SECURITIES
AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 11, 1998
EDnet, INC.
(Exact name of registrant as specified in its charter)
Colorado
State or other jurisdiction of incorporation or organization
000-21659 84-1273795
(Commission File No.) (I.R.S. Employer Identification No.)
One Union Street
San Francisco, California 94111
Address of principal executive offices and zip code
Registrant's telephone number, including area code: (415) 274-8800
<PAGE>
Item 2 Disposition of Assets of Wholly-Owned Subsidiary.
On December 11, 1998, EDnet, Inc., ("EDnet") entered into an
asset purchase agreement (the "Agreement") with Enterprise
Communications Consulting, Inc., a Washington Corporation
("Buyer") and a wholly-owned subsidiary of Attachmate
Corporation of Bellevue, Washington, under which Buyer
acquired substantially all of the assets of EDnet's
wholly-owned subsidiary Internet Business Solutions, Inc.
("IBS"), a California corporation. Additionally, Buyer has
assumed certain outstanding liabilities of IBS.
As consideration for the IBS assets, Buyer has paid a total of
one million dollars ($1,000,000), of which nine hundred
thousand dollars $900,000 was paid to EDnet on December 18,
1998, the closing date of the transaction (the "Closing
Date"). The remaining one hundred thousand dollars ($100,000)
was paid into an interest bearing escrow account established
for the benefit of EDnet and will be released in full to EDnet
in increments upon the termination of the statute of
limitations governing certain potential claims against IBS or
the Buyer connected with the disposition of IBS's assets, or
upon the earlier agreement of the Buyer.
The assets to be acquired by Buyer include office and computer
equipment used by IBS in its business of web site development
and design, as well as receivables and certain other
intangible assets. Buyer is expected to continue IBS's
business of web site development and design.
Item 7(b). Proforma Financial Information and Exhibits
The Proforma Financial Information submitted herewith are
Unaudited Condensed Consolidated Pro Forma Statements of
Operations for the year ended June 30, 1998 and the three
months ended September 30, 1998, and an Unaudited Consolidated
Proforma Balance Sheet of the Company as of September 30,
1998, which reflect adjustments to EDnet's results of
operations and EDnet's balance sheet to give effect to the
transaction discussed above as if such transaction had
occurred at the beginning of each period presented.
F-1. Unaudited Condensed Consolidated Proforma Statements of
Operations for fiscal year ended June 30, 1998.
F-2. Unaudited Condensed Consolidated Proforma Statements of
Operations for three months ended September 30, 1998.
F-3. Unaudited Consolidated Proforma Balance Sheet as of
September 30, 1998.
F-4. Notes to unaudited Consolidated Financial Statements.
(c) Exhibit
10.1 Asset Purchase Agreement between Enterprise
Communications Consulting, Inc., Internet Business
Solutions Inc., and EDnet, Inc.
<PAGE>
EDnet, Inc.
UNAUDITED CONDENSED CONSOLIDATED PROFORMA STATEMENT OF OPERATIONS
For Fiscal Year Ended June 30, 1998
<TABLE>
<CAPTION>
(Audited) Adjusted Entries (Unaudited)
ProForma
Consolidated Sales of IBS's Consolidated
Balance Assets Balance
-------------------------------------------
<S> <C> <C> <C>
Revenues:
Equipment sales $ 874,785 $ 874,785
Installation and monthly fees 610,514 610,514
Web design and consulting 784,528 $ (784,528) -
Usage and hosting fees 1,617,291 (323,765) 1,293,526
Rental Fees 99,385 99,385
Other fees 17,839 (9,128) 8,711
------------------------------------------
4,004,342 (1,117,421) 2,886,921
Cost of Sales 2,602,494 (480,638) 2,121,856
------------------------------------------
Gross Profit 1,401,848 (636,783) 765,065
Sales & marketing expenses 666,985 (322,181) 344,804
General and administrative expenses 1,490,593 (135,234) 1,355,359
------------------------------------------
2,157,578 (457,415) 1,700,163
Loss from operations before other income
provisions for income taxes and
extraordinary item (755,730) (179,368) (935,098)
------------------------------------------
Other income (expense)
Interest (Expense) Income (59,606) (2,885) (62,491)
Gain on Sales of Investment 422,225 (422,225) (5) -
Forgiveness of Debt 200,000 (200,000) (5) -
Profit on sales of fixed assets 3,160 3,160
------------------------------------------
Loss before provisions for income tax and
extraordinary expenses (189,951) (804,478) (994,429)
Income Taxes 2,400 2,400
------------------------------------------
Loss before extraordinary item $ (192,352) $ (804,478) $ (996,829)
===========================================
Loss per share from operations:
Basic $ (0.02) $ (0.13)
Diluted $ (0.02) $ (0.13)
Weighted Average Number of Shares Outstanding
Basic 7,936,358 7,936,358
Diluted 7,936,358 7,936,358
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
F-1
<PAGE>
EDnet, Inc.
UNAUDITED CONDENSED CONSOLIDATED PROFORMA STATEMENT OF OPERATIONS
For the Three Months Ended September 30, 1998
<TABLE>
<CAPTION>
9/30/98 9/30/98
(Unaudited) Adjusted Entries (Unaudited)
Pro Forma
Consolidated Sales of IBS's Consolidated
Balance Assets Balance
------------------------------------------------
<S> <C> <C> <C>
Revenues:
Equipment sales $ 281,673 $ 281,673
Installation and monthly fees 153,440 153,440
Web design and consulting 255,850 $ (255,850) -
Usage and hosting fees 428,449 (89,778) 338,671
Other fees 27,633 (5,083) 22,550
------------------------------------------------
1,147,045 (350,711) 796,334
Cost of sales 680,540 (145,024) 535,516
------------------------------------------------
Gross Profit 466,505 (205,687) 260,818
Sales and Marketing expenses 129,139 (75,056) 54,083
General and Administrative Expenses 308,895 (58,802) 250,093
------------------------------------------------
438,034 (133,858) 304,176
Income (loss) before other income (expenses)
and provision for income taxes 28,471 (71,829) (43,358)
Other income (expense):
Interest income (expense) 843 843
Other income (expense) 27,372 27,372
------------------------------------------------
Total other income (expense), net 28,215 - 28,215
------------------------------------------------
Income (loss) before provision
for income taxes 56,686 (71,829) (15,143)
Income taxes - - -
------------------------------------------------
Net income (loss) $ 56,686 $ (71,829) $ (15,143)
================================================
Net Income (Loss) Per Common Share
Basic $ Nil $ Nil
Diluted $ Nil $ Nil
Weighted Average Number of Shares Outstanding
Basic 16,761,836 16,761,836
Diluted 22,105,992 22,105,992
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
F-2
<PAGE>
EDnet, Inc.
UNAUDITED CONSOLIDATED PROFORMA BALANCE SHEET
As of September 30, 1998
ASSETS
<TABLE>
<CAPTION>
9/30/98 9/30/98
(Unaudited) Adjusted Entries (Unaudited)
------------------------------ Pro Forma
Consolidated Sales of IBS's After sales of Consolidated
Balance Assets IBS' Assets Balance
--------------------------------------------------------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash $ 52,089 $ (62,942) $ 900,000 $ 889,147
Restricted cash-escrow account - 100,000 (1) 100,000
Accounts Receivable, net 602,138 (186,440) 415,698
Note Receivable - related party 62,354 62,354
Inventories 119,770 119,770
Prepaid expenses 8,601 (2,273) 6,328
---------------------------------------------------------------
TOTAL CURRENT ASSETS 844,952 (251,655) 1,000,000 1,593,297
NOTE RECEIVABLE - RELATED PARTY 226,997 226,997
PROPERTY AND EQUIPMENT, NET 380,417 (128,352) 252,065
OTHER ASSETS 7,282 (6,413) 869
--------------------------------------------------------------
TOTAL ASSETS $1,459,648 $ (386,420) $1,000,000 $2,073,228
===============================================================
LIABILTIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 261,348 $ (10,743) $ 10,000 (2) $ 260,605
Accrued expenses 229,765 (70,517) 50,000 (3) 209,248
Deferred revenue 33,421 (31,449) 1,972
Sales tax payable - 10,910 (4) 10,910
Line of credit 7,986 7,986
Notes payable - related parties 257,122 257,122
Current portion of capital
lease obligations 17,147 17,147
---------------------------------------------------------------
TOTAL CURRENT LIABILITIES 806,788 (112,709) 70,910 764,990
Capital Lease obligations 15,058 15,058
---------------------------------------------------------------
TOTAL LIABILITIES $ 821,847 $ (112,709) $ 70,910 $ 780,048
---------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock; par value $0.001
per share Authorized 50,000,000
shares, 16,761,836 issued and
outstanding as of September 30, 1998 16,761 16,761
Capital paid in excess of par value
of common stock 6,755,445 6,755,445
Accumulated Deficit (6,134,405) (273,711) 929,090 (5,479,026)
---------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 637,800 (273,711) 929,090 1,293,180
---------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,459,646 $ (386,420) $1,000,000 $2,073,228
===============================================================
The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
F-3
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EDnet, INC.
December 28, 1998 By: /s/ Tom Kobayashi
-----------------
Tom Kobayashi
Chief Executive Officer
Exhibit 10.1
ASSET PURCHASE AGREEMENT
BETWEEN
ENTERPRISE COMMUNICATIONS CONSULTING INC.,
INTERNET BUSINESS SOLUTIONS INC.,
AND
EDNET, INC.
Dated as of December 11, 1998
Execution Copy
<PAGE>
ASSET PURCHASE AGREEMENT
This Agreement, dated December 11, 1998, is by and between Enterprise
Communications Consulting, Inc., a Washington corporation ("Buyer"), Internet
Business Solutions Inc., a California corporation ("Seller"), and EDnet, Inc., a
Colorado corporation ("Parent"). Buyer, Seller, and Parent are referred to
herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, Seller desires to sell and assign, and Buyer desires to
purchase and assume, substantially all of the assets and certain of the
liabilities of Seller on the terms and subject to the conditions set forth
herein; and
WHEREAS, Parent owns all of the outstanding capital stock of Seller and
intends to dissolve and liquidate Seller promptly after the closing of the
transactions contemplated hereby, and Buyer and Parent desire to provide for
certain post-closing covenants among themselves;
AGREEMENT
Now, therefore, in consideration of the premises and of the mutual
promises and covenants contained herein, the parties agree as follows:
Definitions
Unless otherwise stated in this Agreement or required by the context in
which they are used, the following terms shall have the meanings set forth
below:
<PAGE>
1.1 "Assets" means the assets of Seller to be purchased by Buyer hereunder, as
more fully specified in Section 2.1.
1.2 "Assumed Liabilities" means the liabilities of Seller to be assumed by Buyer
hereunder, as more fully specified in Section 2.2.
1.3 "Closing" means the closing of the transactions contemplated hereby as
described in Section 3.
1.4 "Closing Date" means the date specified in Section 3.1 hereof.
1.5 "Code" means the Internal Revenue Code of 1986, as amended.
1.6 "Contracts" means all contracts, agreements, leases, licenses, permits,
warranties, consents, orders, registrations, memberships, privileges, approvals
and other similar rights and all other commitments, understandings, options,
rights, and interests, written or oral, of Seller or to which Seller is a party,
excluding this Agreement.
1.7 "Environmental Laws" means any federal, state or local tax, rule,
regulation, ordinance, statute, order, licence, permit, judgment or award
relating to pollution of the ambient environment and applicable to Seller's
business, including, without limitation, laws relating to air, water or soil
quality, or the handling, storage, release or disposal of any substance defined
or listed as a hazardous substance under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, and includes,
without limitation, petroleum oil and its fractions, or compliance with any of
the foregoing, or both, in effect as of the date of this Agreement.
1.8 "ERISA" means the Employment Retirement Income Security Act of 1974, as
amended.
<PAGE>
1.9 "Escrow Agent" means the third party selected jointly by Seller and Buyer to
serve as escrow agreement under the Escrow Agreement.
1.10 "Escrow Agreement" means the escrow agreement between Seller, Buyer, and
the Escrow Agent to be negotiated, executed, and delivered in good faith by such
parties within 30 days after the Closing Date, as described more fully in
Section 7.5.
1.11 "Escrow Funds" means that portion of the Purchase Price deposited with the
Escrow Agent in accordance with Section 3.3(b) of this Agreement and held and
disbursed by the Escrow Agent in accordance with the Escrow Agreement, together
with any interest income earned on such sum while held by the Escrow Agent.
1.12 "Financial Statements" means the September 1998 Balance Sheet and the
unaudited statement of income of Seller for the year ended September 30, 1998.
<PAGE>
1.13 "Intellectual Property" means (a) all inventions (whether patentable or
unpatentable, and whether or not reduced to practice), improvements thereto, and
patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof; (b) all trademarks, service marks, trade dress, logos,
trade names, corporate names, and domain names, together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, reservations, and
renewals in connection therewith; (c) all copyrightable works, all copyrights,
and all applications, registrations, and renewals in connection therewith; (d)
all trade secrets and confidential business information, (including, without
limitation, ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals); (e) all computer
software (in both source and object code form), databases, listings, code
(including HTML code), CGI scripts, Java applets, routines and other
computer-related materials or information, along with all documentation (in hard
and machine readable formats) therefor; (f) all other proprietary rights; and
(g) all copies and tangible embodiments thereof (in whatever form or medium).
1.14 "Knowledge" means actual knowledge after reasonable investigation.
1.15 "Material" or "Materially," with reference to any fact, means, unless the
term is otherwise defined or the context requires otherwise, material to
Seller's business and the Assets when considered as a whole.
1.16 "Permitted Liens" means (a) minor imperfections of title that do not
detract from the value or impair the use of any Asset; (b) liens for taxes,
assessments and other governmental charges or levies not yet due or which are
being contested in good faith by appropriate action and as to which adequate
reserves have been set aside in accordance with generally accepted accounting
principles; and (c) statutory liens of mechanics, materialmen, warehousemen or
carriers and similar liens arising by operation of law in the ordinary course of
business for sums not yet due or being contested in good faith and as to which
adequate reserves have been set aside in accordance with generally accepted
accounting principles, all of which such Permitted Liens shall be set forth at
Schedule 1.16.
1.17 "Purchase Price" has the meaning set forth in Section 3.2.
1.18 "September Balance Sheet" means the unaudited balance sheet of Seller as of
September 30, 1998, attached hereto as Annex A to Schedule 4.8.
Purchase of Assets and Assumption of Liabilities
<PAGE>
2.1 Purchase and Sale of Assets. On the Closing Date, Seller will sell, assign,
transfer, and convey to Buyer, and Buyer will purchase, acquire, and accept from
Seller, all the assets, real and personal, tangible and intangible, owned by
Seller and related to the conduct of Seller's business (the "Assets"). The
Assets will be transferred to Buyer free and clear of all debts, liens, security
interests, mortgages, trusts, claims, or other liabilities or encumbrances
except for Permitted Liens and liens of record on real property, and shall
include, without limitation, the following:
(1) all cash, cash equivalents, securities, short-term investments, and
similar highly liquid instruments;
(2) all accounts receivable (whether current or noncurrent), notes
receivable, and all other instruments and interests of a similar
nature;
(3) all prepayments and prepaid expenses;
(4) all interests (including leasehold interests) in tangible personal
property;
(5) all interests (including leasehold interests) in real property,
including land, buildings, fixtures and the like;
(6) all Intellectual Property;
(7) all other intangible assets and intellectual property including,
without limitation, all license rights;
(8) all permits, authorizations, consents, and approvals of governmental
entities;
(9) all rights existing under all Contracts;
(10) all creative materials of Seller, including, without limitation, sales
and promotional materials and photographs, films, art work, color
separations and the like related to Seller's business;
<PAGE>
(11) all policies of insurance and rights thereunder, rights of indemnity
from third parties, standby commitments of third parties, and other
similar rights of every kind and nature;
(12) all books, records, files, and papers, whether in hard or machine
readable format, pertaining to Seller's customers, suppliers,
distributors, personnel, and agents, and all other books, ledgers,
files, documents, correspondence, computer programs and business
records of Seller of every kind and nature, other than (i) records
required by law to be retained by Seller, copies of which have been
furnished to Buyer at or before the Closing, (ii) records whose
transfer would violate confidentiality agreements, and (iii) Seller's
taxpayer and other identification numbers, seal, minute books, charter
documents, corporate stock record books, and such other books and
records as pertain to the organization, existence or share
capitalization of Seller or as are necessary to enable Seller to file
its tax returns and reports; provided, however, that such books and
records will be maintained in existence for not less than two years
following the Closing Date and that the originals of such books and
records will be made available for inspection and duplication by
Buyer, at its expense, upon reasonable request during normal business
hours;
(13) all claims, refunds, credits, causes of action, choses in action,
rights of recovery, and rights of set-off of every kind and nature
(other than those having no relation to Seller's business), all
goodwill as a going concern, and all goodwill associated with the
assets described in Sections 2.1(c), (d), (f) and (g); and
(14) any assets set forth as assets of Seller on the September Balance
Sheet not otherwise described in Sections 2.1(a) through (m) above.
2.2 Assumption of Liabilities. On the Closing Date, Seller will assign to Buyer,
and Buyer will assume and agree to pay, defend, discharge, and perform as and
when due, the following liabilities (the "Assumed Liabilities"):
<PAGE>
(1) all liabilities set forth on the September Balance Sheet, excluding
intercompany balances and any liability of Seller for federal, state,
and local taxes of any kind whatsoever, including any interest,
penalty or addition thereto; and
(2) all obligations under the Contracts.
Buyer will not assume or be responsible for any obligation or liability of
Seller except as set forth in Sections 2.2(a) and (b).
3. Closing and Purchase Price
3.1 Closing. The Closing of the transactions contemplated by this Agreement will
take place at the offices of Stoel Rives LLP, 600 University Street, Suite 3600,
Seattle, Washington 98101 at 10:00 a.m., Pacific Time, on or before December 31,
1998, as the Parties may mutually agree (the "Closing Date").
3.2 Purchase Price. The Purchase Price for the Assets (the "Purchase Price")
will be One Million U.S. Dollars ($1,000,000).
3.3 Payment of Purchase Price
(1) On the Closing Date, Buyer shall pay Nine Hundred Thousand Dollars
($900,000) to Seller paid by wire transfer of immediately available
funds to such bank account as Seller shall designate.
(2) Within thirty days after the Closing Date, Buyer shall deposit One
Hundred Thousand Dollars ($100,000) with the Escrow Agent under the
Escrow Agreement. Subject to the terms and conditions of the Escrow
Agreement, up to Fifty Thousand Dollars ($50,000) of such Escrow Funds
will be disbursed to Seller not later than six months after the
Closing Date, with the balance of the Escrow Funds to be disbursed to
Seller not later than one year after the Closing Date.
<PAGE>
3.4 Allocation of Purchase Price. The Parties agree to allocate the Purchase
Price (and all other capitalizable costs) among the Assets for all purposes
(including financial accounting and tax purposes), and to file IRS Form 8594 in
a manner consistent with such allocation, in accordance with the allocation
schedule to be prepared by Buyer and delivered to Seller within 30 days after
the Closing Date.
3.5 Seller's Deliveries at Closing. At the Closing and subject to the terms and
conditions set forth herein, Seller shall deliver to Buyer the following
documents, duly executed by the respective parties thereto:
(1) confidentiality and ownership of developments agreements, in the form
attached as Exhibit A, executed by each of Seller's employees other
than those employees who are requested by Buyer to execute
confidentiality, ownership of developments, and employee retention
agreements;
(2) confidentiality, ownership of developments, and employee retention
agreements, in the form attached as Exhibit B, executed by those of
Seller's employees identified by Buyer prior to the Closing;
(3) a warranty bill of sale, in the form attached as Exhibit C, relating
to the transfer and conveyance of all of Seller's right, interest, and
title in the Assets to Buyer;
(4) an assignment and assumption agreement, in the form attached as
Exhibit D, relating to the assignment by Buyer to Seller, and the
assumption by Buyer from Seller, of the Assumed Liabilities;
(5) an assignment of lease, in the form attached as Exhibit E, relating to
the assignment by Seller to Buyer of the real property located at 2083
Landings Drive, Mountain View, CA 94043;
<PAGE>
(6) all consents, approvals, and authorizations of, and all filings and
registrations with, all federal, state, and local governmental
authorities and any third persons required for consummation of the
transactions contemplated hereby;
(7) a Financing Statement Change (UCC-2) terminating Union Bank of
California's security interest in the Assets;
(8) any other deeds, bills of sale, endorsements, assignments, and other
instruments of conveyance and transfer reasonably satisfactory in form
and substance to Buyer that may be required to effect the sale,
transfer, assignment, and conveyance of the Assets and Assumed
Liabilities to Buyer;
(9) a certificate from the Secretary or other duly authorized officer of
Seller certifying that the execution, delivery, and performance of
this Agreement and all actions taken or to be taken in connection
herewith have been approved by Seller's Board of Directors and
shareholders, and to which such certificate shall be attached copies
of the relevant resolutions of the Board of Directors and of the
shareholders; a certified copy of Seller's articles of incorporation,
as amended, issued within ten business days of the Closing Date by the
Secretary of State of California; Seller's Bylaws; a certificate of
good standing for Seller issued within ten business days of the
Closing Date by the Secretary of State of California; and a tax
clearance certificate issued within ten business days of the Closing
Date by the relevant tax authorities of the State of California;
(10) a list of all creditors and claimants known to Seller within three
days of the Closing Date in the form set forth in Exhibit F;
<PAGE>
(11) a certificate from the Secretary or other duly authorized officer of
Parent certifying that the execution, delivery, and performance of
this Agreement and all actions taken or to be taken in connection
herewith have been approved by Parent's Board of Directors, and to
which such certificate shall be attached copies of the relevant
resolutions of the Board of Directors; a certified copy of Parent's
articles of incorporation, as amended, issued within ten business days
of the Closing Date by the Secretary of State of Colorado; Parent's
Bylaws; and a certificate of good standing for Parent issued within
the most recent date practicable by the Secretary of State of
Colorado;
(12) a certificate from the Secretary or other duly authorized executive
officer of Seller and of Parent, dated as of the Closing Date, to the
effect that the respective representations and warranties of Seller
and Parent contained in this Agreement are in all material respects
true and complete on and as of the Closing Date as though made on and
as of such date, and that Seller and Parent have each complied in all
material respects with or performed all terms, covenants, and
conditions to be complied with or performed by such party at or prior
to the Closing;
(13) such incumbency certificates and other documents as Buyer reasonably
may request; and
(14) an unaudited balance sheet of Seller, dated as of the Closing Date,
and a list of all "work-in-progress" as of the Closing Date.
3.6 Buyer's Deliveries at Closing. At the Closing and subject to the terms and
conditions set forth herein, Buyer shall deliver to Seller the following
documents, duly executed by the respective parties thereto:
(1) a certificate from the Secretary or other duly authorized officer of
Buyer certifying that the execution, delivery, and performance of this
Agreement and all actions taken or to be taken in connection herewith
have been approved by Buyer's Board of Directors, and to which such
certificate shall be attached copies of the relevant resolutions of
the Board of Directors;
<PAGE>
(2) a certificate from the Secretary or other duly authorized executive
officer of Buyer, dated as of the Closing Date, to the effect that the
representations and warranties of Buyer contained in this Agreement
are in all material respects true and complete on and as of the
Closing Date as though made on and as of such date, and that Buyer has
complied in all material respects with or performed all terms,
covenants, and conditions to be complied with or performed by it at or
prior to the Closing; and
(3) such incumbency certificates and other documents as Seller reasonably
may request.
Representations and Warranties of Seller and Parent
4. Parent and Seller represent and warrant to Buyer as follows:
4.1 Organization and Standing. Seller is a corporation duly incorporated,
validly existing, and in good standing under the laws of the State of
California, and Parent is a corporation duly incorporated, validly existing, and
in good standing under the laws of the State of Colorado. Seller has full
corporate power and corporate authority to own or lease its properties and to
carry on its business as now being conducted and is duly qualified to do
business and in good standing in each jurisdiction where it is required to be so
qualified.
4.2 Authorization and Binding Obligation. Each of Seller and Parent has full
corporate power and corporate authority to execute, deliver, and perform this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery, and performance of this Agreement by each of Seller and Parent have
been duly and validly authorized by all necessary corporate action on the part
of Seller and or Parent, as the case may be. This Agreement has been duly
executed and delivered by Seller and by Parent and constitutes the legal, valid,
and binding obligation of Seller and Parent, as the case may be, enforceable
against each of them in accordance with its terms.
<PAGE>
4.3 Absence of Conflicting Agreements or Required Consents. The execution,
delivery, and performance of this Agreement by Seller and by Parent (a) do not
require (i) the consent, approval or authorization of any governmental or
regulatory authority having jurisdiction over Seller, Parent, or the Assets or
(ii) the submission or filing of any notice, report or other filing with any
governmental or regulatory authority having jurisdiction over Seller or Parent;
(b) will not violate any provisions of Seller's or Parent's Articles of
Incorporation or Bylaws; (c) will not violate any applicable law, judgment,
order, injunction, decree, rule, regulation, or ruling of any governmental
authority applicable to Seller or Buyer in any way having a material adverse
effect on the Assets or the Assumed Liabilities; (d) will not, either alone or
with the giving of notice or the passage of time or both, conflict with,
constitute grounds for termination of, or result in a breach of the terms,
conditions, or provisions of, or constitute a default under, any Contract to
which Seller is now subject or by which any of the Assets is bound or affected;
and (e) will not result in the creation of any lien, charge or encumbrance on
any of the Assets.
4.4 Title to and Condition of Real Property. Schedule 4.4 contains a list of all
real property currently owned or leased by Seller. Seller has good and
marketable fee simple title to all of the real property listed as owned by it in
Schedule 4.4, free and clear of all liens, mortgages, pledges, covenants,
easements, restrictions, leases, charges, and other claims and encumbrances of
any nature whatsoever and without reservation or exclusion by Seller of any
mineral, timber or other rights or interests, except Permitted Liens and
easements, rights of way and restrictions of record. Seller has delivered to
Buyer copies of all leases listed in Schedule 4.4 (including any and all
amendments and other modifications thereof), which leases are in full force and
effect. Seller is not in material default under any such leases and no event has
occurred and is continuing that, with the passage of time or upon giving of
notice or both would constitute an event of default thereunder. All real
property listed in Schedule 4.4 (including improvements thereon) is in
satisfactory condition and repair consistent with its present use, and available
for immediate use in the conduct of Seller's business. None of the property
listed in Schedule 4.4 violates in any material respect any applicable building
or zoning code or regulation of any governmental authority having jurisdiction.
<PAGE>
4.5 Title to and Condition of Personal Property. Without material exception,
Schedule 4.5 contains descriptions of all tangible personal property and assets
owned, leased or held by Seller and significantly related to the conduct of its
business. Seller has delivered to Buyer copies of all leases and other
agreements or documents affecting the properties listed in Schedule 4.5
(including any and all amendments and other modifications to such leases and
other agreements), all of which leases and other agreements are valid, binding,
and enforceable in accordance with their terms. Neither Seller nor, to Seller's
knowledge, any other party to such leases and other agreements is in material
default thereunder. The properties listed in Schedule 4.5 are in good operating
condition and repair (ordinary wear and tear excepted), are performing
satisfactorily, and are available for immediate use in the conduct of Seller's
business. All such tangible personal property and the state of maintenance
thereof are in compliance in all material respects with all applicable statutes,
ordinances, rules and regulations, federal, state and local. Seller has good and
marketable title to all of the personal property included in the Assets, free
and clear of all security interests, mortgages, liens, pledges, charges, valid
claims or encumbrances of any kind or character, except Permitted Liens.
4.6 Contracts. Schedule 4.6 lists all Contracts:
(1) for the lease of personal property to or from any person providing for
lease payments in excess of $5,000 per year;
(2) any agreement (or group of related agreements) for the purchase or
sale of supplies, products, or other personal property, or for the
furnishing or receipt of services, the performance of which will
extend over a period of more than one year, result in a material loss
to Seller, or involve payments in excess of $5,000;
(3) any agreement concerning a partnership or joint venture;
<PAGE>
(4) any agreement (or group of related agreements) under which Seller has
created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of
$5,000 or under which it has imposed a security interest on any of the
Assets;
(5) any agreement imposing confidentiality or noncompetition obligations
on Seller;
(6) any profit sharing, stock option, stock purchase, stock appreciation,
deferred compensation, severance, or other plan or arrangement for the
benefit of Seller's current or former directors, officers, and
employees;
(7) any collective bargaining agreement;
(8) any agreement for the employment of any individual on a full-time,
part-time, consulting, or other basis providing annual compensation in
excess of $5,000 or any severance benefits;
(9) any agreement under which Seller has advanced or loaned any amount to
any of its directors, officers, and employees outside the ordinary
course of business;
(10) any agreement under which the consequences of a default or termination
could have an adverse effect on the business, financial condition,
operations, results of operations, or future prospects of Seller; or
(11) any other agreement (or group of related agreements) the performance
of which involves consideration in excess of $5,000.
<PAGE>
Seller has delivered to Buyer copies of all written Contracts, and
descriptions of all oral Contracts, listed in Schedule 4.6 (including any and
all amendments and other modifications thereto). The parties to each Contract
that is an Asset have complied in all material respects therewith and no such
party is in material default under any of such Contracts, nor has Seller granted
or been granted any material waiver or forbearance with respect to any of such
Contracts. Seller has full legal power and authority to assign its rights under
all Contracts to Buyer in accordance with this Agreement, and such assignment
will not affect the validity, enforceability, and continuity of any of such
Contracts in accordance with their terms.
4.7 Intellectual Property.
(1) Seller owns or has the right to use pursuant to license, sublicense,
agreement, or permission all Intellectual Property necessary for the
operation of its business as presently conducted and as presently
proposed to be conducted. Each item of Intellectual Property owned or
used by Seller immediately prior to the Closing hereunder will be
owned or available for use by Buyer on identical terms and conditions
immediately subsequent to the Closing hereunder. Seller has taken all
necessary action to maintain and protect each item of Intellectual
Property that it owns or uses.
(2) Seller has neither interfered with, infringed upon, misappropriated,
or otherwise come into conflict with any third party Intellectual
Property nor has received any charge, complaint, claim, demand or
notice alleging any such interference, infringement, misappropriation,
or violation (including any claim that Seller must license or refrain
from using any third party Intellectual Property rights). To Seller's
knowledge, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any of Seller's
Intellectual Property rights.
(3) Schedule 4.7(c) identifies each of Seller's patents, trademarks,
service marks, trade dress, logos, trade names, registrations issued
to Seller for any of its Intellectual Property, and each license,
agreement or other permission that Seller has granted to any third
party with respect to any of its Intellectual Property. Seller has
delivered to Buyer correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as
amended to date). With respect to each item of Intellectual Property
identified in Schedule 4.7(c):
<PAGE>
(1) Seller possesses all right, title, and interest in and to the
item, free and clear of any security interest, license or other
restriction;
(2) the item is not subject to any outstanding injunction, judgment,
order, decree, ruling or charge;
(3) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to Seller's knowledge,
is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(4) Seller has not agreed to indemnify any person for or against any
interference, infringement, misappropriation, or other conflict
with respect to the item.
(4) Schedule 4.7(d) identifies each item of Intellectual Property that any
third party owns and that Seller uses pursuant to license, sublicense,
agreement or permission, except for any off-the-shelf or other
generally available commercial computer software that Seller uses
pursuant to "click-through" or "shrinkwrap" license agreements. Seller
has delivered to the Buyer correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended to
date). With respect to each item of Intellectual Property that Seller
uses pursuant to license, sublicense, agreement or permission:
(1) the license, sublicense, agreement, or permission covering the
item is legal, valid, binding, enforceable, and in full force and
effect;
(2) the license, sublicense, agreement, or permission will continue
to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the
transactions contemplated hereby;
<PAGE>
(3) no party to the license, sublicense, agreement, or permission is
in breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(4) no party to the license, sublicense, agreement, or permission has
repudiated any provision thereof;
(5) with respect to each sublicense, the representations and
warranties set forth in subsections (i) through (iv) above are
true and correct with respect to the underlying license;
(6) the underlying item of Intellectual Property is not subject to
any outstanding injunction, judgment, order, decree, ruling or
charge;
(7) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to Seller's knowledge,
is threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property;
and
(8) Seller has not granted any sublicense or similar right with
respect to the license, sublicense, agreement, or permission.
4.8 Financial Statements. Copies of the Financial Statements are set forth at
Annex A and Annex B to Schedule 4.8. The Financial Statements have been prepared
in accordance with generally accepted accounting principles applied on a basis
consistent with prior periods, from the books and records of Seller, fairly
present the financial condition of Seller and the results of its operations as
of September 30, 1998 and for the periods so indicated, and are correct and
complete.
<PAGE>
4.9 No Undisclosed Liabilities. The Seller has no liabilities except for (a)
liabilities set forth on the face of the September Balance Sheet and (b)
liabilities incurred after September 30, 1998 in the ordinary course of Seller's
business (none of which results from, arises out of, relates to, or was caused
by any breach of contract, warranty, tort, infringement, or violation of law,
including Environmental Laws). Seller is not subject to any material liability
or obligation that, in accordance with Seller's past practices in preparing its
financial statements, should have been included or adequately reserved against
in the September 30, 1998 Balance Sheet and was not so included or reserved
against.
4.10 Accounts Receivable. Schedule 4.10 sets forth a complete and accurate list
of Seller's accounts receivable as of November 30, 1998. The accounts receivable
reflected in the Financial Statements and listed Schedule 4.10, and the accounts
receivable that have arisen since September 30, 1998, (a) have arisen from bona
fide transactions in the ordinary course of Seller's business; (b) represent
valid obligations due to Seller, enforceable in accordance with their terms; (c)
have been collected or will be collected in the ordinary course of Seller's
business, subject only to allowances for doubtful accounts set forth in the
Financial Statements; and (d) will not be subject to any recoupments, setoffs or
counterclaims.
4.11 Insurance. Schedule 4.11 lists all policies of insurance that insure the
Seller, the Assets, and certain of Seller's officers. All policies of insurance
listed in Schedule 4.11 are valid, enforceable, and in full force and effect,
all premiums with respect to such policies covering all periods up to and
including the date hereof have been paid, and no notice of cancellation or
termination has been received with respect to any such policy.
4.12 Litigation and Administrative Proceedings. There is no litigation,
proceeding or investigation pending or threatened against Seller or any of the
Assets in any court or before any administrative agency that might result in any
material adverse effect upon the business, financial condition or results of
operations of Seller or any of the Assets or that seeks to enjoin or prohibit,
or otherwise questions the validity of, any action taken or to be taken pursuant
to or in connection with this Agreement.
<PAGE>
4.13 Compliance With Laws. Seller has not received any notice asserting that
Seller is in default under, or in violation of, any applicable statute, law,
ordinance, decree, order, rule, or regulation, franchise, permit or license of
any governmental body, which has resulted or may reasonably be expected to
result in a material adverse effect upon the business, financial condition or
results of operations of Seller or any of the Assets. Seller is not in default
under or in violation of any judgment, order, injunction or decree of any court,
administrative agency, or other governmental authority in any respect material
to the transactions contemplated hereby.
4.14 Environmental Compliance. Seller is in compliance in all respects with all
Environmental Laws applicable to the conduct of its business. Within five years
prior to the date of this Agreement, Seller has not received any notice
asserting any noncompliance in any respect by it with any Environmental Laws
from any federal, state, or local agency having jurisdiction over it.
4.15 Reports. All reports and statements required to be filed by Seller with any
governmental agency with respect to its business have been filed, and all
reporting requirements of any governmental authorities having jurisdiction
thereof have been complied with in all respects. All of such reports and
statements are materially complete and correct as filed.
4.16 Licenses and Permits. Seller has currently in full force and effect,
without material exception, all of the licenses and permits required (including
all licenses and permits required by Environmental Laws) to conduct its business
as it is presently conducted. Copies of each such license and permit, as
currently in force, have been made available to Buyer prior to the Closing.
Seller has not received notice from any regulatory authority indicating its
intention to amend materially and adversely or to revoke any such license or
permit or to conduct hearings, investigations or other proceedings potentially
leading to such action.
<PAGE>
4.17 Absence of Certain Changes. Since September 30, 1998, there has not been
any material adverse change in the business, financial condition, operations, of
future prospects of the Seller. Without limiting the generality of the
foregoing, since that date there has not been:
(1) any change in the financial condition or in the assets or liabilities
of Seller as set forth in the Financial Statements, except for changes
in the ordinary course of business that individually and in the
aggregate have not been materially adverse to Seller or any of the
Assets;
(2) any pending or threatened union organizational activity, labor
dispute, strike or work stoppage affecting Seller's business or the
Assets, or any charge or complaint against Seller filed with the
National Labor Relations Board or any administrator of any applicable
state or federal equal employment opportunity laws;
(3) any damage, destruction or loss (whether or not covered by insurance)
materially affecting the Assets;
(4) any entry into any agreement, contract, lease or license either
involving more than $5,000 or outside the ordinary course of business;
(5) any sale, assignment, lease, assignment or other transfer of any of
its Assets, tangible or intangible, other than for fair consideration
in the ordinary course of business;
(6) any creation or assumption of any mortgage, pledge or other lien,
encumbrance or security interest upon any of Assets, except for
Permitted Liens;
(7) any sale, assignment, transfer, grant abandonment or lapse on the part
of Seller of any material licenses or permits or any portion thereof,
or any license of any rights under or with respect to Seller's
Intellectual Property;
<PAGE>
(8) any liabilities incurred by Seller, except current liabilities
incurred in the ordinary course of business and liabilities under
Contracts entered into in the ordinary course of business;
(9) any capital investment in, any loan to, or any acquisition of the
securities or assets of, any other person involving more than $5,000;
(10) any capital expenditures exceeding $5,000 or commitments therefor;
(11) any notes, bonds, or other debt security issued, or any indebtedness
created, incurred, assumed or guaranteed, except for advances made to
employees for expenses in the ordinary course of business;
(12) any extraordinary losses or waivers of any rights of material value,
whether or not in the ordinary course of business or consistent with
past practice;
(13) any delay or postponement in the payment of accounts payable and other
liabilities outside the ordinary course of business;
(14) any cancellation, acceleration, termination, or modification by any
party of any agreement, contract, lease or license involving more than
$5,000 to which Seller is a party or by which Seller is bound;
(15) any declaration, set aside, distribution or payment of any dividend
with respect to Seller's capital stock or redemption, purchase or
acquisition of Seller's capital stock;
(16) any cancellation, compromise, waiver or release of any right or claim
outside the ordinary course of business;
<PAGE>
(17) any change in the employment terms of any of Seller's directors,
officers, or employees outside the ordinary course of business; or
(18) any other material occurrence, event, incident, action, failure to
act, or transaction outside the ordinary course of business involving
the Seller.
4.18 Tax Matters.
(1) All United States, state, local and foreign tax returns and reports
heretofore required to be filed by or with respect to Seller's
business have been so filed and all such returns were complete and
correct in all respects.
(2) No taxing authority has asserted any deficiency in the payment of any
tax or informed Seller that it intends to assert any such deficiency
or to make any audit or other investigation of Seller for the purpose
of determining whether such a deficiency should be asserted against or
with respect to Seller's business.
(3) Seller has not waived any statute of limitations or agreed to any
extensions of time for assessment or deficiency in respect of any
United States, state, local or foreign income taxes.
(4) Seller is not a party to any allocation or sharing agreement with
respect to any United States, state, local or foreign income taxes.
<PAGE>
4.19 Personnel Information. Schedule 4.19 sets forth (a) a complete and accurate
list of all directors, officers, employees or consultants of Seller as of the
date of this Agreement, specifying their names and job designations; visa status
(as applicable); the total amount paid or payable as compensation to each such
person, and the basis of such compensation, whether salaried, hourly, or fixed
or commission or a combination thereof; and accrued benefits for such persons as
of the date of this Agreement; and (b) the names and titles (as applicable) of
each person employed by Seller pursuant to a written employment agreement or
retained by Seller pursuant to a written agreement for consulting or other
advisory services.
4.20 Employees and Labor Relations Matters.
(1) Seller has complied in all respects with all state and federal labor
and employment laws, including provisions thereof relating to wages,
hours, equal opportunity, collective bargaining and the payment of
social security and other taxes.
(2) There is no unfair labor practice charge, complaint or other action
against Seller pending or, threatened before the National Labor
Relations Board and Seller is not subject to any order to bargain by
the National Labor Relations Board.
(3) There is no labor strike, dispute, petition for representation, demand
for recognition by a union, slowdown or stoppage pending or, to
Seller's knowledge, threatened against Seller.
(4) No grievance that might have a material adverse effect on the Assets
or Seller's business and no arbitration proceeding arising out of or
under any collective bargaining agreement is pending and no basis
exists for any such grievance or arbitration proceeding.
(5) No employee of Seller is subject to any non-compete, nondisclosure,
confidentiality, employment, consulting or similar agreements with any
third party relating to the present business activities of Seller.
4.21 Employee Plans. Except as set forth in Schedule 4.21:
<PAGE>
(1) Seller is not a party to any: (i) management, employment or other
contract providing for the employment or rendition of services; (ii)
bonus, incentive, deferred compensation, severance pay, pension,
profit-sharing, retirement, stock purchase, stock option, employee
benefit or similar plan, agreement or arrangement; or (iii) other
employment contract or other compensation agreement or arrangement,
oral or written, affecting or relating to any current or former
employee of Seller.
(2) Seller and every member of any controlled group (within the meaning of
Code section 414(b) and (c)) of which Seller is a member (an "ERISA
Controlled Group") is in compliance with the continuation coverage
requirements of Code section 4980B and Part 6 of Title I of ERISA.
(3) Seller has no potential "withdrawal liability" as defined in Section
4201 of ERISA and no partial or complete withdrawal has occurred with
respect to any Multiemployer Plan (as defined in Section 4001(a)(3) of
ERISA) that has resulted in any withdrawal liability for which the
Seller or any member of its ERISA Controlled Group may be liable.
4.22 Brokerage. Seller has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which Buyer could become liable or obligated.
5. Representations And Warranties of Buyer
Buyer represents and warrants to Seller as follows:
5.1 Organization and Standing. Buyer is a corporation duly incorporated, validly
existing, and in good standing under the laws of the State of Washington.
<PAGE>
5.2 Authorization and Binding Obligation. Buyer has full corporate power and
corporate authority to execute, deliver, and perform this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement by Buyer have been duly and validly authorized by
all necessary corporate action on the part of Buyer. This Agreement has been
duly executed and delivered by Buyer and constitutes the legal, valid, and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms.
5.3 Absence of Conflicting Agreements or Required Consents. The execution,
delivery and performance of this Agreement by Buyer (a) do not require (i) the
consent, approval or authorization of any governmental or regulatory authority
having jurisdiction over Buyer or of any third party or (ii) the submission or
filing of any notice, report or other filing with any governmental or regulatory
authority having jurisdiction over Buyer; (b) will not violate Buyer's Articles
of Incorporation or Bylaws; (c) will not violate any applicable law, judgment,
order, injunction, decree, rule, regulation or ruling of any governmental
authority applicable to Buyer; and (d) will not, either alone or with the giving
of notice or the passage of time or both, conflict with, constitute grounds for
termination of, or result in a breach of the terms, conditions or provisions of,
or constitute a default under any material agreement, instrument, license or
permit individually or in the aggregate material to the transactions
contemplated hereby and to which Buyer is now subject.
5.4 Brokerage. Buyer has not entered into any agreements for brokerage
commissions, finders' fees or similar compensation with respect to the
transactions contemplated by this Agreement.
6. Indemnity
6.1 Seller's Agreement to Indemnify. Seller and Parent shall defend, indemnify
and hold Buyer harmless against and in respect of: (a) any and all damages or
deficiencies resulting to Buyer from any breach of any of Seller's or Parent's
representations or warranties and any covenant or agreement on the part of
Seller contained herein; and (b) any liability or obligation arising out of any
and all actions, claims, suits, proceedings, demands, assessments, judgments,
recoveries, damages, deficiencies, interest, penalties, costs and expenses,
including, without limitation, reasonable attorneys' fees, incident to the
disposal of any matter that is the subject of indemnification pursuant to
subsection (a) of this Section 8.1. The obligations of Seller and Parent under
this Section 8.1 shall be joint and several. 1.1
<PAGE>
6.2 . Buyer shall defend, indemnify and hold Seller harmless against and in
respect of: (a) any and all damages or deficiencies resulting to Seller from any
breach of any of Buyer's representations or warranties and any covenant or
agreement on the part of Buyer contained herein; and (b) any liability or
obligation arising out of any and all actions, claims, suits, proceedings,
demands, assessments, judgments, recoveries, damages, deficiencies, interest,
penalties, costs and expenses, including, without limitation, reasonable
attorneys' fees, incident to the disposal of any matter that is the subject of
indemnification pursuant to subsection (a) of this Section 8.2.
6.3 . Seller and Parent, on the one hand, and Buyer, on the other, will provide
each other with notice of all third-party actions, suits, proceedings, claims,
demands or assessments that may be subject to the indemnification provisions of
this Section 8.3 (collectively, "Third Party Claims") promptly after becoming
aware thereof. Such notice shall state the nature and basis of such Third Party
Claims and the amounts thereof, in reasonable detail, to the extent then known
by the indemnified party, and will otherwise timely make available all relevant
information material to the defense of any Third Party Claims against it. The
indemnifying party will have the right to elect to join in the defense of any
such Third Party Claim at its sole expense, and no claim will be settled or
compromised without the consent (which will not be unreasonably withheld) of the
indemnifying party unless (i) the suit, action, claim, liability or obligation
seeks to impose any liability or obligation upon the indemnified party other
than for money damages, (ii) the suit, action, claim, liability or obligation
relates to the indemnified party's relationship with its customers or employees,
or (iii) the indemnifying party has failed, after the lapse of a reasonable
time, but in no event more than thirty (30) days, after notice to it of such
proposed settlement, to notify the indemnified party of the indemnifying party's
objection thereto. If the indemnifying party wishes, it may control the defense
of such litigation, at its own expense; provided that legal counsel and other
professional and expert assistance retained in connection with such defense must
be reasonably satisfactory to the indemnified party. The indemnified party shall
provide copies of documents and furnish relevant data in connection with any
Third Party Claim.
<PAGE>
7. Other Agreements and Post-Closing Covenants
7.1 Survival. The representations, warranties, covenants, indemnities, and
agreements contained herein will survive the Closing.
7.2 Public Announcements. Neither Seller nor Parent will issue or make any press
release or other announcement concerning this Agreement and the transactions
contemplated hereby without the approval of Buyer, except as may be required by
law, in which case Seller or Parent, as the case may be, will consult with Buyer
prior to issuing the announcement.
7.3 Cooperation. Subsequent to Closing, Seller and Parent, on the one hand, and
Buyer, on the other, will each make available to the other for inspection and
copying at reasonable times any documents retained by Buyer, Seller, or Parent,
as the case may be, that are reasonably required by the party requesting such
documents and that are related to the Seller's business and the transactions
contemplated hereby.
7.4 Expenses. Each Party shall be solely responsible for all costs and expenses
incurred by it in connection with the negotiation, preparation, and performance
of this Agreement.
<PAGE>
7.5 Escrow Arrangement. Within 30 days after the Closing Date, Seller, Buyer,
and the Escrow Agent shall negotiate, execute, and deliver in good faith an
escrow agreement that will govern disbursement of the Escrow Funds. The escrow
agreement shall contain customary terms and conditions relating to the
establishment of an interest-bearing escrow account and the obligations of the
Escrow Agent. Subject to the terms and conditions of the escrow agreement, Fifty
Thousand Dollars ($50,000) of the Escrow Funds, less any amounts paid to Buyer
under the Escrow Agreement in satisfaction of Buyer's indemnification claims
hereunder ("Indemnification Payments"), shall be disbursed to Seller not later
than six months after the Closing Date, with the balance of the Escrow Funds,
less any Indemnification Payments, to be disbursed to Seller not later than
twelve months after the Closing Date. Subsequent to the Closing, Buyer and
Seller may agree to release all or a portion of the Escrow Funds prior to such
six month or twelve month release dates, as the case may be, and to instruct the
Escrow Agent accordingly.
7.6 Seller's Name Change. Within five business days after the Closing Date,
Seller shall make such filings with appropriate governmental authorities of the
State of California and of each other jurisdiction in which Seller is qualified
to do business as a foreign corporation as may be necessary to change Seller's
name from "Internet Business Solutions, Inc." to any other name that is not
substantially similar thereto.
7.7 Compliance with Bulk Sales Law. Within 30 days after the Closing Date,
Seller and Buyer shall take such actions as may be necessary to comply with the
bulk sales law of the State of California set forth in Division 6 of the
California Commercial Code.
7.8 Employee Benefits. Seller shall pay directly to each former employee of
Seller the portion of all benefits that has accrued on behalf of each employee
as of the Closing Date, and Buyer shall assume no liability therefor. No portion
of the assets of any plan, fund, program or arrangement (a "Plan"), written or
oral, sponsored or maintained by Seller or Parent (and no amount attributable to
any such Plan) shall be transferred to Buyer, and Buyer shall not be required to
continue any such Plan after the Closing Date. Buyer shall not be liable for any
claim for insurance, reimbursement or other benefits payable to Seller's
employees by reason of any event that occurs prior to the Closing Date.
7.9 Buyer's Use of Parent's Accounting System. Parent shall provide accounting
services to Buyer of the kind provided by Parent to Seller prior to the Closing
Date for a period commencing on the Closing Date and terminating on March 31,
1999. Buyer shall pay to Parent all reasonable direct costs incurred by Parent
in providing such accounting services to Buyer during such period.
8. Covenants of Seller
<PAGE>
8.1 Access to Properties, Books and Records. Prior to the Closing Date, Seller
shall, at Buyer's request, afford or cause to be afforded to the agents,
attorneys, accountants and other authorized representatives of Buyer reasonable
access during normal business hours to all of Seller's employees, properties,
books, and records and shall permit such persons, at Buyer's expense, to make
copies of such books and records. No investigation by Buyer or any of its
authorized representatives pursuant shall affect any representation, warranty or
closing condition of any party hereto or Buyer's rights to indemnification
hereunder.
8.2 Negative Covenants. Except as otherwise permitted by this Agreement or with
the prior written consent of Buyer, prior to the Closing, Seller shall not:
(1) incur additional debt for borrowed money, incur or increase any
obligation or liability (fixed, contingent or other, including without
limitation liabilities as a guarantor or otherwise with respect to
obligations of others) except in the ordinary and usual course of its
business and consistent with past practices, forgive or release any
debt or claim, or give any waiver of any right of material value or
voluntarily suffer any extraordinary loss;
(2) make any payment to discharge or satisfy any lien or encumbrance or
pay any obligation or liability (fixed or contingent) other than (i)
current liabilities (including the current portion of any long-term
liabilities) included in the Financial Statements and (ii) current
liabilities incurred or maturing since September 30, 1998 in the
ordinary course of business;
(3) declare, pay or make any dividend or other distribution of money or
property on or with respect to any share of its capital stock;
(4) issue, sell, encumber or give any option or right to purchase any of
its capital stock or other securities or purchase, redeem or otherwise
acquire or commit to acquire, directly or indirectly, any shares of
its capital stock;
<PAGE>
(5) mortgage, pledge, otherwise encumber or subject to lien any of its
assets or properties, tangible or intangible, or commit itself to do
any of the foregoing, except for Permitted Liens;
(6) except in the ordinary and usual course of its business and in each
case for fair consideration, dispose of, or agree to dispose of, any
of the Assets or lease or license to others (including officers and
directors), or agree so to lease or license, any of the Assets;
(7) acquire any material assets other then assets acquired in the ordinary
and usual course of its business and consistent with past practices;
(8) purchase or otherwise acquire, or agree to purchase or otherwise
acquire, any debt or equity securities of any corporation,
partnership, joint venture, firm or other entity other than equity
securities issued by a money market fund registered as an investment
company under the Investment Company Act of 1940;
(9) enter into any transaction or contract or make any commitment to do
the same, except in the ordinary and usual course of business;
(10) increase the wages, salaries, compensation, pension or other benefits
payable, or to become payable by it, to any of its officers, employees
or agents, including without limitation any bonus payments or
severance or termination pay, other than increases in wages and
salaries required by employment arrangements existing on the date
hereof or otherwise in the ordinary and usual course of its business;
or
(11) Agree or commit to do any of the foregoing.
8.3 Affirmative Covenants. Except as otherwise permitted by this Agreement or
with the prior written consent of Buyer, prior to the Closing, Seller shall:
<PAGE>
(1) operate its business as presently operated and only in the ordinary
course and consistent with past practices;
(2) advise Buyer in writing of any litigation or administrative proceeding
that challenges or otherwise materially affects the transactions
contemplated hereby and of any material adverse change or any event,
occurrence or circumstance which is likely to cause a material adverse
change in the Assets or to Seller's business;
(3) use its best efforts to obtain the consent, on terms and conditions
not materially less favorable than those in effect on the date hereof,
to the transactions contemplated hereby from third parties under the
terms of any contract or agreement to which Seller is a party or by
which it is bound,
(4) use its best efforts to maintain all of the tangible Assets in good
operating condition, reasonable wear and tear excepted, consistent
with past practices, and take all steps reasonably necessary to
maintain the intangible Assets;
(5) not cancel or change any policy of insurance relating to the Assets;
(6) maintain, consistent with past practices, all inventories, office
supplies and other expendable items included in Assets;
(7) use its best efforts to retain all current employees;
(8) maintain its books and records in accordance with past practices;
(9) pay and discharge all taxes, assessments, governmental charges and
levies imposed upon it, its income or profits or upon any property
belonging to it, in all cases prior to the date on which penalties
attach thereto;
(10) comply with all laws, rules and regulations applicable to it; (1)
<PAGE>
(11) preserve and maintain its separate corporate existence, rights,
privileges and franchises in connection therewith and not amend its
articles of incorporation or bylaws.
8.4 No Negotiations With Others. Parent and Seller shall refrain, and shall
cause their officers, directors, employees and agent retained to refrain, from
initiating or soliciting any inquiries or making any proposals with respect to,
or engaging in negotiations concerning, or providing any confidential
information or data to or having any discussions with any person relating to,
any acquisition, business combination or purchase of all or any significant
portion of the assets of, or any equity interest in, Seller. Parent and Seller
will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing.
9. Joint Covenant
Each of Buyer, Parent, and Seller covenant and agree that it will use
its best efforts to effect the transactions contemplated by this Agreement and
to fulfill the conditions to their respective obligations hereunder. No party
will take any action inconsistent with its obligations under this Agreement or
that could hinder or delay the consummation of the transactions contemplated by
this Agreement, except that nothing in this Section 9.1 shall limit the rights
of the parties under Sections 10, 11 and 12.
10. Conditions to Obligations of Buyer
The obligations of Buyer under Sections 2 and 3 are, at its option,
subject to satisfaction, at or prior to the Closing, of each of the following
conditions:
10.1 Consents. Seller shall have obtained the third-party consents required
under the terms of the Contracts to be assigned by it hereunder, and such
consents shall not have required any change to the terms and conditions of the
Contracts other than changes consented to in writing by Buyer.
<PAGE>
10.2 Representations, Warranties and Covenants.
(1) All representations and warranties of Parent and Seller made in this
Agreement, or in any certificate delivered pursuant hereto, shall in
all material respects be true and complete on and as of the Closing
Date with the same force and effect as if made on and as of that date.
(2) All of the terms, covenants and conditions to be complied with and
performed by Parent and Seller at or prior to the Closing shall in all
material respects have been complied with or performed thereby.
10.3 Adverse Proceedings. No suit, action, claim or governmental proceeding
shall have been instituted or threatened against, and no order, decree or
judgment of any court, agency or other governmental authority shall have been
rendered against, Buyer, Seller or Parent to restrain or prohibit, or obtain
damages in respect of, this Agreement or the transactions contemplated by this
Agreement.
10.4 No Material Adverse Change. There shall not have been any material adverse
change to Seller's business or affecting the Assets.
10.5 Closing Deliverables. Parent and Seller shall have delivered to Buyer all
closing documents specified in Section 3.5 hereof.
10.6 Actions Satisfactory to Buyer's Counsel. All actions, proceedings,
instruments, and documents required to be carried out by this Agreement, or
incidental hereto shall be reasonably satisfactory to counsel for Buyer.
11. Conditions to Obligations of Seller
<PAGE>
The obligations of Seller under Section 2 are, at its option, subject
to satisfaction, at or prior to the Closing, of each of the following
conditions:
11.1 Representations, Warranties and Covenants.
(1) All representations and warranties of Buyer made in this Agreement, or
in any certificate delivered pursuant hereto, shall in all material
respects be true and complete on and as of the Closing Date with the
same force and effect as if made on and as of that date.
(2) All of the terms, covenants, and conditions to be complied with and
performed by Buyer at or prior to the Closing shall in all material
respects have been complied with or performed thereby.
11.2 Adverse Proceedings. No suit, action, claim or governmental proceeding
shall have been instituted or threatened against, and no order, decree or
judgment of any court, agency or other governmental authority shall have been
rendered against, Buyer, Seller or Parent to restrain or prohibit, or obtain
damages in respect of, this Agreement or the transactions contemplated by this
Agreement.
11.3 Closing Deliverables. Buyer shall have delivered to Buyer all closing
documents specified in Section 3.6 hereof.
11.4 Actions Satisfactory to Seller's Counsel. All actions, proceedings,
instruments, and documents required to be carried out by this Agreement, or
incidental hereto shall be reasonably satisfactory to counsel for Seller.
12. Termination
12.1 Right of Parties to Terminate. This Agreement may be terminated:
<PAGE>
(1) by Buyer, if any of the third party consents described in Section 10.1
shall have been denied, not permitted to go into effect or obtained on
terms not reasonably satisfactory to Buyer and all reasonable final
appeals shall have been exhausted;
(2) by Buyer, if Seller shall have breached any of its obligations
hereunder in any material respect;
(3) by Seller, if Buyer shall have breached any of its obligations
hereunder in any material respect; or
(4) by either Seller or Buyer, by written notice to the other party, if
the Closing shall not have occurred by December 31, 1998; provided,
however, that the right to terminate this Agreement under this Section
12.1(a) shall not be available to any party whose failure to fulfill
or perform any obligation under this Agreement has been the cause of,
or resulted in, the failure of the Closing to occur on or before such
date.
12.2 Effect of Termination. If either Buyer or Seller terminates this Agreement
pursuant to Section 12.1, such party shall promptly give written notice thereof
to the other Parties. In the event of a termination pursuant to Section 12.1,
the Parties shall be released from all liabilities and obligations arising under
this Agreement with respect to the matters contemplated by this Agreement, other
than for damages arising from a breach of this Agreement.
13. Miscellaneous
13.1 Benefit and Assignment. This Agreement will be binding upon and shall inure
to the benefit of the Parties hereto and their respective successors and
permitted assigns. Neither Seller nor Parent may assign its interests under this
Agreement without the prior written consent of Buyer.
<PAGE>
13.2 Headings. The headings are for convenience only and will not control or
affect the meaning or construction of the provisions of this Agreement.
13.3 Governing Law. The construction and performance of this Agreement will be
governed by the laws of the State of Washington without giving effect to the
choice or conflict of law provisions thereof. Each party submits to the
non-exclusive jurisdiction of King County Superior Court or the United States
District Court for the Western District of Washington, over any suit, action, or
proceeding arising out of or relating to this Agreement and confirms that such
court shall have personal jurisdiction over such party. Each party irrevocably
waives any right to assert, as a defense or otherwise, any claim that it is not
subject to the jurisdiction or the venue of any such court. The Parties agree
that such courts offer convenient forums and proper venue for any such suit,
action, or proceeding arising from or related to this Agreement.
13.4 Notices. Any notice, demand or request required or permitted to be given
under the provisions of this Agreement will be in writing and will be deemed to
have been duly delivered on the date of personal delivery or three business days
after it is mailed by registered or certified mail, postage prepaid and return
receipt requested, to the following addresses, or to such other address as any
party may request, in the case of Seller, by notifying Buyer, and in the case of
Buyer, by Seller:
To Seller: Internet Business Solutions, Inc.
2083 Landings Drive
Mountain View, CA 94043
Attn: Brian Service
To Parent: EDnet, Inc.
One Union Street
San Francisco, CA 94111
Attn: Brian Service
<PAGE>
Copy to: Niesar & Diamond LLP
90 New Montgomery Street
9th Floor
San Francisco, CA 94105
Attn: Jonathan Rubens
To Buyer: Attachmate Corporation
3617 - 131st Avenue SE
Bellevue, WA 98006
Attn: Jeffrey Libby
Copy to: Stoel Rives LLP
600 University Street, Suite 3600
Seattle, Washington 98101-3197
Attn: Geoffrey G. Revelle, Esq.
13.5 No Third Party Interests. No person not a party to this Agreement will be
entitled to the benefit hereof or incur any liability hereunder.
13.6 Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms of this Agreement.
13.7 Counterparts. This Agreement may be executed in one or more counterparts,
each of which will be deemed an original but all of which together will
constitute one and the same instrument.
<PAGE>
13.8 Entire Agreement; Amendments, Waivers and Consents. This Agreement and the
Schedules and Exhibits hereto embody the entire agreement and understanding of
the Parties and supersede any and all prior agreements, arrangements and
understandings relating to matters provided for herein. No amendment, waiver of
compliance with any provision or condition hereof, or consent pursuant to this
Agreement will be effective unless evidenced by an instrument in writing signed
by the Parties.
13.9 Schedules and Exhibits. The following schedules and exhibits are attached
to and constitute part of this Agreement:
Exhibit A Form of Confidentiality and Ownership of Developments
Agreement
Exhibit B Form of Confidentiality, Ownership of Developments, and
Employee Retention Agreement
Exhibit C Form of Warranty Bill of Sale
Exhibit D Form of Assignment and Assumption Agreement
Exhibit E Form of Assignment of Lease
Exhibit F Form of List of Seller's Creditors and Claimants
Schedule 1.16 - Permitted Liens
Schedule 4.4 - Real Property
Schedule 4.5 - Personal Property
Schedule 4.6 - Contract
Schedule 4.7 - Intellectual Property
Schedule 4.8 - Financial Statements
Schedule 4.10 - Accounts Receivable
Schedule 4.11 - Insurance
Schedule 4.19 - Personnel Information
Schedule 4.21 - Employee Plans
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement the
day and year first above written.
ENTERPRISE COMMUNICATIONS CONSULTING INC.
-----------------------------------------
By: Jeffrey Libby
Title: Vice President
INTERNET BUSINESS SOLUTIONS INC.
-----------------------------------------
By: ________________________________
Title: _______________________
EDNET INC.
-----------------------------------------
By: ________________________________
Title: _______________________
