be
executed in connection with this Agreement and the
taking by Buyer of any and all actions necessary or
advisable to consummate the transactions contemplated
in this Agreement;
(g) a certificate dated the Closing Date signed by an
authorized officer of Buyer certifying that the
conditions specified in Paragraphs 3.3(a), (b) and (d)
have been fulfilled and that there is no litigation
under Paragraph 3.3(c) threatened or pending against
Buyer.
(h) the opinion of ▇▇▇▇ ▇▇▇▇▇▇▇, Executive Vice
President and General Counsel of Buyer, dated the
Closing Date, in substantially the form of Exhibit H.
ARTICLE IV
Warranties and Representations of Seller
Seller represents and warrants to Buyer as follows
as of the Effective Date and as of the Closing Date:
4.1. Corporate Matters. Seller is a corporation
duly incorporated and validly existing under the laws
of the State of Wisconsin and has and has had the
requisite corporate authority and power to carry on all
activities related to the Subject Business as currently
or previously conducted. Seller is duly qualified and
in good standing to do business in each jurisdiction in
which the nature of its business or the ownership,
leasing or holding of its properties makes such
qualification necessary unless the absence of
qualification would not have a material adverse effect
on the Subject Business or the Subject Assets. Seller
has the corporate power and corporate authority to
enter into this Agreement and to consummate the
transactions this Agreement contemplates. The Board of
Directors of Seller has approved the execution and
delivery of this Agreement, the agreements, documents
and instruments relating to this Agreement and the
consummation of the transactions this Agreement
contemplates, and this Agreement and such other
agreements, documents and instruments will constitute
valid and legally binding obligations of Seller,
enforceable against it in accordance with their
respective terms. Each Foreign Subsidiary has the
corporate power and corporate authority to transfer its
Subject Assets to the Buyer pursuant to this Agreement.
Schedule 4.1 sets forth the name, jurisdiction of
incorporation, capitalization, ownership and officers
and directors of each Foreign Subsidiary. Each Foreign
Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its
jurisdiction of organization. Each Foreign Subsidiary
has and has had the full power and authority to carry
on all activities as currently or previously conducted.
Except for Seller's ownership of the Foreign
Subsidiaries, neither the Seller nor any of the Foreign
Subsidiaries, directly or indirectly, owns any capital
stock of, any equity interest in, or any other
ownership or investment interest in, any corporation,
partnership, limited liability company, joint venture
or other business entity through which the Subject
Business is conducted.
4.2. No Violation. The execution and delivery of
this Agreement does not, and the consummation of the
transactions this Agreement contemplates and compliance
with the terms of this Agreement will not (a) conflict
with, or result in any violation of, (i) any provision
of the Articles of Incorporation or By-Laws (or
comparable governing instruments) of Seller or any
Foreign Subsidiary or (ii) any judgment, order or
decree, or statute, law, ordinance, rule or regulation
applicable to Seller or any Foreign Subsidiary, the
Subject Business or the Subject Assets, or (b) except
as set forth on Schedule 4.11, result in a breach or
default under any Material Contract (as defined in
Paragraph 4.11).
4.3. No Consent. No consent, approval, order or
authorization of, or registration, declaration or
filing with, any court, administrative agency or
commission or other governmental authority or
instrumentality, domestic or foreign, is required to be
obtained or made by or with respect to Seller, any
Foreign Subsidiary, the Subject Business or the Subject
Assets in connection with the execution and delivery of
this Agreement or the consummation of the transactions
this Agreement contemplates.
4.4. Title to and Condition of Subject Assets.
Seller and the Foreign Subsidiaries have, and Seller
will or will cause the Foreign Subsidiaries to transfer
to Buyer at Closing, good and marketable title to the
Accounts Receivable, the Intangible Assets (other than
the Licensed Software), the Inventory, the Fixed Assets
and all of the other Subject Assets which Seller or any
of the Foreign Subsidiaries purports to own, tangible
and intangible, free and clear of all liens, claims and
encumbrances. The Fixed Assets are in reasonably good
operating condition and repair, ordinary wear and tear
and routine maintenance excepted, and Schedule 1(d)
details the net book value of the various items of
Fixed Assets as reflected in Seller's accounting
records prepared in accordance with generally accepted
accounting principles consistently applied but ARE
OTHERWISE PROVIDED AS IS WITHOUT ANY WARRANTY OF ANY
KIND, INCLUDING BUT NOT LIMITED TO ALL EXPRESS, IMPLIED
AND STATUTORY WARRANTIES, INCLUDING WITHOUT LIMITATION
ALL WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE AND
MERCHANTABILITY. All leased property is substantially
in the condition required of such property by the lease
of such property.
4.5. Software and Licensed Software.
(a) Schedule 1(b) identifies all software currently
licensed to others by the Subject Business or under
development by the Subject Business.
(b) The Software is owned by Seller free and clear of
all liens, claims or encumbrances.
(c) Except as listed on the Schedule 1(b), Seller is
not obligated to pay any compensation to any person or
entity with respect to use of the Software.
(d) Upon Closing, Buyer may use, modify and/or
distribute the Software without restriction and, except
as listed on the Schedule 1(b), there are no fees,
charges, licenses or other costs payable by Buyer with
respect to the Software or the use or distribution of
the Software.
(e) The Software performs substantially in accordance
with its functional specifications and related
documentation. Seller has provided Buyer with all
fault logs and other logs and other records relating to
the Software and any defects or deficiencies in the
possession of Seller.
(f) Except as set forth on Schedule 1(b), Seller has
not disclosed the source code for any of the Software
or other confidential or proprietary information
constituting, embodied in or pertaining to the Software
to any person or entity other than employees or
contractors of Seller who are bound by confidentiality
agreements in substantially the form disclosed to
Buyer. Except as set forth on Schedule 1(b), none of
the Software has been placed in escrow or is subject to
other arrangements pursuant to which the source code
has been or could be delivered or disclosed to any
third party.
(g) Except as provided in Schedule 1(b), the Software
is designed to be used prior to, during, and after the
calendar year 2000 A.D., and the Software will operate
during each such time period without error related to
date data and, specifically, be able to accurately
carry out calculations using, and compare and sequence,
date data of the twentieth and twenty-first centuries,
including leap year calculations.
(h) Schedule 1(c) identifies all Licensed Software.
4.6. Accounts Receivable. The Accounts
Receivable arose from Seller's or a Foreign
Subsidiary's performance of services or from a bona
fide sale or license of software or other goods or
services and Seller has received no notice of any
dispute regarding the payment of any Accounts
Receivable.
4.7. Litigation. Schedule 4.7 sets forth all
litigation, proceedings or investigations or other
legal or administrative proceedings pending or, to the
best of Seller's knowledge, threatened (a) against or
relating to any Foreign Subsidiary, the Subject Assets
or the Subject Business, (b) which questions or
challenges the validity of this Agreement or any action
taken by Seller pursuant to this Agreement or in
connection with the transactions contemplated hereby or
(c) against Seller which, if adversely determined,
could reasonably be expected to have an adverse effect
on the Subject Business.
4.8. Intangible Assets. The Subject Business
does not own any Registrations except as set forth on
Schedule 1(h). To Seller's knowledge, the Intangible
Assets do not infringe or otherwise violate the patent,
trade name, trademark, copyright or other rights of any
other person in the United States or in any foreign
country in which the Subject Business has sold products
or conducted business. To Seller's knowledge, the
Intangible Assets are all the intellectual property
necessary for the conduct of the Subject Business as
currently conducted. Any employee or independent
contractor of Seller or any Foreign Subsidiary having
any interest in any of the Intangible Assets has
assigned or will assign such interest or interests to
Seller prior to the Closing. Except as set forth in
the Schedule 4.8, Seller has taken all commercially
reasonable steps to enforce its rights in the
Intangible Assets and has not granted any license or
other right under, or authorized or permitted anyone
else to use, any of the Intangible Assets, nor, to the
knowledge of Seller, does any other person have any
right in the foregoing, nor to the best knowledge of
Seller, is any other person making any unauthorized use
of any of the foregoing. Except as set forth in
Schedule 4.8, all of Seller's rights in, to and under
the Intangible Assets and its other proprietary rights
are transferable by Seller in accordance with this
Agreement without the consent of any third party.
4.9. Financial Statements. The income statement
and balance sheet of the Subject Business as and for
the fiscal years ended June 28, 1998, and June 29,
1997, and the interim financial statements for the
period ended August 28, 1998 (collectively, the
"Financial Statements"), are attached hereto as
Schedule 4.9 and present fairly the financial condition
of Seller on the dates of such statements and the
results of operations for the periods in such Financial
Statements and were prepared in accordance with
generally accepted accounting principles, consistently
applied ("GAAP") except that they do not contain
footnotes required by GAAP and, in the case of interim
financial statements, are subject to audit and
appropriate year-end adjustments. The Financial
Statements do not reflect adjustments relating to
capitalized software or any required provision for loss
contracts under percentage of completion accounting.
Except as set forth in Schedule 4.9, there has been no
change in the capitalization, assets, liabilities,
business prospects or methods of doing business of the
Subject Business since June 28, 1998, other than
changes in the ordinary course of business (none
of which have had a material adverse effect on the
business, prospects or condition, financial or
otherwise, of the Subject Business).
4.10. Taxes. To the extent relating to the
Subject Business or Subject Assets: (i) all federal,
state, county, local and foreign tax returns, reports
and forms of the Seller or any Foreign Subsidiary due
prior to the date of this Agreement have been filed and
properly reflect the tax liability of the Seller or
Foreign Subsidiary, and all federal, state, county,
local and foreign taxes due and payable prior to the
Closing (including applicable payroll and sales taxes)
will have been paid prior to the Closing; (ii) no tax
liens have been filed and no claims are being asserted
with respect to any taxes and there is no basis for any
such lien or claim; and (iii) neither Seller nor any
Foreign Subsidiary is a party to any agreement for the
extension of the time for the assessment and payment of
any tax and no restriction on assessment or collection
of taxes has been waived with respect to the Seller or
any Foreign Subsidiary.
4.11. Contracts and Other Agreements. Schedule
4.11 lists all of the following written or oral
contracts (the "Material Contracts") to which Seller or
any Foreign Subsidiary is bound that relate to the
Subject Business:
(a)All contracts not in the ordinary course of
business;
(b)Contracts with Seller or an affiliate thereof;
(c)Contacts pertaining to the borrowing of money;
(d)Contacts creating guarantees or powers of
attorney;
(e)Contacts relating to employment (other than at-
will) or consulting services;
(f)VAR, distributor, dealer, representative,
agency or other distribution agreements;
(g)Development agreements;
(h)Joint venture, partnership or similar
agreements or cooperative arrangements;
(i)Noncompetition, confidentiality, secrecy or
similar agreements that impose obligations on
the Subject Business;
(j)Contracts involving payment or performance by
either party thereto having an aggregate value
of $25,000 or more;
(k)Licenses or royalty agreements (other than
licenses to customers in the ordinary course
of business);
(l)Contracts granting exclusive rights of any
kind to any other party;
(m)Contracts that cannot be canceled on thirty
(30) days or less notice without payment or
penalty;
(n)Contracts relating to the lease of real
property; or
(o)Contracts requiring performance by Seller or a
Foreign Subsidiary outside of the United
States.
Seller has delivered true and correct copies of
each of the Material Contracts, and all amendments and
modifications of such Contracts, to Buyer (and true and
correct English translations thereof for any Material
Contract written in a foreign language). Each Material
Contract is valid, binding and in full force and effect
in accordance with its terms. Except as set forth on
Schedule 4.11, none of Seller, any Foreign Subsidiary,
nor, to the best of Seller's knowledge, any other party
to a Material Contract is in breach or default under
any Material Contract (with or without the lapse of
time, or the giving of notice, or both). Neither
Seller nor any Foreign Subsidiary has relinquished any
rights it has under any of the Material Contracts.
Except in respect of Intellectual Property, any and all
contracts, licenses, agreements and similar items held
in the name of, or for the benefit of, Seller or any
Foreign Subsidiary, and that are necessary to the
conduct of the Subject Business as currently conducted,
are included in Schedule 4.11.
4.12. Customization Projects . Attached hereto
as Schedule 4.12 is a true and correct listing of all
customizations or software or catalog development
projects in process, or pending proposals regarding
customization or software or catalog development
projects, including a description of the project,
estimated costs of completion, payment terms, ▇▇▇▇▇▇▇▇
to date, ▇▇▇▇▇▇▇▇ received, work completed and work
still to be performed. Seller has delivered true,
correct and complete copies of documentation relating
to each of the foregoing projects or proposals to
Buyer. Seller makes no representation or warranty that
the actual costs of completion will not exceed the
estimated costs of completion -- but does represent
that such estimates represent Seller's good faith
estimate of such costs, considering the nature of the
customer requirements and the work performed to date.
4.13. Employees. Seller has delivered to Buyer
true and correct copies of the following:
(a) all employee handbooks and personnel
manuals applicable to employees of the Subject
Business and the Foreign Subsidiaries; and
(b) a list of all employees of the Subject
Business and each Foreign Subsidiary as of the
date hereof together with their current job
descriptions, rates of salary or wages, vacation
benefits and each bonus, deferred compensation,
fringe benefit, stock option, incentive
compensation, severance or termination pay,
hospitalization or other medical, life or other
insurance, supplemental unemployment benefit or
program, profit sharing, pension or retirement
plan, program, agreement or arrangement currently
affecting such employees.
None of the employees of the Subject Business is
represented by a union.
4.14. Labor Practices. Neither Seller nor any of
the Foreign Subsidiaries has engaged in any unfair
labor practice or unlawful discriminatory practice in
the conduct of the Subject Business, and there is no
basis for any claim by any past or present employee of
the Subject Business that such employee was subject to
wrongful discharge or any employment discrimination
arising out of or relating to such employee's race,
sex, color, religion, handicap or other protected
characteristic under applicable law. Seller and the
Foreign Subsidiaries have complied with all applicable
laws, ordinances and governmental regulations relating
to employment practices, including, without limitation,
wage hour laws, equal pay laws and all laws relating to
employment discrimination, employee welfare,
immigration matters and labor standards.
4.15. ERISA. Since at least June 29, 1997, the
Subject Business has had no employee pension benefit
plan other than such plans offered generally to the
employees of Seller.
4.16. Conduct Out of Ordinary Course. Since June
28, 1998, Seller and the Foreign Subsidiaries have
conducted the business of the Subject Business in the
normal and ordinary course and have not, (a) incurred
or agreed to incur any obligations or liabilities,
absolute, accrued, contingent or otherwise, whether due
or to become due, except current liabilities accrued in
the ordinary course of business, none of which
materially adversely affects the Subject Business, the
Subject Assets or the obligations this Agreement
contemplates; (b) mortgaged, pledged or subjected to,
or agreed to mortgage, pledge or subject to, any lien,
charge, security interest or any other encumbrance or
restriction, any of the Subject Assets or the Subject
Business, except for this Agreement; (c) except as set
forth on Schedule 1(d), sold, transferred, leased to
others or otherwise disposed of or agreed to sell,
transfer, lease or otherwise dispose of any of the
Subject Assets (except sales of Inventory in the
ordinary course of business), or canceled or
compromised, or agreed to cancel or compromise, any
debt or claim or waived or released, or agreed to waive
or release, any right of substantial value relating to
the Subject Business or the Subject Assets; (d)
suffered any damage, destruction or loss (whether or
not covered by insurance) materially affecting any
of the Subject Assets, or the business, condition or
known prospects (financial or otherwise) of the Subject
Business; (e) transferred or granted, or agreed to
transfer or grant, any rights under, or entered into or
agreed to enter into, any settlement regarding the
breach or infringement of any lease, license, patent,
copyright, trademark, trade name, invention or similar
rights, or modified or agreed to modify any existing
rights with respect to the foregoing; or (f) made, or
agreed to make, any direct or indirect change in the
rate of compensation, commission, bonus or other
remuneration payable, or paid or agreed to pay,
conditionally or otherwise, any bonus, extra
compensation, pension or severance pay, to any employee
or agent of the Subject Business out of the ordinary
course of business.
4.17. No Transfer of Assets. Except as set forth
on Schedule 1(d), none of the Fixed Assets has, since
June 28, 1998, been sold, disposed of, stolen,
transferred or otherwise lost.
4.18. Insurance. Seller maintains policies of
fire and casualty, liability and other forms of
insurance in such amounts, with such deductibles and
against such risks and losses as are, in Seller's
judgment, reasonable for the Subject Business and the
Subject Assets and will continue such insurance in
effect through the date of Closing. A true and
complete list of such insurance policies is set forth
on attached Schedule 4.18.
4.19. Brokers and Agents. Neither Seller nor any
employee, agent or other representative of the Subject
Business has dealt with any agent, finder, broker or
other representative in any manner which could result
in Buyer being liable for any fee or commission in the
nature of a finder's fee or originator's fee in
connection with the subject matter of this Agreement.
4.20. Warranties. Schedule 4.20 sets forth a
true and accurate description of the warranty claims
expenses incurred by the Subject Business in the two
years ended June 28, 1998.
4.21. Laws and Permits. Seller and each of the
Foreign Subsidiaries are in compliance in all material
respects with and have all material permits required by
all applicable federal, state, local or foreign laws,
statutes, regulations, rules, ordinances or other
requirements of law or interpretations of any such
matters by any court ("Laws") in the operation of the
Subject Business as previously or presently operated,
including the import, export, manufacture, storage,
sale and distribution of all products and services. A
true and complete list of all material permits issued
or granted to the Company or any Foreign Subsidiary by
any governmental authority is set forth on the Schedule
4.21 and true, complete and correct copies of all such
permits have previously been delivered to the Buyer.
Neither the Company nor any Foreign Subsidiary is in
breach or violation in any material respect of any
applicable Law relating thereto and all such permits
are current and effective. Without limiting the
foregoing, Seller and the Foreign Subsidiaries have
complied with all applicable Laws relating to the
reproduction, distribution and marketing of the
Software, including any such laws or regulations
relating to the export or import of the Software.
4.22. Customers. Schedule 4.22 sets forth, with
respect to the last two (2) fiscal years of the Seller,
a list regarding the recurring and nonrecurring revenue
received from each of the ten (10) largest (based on
dollar amounts purchased from the Seller and any of the
Foreign Subsidiaries) customers of the Subject
Business. Except as set forth on Schedule 4.22,
neither the Seller nor any Foreign Subsidiary has
received any written notice or indication (or, to
Seller's knowledge, any oral notice or indication) of
the intention of any of such customers to cease doing
business or reduce in any material respect the business
transacted with the Subject Business or to terminate or
modify any arrangements or agreements with the Subject
Business (as a result of consummation of the
transactions contemplated hereby or otherwise).
4.23. Investment Intent. Seller is acquiring the
Subject Shares for its own account, for investment
purposes, and not with a view to the distribution
thereof within the meaning of the Securities Act of
1933, as amended (the "Securities Act"). Seller
covenants and agrees that it will not offer, sell or
otherwise transfer the Subject Shares unless and until
the Subject Shares are registered pursuant to the
Securities Act and all other applicable securities laws
or unless the disposition thereof is exempt from
registration thereunder.
4.24. Warranties True and Correct. No warranty
or representation by Seller contained in this Agreement
or in any writing to be furnished under this Agreement
or previously furnished to Buyer contains or will
contain any untrue statement of a material fact nor has
Seller omitted to state any material fact necessary in
order to make any such warranty or representation, in
light of the circumstances under which it was made, not
misleading.
4.25. Warranties Survive Closing.
Notwithstanding any investigation by or information
supplied to Buyer, the warranties and representations
of Seller contained in this Agreement will be true and
correct on the Closing Date and will survive the
Closing for sixteen (16) months following the Closing
Date. Any claim for indemnification under Article VIII
below, made in writing prior to the expiration of the
sixteen (16) month period specified in Paragraph 8.1,
and the rights of indemnity with respect to such claim,
will survive such expiration until resolved or
judicially determined and any such claim not submitted
in writing prior to the expiration of such applicable
survival period will be considered to have been waived.
Notwithstanding the foregoing, the first sentence of
Paragraph 4.4 and the right of indemnity with respect
thereto shall forever survive the Closing.
4.26. Knowledge of Seller. For those warranties
and representations set forth in this Article IV which
are subject to the qualification "to Seller's
knowledge" or "to the best of Seller's knowledge," the
Seller will be considered to have knowledge of a matter
if ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇ or any other current executive officer or
current director of the Subject Business has actual
knowledge of the matter.
ARTICLE V
Warranties and Representations of Buyer
Buyer represents and warrants to Seller as
follows:
5.1. Corporate Matters. Buyer is a corporation
duly incorporated and validly existing under the laws
of the State of Wisconsin and has the requisite
corporate authority and power to carry on all business
activities Buyer currently conducts or previously
conducted. Buyer is duly qualified and in good
standing to do business in each jurisdiction in which
the nature of its business or the ownership, leasing or
holding of its properties makes such qualification
necessary unless the absence of qualification would not
have a material adverse effect on Buyer's business
activities. Buyer has the corporate power and
corporate authority to enter into this Agreement and to
consummate the transactions this Agreement
contemplates. The Board of Directors of Buyer has
approved the execution and delivery of this Agreement,
the agreements, documents and instruments relating to
this Agreement and the consummation of the transactions
this Agreement contemplates, and this Agreement and
such other agreements, documents and instruments are
and will constitute valid and legally binding
obligations of Buyer, enforceable against it in
accordance with their respective terms.
5.2. No Violation. The execution and delivery of
this Agreement does not, and the consummation of the
transactions this Agreement contemplates and compliance
with the terms of this Agreement will not (a) conflict
with, or result in any violation of, (i) any provision
of the Articles of Incorporation or By-Laws of Buyer,
or (ii) any judgment, order or decree, or statute, law,
ordinance, rule or regulation applicable to Buyer or
Buyer's assets, or (b) result in a breach or default
under any material agreement, instrument or document to
which Buyer is a party or which binds Buyer or its
assets.
5.3. No Consent. No consent, approval, order or
authorization of, or registration, declaration or
filing with, any court, administrative agency or
commission or other governmental authority or
instrumentality, domestic or foreign, is required to be
obtained or made by or with respect to Buyer in
connection with the execution and delivery of this
Agreement or the consummation of the transactions this
Agreement contemplates, except as contemplated by the
Registration Rights Agreement, filing of appropriate
notices with The Nasdaq Stock Market and filings
required under the Securities Exchange Act of 1934, as
amended.
5.4. No Litigation. There is no litigation,
proceeding or investigation or other legal or
administrative proceeding pending or, to the best of
Buyer's knowledge, threatened (a) against or relating
to Buyer or (b) which questions or challenges the
validity of this Agreement or any action taken by Buyer
pursuant to this Agreement or in connection with the
transactions contemplated hereby.
5.5. Brokers and Agents. Buyer has not dealt
with any agent, finder, broker or other representative
in any manner which could result in Seller being liable
for any fee or commission in the nature of a finder's
fee or originator's fee in connection with the subject
matter of this Agreement.
5.6. SEC Documents.
(a) Buyer has filed all forms, reports and
documents required to be filed with the SEC since
July 31, 1997, including without limitation
(i) its Annual Report on Form 10-K for the fiscal
year ended July 31, 1997; (ii) its Quarterly
Reports on Form 10-Q for the periods ended October
31, 1997, January 31, 1998 and April 30, 1998 and
(iii) the definitive Proxy Statement for the
meeting of shareholders of Buyer held November 19,
1997 (collectively, the "Buyer SEC Reports").
(b) The Buyer SEC Reports (i) were prepared
in conformity in all material respects with the
applicable rules and regulations of the SEC, and
(ii) did not at the time they were filed contain
any untrue statement of a material fact or omit to
state a material fact required to be stated in
such reports or necessary in order to make the
statements in such reports, in light of the
circumstances under which they were made, not
misleading.
5.7. Financial Statements. The financial
statements and related notes of Buyer set forth in the
Buyer SEC Reports present fairly the financial
condition of Buyer on the dates of such financial
statements and the results of operations for the
periods in such financial statements and were prepared
in accordance with GAAP, except that any interim
financial statements are subject to audit and
appropriate year-end adjustments and do not contain
footnotes required by GAAP. There has been no change
in the capitalization, assets, liabilities, business
prospects or methods of doing business of Buyer since
July 31, 1998, other than changes in the ordinary
course of business (none of which has had a material
adverse effect on the business, prospects or condition,
financial or otherwise, of Buyer).
5.8. Capitalization.
(a) The entire authorized capital stock of Buyer
consists of 25,000,000 shares of Common Stock, par
value $.001 per share, of which 4,242,780 shares are
outstanding (exclusive of the shares issued hereby) and
1,000,000 shares of Preferred Stock, par value $.001
per share, of which 40,000 shares are designated as
Series A Preferred Stock, 20,000 shares of which are
issued and outstanding.
(b) Except as set forth on Schedule 5.8, there are no
outstanding options, warrants or other rights to
subscribe for, purchase or otherwise receive any shares
of capital stock of Buyer or any security or obligation
of Buyer which is by its terms convertible into capital
stock of Buyer or any option, warrant, subscription or
other purchase right with respect to capital stock of
Buyer (collectively, "Buyer Capital Stock") from Buyer
(including, without limitation, convertible debt
securities).
(c) Except as set forth on Schedule 5.8, Buyer is not
subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of
Buyer Capital Stock.
(d) Except as set forth on Schedule 5.8, there are no
agreements, whether written or oral, between any
shareholder and Buyer with respect to the voting or
transfer of Buyer Capital Stock or with respect to any
other aspect of Buyer's affairs that is required to be
disclosed in the Buyer SEC Reports and is not so
disclosed.
5.9. Registration Rights. Except as set forth
on Schedule 5.9, no shareholder, investor or other
person has any right to cause Buyer to register under
the Securities Act of 1933 any shares of Buyer Capital
Stock, whether upon demand or in connection with any
registration by Buyer of Buyer Capital Stock.
5.10. Subject Shares. The Subject Shares have
been duly and validly authorized, and when issued as
provided herein, will be duly and validly issued, fully
paid and non-assessable (except for liability for
certain indebtedness to employees as provided in
Section 180.0622 of the Wisconsin Business Corporation
Law, or any successor provision to such Section).
5.11. Warranties True and Correct. No warranty
or representation by Buyer contained in this Agreement
or in any writing to be furnished under this Agreement
or previously furnished to Seller contains or will
contain any untrue statement of a material fact nor has
Buyer omitted to state any material fact necessary in
order to make any such warranty or representation, in
light of the circumstances under which it was made, not
misleading.
5.12. Warranties Survive Closing.
Notwithstanding any investigation by or information
supplied to Seller, the warranties and representations
of Buyer contained in this Agreement will be true and
correct on the Closing Date and will survive the
Closing for sixteen (16) months following the Closing
Date. Any claim for indemnification under Article
VIII, below, made in writing prior to the expiration of
the sixteen (16) month period specified in Paragraph
8.2, and the rights of indemnity with respect to such
claim, will survive such expiration until resolved or
judicially determined and any such claim not submitted
in writing prior to the expiration of such applicable
survival period will be considered to have been waived.
5.13. Knowledge of the Buyer. For those
warranties and representations set forth in this
Article V which are subject to the qualification "to
Buyer's knowledge" or "to the best of Buyer's
knowledge," Buyer will be considered to have knowledge
of a matter if any current executive officer of Buyer
has actual knowledge of the matter.
ARTICLE VI
[Reserved]
ARTICLE VII
Conduct Prior to and Subsequent to Closing
7.1. Execution and Delivery of Further
Instruments by Seller. Seller will at any time, and
from time to time after the Closing, upon the
reasonable request of Buyer or its successors or
assigns, execute, acknowledge and deliver to Buyer or
its successors or assigns such further instruments of
conveyance, assignment and transfer, consents and
assurances and will take such other action as Buyer or
its successors or assigns may reasonably request in
order to more effectively convey, assign, transfer and
deliver any of the properties or assets intended to be
conveyed, assigned, transferred and delivered under
this Agreement, and assist, at Buyer's expense, in the
collection or reduction to possession of any and all
such properties or assets.
7.2. Access to Business Records After Closing.
From and after the Closing Date, Buyer will maintain
the financial books and business records of the Subject
Business acquired by Buyer under this Agreement. Upon
Seller's request and with prior notice to Buyer, Buyer
will afford Seller and its accountants and counsel
access to any such financial books and business records
during normal business hours to the extent such access
is required by Seller in anticipation of, or
preparation for, any legal proceedings or financial,
tax or audit matters involving Seller. Damage by fire
or other casualty or accident excepted, Buyer will not
for a period of three (3) years after the Closing Date,
destroy or dispose of any such books or records unless
Buyer first offers Seller, at least sixty (60) days
prior to such destruction or disposition, an
opportunity to take possession of such books and
records.
7.3. Seller's Customers. Seller hereby confirms
that it has granted Buyer permission to contact any of
Seller's customers, vendors or suppliers and to discuss
the fact that Buyer is purchasing the Subject Business
from Seller with such customers, vendors and/or
suppliers.
7.4 Sale of BMS Business. Buyer shall use
commercially reasonable efforts to sell the assets
relating to the Subject Business' Business Management
System business (the "BMS Assets"), as set forth on
Schedule 7.4. In the event that Buyer is successful in
selling all or any portion of the BMS Assets within six
(6) months of the Closing, (i) as part of the Purchase
Price referred to in Paragraph 2.1, above, Buyer shall
pay Seller an amount equal to the consideration
received by Buyer for such BMS Assets (which shall be
cash, assumed liabilities and/or marketable securities,
including restricted stock) (the "Consideration") less
the greater of Twenty Five Thousand Dollars ($25,000)
or five percent (5%) of the Consideration, and (ii)
Seller shall reimburse Buyer for its out of pocket
expenses incurred in connection with such sale. Such
expenses are not to include a charge for the time of
any Buyer employee. In the event that Buyer is unable
to sell any of the BMS Assets within six (6) months of
the Closing, Buyer may retain such assets and, at its
own risk and expense, operate or discontinue the BMS
business, and Buyer shall have no further obligation to
Seller under this Paragraph with respect thereto.
Seller has granted Buyer the right to begin working on
the sale of the BMS Assets, provided that any sale of
the BMS Assets will be contingent upon the Closing.
Seller will cooperate with Buyer in the sale of the BMS
Assets and provide such consulting advice and
assistance and such information as Buyer shall
reasonably request.
7.5. Conduct of Subject Business Prior to the
Closing. Except as contemplated by this Agreement,
between the date hereof and the Closing Date, Seller
shall conduct the Subject Business in the ordinary
course and consistent with prior practices. Without
limiting the generality of the foregoing, without
Buyer's prior consent, Seller shall:
(a) continue pricing, purchasing, collection, vendor
payments, sales and credit policies and procedures in
accordance with past practice;
(b) use reasonable efforts to preserve the goodwill of
the Subject Business and the Subject Business' current
relationships with employees, customers, suppliers and
other persons with which the Subject Business has
significant business relationships;
(c) refrain from doing any act or omitting to do any
act, which will cause a breach of any Material
Contract;
(d) sell any properties or assets, or enter into any
agreement or agreements for the sale of assets or
properties, other than the sale of, and agreements for
the sale of, inventory made in the ordinary course of
the Subject Business;
(e) adopt, amend or increase compensation or benefits
payable under, or take any actions which might result
in adverse tax or other consequences with respect to,
any bonus, profit sharing, compensation, stock option,
pension, retirement, deferred compensation, collective
bargaining agreement, or other plan, agreement, trust,
fund or arrangement for the benefit of any employee or
class of employees of the Subject Business; or
(f) take any action or refrain from taking any action
that results in the representations and warranties set
forth herein not to be true and correct in all material
respects on the Closing Date.
7.6. Access to Information. From the date hereof
until the Closing, upon reasonable notice, Seller shall
afford the officers, employees and authorized agents,
accountants, counsel, and representatives of Buyer full
and complete access to the offices, properties,
software, books, records, contracts, financial
statements and other documents and materials relating
to the Subject Business' operations, business,
financial condition, assets and liabilities. From the
date hereof through the Closing Date, Seller shall
cause appropriate management personnel of the Subject
Business to be available on a regular and frequent
basis to confer with one or more designated
representatives of Buyer to report material operational
matters and the general status of ongoing operations of
the Business. Seller shall cooperate in keeping Buyer
fully informed and promptly notify Buyer of any adverse
change in the normal course of business or prospects of
the Subject Business and permit Buyer to participate in
all discussions relating thereto.
7.7. Consummation of Agreement. Seller and Buyer
shall each use their respective commercially reasonable
efforts to perform and fulfill all obligations on each
of their parts to be performed and fulfilled under this
Agreement, and to cause all of the conditions precedent
to the consummation of the transactions contemplated by
this Agreement to be met. Each of the parties hereto
shall use their respective commercially reasonable
efforts to take, or cause to be taken, all appropriate
action, do or cause to be done all things necessary,
proper or advisable under applicable law, and to
execute and deliver such documents and other
instruments or papers as may be required to carry out
the provisions of this Agreement and to consummate and
render effective the transactions contemplated by this
Agreement.
7.8. Noncompetition. Seller agrees that at no
time for a period of two (2) years after the Closing
(the "Non-Competition Period") shall Seller, either
directly or indirectly:
(a) Acquire an ownership interest in (other than stock
of a publicly-traded corporation amounting to less than
5% of the corporation's outstanding shares or any
interest obtained in connection with the sale of the
BMS Assets), engage in or render advice or assistance
to any business competitive with the Subject Business
in the United States, Canada or Europe;
(b) Divert, or attempt to divert, any business from
the Subject Business in the United States, Canada or
Europe, or, in such areas, solicit or entice, or
attempt to solicit or entice, any of the customers or
suppliers of the Subject Business so as to cause any
such customers or suppliers not to do business with the
Buyer; or
(c) Contact or solicit for employment any person now
or hereafter employed by the Subject Business or
entice, or attempt to solicit or entice, any such
person to leave the employment of the Buyer.
Seller recognizes that irreparable injury may
result to Buyer and the Subject Business in the event
of a breach by Seller of the restrictions imposed by
this Paragraph, and that its acceptance of such
restrictions was a material factor in the Buyer's
decision to enter into this Agreement. In the event
that Seller shall engage in any act in violation of the
provisions of this Paragraph, Buyer shall be entitled,
in addition to such other remedies and damages as may
be available to it, to an injunction prohibiting such
Seller from engaging in such acts.
7.9. Termination of Dealings. Seller shall not,
nor shall it permit any of its officers, directors,
employees, agents, or representatives to, directly or
indirectly, solicit, initiate or enter into discussions
or negotiations with, or provide any assistance or
information to, or enter into any agreement with, any
person or group of persons (other than Buyer)
concerning any acquisition, directly or indirectly, of
any equity interest in, or a merger, consolidation,
recapitalization, liquidation, dissolution or similar
transaction involving the Subject Business or any
purchase of any of the Subject Assets. Seller shall
immediately cease, and shall cause all of its officers,
directors, employees, agents, representatives, or
affiliates to immediately cease, any existing
activities, including discussions or negotiations with
any parties, conducted heretofore with respect to any
acquisition proposal and shall take the necessary steps
to inform the relevant persons of the obligations
undertaken in this Paragraph.
7.10. Confidentiality.
(a) Buyer and Seller agree that, after the
Closing, the Mutual Non-Disclosure Agreement dated
February 24, 1998 among the parties and Powercom-2000,
Inc. (the "Non-Disclosure Agreement") shall be
terminated and of no further force or effect.
(b) Seller agrees that, except as required by
law, at no time subsequent to the Closing shall Seller,
directly or indirectly, use for any purpose, disclose
to any person or retain copies of any Confidential
Information. As used herein, Confidential Information
means and includes (i) any proprietary, nonpublic
information included within the definition of
Intangible Assets, (ii) any manuals, reports, business
or other plans, customer or prospect profiles,
recommendations or proposals to the extent relating to
the Subject Business prepared by or for the Subject
Business or customers or clients of the Subject
Business other than Seller or any affiliate of Seller,
(iii) information with respect to any products or
services of the Subject Business or any of its
customers or clients other than Seller or any affiliate
of Seller, including without limitation customer lists
and customer information, and development and marketing
activities and operations, and (iv) any other
confidential information of Buyer provided to Seller in
accordance with the Non-Disclosure Agreement; provided,
however, Confidential Information shall not include any
information which is or becomes generally available to
the public other than as a result of disclosure on or
after the Closing Date by Seller or its present or
former subsidiaries, affiliates, employees or agents.
(c) In the event Seller is requested or required
by applicable law or regulation or by legal process to
disclose any Confidential Information, Seller agrees to
provide Buyer with prompt notice of such request to
enable Buyer to seek an appropriate protective order.
Seller agrees to cooperate with Buyer in any lawful
attempt that Buyer may make to obtain reasonable
assurance that confidential treatment will be afforded
the Confidential Information.
7.11. COBRA. Seller will provide notice pursuant
to the Consolidated Omnibus Budget Reconciliation Act
of 1985 to all employees of the Subject Business whose
employment with Seller or any Foreign Subsidiary
terminates prior to the Closing.
ARTICLE VIII
Indemnification
8.1. Indemnification of Buyer. Subject to
Paragraph 4.25, Seller will indemnify Buyer and hold it
harmless from and against any and all damages, losses,
deficiencies, actions, demands, judgments, costs and
expenses (including without limitation, reasonable
attorneys' and accountants' fees) (collectively,
"Damages") of or against Buyer resulting from or
arising out of (a) any misrepresentation or breach of
any warranty or representation of Seller contained in
this Agreement, or in any agreement, document or
instrument delivered by or on behalf of Seller pursuant
to or in connection with this Agreement; (b) the breach
or nonfulfillment of any covenant or agreement of
Seller contained in this Agreement or in any agreement,
document or instrument delivered by or on behalf of
Seller pursuant to or in connection with this
Agreement; (c) except for the Assumed Liabilities, any
liabilities or obligations of Seller or the Foreign
Subsidiaries arising out of the ownership or operation
of the Subject Business prior to the Closing Date,
including, without limitation, any assessments, claims
or liabilities (including interest and penalties) for
federal, state, local or foreign income, sales, use,
franchise, transfer or other taxes, any claim for
nonperformance or breach of contract, any claim for
worker's compensation or unemployment compensation, any
liability or obligation of Seller or a Foreign
Subsidiary to any of its employees or former employees,
any litigation or procee,ding (whether or not set forth
in Schedule 4.7), and any claims for personal injury or
property damage; (d) any violation of the Worker
Adjustment and Retraining Notification Act or similar
notification requirements under state law which occurs
prior to the Closing; or (e) without limiting the
foregoing, any claims for refunds or Damages caused by
actions or omissions which occurred prior to the
Closing Date under any of the Assumed Contracts.
8.2. Indemnification of Seller. Subject to
Paragraph 5.12, Buyer will indemnify Seller and hold it
harmless from and against any and all Damages of or
against Seller resulting from or arising out of (a) any
misrepresentation or breach of any warranty or
representation of Buyer contained in this Agreement, or
in any agreement, document or instrument delivered by
or on behalf of Buyer pursuant to or in connection with
this Agreement; (b) the breach or nonfulfillment of any
covenant or agreement of Buyer contained in this
Agreement or in any agreement, document or instrument
delivered by or on behalf of Buyer pursuant to or in
connection with this Agreement; (c) the Assumed
Liabilities; (d) any liabilities or obligations of
Buyer arising out of the ownership or operation of the
Subject Business on or after the Closing Date,
including, without limitation, any claim for
nonperformance or breach of contract, any claim for
worker's compensation or unemployment compensation,
and/or claims for personal injury or property damage
occurring thereafter; (e) any violation of the Worker
Adjustment and Retraining Notification Act or similar
requirements under state law which occurs after or as a
result of the Closing; or (f) the first post-Closing
payroll obligations paid by Seller to the employees of
the Subject Business, except amounts paid to ▇▇▇▇
▇▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇ and any amounts paid to ▇▇▇▇▇
▇▇▇▇▇ in excess of two weeks' salary.
8.3. Procedure Relative to Indemnification.
(a) In the event that any party to this Agreement
claims that it is entitled to be indemnified under the
terms of this Article VIII, it (the "Claiming Party")
will notify the party against which the claim is made
(the "Indemnifying Party") in writing of such claim
promptly after discovery of the facts supporting the
claim or receipt of a notice of any claim of a third
party (a "Third Party Claim") that may reasonably be
expected to result in a claim by such party against the
party to which such notice is given, as the case may
be; provided, however, that failure to give such
notification will not affect the indemnification
provided under this Agreement except to the extent the
Indemnifying Party is actually prejudiced as a result
of such failure. Such notice will specify the breach
of representation, warranty, covenant or agreement
claimed by the Claiming Party and the liability, loss,
cost or expense incurred by or imposed upon the
Claiming Party on account of such breach and will
include, if applicable, a copy of any summons,
complaint or other court pleading which evidences any
Third Party Claim. If such liability, loss, cost or
expense is liquidated in amount, the notice will state
such amount and such amount will be considered the
amount of the claim of the Claiming Party. If the
amount is not liquidated, the notice will so state and
in such event a claim will be considered asserted
against the Indemnifying Party on behalf of the
Claiming Party.
(b) The Indemnifying Party may, upon receipt of
written notice of a Third Party Claim and at its
expense, defend such Third Party Claim in its own name
or, if necessary, in the name of the Claiming Party.
The Claiming Party will cooperate with and make
available to the Indemnifying Party such assistance and
materials as may be reasonably requested of it, at the
Indemnifying Party's expense, and the Claiming Party
will have the right, at its expense, to participate in
the defense. The Claiming Party will not have the
right to settle and compromise any Third Party Claim
without the prior written consent of the Indemnifying
Party, which consent will not be unreasonably withheld.
(c) In the event the Indemnifying Party refuses to, or
notifies the Claiming Party that it refuses to, conduct
a defense against a Third Party Claim, then the
Claiming Party will have the right to conduct a defense
against such Third Party Claim and will have the right
to settle and compromise such Third Party Claim without
the consent of the Indemnifying Party. Once the amount
of such Third Party Claim is liquidated and the Third
Party Claim is finally determined, the Claiming Party
will be entitled to pursue each and every remedy
available to it at law or in equity to enforce the
indemnification provisions of this Article VIII and, in
the event it is determined, or the Indemnifying Party
agrees, that it is obligated to indemnify the Claiming
Party for such Third Party Claim, the Indemnifying
Party will pay all costs, expenses and fees, including
all reasonable attorneys' fees which may be incurred by
the Claiming Party in attempting to enforce
indemnification under this Article VIII, whether
enforced by suit or otherwise.
8.4. Certain Limits.
(a) Seller shall be liable to Buyer, and Buyer
shall be liable to Seller, for Damages that are
indemnifiable under Paragraphs 8.1(a) or 8.2(a),
respectively, only to the extent that the aggregate
amount of Damages exceeds $100,000. The foregoing
deductible shall not apply to and every dollar of
Damages shall be indemnifiable for breaches of the
representations and warranties in Paragraphs 4.1, 4.2,
4.3, the first sentence of Paragraph 4.4, 4.10, 4.19,
4.23, 5.1, 5.2, 5.3, 5.5, 5.8 and 5.10.
(b) If any representation, warranty or covenant
subject to indemnification pursuant to Paragraph 8.1(a)
or (b) or 8.2(a) or (b) contains a materiality
qualification (e.g., "material," "materiality," "in all
material respects," "material adverse effect" or
similar qualifications), such materiality qualification
shall have been deemed to have been met, and such
representation, warranty or covenant shall be deemed to
have been breached, if Buyer or Seller, as the case may
be, incurs or is alleged to have incurred Damages for
any breach with respect to each individual claim that
exceeds $5,000 (such excess over $5,000 being the
Damages for such claim).
ARTICLE IX
Bulk Sales
Seller and Buyer waive compliance by Buyer and
Seller with the provisions of the Uniform Commercial
Code relating to bulk sales and Seller agrees to pay
and discharge when due all claims of creditors which
could be asserted against Buyer by reason of such
noncompliance to the extent that Buyer does not
specifically assume such liabilities under this
Agreement.
ARTICLE X
[Reserved]
ARTICLE XI
Miscellaneous
11.1. Expenses. The parties to this Agreement
will pay their own expenses, including without
limitation, accountants' and attorneys' fees incurred
in connection with the negotiation and consummation of
the transactions the Agreement contemplates.
11.2. Notices. All notices or other
communications required or permitted to be given under
this Agreement to a party under this Agreement will be
in writing and will be considered to be given and
received in all respects when (a) personally delivered;
(b) upon confirmation of transmission if sent by
telecopy; (c) one (1) business day after being sent by
reputable overnight courier service; or (d) three (3)
business days after being deposited in the United
States mail, certified mail, postage prepaid, return
receipt requested, addressed as follows, or to such
other address as will be designated by notice duly
given:
IF TO BUYER: ARI Network Services,
Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇.
▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a Copy To: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇, S. C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
IF TO SELLER: ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Corporation
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a Copy To: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Corporation
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
11.3. Confidentiality and Public Announcements.
All information and documents received by either party
from the other relating to this Agreement will be
subject to the Non-Disclosure Agreement. Except as
required by law, neither party will make any public
announcement regarding this Agreement or the matters
described herein without the prior written consent of
the other party. Neither party shall make any other
press release or other written public statement
concerning the matters covered by this Agreement
without the approval of the other party; provided,
however, that either Buyer or Seller may, without such
approval, make such press releases or other written
public statements required by law, and shall consult
with the other party with respect to the form and
substance of such statements. Notwithstanding the
foregoing, after the Closing, Buyer will have the sole
authority as to what, if any, public announcements are
to be made.
11.4. Entire Agreement. This Agreement, the Non-
Disclosure Agreement, the attached schedules and
exhibits and the agreements executed and delivered in
connection with this Agreement constitute the entire
agreement between the parties relating to the subject
matter of this Agreement, and all prior agreements,
correspondence, discussions and understandings of the
parties (whether oral or written) are superseded
(including the Letter of Intent dated July 24, 1998),
it being the intention of the parties that this
Agreement will serve as the complete and exclusive
statement of the terms of their agreement together. No
amendment, waiver or modification to or under this
Agreement will be valid unless in writing signed by an
authorized signatory of the party or parties affected
by such amendment, waiver of modification.
11.5. Legends. The certificate representing the
Subject Shares shall be endorsed with a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED, ASSIGNED OR HYPOTHECATED
UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT COVERING SUCH
SECURITIES, THE SALE IS MADE IN ACCORDANCE
WITH RULE 144 OR ITS SUCCESSOR RULE UNDER THE
ACT, OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL OR MEMORANDUM OF LAW REASONABLY
SATISFACTORY TO THE COMPANY THAT AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE.
Buyer and its transfer agent need not register a
transfer of Subject Shares, unless the conditions
specified in the foregoing legend are satisfied.
11.6. Binding Effect. This Agreement will be
binding upon the parties to this Agreement and their
respective legal representatives, successors and
assigns.
11.7. Paragraph Headings. The headings in this
Agreement are for convenience and ease of reference
only and will not be construed to limit or otherwise
affect the meaning of any part of this Agreement.
11.8. Severability. The parties agree that if
any provision of this Agreement is under any
circumstances considered invalid or inoperative, this
Agreement will be construed with the invalid or
inoperative provision deleted, and the remaining rights
and obligations of the parties will be construed and
enforced in accordance with the remaining provisions of
the Agreement.
11.9. Terminology. As used in Article IV, unless
the context indicates otherwise, references to the
Seller shall be deemed to include Powercom-2000, Inc.,
a Wisconsin corporation that was dissolved in June
1998.
11.10. Applicable Law. This Agreement and all
questions arising in connection with it will be
governed and construed in accordance with the internal
laws of the State of Wisconsin.
11.11. Dispute Resolution. All controversies or
claims between the Seller and the Buyer arising out of
or relating to this Agreement or the breach thereof,
including any dispute as to the existence or validity
of this Agreement or the arbitrability of any
particular issue which cannot be settled amicably by
the Buyer and the Seller, shall be finally settled in
an arbitration to be conducted under the commercial
arbitration rules of the American Arbitration
Association (the "AAA") by a single arbitrator selected
under the rules of the AAA. Any such arbitration
proceedings shall be conducted in English and shall be
held in Milwaukee, Wisconsin. The decision of any such
arbitrator shall be final and binding upon the Buyer
and the Seller and may be enforced in any court of
competent jurisdiction, and neither the Buyer nor the
Seller shall seek redress against each other in any
court or tribunal except solely for the purpose of
obtaining execution of any arbitral award or of
obtaining a judgment consistent therewith. The fees
and expenses of the arbitration proceedings shall be
divided equally between the Buyer and the Seller;
provided, that the Buyer and the Seller each shall pay
the fees and expenses of its own legal counsel and
representatives incurred in connection with the
arbitration proceedings.
IN WITNESS WHEREOF, the parties have caused their
names to be subscribed on one or more counterparts of
this Agreement, all of which such counterparts will be
read together and construed as but one and the same
instrument as of the day, month and year first above
written.
SELLER:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ CORPORATION
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Executive Vice President (Title)
BUYER:
ARI NETWORK SERVICES, INC.
By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Executive Vice President (Title)