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 December 23, 1994
Commission File No. 0-12141
MICRO SECURITY SYSTEMS, INC.
(Exact name of Registrant as specified in its Charter)
Utah 87-0401894
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
150 Wright Brothers Drive Suite 560
Salt Lake City, Utah 84116
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code:
(801) 575-6600
Not Applicable
(Former Name, Former Address,
If Changed Since Last Report)
Page 1 of 3
<PAGE>
Item 5. Other Events
On December 23, 1994, the Company and Aladdin Software Security, Inc.
("Aladdin"), the United States subsidiary of Aladdin Knowledge Systems Ltd.,
of Tel Aviv, Israel, executed an Agreement (the "Agreement") pursuant to
which the Company sold Aladdin the following assets (the"Assets"): (i) all
of the Company's intellectual property rights related to the Company's
proprietary electronic systems, circuits, hardware and software in the field of
software and/or data protection; (ii) its list of security device customers;
(iii) its security devices, including software and printed circuits contained
in the security devices; and (iv) the goodwill and commercial know-how of
the Company. The aggregate purchase price of the Assets is $500,000 (the
"Purchase Price"). In addition, the Company or its wholly-owned subsidiary,
Maxwell Systems, Inc., will provide manufacturing services to Aladdin for a
minimum of one year following the closing of the transaction, the Company
will receive payment for the products manufactured at Aladdin's request
within 30 days after their delivery. A copy of the agreement is attached to
this report as Exhibit "A", and reference is made to that document regarding
a complete description of the assets sold and the other terms and conditions
of the parties' agreement.
The Agreement is subject to and conditioned upon the approval of the
United States Bankruptcy Court for the District of Utah (the "Court"). The
Court will consider the approval of the Agreement at a hearing scheduled on
January 25, 1995 at 2:00 p.m. In addition, the Agreement is subject to and
conditioned upon a due diligence process by Aladdin, Aladdin's satisfaction
with the results of such process, and the approval of the transaction by
the board of directors of Aladdin's parent company.
In the event the above conditions are satisfied, Aladdin will pay the
Purchase Price as follows:
(i) Aladdin will pay the Company $300,000 within ten business days after
the Court approves the Agreement; and
(ii) Aladdin will pay the Company and aggregate amount of $200,000 by
paying $13,000 per month, on the first day of each month, for
eleven consecutive months beginning March 1, 1995 and $57,000 on
February 1, 1996, subject to the Company meeting, on a monthly
basis, manufacturing, technical assistance and client referral
requirements.
Item 7. Financial Statements and Exhibits
(a) Exhibits. Exhibit A is a copy of the Agreement dated December 23,
1994 among the Company and Aladdin Software Security, Inc.
(b) Financial Statements.
N/A
Pursuant to the requirements of the Security and Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned hereunto duly authorized.
MICRO SECURITY SYSTEMS, INC.
__________________________________
by: Daniel C. Maxwell
Dated: January 4, 1995
<PAGE>
AGREEMENT
THIS AGREEMENT is entered into as of the 23rd day of
December, 1994, by and between MICRO SECURITY SYSTEMS, INC.,
a corporation formed under the laws of the State of Utah, United States of
America ("Seller"), and ALADDIN SOFTWARE SECURITY, INC., a
corporation formed under the laws of the State of New York, United States
of America ("Purchaser"), and, for purposes of obligating itself under
clauses 36 26 through 34 below, MAXWELL SYSTEMS, INC., the wholly-
owned subsidiary of Seller ("Maxwell"), with reference to the following:
WHEREAS, the Seller declares that amongst its businesses and
fields of endeavor, it has engaged and does engage in research,
development, manufacture, marketing and sale of the Property Sold, as
hereafter defined.
AND WHEREAS, the Purchaser declares that, amongst its other
businesses and fields of endeavor, it engages in research, development,
manufacture, marketing and sale of means which compete with parts of the
Property Sold.
AND WHEREAS, the Seller declares that it, and only it, owns all
the rights of whatsoever nature, including the intellectual property rights in
the Property Sold.
AND WHEREAS, the Seller has made an offer to the Purchaser that
the Purchaser buy the Property Sold, the same being free and clear of any
third party right.
AND WHEREAS, the Seller is a voluntary debtor and debtor-in-
possession in the United States Bankruptcy Court for the District of Utah,
Central Division, Consolidated Case No. 94B-23643, filed July 21, 1994.
AND WHEREAS, the Purchaser has accepted the aforesaid offer;
all in accordance with and subject to the matters set forth below in this
Agreement.
AND WHEREAS, the parties wish to regulate their mutual
relationship, all as more fully described in this Agreement, in accordance
with the conditions set forth herein and the provisions stipulated herein
subject to the Bankruptcy Court approval after notice and hearing.
<PAGE>
NOW THEREFORE IT IS DECLARED, STIPULATED AND
AGREED
BETWEEN THE PARTIES:
General:
1. The preamble to this Agreement constitutes an integral part hereof
and the representations contained therein constitute part and parcel
of the conditions of the Agreement.
2. The terms and expressions appearing below will have the meaning
in this Agreement and in all the appendices attached hereto as set
forth opposite each of them.
The Property Sold:
2.1. "The Property Sold": All the assets and rights, including
the intellectual property rights and the rights of action of the
Seller in its business as presently or previously constituted,
including - but without derogating from the generality of the
foregoing - all the aforesaid rights which the Seller has in
products, commercial know-how, movables and goodwill.
The business and the field of endeavor:
2.2. "The business": Every matter or thing belonging to the
Seller, or which the Seller has done, is doing or intends to
do (itself, its affiliates - including Maxwell - or through or
with the assistance of others) in the field of endeavor,
including activity involving the research, development,
manufacture and marketing of the products.
2.3. "The field of endeavor": The field of software and/or data
protection.
2.4. "Software and/or data protection": All hardware or
software means, or means which combine hardware and
software, the aim of which is to prevent, disrupt or hamper
the use of a party infringing software and/or data, or giving
information or providing monitoring ability on or in
connection with any infringing use of software and/or data,
or identifying of infringing use of software and/or data.
2.5. "Infringing use of software and/or data": Any act,
including the operation, running, use, of software and/or
data or part of software and/or data, which has not been
expressly authorized by the owner of the copyright in the
software and/or data and/or the person who holds the
commercial know-how in respect thereof.
<PAGE>
Parts of the Property Sold:
2.6. "The products": All the means connected with the Seller's
field of endeavor which had been developed in the past,
which are being developed at present and which were or are
under stages of development or predevelopment, whether
the same are presently in use or were in use in the past, and
whether or not the same combine electronic systems and
electronic circuits and hardware, or only part thereof, for
purposes of the operation thereof in software, and which are
in the sole and exclusive ownership of the Seller, including:
SecuriKey I, SecuriKey II, SecuriKey III, SecuriKey IV,
SecuriKey V, SecuriKey VI, Super SecuriKey ,
SecuriKey ADB, SecuriKey for UNIX, SecuriLan ,
Perfectly Secure and SecuriData , and including the
electronic drawings, code records, documentation and
anything else connected with the aforesaid means.
2.7. "Software": The software contained in and part of the
products.
2.8. "Printed circuits": The printed circuits contained in
and part of the products.
2.7 2.9. "Intellectual property rights": Any patent,
copyright (including the
droit
moral
e), copyright registrations,
copyright registration applications, the commercial
know-how and the trade secrets, trade names,
service marks, trade marks, trade mark registration
and trade mark registration applications, connected
with the Property Sold, whether or not the right has
been registered (in the United States or in any other
country in the world), whether such right is known
and/or has fully crystallized at the date of signing or
becomes known and/or fully crystallized after the
aforesaid date, and including such right which
stems, derives or is to be inferred from the Property
Sold.
Without limiting the generality of the foregoing, the terms
"trade mark" and "trade name" shall mean any insignia,
slogan, picture, graphic description, image, logo, or other
mark, name, form, initials or any other exclusive aspect - in
the singular or the plural, and each one of them or any
combination thereof - of which the Seller has or could have
made use within the scope of conducting the business, the
development thereof and/or marketing of the products
and/or for purposes of distinguishing the business and the
products from competing businesses and products, including
compatibility marks of computer manufacturers or other
software manufacturers.
<PAGE>
2.8 2.10. "Commercial know-how": Any information of
Seller of commercial value connected with the
Property Sold and the field of endeavor, including
information connected with research, development
and manufacturing of the Seller's business and/or of
the products and/or of the software, and including
the ideas and the principles which serve as the basis
for the products and the software included therein,
and the stages for the development thereof and/or
any information connected with: the stage of
defining the requirements and/or the stage of design
of each and every of the products and each and every
item of software; which is included in the
preparatory material for the software; in methods,
means and ways of encoding of products and the
codes imprinted on the products; the manufacturing
and marketing methods of the business and/or the
products and/or the software; the Seller's suppliers
and its customers (including information in regard to
its liaisons and contacts within customer firms,
selling prices and credit terms) and all the terms of
the Seller's contractual arrangements with the
aforesaid entities.
2.9 2.11. "The movables": Documentary material (verbal and
graphic material describing the products, the
operating processes thereof, technical documentation
and so forth), and advertising material and Seller's
rights in and to its "800" telephone service line and
its dedicated facsimile telephone line.
2.10 2.12. "The goodwill": The Seller's goodwill connected
with the Property Sold and the business, and
including the right to continue to trade in the goods
products in place of the Seller.
2.11 2.13. "Causes of action": Any cause of action and rights
of claim which the Seller has in connection with the
Property Sold and the business against any third
party whatsoever, irrespective of the normative
source for holding the third party liable; provided,
however, that Seller shall be entitled to pursue and
shall be entitled to retain any and all amounts
recovered by it with respect to its current litigation
with Interstate Trucking Service and with respect to
its claims against Phillips Electronics, which are not
part of the Products Property Sold; and provided,
further, that as a condition to any such litigation by
Seller, Purchaser not be named a party to such
actions.
Miscellaneous:
2.12 2.14. "The Seller's suppliers": The suppliers who supply
the Seller with raw materials, including a supplier
which supplies raw materials to another of the
Seller's suppliers.
<PAGE>
2.13 2.15. "Raw materials": Electronic components, or
hardware components, or any other component of
the products, but excluding the software.
2.14 2.16. "The Seller's customers": Any user and any person
who has received the products from the Seller, from
Seller's subsidiary, Maxwell, from the seller's
distributors or from software houses associated with
the Seller, or with any of the parties enumerated
above.
2.15 2.17. "Date of signing": The date stipulated at the head
of this Agreement on which the Purchaser and the
Seller signed this Agreement.
2.16 2.18. "Effective Date": Five (5) days after receiving the
Court's confirmation in regard to the Agreement. the
Verification Date.
2.17 2.19. "The interim period": The period between the date
of signing and the Effective Date.
2.18 2.20. "Court": The United States Bankruptcy Court for
the District of Utah, Central Division.
2.19 2.21. "Court approval": The approval of Court of the
transactions described herein after hearing and
notice.
2.20 2.22. "Manufacturer": Maxwell System, Inc. and/or
Seller, which will be granted a license, as of the
Effective Date by Purchaser to manufacture part or
all of the Products for the Purchaser in accordance
with the terms and conditions herein.
2.21 2.23. "Manufacturing Agreement": The agreement
governing the terms and conditions of the
manufacture of the Products for the Purchaser as of
and after the Effective Date, as set forth in clauses
26 through 34.
2.22 2.24. "Approval of the Board": Approval of the Board
of Directors of Aladdin Knowledge Systems, Ltd.,
the parent corporation of Purchaser, of this
Agreement.
2.25. "Verification Date": The date that the conditions set
forth in clause 35.9 are satisfied, which shall not be more
than five (5) business days after receipt of the Court
Approval.
2.26. "Third party right": Any right arising under contract,
law, statute or by operation of any administrative,
governmental or judicial body having jurisdiction, in
favor of a party not a party to this Agreement including,
without limitation, any liens, charges, encumbrances, or
claims.
<PAGE>
3. Words in the singular shall include the plural, and vice versa; words
in the masculine shall include the feminine, and vice versa; words
which apply to a person shall also include bodies corporate and any
authority; reference to the whole (such as references to the Property
Sold, the business, the products, the commercial know-how, the
intellectual property rights, and the software, without limitation) is
also to each and every part thereof and the entire itemization of parts
of the entirety which accompanies the entirety will be interpreted in
a manner which has the effect of adding to and clarifying what is
written and not derogating from the reference thereto; overlapping
definitions or classifications will not be interpreted as a
contradiction, but as an addition, supplement and reinforcement, or
as a parallel definition or classification, unless such definition
demands the execution at a specific point in time of conflicting
obligations and in such event the terms will be interpreted according
to law and not in accordance with the foregoing.
4. Any reference to a particular clause is reference to the whole clause,
including all the sub-clauses thereof; any reference to an annex is to
the entire annex, including all the appendices thereto; any reference
to a sub-clause or to a specific appendix is a reference to such sub-
clause (and to the sub-clauses thereof) or the specific appendix
mentioned.
5. Wherever in this Agreement there is a declaration in regard to the
sum total of the Seller's knowledge, such declaration will include
and combine within the confines thereof also a declaration in regard
to knowledge obtained after investigation, demand and due
diligence.
6. The captions to clauses in this Agreement have been added for the
sake of convenience and the ease of place-finding only and shall not
be used in the interpretation of the Agreement or for any other
purpose.
7. All the annexes to the Agreement constitute an integral part hereof
and shall be read as an inseparable part hereof.
The transaction:
Purchase:
8. Subject to the provisions of this Agreement and the effecting of the
payments referred to herein, the Seller sells to the Purchaser and
hereby assigns to it by way of full and irrevocable assignment,
which will come into force on the Effective Date, the Property Sold,
every part thereof and all the rights the Seller has therein, including
intellectual property rights and rights of claim; and it undertakes to
transfer the Property Sold to the Purchaser in full and in the best
possible way, on the Effective Date; and the Purchaser, in reliance
on the Seller's declarations as set forth below, hereby purchases the
Property Sold and all the rights connected thereto and it hereby
undertakes to take transfer of the Property Sold on the date this
Agreement comes into force; all in accordance with the provisions
of this Agreement and the conditions specified herein.
<PAGE>
Manufacturing:
The license which will be granted, as of the Effective Date, by
Purchaser to Manufacturer to manufacture part or all of the Products
for the Purchaser, all in accordance with the terms and conditions
provided herein.
Representations by the Seller
The power to enter into the transaction and to sell the Property Sold
and any part thereof:
9. The Seller hereby represents and undertakes that:
9.1. Subject to receiving the Court Approval, it has the power
and authority to enter into this Agreement and to perform
due implementation of this Agreement; that the competent
organs according to the Seller's documents of incorporation
have passed all the resolutions required for purposes of its
entering into this Agreement and the implementation hereof;
and that its entering into this Agreement and the
implementation hereof do not conflict with other resolutions
it has passed and are not contrary to its founding documents
or to any contract to which it is bound, or to any law, the
violation of which would have a material and adverse effect
on the Seller's ability to perform hereunder. Seller will use
its best commercial efforts to obtain the Court Approval on
or before January 25, 1995.
9.2. Subject to receiving the Court Approval, there is no
necessity, for purposes of entering into this Agreement and
the implementation hereof, for any authorization, consent,
approval, license, permit or any other legal action on the part
of or by any person.
Absence of impediment to entering into the Agreement and on
implementation thereof:
10. The Seller hereby represents and undertakes that:
10.1. Subject to receiving the Court Approval, there is no
impediment according to any law to its entering into this
Agreement, to its implementing its part of the Agreement
and to the transfer of title in the Property Sold to the
Purchaser.
10.2. The contractual arrangement under this Agreement and the
implementation hereof shall not lead to the lapse of any
right the Seller has in the Property Sold, or in any part
thereof.
Seller's rights in the Property Sold and absence of rights of third
parties:
<PAGE>
11. The Seller represents and undertakes that:
11.1. Annexes "D-G" to this Agreement include a full and
accurate list which correctly describes the products (Annex
"D"), the software (including source code) (Annex "E"), the
electronic drawings (Annex "F") and the intellectual
property rights (Annex "G").
11.2. It and only it owns all the rights, including the intellectual
property rights, in the Property Sold, and without derogating
from the generality of the foregoing, all the copyright and all
the commercial know-how connected with the products, the
software and the printed circuits; and that apart from the
user licenses as referred in clause 11.7 below, to the
knowledge of Seller no rights whatsoever connected with
the Property Sold and with any one of the material
components thereof has been sold, leased out, assigned,
given or in any other manner transferred to any third party.
11.3. To the knowledge of Seller, the items of software, or part
thereof, have never been copied from other software or
software programs, or parts thereof, and the same are the
fruits of the Seller's own development; that, to the
knowledge of Seller, the electronic drawings were never
copied from other drawings, or part thereof, and they are the
fruits of the Seller's own development; and that, to the
knowledge of Seller, the printed circuits were never copied
from other printed circuits, or parts thereof, and they are the
fruits of the Seller's own development.
11.4. The Property Sold, and in particular the items of software
and/or the printed circuits, do not infringe a right of any
third party.
11.5. No third party has made to Seller any allegation, demand,
complaint or claim of whatsoever nature against the Seller
in any matter directly or indirectly connected with or arising
out of rights which the Seller has in the Property Sold, and
in particular the Seller's intellectual property rights and
commercial know-how in the terms of software and in the
printed circuits; and that to the best of its knowledge it
has not made a promise, made a representation, conducted
negotiations, concluded an agreement, verbal or in writing,
or performed any legal act whatsoever in consequence of
which, or in connection with which, any third party could
claim rights in the Property Sold.
11.6. It is not aware of an infringement of any of its rights; that it
is not aware of any waiver or any act by it which might be
construed as or be deemed to be a waiver of any of its rights;
that to its knowledge it has never performed any act in
pursuance of which or in respect of which it could be
contended that any of its rights has lapsed; and that it has
not performed any legal act by virtue of which it will not
have the power to enforce, or may be estopped from
enforcing, any of its rights.
<PAGE>
11.7. The sole right which has been granted to third parties in
connection with the Property Sold is a perpetual right of use
which is not conditional on the payment of any royalties,
which is not transferable to any person whatsoever, and
which allows the grantee of such right to make use of
products and software according to the purposes for which
they are intended, but does not confer on the user any other
right whatsoever.
11.8. None of the material components of the commercial know-
how are within the public domain; that all the commercial
know-how and each of the material components thereof,
whether or not same are protected by virtue of the laws of
know-how and secrecy or by virtue of the laws of copyright,
is kept secret by the Seller, and that the commercial know-
how, or any part thereof, has not been transferred to any
third party except for the Seller's work or for the Seller; and
that every person - including employees of the Seller, its
shareholders, consultants, officers therein and
subcontractors who have done work for it - to whom the
commercial know-how or any part thereof has been
transferred, have received an explanation as to the nature of
the information and the classified and secret nature thereof,
and the transferee has undertaken not to transfer such
information to any other third party without his receiving the
Seller's prior written consent; and that the Seller has
performed all reasonably necessary actions for purposes of
keeping the commercial know-how a secret and to prevent
the dissemination thereof.
11.9. The Property Sold and each of the components thereof is
free and clear of any third party right; that it will use
reasonable commercial efforts to cause a situation that
during the interim period the Property Sold will remain free
and clear of any third party right as aforesaid; and that in the
event that unfortunately a third party right as aforesaid
should be imposed during the interim period up to the date
of this Agreement coming into force, it will have such right
removed within 30 (thirty) days from the date it is imposed.
11.10. Seller has not made or given any express, implied or oral
warranties to any of its customers or in connection with the
sale of its products relating to any continued obligation on
the part of the Seller or any other party to manufacture or
sell its products.
Manufacturing, marketing set-up and the Seller's customers:
12. The Seller hereby represents and undertakes that:
12.1. Annex "I" constitutes full and accurate particulars of all the
Seller's suppliers.
12.2. Annex "J" constitutes full and accurate details of all the
components and the raw materials required for purposes of
the manufacture of the products and the assembly thereof.
<PAGE>
12.3. Annex "K" contains full and accurate details of all the
Seller's customers, with an indication in respect of each and
every customer: name and address of customer, quantity
and details of products purchased and/or ordered by the
customer, dates and prices of sale, credit arrangements with
the customer, supply times, and "payment ethic."
12.4. Annex "L" contains all the information Seller has in regard
to the Seller's material customers, including all the databases
the Seller possesses, in any application whatsoever, in
regard to such customers.
12.5. Annex "M" contains all information the Seller has about
possible customers or potential customers who in the past
made an approach to the Seller, including all the databases
the Seller has in its possession, in any application
whatsoever, in connection with such possible customers.
12.6. Annex "N" to the Agreement constitutes all the information
and the files the Seller has in the field of technical support.
Financial Statements:
13. The Seller hereby represents and undertakes that:
13.1. Annex "O" contains all the audited financial statements of
the business for the years 1989-1993 (inclusive).
13.2. Annex "P" contains all the Seller's financial statements for
the first eleven months of 1994.
13.3. All the aforesaid financial statements in Annexes O and P
have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis; that the
aforesaid financial statements do not contain any
information which is materially incorrect or inaccurate; that
the Seller has never been given any notice or warning and no
information has been brought to its attention in regard to a
suspicion or fear that the financial statements contain
information which is inaccurate.
13.4. Seller's sales for the year 1994, on a month-by-month basis,
were as follows:
January, 1994 $149,620
February, 1994 $130,148
March, 1994 $161,107
April, 1994 $42,283
May, 1994 $39,611
June, 1994 $4,006
July, 1994 $55,206
August, 1994 $103,002
September, 1994 $79,489
October, 1994 $67,057
November, 1994 $43,000
December, 1994 (through December 20th)
$45,000
<PAGE>
Defective Products:
14. The Seller hereby represents and undertakes that it has not
manufactured, distributed, transferred or granted a right of use in
products which contain faults and/or which do not meet the
standards which have been announced in respect thereof to
customers and in its advertisements.
Management of the business during the period commencing October
1994:
15. The Seller hereby represents and undertakes that during the period
commencing from October this year and terminating on the date of
signing of the Agreement, and also in the interim period, it has not
conducted the business in an irregular manner, has not performed
any act which would not have been performed by it had it not been
for the negotiations between the parties and/or any activities which
are not in the ordinary course of the business and/or it has not
supplied, is not about to supply or has not undertaken to supply to
any of its customers products other than in a reasonable and usual
volume and at a reasonable and usual prices.
Representations by the Purchaser:
16. The Purchaser hereby represents and undertakes that:
16.1. It engages in the field of endeavor and that part of the means
manufactured by it compete with the products.
16.2. Subject to receiving the Approval of the Board, it has the
power and authority to enter into this Agreement and to
perform due implementation of this Agreement; that all the
organs in the Purchaser have passed all the resolutions
required for purposes of its entering into this Agreement and
the implementation hereof; and that its entering into this
Agreement and the implementation hereof do not conflict
with other resolutions it has passed and are not contrary to
its founding documents or to any contract to which it is
bound, or to any law, the violation or breach of which would
have a material and adverse effect on the Purchaser's ability
to perform its obligations hereunder. Purchaser will use its
best commercial efforts to obtain the Approval of the Board
on or before the Effective Date.
16.3. Subject to receiving the Approval of the Board, no
authorization, consent, approval, license, permit or any other
legal act is required on the part of or by any person for
purposes of its entering into this Agreement and the
implementation hereof.
16.4. There is no impediment according to any law to its entering
into this Agreement, to the implementation of its part of the
Agreement and to the transfer of title in the Property Sold to
the Purchaser.
<PAGE>
16.5. At the date of signing and on the Effective Date it has the
financial means to pay the Seller the consideration specified
in this Agreement, and that on the date of signing does not
require assistance for financing the transaction which is the
subject matter of this Agreement.
The consideration:
17. In consideration for the Property Sold and the fulfillment of all the
Seller's and/or Manufacturer's obligations pursuant to this
Agreement in full and punctually on due date, and against transfer
of the Property Sold to it at the Effective Date, and on the strength
of the Seller's confirmations and representations contained in this
Agreement and in the annexes hereto, the Purchaser undertakes to
pay the Seller, subject to the provisions hereof, the sum of Five
Hundred Thousand Dollars ($500,000.00).
18. The consideration will be paid at the times and subject to the
conditions set forth below:
18.1. On the Effective Date, and against the transfer of the
Property Sold to the Purchaser, the sum of Three Hundred
Thousand Dollars ($300,000.00).
18.2. Subject to clause 19 of this Agreement, on the first day of
March, 1995, and continuing thereafter on the first day of
each succeeding calendar month through January, 1996, the
sum of Thirteen Thousand Dollars ($13,000).
18.3. Subject to clause 19 of this Agreement, on the first day of
February, 1996, the sum of Fifty-Seven Thousand Dollars
($57,000).
Conditions to Monthly Payments:
19. Purchaser's obligation to pay the monthly consideration payable
under the provisions of clauses 18.2 and 18.3 shall be subject to the
Seller's satisfaction, on a monthly basis for the month preceding any
such payment, of the following conditions:
19.1. Manufacturer shall manufacture of the Product in
accordance with the provisions of clauses 26 through 34.
19.2. Manufacturer shall visually inspect each unit of the Product
manufactured by it, with. In addition, quality control will
be insured by computer inspection, and the rejection rate of
the number of units delivered by Manufacturer to Purchaser
that month shall be no greater than one percent. For
purposes of determining the rejection rate under this clause
19.2, no unit will be deemed rejected for purely cosmetic
reasons, or for damage or defects causes other than by
Manufacturer.
19.3. Manufacturer and/or Seller shall respond to all technical
questions involving the product or the Property Sold within
one (1) business day after receiving the inquiry.
<PAGE>
19.4. Seller and/or Manufacturer shall refer all order requests by
clients or prospective clients of Purchaser or from former
clients of Seller to the Purchaser for processing.
19.5. Manufacturer shall ship orders of 100 or fewer units within
two (2) weeks after receiving the order for those units, will
ship orders for units of more than 100 but less than 500
units within three (3) weeks after receiving the order for
those units, and will ship the orders for units of more than
500 and up to 1,000 units within four (4) weeks after
receiving the order for those units. If, however, the
Manufacturer's failure to ship an order within the time
periods specified in the preceding sentence are caused by
acts such as, but not limited to, acts of God, fire, earthquake,
explosion, flood, drought, war, riot, sabotage, embargo,
compliance with any order or regulation of any government
entity acting with color of right, intervention or delays
created by any regulatory authority, lockouts, strikes,
shortages of raw materials or delays by subcontractors,
Manufacturer shall use all reasonable efforts to remove such
cause as soon as reasonably practicable, and the time period
for Manufacturer's performance under this clause 19.5 shall
be extended by the period of such
force
majeu
re.
Transfer of the Property Sold to the Purchaser and management
thereof during the interim period:
20. Immediately after the signing of this Agreement, each party will
publicize the fact that this Agreement has been entered into between
the parties and their intentions, which are conditional on the matters
set forth in this Agreement, for the transfer of the Property Sold to
the Purchaser in a form reasonably acceptable to the other party. In
addition, and at the earliest possible time, the parties will jointly
send a letter to each and every customer of the Seller in the form of
the letter contained in Annex "Q" to this Agreement, in which the
parties will explain to the Seller's customers that the transfer of the
Property Sold to the Purchaser will in no way impair the standard of
service and the quality of the products which will be given to them
by the Purchaser after the Effective Date.
21. The Seller undertakes that during the interim period it will regularly
report to and send the Purchaser all information connected with the
Property Sold and the manner of management of the business, and
also:
21.1. It will continue to manage the business in the ordinary
course of business. For the clarification of doubt it is hereby
recorded that management of the business in the ordinary
course of business includes maintaining the level of
commercial activity of the business, which includes:
<PAGE>
21.1.1. Accepting all orders from customers of the Seller -
provided that the orders which are accepted and the
obligations which stem therefrom will not be
materially different than those which were the
normal and customary practice of the Seller
(particularly with respect to selling prices and the
terms of credit in respect of the products) during the
period preceding the date of signing.
21.1.2. Continued manufacture of the products in
accordance with the aforesaid orders, or anticipated
orders (provided that the forecast and the decision-
making system in regard to the forecast shall be
brought to the notice of the Purchaser and shall be
approved by it) at the same quality, standard and in
the same manner as the same would have been
manufactured by the Seller had it not signed this
Agreement.
21.1.3. To continue to provide services and support to all
the Seller's customers, which shall include attending
to the supply of the products on the dates required by
the Seller's customers and the providing of technical
support to the Seller's customers.
21.1.4. To manage the business in a manner that at the end
of the interim period the inventory of products in its
possession and the inventory of raw materials in the
possession of its suppliers who manufacture
products for it, shall not be less than the inventory
maintained by it as at the date of signing.
21.2. Not to perform any act which is not in the ordinary course of
the Seller's business, which shall include:
21.2.1. Not to conduct negotiations, to make a
representation, to perform any legal act, or to
contract under agreement with any third party
whatsoever in connection with the business and not
to assume any liability whatsoever in connection
with the Property Sold, unless this is required for
purposes of fulfilling the obligations set forth in
clause 20.1.
21.2.2. Not to perform any exceptional act which has the
effect of prejudicing the business, including the
acceptance of orders of exceptional or irregular
scope from customers other than against full and
normal consideration and/or on terms of payment
which constitute a departure from the normal course
of business.
21.2.3. To issue invoices only simultaneously with the
actual execution of an order.
<PAGE>
21.2.4. Not to agree to or to take part in the grant of any
third party right in the Property Sold to any person
whatsoever.
21.2.5. Not to postpone any payment for which it is
indebted and the non-payment of which on its due
date could have a material and adverse affect on any
commercial contracts of the Purchaser after the
transfer of the Property Sold to it.
21.3. Should there be events or circumstances in consequence of
which the Seller believes that it is obliged to take or perform
an act in connection with the Property Sold, and in particular
in order to safeguard it and prevent any prejudice thereto,
but in respect of which it has doubt as to the applicability
thereof to the course of management of the regular business
of the Property Sold, the Seller hereby undertakes in
advance to notify the Purchaser of the aforesaid events and
circumstances, and of the steps which in its opinion ought to
be taken, and the two parties will jointly agree on the best
course of action in such circumstances.
22. The Seller hereby undertakes to transfer the Property Sold to the
Purchaser on the Effective Date and the Purchaser undertakes to
accept the Property Sold at the aforesaid time. For the removal of
doubt it is hereby recorded that at the aforesaid time all the
proprietary rights in the Property Sold will pass from the Seller to
the Purchaser.
23. The transfer of the Property Sold to the Purchaser shall mean: the
moving of the Property Sold, including all the assets and rights
attaching thereto, to the Purchaser (and physically to its offices in
New York) in a manner that, on the one hand, the Purchaser will
have sole and exclusive title to the Property Sold and it may manage
the business in lieu of the Seller, which shall include commencing
research and development operations in respect of products, the
manufacture, marketing and sale thereof to the Seller's customers
(which at the aforesaid time will become the Purchaser's customers),
and on the other hand, the Seller having no right whatsoever
attaching to the Property Sold and anything connected with the
Property Sold.
24. The Seller undertakes to transfer the Property Sold to the Purchaser
in a manner that the transfer thereof to the Purchaser will be in the
best possible way, and to perform every reasonable act which it is
required by the Purchaser to do for purposes of transferring the
Property Sold to the Purchaser.
Additional obligations of the Seller:
25. In addition to the Seller's remaining representations and
undertakings in terms of this Agreement, and in consideration for
portion of the monies payable to it pursuant to clause 18 of this
Agreement, the Seller hereby represents and undertakes that:
<PAGE>
Confidentiality:
25.1. Except as required or contemplated by this Agreement, to
maintain full and complete secrecy, not to divulge, publicize
or transfer in any manner to any third party who is not a
party to this Agreement, and/or not to make any use
whatsoever, of any information in its knowledge and which
is connected with the Property Sold, including information
connected with the products and/or the software and/or the
printed circuits and/or the commercial know-how; further to
maintain full and complete confidentiality in regard to all
information connected with the Purchaser and which is not
within the public domain, including information connected
with its shareholders, directors and/or other officers therein.
Non-competition and restriction of activities:
25.2. Not to perform any act which has the effect of prejudicing
any interest the Purchaser has in the Property Sold, in the
business and in the field of endeavor, including:
25.2.1. Any act which has the effect of prejudicing the
Seller's customers (who will become the Purchaser's
customers) and the Purchaser's customers (also those
who are among the Seller's customers).
25.2.2. To make an approach to the customers referred to in
clause 25.2.1. in connection with the field of
endeavor in regard to any matter or thing connected
with the field of endeavor; and to pass onto the
Purchaser any inquiry by such customers which may
come to its notice.
25.2.3. To make any use for commercial purposes or for any
other purpose, of the trade marks and trade names
which form part of the Property Sold.
25.2.4. To perform any act likely to have a detrimental
effect on the goodwill; this shall include not
publishing, announcing or supplying information
likely to lead any third party into believing that there
is no basis, necessity or justification for availing
himself of the field of endeavor, and/or that such
products (or means which compete with or serve as
a substitute for them) do not provide sufficient and
proper protection.
25.2.5. To employ any of the Purchaser's employees.
25.2.6. To engage in the field of endeavor and/or to compete
with the business and with the Purchaser any place
in the world for a period of five years after the
Effective Date.
<PAGE>
25.2.7. To engage in research, development, manufacture or
marketing of products which imitate the operation of
the products (or means which compete with or are
substitute for them), or which are likely to prejudice
the field of endeavor or the business any place in the
world for a period of five years after the Effective
Date.
25.3. For the removal of doubt the Seller hereby declares, agrees
and undertakes that:
25.3.1. The agreements, conditions, and the undertakings set
forth in clauses 25.1 and 25.2 will apply to it,
directly or indirectly, in the Seller's individual
capacity or as an employee, a self-employed person,
a consultant, a shareholder, or in any other manner.
25.3.2. The aforesaid restrictions shall apply to any act,
whether the same is done for consideration or
otherwise.
25.3.3. All the acts or restrictions enumerated in clause 25.1
and 25.2 are independent restrictions; and that if,
notwithstanding the matters set forth below, any of
the aforesaid restrictions should be nullified or
declared invalid, this will not have the effect of
nullifying those restrictions which have not been
held invalidated or annulled.
25.3.4. The aforesaid restrictions constitute an essential part
of the Property Sold and the contractual
consideration has been fixed on the strength of the
aforesaid restrictions being complied with and on
the strength on an assumption in regard to their
validity and effect.
25.3.5. Should it transpire that the aforesaid restrictions are
contrary to a cogent law, the Seller waives any
contention in regard to such conflict, and waives
reliance on the cogency of the law for purposes of
validating or justifying an activity which has been
forbidden in accordance with this Agreement.
25.3.6. Without derogating from the generality of the
foregoing, or from the validity of the aforesaid
restrictions and the effect thereof in terms of the law
(as is agreed and understood by the parties), or on
the grounds of an estoppel operating against the
Seller, or from the Purchaser's right to rely on the
contents of this Agreement; the Seller hereby
declares and undertakes that in the event that it
should transpire that any of the aforesaid restrictions
is too broad from the aspect of duration of time or
from the aspect of geographic applicability, or on
any other ground, the restrictions shall be deemed to
apply to the maximum length of time permitted in
<PAGE>
terms of any law and/or the restriction shall apply to
the broadest possible territory which is permitted in
accordance with any law,and/or to the extent that the
law allows, but under no circumstances the
restriction shall be invalidated by virtue of the broad
application thereof.
Manufacture of Products According to the Manufacturing Agreement:
Title and Ownership:
26. Manufacturer acknowledges that on the Effective Date, the Property
Sold, including the Products, the intellectual property rights and the
commercial know-how and the Technology (as hereafter defined)
is the property of Purchaser.
License to Manufacture:
27. Purchaser and Manufacturer agree that:
27.1. Subject to the terms, conditions, reservations, limitations
and requirements set forth in this Agreement, as of the
Effective Date Purchaser hereby grants to Manufacturer
and Manufacturer hereby accepts, a non-exclusive,
nontransferable, license to manufacture the Product.
27.2. The foregoing license is limited solely to manufacturing the
Product for the Purchaser.
27.3. Without limiting the generality of any provisions of this
Agreement, Manufacturer may not sell, directly or
indirectly, the Products and it further represents and
warrants that it will refrain from seeking customers or
soliciting, directly or indirectly, orders for the Product from
anyone but the Purchaser or pursuing any active sales policy
of the Product including, but without derogating from the
generality of the above, establishing any branch or affiliated
entity, maintaining any sales or manufacturing depot, or
making any publicity or advertisement of the Product.
27.4. On the Effective Date the Purchaser shall furnish all the
commercial know-how, including the know-how regarding
the methods and process for the manufacture of the
Products, technical data, assembly drawings, detail
drawings, prints, specifications and other related material
pertaining to the manufacture of the Product (the
"Technology").
Purchaser shall only be obligated to furnish such
information and data which is in its opinion necessary for
the manufacture of the Products, or not already available to
or already prepared by Manufacturer.
Term and Termination:
<PAGE>
28. The term of the Manufacturing Agreement shall commence on the
Effective Date and shall expire twelve (12) months thereafter.
29. In the event of a default by either Manufacturer or Purchaser under
the provisions of this Manufacturing Agreement, the non-defaulting
party shall have the right to terminate this Manufacturing
Agreement on 30 days written notice if, after such notice and during
such 30 day period, the defaulting party fails to cure the default.
Delivery and Payment:
30. In consideration of the manufacture of the Products, Purchaser shall
pay Manufacturer:
Product Name
Price SecuriKey 1 $3.10
SecuriKey 2 $6.30
SecuriKey 3 $7.43
SecuriKey 4 $4.00
Super SecuriKey $5.75
SecuriKey ADB $12.30*
* This price is based on a $5.00 cost for the I.C. component of
this product. Were the component's price to decrease, the
price paid for the product would decrease accordingly.
31. In consideration of the manufacture by Manufacturer of any other
Products as defined herein, Purchaser shall pay Manufacturer the
direct costs of materials and labor, plus 22% of these costs.
Manufacturer Obligations:
32. Manufacturer shall:
32.1. Manufacture for Purchaser and sell to Purchaser Purchaser's
entire requirements of the Product units ordered, from time
to time, by Purchaser.
32.2. Manufacture, pack and deliver the Products at the same
standard of quality and workmanship and in the same
manner as it would have been manufactured by the Seller if
the Seller had not entered into this Agreement.
32.3. Visually inspect each unit of the Product manufactured by
it, with and, in addition, quality control insured by
computer inspection, so that the rejection rate of the number
of units delivered by Manufacturer to Purchaser shall be no
greater than one percent.
32.4. Hold inventory of Raw Materials needed to manufacture the
total units of Product units ordered by Purchaser, and at least
an inventory of Raw Materials needed to manufacture the
total product units ordered by Purchaser in the previous 60
days prior to each and any order.
<PAGE>
32.5. Supply the Product units ordered by Purchaser as quickly as
they would have been supplied by Seller if the Seller had not
entered into this Agreement, and in any case no later than
two weeks for up to 100 units, three weeks for up to 500
units and four weeks for up to 1,000 units.
32.6. Enable the Purchaser and/or Purchaser's designated
supervisor ("Supervisor") to inspect the manufacturing plant
and process and the Manufacturer's inventory, and to
provide the Supervisor with a room to which no one else
may enter without the Supervisor's permission, and to
permit the Supervisor access to the Manufacturer's mailbox.
32.7. Enable Purchaser and/or his Supervisor to inspect all proper
books, invoices, purchase orders, shipment receipts and bills
of lading for orders made by Purchaser and/or customers of
the Manufacturer, which will be kept in Manufacturer's
usual place of business.
32.8. Notify Purchaser, as soon as it comes to its knowledge, that
it may cease to manufacture any or all the Products.
33. Purchaser shall:
33.1. Place all orders with the Manufacturer in writing by
facsimile transmission, with confirmation.
33.2. Pay for all orders no later than 30 days after delivery.
Confidentiality & Intellectual Property Rights:
34. Without derogating from the generality of clause 26 it is further
agreed and declared by the parties that:
34.1. The Technology is furnished solely for the purpose of
manufacturing the Products and upon termination of the
Manufacturing Agreement Manufacturer shall return to
Purchaser all tangible manifestations of the Technology and
shall not use, sell or disclose any of the Technology or
information derived from it to any third party.
34.2. Manufacturer acknowledges and agrees that certain
information which it may receive from the Purchaser shall
be proprietary to the Purchaser. Such information includes,
without limitation: the Technology, non-public information
concerning the business or finances of the Purchaser; any
other information, the disclosure of which might harm or
destroy a competitive advantage of the Purchaser (such
information shall be referred to collectively herein as
"Proprietary Information").
34.3. Manufacturer agrees that it shall not, directly or indirectly,
either during or subsequent to any termination of the
Manufacturing Agreement:
<PAGE>
34.3.1. Disclose any Proprietary Information of the
Purchaser, other than to its employees and/or
independent contractors who participate directly in
the performance of the obligations under the
Manufacturing Agreement;
34.3.2. Copy or use any Proprietary Information of the
Purchaser except for the purpose of fulfilling its
obligations hereunder; or
34.3.3. Publish any Proprietary Information of the Purchaser
without the prior written consent of Purchaser.
34.4. The degree and care employed by Manufacturer to protect
and safeguard the Proprietary Information of the Purchaser
shall be no less protective than the degree of care used by it
to protect its own confidential information of like
importance, and no less than reasonable care.
34.5. The obligations set forth in this clause shall not be
applicable to any Proprietary Information which: (i) the
Manufacturer is authorized by the Purchaser, in writing,
to disclose, copy or use; (ii) is generally known or becomes
part of the public domain through no fault of the
Manufacturer; (iii) is disclosed by the Purchaser to third
parties without restriction on subsequent disclosure; (iv) is
provided to the Manufacturer by a third party without breach
of any separate non-disclosure agreement; or (v) is required
to be disclosed in the context of any administrative or
judicial proceeding.
34.6. Any proprietary trademarks, trade names, service marks,
commercial symbols and/or logos which have been
developed, or will be developed in the future, for the
Product shall be and remain the sole and exclusive property
of Purchaser. Manufacturer acknowledges and agrees that
it has not, does not, and shall not acquire any rights with
respect to any such trade-names, trademarks, service marks,
commercial symbols and/or logos as a result of
Manufacturer's use thereof in connection with the Product,
and that Purchaser shall be free, at all times, to use any such
trade names, trademarks, service marks, commercial
symbols and/or logos in connection with any other product
or services.
34.7. Manufacturer shall not, in any manner, represent that it
possesses any proprietary interest in the Intellectual Property
Rights or the registration thereof, and shall not, directly or
indirectly, take any action to contest these Intellectual
Property Rights or infringe them in any way.
<PAGE>
34.8. Notwithstanding any other provisions contained in this
Agreement, it is understood and agreed that Purchaser shall
not be liable for any defects in material or workmanship
respecting the Products manufactured by Manufacturer, or
for any warranty respecting any Products manufactured by
Manufacturer pursuant to the Manufacturing Agreement and
Manufacturer hereby agrees to hold Purchaser harmless
from any such claim.
Conditions to Purchaser's Obligations:
35. Unless waived by Purchaser, the obligation of Purchaser to
consummate the purchase of the Property Sold on the Effective Date
is conditioned upon the following:
35.1. The receipt by Purchaser of the Approval of the Board.
35.2. The representations and warranties of the Seller set forth in
clauses 9 through 15 hereof shall be true and correct in all
material respects as of the date of signing and as of the
Effective Date, as though made on and as of the Effective
Date, except for changes in the ordinary course of business
of the Seller after the date hereof and not in violation of the
terms of this Agreement.
35.3. Seller shall perform and comply in all material respects with
all agreements, obligations and covenants required by this
Agreement to be so conformed or complied with by it prior
to or at the Effective Date, including the transfer of the
Property Sold.
35.4. During the period from the date of signing to the Effective
Date, there shall have been no material and adverse change
in the Property Sold.
35.5. Purchaser shall not have discovered any material error,
misstatement or omission in the representations and
warranties made or deemed to be made by Seller herein or
pursuant hereto, or in connection with the transactions
contemplated hereby.
35.6. Purchaser shall have received an opinion of Parsons Behle
& Latimer, counsel for Seller, dated on or before the date of
the signing, substantially in the form of Annex "R" hereto.
35.7. The Court shall have approved or otherwise confirmed this
Agreement, and such approval or confirmation shall have
taken place on or before January 25, 1995. Pursuant to the
terms of the Seller's "Motion for Approval of Sale of
Personal Property of the Estate Free and Clear of Liens", as
filed with the Court, (i) Seller's sale of the Products Sold to
Purchaser is subject to qualified higher and better offers in
<PAGE>
increments of $50,000 and (ii) if a higher and better offer is
received by Seller no later than January 18, 1995, Purchaser
will have the right to match that higher offer.
Notwithstanding any other provision contained herein, if the
Court Order is not issued and granted in Purchaser's favor by
action of the Court on or before January 25, 1995, and,
pursuant to such offer provisions, the Court grants approval
to any other party to purchase the Products Sold, Purchaser
shall have the immediate right (but not the obligation) to
terminate this Agreement, without liability, prior to the
Effective Date.
35.8. At the Effective Date, no suit, action or other proceedings
shall be pending or threatened before any court or
governmental agency in which it is sought to restrain or
prohibit or to obtain damages or other relief in connection
with this Agreement or the consummation of the
transactions contemplated hereby.
35.9. Purchaser and Seller shall have verified that:
35.9.1. Seller's sales, based on invoiced amounts of
orders, for the months of November and
December, 1994, and January, 1995 was in excess
of, respectively, $43,000, $50,000 and $50,000,
and Seller's ten largest clients in terms of volume
sales of the products and ten largest clients in
terms of dollar sales of the products during the
fifteen (15) month period preceding the date of
signing will continue to deal with the Purchaser
on materially the same terms after the Effective
Date as they dealt with Seller prior to the
Effective Date.
35.9.2. The verification of Seller's sales during the
months of November and December, 1994, and
January 1995, shall be made by a person or
entity reasonably acceptable to both parties who
is familiar with the accounting and business
concepts of Seller's business.
35.9.3. The verification of the continuing relationships
between Purchaser and Seller's largest clients
shall be determined in the sole discretion of the
Purchasers based upon the results of a survey in
the form of Annex "S" hereto, to be conducted
by an independent party mutually acceptable to
Purchaser and Seller.
35.9.4. Notwithstanding any other provision contained
herein, if the conditions set forth in this clause
35.9 are not satisfied on or before the Verification
Date, Purchaser shall have the immediate right
(but not the obligation) to terminate this
Agreement, without liability, prior to the
Effective Date.
<PAGE>
35.9 35.10. If the conditions to the Purchaser's obligations
hereunder are not satisfied (or waived by Purchaser)
on or before the Effective Date, Purchaser may
terminate this Agreement, without liability.
Conditions to Seller's Obligations:
36. Unless waived by Seller, the obligation of Seller to consummate the
sale, assignment and delivery of the Property Sold is conditioned
upon the following:
36.1. The representations and warranties of Purchaser set forth in
clause 16 hereof shall be true and correct in all material
respects as of the date of signing and as of the Effective
Date as though made on as of the Effective Date, except for
changes in the ordinary course of business of Purchaser after
the date hereof and not in violation of the terms hereof.
36.2. Purchaser shall have performed and complied in all respects
with all agreements, obligations, covenants and conditions
required by this Agreement to be so conformed or complied
with by it prior to or at the Effective Date, including the
tender to Seller of the consideration set forth in clause 18.1.
36.3. The Seller shall have obtained the Court Approval on or
before January 25, 1995.
36.4. The receipt by Purchaser of the Approval of the Board.
36.5. During the period from the date of signing to the Effective
Date, the financial condition, assets, liabilities, prospects or
business of Purchaser shall not have been materially and
adversely effected.
36.6. Seller shall not have discovered any material error,
misstatement or omission in the representations and
warranties made or deemed to be made by Purchaser herein
or pursuant hereto or in connection with the transactions
contemplated hereby.
36.7. At the Effective Date, no suit, action or other proceedings
shall be pending or threatened before any court or
governmental agency in which it is sought to restrain
or prohibit Purchaser in connection with this Agreement or
the consummation of the transactions contemplated hereby.
36.8. If the conditions to the Seller's obligations hereunder are not
satisfied (or waived by Seller) on or before the Effective
Date, Seller may terminate this Agreement, without liability.
Indemnification:
37. The parties agree to indemnify and hold one another harmless as
follows:
<PAGE>
37.1. Seller agrees to indemnify and hold harmless the Purchaser
from and against any and all of Purchaser's damages, losses,
liabilities, costs or expenses (collectively, "Losses")
including, without limitation, the reasonable fees of counsel,
incurred with respect to any action, suit, proceeding,
demand, claim, assessment, judgment, cost or expense
("Claim") resulting or arising from or incurred in connection
with:
37.1.1. Any misrepresentation, breach of warranty, non-
fulfillment or non-performance of any agreement,
term or condition on the part of Seller hereunder.
37.1.2. Any actions, suits, proceedings, demands,
assessments, judgments, costs or expenses
(including reasonably attorneys fees) incident to any
of the foregoing.
37.2. Purchaser agrees to indemnify and hold Seller harmless
from and against any of Seller's Losses (including, without
limitation, the reasonable fees of counsel) incurred with
respect to any Claim resulting or arising from or incurred in
connection with:
37.2.1. Any misrepresentation, breach of warranty, non-
fulfillment or non-performance of any agreement,
term or condition on the part of Purchaser
hereunder.
37.2.2. Any actions, suits, proceedings, demands,
assessments, judgments, costs or expenses
(including attorneys' fees) incident to any of the
foregoing.
37.3. Any request for indemnification for losses pursuant to this
clause 30 37 may be brought or asserted only at any time
within two (2) years of the Effective Date for all Claims
except those with respect to any Claims resulting from the
intentional fraud or misrepresentation of a party.
37.4. The provisions of this clause 33 37 shall not be effective
until a party shall be liable to make payments to the other
party under this clause 33 37 in the aggregate amount
in excess of $10,000, and then only to the extent such
aggregate liability exceeds such amount; provided, however,
that any claim resulting from the intentional fraud or
misrepresentation of a party shall be completely indemnified
by that party without regard to any minimal indemnification
amount under this clause 33 37.
<PAGE>
Due Diligence:
38. After the date of the granting of the Court Order Verification Date
and prior to the Effective Date, and subject to the Purchaser
executing a non-disclosure agreement in the form of Annex "S"T"
hereto, Purchaser shall have the right to conduct a due diligence
review and investigation of the Property Sold. Seller shall
cooperate with Purchaser in such review and shall provide
Purchaser with such information, data, products and material as it
shall reasonably request in connection therewith.
Severability:
39. Any clause, provision, or portion of this Agreement found or ruled
invalid, void, illegal or otherwise unenforceable under any law or by
any court, magistrate, referee, arbitrator, or other proceeding, shall
be amended to the extent required to render it valid, legal and
enforceable, or deleted if no such amendment is feasible, and such
amendment or deletion shall not effect the enforceability of the
other provisions hereof.
Relationship of Parties:
40. In performing their respective services hereunder, Manufacturer and
Purchaser shall operate as and have the status of independent
contractors and shall not act as or be an agent or employee of the
other. Neither party shall have any right or authority or assume or
create any obligations or make any representations or warranties on
behalf of the Purchaser, whether expressed or implied, or to bind the
Purchaser in any respect whatsoever.
Assignment:
41. The rights of Manufacturer under this Agreement are restricted
solely to Manufacturer and shall not be assigned, transferred,
subleased, sublicensed, encumbered, or subject to any security
interest without the written authorization of Purchaser. any
attempted assignment will be void and of no effect.
42. None of the duties, responsibilities or conditions of the
Manufacturer may be delegated or subcontracted except as explicitly
stated in this Agreement, unless there is an express authorization in
writing signed by Purchaser.
Integration:
43. The parties agree that this Agreement is the complete and exclusive
statement of the agreement between the parties, which supersedes
all proposals or prior agreements, oral or written, and all other
communications between the parties relating to the subject matter
of this Agreement. No modification of this Agreement shall be
binding on either party unless it is in writing and signed by both
parties.
Notices:
<PAGE>
44. Any notices required or permitted to be given hereunder shall be
sent by prepaid registered or certified mail, return receipt requested,
addressed to the Purchaser at the addresses shown at the beginning
of or elsewhere in this Agreement, and shall be deemed to have
been given on the date shown on the return receipt thereof. Until
either party hereto advises the Purchaser of a change in notice
address, all notices shall be sent to the respective addresses
specified herein above.
Waiver & Delay:
45. Any waiver of any right or default hereunder shall be effective only
if made in writing (through its managing director as to Purchaser),
and in the instance given and shall not operate as or imply a waiver
of any similar right or default on any subsequent occasion. No
waiver by either party of any breach or series of breaches or defaults
in performance by the Purchaser, and no failure, refusal or neglect
of either party to exercise any right, power or option given to it
hereunder or to insist upon strict compliance with or performance
of either party's obligations under this Agreement, shall constitute
a waiver of the provisions of this Agreement with respect to any
subsequent breach thereof or a waiver by either party of its right at
any time thereafter to require exact and strict compliance with the
provisions hereof.
Titles for Convenience:
46. Titles used in this Agreement are for convenience only and shall not
be deemed to affect the meaning or construction of any of the terms,
provisions, covenants, or conditions of this Agreement. Unless
otherwise provided herein, all accounting terms used herein shall be
defined and applied on a consistent basis in accordance with
generally accepted accounting principles. As used herein, the
singular number shall include the plural, the plural the singular and
the use of the masculine, feminine or neuter gender shall include all
genders, as the context may require, and the term "party" shall mean
an individual, a corporation, an association, a partnership, a trust
and any legal entity.
Authorized Signatories:
47. The parties declare that this Agreement has been signed on behalf
of each one by an authorized signatory.
Miscellaneous:
48. No overlapping definition or allegation to the effect that any right
comes into being or is protected by virtue of the laws of copyright
shall have the effect of barring an allegation to the effect that such
right comes into being or is protected pursuant to the laws of know-
how, and vice versa, and no allegation or overlapping classification
as aforesaid shall constitute a waiver of a normative source which
could protect such right.
49. The denial of relief or a right stemming from one normative source
shall not negate relief or a right stemming from another normative
source.
<PAGE>
50. Each of the parties undertakes to the other to act with the greatest
speed in performing all the actions, in signing all the documents,
affidavits, approvals, referrals, and to produce all the certificates and
documents the making and signature of which should be required
for purposes of giving force and effect to the provisions of this
contract, and in assisting or in easing the full and speedy execution
of all the provisions of this contract.
IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the date first noted above.
PURCHASER:
ALADDIN SOFTWARE SECURITY, INC.
By:
Its:
SELLER:
MICRO SECURITY SYSTEMS, INC.
By:
Its:
FOR PURPOSES OF CLAUSES 26
THROUGH 34:
MAXWELL SYSTEMS, INC.
By:
Its:
