<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): January 10, 1997
APERTUS TECHNOLOGIES INCORPORATED
(Exact name of registrant as specified in its charter)
Minnesota 0-12378 41-1349953
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
7275 Flying Cloud Drive, Eden Prairie, Minnesota 55344
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 828-0300
Not Applicable
(Former name or former address, if changed since last report.)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On January 10, 1997, Apertus Technologies Incorporated (the "Company")
sold its MQView product line to Candle Corporation, a California corporation
("Candle"), pursuant to a letter agreement (as amended, the "Agreement") between
the Company and Candle. As a result of the sale, Candle paid $7.4 million in
cash for assets, including technology, intellectual property, hardware, software
and goodwill, related to the Company's MQView product, a standards-based system
management software product for centralized installation, configuration and
monitoring of IBM's MQSeries messaging software in a distributed computing
environment.
Copies of the letter agreement and the amendment thereto are included
as Exhibit Nos. 2.1 and 2.2 hereto.
Item 7. Financial Statements and Exhibits.
(b) Pro Forma Financial Information
Pro Forma Condensed Balance Sheet as of March 31, 1996 (Unaudited)
Pro Forma Condensed Statement of Operations for the Year Ended
March 31, 1996 (Unaudited)
Pro Forma Condensed Balance Sheet as of September 29, 1996 (Unaudited)
Pro Forma Condensed Statement of Operations for the Year Ended
September 29, 1996 (Unaudited)
Notes to Pro Forma Condensed Financial Information (Unaudited)
(c) Exhibits
2.1 Letter Agreement between the Company and Candle Corporation,
dated as of December 27, 1996.
2.2 Amendment No. 1 to Letter Agreement between the Company and
Candle Corporation, dated as of January 10, 1997.
-2-
<PAGE>
PRO FORMA CONDENSED FINANCIAL INFORMATION
(UNAUDITED)
The following unaudited pro forma condensed financial information presents
the estimated effects of the sale by the Company of its MQView product line to
Candle. The pro forma information assumes that the sale had occurred as of the
beginning of the respective periods presented in the Pro Forma Condensed
Statements of Operations. In the case of the Pro Forma Condensed Balance
Sheets, the sale is reflected on a pro forma basis as if it occurred on the
dates presented. The information presented in the following pro forma financial
statements reflects the financial statements of the Company as of and for the
periods ended March 31, 1996 (the end of the Company's last fiscal year) and
September 29, 1996 (the end of the Company's most recently reported quarter).
The following pro forma financial data is not necessarily indicative of the
results of the future operations of the Company. In the opinion of the
Company's management, all adjustments necessary to present fairly such pro forma
financial statements have been in the terms and structure of the transaction.
-3-
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA CONDENSED BALANCE SHEET AS OF MARCH 31, 1996
(In Thousands)
(Unaudited)
<S> <C> <C> <C>
Apertus Pro Forma
Historical Adjustments Pro Forma
--------- ----------- ----------
ASSETS
Current Assets:
Cash and cash equivalents $5,455 $7,400 (1) $12,855
Cash in escrow $1,539 $1,539
Marketable securities $4,318 $4,318
Accounts receivable - net $14,216 $14,216
Note receivable $8,700 $8,700
Inventories $3,881 $3,881
Installment receivables - net $1,018 $1,018
Other $388 ($9) (2) $379
------- ------- -------
Total Current Assets $39,515 $7,391 $46,906
Property and equipment - net $5,005 ($254) (3) $4,751
Capitalized software $6,286 $6,286
Installment receivables - net of current portion $1,310 $1,310
Goodwill - net $1,697 $1,697
Other $876 $876
------- ------ -------
TOTAL ASSETS $54,689 $7,137 $61,826
======= ====== =======
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities:
Accounts Payable $5,100 $5,100
Accrued Expenses $6,029 $6,029
Deferred Revenue $4,255 $4,255
Note Payable $1,000 $1,000
Debt $8,976 $8,976
------- ------ -------
Total Current Liabilities $25,360 $0 $25,360
Shareholders Equity:
Common stock $701 $701
Additional paid-in capital $57,062 $57,062
Retained deficit ($28,237) $7,137 (4) ($21,100)
Unearned compensation ($197) ($197)
------- ------ -------
Total Shareholders Equity $29,329 $7,137 $36,466
------- ------ -------
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY $54,689 $7,137 $61,826
======== ====== =======
</TABLE>
(See Accompanying Notes)
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<PAGE>
<TABLE>
<CAPTION>
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1996
(In thousands, except per share data)
(Unaudited)
<S> <C> <C> <C>
Apertus Pro Forma
Historical Adjustments Pro Forma
----------- ---------- ------------
REVENUES
Sales $37,666 ($1,513) (5) $36,153
Rentals and Services $11,653 ($920) (5) $10,733
----------- ---------- ------------
Total Revenues $49,319 ($2,433) $46,886
COSTS AND EXPENSES
Cost of sales $18,368 ($1,252) (5) $17,116
Research, development and engineering $11,195 ($831) (5) $10,364
Selling, general and administrative $21,937 ($708) (5) $21,229
Other charges $5,820 $5,820
----------- ---------- ------------
Total costs and expenses $57,320 ($2,791) $54,529
----------- ---------- ------------
Income (Loss) From Operations ($8,001) $358 ($7,643)
Other Income (Expense) $714 $0 $714
----------- ---------- ------------
Income (Loss) Before Income Tax ($7,287) $358 ($6,929)
Provision for Income Taxes ($203) $0 ($203)
----------- ---------- ------------
Net Income (Loss) ($7,490) $358 ($7,132)
=========== ========== ============
Net Income Per Common and Common
Equivalent Share ($0.54) ($0.51)
=========== ============
Weighted Average Number of Common and
Common Equivalent Shares Outstanding 13,897,000 13,897,000
=========== ===========
Note: Prior year amounts have been restated to conform to the current year presentation.
</TABLE>
(See Accompanying Notes)
-5-
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA CONDENSED BALANCE SHEET AS OF SEPTEMBER 29, 1996
(In Thousands)
(Unaudited)
<S> <C> <C> <C>
Apertus Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ----------
ASSETS
Current Assets:
Cash and cash equivalents $5,717 $7,400 (1) $13,117
Cash in escrow $781 $781
Marketable securities $552 $552
Accounts receivable - net $17,452 $17,452
Note receivable $0 $0
Inventories $3,844 $3,844
Installment receivables - net $646 $646
Other $511 ($9) (2) $502
-------- ------ --------
Total Current Assets $29,503 $7,391 $36,894
Property and equipment - net $4,586 ($238) (3) $4,348
Capitalized software $6,633 ($188) (6) $6,445
Installment receivables - net of current portion $1,255 $1,255
Goodwill - net $1,561 $1,561
Other $0 $0
-------- ------ --------
TOTAL ASSETS $43,538 $6,965 $50,503
======== ====== ========
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities:
Accounts Payable $4,850 $4,850
Accrued Expenses $6,134 $6,134
Deferred Revenue $3,746 $3,746
Note Payable $1,000 $1,000
Debt $0 $0
-------- ------ --------
Total Current Liabilities $15,730 $0 $15,730
Shareholders Equity:
Common stock $706 $706
Additional paid-in capital $57,312 $57,312
Retained deficit ($30,051) $6,965 (4) ($23,086)
Unearned compensation ($159) ($159)
-------- ------ --------
Total Shareholders Equity $27,808 $6,965 $34,773
-------- ------ --------
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY $43,538 $6,965 $50,503
======== ====== ========
</TABLE>
(See accompanying notes)
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<PAGE>
<TABLE>
<CAPTION>
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 29, 1996
(In thousands, except per share data)
(Unaudited)
<S> <C> <C> <C>
Apertus Pro Forma
Historical Adjustments Pro Forma
------------- ----------- -------------
REVENUES
Sales $15,522 ($2,316) (7) $13,206
Rentals and Services $5,493 ($390) (7) $5,103
Total Revenues $21,015 ($2,706) $18,309
----------- ---------- ----------
COSTS AND EXPENSES
Cost of sales $7,376 ($555) (7) $6,821
Research, development and engineering $4,530 ($828) (7) $3,702
Selling, general and administrative $11,037 ($569) (7) $10,468
----------- ---------- ----------
Total costs and expenses $22,943 ($1,952) $20,991
----------- ---------- ----------
Income (Loss) From Operations ($1,928) ($754) ($2,682)
Other Income (Expense) $214 $0 $214
----------- ---------- ----------
Income (Loss) Before Income Tax ($1,714) ($754) ($2,468)
Provision for Income Taxes ($100) $0 ($100)
----------- ---------- ----------
Net Income (Loss) ($1,814) ($754) ($2,568)
=========== ========== ==========
Net Income Per Common and Common
Equivalent Share ($0.13) ($0.18)
=========== ==========
Weighted Average Number of Common and
Common Equivalent Shares Outstanding 14,083,000 14,083,000
=========== ==========
</TABLE>
(See accompanying Notes)
-7-
<PAGE>
NOTES TO PRO FORMA CONDENSED FINANCIAL INFORMATION
(Unaudited)
(1) To reflect the consideration received from the sale of the MQView business.
(2) Represents the write off of the prepaid deposits on the Long Island facility
assumed by Candle.
(3) Represents the write off of fixed assets associated with the MQView
business.
(4) Equals purchase price of $7,400 less the assets written off related to the
MQView business.
(5) To remove the operational impacts of the MQView business in FY'96.
(6) Represents the write off of capitalized software associated with the MQView
business.
(7) To remove the operational impacts of the MQView business through the second
quarter of FY'97.
<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.
Dated: January 24, 1997
APERTUS TECHNOLOGIES INCORPORATED
By /s/ Julie Cummins Brady
---------------------------------
Julie Cummins Brady
Corporate Vice President, Secretary
and General Counsel
-9-
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibits Page No.
- -------- --------
2.1 Letter Agreement between the Company and Candle Corporation,
dated as of December 27, 1996.
2.2 Amendment No. 1 to Letter Agreement between the Company and
Candle Corporation, dated as of January 10, 1997.
<PAGE>
Exhibit 2.1
-----------
[Letterhead of Candle Corporation]
December 27, 1996
Robert D. Gordon
Chairman, CEO & President
Apertus Technologies, Inc.
7275 Flying Cloud Drive
Eden Prairie, MN 55344
Re: Letter Agreement Regarding Acquisition of the MQView
-----------------------------------------------------
Business Unit
- -------------
Dear Mr. Gordon:
The purpose of this letter is to set forth in writing the arrangements
which Apertus Technologies Inc. ("Seller") and Candle Corporation ("Buyer") have
made regarding Buyer's acquisition of MQView Business Unit ("MQView") from
Seller.
In consideration of Buyer's agreement to expend time, money and effort in
conducting due diligence regarding the Assets (as described above):
1. Description of Assets. As used in this letter agreement, the term
"Assets" shall mean: (i) the product known as MQView, which includes; (1) its
related technology and intellectual property; (2) all MQView maintenance
agreements and other contracts with existing customers; (3) the agreement with
IBM for maintenance of IBM's Level 1 code base (known as EZBridge); (4) the
royalty agreement for the transition from Level 1 code (EZBridge) to Level 2;
(5) the employment rights identified in Section 5 of this Letter Agreement; and
(6) the MQView Business Unit's associated hardware and software, and (ii)
subject to the consent of the landlord, the Apertus Long Island office facility
lease. Purchase of both the agreement with IBM for maintenance of IBM's Level 1
code base and the royalty agreement for the transition from Level 1 code and are
subject to the consent of IBM.
2. Purchase Price. The purchase price for the Assets shall be the sum of
$7,400,000 (Seven million, four hundred thousand US dollars), payable $250,000
(two hundred and fifty thousand US dollars) as a non-refundable deposit by wire
transfer no later than 3pm cst on January 3, 1997 and $7,150,000 (Seven million,
one hundred and fifty thousand US dollars) at the time of closing.
1
<PAGE>
December 27, 1996
Page 2
3. Due Diligence Period. Buyer shall have until January 17, 1997 to
review all aspects of the Assets, and Seller shall give Buyer access to all of
Seller's files, materials, books and records (interpreted broadly) regarding the
Assets. Buyer may terminate this letter agreement by written notice to Seller
on or before January 31, 1997, if Buyer is not satisfied with the results of its
due diligence review in its sole and subjective determination.
4. Closing. The closing shall take place on or before January 31, 1997
at Buyer's (or its counsel's) offices in Los Angeles County, California. At the
closing, Seller shall execute, acknowledge (where appropriate) and deliver
conveyance documents in form reasonably requested by Buyer transferring the
Assets to Buyer. Buyer shall concurrently pay all amounts required to be paid
by Buyer at closing.
5. Employees. Candle shall have the right, at its sole discretion, to
offer employment to all key sales, marketing, development and support employees
of the MQView Business Unit of Apertus. Candle will evaluate these employees
for those management, technical, sales and marketing skills necessary for the
success of the business and negotiate employment Agreements in good faith.
Candle will assume responsibility for accrued salary and paid time off of any
Apertus employee which becomes a Candle employee pursuant to this paragraph.
6. Limitation on Contracts and Liabilities Assumed. Buyer shall not be
liable for any contracts or liabilities of Seller except for those expressly
assumed by Buyer.
7. Confidentiality. I. Prior to Closing, neither the Buyer nor Seller
shall make any public announcement or otherwise disclose the transaction
contemplated in this letter agreement to any third persons whatsoever except (a)
as agreed upon in advance by both parties, (b) to lenders, creditors or other
persons whose consent is required before the disclosing party may consummate the
contemplated transaction, (c) as contemplated by the Agreement, (d) to
accountants, attorneys and other professionals engaged by the parties to
facilitate the transaction, or (e) otherwise as may be required by law.
II. In accordance with Section 7(I)(a), the parties agree that
subsequent to the execution of this Letter Agreement, Seller may inform Boole &
Baggage Inc. of the existence of this Letter Agreement. This consent shall not
allow either party to inform Boole & Babbage Inc. of the terms and conditions of
this Letter Agreement.
8. Non-Compete Clauses. For a period of 3 years, commencing on the
closing date, Apertus will not develop, manufacture, market, and/or distribute
any products similar or competitive to the "Assets".
2
<PAGE>
December 27, 1996
Page 3
9. Agreement to Continue Customary Operations. Seller agrees to operate
and cause Seller's business to be operated from the date hereof until the
closing in a manner consistent with which such business has been operated for
the one year period prior to the date hereof, including, but not limited to, the
manner Seller collects its receivables and pays its payables. Seller agrees to
refrain from selling any asset, incurring any liability or making any
distributions to stockholders until the closing other than in the ordinary
course of business.
10. Costs and Expenses; Brokerage Fees. Each party shall bear all costs
incurred by it, including brokerage fees and commissions, in connection with the
transaction contemplated by this letter.
11. Representations and Warranties. Each party represents and warrants
that (i) this letter agreement is binding upon and enforceable against such
party, (ii) such party is authorized to enter into this letter agreement by all
required corporate actions, (iii) no consent of any other party is required for
the execution and performance of this letter agreement, nor is such execution
and performance prevented in whole or part by any order, decree or ruling of any
court or governmental agency. Seller represents and warrants it owns all right,
title and interest in and to the Assets, free and clear of any encumbrance, lien
or obligation of any kind or nature. Any representations or warranties
contained in this letter agreement shall survive the closing and the conveyance
of the assets.
12. Further Documentation. The parties anticipate negotiating and
executing additional documentation regarding the business transactions of this
letter agreement by January 31, 1997. From and after the execution of this
letter agreement, however, the parties may fully enforce each provision of this
letter agreement, even if no subsequent detailed documentation is executed and
delivered, unless the due diligence is unsatisfactory to Buyer and Buyer
terminates this letter agreement pursuant to Paragraph 4.
13. Miscellaneous. This letter agreement contains the entire agreement of
the parties regarding the subject matter and may be amended only in writing. In
the event of any dispute, the prevailing party shall be entitled to attorneys'
fees. This letter agreement shall be binding upon and inure to the benefit
3
<PAGE>
December 27, 1996
Page 4
of the parties' successors and assigns. This Agreement shall be interpreted
under the laws of the state of California, where venue shall lie.
Agreed:
Apertus Technologies, Inc. Candle Corporation
By /s/ Sue Hogue - for R.D. Gordon By /s/ Andy Mullins
---------------------------------- --------------------
Name Sue Hogue for R.D. Gordon Name
-------------------------------- -------------------
Title VP & CFO Title
-------------------------------- ------------------
4
<PAGE>
Exhibit 2.2
-----------
January 10, 1997
Robert D. Gordon
Apertus Technologies Incorporated
7275 Flying Cloud Drive
Eden Prairie, MN 55344
Re: Amendment No. 1 to Letter Agreement
Dear Mr. Gordon:
The purpose of this letter is to amend the Letter Agreement between Candle
Corporation and Apertus Technologies Incorporated dated December 27, 1996 (the
"Letter Agreement"). Defined terms used herein have the meanings set forth in
the Letter Agreement.
1. Seller has concurrently with the execution hereof delivered to Buyer a
bill of sale with respect to the assets described below, and Buyer will wire
transfer to Seller's account at the opening of business on January 13, 1997, the
sum of $7,150,000. If such sum is not received for credit to Seller's account
by the close of business on January 13, 1997, the bill of sale shall be
considered null and void.
Buyer hereby assumes the liabilities or obligations specifically
identified in the attached Schedule 11j ("Assumed Liabilities")as being assumed.
Except for the Assumed Liabilities listed in Schedule 11j, and as provided in
paragraph 5, Buyer shall not assume, shall not take subject to and shall not be
liable for any other liabilities or obligations of any kind or nature, whether
absolute, contingent, accrued, known or unknown, of Seller.
Except as specifically assumed by Buyer in the prior paragraph, Seller
shall be solely responsible for the liabilities and obligations of Seller to its
employees, distributors and customers, and arising out of or relating to the
Contracts, for events up to and including the Effective Date.
Seller shall be solely responsible for the payment of any and all
sales and use taxes and any other taxes or other charges assessed by any
governmental authority with respect to the transactions contemplated by the
Letter Agreement; provided that Seller shall have no obligation to pay any tax
based on Buyer's income.
2. Paragraph 1 is amended in its entirety to read as follows:
1. Description of Assets. As used in this letter agreement, the
term "Assets" shall mean: (1) the product known as MQView and its related
technology and intellectual property
1
<PAGE>
(the "Product"), including those features, enhancements, derivative works and
extensions thereof currently in development, all related programming technology,
in both source and object code form, regardless of the stage of development of
any such technology and those features, enhancements, derivative works and
extensions currently in development, any other computer program containing a
substantial portion of its source code, any technical and other related
documentation, and any intellectual property rights, including without
limitation trademarks, service marks, copyrights, copyright registrations and
applications, patent and patent applications, inventions, trade secrets logos
and other related know-how; (2) subject to obtaining the consents referenced in
paragraph 19a, the Contracts listed in Schedule 11j; (3) the employment rights
identified in Section 5 of this Letter Agreement; (4) goodwill associated with
the Assets; (5) the MQView Business Unit's associated hardware and software; and
(6) the following information, to the extent directly related to the Product:
(a) advertisements, press releases, brochures and other promotional materials;
(b) strategic data, such as marketing and development plans, forecasts and
forecast assumptions and volumes, and future plans and potential strategies of
Seller which have been or are being discussed; (c) financial data, such as price
and cost objectives, price lists, pricing and quoting policies and procedures;
and (d) customer data, such as customer lists, names of customers and their
representatives, data provided by or about prospective, existing or past
customers, customer service materials, and the type, quantity and specifications
of Product and services purchased, leased or licensed by customers of Seller.
3. A new paragraph 14 is added to contain the following definitions:
14. Definitions. The following terms in this Agreement shall have
the meanings set forth below:
a. "Agreement" means the Letter Agreement, as amended hereby.
b. "Contracts" means the contracts (whether oral or in writing)
listed in Schedule 11j.
c. "Distribution Agreements" means the agreements so identified on
Schedule 11j.
d. "Effective Date" means the close of business on January 10, 1997.
e. "Employees" means, with respect to a person or entity, all
officers and employees of that person or entity.
f. "Liens" means restrictions, mortgages, deeds of trust, pledges,
security interests, liens, leases, licenses, liabilities, encumbrances, costs,
claims and any other similar
2
<PAGE>
rights or claims.
g. "Seller Subsidiary or Affiliate" means a person or entity
controlled by Seller. For this purpose "control" means ownership or the right
to vote more than 50% of any class of voting securities of such entity.
4. Paragraph 11 is amended in its entirety to read as follows:
11. Representations And Warranties Of Seller. Seller represents and
warrants as follows:
a. Existence and Rights. Seller: (a) is duly organized, validly
existing and in good standing under the laws of the state of Minnesota and (b)
has all requisite corporate power and authority to carry out this Agreement and
the transactions contemplated herein.
b. Agreement Authorized and Binding. The execution, delivery and
performance of this Agreement by Seller has been duly authorized by all
necessary corporate action. The sale of the Assets by Seller to Buyer as
provided herein does not represent a sale of substantially all the assets of
Seller and the approval of Seller's shareholders is not required under
applicable corporate law or the articles of incorporation or the by-laws of
Seller. This Agreement is a legal, valid and binding obligation of Seller,
enforceable in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing equitable remedies.
c. No Notice or Consent Required from Any Authorities. The
execution, delivery and performance of this Agreement by Seller does not require
notice to, or the consent or approval of, any governmental body or other
regulatory authority.
d. No Conflict. The execution, delivery and performance of this
Agreement does not and will not: (a) breach or constitute grounds for the
occurrence or declaration of default under any agreement, indenture, undertaking
or other instrument to which Seller is a party or by which the Assets may be
bound; (b) violate any provision of law or any regulation or any order,
judgment, or decree of any court or other agency of government, the violation of
which could have an adverse effect on the Assets and Product; (c) violate any
provision of the Articles of Incorporation, By-Laws or Resolutions of the Board
of Directors; or (d) result in the creation or imposition of (or the obligation
to create or impose) any Lien on the Assets.
e. Liabilities. The Assets are not subject to any obligations,
indebtedness or liabilities, contingent or otherwise, other than the obligations
relating to the Contracts set forth on Schedule 11j.
3
<PAGE>
f. Litigation. Except as shown on Schedule 11f, there is no
litigation, arbitration or other proceeding (formal or informal) pending or, to
the best knowledge of Seller, threatened against or affecting the Assets; nor
does Seller know of any basis for any such litigation, arbitration or other
proceeding (formal or informal), the result of which could have an adverse
effect on the Assets or the Product. Seller is not in default with respect to
any order, writ, injunction, decree or demand of any court or other governmental
or regulatory authority, and there is no suit, action or other proceeding,
pending or to its knowledge threatened against or affecting Seller in any court
or before any tribunal or governmental body, in which it is sought to restrain,
prohibit or otherwise adversely affect the ability of Seller to perform any or
all of the obligations required of it under this Agreement, or the consummation
of the transactions contemplated herein.
g. Condition of the Assets; Product Warranties. The Product as in
existence on the Effective Date substantially meets the applicable
specifications and the standards set forth in Seller's written descriptions of
the Product as in existence on the Effective Date and in its representations and
warranties (express and implied, written and oral) to customers and distributors
of the Product as in existence on the Effective Date. Those Assets constituting
tangible goods are in good repair and working order, ordinary wear and tear
excepted.
h. Title to Assets. Seller has all right, title and interest in and
to the Assets, including without limitation any and all rights heretofore held
by any Seller Subsidiary or Affiliate. In addition, (a) except as shown on
Schedule 11j, the Assets are subject to no Liens; (b) the legal rights and
interests of Seller in the Assets to be conveyed by Seller to Buyer pursuant
hereto are adequate to permit Buyer to license or sell the Product as
contemplated hereby; and (c) the Assets are either freely transferable or
assignable to Buyer or will not be rendered invalid or affected in any way by
the execution, delivery and performance of this Agreement. The Product and the
Assets do not infringe upon or conflict with any rights of third parties; and to
the best knowledge of Seller, no third party has asserted or is threatening to
assert any claim against Seller or any other person or entity concerning such an
infringement or conflict.
i. Registration List. Schedule 11i lists all patents, copyrights,
and trade and service marks and names, issued or reissued to Seller or any of
its predecessors-in- interest or registered, applied for or pending under
Seller's name or assigned to is as of the date hereof, and that are included in
the Product, along with the registration numbers, dates of issuance and names of
the inventors or authors of such patens, marks, names and copyrights.
j. Lists of Contracts. Schedule 11j hereto lists all contracts,
understandings, licenses, franchises or leases
4
<PAGE>
regarding the Assets or Product or any of them, or under which any portion of
the Product is licensed, used or held, including without limitation all related
supply, marketing and end-user agreements, and all related agreements for the
testing, modification, development, trial, license, lease, rental, sale or other
use of the Product, and all related nondisclosure and/or confidentiality
agreements. All Contracts are valid and binding and in full force and effect in
accordance with their terms, except as noted in Schedule 11j. Neither Seller
nor, to Seller's knowledge, any other party to any Contract is in default, nor
to the knowledge of Seller is there any basis for any claim of default, and
Seller has not waived any right under any Contracts, except defaults and waivers
which are not material to such contract. Except as specifically indicated on
Section 11j, true, correct and complete copies of all Contracts have been
delivered to Buyer. The license for all evaluation copies of the Product
previously shipped was contained within its shrink wrapped package. None of the
Contracts are oral.
k. No Finder's Fees. Seller has not employed or incurred any
liability to any broker, finder or agent for any brokerage fees, finder's fees,
commissions or other amounts regarding the transactions contemplated by this
Agreement.
l. Paid Time Off. Schedule 5 contains a true, correct and complete
listing of Buyer's obligations for paid time off for each employee of Seller's
MQView Business Unit.
m. Adequacy of Cash. At December 31, 1996, Seller's cash, cash
equivalents and marketable securities totaled $7,506,000. Seller believes that,
based on its current and expected operations, its current cash, cash equivalents
and marketable securities, proceeds of the sale of the Assets, and the cash to
be generated from expected operations will be adequate to cover Seller's cash
requirements through the year ended March 31, 1998, including, if required,
payment of any Claims to Buyer pursuant to Paragraph 16.
5. A new paragraph 15 is added as follows:
15. Confidentiality.
a. The parties agree that the Assets and the Product constitute
confidential information ("Proprietary Information").
b. All Proprietary Information shall be held in confidence by
Seller, and Seller agrees to refrain from copying, using, transferring, or
exploiting any Proprietary Information and to take all reasonable actions to
protect the Proprietary Information in the same manner that a reasonable person
protects its own proprietary information. Unless required by applicable
securities laws (as determined by Seller in its absolute discretion), this
Letter Agreement and its terms shall be considered Proprietary Information.
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c. The agreements of this Paragraph 15 shall survive the purchase
and sale of the Assets.
d. The provisions of this paragraph shall not apply to information
which is: available to the public other than by breach of this Agreement by
Seller, otherwise rightfully received by Seller from a third party without
obligations of confidentiality to Buyer; independently developed, without
incorporation of Proprietary Information, by Seller; independently developed by
Seller having no access to the Proprietary Information; or disclosed by Buyer to
a third party without restrictions. However, Seller agrees to abide by the
provisions of this paragraph, even if Seller has rightfully obtained such
information pursuant to the exceptions outlined in this paragraph, until Seller
has notified Buyer of such rightful possession and provided a reasonable
description of the method by which such information was obtained, and Buyer has
not objected in writing within 15 days from receipt of such notice.
6. A new paragraph 16 is added as follows:
16. Survival And Indemnification.
a. Survival. All representations, warranties and covenants of Buyer
and Seller are material, shall be deemed to have been relied upon by the other
party and shall survive until eighteen (18) months following the Effective Date
(the "Indemnification Period"). Each party shall have a claim against the other
as provided in and subject to the limitations of Paragraph 16b in respect of any
breach of any representation, warranty or covenant.
b. Indemnification.
(1) Seller Indemnification of Buyer. Seller shall indemnify and hold
harmless Buyer from and against any and all losses, damages, injuries, causes of
action, claims, demands and expenses (whether based upon tort, breach of
contract, patent, trade secret, copyright or other proprietary rights
infringement, or otherwise), including legal, accounting and expert witnesses
fees and expenses, of whatever kind and nature ("Loss") arising out of or on
account of, or resulting from (i) Seller's breach of any warranty or
representation, or default in the performance of any covenant contained herein
("Seller's Breach"), or (ii) any claim by any third party (x) with respect to
any act or omission constituting a Seller's Breach, or (y) that the Product or
its use, copying, marketing or other exploitation by Seller or Buyer or their
customers, distributors, successors or assigns infringes or conflicts with the
United States or foreign rights of any person not a party hereto except to the
extent of modifications to the Product made by or for Buyer, and, in each
instance, which occurs or is incurred, made or filed during the Indemnification
Period (any such Loss being herein referred to as a "Claim").
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(2) Buyer Indemnification of Seller. Buyer shall indemnify and hold
harmless Seller from and against any and all Losses arising out of or on account
of, or resulting from: (i) Buyer's or its successors' or assigns' actions after
the Effective Date or act or breach of any warranty or representation or default
in the performance of any contract contained herein ("Buyer's Breach"), or (ii)
any claim by any third party (x) with respect to any act or omission
constituting a Buyer's Breach, or (y) that any modification made by or for Buyer
to the Product, or the use, copying, marketing or other exploitation by Buyer or
its customers, distributors, successors or assigns of such modification
infringes or conflicts with the rights of any person not a party hereto and, in
each instance, which occurs or is incurred, made or filed during the
Indemnification Period (any such Loss being herein referred to a "Claim").
(3) Procedures for Indemnification.
(a) In the event of any Claim, the party entitled to
indemnification (the "Indemnitee") shall, with reasonable promptness, provide
the indemnifying party (the "Indemnitor") with written notice thereof (during
the Indemnification Period) and copies of any claims or other documents
received; provided that the Indemnitee's failure to so notify the Indemnitor
shall not relieve the Indemnitor from any liability it might otherwise have on
account of this indemnity, except to the extent that the Indemnitor has been
materially prejudiced by such failure to notify or to the extent that the notice
is not given reasonably promptly after the end of the Indemnification Period.
(b) Subject to paragraph (c), the Indemnitor may undertake full
responsibility for the defense or prosecution in connection with any Claim that
relates to a third-party allegation or claim as described in clause (ii) of
paragraph (b((1) or paragraph (b)(2) ("Third-Party Claim") and may contest or
settle it on such terms as the Indemnitor may choose, provided that the
Indemnitor shall not, without the Indemnitee's written consent, settle any such
claim if such settlement arises from or is part of any criminal action, suit or
proceeding, or contains a stipulation to, confession of judgment with respect
to, or admission or acknowledgment of, any liability or wrongdoing on the part
of the Indemnitee;
(c) Notwithstanding anything to the contrary contained in
paragraph (b), to the extent that any Third-Party Claim against Buyer relates to
the Assets and Product, Buyer shall have the right at its election exercisable
at any time by written notice to the Seller specifically referencing this
paragraph (c), to undertake full responsibility for the defense or prosecution
of such Claim and to contest or settle it on such terms as Buyer may choose, in
which case Seller shall no have no further responsibility for indemnification.
(e) Each party's total liability under this paragraph 16 shall
be limited to $7,400,000.
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7. Paragraph 8 is amended in its entirety to read as follows:
8. Non Compete Clause.
a. Covenant. Except for the Distribution Agreements, for a period
of three years, commencing on the Effective Date, neither Seller nor Seller
Subsidiary or Affiliate shall directly or indirectly develop, manufacture,
market, and/or distribute any product or portion thereof that competes directly
or indirectly with the Product within the United States or any other country in
which Buyer does business (the "Territory"). Seller agrees not to: (i) render
services with respect to any product having the functionality of the Product as
a consultant or in any other capacity to any person, firm or entity or (ii)
obtain an interest, as a partner, shareholder, agent, trustee, consultant,
advisor, manager, operator or in any other ownership relationship or management
capacity, in any entity or association that competes directly or indirectly with
the Product.
8.2 Exceptions. The foregoing (a) shall not prohibit the ownership
by Seller of up to five percent (5%) of the issued and outstanding capital stock
of a publicly-held corporation, so long as Seller does not participate in the
control or take an active part in the management or direction thereof and does
not act as consultant or in any other way render services thereto; and (b) shall
apply only for so long as Buyer, or its successors or assignee of the Assets, as
a whole, carries on a business utilizing the Product within the Territory.
8.3 Independent Obligations. Each covenant and provision of this
paragraph shall be construed as a separate agreement, independent of any other
provision of the Letter Agreement, the unenforceability of which shall not
preclude the enforcement of any other of said covenants or provisions or of any
other obligation of Seller or hereunder, and the existence of any claim or cause
of action of Seller against Buyer, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Buyer of any of
said covenants.
8. New paragraphs 17 through 19 are added as follows:
17. No Implied Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, SELLER MAKES NO REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY REPRESENTATION OR WARRANTY AS TO
MERCHANTABILITY OR FITNESS OF THE ASSETS FOR ANY PARTICULAR PURPOSE.
18. Prepaid Amounts and Receivables. To the extent Seller has or
will receive any revenue for any development work or similar obligations not
completed prior to the Effective Date under the Contracts assumed by Buyer,
Seller shall pay to Buyer an amount equal to Buyer's proportionate share of the
work completed by Buyer under such Contracts within two business days
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after receipt of any such revenue. To the extent Seller has or will receive any
revenue for any development work or similar obligations completed by Seller
before the Effective Date under the Contracts assumed by Buyer, whether billed
or unbilled, such revenue shall be retained by Seller and if Buyer receives any
such revenue, it shall immediately notify Seller and pay such amount to Seller
within two business days.
19. Transition Obligations. Buyer and Seller hereby agree to the
following post-closing arrangements:
a. Consents. Seller shall use commercially reasonable efforts to
assist Buyer in obtaining, and Buyer shall use commercially reasonable efforts
to obtain, consents for the assignment of the Contracts referenced in paragraphs
c and d. Upon receipt of each such consent, Seller shall assign the pertinent
Contract to Buyer, and Buyer shall assume Seller's obligations thereunder.
b. Access to Eden Prairie Office and Equipment. Seller shall grant
to Buyer a license, not to exceed 90 days after the Closing Date, permitting the
employees of Seller hired by Buyer to retain access to Seller's Eden Prairie
office facilities and use of Seller's office equipment, including telephones,
desks, photocopiers, facsimile machines and packaging equipment, in the ordinary
course of business relating to the Assets. In exchange for such license, Buyer
shall pay Seller $25.40 per day for each employee of Seller hired by Buyer for
so long as any such employee continues to use Seller's Eden Prairie office
facilities and equipment, and $80.00 per day for use of the mainframe computer
for so long as Buyer continues to use the mainframe. Seller shall invoice Buyer
for the amounts due under this paragraph, and Buyer shall pay such invoice
within 30 days of receipt.
c. Long Island Lease. Seller shall grant to Buyer a license, not to
exceed 120 days after the Closing Date, for access to Seller's Long Island
office facilities. In exchange for such license, Buyer shall pay Seller $867.13
per day until Buyer obtains consent for an assignment or sublease of Seller's
Long Island office facility lease, not to exceed 120 days after the Closing
Date. In the event that Buyer is unable to obtain consent for an assignment or
sublease of Seller's Long Island office facility lease within 120 days after the
Closing Date, the license provided for in this paragraph shall terminate and
Buyer shall vacate Seller's Long Island office facility. Seller shall invoice
Buyer for the amounts due under this paragraph, and Buyer shall pay such invoice
within 30 days of receipt.
d. IBM Contracts. Until Buyer is able to obtain consent from IBM
for an assignment of the IBM Messaging Alliance Agreement, Amendment 11 to IBM
Messaging Alliance Agreement, IBM Post Option Services Agreement and IBM Dispute
Resolution dated 12/23/96 (collectively, the "IBM Contracts"), Seller shall
subcontract with Buyer under the terms of the IBM Contracts until
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the end of the respective current terms of the IBM Contracts, and Buyer agrees
to perform the IBM Contracts in accordance with their respective terms. Seller
shall pay over to Buyer, to the extent collected by Seller, (i) any revenues
with respect to the IBM Contracts recognized after the Effective Date, including
all royalties and all payments to support staffing received from IBM ("N=10
Program"), and (ii) 25% of the monthly maintenance revenue recognized by Seller
after the Effective Date, including maintenance fees paid to Seller prior to the
Effective Date. Following the assignment of the IBM Contracts to Buyer, Seller
shall pay to Buyer, to the extent collected by Seller, in a lump sum, all
remaining unrecognized maintenance revenue related to the IBM Contracts.
e. Reseller Agreements. Seller shall withdraw the Product from the
scope of the Distribution Agreements (other than the Samsung Corporation
Distribution Agreement ("Samsung Agreement")) as soon as possible, and in any
event not later than 90 days after the Effective Date. Seller shall use
commercially reasonable efforts to withdraw the Product from the scope of the
Samsung Agreement. Buyer may notify the distributors under the Distribution
Agreements of the change of ownership of the Product and may enter into new
distribution arrangements with respect to the Product with such distributors.
Through September 27, 1997, with respect to the Samsung Agreement, and for up to
90 days after the Effective Date, with respect to the other Distribution
Agreements, Buyer shall sell Product to Seller at standard commercial prices and
terms to enable Seller to fulfill its obligations under the Distribution
Agreements.
f. Vision Consultation. For a period of one year after the
Effective Date, Buyer shall provide to Seller without charge up to 10 hours of
consultation per month with respect to Seller's Vision products and services.
9. Paragraph 13 is amended by deleting the second and fourth sentences
and adding the following:
a. Validity, Forum, Laws and Construction. The legal relations
between the parties shall be governed by the laws of the State of
California, regardless of the choice of law provisions of California or any
other jurisdiction. Litigation or arbitration of disputes under this
Agreement shall be conducted in Los Angeles, California.
b. Attorneys' Fees. In the event of any dispute or
controversy arising out of this Agreement, the prevailing party shall be
entitled to reimbursement of its costs, including court and arbitration
costs and attorneys' and expert witnesses' fees and costs.
c. Further Assurances. Each party agrees to execute and
deliver any and all further documents, and to perform such other acts
(including without limitation the
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immediate notification of any reissues or extensions of the patents,
trademarks, trade names and copyrights set forth in Schedule 11i hereto),
as may be necessary or expedient to carry out and make effective the
purposed and transactions contemplated by this Agreement. Buyer will
cooperate with Seller upon its request, to the extent reasonable (which in
no event shall include the incurrence by Buyer of any Liens), in minimizing
sales, use or other taxes payable in connection with the purchase by Buyer
of the Product (including without limitation the Product).
10. Paragraph 5 is amended in its entirety to read as follows:
5. Employees. For the period beginning on the Effective Date and
ending on February 10, 1997, Buyer shall have the right, at its sole discretion,
to offer employment to all Employees of Seller listed on Schedule 5. Buyer
shall pay to Seller the amount of paid time off listed on Schedule 5 for each
such Employee hired by Buyer during such period. Buyer shall deliver payment by
check or wire transfer within ten days after hiring each such Employee.
Agreed:
APERTUS TECHNOLOGIES INCORPORATED
By: /s/ Robert Gordon
------------------------------------
Name: Robert Gordon
----------------------------------
Title: CEO
---------------------------------
CANDLE CORPORATION
By: /s/ Aubrey Chernick
------------------------------------
Name: Aubrey Chernick
----------------------------------
Title: Chairman & CEO
---------------------------------
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