SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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) November 18, 1997
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Venturian Corp.
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(Exact Name of Registrant as Specified in Charter)
Minnesota 0-12117 41-1460782
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(State or Other Jurisdiction of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
11111 Excelsior Boulevard, Hopkins, Minnesota 55343
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (612) 931-2500
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
In October 1997, Venturian Corp. (the "Company") entered into a joint
venture agreement (the "Joint Venture Agreement") with Atio Corporation
International, Inc. ("Atio International"), Atio Corporation (PTY) LTD ("Atio
PTY"), Venturian Software Enterprises, Inc. ("VSE") and Mr. Ilan Sharon
("Sharon"). On November 18, 1997, the parties to the Joint Venture Agreement
closed (the "Closing") the transactions contemplated thereby. VSE plans to
change its name to Atio Corporation USA, Inc. ("Atio USA") in the near future.
Pursuant to the terms of the Joint Venture Agreement, Atio PTY granted
to Atio USA, on behalf of Atio International, a royalty-free license (the
"License"). The specific terms of the License are governed by a Technology
License and Transfer Agreement entered into by the parties and which is
described below. The License, among other things, provides (i) Atio USA the
exclusive right, on a royalty-free basis, to Atio PTY's AtioCall(TM) product,
(ii) for the transfer of such rights to the Company, subject to certain
conditions, no later than December 31, 1999, (iii) that Atio PTY shall furnish
certain development services in connection with this exclusive right, and (iv)
that Atio USA shall pay an initial prepayment for such development services in
the amount of $800,000 by an offset of amounts owing by Atio PTY to Atio USA.
Pursuant to the Joint Venture Agreement, Atio PTY, on behalf of Atio
International, will pay to Atio USA installment payments totaling $3.5 million
(less the above-mentioned $800,000 prepayment). Also, in connection with the
Joint Venture Agreement, Atio USA issued 2,000,000 shares of its common stock to
Atio International. The balance of the shares of common stock of Atio USA are
owned by the Company and Sharon.
In connection with the Closing, the Company and Atio PTY also entered
into a letter agreement pursuant to which the parties agreed, among other
things, that (i) the date of the Closing would be deemed to be November 14,
1997, (ii) the parties may choose to set the date as of which the shares of Atio
USA were issued pursuant to the terms of the Joint Venture Agreement as October
1, 1997, and (iii) the License, as such term is defined in the Joint Venture
Agreement, be divided into two documents: (A) a Technology License and Transfer
Agreement (described below), and (B) a Technology Development and Support
Agreement, which will be prepared and entered into on terms previously set forth
after the Closing.
In connection with the Closing, the Company, Atio International, Sharon
and Atio USA also entered into a Shareholders Agreement (the "Shareholders
Agreement"). Among other things, the Shareholders Agreement (i) governs the
transfer of shares of Atio USA by any of the parties to such agreement, and (ii)
sets forth certain matters with respect to the governance of Atio USA.
Specifically, the Shareholders Agreement provides that the Board of Directors of
Atio USA shall consist of six persons or such greater number of people as to
which the Company and Atio International shall agree. Subject to certain
conditions set forth in the Shareholders Agreement, 50% of such directors shall
be designated by the Company and 50% of such directors shall be designated by
Atio International. The Shareholders Agreement also provides that various
actions, e.g., the approval of Atio USA's annual budget, the issuance by Atio
USA of any shares of its capital stock and any merger, exchange or transfer to
which Atio USA is a party, shall be approved by 75% of Atio USA's directors. The
Shareholders
<PAGE>
Agreement further provides that Atio USA's Chief Executive Officer shall be
appointed by Atio International. The Shareholders Agreement also imposes certain
prohibitions on competition with Atio USA on the parties to such agreement.
As set forth above, and in connection with the Closing, Atio USA, Atio
PTY, Atio International, the Company and Sharon entered into a Technology
License and Transfer Agreement (the "License Agreement") pursuant to which Atio
International granted to Atio USA, subject to the terms and conditions set forth
in the License Agreement, a royalty-free, worldwide, exclusive license to
exercise all rights and privileges of ownership of the AtioCall(TM) Products (as
such term is defined in the License Agreement). A discussion of this License is
set forth above.
Finally, and in connection with the Closing, Atio USA and Atio
International entered into a Distribution Agreement (the "Distribution
Agreement"). Pursuant to the terms of the Distribution Agreement, Atio USA
granted certain distribution rights to Atio International with respect to Atio
USA's CyberCall Products, including the right, subject to certain limitations
set forth in such agreement, to appoint dealers to market and distribute the
same to end users.
The amount of consideration set forth above was arrived at by
arms-length negotiations between the subject parties. There was no plant,
equipment or other physical property involved in the transactions which are the
subject of this Report. There was no material relationship between any of the
Atio entities and the Company, its affiliates, officers, directors or any
associate of such people prior to the transactions set forth above. As set forth
above, and as a result of the transactions set forth above, the Company and Atio
International are joint shareholders in Atio USA.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(b) PRO FORMA FINANCIAL INFORMATION.
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS OF VENTURIAN CORP. AND SUBSIDIARIES
The following unaudited pro forma condensed consolidated financial
statements sets forth, for the periods and at the dates indicated, summarized
unaudited pro forma condensed consolidated financial information for the
Company. This information is derived from the Company's historical consolidated
financial statements and notes thereto and reflects (a) the condensed
consolidated balance sheet as of September 30, 1997, as if the transactions set
forth above had occurred on September 30, 1997, and (b) the condensed
consolidated results of operations for the nine months ended September 30, 1997
and for the year ended December 31, 1996 as if the transactions set forth above
had occurred on January 1, 1996.
Assumptions underlying the pro forma adjustments are described in the
accompanying notes which should be read in conjunction with the following
unaudited pro forma condensed
<PAGE>
consolidated financial statements. These financial statements should also be
read in conjunction with the historical financial statements of the Company and
the notes thereto. Actual adjustments may differ from the pro forma adjustments
presented below. The pro forma financial statements do not purport to be
indicative of the actual results of operations which would have occurred had the
transactions set forth above occurred on the dates indicated or the future
results of operations which may be obtained.
<PAGE>
Venturian Corp. and Subsidiaries
Pro Forma Unaudited Condensed Consolidated Balance Sheet
September 30, 1997
(In thousands, except per share data)
<TABLE>
<CAPTION>
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Deconsolidate
Venturian
Historical Software Adjustments Pro Forma
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Current assets
Cash and cash equivalents $ 483 $ (14) $ -- $ 469
Accounts receivable, less allowance for
doubtful accounts 3,914 (150) -- 3,764
Due from subsidiary -- 2,866 (2,543)(a) 323
Inventories 4,443 -- -- 4,443
Restricted cash 85 -- -- 85
Rental real estate held for sale 2,916 -- -- 2,916
Prepaid expenses 412 (118) -- 294
--------- --------- --------- ---------
Total current assets 12,253 2,584 (2,543) 12,294
Property and equipment - at cost
Buildings and improvements 1,741 -- -- 1,741
Equipment 6,199 (252) -- 5,947
--------- --------- --------- ---------
7,940 (252) -- 7,688
Less accumulated depreciation and amortization 5,975 (53) -- 5,922
--------- --------- --------- ---------
1,965 (199) -- 1,766
Land 314 -- -- 314
--------- --------- --------- ---------
2,279 (199) -- 2,080
Investment in subsidiary -- (2,671) 2,543(a) 1,468
1,596(b)
Other assets 4,397 -- -- 4,397
--------- --------- --------- ---------
$ 18,929 $ (286) $ 1,596 $ 20,239
========= ========= ========= =========
Liabilities and Stockholders' Equity
Current liabilities
Bank overdraft $ 422 $ -- $ -- $ 422
Note payable to bank 600 -- -- 600
Current maturities of long-term debt 120 -- -- 120
Accounts payable 1,868 (15) -- 1,853
Advances from customers 602 (9) -- 593
Accrued liabilities 1,283 (262) -- 1,021
Rental real estate mortgage and related costs 3,443 -- -- 3,443
--------- --------- --------- ---------
Total current liabilities 8,338 (286) -- 8,052
Long-term debt, less current maturities 411 -- -- 411
Deferred compensation and
postretirement benefits 2,308 -- -- 2,308
Commitments and contingencies -- -- -- --
Stockholders' equity
Common stock - $1 par value 753 -- -- 753
Additional contributed capital 14,700 -- 1,596(b) 16,296
Accumulated deficit (7,581) -- -- (7,581)
--------- --------- --------- ---------
7,872 -- 1,596 9,468
--------- --------- --------- ---------
$ 18,929 $ (286) $ 1,596 $ 20,239
========= ========= ========= =========
</TABLE>
<PAGE>
Venturian Corp. and Subsidiaries
Pro Forma Unaudited Condensed Consolidated Statement of Operations
Nine months ended September 30, 1997
(In thousands, except per share data)
<TABLE>
<CAPTION>
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Deconsolidate
Venturian
Historical Software Adjustments Pro Forma
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 19,535 $ 730 $ -- $ 18,805
Cost of products sold 14,134 81 -- 14,053
--------- --------- --------- ---------
Gross profit 5,401 649 -- 4,752
Operating expenses
Sales and marketing 3,463 1,107 -- 2,356
Administrative 3,152 1,317 -- 1,835
Warehousing 1,329 -- -- 1,329
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Total operating expenses 7,944 2,424 -- 5,520
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Operating loss (2,543) (1,775) -- (768)
Other income
Investment income 17 -- -- 17
Interest expense (338) (50) (50)(c) (338)
Rental income 309 -- -- 309
Other 11 -- -- 11
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Total (1) (50) (50) (1)
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Loss before income taxes and equity
in losses of unconsolidated
subsidiary (2,544) (1,825) (50) (769)
Income tax expense -- -- -- --
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Loss before equity in losses of
unconsolidated subsidiary (2,544) (1,825) (50) (769)
Equity in losses of unconsolidated
subsidiary -- (799)(d) (799)
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Net loss $ (2,544) $ (1,825) $ (849) $ (1,568)
========= ========= ========= =========
Net loss per share $ (3.39) $ (2.09)
========= =========
</TABLE>
<PAGE>
Venturian Corp. and Subsidiaries
Pro Forma Unaudited Condensed Consolidated Statement of Operations
Year ended December 31, 1996
(In thousands, except per share data)
<TABLE>
<CAPTION>
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Deconsolidate
Venturian
Historical Software Adjustments Pro Forma
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 28,398 $ 848 $ -- $ 27,550
Cost of products sold 19,939 77 -- 19,862
--------- --------- --------- ---------
Gross profit 8,459 771 -- 7,688
Operating expenses
Sales and marketing 3,300 545 -- 2,755
Administrative 3,429 727 -- 2,702
Warehousing 1,635 -- -- 1,635
--------- --------- --------- ---------
Total operating expenses 8,364 1,272 -- 7,092
--------- --------- --------- ---------
Operating profit (loss) 95 (501) -- 596
Other income
Investment income 42 -- -- 42
Interest expense (371) -- -- (371)
Rental income 428 -- -- 428
Other (110) (14) -- (96)
--------- --------- --------- ---------
Total (11) (14) -- 3
--------- --------- --------- ---------
Earnings (loss) before income taxes
and equity in losses of
unconsolidated subsidiary 84 (515) -- 599
Income tax expense -- -- -- --
--------- --------- --------- ---------
Earnings (loss) before equity in losses
of unconsolidated subsidiary 84 (515) -- 599
Equity in losses of unconsolidated
subsidiary -- -- (232)(d) (232)
--------- --------- --------- ---------
Net earnings (loss) $ 84 $ (515) $ (232) $ 367
========= ========= ========= =========
Net earnings per share $ 0.11 $ 0.49
========= =========
</TABLE>
<PAGE>
NOTES TO THE PRO FORMA UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
THE COMPANY
(a) To record as a capital contribution the account receivable due from
Venturian Software as of September 1, 1997.
(b) To adjust the investment in subsidiary to 45% of Venturian Software's
net equity as of September 30, 1997 after Venturian Corp.'s capital
contribution and Atio's $3.5 million capital contribution (net of
expenses).
(c) Elimination of interest on parent company advances to Venturian
Software since January 1, 1997.
(d) To record the 45 percent equity in the adjusted net loss of Venturian
Software.
(c) EXHIBITS.
10.1 Agreement, dated October 23, 1997, by and between
Atio Corporation (PTY) LTD, Atio Corporation
International, Inc., Venturian Corp., Venturian
Software Enterprises, Inc. and Ilan Sharon
10.2 Letter Agreement, dated November 14, 1997, by and
between Venturian Corp., Atio Corporation (PTY) LTD,
Atio Corporation International, Inc. and Venturian
Software Enterprises, Inc.
10.3 Shareholders Agreement, dated November 14, 1997, by
and among Venturian Corp., Atio Corporation
International, Inc., Ilan Sharon and Venturian
Software Enterprises, Inc.
10.4 Technology License and Transfer Agreement, dated
November 14, 1997, by and between Atio Corporation
USA, Inc., Atio Corporation (PTY) LTD, Atio
Corporation International, Inc., Venturian Corp. and
Ilan Sharon
10.5 Distribution Agreement, dated November 14, 1997, by
and between Atio Corporation USA, Inc. and Atio
Corporation International, Inc.
<PAGE>
SIGNATURES
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.
VENTURIAN CORP.
Dated: December 2, 1997 By: /s/ Gary B. Rappaport
------------------------
Gary B. Rappaport
Its President
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
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10.1 Agreement, dated October 23, 1997, by and between Atio
Corporation (PTY) LTD, Atio Corporation International,
Inc., Venturian Corp., Venturian Software Enterprises,
Inc. and Ilan Sharon
10.2 Letter Agreement, dated November 14, 1997, by and between
Venturian Corp., Atio Corporation (PTY) LTD, Atio
Corporation International, Inc. and Venturian Software
Enterprises, Inc.
10.3 Shareholders Agreement, dated November 14, 1997, by and
among Venturian Corp., Atio Corporation International,
Inc., Ilan Sharon and Venturian Software Enterprises, Inc.
10.4 Technology License and Transfer Agreement, dated November
14, 1997, by and between Atio Corporation USA, Inc., Atio
Corporation (PTY) LTD, Atio Corporation International,
Inc., Venturian Corp. and Ilan Sharon
10.5 Distribution Agreement, dated November 14, 1997, by and
between Atio Corporation USA, Inc. and Atio Corporation
International, Inc.
EXHIBIT 10.1
AGREEMENT
This Agreement (the "Agreement") is made and entered into as of the
23rd day of October, 1997 by and among Atio Corporation (PTY) LTD ("Atio
(PTY)"), a corporation organized and existing under the laws of the Republic of
South Africa; Atio Corporation International, Inc. ("Atio International"), a
corporation organized and existing under the laws of the State of Delaware;
Venturian Corp. ("Venturian"), a corporation organized and existing under the
laws of the State of Minnesota; Venturian Software Enterprises, Inc. ("VSI"), a
corporation organized and existing under the laws of the State of Minnesota; and
Ilan Sharon ("Sharon").
WHEREAS, Venturian, Atio International, and Atio (PTY) desire to create
a joint venture to pursue the development and marketing of certain software
products and certain related activities, on the terms set forth in this
Agreement; and
WHEREAS, Venturian owns 90% and Sharon owns 10% of the issued and
outstanding capital stock of VSI; and
WHEREAS, Atio (PTY) owns a majority of the issued and outstanding
shares of capital stock of Atio International;
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants, and subject to the conditions, herein contained, the
parties hereto agree as follows:
<PAGE>
ARTICLE I
Formation and Capitalization of Joint Venture
Section 1.1 Formation of Corporation. On or prior to the Closing Date
(as hereinafter defined) the parties shall cause to be formed under the laws of
the State of Minnesota a corporation named Atio Corporation USA, Inc. (the
"Company"), having articles of incorporation in the form attached hereto as
Exhibit A.
Section 1.2 Capitalization. At the Closing (as hereinafter defined) and
on the Closing Date, the parties shall make the following contributions to the
capital of the Company (the "Capital Contributions"):
(a) Atio (PTY) shall, on behalf of Atio International, pay to the
Company the sum of U.S. $3,500,000 as follows: (A) $500,000 by wire transfer of
immediately available funds in United States currency at the Closing (the
"Initial Installment"), (B) $800,000 by offset against the initial prepayment
for development services owing under the License, (C) $500,000 on the thirtieth
day following the Closing Date, and (D) the remainder in ten installments of
$170,000 each, by wire transfer of immediately available funds in United States
currency on or prior to the last day of each of the ten calendar months
commencing with the last day of November, 1997 and concluding with the last day
of August, 1998 (the payments identified in clauses (C) and (D) being the
"Deferred Installments"); provided, however, that at any time and from time to
time on or after January 1, 1998, the Chief Executive Officer of the Company may
cause the acceleration of all or any portion of the Deferred Installments by
certifying in writing to Atio (PTY) that the accelerated amounts are required by
the Company under its business plan, and upon the Company's delivery of each
such certification the amounts so accelerated shall be immediately due and
payable in full. Atio (PTY)'s obligation to pay the Deferred Installments shall
be secured by a security interest in 28,000 of the Shares to be
<PAGE>
issued to Atio International pursuant hereto, under terms set forth in the
Shareholders Agreement (as defined in Section 6.3 below).
(b) Venturian shall assign, transfer and convey to the Company:
(i) 1,800,000 common shares of VSI (representing 90% of the
issued and outstanding shares of the capital stock of VSI), free and clear of
any lien, claim or encumbrance; and
(ii) Venturian's right to the repayment of amounts advanced
by Venturian to VSI, as evidenced by that certain Promissory Note dated
September 29, 1997 by VSI in favor of Venturian (the "Venturian Note"), and all
of Venturian's rights with respect to any security interests granted in
connection therewith, free and clear of any lien, claim or encumbrance.
(c) Sharon shall assign, transfer and convey to the Company
200,000 common shares of VSI (representing 10% of the issued and outstanding
shares of the capital stock of VSI), free and clear of any lien, claim or
encumbrance.
Section 1.3 Issuance of Shares. At the Closing the parties shall cause
the Company to issue to the following parties the following respective numbers
of common shares of the Company's capital stock (the "Shares"):
Number of Shares
Name of Party to be Issued
-----------------------------------------------------
Atio International 2,000,000 shares
Venturian 1,800,000 shares
Sharon 200,000 shares
Such shares, when so issued, shall be duly and validly issued, fully paid and
nonassessable (subject, in the case of the Shares issued to Atio International,
to the obligation of Atio (PTY) to pay the Deferred Installments).
<PAGE>
Section 1.4 Alternative Structure. In the event that, prior to the
Closing, VSI reaches agreement with Netcall Technologies Ltd. ("Netcall")
terminating that certain Software Distribution Agreement dated July 4, 1996
between Netcall and VSI (the "Netcall Agreement") or modifying Section 6.7 of
the Netcall Agreement to permit VSI to market software competitive with the
Software (as defined in the Netcall Agreement), then in lieu of the formation of
the Company and the Capital Contributions and share issuances contemplated in
Sections 1.1, 1.2 and 1.3 above, Atio (PTY) shall make to VSI the capital
contributions contemplated to be made by Atio (PTY) to the Company in
Subparagraphs 1.2(a)(i) and (ii) above and VSI shall, in consideration thereof,
issue to Atio International 2,000,000 common shares of the capital stock of VSI
(which shares, when so issued, shall be duly and validly issued, fully paid and
nonassessable). In such event, VSI shall be a party to the Shareholders
Agreement (as defined in Article VI below) and the License Agreement in lieu of
the Company and the other references in this Agreement to "the Company" shall be
deemed to refer to VSI to the extent consistent with the provisions of this
Section 1.4. The parties acknowledge, however, that Atio (PTY) would not make to
VSI the capital contributions contemplated to be made by it herein, and Atio
International would not accept shares in VSI as contemplated herein, if VSI
continued to owe to Venturian the amounts evidenced by the Venturian Note.
Accordingly, it shall be a condition to the obligation of Atio (PTY) to
contribute to VSI the amounts contemplated in this Section 1.4 that, prior
thereto, Venturian make, as a Capital Contribution to VSI but in exchange for no
additional shares of the capital stock or securities of VSI, Venturian's right
to receive all amounts owing by VSI to Venturian as evidenced by the Venturian
Note, other than any amounts advanced by Venturian to VSI after August 31, 1997
(the "Post-August Advances"). Promptly following the Closing, VSI shall repay to
Venturian the Post-August Advances. If the transactions contemplated
<PAGE>
herein are consummated under the Alternative Structure set forth in this Section
1.4, the parties shall, promptly following the Closing, change the name of VSI
to Atio Corporation in USA, Inc.
Section 1.5 Time and Place of the Closing. The closing of the
transactions contemplated herein shall take place at the offices of Leonard,
Street and Deinard in Minneapolis, Minnesota at 10:00 A.M., local time, on
October ___, 1997; provided, however, that if any of the conditions set forth in
Articles VI and VII of this Agreement has not been satisfied (or waived) by such
date, then such closing shall take place on a subsequent date, which shall be
determined by the mutual agreement of Atio (PTY) and Venturian. Throughout this
Agreement, such event is referred to as the "Closing" and such date and time are
referred to as the "Closing Date."
Section 1.6 Procedure at the Closing. At the Closing, the parties agree
to take the following steps in the order listed below (provided, however, that
upon their completion all such steps shall be deemed to have occurred
simultaneously):
(a) Venturian shall deliver to Atio (PTY) evidence, in such form
as in each case is reasonably satisfactory to Atio (PTY), that each of the
conditions to the obligation of Atio (PTY) and Atio International set forth in
Article VI of this Agreement has been satisfied.
(b) Atio (PTY) shall deliver to Venturian evidence, in such form
as in each case is reasonably satisfactory to Venturian, that each of the
conditions to the obligations of Venturian and Sharon set forth in Article VII
of this Agreement has been satisfied.
(c) The Distribution Agreement, the Shareholders Agreement and the
Employment Services Agreement (each as defined in Articles VI and VII hereof)
shall be executed and delivered by the respective parties thereto.
(d) Atio (PTY), Atio International and the Company shall execute
the License.
<PAGE>
(e) Atio (PTY) shall pay to the Company the Initial Installment in
accordance with subparagraph 1.2(a) above.
(f) Unless the transactions are consummated pursuant to Section
1.4 above, Venturian and Sharon shall deliver to the Company certificates
representing their respective Shares in VSI, duly endorsed for transfer or
accompanied by duly executed Assignments Separate From Certificate, and
Venturian shall executive and deliver to the Company an assignment of its rights
under the Venturian Note (other than with respect to the Post-August Advances)
and any security therefor.
(g) The Company shall issue to Atio International, Venturian and
Sharon certificates representing the Shares to be issued to each of them.
(h) The Company, Atio International, Venturian and Sharon shall
execute and deliver a cross receipt acknowledging receipt, respectively, of the
Shares and the Capital Contributions.
Section 1.7 License. At the Closing, Atio International and Atio PTY
shall grant to the Company a royalty-free license, in the form and on the terms
and conditions set forth in a Technology License, Transfer and Development
Agreement to be agreed to among the parties (the "License"), which License
shall, among other matters, (A) provide the Company with exclusive rights on a
royalty free basis with respect to Atio (PTY)'s AtioCall(TM) product (such
product is hereinafter referred to as the "AtioCall Product" and such rights are
hereinafter referred to as the "AtioCall Product Rights"), (B) provide for the
transfer to the Company of the AtioCall Product Rights no later than December
31, 1999, unless the Company (directly or through VSI) is not then actively
engaged in the marketing of computer telephony products as defined in the
License, (C) provide for Atio (PTY) to furnish certain development services in
<PAGE>
connection therewith for compensation according to a quarterly budget agreed
upon by the parties, and (D) provide for the Company to pay an initial
prepayment for such development services by offset of amounts owing by Atio
(PTY) to the Company under subsection 1.2(a) above.
ARTICLE II
Representations and Warranties of Venturian and VSI
In order to induce Atio (PTY) and Atio International to enter into this
Agreement and to consummate the transactions contemplated hereunder, VSI and
Venturian jointly make the representations and warranties set forth in Sections
2.1 through 2.27 below, and Sharon makes the representations and warranties set
forth in Sections 2.28 and 2.29 below, in each case as of the date hereof and as
of the Closing Date (except that, as of the Closing Date, such representations
and warranties are subject to changes arising out of the operation by VSI of its
business in the ordinary course and in compliance with the terms of this
Agreement between the date of this Agreement and the Closing Date, which changes
shall not, individually or in the aggregate, be materially adverse):
Section 2.1 Organization, Power and Authority of VSI. VSI is a
corporation duly organized and legally existing in good standing under the laws
of Minnesota, and has full corporate power and authority, and all requisite
rights, licenses, permits and franchises to own, lease and operate its assets
and to carry on its business as it is now being conducted. VSI is duly licensed,
registered and qualified to do business as a foreign corporation and is in good
standing in all jurisdictions in which the ownership, leasing or operation of
its assets or the conduct of its business requires such qualification, except
where the failure to be so licensed, registered or qualified would not have a
<PAGE>
material adverse effect upon its business or assets. The Disclosure Schedule
sets forth each state or other jurisdiction in which VSI is licensed or
qualified to do business. VSI has delivered to the Atio (PTY) an accurate,
correct and complete copy of its charter and by-laws and each agreement, trust,
proxy or other arrangement among its stockholders.
Section 2.2 Validity. This Agreement has been, and the documents to be
delivered at Closing will be, duly executed and delivered by VSI and Venturian
and constitute lawful, valid and legally binding obligations of VSI and
Venturian, enforceable in accordance with their respective terms. Except as set
forth in the Disclosure Schedule, the execution and delivery of this Agreement
by VSI and Venturian and the consummation by VSI and Venturian of the
transactions contemplated hereb will not result in the creation of any lien,
charge or encumbrance of any kind upon the assets of VSI or give rise to the
right of any party to terminate or accelerate any indebtedness or other
obligation of VSI, and are not prohibited by, do not violate any provision of,
and do not constitute a default under or a breach of (a) the Articles of
Incorporation or By-laws of VSI, (b) any note, bond, indenture, contract,
agreement, permit, license or other instrument to which VSI is a party or by
which VSI or its respective assets is bound, (c) any order, writ, injunction,
decree or judgment of any court or governmental agency, or (d) any law, rule or
regulation applicable to VSI. No approval, authorization, registration, consent,
order or other action of or filing with any person, including any court,
administrative agency or other governmental authority, is required for the
execution and delivery by VSI or Venturian of this Agreement or the consummation
by VSI and Venturian of the transactions contemplated hereby.
Section 2.3 Capital Stock of VSI. The authorized capital of VSI
consists solely of 11,000,000 common shares, $ .01 par value per share,
2,000,000 shares of which are issued and outstanding. All voting rights in VSI
are vested exclusively in its common shares. All of the issued
<PAGE>
and outstanding shares of VSI are validly authorized and issued, fully paid and
non-assessable. The Disclosure Schedule sets forth the name and the number of
shares of VSI owned by each shareholder of record as of the date hereof, and the
name of each person having an option to acquire shares of VSI and the number of
shares subject to each such option. Except as set forth on the Disclosure
Schedule, there are no outstanding subscriptions, convertible or exchangeable
securities, preemptive rights, calls, warrants, options or rights or agreements
of any kind (other than this Agreement) to acquire from VSI any shares or
securities of any kind. Except as set forth on the Disclosure Schedule, VSI has
no obligation to acquire any of its issued and outstanding shares or any other
security issued by it from any holder thereof. Except as set forth in the
Disclosure Schedule, there are no preemptive rights existing with respect to
VSI's shares. There are no voting trusts or other agreements, arrangements or
understandings applicable to the exercise of voting or any other rights with
respect to any shares of VSI, other than the Amended and Restated Shareholders
Agreement among VSI, Venturian and Sharon, whic shall be terminated
automatically and immediately upon the closing of the transactions contemplated
herein. In the event that the transactions contemplated herein are consummated
pursuant to Section 1.4 above, title to the Shares issued by VSI to Atio
International pursuant to this Agreement shall (subject to the performance by
Atio International of its obligations hereunder) be good and indefeasible, free
and clear of all claims, security interests, liens, pledges, charges, escrows,
options, proxies, rights of first refusal, preemptive rights, mortgages,
hypothecations, prior assignments, title retention agreements, indentures,
security agreements and other limitations, encumbrances and restrictions of any
kind other than those arising under the Shareholders Agreement.
Section 2.4 Subsidiaries of VSI. VSI has no equity interest, or the
right or obligation to acquire an equity interest, in any other person or
entity.
<PAGE>
Section 2.5 Financial Statements of VSI. VSI has previously delivered
to Atio (PTY) VSI's December 31, 1996, March 31, 1997, and August 31, 1997
unaudited financial statements, a copy of each of which is attached to the
Disclosure Schedule (the "Financial Statements"). Such financial statements
present fairly the financial position of VSI at each of the dates thereof and
the results of its operations for each of the periods covered, and such
financial statements have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis, except as may be disclosed
in the notes thereto or in the Disclosure Schedule.
Section 2.6 Litigation Involving VSI. Except as set forth in the
Disclosure Schedule, there are no actions, suits, proceedings, legal complaints
or charges, hearings, investigations or arbitration proceedings pending or to
the best knowledge of VSI threatened against VSI or any of its assets or
properties. There are no outstanding orders, decrees, writs, injunctions or
stipulations issued by any local, state or federal governmental or judicial
authority to which VSI is subject or to which VSI is or was a party.
Section 2.7 License Agreements and Distribution Agreements. The
Disclosure Schedule sets forth a true and complete list of all license and
distribution agreements pursuant to which VSI markets or distributes products
(collectively, the "License Agreements"). VSI has previously delivered to Atio
(PTY) true and complete copies of all of the License Agreements. Except as set
forth in the Disclosure Schedule, VSI is not in breach of or default under any
of the License Agreements and no event, act or omission has occurred or
circumstance exists that, with the giving of notice or the passage of time or
both, would constitute such a breach or default. To the best of VSI's knowledge,
except as set forth in the Disclosure Schedule, no other party to any of the
License Agreements is in breach or default thereunder, and no event or omission
has occurred or circumstance
<PAGE>
exists that, with the giving of notice or the passage of time or both, would
constitute such a breach or default.
Section 2.8 Transactions with Affiliates. Since August 31, 1997, there
has not been any dividend or other distribution of assets by VSI. Except as set
forth in the Disclosure Schedule, no Affiliate:
(a) owns, directly or indirectly, any debt, equity or other
interest or investment in any corporation, association or other entity which is
a competitor, lessor, lessee, customer, supplier or advertiser of VSI or its
business;
(b) has any cause of action or other claim whatsoever against or
owes any material amount to, or is owed any material amount by, VSI;
(c) has any interest in or owns any property or right used in the
conduct of the business of VSI;
(d) has lent or advanced any money to, or borrowed any money from,
or guaranteed or otherwise become liable for any indebtedness or other
obligations of VSI;
(e) is a party to any contract, lease, agreement, arrangement or
commitment used in the business of VSI; or
(f) received from or furnished to VSI any goods or services (with
or without consideration) since August 31, 1997.
The term "Affiliate" shall mean (i) any officer or director of VSI or any owner
of 5% or more of the issued and outstanding capital stock of VSI (a "5%
Stockholder"), (ii) any member of the immediate family (including spouse,
brother, sister, descendant, ancestor or in-law) of any officer or director of
VSI or 5% Stockholder, (iii) any corporation, partnership, trust or other entity
in which any of the foregoing owns 5% or more of the equity interests or of
which any of
<PAGE>
the foregoing are discretionary beneficiaries, and (iv) any entity that
controls, or is controlled by, or is under common control with any of the
foregoing.
Section 2.9 Interim Change. Since August 31, 1997, except as set forth
in the Disclosure Schedule, there has not been (a) any material adverse change
in the financial condition, assets, properties, liabilities, personnel or
business of VSI or in its relationships with suppliers, customers, distributors,
lenders, lessors or others, except changes in the ordinary course of business
(recognizing that VSI has since its inception, and continues to, operate at a
loss); (b) any damage, destruction or other casualty loss, whether or not
covered by insurance, materially adversely affecting the business or assets of
VSI; (c) any forgiveness or cancellation of debts or claims, waiver of any
rights or any discharge or satisfaction of any lien, charge or encumbrance or
payment of any liability or obligation, other than current liabilities in the
ordinary course of business; (d) any material change in the credit practices of
VSI or in the methods or accounting principles used in maintaining it books,
accounts or business records. Since August 31, 1997, VSI has not incurred or
become subject to, or agreed to incur or become subject to, any liability or
obligation, contingent or otherwise, except current liabilities and contractual
obligations in the ordinary course of business in amounts consistent with past
practices.
Section 2.10 Accounts Receivable. The Disclosure Schedule sets forth an
accurate, correct and complete list of all outstanding accounts and notes
receivable as of August 31, 1997, showing which are current and which are past
due. All outstanding accounts and notes receivable reflected on the Financial
Statements are due and valid claims against account debtors for goods or
services delivered or rendered, subject to no defenses, offsets or counterclaims
known to VSI. All receivables arose in the ordinary course of business. No
receivables are subject to prior assignment, claim, lien or security interest.
<PAGE>
Section 2.11 Insurance. The Disclosure Schedule sets forth an accurate,
correct and complete list of all binders, policies of insurance or fidelity
bonds ("Insurance") maintained by VSI or in which VSI is a named insured. Except
as set forth on the Disclosure Schedule, all of the Insurance is maintained in
Venturian's name with VSI named as an additional insured. Neither VSI nor
Venturian makes any representation or warranty as to what Insurance will be
available upon the closing of the transactions contemplated herein or what the
cost thereof will be. Except as set forth in the Disclosure Schedule, there are
no pending or asserted claims against any Insurance as to which any insurer has
denied liability, and there are no claims under any Insurance that have been
disallowed or improperly filed. During calendar year 1996 and calendar year 1997
through August 31, VSI has made no claims under its property or casualty
insurance. No notice of cancellation or nonrenewal with respect to, or material
increase of premium for, any insurance has been received by VSI.
Section 2.12 Title to Assets. VSI is the sole and exclusive legal and
equitable owner of all right, title and interest in, and has good and marketable
title, to all of the assets listed on the Financial Statements. Except as set
forth on the Disclosure Schedule, none of the assets of VSI are subject to (a)
any contract of lease, license or sale; (b) any security interest, mortgage,
pledge, lien, charge or encumbrance of any kind or character, direct or
indirect, whether accrued, absolute, contingent or otherwise, except liens and
encumbrances which do not materially interfere with the present use thereof; (c)
any royalty or commission arrangement; or (d) any claim, covenant or
restriction. VSI's assets are in good operating condition and repair (reasonable
wear and tear excepted), are suitable for the purposes for which they are
presently being used, and are adequate to meet all present and reasonably
anticipated future requirements of its business as presently conducted.
<PAGE>
Section 2.13 Real Estate Leases. The Disclosure Schedule sets forth an
accurate, correct and complete list of all real property leased or subleased by
VSI, including identification of the lease or sublease, street address, and list
of contracts, agreements, leases, subleases, options and commitments with
respect thereto to which VSI is a party (the "Real Estate Leases"). VSI has been
in peaceable possession of the premises covered by each Real Estate Lease since
the commencement of the original term of such Lease. VSI has delivered to the
Purchaser accurate, correct and complete copies of each Real Estate Lease.
Section 2.14 Personal Property Leases. The Disclosure Schedule sets
forth an accurate, correct and complete list of all leases or bailments of
personal property to which VSI is a party (the "Personal Property Leases"). VSI
has been in peaceable possession of the property covered by each Personal
Property Lease since the commencement thereof. VSI has delivered to the
Purchaser an accurate, correct and complete copy of each Personal Property
Lease.
Section 2.15 Intellectual Property. The Disclosure Schedule sets forth
an accurate, correct and complete list of all patents, trademarks, trademark
rights, trade names, trade styles, trade dress, product designations, service
marks, copyrights (the "Intellectual Property") and applications for any of the
foregoing owned by VSI and a complete list of all licenses and other agreements
relating to any Intellectual Property owned by any third party as to which VSI
has marketing or distribution rights. None of the Intellectual Property owned by
VSI is subject to any extensions, renewals, taxes or fees due within ninety (90)
days after Closing. Except as set forth in the Disclosure Schedule, with respect
to the Intellectual Property owned by VSI: (a) VSI is the sole and exclusive
owner and has the sole and exclusive right to use such Intellectual Property;
(b) no action, suit, proceeding or investigation is pending or, to VSI's
knowledge, threatened; (c) none of such Intellectual Property interferes with,
infringes upon, conflicts with or otherwise violates the rights of others or, to
VSI's knowledge, is
<PAGE>
being interfered with or infringed upon by others, and none is subject to any
outstanding order, decree, judgment, stipulation or charge; (d) there are no
royalty, commission or similar arrangements, and no licenses, sublicenses or
agreements, pertaining to any of such Intellectual Property; (e) VSI has not
agreed to indemnify any person for or against any infringement of or by such
Intellectual Property; (f) VSI has no knowledge of any patent, invention or
application therefor or similar property which VSI believes would infringe upon
any of such Intellectual Property or render obsolete or adversely affect the
distribution or sale of products or services currently distributed or sold by
VSI based upon such Intellectual Property; (g) all items of Intellectual
Property are properly registered under applicable law. Except as set forth in
the Disclosure Schedule, with respect to the Intellectual Property owned by a
third party as to which VSI has marketing or distribution rights: (h) to VSI's
knowledge, no action, suit, proceeding or investigation is pending or
threatened; (i) there are no royalty, commission or similar arrangements,
sublicenses or other agreements pertaining to such Intellectual Property as to
which VSI is a party; and (j) VSI has not agreed to indemnify any person for or
against any infringement of or by such Intellectual Property. VSI is not subject
to any judgment, order, writ, injunction or decree of any court or any Federal,
state, local or other governmental agency or instrumentality, domestic or
foreign, or any arbitrator, and has not entered into and is not a party to any
contract which restricts or impairs the use of any Intellectual Property other
than the contracts identified in the Disclosure Schedule. VSI has all right,
title and interest necessary for the non-infringing publication, reproduction,
distribution, and importation of the Intellectua Property in the manner VSI
presently conducts its business.
Section 2.16 Customers and Suppliers. All sales contracts and orders
with customers and suppliers entered into by or on behalf of VSI were entered
into in the ordinary course of business. The Disclosure Schedule sets forth an
accurate, correct and complete list of all sales by VSI over the
<PAGE>
last two years. Based on the actual knowledge of VSI, except as set forth in the
Disclosure Schedule, VSI has no reason to believe that any of its customers or
suppliers will cease to do business with it because of the transactions
contemplated herein. Neither VSI, nor any of its officers or employees has,
directly or indirectly, given or agreed to give any rebate, gift or similar
benefit to any supplier, customer, distributor, broker, governmental employee or
other person who was, is or may be in a position to help or hinder the business
(or assist in connection with any actual or proposed transaction) which subjects
VSI, the Company or Atio (PTY) to any damage or penalty in any civil, criminal
or governmental litigation or proceeding or which would have a material adverse
effect on VSI's business.
Section 2.17 Employees.
(a) Contracts. The Disclosure Schedule sets forth an accurate,
correct and complete list and summary description of all legally binding
agreements, arrangements and understandings with officers, directors and
employees of VSI regarding services to be rendered, terms and conditions of
employment, and compensation (the "Employment Contracts").
(b) Compensation. The Disclosure Schedule sets forth an accurate,
correct and complete list of all employees of VSI, including name, title or
position, present annual compensation (including bonuses, commissions and
deferred compensation), date of hire and any interests in any incentive
compensation plan. The Disclosure Schedule sets forth an accurate, correct and
complete list of each employee who is entitled to receive supplementary
retirement benefits or allowances, and the estimated amounts of such payments.
Since August 31, 1997, except in ordinary course of business, VSI has not (i)
paid, or made any accrual or arrangement for the payment of, bonuses or special
compensation of any kind, including any severance or termination pay, to any
present or former officer or employee, (ii) made any general wage or salary
increases, or (iii) increased or
<PAGE>
altered any other benefits or insurance provided to any employee. No employee is
eligible for payments that would constitute " parachute payments" under Section
280G of the Internal Revenue Code of 1986, as amended (the "Code").
(c) Disputes. To the knowledge of VSI, there are no controversies
pending or threatened involving any group of employees, except individual
grievances which, in the aggregate, are not material. VSI has not suffered or
sustained any work stoppage and, to the knowledge of VSI, no such work stoppage
is threatened. To the knowledge of VSI, no union organizing or election
activities are in progress or threatened. No union or collective bargaining
agreement exists to which VSI is a party.
(d) Compliance. VSI has complied in all material respects with all
laws, rules and regulations relating to the employment of labor, including
provisions relating to wages, hours, equal opportunity, occupational health and
safety, severance, and the payment of social security and other taxes.
Section 2.18 Employment Benefit Plans.
(a) Benefit Plans. The Disclosure Schedule sets forth an accurate,
correct and complete list of all "welfare benefit plans" (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and "employee pension benefit plans" (as defined in Section 3(2) of
ERISA) (all the foregoing being herein called "Benefit Plans") maintained or
contributed to by VSI or any other organization which is a member of a
controlled group of organizations that includes VSI (within the meaning of
Section 414(b), (c), (m) or (o) of the Code).
(b) Compliance with the Code and ERISA. Except as set forth in
Disclosure Schedule, VSI and each Benefit Plan (and any related trust agreement
or annuity contract or any other funding instrument) in all material respects
comply currently, and have complied in the past, both as
<PAGE>
to form and operation, with the provisions of ERISA and the Code (including, but
not limited to, (i) where required in order to be tax-qualified, Section 401(a)
of the Code and Section 410(b) of the Code and (ii) Code Section 4980B relating
to health coverage continuation) and all other applicable laws, rules and
regulations; all necessary governmental approvals for the Benefit Plans have
been obtained; and, where available, a favorable determination as to the
qualification under the Code of each of the Benefit Plans and each amendment
thereto has been made by the Internal Revenue Service. Except as set forth in
the Disclosure Schedule, the Benefit Plans that are employee pension benefit
plans have received determination letters from the Internal Revenue Service to
the effect that such Benefit Plans are qualified and exempt from Federal income
taxes under Sections 401(a) and 501(a), respectively, of the Code, and no such
determination letter has been revoked nor, to the knowledge of VSI has
revocation been threatened, nor has any such Benefit Plan been amended since the
date of its most recent determination letter or application therefor in any
respect which would adversely affect its qualification.
(c) Administration. Each Benefit Plan has been administered to
date in material compliance with the requirements of the Code and ERISA. Except
as set forth in the Disclosure Schedule, all contributions to, and payments
from, the Benefit Plans that may have been required to be made in accordance
with the Benefit Plans and, when applicable, Section 302 of ERISA or Section 412
of the Code, have been timely made. All premiums, late fees, interest or
penalties relating to the Benefit Plans have been paid. All reports, returns and
similar documents with respect to the Benefit Plans required to be filed with
any government agency or distributed to any Benefit Plan participant have been
duly and timely filed or distributed. Except as set forth in the Disclosure
Schedule, there are no investigations by any governmental agency, termination
proceedings, participant claims or litigation, fiduciary liability insurance
claims, or other claims (except claims for
<PAGE>
benefits payable in the normal operation of the Benefit Plans), suits or
proceedings against or involving any Benefit Plan or asserting any rights or
claims to benefits under any Benefit Plan that could give rise to any material
liability, nor, to the knowledge of VSI, are there any facts that could give
rise to any material liability in the event of any such investigation, claim,
suit or proceeding. No event has occurred and no condition exists under any
Benefit Plan that would subject VSI to any tax under Code Sections 4971, 4972,
4977, 4979, or 4980B(f) or to a fine under ERISA Section 502(c). There are no
leased employees (as defined in Section 414(1) of the Code) that must be taken
into account under any Benefit Plan.
(d) Prohibited Transactions. No "prohibited transaction" (as
defined in Section 4975 of the Code or Section 406 of ERISA) has occurred which
involves the assets of any Benefit Plan and which could subject VSI or any of
its employees, or a trustee, administrator or other fiduciary of any Benefit
Plan to the tax or penalty on prohibited transactions imposed by Section 4975 of
the Code or the sanctions imposed under Title I of ERISA. During the last three
years, no Benefit Plan has been terminated nor have there been any "reportable
events" (as defined in Section 4043 of ERISA and the regulations thereunder)
with respect thereto. VSI has not engaged in any transaction or acted or failed
to act in a manner which could subject VSI to any liability for breach of
fiduciary duty under ERISA or any other applicable law.
(e) Multi-Employer Plans. At no time has VSI been required to
contribute to any "multi-employer pension plan" (as defined in Section 3(37) of
ERISA) or incurred any withdrawal liability, within the meaning of Section 4201
of ERISA, or announced an intention to withdraw, but not yet completed such
withdrawal, from any multi-employer pension plan.
Section 2.19 Licenses and Permits. The Disclosure Schedule contains an
accurate, correct and complete list of each material license, permit,
certificate, approval, exemption, franchise,
<PAGE>
registration, variance, accreditation or authorization issued to VSI
(collectively, the "Licenses and Permits"). The Licenses and Permits are valid
and in full force and effect and there are not pending or, to the knowledge of
VSI, threatened, any proceedings which could result in the termination
revocation, limitation or impairment of any License or Permit. VSI has all
licenses, permits, certificates, approvals, franchises, registrations,
accreditations and other authorizations that are necessary or appropriate in
order to enable it to own and conduct its business and to lease or occupy its
real property in the manner such business is owned and conducted and such real
property is leased or occupied.
Section 2.20 Material Contracts. The Disclosure Schedule sets forth an
accurate, correct and complete list of all instruments, commitments, agreements,
arrangements and understanding to which VSI is a party or by which VSI is bound,
or by which any of its assets are subject or bound, or pursuant to which VSI is
a beneficiary, meeting any of the descriptions set forth below (the "Material
Contracts"):
(a) Real Estate Leases, Personal Property Leases, License
Agreements, Employment Contracts, Benefit Plans and Licenses and Permits;
(b) Any contract for capital expenditures or for the purchase of
goods or services in excess of $10,000, except those incurred in the ordinary
course of business and to be performed in six months or less;
(c) Any purchase order, agreement or commitment obligating VSI to
sell or deliver any product or service at a price which does not cover the cost
(including labor, materials and production overhead) plus the customary profit
margin associated with such product or service;
<PAGE>
(d) Any instrument evidencing indebtedness, any liability for
borrowed money, any obligation for the deferred purchase price of property in
excess of $10,000 (excluding normal trade payables), or any instrument
guaranteeing any indebtedness, obligation or liability;
(e) Any joint venture, partnership, cooperative arrangement or any
other agreement involving a sharing of profits;
(f) Any advertising contract not terminable without payment or
penalty on sixty (60) days (or less) notice;
(g) Any contract with any government or any agency or
instrumentality thereof;
(h) Any contract with respect to the discharge, storage or removal
of effluent, waste or pollutants;
(i) Any license or royalty agreement;
(j) Any power of attorney, proxy or similar instrument;
(k) The Articles of Incorporation and By-laws of VSI and any
agreement among its stockholders;
(l) Any contract for the purchase or sale of any of its assets
other than in the ordinary course of business or granting an option or
preferential rights to purchase or sell any assets;
(m) Any contract to indemnify any party or to share tax liability
of any party;
(n) Any contract for the purchase or sale of foreign currency or
otherwise involving foreign exchange transactions;
(o) Any contract containing covenants not to compete in any line
of business or with any person in any geographical area;
(p) Any contract relating to the acquisition of a business or the
equity of any other person;
<PAGE>
(q) Any contract relating to the purchase or sale of a portion of
VSI's requirements or output; and
(r) Any other contract, commitment, agreement, arrangement or
understanding to which VSI is a party (other than those excluded by an express
exception from the descriptions set forth in subsections (a) through (q) above)
which (i) provides for the payment or performance by either party thereto having
an aggregate value of $25,000 or more, (ii) is not terminable without payment or
penalty on sixty (60) days (or less) notice, or (iii) is between an Affiliate
and VSI; and
(s) Any arrangement currently under active negotiation of a type
that if entered into would be a Material Contract. Accurate, correct and
complete copies of each Material Contract have been delivered to Atio (PTY).
Each Material Contract is in full force and effect, and to VSI's knowledge, is
valid, binding and enforceable in accordance with its terms. Except as set forth
in the Disclosure Schedule, VSI and, to VSI's knowledge each other party, to a
Material Contract, has complied with all material commitments and obligations on
its part to be performed or observed under each Material Contract. Except as set
forth i the Disclosure Schedule, no event has occurred that is or, after the
giving of notice or passage of time or both, would constitute, a default under
or a breach of any Material Contract by VSI or, to the knowledge of VSI, by any
other party. VSI has not received or given notice of an intention to cancel or
terminate a Material Contract or to exercise or not exercise options or rights
under a Material Contract. Except as set forth in the Disclosure Schedule, VSI
has received no notice of a default, offset or counterclaim under any Material
Contract, or any other communication calling upon VSI to comply with any
provision of any Material Contract or ascertaining noncompliance.
<PAGE>
Section 2.21 Taxes.
(a) Filings. There has been filed or will be filed, on VSI's
behalf, all returns, declarations and reports and all information returns and
statements (collectively, "Returns") required to be filed with respect to all
foreign, federal, state, county, local and other taxes of every kind and however
measured, including income, gross receipts, excise, franchise, property, value
added, import duties, employment, payroll, sales and use taxes and any additions
to tax and any interest or penalties thereon (collectively, "Taxes") for any
period ending on or before the Closing Date. As of the time of filing, the
Returns correctly reflected, and Returns not yet filed as of the date hereof
will correctly reflect, the income, business, assets, operations, activities and
status of VSI and any other information required to be shown thereon. VSI has
timely paid or made provision for all Taxes shown as due and payable on its
Returns required to be filed or sent prior to the date hereof and will timely
pay all Taxes that will be shown as due and payable on its Returns required to
be filed or sent after the date hereof. All required Tax estimates, deposits,
prepayments and similar reports or payments of VSI for current periods have been
properly made. VSI is not delinquent in the filing of any Return or the payment
of any Tax and, except as reflected in the Disclosure Schedule, has not
requested any extension of time within which to file any Return. VSI has made
available to Atio (PTY) accurate correct and complete copies of all federal and
state income tax Returns for the last three (3) fiscal years.
(b) Compliance. VSI has withheld amounts from employees, as
required under applicable law, and has filed all Returns with respect to
employee income Tax withholding and social security and unemployment Taxes in
compliance with the tax withholding provisions of the Code and other applicable
foreign, Federal, state or local laws.
<PAGE>
(c) Disputes. There are no Tax liens on any assets of VSI and no
basis exists for the imposition of any such liens (other than liens for taxes
not yet due and payable). To the knowledge of VSI, no adjustment of or
deficiency for any Tax or claim for additional Taxes has been proposed,
threatened, asserted or assessed against VSI. There are no audit examinations
being conducted or, to the knowledge of VSI, threatened, and there is no
deficiency or refund litigation or controversy in progress or, to the knowledge
of VSI, threatened, with respect to any Taxes previously paid by VSI or with
respect to any returns previously filed by or on behalf of VSI. VSI has no
extension or waiver of any statute of limitations relating to the assessment or
collection of Taxes. There are in effect no powers of attorney or other
authorizations to any persons to represent VSI with respect to any Tax.
Section 2.22 Product Warranty. All products manufactured, processed,
distributed, shipped or sold by VSI and any services rendered by it have been in
conformity with all applicable contractual commitments and expressed or implied
warranties of VSI. No liability exists or will arise for repair, replacement or
damage in connection with sales or deliveries prior to the Closing Date in
excess of $50,000.00.
Section 2.23 Absence of Undisclosed Liabilities. Except to the extent
reflected on the balance sheet dated August 31, 1997 or the Disclosure Schedule,
VSI does not have any indebtedness, liability or obligation of any nature,
whether absolute, accrued, contingent or otherwise, related to or arising from
the operation of its business or the ownership, possession or use of its assets
through the Closing Date, other than indebtedness, liabilities and obligations
arising in the ordinary course of business which are not in aggregate materially
adverse.
Section 2.24 Compliance with Law and Rights of Others. The assets of
VSI conform to all applicable statutes, codes, ordinances, licensing
requirements, laws, rules and regulations, except for
<PAGE>
such violations as do not materially impair or interfere with the use for which
such assets are employed. VSI has complied in all material respects with all
statutes, codes, ordinances, licensing requirements, laws, rules, regulations,
decrees, awards and orders applicable to its business o operations, including
those relating to employment, environmental matters, employee benefits, the
production, marketing, sale and distribution of products, labeling of products,
trade regulation, antitrust, warranties and control of foreign exchange; and
there is not any liability of VSI arising from or related to any violations
thereof. To the best of VSI's knowledge, the operation of its business is in all
material respects in compliance with all Material Contracts and the Intellectual
Property rights of others.
Section 2.25 Disclosure. The representations and warranties of the
Company and Venturian contained in this Agreement and the Disclosure Schedule
are accurate, correct and complete in all material respects, and do not contain
any untrue statement of a material fact or, considered in the context in which
presented, omit to state a material fact necessary in order to make the
statements and information contained herein or therein not misleading.
Section 2.26 Magic Division. The Disclosure Schedule accurately sets
forth the sales, cost of sales, and gross margin for VSI's Magic Division for
the seven month period ended July 31, 1997 and the twelve month period ended
December 31, 1996, determined in accordance with the methods used by VSI for the
preparation of its internal financial statements in the ordinary course of
business, and VSI's forecast for its performance through December 31, 1997.
Recognizing that such forecast is not a statement of fact, neither VSI nor
Venturian makes any representation or warranty as to it, but Venturian believes
in good faith that the performance of VSI's Magic Division through December 31,
1997 will not be materially adverse to that reflected in such forecast.
<PAGE>
Section 2.27 Restrictions on Transferability. Venturian acknowledges
that the Shares are not being registered under the United States Securities Act
of 1933 or relevant state securities laws but are being offered and sold
pursuant to exemptions from such laws, and that the Company's reliance upon such
exemptions is predicated in part on Venturian's representations as contained
herein. The Shares being issued to Venturian are being purchased for Venturian's
own account, for investment, and without the intention or reselling or
distributing the same. Venturian has not made any agreement with others
regarding any of the Shares, and Venturian's financial condition is such that it
is not likely that it will be necessary to dispose of any of the Shares in the
foreseeable future. Venturian is aware that, in the view of the Securities and
Exchange Commission, a purchase of shares with intent to resell by reason of any
foreseeable specific contingency or anticipated market value, or any change in
the condition of the Company, or in connection with a contemplated liquidation
or settlement of any loan obtained for the acquisition of the Shares and for
which the Shares were pledged as security, would represent an intent
inconsistent with the representations set forth above. Venturian further
represents and agrees that if, contrary to the foregoing intentions, it should
later desire to dispose of or transfer any of the Shares in any manner, it shall
not do so without first obtaining (1) the opinion of counsel to the Company that
such proposed disposition or transfer lawfully may be made without registration
of such Shares pursuant to the Securities Act of 1933 and applicable state
securities laws, or (2) such registration (it being expressly understood that
the Company shall not have any obligation to register the Shares for such
purpose).
Section 2.28 Validity to Sharon. This Agreement has been, and the
documents to be delivered at the Closing will be, duly executed and delivered by
Sharon and constitute lawful, valid and legally binding obligations of Sharon,
enforceable in accordance with their respective terms. Except as set forth in
the Disclosure Schedule, the execution and delivery of this Agreement by
<PAGE>
Sharon and the consummation by Sharon of the transactions contemplated hereby
are not prohibited by, and d not violate any provision of, and do not constitute
a default under or a breach of (a) any note, bond, indenture, contract,
agreement, permit, license or other instrument to which Sharon is a party or by
which Sharon or his assets are bound, (b) any order, writ, injunction, decree or
judgment of any court or governmental agency, or (c) any law, rule or regulation
applicable to Sharon. No approval, authorization, registration, consent, order
or other action of or filing with any person, including any court,
administrative agency or other governmental authority, is required for the
execution and delivery by Sharon of this Agreement or the consummation by Sharon
of the transactions contemplated hereby.
Section 2.29 Restrictions on Transferability. Sharon acknowledges that
the Shares are not being registered under the United States Securities Act of
1933 or relevant state securities laws but are being offered and sold pursuant
to exemptions from such laws, and that the Company's reliance upon such
exemptions is predicated in part on Sharon's representations as contained
herein. The Shares being issued by Sharon are being purchased for Sharon's own
account, for investment, and without the intention or reselling or distributing
the same. Sharon has not made any agreement with others regarding any of the
Shares, and Sharon's financial condition is such that it is not likely that it
will be necessary to dispose of any of the Shares in the foreseeable future.
Sharon is aware that, in the view of the Securities and Exchange Commission, a
purchase of Shares with intent to resell by reason of any foreseeable specific
contingency or anticipated market value, or any change in the condition of the
Company, or in connection with a contemplated liquidation or settlement of any
loan obtained for the acquisition of the Shares and for which the Shares were
pledged as security, would represent an intent inconsistent with the
representations set forth above. Sharon further represents and agrees that if,
contrary to the foregoing intentions, it should later desire to dispose of or
transfer any of the shares
<PAGE>
in any manner, it shall not do so without first obtaining (1) the opinion of
counsel to the Company that such proposed disposition or transfer lawfully may
be made without registration of such Shares pursuant to the Securities Act of
1933 and applicable state securities laws, or (2) such registration (it being
expressly understood that the Company shall not have any obligation to register
the Shares for such purpose).
ARTICLE III
Representations and Warranties of Atio (PTY) and Atio International
In order to induce Venturian, VSI and Sharon to enter into this
Agreement and to consummate the transactions contemplated hereunder, Atio (PTY)
and Atio International, jointly and severally, make the following
representations and warranties to Venturian, VSI and Sharon, as of the date
hereof and as of the Closing Date:
Section 3.1 Organization, Power and Authority of Atio (PTY). Atio (PTY)
is a corporation duly organized and validly existing under the laws of the
Republic of South Africa, with full corporate power and authority to own or
lease its properties, to carry on its business as it is now being conducted, and
to enter into this Agreement and carry out the transactions and agreements
contemplated hereby (subject to the approval of its Board of Directors as
contemplated in Sectio 6.8 below). Atio International is a corporation duly
organized and validly existing under the laws of the State of Delaware, with
full corporate power and authority to own or lease its properties, to carry on
its business as it is now being conducted and as contemplated in connection
herewith, and to enter into this Agreement and carry out the transaction and
agreements contemplated hereby (subject to the approval of its Board of
Directors as contemplated in Section 6.8 below).
<PAGE>
Section 3.2 Access to Information. Atio (PTY) and Atio International
have each been provided information regarding VSI, including without limitation
access to VSI's employees, facilities, and corporate and financial books and
records and opportunities to question Gary Rappaport, Sharon and David Van
Daele, in order for Atio (PTY) to conduct its due diligence.
Section 3.3 Projections. Atio (PTY) and Atio International each
recognize that any financial projections, assumptions or estimates concerning
the business or affairs of VSI are not statements of fact, and that no
representation or warranty is made by Venturian or VSI or any officer, director,
shareholder, employee or agent thereof, with respect to the accuracy of such
projections, assumptions or estimates or with respect to the future operations
or the amount of any future income or loss of VSI.
Section 3.4 Restrictions on Transferability. Atio (PTY) and Atio
International each acknowledge that the Shares are not being registered under
the United States Securities Act of 1933 or relevant state securities laws but
are being offered and sold pursuant to exemptions from such laws, and that the
Company's reliance upon such exemptions is predicated in part on Atio (PTY)'s
and Atio International's representations as contained herein. The Shares to be
issued to Atio International hereunder are being purchased for Atio
International's own account, for investment and without the intention of
reselling or redistributing the same. Neither Atio (PTY) nor Atio International
has made any agreement with others regarding any of the Shares, and Atio
International's financial condition is such that it is not likely that it will
be necessary to dispose of any of the Shares in the foreseeable future. Atio
(PTY) and Atio International are each aware that, in th view of the Securities
and Exchange Commission, a purchase of Shares with an intent to resell by reason
of any foreseeable specific contingency or anticipated change in market value,
or any change in the condition of the Company, or in connection with a
contemplated liquidation
<PAGE>
or settlement of any loan obtained for the acquisition of the Shares and for
which the Shares were pledged as security, would represent an intent
inconsistent with the representations set forth above. Atio International
further represents and agrees that if, contrary to the foregoing intentions, it
should later desire to dispose of or transfer any of the Shares in any manner,
it shall not do so without first obtaining (1) the opinion of counsel to the
Company that such proposed disposition or transfer lawfully may be made without
the registration of such Shares pursuant to the Securities Act of 1933 and
applicable state securities laws, or (2) such registration (it being expressly
understood that the Company shall not have any obligation to register the Shares
for such purpose).
Section 3.5 Foreign Laws. Except for filings and approvals required
from the Reserve Bank of South Africa, no registration or filing with any
regulatory or other governmental authority or other third party is necessary
under the laws of the Republic of South Africa or political subdivision thereof
in connection with the issuance by the Company of the Shares pursuant to this
Agreement, and such issuance is not a violation of any laws, rules or
regulations of the Republic of South Africa or any of its political
subdivisions.
Section 3.6 Due Authorization and Absence of Breach. Subject to the
approval of this transaction by the Boards of Directors of Atio (PTY) and Atio
International as contemplated in Section 6.8 below and the receipt of Reserve
Bank approval as contemplated in Section 6.7 below, the execution, delivery and
performance of this Agreement by Atio (PTY) and Atio International and the
consummation by Atio (PTY) of the transactions contemplated hereby have been
duly authorized by all necessary corporate action of Atio (PTY) and Atio
International. This Agreement has been duly executed and delivered by Atio (PTY)
and Atio International and, subject to the approval of this transaction by the
Boards of Directors of Atio (PTY) and Atio International as contemplated in
<PAGE>
Section 6.8 below, is a valid and binding obligation of each of them,
enforceable in accordance with its terms. Neither the execution and delivery of
this Agreement by Atio (PTY) and Atio Internationa nor the consummation by Atio
(PTY) and Atio International of the transactions contemplated hereby will: (i)
violate any provision of the certificate or articles of incorporation, by-laws
or other governing documents of Atio (PTY) or Atio International or of any law,
ordinance or regulation or any decree or order of any court or administrative or
other governmental body that is either applicable to, binding upon or
enforceable against Atio (PTY) or Atio International; or (ii) result in an
breach of or default under any mortgage, contract, agreement, indenture, will,
trust or other instrument that is either binding upon or enforceable against
Atio (PTY) or Atio International or the assets or properties of Atio (PTY) or
Atio International; or (iii) violate any legally protected right of any
individual or entity or give to any individual or entity a right or claim
against Atio (PTY), Atio International, the Company or the assets or properties
of any of them (excluding any claim against VSI under the Netcall Agreement).
ARTICLE IV
Additional Covenants of Venturian and VSI
Section 4.1 Best Efforts. Venturian and VSI shall use their respective
best efforts to cause to be satisfied as soon as practicable and prior to the
Closing Date all of the conditions set forth in Article VI to the obligations of
Atio (PTY) and Atio International.
Section 4.2 Conduct of Business Pending the Closing. From the date
hereof until the Closing, VSI shall use commercially reasonable efforts to
preserve, protect and maintain the business and assets of VSI and operate VSI
consistent with prior practice and in the ordinary course of
<PAGE>
business. Without limiting the generality of the foregoing, from the date hereof
until the Closing, except for transactions expressly approved in writing by Atio
(PTY), VSI shall:
(a) maintain and keep in full force and effect all Insurance;
(b) use commercially reasonable efforts to preserve intact the
organization and reputation of VSI, to keep available the services of its
present executives, employees and agents, and to preserve the good will of its
suppliers, customers and others having business relationships with VSI;
(c) maintain its books, accounts and records in the usual, regular
and ordinary manner on a basis consistent with prior years;
(d) not enter into, amend or terminate any employment, bonus,
severance or retirement contract or arrangement, nor increase any salary or
other form of compensation payable or to become payable to any executives or
employees, other than in the ordinary course of business;
(e) not enter into, amend or terminate, or agree to enter into,
amend or terminate, any Material Contract, other than in the ordinary course of
business and except as contemplated in Section 1.4 above;
(f) not extend credit in the sale of products, collection of
receivables or otherwise, other than in the ordinary and regular course of
business;
(g) not declare, set aside or pay any dividend or make any other
distribution with respect to its capital stock;
(h) not merge or consolidate with or agree to merge or consolidate
with, nor purchase or agree to purchase all or substantially all of the assets
of, nor otherwise acquire, any corporation, partnership, or other business
organization or division thereof;
<PAGE>
(i) not sell, lease or otherwise dispose of or agree to sell,
lease or otherwise dispose of, any of its assets, properties, rights or claims,
except in the ordinary course of business;
(j) not authorize for issuance, issue, sell or deliver any
additional shares of its capital stock of any class or any securities or
obligations convertible into shares of its capital stock of any class or issue
or grant any option, warrant or other right to purchase any shares of its
capital stock of any class, other than grants of options to employees (including
without limitation new employees) in the ordinary course of business;
(k) not incur or become subject to, nor agree to incur or become
subject to, any debt, obligation or liability, contingent or otherwise, except
current liabilities and contractual obligations in the ordinary course of
business; or
(l) not take any action to seek, encourage, solicit or support any
inquiry, proposal, expression of interest or offer from any other person or
entity with respect to an acquisition, combination or similar transaction
involving VSI or substantially all of its assets, and VSI will promptly inform
Atio (PTY) of the existence of any such inquiry, proposal, expression of
interest or offer and shall not without the written consent of Atio (PTY)
furnish any information to or participate in any discussions or negotiations
with any other person or entity regarding the same. From the date hereof through
the Closing, VSI shall confer with one or more designated representatives of
Atio (PTY) to report material operational matters and the general status of
on-going operations of VSI, to the extent such designated representatives
reasonably request. VSI shall promptly notify Atio (PTY) of any material adverse
change in the financial condition, results of operations, properties, business
or prospects of VSI and shall keep Atio (PTY) fully informed of such events and
permit Atio (PTY)'s representatives to participate in discussions relating
thereto.
<PAGE>
Section 4.3 Access. From the date hereof through the Closing Date, VSI
shall give Atio (PTY) and its representatives full and free access to all
properties, facilities, personnel, books, contracts, leases, commitments and
records, and during this period VSI shall furnish Atio (PTY) with all financial
and operating data and other information as to VSI and its assets, properties,
rights and claims, as Atio (PTY) may from time to time reasonably request. In
particular, VSI shall, (a) afford to the officers, employees, attorneys,
accountants, appraisers, environmental engineers and other authorized
representatives of Atio (PTY) reasonable access, during normal business hours,
to the offices, plants, properties, books and records of VSI in order that Atio
(PTY) may have full opportunity to make such engineering, environmental, legal,
financial, accounting and other reviews or investigations of VSI as Atio (PTY)
shall desire to make, (b) use its best efforts to cause its independent public
accountants to permit Atio (PTY)'s independent public accountants to inspect
their work papers and other records of VSI, and (c) furnish to Atio (PTY) and
its authorized representatives such additional financial and operating data and
other information regarding its assets, properties, rights, claims, contracts,
goodwill and business as Atio (PTY) shall from time to time reasonably request.
Section 4.4 Post-August Advances. Immediately following the Closing
(whether consummated pursuant to Sections 1.2 through 1.3 or Section 1.4 above),
VSI shall repay to Venturian the Post-August Advances (and, if necessary, the
parties shall cause the Company to contribute funds to VSI to enable it to do
so); provided, however, that without the prior consent of Atio (PTY), Venturian
shall not make to VSI Post-August Advances in excess of $250,000 per month.
<PAGE>
ARTICLE V
Additional Covenants of Atio (PTY) and Atio International
Section 5.1 Best Efforts. Atio (PTY) and Atio International shall use
their respective best efforts to cause to be satisfied as soon as practicable
and prior to the Closing Date all of the conditions set forth in Article VII to
the obligations of Venturian, VSI and Sharon.
ARTICLE VI
Conditions to the Obligation of Atio (PTY) and Atio International
The obligations of Atio (PTY) and Atio International pursuant to
Article I above shall be subject to the fulfillment at or prior to the Closing
Date of each of the following conditions (unless such conditions are waived
prior to the Closing, which Atio (PTY) may do on behalf of both of them):
Section 6.1 Accuracy of Representations and Warranties and Compliance
with Obligations. The representations and warranties of VSI, Venturian and
Sharon contained in this Agreement shall have been true and correct in all
material respects at and as of the date hereof, and they shall be true and
correct in all material respects at and as of the Closing Date with the same
force and effect as though made at and as of that time (subject to changes
arising out of the operation by VSI of its business in the ordinary course and
in compliance with the terms of this Agreement between the date of this
Agreement and the Closing Date, which changes shall not, individually or in the
aggregate, be materially adverse). VSI and Venturian shall have performed and
complied with all of their respective obligations required by this Agreement to
be performed or complied with at or prior to the Closing Date. VSI and Venturian
shall have delivered to Atio (PTY) and Atio International a certificate, dated
as of the Closing Date and signed by an officer of VSI and Venturian, certifying
that
<PAGE>
such representations and warranties are thus true and correct and that all such
obligations have been thus performed and complied with.
Section 6.2 License Agreement. The Company shall have executed and
delivered to Atio (PTY) the License Agreement.
Section 6.3 Shareholders Agreement. The Company and each of its
shareholders shall have executed and delivered a shareholders agreement in the
form attached hereto as Exhibit B (the "Shareholders Agreement").
Section 6.4 Employment Services Agreement. The Company and Atio
International shall have executed and delivered an Employment Services Agreement
(the "Employment Services Agreement") in a form to be agreed upon among all of
the parties hereto pursuant to which Atio International shall provide to the
Company the services of certain employees.
Section 6.5 Opinion of Counsel. Atio (PTY) and Atio International shall
have received an opinion dated the Closing Date from Leonard, Street and
Deinard, counsel for Venturian and VSI, in form and substance reasonably
satisfactory to such parties.
Section 6.6 No Adverse Litigation. There shall not be pending or
threatened any action or proceeding by or before any court or other governmental
body which shall seek to restrain, prohibit or invalidate the transactions
contemplated hereby.
Section 6.7 Reserve Bank. Atio (PTY) shall have received all required
approvals from the Reserve Bank of South Africa to consummate the transactions
contemplated herein, including, without limiting the generality of the
foregoing, the payment of the amount contemplated in Subparagraph 1.2(a)(ii)
above.
Section 6.8 Board of Directors Approval. This Agreement and the
transactions contemplated herein shall have been approved by the Board of
Directors of Atio (PTY) and Atio
<PAGE>
International; provided, however, that this condition shall be deemed to have
been satisfied unless Atio (PTY) or Atio International, as the case may be,
delivers to Venturian, prior to the tenth day following the date of this
Agreement, written notice that such condition has not been satisfied.
Section 6.9 Distribution Agreements. The Company and Atio International
shall have executed and delivered a distribution agreement (the "Distribution
Agreement") in a form to be agreed upon among all of the parties hereto pursuant
to which Atio International (or, in the case of Africa, Atio (PTY) as a
sub-distributor) shall distribute the Company's products in all territories
outside of North America.
ARTICLE VII
Conditions to Obligations of Venturian, VSI and Sharon
The obligations of Venturian, VSI and Sharon pursuant to Article I
above shall be subject to the fulfillment at or prior to the Closing Date of
each of the following conditions (unless such conditions are waived, which
Venturian may do on behalf of Venturian, VSI and Sharon):
Section 7.1 Accuracy of Representations and Warranties and Compliance
with Obligations. The representations and warranties of Atio (PTY) and Atio
International contained in this Agreement shall have been true and correct in
all material respects at and as of the date hereof, and they shall be true and
correct in all material respects at and as of the Closing Date with the same
force and effect as though made at and as of that time (subject to changes
arising out of the operation by Atio (PTY) and Atio International of their
respective businesses in the ordinary course and in compliance with the terms of
this Agreement between the date of this Agreement and the Closing Date, which
changes shall not, individually or in the aggregate, be materially adverse).
Atio (PTY) and Atio International shall have performed and complied with all of
their obligations required by this Agreement to be performed or complied with at
or prior to the Closing Date. Atio (PTY) and Atio International
<PAGE>
shall have delivered to Venturian, VSI and Sharon a certificate, dated as of the
Closing Date and signed by an officer of Atio (PTY) and Atio International,
certifying that such representations and warranties are thus true and correct
and that all such obligations have been thus performed and complied with.
Section 7.2 License Agreement. Atio (PTY) and the Company shall each
have executed and delivered the License Agreement.
Section 7.3 Shareholders Agreement. The Company and its shareholders
shall have executed and delivered the Shareholders Agreement.
Section 7.4 Employment Services Agreement. The Company and Atio
International shall have executed and delivered the Employment Services
Agreement.
Section 7.5 Opinion of Counsel. Venturian, VSI and Sharon shall have
received an opinion, dated the Closing Date, from McDermott, Will & Emery,
counsel for Atio (PTY) and Atio International, in form and substance reasonably
satisfactory to such parties.
Section 7.6 No Adverse Litigation. There shall not be pending or
threatened any action or proceeding by or before any court or other governmental
body which shall seek to restrain, prohibit or invalidate the transactions
contemplated hereby.
Section 7.7 Board of Directors Approval. This Agreement, and the
transactions contemplated herein, shall have been approved by the Boards of
Directors of Venturian and VSI; provided, however, that this condition shall be
deemed to have been satisfied unless prior to the tenth day following the date
of this Agreement Venturian or VSI, as the case may be, delivers to Atio
International written notice that such condition has not been satisfied.
<PAGE>
Section 7.8 Distribution Agreement. The Company and Atio International
shall have executed and delivered the Distribution Agreement.
ARTICLE VIII
Certain Actions After the Closing
Section 8.1 Execution of Further Documents. From and after the Closing,
upon the reasonable request of a party hereto, the other party shall execute,
acknowledge and deliver all such further acts, deeds, assignments, transfers,
conveyances, powers of attorney and assurances as may be appropriate to carry
out the transactions contemplated by this Agreement.
Section 8.2 Exchange of Options. Promptly after the Closing, the
parties shall cooperate to cause all options outstanding as of the date hereof
to purchase common shares of VSI to be exchanged for options to purchase a like
number of common shares of the Company.
ARTICLE IX
Indemnification
Section 9.1 Agreement by Venturian to Indemnify. Venturian shall
indemnify and hold Atio (PTY) and Atio International harmless in respect of the
aggregate of all indemnifiable damages of Atio (PTY) and Atio International. For
purposes of this Agreement, "indemnifiable damages" shall mean the aggregate of
all expenses, losses, costs, deficiencies, liabilities and damages (including
court costs, amounts paid in settlements, judgments, and reasonable related
counsel fees and expenses, including those for investigating and defending).
Indemnifiable damages of Atio (PTY) and Atio International shall mean
indemnifiable damages incurred or suffered by Atio (PTY) or Atio International
(i) resulting from any inaccurate representation or warranty made by VSI or
Venturian
<PAGE>
in Article II hereof or (ii) resulting from any default in the performance of
any of the covenants or agreements made by VSI or Venturian in this Agreement or
any agreement, assignment, certificate or other instrument executed in
connection with the Closing of the transactions contemplated herein; provided,
however, that neither VSI nor Venturian shall have any liability to Atio (PTY)
or Atio International for any indemnifiable damages arising out of any breach of
any representation or warranty if Atio (PTY) or Atio International had actual
knowledge of such breach prior to the Closing unless, prior to the Closing, Atio
(PTY) or Atio International notified Gary Rappaport of such breach an Mr.
Rappaport, or Venturian's legal counsel, asserted that such breach did not
constitute a basis for Atio (PTY) or Atio International to refuse to close the
transactions contemplated herein pursuant to Section 6.1 hereof. Nothing in this
paragraph shall be interpreted as providing Mr. Rappaport or Venturian's legal
counsel with a right to require Atio (PTY) or Atio International to close the
transactions contemplated herein if such asserted breach violates Section 6.1
hereof. The disclosure of a matter in the Disclosure Schedule shall not be
deemed to create actual knowledge on the part Atio (PTY) or Atio International
except to the extent that it is made with sufficient particularity that a
reasonable party in the position of Atio International or Atio (PTY) would
understand the substance thereof and its relationship to the relevant
representation or warranty.
Section 9.2 Agreements by Atio (PTY) and Atio International to
Indemnify. Atio (PTY) and Atio International, jointly and severally, shall
indemnify and hold VSI, Venturian and Sharon harmless in respect of the
aggregate of all indemnifiable damages of VSI, Venturian or Sharon. For this
purpose, "indemnifiable damages of VSI, Venturian or Sharon" shall mean the
indemnifiable damages incurred or suffered by VSI, Venturian or Sharon (i)
resulting from any inaccurate representation or warranty made by Atio (PTY) or
Atio International in Article III hereof or (ii) resulting from any default in
the performance of any of the covenants or agreements made by Atio
<PAGE>
(PTY) or Atio International in this Agreement or any agreement, assignment,
certificate or other instrument executed in connection with the Closing of the
transactions contemplated herein; provided, however, that neither Atio (PTY) nor
Atio International shall have any liability with respect to any indemnifiable
damages arising out of any breach of any representation or warranty made by Atio
(PTY) or Atio International if VSI or Venturian had actual knowledge of such
breach prior to the Closing.
Section 9.3 Survival. The representations and warranties of the parties
set forth in Articles II and III hereof shall survive the execution and delivery
of this Agreement and the closing of the transactions contemplated herein
through December 31, 1999 and shall thereafter terminate, except with respect to
claims for the breach thereof made in writing delivered to the breaching party
on or prior to December 31, 1999. Notwithstanding the foregoing, the
representations and warranties set forth in Sections 2.2 and 2.3 shall survive
indefinitely and the representations and warranties set forth in Sections 2.21
shall survive for ninety (90) days after the expiration of the applicable
statute of limitations.
Section 9.4 Limitation on Indemnification Claims. Notwithstanding
anything in this Agreement to the contrary, no party to this Agreement shall
have any liability to another party to this Agreement with respect to the breach
of any representation or warranty except to the extent the indemnifiable damages
of the party to whom the liability is owed with respect to all breaches of
representations and warranties set forth in this Agreement exceeds $50,000; and
the aggregate liability of Venturian and VSI, on the one hand, and Atio (PTY)
and Atio International, on the other hand, for all breaches of representations
and warranties set forth in this Agreement shall not exceed $500,000. A claim
for indemnification pursuant to this Section 9 shall be the sole
<PAGE>
remedy of a party for the breach of any representation or warranty made in
connection with the transactions contemplated herein.
Section 9.5 Indemnification Procedure on Third Party Claims.
(a) Promptly after receipt by a party (an "Indemnified Party") of
notice by a third party of any complaint or the commencement of any action or
proceeding with respect to which such Indemnified Party may be entitled to
indemnification hereunder, such Indemnified Party shall, within twenty (20)
days, notify the other party (the "Indemnifying Party") of such complaint or of
the commencement of such action or proceeding; provided, however, that the
failure to so notify the Indemnifying Party shall relieve the Indemnifying Party
from liability under this Agreement with respect to such claim only if, and only
to the extent that, such failure to notify the Indemnifying Party results in the
forfeiture by the Indemnifying Party of material rights and defenses otherwise
available to the Indemnifying Party with respect to such claim. The Indemnifying
Party shall have the right, upon written notice delivered to the Indemnified
Party within twenty (20) days thereafter, to assume the defense of such action
or proceeding, including the employment of counsel reasonably satisfactory to
the Indemnified Party and the payment of the fees and disbursements of such
counsel. In the event, however, that the Indemnifying Party declines or fails to
assume the defense of the action or proceeding or to employ counsel reasonably
satisfactory to the Indemnified Party, in either case within such 20-day period,
then such Indemnified Party may employ counsel to represent or defend it in any
such action or proceeding and the Indemnifying Party shall pay the reasonable
fees and disbursements of such counsel as incurred. In any action or proceeding
with respect to which indemnification is being sought hereunder, the Indemnified
Party or the Indemnifying Party, whichever is not assuming the defense of such
action, shall have the right to participate in such litigation and to retain its
own counsel at such party's own expense. The Indemnifying Party or the
<PAGE>
Indemnified Party, as the case may be, shall at all times use reasonable efforts
to keep the Indemnifying Party or the Indemnified Party, as the case may be,
reasonably apprised of the status of the defense of any action the defense of
which it is maintaining and to cooperate in good faith with each other with
respect to the defense of any such action.
Section 9.6 No Indemnified Party may settle or compromise any
claim or consent to the entry of any judgment with respect to which
indemnification is being sought hereunder without the prior written consent of
the Indemnifying Party, unless such settlement, compromise or consent includes
an unconditional release of the Indemnifying Party from all liability arising
out of such claim. An Indemnifying Party may not, without the prior written
consent of the Indemnified Party, settle or compromise any claim or consent to
the entry of any judgment with respect to which indemnification is being sought
hereunder unless (i) the Indemnifying Party shall pay or cause to be paid all
amounts arising out of such settlement or judgment concurrently with the
effectiveness thereof; (ii) the terms or effect of the settlement shall not
encumber any of the assets of any Indemnified Party or any affiliate thereof, or
contain or result in any restriction, interference or condition that would apply
to such Indemnified Party or its affiliates or to the conduct of any of their
respective businesses; and (iii) the Indemnifying Party shall obtain, as a
condition of such settlement, a complete unconditional release of such
Indemnified Party.
<PAGE>
ARTICLE X
Miscellaneous
A. Brokers' Commission. Atio (PTY) and Atio International shall
indemnify and hold harmless VSI and Venturian from the commission, fee or claim
of any person, firm or corporation employed or retained or claiming to be
employed or retained by Atio (PTY) or Atio International to bring about, or to
represent it in, the transactions contemplated hereby. Venturian shall indemnify
and hold harmless Atio (PTY) and Atio International from the commission, fee or
claim of any person, firm or corporation employed or retained or claiming to be
employed or retained by VSI or Venturian to bring about, or to represent it in,
the transactions contemplated hereby (including, without limitation, any claim
by The Smaby Group, Inc. that it is entitled to amounts in excess of that
provided in the last sentence of this paragraph). The indemnification
obligations of the parties under this Section 10.1 shall not be subject to the
limitations set forth in Section 9.4 above. Notwithstanding the foregoing, if
requested by Venturian in connection with the closing of the transactions
contemplated herein, the Company shall (at no cost to Venturian) issue up to
37,500 common shares of its capital stock to The Smaby Group, Inc.
B. Amendment and Modification. The parties hereto may amend, modify and
supplement this Agreement in such manner as may be agreed upon by them in
writing.
C. Payment of expenses. Each party to this Agreement shall pay all of
the expenses incurred by it in connection with this Agreement, including without
limitation its legal and accounting fees.
<PAGE>
D. Termination.
1. Anything to the contrary herein notwithstanding, this Agreement
may be terminated and the transaction contemplated hereby may be abandoned:
a) by the mutual written consent of each of the parties
hereto at any time prior to the Closing Date;
b) by Venturian or Atio International at any time prior to
the Closing Date if there shall be a pending or threatened action or proceeding
by or before any court or other governmental body which shall seek to restrain,
prohibit or invalidate the transactions contemplated hereby;
c) by Atio International in the event of the material breach
by VSI or Venturian of any provision of this Agreement, which breach is not
remedied by VSI or Venturian within fourteen (14) Minnesota business days after
receipt of notice thereof from Atio International;
d) by Venturian in the event of the material breach by Atio
(PTY) or Atio International of any provision of this Agreement, which breach is
not remedied by Atio (PTY) or Atio International within fourteen (14) Minnesota
business days after receipt of notice thereof from Venturian;
e) by Venturian or Atio (PTY) in the event that Venturian,
VSI, Atio (PTY) or Atio International delivers notice prior to the tenth day
following the date of this Agreement that the condition set forth in Section 6.8
or 7.7 above has not been satisfied; or
f) by Venturian or Atio International if the Closing has not
taken place by October 31, 1997.
If this Agreement is terminated pursuant to clauses (i), (ii), (v) or (vi) of
this paragraph (a), no party shall have any liability for any costs, expenses,
loss of anticipated profit or any further obligation for
<PAGE>
breach of warranty or otherwise to any other party to this Agreement, except
that the termination of this Agreement pursuant to clause (vi) above by any
party then in breach of any of its representations, warranties or covenants
hereunder shall not relieve such party of its liability for such breach (for
purposes of this sentence, Atio International and Atio (PTY) shall be considered
the same party and Venturian and VSI shall be considered the same party). Any
termination of this Agreement pursuant to clauses (iii) or (iv) of this
paragraph (a) shall be without prejudice to any other rights or remedies of the
respective parties.
E. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, assigns,
heirs and legal representatives. No party may assign its rights or delegates its
obligations under this Agreement without the prior written consent of the other
party hereto and any purported assignment or delegation without such prior
written consent shall be void and of no force or effect.
F. Third Party Beneficiaries. This Agreement is made solely and
specifically between and for the benefit of the parties hereto and no other
person shall have any rights, interests or claims hereunder or be entitled to
any benefits under or on account of this Agreement as a third party beneficiary
or otherwise.
G. Entire Agreement. This instrument and the exhibits and schedules
attached hereto and the confidentiality agreement previously entered into
between Atio (PTY) and VSI contain the entire agreement of the parties hereto
with respect to the subscription and issuance of the Shares and supersede all
prior understandings and agreements of the parties with respect to the subject
matter hereof. Any reference herein to this Agreement shall be deemed to include
the schedules and exhibits attached hereto.
<PAGE>
H. Headings. The descriptive headings in this Agreement are inserted
for convenience only and do not constitute a part of this Agreement.
I. Execution in Counterpart. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original.
J. Notices. Any notice, request, information or other document to be
given hereunder to any of the parties by any other party shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
as follows:
If to VSI or Venturian, 11111 Excelsior Boulevard
addressed to: Hopkins, MN 55343
Attention: Gary B. Rappaport
with a copy to: Leonard, Street and Deinard
Suite 2300
South Fifth Street
Minneapolis, Minnesota 55402
Attention: Morris M. Sherman
If to Atio (PTY), ATIO Corporation (PTY) Ltd.
addressed to: P.O. Box 4467
Rivonia 2128
Republic of South Africa
Attention: Gary Craul
with a copy to: McDermott, Will & Emery
227 West Monroe Street, Suite 3100
Chicago, IL 60606-5096
Attention: Stuart M. Berkson, P.C.
If to Atio International: 11111 Excelsior Boulevard
addressed to: Hopkins, Minnesota 55343
Attention: Willem Ellis
with a copy to: McDermott, Will & Emery
227 West Monroe Street
Suite 3100
Chicago, IL 60606-5096
<PAGE>
Attention: Stuart M. Berkson, P.C.
If to Sharon: Ilan Sharon
11111 Excelsior Boulevard
Hopkins, Minnesota 55343
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice. Any notice delivered personally shall be deemed to have been
given on the date it is so delivered, and any notice delivered by recognized
international courier service shall be deemed to have been given on the date it
is received.
K. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed therein.
L. Arbitration; Legal Proceedings.
1. The parties shall attempt in good faith to resolve any dispute
arising out of or relating in any manner to this Agreement, the breach,
termination or validity thereof or the transactions contemplated herein
(including, without limitation, any claim for indemnification pursuant to
Article IX hereof and any statutory or common law claim) promptly by negotiation
between representatives of the parties, each of whom has authority to settle the
controversy. Any party may giv the others written notice that a dispute exists
(a "Notice of Dispute"). The Notice of Dispute shall include a statement of such
party's position and the name and title of the representative who will represent
such party. Within ten (10) days of the delivery of the Notice of Dispute, the
parties' respective representatives shall meet at a mutually acceptable time and
place, and thereafter as long as they reasonably deem necessary, to attempt to
resolve the dispute. All documents and other information or data on which each
party relies concerning the dispute shall be furnished or made
<PAGE>
available on reasonable terms to the other party at or before the first meeting
of the parties as provided by this paragraph.
2. Any controversy or claim arising out of or relating to this
Agreement, the breach, termination or validity thereof, or the transactions
contemplated herein (including, without limitation, any claims for
indemnification pursuant to Article IX hereof and any statutory or common law
claim), if not settled by negotiation as provided in paragraph (a) of this
Section 10.12, shall be settled by arbitration in New York, New York, in
accordance with the CPR Rules for Non- Administered Arbitration of Business
Disputes, by three arbitrators. Any party may initiate arbitration twenty (20)
days following the delivery of a Notice of Dispute if the dispute has not then
been settled by negotiation, or sooner if the other party fails to participate
in negotiation in accordance with paragraph (a) above. The three arbitrators
shall be appointed as provided by CPR Rule 5, Selection of Arbitrators by the
parties. The arbitrators shall have no power to add to or detract from the
agreements of the parties and shall not have the authority to make any ruling or
award that does not conform to the terms and conditions of this Agreement.
Without limitation of the foregoing, the arbitrators shall have no power to
terminate this Agreement other than in accordance with its terms and shall have
no power to award punitive damages. The arbitration procedure shall be governed
by the United States Arbitration Act, 9 U.S.C. ss. 1-16, and the award rendered
by the arbitrator shall be final and binding on the parties and may be entered
in any court having jurisdiction thereof.
3. Each party shall have discovery rights as provided by the
United States Federal Rules of Civil Procedure; provided, however, that all such
discovery shall be commenced and concluded within sixty (60) days of the
initiation of arbitration.
4. It is the intent of the parties that any arbitration shall be
concluded as quickly as reasonably practicable. Unless the parties otherwise
agree, once commenced, the hearing on the
<PAGE>
disputed matters shall be held four days a week until concluded, with each
hearing date to begin at 9:00 a.m. and to conclude at 5:00 p.m. The arbitrators
shall use all reasonable efforts to issue the final award or awards within a
period of five business days after closure of the proceedings. Failure of the
arbitrators to meet the time limits of this Paragraph 10.12(d) shall not be a
basis for challenging the award.
5. The arbitrators shall instruct the non-prevailing party to pay
all costs of the proceedings, including the fees and expenses of the arbitrators
and the reasonable attorneys' fees and expenses of the prevailing party. If the
arbitrators determine that there is not a prevailing party, each party shall be
instructed to bear its own costs and to pay one-half of the fees and expenses of
the arbitrators.
6. Each party hereto hereby agrees that any legal proceeding
instituted to enforce an arbitration award hereunder will be brought in the U.S.
federal courts situated in New York (which shall have sole and exclusive
jurisdiction thereof), and hereby submits to personal jurisdiction therein and
irrevocably waives any objection as to venue therein, and further agrees not to
plead or claim in any such court that any such proceeding has been brought in an
inconvenient forum. VSI and Venturian each hereby designates, appoints and
empowers Morris M. Sherman, presently having offices at Leonard, Street and
Deinard, Suite 2300, 150 South Fifth Street, Minneapolis, Minnesota 55402, as
VSI's true and lawful agent for service of process to receive and accept on
their behalf service of process in any such proceeding brought in any such
courts. Sharon hereby designates, appoints and empowers Steven Wolosky,
presently having offices at Olshan Grundman From & Rosenzweig LLP, 505 Park
Avenue, 16th Floor, New York, NY 10022-1106 as Sharon's true and lawful agent
for service of process to receive and accept on its behalf service of process in
any such proceeding brought in any such courts. Atio (PTY) and Atio
International each hereby
<PAGE>
designates, appoints and empowers Stuart M. Berkson, P.C., presently having
offices at 227 West Monroe Street, Chicago, Illinois, as the Purchaser's true
and lawful agent for service of process to receive and accept on their behalf
service of process in any such proceeding brought in any such courts. Each of
the foregoing parties agrees that the failure of the process agent appointed by
such person to give notice of process to such person shall not impair or affect
the validity of service upon such agent or of any judgment based thereon, and
each such person irrevocably consents to the service of process in any such
proceeding by the mailing of copies thereof by certifie mail, postage prepaid,
to such person's address for notice under this Agreement. Nothing herein shall
preclude any of the parties hereto from serving process in any other manner or
in any other jurisdiction in connection with enforcing an arbitration award
hereunder.
M. Termination of Existing Shareholder's Agreement. Upon the
consummation of the transactions contemplated herein, the Amended and Restated
Shareholders Agreement among Venturian, VSI and Sharon shall terminate and be of
no further force or effect, automatically and immediately without any further
action by any party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
ATIO CORPORATION (PTY) LTD
By /s/ Gary Craul
Its Chief Executive
ATIO CORPORATION INTERNATIONAL, INC.
By /s/ Willem Ellis
Its Chairman
<PAGE>
VENTURIAN CORP.
By /s/ Gary B. Rappaport
Its President
VENTURIAN SOFTWARE ENTERPRISES, INC.
By /s/ Ilan Sharon
Its President
/s/ Ilan Sharon
Ilan Sharon
<PAGE>
EXHIBITS
Exhibit A Atio Corporation USA, Inc. Articles of Incorporation (Not filed.)
Exhibit B Shareholders Agreement (See Exhibit 10.3)
Exhibit 10.2
November 14, 1997
Atio Corporation (PTY) Ltd.
P. O. Box 4467
Rivonia 2128
Republic of South Africa
Attention: Gary Craul
Atio Corporation International, Inc.
11111 Excelsior Boulevard
Hopkins, Minnesota 55343
Attention: Willem Ellis
Ilan Sharon
11111 Excelsior Boulevard
Hopkins, Minnesota 55343
Venturian Software Enterprises, Inc.
11111 Excelsior Boulevard
Hopkins, Minnesota 55343
Attention: Ilan Sharon
Re: Closing Under Joint Venture Agreement dated October 23, 1997 among Atio
Corporation (PTY) Ltd., Atio Corporation International, Inc., Venturian
Corp., Venturian Software Enterprises, Inc. and Ilan Sharon
Gentlemen:
Contemporaneously with the execution and delivery of this letter agreement, the
parties to the above-referenced agreement (the "Joint Venture Agreement") are
closing on the transactions contemplated therein. The purpose of this letter is
to set forth certain agreements of such parties in connection with such closing.
Terms used by not otherwise defined in this letter agreement are used in this
letter agreement as defined in the Joint Venture Agreement
The date of the Closing is the date of this letter. However, the parties may
choose to treat the issuance of Shares as effective as of October 1, 1997. If
the parties so agree prior to the issuance of certificates representing the
Shares, such certificates will be dated October 1, 1997.
The License contemplated in the Joint Venture Agreement has been divided into
two documents: a Technology License and Transfer Agreement and a Technology
Development and Support Agreement. The Technology License and Development
Agreement is being entered into contemporaneously with the Closing, but the
Technology Development and Support Agreement
<PAGE>
will be prepared and entered into following the Closing, on the terms set forth
in the "Summary of Development Agreement Terms" attached. The parties agree to
prepare the documentation for, execute and deliver such Technology Development
and Support Agreement promptly following the Closing.
In addition, the parties have not yet finalized the Employment Services
Agreement. Promptly following the Closing, the parties shall finalize the
Employment Services Agreement on terms generally consistent with those set forth
in the most recent draft circulated, subject to the comments set forth in the
attached e-mail from Sberkson (and revised to be a true services agreement,
rather than an employment agreement), and execute and deliver the same.
VSI has entered into an agreement with Netcall providing for termination of the
Netcall Agreement and a release of claims in connection therewith. Such
agreement provides for the payment of $300,000 by VSI to Netcall upon the
closing of the transactions contemplated in the Joint Venture Agreement.
Venturian hereby agrees to finance such payment as a capital contribution to VSI
(without any additional shares of VSI's capital stock being issued to Venturian)
by reducing the amount of Post-August Advances VSI is obligated to repay to
Venturian upon the Closing under Section 4.4 of the Joint Venture Agreement.
Section 1.2(a) of the Joint Venture Agreement provides that, of the $3,500,000
to be paid to the Company by Atio (PTY) on behalf of Atio International,
$500,000 was to be paid contemporaneously with the Closing and an additional
$500,000 30 days thereafter. Because of the delay in the Closing, the second of
such two $500,000 payments shall be made as promptly as possible following the
Closing. The remaining amounts shall be paid as set forth in the Joint Venture
Agreement.
If the foregoing accurately sets forth our agreement with respect to the matters
addressed, please countersign this letter agreement where indicated below.
Very truly yours,
VENTURIAN CORP.
By /s/ Gary B. Rappaport
Its President
AGREED TO AND ACCEPTED:
ATIO CORPORATION (PTY) LTD
By /s/ Gary Craul
Its Chief Executive
<PAGE>
ATIO CORPORATION INTERNATIONAL, INC.
By /s/ Willem Ellis
Its Chairman
VENTURIAN SOFTWARE ENTERPRISES, INC.
By /s/ Ilan Sharon
Its President
/s/ Ilan Sharon
Ilan Sharon
Exhibit 10.3
SHAREHOLDERS AGREEMENT
THIS AGREEMENT is made and entered into as of the 14 day of November,
1997 by and among Venturian Corp. ("Venturian"), a corporation organized and
existing under the laws of the State of Minnesota; Atio Corporation
International, Inc. ("Atio"), a corporation organized and existing under the
laws of the state of Delaware; Ilan Sharon ("Sharon" and, collectively with
Venturian, and Atio, the "Shareholders"); and Venturian Software Enterprises,
Inc. (the "Corporation"), a corporation organized and existing under the laws of
the State of Minnesota that will change its name to Atio Corporation USA, Inc.
promptly following the execution and delivery of this Agreement.
PREMISES:
1. The Shareholders are the holders of all of the issued and
outstanding shares of the capital stock of the Corporation and parties to that
certain agreement (the "Joint Venture Agreement") dated October 23, 1997 among
Venturian, Atio, Atio Corporation (PTY) Ltd ("Atio (PTY)"), Sharon, and the
Corporation.
2. Atio (PTY) owns a majority of the issued and outstanding shares of
the capital stock of Atio and will benefit from Atio's ownership of shares in
the Corporation.
3. The Shareholders and the Corporation desire to enter into this
Agreement concerning the transfer of shares in the Corporation and certain
matters with respect to the governance of the Corporation.
4. Promptly following the execution and delivery of this Agreement, the
Corporation and Atio (PTY) are entering into certain agreements (collectively,
the "License
<PAGE>
Agreement") pursuant to which Atio (PTY) is licensing certain intellectual
property to the Corporation and agreeing to provide certain development services
in connection therewith.
5. The Corporation is making a pre-payment of $800,000.00 (the
"Prepayment") in consideration of development services to be provided by Atio
(PTY) under the License Agreement and such Prepayment is being applied as a
payment of amounts owing by Atio (PTY) to the Corporation as the purchase price
for the Shares to be issued to Atio under the Joint Venture Agreement.
In consideration of the foregoing premises and the mutual covenants and
agreements contained herein, the parties hereto agree as follows:
I. GOVERNANCE
A. VOTING OF SHARES. Each Shareholder shall vote all shares of the
Corporation's capital stock now held or hereafter acquired by such Shareholder
to effectuate the provisions of this Section 1, and each Shareholder shall take
all such other action as is reasonably necessary to carry out the provisions of
this Section 1.
B. BOARD OF DIRECTORS. The Corporation shall be governed by a board of
six directors or such greater number as to which Venturian and Atio may agree.
Subject to Section 1.4 below, and except as Venturian and Atio may mutually
agree, 50% of such directors shall be designated by Venturian (the "Venturian
Directors") and 50% of such directors shall be designated by Atio (the "Atio
Directors"). Venturian shall have the power to remove any Venturian Director and
to designate any director to fill any vacancy created upon the resignation,
death or removal of any Venturian Director; and Atio shall have the power to
remove any Atio Director and to designate any director to fill any vacancy
created upon the resignation, death or removal of any Atio Director.
<PAGE>
C. SUPERMAJORITY ACTION. The following actions by the Corporation shall
require the affirmative vote of 75% of all of the Corporation's directors:
1. The approval of each annual budget for the business and
operation of the Corporation;
2. Any expenditures, or any contracts, commitments or other
arrangements involving expenditures, which in the aggregate exceed the aggregate
amount provided for such year in a budget approved pursuant to subparagraph (a)
above;
3. The issuance by the Corporation of any shares of its capital
stock or other securities;
4. The incurrence by the Corporation of any indebtedness for
borrowed money in excess of $1,000,000 outstanding at any one time;
5. Any sale, lease, license or other transfer by the Corporation
of any patents, copyrights, trademarks, trade secrets or other intellectual
property of the Corporation, including any license or other rights held by the
Corporation with respect to the intellectual property of others ("Intellectual
Property"), other than in the ordinary course of business;
6. Any sale, lease, license or other transfer by the Corporation
of any assets other than Intellectual Property having a value equal to or
greater than 10% of the net book value of the Corporation (determined in
accordance with generally accepted accounting principles consistently applied),
other than in the ordinary course of business;
7. Any merger, exchange or transfer (within the meaning of
Minnesota Statutes ss.302A.601 et seq. or a successor statute) to which the
Corporation is a party (other than a merger pursuant to Section 1.7 below);
<PAGE>
8. Any redemption by the Corporation of any shares of its capital
stock or other securities;
9. Any declaration or payment by the Corporation of any dividend
or other distribution;
10. Any amendment or restatement of the Corporation's articles of
incorporation or by-laws; and
11. Any transaction between the Corporation and an Affiliate (as
hereinafter defined) of Venturian or Atio. For purposes of this Agreement, a
person, corporation, partnership, limited liability company, joint venture,
trust or other entity shall be deemed to be an "Affiliate" of Venturian or Atio,
as the case may be, if such person or entity directly or indirectly controls, is
controlled by, or is under common control with Venturian or Atio, as the case
may be; and a person or entity shall be deemed to control another person or
entity if it (i) owns, beneficially or of record, or has the power to vote, more
than 5% of the issued and outstanding voting securities of such person or
entity, or (ii) has the power to elect or otherwise designate 25% or more of the
members of the board of directors or other governing body of such person or
entity, or (iii) otherwise has the power to direct the management or affairs of
such person or entity. Notwithstanding the foregoing, Willem Ellis and Mark
Chodos are each hereby deemed to be an Affiliate of Atio and Gary Rappaport and
Ilan Sharon are each hereby deemed to be an Affiliate of Venturian.
D. ADDITIONAL CAPITAL.
1. In the event that either Venturian or Atio (the "Principal
Shareholders") determines that the Corporation requires additional capital and
that such capital should not be raised from a third party, if the parties have
been unable to reach agreement with respect thereto through deliberations of the
Corporation's board of directors, the Principal Shareholder making such
<PAGE>
determination (the "Calling Shareholder") shall deliver to each other
Shareholder written notice of such determination (the "Capital Call Notice"),
specifying the amount of additional capital required (the "Capital
Contribution") and the price per share at which the Capital Contribution is to
be made; provided, however, that Atio shall not have the right to be a "Calling
Shareholder" or issue a "Capital Call End Notice" unless and until all Deferred
Installments (as defined in the Joint Venture Agreement) shall have been paid in
full. The aggregate amount of the Capital Contribution shall in no event exceed
the reasonably foreseeable capital requirements of the Corporation for the 12
month period following the date that the Capital Contribution is to be made.
Within 60 days of its receipt of the Capital Call Notice (the "Capital Call
Notice Period"), the other Principal Shareholder (the "Non-Calling Shareholder")
shall by written notice delivered to each Shareholder elect or decline to make
its Proportionate Share (as hereinafter defined) of the Capital Contribution. In
the event that the Non-Calling Shareholder does not deliver to the Calling
Shareholder, within the Capital Call Notice Period, written notice electing or
declining to make its Proportionate Share of the Capital Contribution, the
Non-Calling Shareholder shall be deemed to have declined to make its
Proportionate Share of the Capital Contribution.
2. Sharon shall have the right to make his Ratable Share (as
hereinafter defined) of any portion of any Capital Contribution that Venturian
makes or has the right to make pursuant to this Section 1.4 by notifying all
Shareholders of his election to do so not later than five days prior to the
expiration of the Capital Call Notice Period, and any capital to be contributed
by Venturian pursuant to this Section 1.4 may otherwise be divided between
Venturian and Sharon in such proportion as they may agree. If Sharon elects to
make his Ratable Share of any Capital Contribution, the portion of the Capital
Contribution to be made by Venturian shall be reduced
<PAGE>
accordingly so that the aggregate portion of the Capital Contribution made by
Venturian and Sharon is not greater than Venturian's Proportionate Share of such
Capital Contribution.
3. Within 30 days after the expiration of the Capital Call Notice
Period, (i) the Calling Shareholder shall pay to the Corporation its
Proportionate Share of the Capital Contribution, and (ii) the Non-Calling
Shareholder (and Sharon, if he has so elected pursuant to paragraph (b) above)
shall pay to the Corporation its Proportionate Share of the Capital Contribution
if the Non-Calling Shareholder has elected to make its Proportionate Share of
the Capital Contribution, and (iii) if the Non-Calling Shareholder has declined
to make its Proportionate Share of the Capital Contribution, the Calling
Shareholder may pay to the Corporation such additional portion of the Capital
Contribution as the Calling Shareholder elects to pay (but the aggregate amount
paid by all Shareholders shall in no event exceed the amount of the Capital
Contribution as specified in the Capital Call Notice). All payments of the
Capital Contribution pursuant to this Section 1.4 shall be made by wire transfer
of immediately available funds in United States dollars to an account designated
by the Corporation. Immediately upon each Shareholder's payment of a portion of
the Capital Contribution pursuant to this Section 1.4, the Corporation shall
issue to such Shareholder a certificate or certificates representing that number
of Shares (as defined in Section 2.1 below) that is equal to the portion of the
Capital Contribution made by such Shareholder multiplied by the price per share
set forth in the Capital Call Notice.
4. In the event that a Capital Contribution (or a portion thereof)
is made in accordance with this Section 1.4 by one but not both Principal
Shareholders, the number of directors to be designated by Atio and Venturian,
respectively, following such Capital Contribution shall be adjusted to equal
each Principal Shareholder's Proportionate Share of the Shares outstanding
following such Capital Contribution. In such event, the Principal Shareholder
with the larger
<PAGE>
Proportionate Share of the Shares outstanding shall have the right to designate
not less than a majority of the total number of directors, but the number of
directors designated by such Principal Shareholder shall otherwise be rounded
down to the nearest whole number and the other Principal Shareholder shall have
the right to designate the remaining directors. In the event that a Capital
Contribution (or a portion thereof) is made in accordance with this Section 1.4
by Venturian but not Atio, Atio's right to designate the chief executive officer
of the Corporation pursuant to Section 1.6 hereof shall terminate and be of no
further force or effect.
5. The "Proportionate Share" of Atio shall be the proportion that
the number of Shares held by Atio bears to the total number of Shares held by
Atio, Venturian and Sharon, and the "Proportionate Share" of Venturian shall be
equal to the proportion that the number of Shares held by Venturian and Sharon
bears to the total number of Shares held by Venturian, Sharon and Atio. The
"Ratable Share" of Sharon shall be equal to the proportion that the number of
Shares held by Sharon bears to the total number of Shares held by Sharon and
Venturian.
E. BUY OUT UPON DEADLOCK.
1. In the event that, at any time following the second anniversary
of the date of this Agreement, either Venturian or Atio have unsuccessfully
attempted to receive, at two or more separate meetings of the Corporation's
shareholders or its board of directors (as the case may be), the approval of the
Corporation's directors or its shareholders for the Corporation to take any
action requiring the approval of such directors or shareholders (a "Demanded
Action"), Venturian or Atio, as the case may be (the "Initiating Shareholder")
may deliver to each of the other Shareholders written notice (an "Initiating
Notice") specifying the Demanded Action and a price per share at which the
Initiating Shareholder is willing either (i) to sell all of its Shares to the
other Principal Shareholder
<PAGE>
in accordance with this Section 1.5, or (ii) purchase all of the Shares of the
other Principal Shareholder in accordance with the provisions of this Section
1.5.
2. Not later than 120 days following its receipt of an Initiating
Notice (the "Election Period"), the Principal Shareholder that is not the
Initiating Shareholder (the "Non-Initiating Shareholder") shall deliver to each
of the other Shareholders written notice specifying whether the Non-Initiating
Shareholder (i) acquiesces in the Demanded Action, or (ii) elects to purchase
all of the Shares of the Initiating Shareholder at the purchase price set forth
in the Initiating Notice, or (iii) elects to sell all of its Shares to the
Initiating Shareholder at the purchase price set forth in the Initiating Notice.
If the Non-Initiating Shareholder elects to acquiesce in the Demanded Action,
both Principal Shareholders shall vote their shares and cause the directors
designated by them to vote to cause the Corporation to take the Demanded Action.
If the Non-Initiating Shareholder elects to purchase the Shares of the
Initiating Shareholder, the Initiating Shareholder shall sell to the
Non-Initiating Shareholder, and the Non-Initiating Shareholder shall purchase
from the Initiating Shareholder, all of the Shares of the Initiating Shareholder
at the per Share purchase price set forth in the Initiating Notice and at a
closing conducted in accordance with paragraph (d) below. If the Non-Initiating
Shareholder elects to sell its Shares to the Initiating Shareholder, the
Non-Initiating Shareholder shall sell all of its Shares to the Initiating
Shareholder, and the Initiating Shareholder shall purchase all of the Shares of
the Non-Initiating Shareholder, at the per Share purchase price set forth in the
Initiating Notice and at a closing conducted in accordance with paragraph (d)
below.
3. In the event that Venturian is selling Shares to Atio pursuant
to this Section 1.5, Sharon shall sell to Atio, and Atio shall purchase from
Sharon, all of Sharon's Shares on the same terms and at the same closing as Atio
is purchasing Venturian's Shares. In the event that Venturian is purchasing the
Shares of Atio pursuant to this Section 1.5, Sharon shall have the option
<PAGE>
to purchase his Ratable Share of such Shares by notifying Venturian of his
election to do so not later than 10 days prior to the expiration of the Election
Period (but in such event Venturian shall remain obligated to purchase any
Shares of Atio not purchased by Sharon).
4. The closing of any purchase or sale pursuant to this Section
1.5 shall take place at the principal executive office of the Corporation on a
date not later than 30 days after the expiration of the Election Period. At such
closing, the selling Shareholder(s) shall deliver to the purchasing
Shareholder(s) the certificate or certificates representing the Shares to be
sold, and the purchasing Shareholder(s) shall pay to the selling Shareholder(s)
the purchase price therefor, by wire transfer of immediately available funds in
United States dollars to an account designated by the selling Shareholder(s).
5. Upon the purchase by one Principal Shareholder of another
Principal Shareholder's Shares pursuant to this Section 1.5, the provisions of
this Section 1 shall terminate and be of no further force or effect.
F. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
Corporation shall be designated by Atio.
G. MERGER.
1. Venturian may elect, at any time following the 180th day after
the date of this Agreement, to cause the Corporation to be merged with and into
Atio, with Atio as the surviving corporation, provided that the Corporation
receives an opinion of counsel reasonably satisfactory to Venturian and Atio
that such merger may be effected without the recognition of gain for United
States federal income tax purposes. In any such merger, the Shares of the
Corporation shall be exchanged for common shares of Atio (identical to the
common shares of Atio then held by Atio (PTY), if Atio has more than one series
of common shares then outstanding), at an exchange ratio
<PAGE>
(the "Exchange Ratio") determined in accordance with Paragraph (b) below;
provided, however, that if Venturian delivers to Atio, prior to the first
anniversary of the date of this Agreement, written notice that Venturian elects
to cause a merger pursuant to this Section 1.7, the Exchange Ratio shall be
calculated as if the value of Venturian were 15% greater than the value it would
otherwise be determined to have pursuant to Paragraph (b). If Venturian elects
to merge the Corporation with Atio pursuant to this Paragraph (a), Atio and Atio
(PTY) shall take all such action as is necessary to effect such merger,
including voting the shares in Atio held by Atio (PTY) and by any entity with
whom Atio (PTY) has a Parent/Subsidiary Relationship or Sister Corporation
Relationship, to approve such merger.
2. Promptly following Venturian's delivery of written notice to
the Corporation and Atio that it elects to cause a merger pursuant to Paragraph
(a) above, Atio and Venturian shall negotiate in good faith to determine an
Exchange Ratio. If Atio and Venturian are able to agree upon an Exchange Ratio
within 30 days of Venturian's delivery of such written notice to the Corporation
and Atio, the Exchange Ratio shall be the Exchange Ratio determined by an
independent appraiser qualified to value an ongoing business and acceptable to
Atio and Venturian (an "Independent Appraiser"), according to the relative
values of the Corporation and Atio based upon what a willing buyer would pay to
a willing seller in an arm's-length transaction for the entire equity interests
of the Corporation, and what another willing buyer would pay to a willing seller
in an arm's-length transaction for the entire equity interests of Atio,
separately. If Atio and Venturian are unable to agree on such an Independent
Appraiser within 30 days of the expiration of the aforementioned 30-day period,
such independent appraiser shall be selected by arbitration pursuant to Section
10.8 below. The fees and expenses of any such appraiser shall be paid 50% by
Atio and 50% by Venturian.
<PAGE>
3. Any merger pursuant to this Section 1.7 shall be effected as
promptly as practicable following the determination of the exchange ratio
pursuant to Paragraph (b) above, but in any event not later than 90 days
following such determination.
4. Atio shall provide to Venturian, upon its request, copies of
the certificate of incorporation and bylaws of Atio, any shareholders
agreements, voting trusts, or other documents relating in any manner to the
governance of Atio or the transfer or redemption of its securities, and such
financial statements and other information with respect to the business,
operations, assets, liabilities, financial structure and other matters of Atio
as it may reasonably request for purposes of determining whether to exercise its
rights hereunder and calculate an Exchange Ratio in accordance with the terms of
this Agreement.
H. AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS. Promptly
following the execution and delivery of this Agreement, the parties shall take
all action necessary to amend the articles of incorporation and bylaws of the
Corporation to effect the provisions of this Section 1.
I. ATIO NAME. In the event that at any time neither Atio nor any of its
Affiliates holds directly or indirectly any Shares, the Corporation shall
immediately change its name to a name not including the word "Atio".
II. RESTRICTION ON TRANSFER OF SHARES
A. GENERAL RESTRICTION. No Shares (as hereinafter defined), nor any
interest therein, shall directly or indirectly be sold, assigned, conveyed,
pledged, mortgaged, hypothecated or otherwise disposed of or transferred,
voluntarily or involuntarily, or by operation of law, with or without
consideration (any such disposition shall be referred to hereinafter as a
"Transfer") except as otherwise specifically provided in this Agreement. As used
in this Agreement, "Shares" means the issued and outstanding shares of the
Corporation's capital stock of any class or series, whether such
<PAGE>
shares have been issued on or prior to the date hereof or are subsequently
issued. Any attempt to Transfer that is not permitted under the terms of this
Agreement shall be null, void and of no effect. Recognizing that Venturian's
common stock is publicly held, no transfer of all or any portion of Venturian's
common stock shall in and of itself be deemed to be a Transfer of Shares.
Recognizing that Atio is part of an affiliated group of corporations the
ultimate parent entity of which is Atio (PTY), the shares of which are held by a
number of different shareholders, no transfer of all or any portion of the
shares of Atio (PTY) shall in and of itself be deemed to be a Transfer of
Shares.
B. ISSUANCES AND REDEMPTIONS. Nothing in this Section 2 or in Sections
3, 4 or 5 of this Agreement shall be construed to prohibit or limit in any
manner any issuance by the Corporation of any Shares of its capital stock or any
redemption by the Corporation of any Shares (other than a redemption pursuant to
the exercise of a right of first refusal under Section 3 hereof), provided that
such issuance or redemption is authorized in accordance with Sections 1.3 hereof
and provided, further, in the case of any such issuance, that the party to whom
such Shares are issued executes and delivers to the Corporation an instrument
agreeing to observe and be bound by all of the terms and provisions of this
Agreement (and whether or not such party executes and delivers to the
Corporation such instrument, any Shares issued to such party shall be subject to
the provisions of this Agreement and such party shall be bound by the
obligations of a "Shareholder" hereunder.). Any person or entity acquiring from
the Corporation shares of the Corporation's capital stock and agreeing in
writing to observe and be bound by all of the terms and provisions of this
Agreement shall be deemed to be a "Shareholder" within the meaning of this
Agreement and shall be entitled to all of the rights and benefits thereof.
C. SHARES OF SHARON.
<PAGE>
1. Upon the termination of Sharon's employment with the
Corporation, whether such termination is initiated by the Corporation or Sharon,
with or without cause, or upon the disability of Sharon, Venturian (first) and
Atio (second) shall have the option to purchase all or any portion of the Shares
held by Sharon (including, without limitation, any Shares purchased or
purchasable by Sharon following the termination of his employment with the
Corporation pursuant to any options held by Sharon), and the Corporation shall
have the option to redeem any of such Shares not purchased by Venturian or Atio,
on the terms set forth in this Section 2.3. Venturian shall exercise its option
pursuant to this paragraph (a), if it desires to do so, by delivering to Sharon
and Atio not later than 90 days following the termination of Sharon's
employment, written notice of such exercise specifying the number of Shares to
be purchased by it. If Venturian does not so elect to purchase all of the Shares
of Sharon within such 90 day period, Atio shall exercise its option pursuant to
this paragraph (a), if it desires to do so, by delivering to Sharon not later
than 120 days following the termination of Sharon's employment, written notice
of such exercise specifying the number of shares to be purchased by it; and the
Corporation shall exercise its option pursuant to this paragraph (a), if it
desires to do so, by delivering to Sharon not later than 150 days following the
termination of Sharon's employment, written notice of such exercise.
2. Upon the death of Sharon, Venturian (first) and Atio (second)
shall have the option to purchase all or any portion of the Shares held by
Sharon (including, without limitation, any Shares purchased or purchasable by
his estate following his death pursuant to any options held by him), and the
Corporation shall redeem any of such Shares that Venturian and Atio have not
elected to so purchase, on the terms set forth in this Section 2.3.
3. Upon the termination of Sharon's employment with the
Corporation, whether such termination is initiated by the Corporation or Sharon,
with or without cause, or
<PAGE>
upon the disability of Sharon, if Venturian, Atio and/or the Corporation do not
elect to purchase all of the Shares of Sharon pursuant to paragraph (a) and (b)
above, then Sharon (or his estate) shall have the option to cause the
Corporation to purchase all (but not less than all) of the remaining Shares then
held by Sharon (including, without limitation, any Shares purchased or
purchasable by Sharon following the termination of his employment with the
Corporation pursuant to any options held by Sharon) on the terms set forth in
this Section 2.3. Sharon shall exercise his option pursuant to this paragraph
(c), if he desires to do so, by delivering to the Corporation, not later than
180 days following the termination of his employment, written notice of such
exercise.
4. Not later than 60 days following the death of Sharon or the
termination of his employment with the Corporation, the Corporation shall
deliver to Sharon (or his estate), Atio and Venturian written notice specifying
the price per Share for his Shares, as determined by the Corporation's Board of
Directors in good faith. If none of Venturian, Atio or Sharon delivers to the
Corporation, within 30 days of its receipt of such notice, written notice
objecting to such price per Share, the price per Share to be paid by Venturian,
Atio and/or the Corporation upon the purchase or redemption of Sharon's Shares
pursuant to paragraphs (a) or (b) of this Section 2.3 (the "Option Price") shall
be the price so determined, and the price per Share to be paid by the
Corporation upon the redemption of Sharon's shares pursuant to paragraph (c) of
this Section 2.3 (the "Put Price") shall be the Option Price reduced by 35%.
5. If Sharon, Atio or Venturian delivers to the Corporation,
within 30 days of his or its receipt of notice from the Corporation specifying
the price per Share as determined by the Corporation's directors, written notice
objecting thereto, the Option Price shall be determined by an Independent
Appraiser acceptable to Sharon, Atio, Venturian and the Corporation based upon
what a
<PAGE>
willing buyer would pay to a willing seller in an arm's-length transaction for
the entire equity interests of the Corporation. If Sharon, Atio, Venturian and
the Corporation are unable to agree upon an Independent Appraiser within 30 days
of the delivery of the aforementioned notice of objection, the Independent
Appraiser shall be selected by arbitration pursuant to Section 10.8 below. In
the event that the Option Price has not been determined as of five days prior to
the expiration of any of the option periods set forth in Paragraphs (a) through
(c) above, such period shall be extended to the date that is five days after the
determination of the Option Price in accordance with this Paragraph (e), and all
periods ending subsequent thereto shall be extended by the same amount of time.
6. Any purchase or redemption pursuant to this Section 2.3 shall
close not later than 10 days following the determination of the Option or Put
Price pursuant to Paragraph (d) or (e) above or, if later, with 190 days
following the death of Sharon or the termination of his employment, as the case
may be. Any Option Price owing shall be paid by the Corporation, Atio and/or
Venturian, as the case may be, delivering the amount owing to Sharon by
certified check or wire transfer of immediately available funds to an account
designated by Sharon. Any Put Price owing shall be paid by the Corporation
delivering to Sharon 20% of the Put Price by certified check or wire transfer of
immediately available funds to an account designated by Sharon, and the
remainder by the Corporation delivering to Sharon its promissory note ("the
Note") in the amount so owing, with interest accruing on a principal balance
thereof remaining unpaid from time to time at the corresponding applicable
federal rate under Section 1274 of the Internal Revenue Code. Interest and
principal owing under the Note shall be payable in twenty equal quarterly
installments on or prior to the 15th day of the first month of each calendar
quarter following the closing of such purchase. The Corporation may at any time
and from time to time pre-pay any or all amounts owing under the Note, without
premium or penalty. All payments
<PAGE>
under the Note shall be applied first in payment of accrued but unpaid interest
owing thereunder and thereafter in reduction of the principal balance thereof.
The Shares of Sharon shall be deemed to have been transferred to Venturian
and/or Atio and/or canceled, as the case may be, automatically and immediately
upon Venturian's, Atio's and/or the Corporation's delivery of the Option or Put
Price in accordance with this Paragraph (f), and Sharon (or his estate) shall
promptly return to the Corporation all certificates representing the Shares so
redeemed or transferred, duly endorsed for transfer or accompanied by assignment
separate from certificate.
D. REDEMPTIONS UPON TERMINATION OF EMPLOYMENT. Upon the termination of
an individual Shareholder's employment with the Corporation (other than Sharon),
whether such termination is initiated by the Corporation or such Shareholder,
with or without cause, or upon the death or disability of such Shareholder, the
Corporation shall have the option to redeem from such Shareholder all of the
Shares of such Shareholder (including without limitation any Shares purchased by
such Shareholder following the termination of his or her employment with the
Corporation pursuant to any options held by such Shareholder), on the terms set
forth in this Section 2.4. The Corporation shall exercise such option, if it
desires to do so, by delivering to such Shareholder not later than 120 days
following the termination of such Shareholder's employment, written notice of
such election accompanied by payment of the redemption price therefor by
certified check or wire transfer of immediately available funds to an account
designated by such Shareholder. The Shares of such Shareholder shall be canceled
automatically and immediately upon the Corporation's delivery of such notice and
payment of such redemption price, and such Shareholder shall promptly return to
the Corporation all certificates representing the Shares so redeemed, duly
endorsed for transfer or accompanied by assignment separate from certificate.
The redemption price for any Shares redeemed pursuant this Section 2.4 shall be
as determined in good faith by the Corporation's board of directors.
<PAGE>
E. ATIO AND VENTURIAN AFFILIATES. Notwithstanding any other provisions
set forth herein, the parties expressly agree that each Principal Shareholder
shall have an absolute right to Transfer any Shares owned by such Principal
Shareholder to any entity with which such Principal Shareholder has a
Parent/Subsidiary Relationship (as hereinafter defined) or a Sister Corporation
Relationship (as hereinafter defined) without regard to the provisions of this
Section 2 or Sections 3, 4 or 5 hereof, provided that such transferee agrees in
writing to be bound by the terms of this Agreement as a "Shareholder" hereunder
and as a "Principal Shareholder" under Section 6 hereof. Without limiting the
generality of the foregoing, any such transferee shall be obligated to purchase
or sell Shares pursuant to Section 1.5 hereof upon the election of its
transferor as fully as if such Shares remained the Shares of the transferor, and
no Transfer pursuant to this Section 2.5 shall relieve the transferor of any of
its obligations hereunder. Any Shares transferred pursuant to this Section 2.5
shall be deemed to be the Shares of the transferor for purposes of determining
the respective Proportionate Shares of Venturian and Atio and the Ratable Share
of Sharon. For purposes of this Section 2.5, two subject entities shall be
deemed to have a Parent/Subsidiary Relationship if one of such subject entities
(i) owns, beneficially and of record, and has the power to vote, more than 50%
of the issued and outstanding voting securities of the other such subject
entity, and (ii) has the power to elect or otherwise designate more than 50% of
the members of the board of directors or other governing body of the other such
subject entity; and two subject entities shall be deemed to have a Sister
Corporation Relationship if a common entity, directly or indirectly through one
or more other entities with whom such entity has a Parent/Subsidiary
Relationship (i) owns, beneficially and of record, and has the power to vote,
more than 50% of the issued and outstanding voting securities of both such
subject entities and (ii) has the power to elect or otherwise designate more
than 50% of the members of the Board of Directors or other governing body of
both such subject entities.
<PAGE>
III. RIGHT OF FIRST REFUSAL
A. BASIC TERMS.
1. Upon the occurrence of a Third Party Offer (as hereinafter
defined) or Involuntary Transfer (as hereinafter defined), each Shareholder
shall have a right of first refusal to purchase the Shares subject thereto and
the Corporation shall have a right of first refusal to purchase any such Shares
that the Shareholders do not elect to purchase, all in accordance with the
provisions of this Section 3. The price and terms of any such purchase shall be
(i) in the case of a Third Party Offer, the price and terms contained in the
Third Party Offer or, if the Third Party Offer involves Non-Cash Consideration
(as defined in Section 3.2 hereof), at the separate election of each Other
Shareholder (as defined in paragraph (b) below), the cash equivalent thereof as
specified in the Transfer Notice (as defined in Section 3.2 hereof), payable by
wire transfer of immediately available funds to an account designated by the
Selling Shareholder upon the closing of such transaction, or (ii) in the case of
an Involuntary Transfer, the per-share book value of the Corporation as of the
last day of the Corporation's fiscal year next preceding the date of the
Involuntary Transfer, determined in accordance with generally accepted
accounting principals consistently applied, multiplied by the number of Sale
Shares (as hereinafter defined), payable in the manner provided in Section 3.6
hereof.
2. "Third Party Offer" means the receipt by a Shareholder of a
bona fide, written offer from a third party (or another Shareholder) that would
be considered financially responsible by a reasonably prudent seller to purchase
all (but not less than all) of such Shareholder's Shares, which offer such
Shareholder intends to accept. "Involuntary Transfer" means the transfer of
title to or beneficial ownership of any Shares upon divorce, insolvency,
default, forfeiture, court order, an assignment for the benefit of creditors, or
otherwise than by a voluntary decision of the transferor, but excluding a
transfer to the estate of a Shareholder upon his or her death. The Shareholder
whose
<PAGE>
Shares are subject to a Third Party Offer or Involuntary Transfer is hereinafter
referred to as the "Selling Shareholder", the other Shareholders are hereinafter
referred to as the "Other Shareholders", the Shares that are subject to the
Third Party Offer or Involuntary Transfer are hereinafter referred to as the
"Sale Shares", and the third party making a Third Party Offer is hereinafter
referred to as the "Third Party Offeror".
B. NOTICE OF TRIGGERING EVENTS. Upon the occurrence of a Third Party
Offer, the Selling Shareholder shall deliver a notice thereof (a "Transfer
Notice") to each of the Other Shareholders and the Corporation, including with
such Transfer Notice the name and address of the Third Party Offeror, the
maximum number of Shares the Third Party Offeror party is willing to acquire
(which shall not be less than all of the Shares of the Selling Shareholder), a
copy of such written offer containing all of the terms and conditions thereof
and, if the consideration payable under such Third Party Offer includes
securities or other property other than cash and promissory notes (non-cash
consideration), the per share cash equivalent thereof. Upon the occurrence of an
Involuntary Transfer, the Selling Shareholder or the transferee thereof shall
give notice of such transfer to each of the Other Shareholders and the
Corporation. As used in this Agreement, "Notice Date" means the date upon which
a notice required to be given pursuant to this Paragraph 3.2 is given to the
last party entitled to be so notified.
C. EXERCISE OF RIGHT OF FIRST REFUSAL. An Other Shareholder that
desires to exercise its right of first refusal pursuant to this Section 3 shall
do so by delivering to the Selling Shareholder, the Corporation and each of the
Other Shareholders, prior to the forty-fifth day following the Notice Date,
written notice of exercise specifying the number of Sale Shares to be purchased
by it and, in the case of a Third Party Offer that involves Non-Cash
Consideration, whether such Other Shareholder elects to pay with such Non-Cash
Consideration or the cash equivalent thereof as specified in the
<PAGE>
Transfer Notice. Such notice of exercise may also state, if the Other
Shareholder so desires, that such Other Shareholder elects to exercise its
Co-sale Right pursuant to Section 4 hereof in the event that the Other
Shareholders and the Corporation, in aggregate, do not elect to purchase all of
the Sale Shares. The Corporation shall exercise its right of first refusal
pursuant to this Section 3, if it desires to do so, by delivering to the Selling
Shareholder and each of the Other Shareholders, prior to the sixtieth day
following the Notice Date, written notice of exercise specifying the number Sale
Shares to be purchased by it (but the Corporation shall have the right to
purchase only that number of Shares that the Other Shareholders have not elected
to purchase). The period commencing on the Notice Date and terminating sixty
days thereafter is hereinafter referred to as the "Option Period".
D. PURCHASE AND CLOSING. In the event the Other Shareholders and the
Corporation elect to purchase all (but not less than all) of the Sale Shares,
the Other Shareholders and the Corporation shall purchase from the Selling
Shareholder, and the Selling Shareholder shall sell to the Other Shareholders
and the Corporation, the Sale Shares at the price and on the terms determined in
accordance with Paragraph 3.1 hereof. The closing of any such purchase shall
occur at a time and place acceptable to all purchasing and selling parties or,
if such parties are not able to agree upon a time and place, at a time and place
specified by the Chief Executive Officer of the Corporation. In the event the
Other Shareholders, in the aggregate, elect to purchase more than all of the
Sale Shares, the Sale Shares shall be divided among the Other Shareholders so
electing in proportion to their relative Share holdings; provided, however, that
if the Selling Shareholder is Sharon and Venturian elects to purchase all or any
portion of the Sale Shares, Venturian shall have a first right to purchase that
number of Sale Shares that it elects to purchase, and any remainder shall be
divided among the Other Shareholders and the Corporation in accordance with the
provisions of this Section 3.
<PAGE>
E. ELECTION NOT TO PURCHASE. Unless the Other Shareholders and the
Corporation, in aggregate, elect to purchase all of the Sale Shares, the Selling
Shareholder or its transferee, as the case may be, shall not be required to sell
to the Other Shareholders or the Corporation any of the Sale Shares. In such
event, if the Triggering Event was a Third Party Offer, the Selling Shareholder
shall be entitled (subject to Sections 4 and 5 hereof), for a period of 90 days
commencing on the expiration of the Option Period, to sell all (but not less
than all) of the Sale Shares, but only (i) to the Third Party Offeror, (ii) on
the terms and subject to the conditions of the Third Party Offer, as specified
in the copy accompanying the Transfer Notice, and (iii) provided that the
transferee agrees in writing to be bound by the terms and provisions of this
Agreement (and, upon such transferee agreeing in writing to be bound by the
terms and provisions of this Agreement, such transferee shall be deemed to be a
"Shareholder" hereunder, entitled to all of the rights and benefits thereof). If
the Sale Shares are not so transferred within such 90 day period, then such
Third Party Offer shall be deemed to have expired. Such Shares shall not then be
transferred except in accordance with this Agreement.
F. PAYMENT TERMS UPON INVOLUNTARY TRANSFER. Any purchase price payable
upon the exercise of a right of first refusal pursuant to Paragraph 3.1 hereof
upon the occurrence of an Involuntary Transfer shall be payable (i) in cash at
the closing of such purchase to the extent of 20% of the purchase price, and
(ii) the remainder by the purchasing party delivering at the closing its
promissory note (the "Note") in such amount. The Note shall provide for payment
of all principal and interest owing thereunder in 60 equal monthly installments
commencing on the first day of the first month following the closing and
continuing on the first day of the each of the next 59 months, with interest
accruing on the principal balance remaining unpaid from time to time at the rate
of interest publicly announced by First Bank National Association, Minneapolis,
Minnesota, or its successor as its "reference rate" as of the date of the
closing (or, if First Bank National Association or
<PAGE>
its successor is not then publicly announcing a "reference rate," the rate of
interest publicly announced by First Bank National Association or its successor
as being payable by its commercial customers of the highest credit quality).
Each payment under the Note shall be applied first to accrued but unpaid
interest owing thereunder and any remainder in reduction of the principal
balance thereof. If any installment of principal or interest owing under the
Note is not paid within ten days from the date due, then, at the option of the
holder of the Note, the entire unpaid principal balance thereof, plus all
accrued but unpaid interest thereon, shall become immediately due and payable in
full without notice of any kind, presentment or demand for payment, notice of
nonpayment, protest and notice of protest being waived.
IV. CO-SALE RIGHTS
A. RIGHT OF CO-SALE. If a Selling Shareholder is transferring any
Shares upon the occurrence of a Third Party Offer (whether such transfer is to
the Third Party Offeror, another Shareholder or the Corporation), each Other
Shareholder shall have the right to participate in such transfer (a "Co-Sale
Right") on the terms and subject to the conditions set forth in the Transfer
Notice (except that, if such transfer involves Non-Cash Consideration, each
Other Shareholder may elect to receive payment of the purchase price in the cash
equivalent thereof, as specified in the Transfer Notice, by wire transfer of
immediately available funds at the closing of such purchase). Each Other
Shareholder desiring to exercise its Co-Sale Right shall do so by delivering to
the Selling Shareholder, the Corporation and each of the Other Shareholders,
prior to the forty-fifth day following the Notice Date, written notice of such
election indicating the number of Shares such Other Shareholder elects to
transfer under such Co-Sale Right (the "Co-Sale Shares"), up to the maximum
number such Other Shareholder is entitled to so transfer, determined in
accordance with Paragraph 4.2. To the extent one or more Other Shareholder
exercises its right of Co-Sale in
<PAGE>
accordance with this Section 4, the number of Sale Shares that the Selling
Shareholder may transfer in such transaction shall be correspondingly reduced.
B. NUMBER OF SHARES TRANSFERABLE. The number of Shares that each Other
Shareholder is entitled to transfer under its Co-Sale Right shall be equal to
the product obtained by multiplying (i) (A) if the transferee is the Third Party
Offeror, the maximum number of Shares such Third Party Offeror has agreed to
purchase, as indicated in the Transfer Notice, or (B) if the transferee is one
or more Other Shareholders and/or the Corporation, the total number of Sale
Shares, by (ii) a fraction the numerator of which is the number of Shares owned
by such Other Shareholder at the time of such transfer and the denominator of
which is the total number of Shares held by all Shareholders participating in
such transfer.
C. DELIVERIES. Each Other Shareholder electing to exercise its Co-Sale
Right under this Section 4 (a "Participant") shall promptly deliver to the
Selling Shareholder for transfer to the prospective purchaser one or more
certificates, properly endorsed for transfer, which represent the number of
Shares such Participant elects to transfer. Such Shares shall be transferred to
the transferee on the terms and subject to the conditions specified in the
Transfer Notice (subject to the Other Shareholders' rights to receive the cash
equivalent of any Non-Cash Consideration) and the Selling Shareholder shall
concurrently remit to such Participant that portion of the sale proceeds to
which such Participant is entitled by reason of its participation in such
transfer, less a percentage of the reasonable legal, investment banking, and
other fees and expenses of such sale equal to the percentage that the Co-Sale
Shares of such Participant bears to all Shares so transferred. To the extent
that any prospective purchaser or purchasers prohibit such assignment or
otherwise refuses to purchase Shares from a Participant exercising its Co-Sale
Right hereunder, the Selling Shareholder shall not sell to such purchaser any
Sale Shares unless, simultaneously with such sale, the Selling Shareholder
<PAGE>
purchases the Co-Sale Shares of each Participant on the terms and subject to the
conditions specified in the Transfer Notice.
D. NO WAIVER. The exercise or non-exercise of the Co-Sale Right of the
Other Shareholders hereunder in connection with one or more sales shall not
adversely affect their rights to participate in subsequent sales in accordance
with the terms of this Agreement.
E. REMEDIES. In the event that a Selling Shareholder sells any Shares
in contravention of the Co-Sale Rights under this Section 4, each Other
Shareholder, in addition to such other remedies as may be available at law or in
equity, shall have the right to sell to the Selling Shareholder the number of
Shares such Other Shareholder was entitled to transfer pursuant to this Section
4, and the Selling Shareholder shall pay to the such Other Shareholder, in
consideration thereof, the consideration such Other Shareholder would have
received in any such sale and all reasonable legal and other fees and expenses
incurred by such Other Shareholder in connection with the enforcement of its
rights hereunder.
V. BRING ALONG RIGHTS
A. BRING ALONG RIGHT. In the event that, upon the occurrence of a Third
Party Offer, (i) the Selling Shareholder is Venturian or Atio, and (ii) the
Other Shareholders and the Corporation do not purchase the Sale Shares pursuant
to Section 3 hereof, the Selling Shareholder may require the Other Shareholders
to exercise their Co-Sale Rights in accordance with Section 4 hereof. To
exercise such election, such Selling Shareholder shall so indicate in the
Transfer Notice and, within 15 days after the expiration of the Option Period,
such Selling Shareholder shall deliver to each Other Shareholder written notice
specifying the number of Shares to be sold by such Other Shareholder (determined
in accordance with Paragraph 4.2 hereof). Promptly upon receipt of such notice,
each Other Shareholder shall deliver to the Selling Shareholder one or more
certificates, properly endorsed
<PAGE>
for transfer, representing the number of Shares to be transferred by such Other
Shareholder and, upon the closing of such sale, the Selling Shareholder shall
remit to each Other Shareholder that portion of the sale proceeds to which such
Other Shareholder is entitled by reason of its participation in such sale (less
a percentage of the legal, investment banking and other reasonable fees and
expenses of such sale equal to the percentage that such Other Shareholder's
Co-Sale Shares bears to all Shares transferred in such sale).
VI. NONCOMPETITION.
A. Neither Principal Shareholder shall, anywhere in the world (except
outside the United States and Canada pursuant to a distribution or license
agreement with the Corporation) at any time when such Shareholder or any entity
with whom such Shareholder has a Parent/Subsidiary Relationship or a Sister
Corporation Relationship owns any Shares and for a period of five years
thereafter, directly or indirectly, whether alone, as partner with another,
shareholder in a corporation (other than as a less than 2% shareholder in a
corporation listed on a national securities exchange), lender, consultant,
financier, agent or otherwise, except through and on behalf of the Corporation:
1. engage in the marketing, sale, licensing or other distribution
of software for telephone call centers anywhere in the world; or
2. solicit or otherwise attempt to hire, or hire, as an employee,
independent contractor or otherwise, any individual who was an employee of the
Corporation at any time within the one year period preceding the solicitation or
hiring of such individual by such Principal Shareholder; or
3. induce or attempt to induce any person or entity who is an
independent contractor, other service provider, supplier or customer of the
Corporation to stop doing business or
<PAGE>
reduce its business with the Corporation, or otherwise seek to disrupt or impair
the business relationship between the Corporation and such person or entity.
B. The Corporation shall not, anywhere in the world, at any time when a
Shareholder or any entity with whom such Shareholder has a Parent/Subsidiary
Relationship or a Sister Corporation Relationship owns any Shares and for a
period of five years thereafter, directly or indirectly, whether alone, as
partner with another, shareholder in a corporation (other than as a less than 2%
shareholder in a corporation listed on a national securities exchange), lender,
consultant, financier, agent or otherwise, solicit or otherwise attempt to hire,
as an employee, independent contractor or otherwise, any individual who was an
employee of such Shareholder or of any entity with whom such Shareholder has a
Parent/Subsidiary Relationship or a Sister Corporation Relationship, at any time
within the one year period preceding the solicitation or hiring of such
individual by the Corporation.
C. Provided, however, that in the event that that certain Technology
License, Transfer and Development Agreement of even date herewith between the
Corporation and Atio (PTY) is terminated without a transfer to the Corporation
of the AtioCALL Product Rights (as defined therein) because the Corporation
ceases to be actively engaged in the marketing of computer telephony products,
this Section 6 shall terminate and be of no further force or effect.
VII. TERMINATION.
A. PUBLIC OFFERING. Sections 1, 2, 3, 4 and 5 of this Agreement shall
terminate automatically and immediately when a registration statement filed by
the Corporation in connection with a sale by the Corporation of its common
shares is declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended (provided such sale is consummated).
<PAGE>
B. EACH SHAREHOLDER. The rights and obligations of each Shareholder
hereunder (other than those set forth in Section 6 hereof) shall terminate
automatically and immediately at such time as such Shareholder (and, in the case
of the Principal Shareholders, any parties to whom such Shareholder has properly
transferred Shares pursuant to Section 2.5 above) no longer holds of record any
Shares; provided, however, that no such termination shall relieve any
Shareholder for any breaches of this Agreement by such Shareholder occurring
prior thereto.
VIII. LEGEND ON SHARE CERTIFICATES
A. LEGEND. The Corporation shall cause to be conspicuously endorsed on
each certificate representing Shares a legend reading substantially as follows:
Any transfer of the shares represented by this certificate, or
any interest therein, is restricted by, and subject to, the provisions
of that certain Shareholders Agreement among Venturian Corp., Atio
Corporation International, Inc., Ilan Sharon, and the Corporation dated
________, 1997, a copy of which Agreement is on file with the Secretary
of the Corporation. Such agreement also concerns certain matters with
respect to the governance of the Corporation.
B. COPY TO BE ON FILE. A copy of this Agreement shall be filed with the
Secretary of Corporation. So long as this Agreement shall remain in force, a
legend reading substantially as above shall be conspicuously endorsed on each
certificate representing Shares hereafter issued by the Corporation.
IX. RIGHTS TO SPECIFIC PERFORMANCE
In view of the purposes of this Agreement, the parties hereto
acknowledge that in the event of a breach of any term or condition of this
Agreement the remedy at law would be inadequate. Accordingly, in such event, the
injured party or parties, at his, her, its or their option, shall have the right
to compel the specific performance of this Agreement in a court of competent
jurisdiction;
<PAGE>
provided, however, that this right shall not be deemed to preclude an injured
party or parties from pursuing any other remedy that may be available at law or
in equity.
X. MISCELLANEOUS PROVISIONS
A. NOTICES. All notices, requests, and other communications from any of
the parties hereto to another shall be in writing and shall be considered to
have been duly given or served if personally delivered, or sent by first class,
certified or registered mail, return receipt requested, or recognized
international courier, postage prepaid, to the party at his, her or its address
as provided below, or to such other address as such party may hereafter
designate by written notice to the other parties:
If to the Corporation: To the address of its registered office or
principle executive offices.
If to any Shareholder: To the address of such Shareholder as
shown on such books and records of the
Corporation.
If to Atio (PTY): P.O. Box 4467
Rivonia 2128
Republic of South Africa
Attention: Gary Craul
Any such notice shall be deemed given when delivered
B. AMENDMENT. This Agreement may be altered or amended only by a
written amendment signed by Shareholders representing 75% or more of the issued
and outstanding Shares.
C. GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the state of Minnesota.
D. PARTIES IN INTEREST. This Agreement shall be binding upon the heirs,
personal representatives, successors, and assigns of the parties hereto. The
parties hereto each covenant and agree that they, their heirs, personal
representatives, successors and assigns shall take all action and
<PAGE>
execute any and all instruments, releases, assignments, consents and
other documents that may reasonably be required of them in order to
carry out the provisions of this Agreement.
E. CAPTIONS. The captions at the head of a Section or Paragraph of this
Agreement are designed for convenience of reference only and are not to be
resorted to for the purpose of interpreting any provisions of this Agreement.
F. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties hereto on the subject matter hereof and supersedes any prior
agreement or understanding among them on such subject matter. Without limiting
the generality of the foregoing, the Existing Shareholders Agreement is hereby
terminated and of no further force or effect.
G. NO THIRD PARTY BENEFICIARIES. This Agreement is made solely and
specifically among and for the benefit of the parties hereto and such other
persons as become "Shareholders" in accordance with the terms of this Agreement.
No other person or entity shall have any rights, interests or claims hereunder
or be entitled to any benefits under or on account of this Agreement as a third
party beneficiary or otherwise.
H. ARBITRATION; LEGAL PROCEEDINGS.
1. The parties shall attempt in good faith to resolve any dispute
arising out of or relating in any manner to this Agreement or the breach,
termination or validity thereof promptly by negotiation among representatives of
the parties to the dispute, each of whom has authority to settle the
controversy. Any party may give the others written notice that a dispute exists
(a "Notice of Dispute"). The Notice of Dispute shall include a statement of such
party's position and the name and title of the representative who will represent
such party. Within ten (10) days of the delivery of the Notice of Dispute, the
parties' respective representatives shall meet at a mutually acceptable time and
place, and thereafter as long as they reasonably deem necessary, to attempt to
resolve the dispute. All
<PAGE>
documents and other information or data on which each party relies concerning
the dispute shall be furnished or made available on reasonable terms to the
other party at or before the first meeting of the parties as provided by this
paragraph.
2. Any controversy or claim arising out of or relating to this
Agreement or the breach, termination or validity thereof, if not settled by
negotiation as provided in paragraph (a) of this Section 9.8, shall be settled
by arbitration in New York, New York, in accordance with the CPR Rules for
Non-Administered Arbitration of Business Disputes, by three arbitrators. Any
party may initiate arbitration twenty (20) days following the delivery of a
Notice of Dispute if the dispute has not then been settled by negotiation, or
sooner if any other party fails to participate in negotiation in accordance with
paragraph (a) above. The three arbitrators shall be appointed as provided by CPR
Rule 5, Selection of Arbitrators by the parties. The arbitrators shall have no
power to add to or detract from the agreement of the parties as set forth herein
and shall not have the authority to make any ruling or award that does not
conform to the terms and conditions of this Agreement. Without limitation of the
foregoing, the arbitrators shall have no power to terminate this Agreement other
than in accordance with its terms or to award punitive damages. The arbitration
procedure shall be governed by the United States Arbitration Act, 9 U.S.C. ss.
1-16, and the award rendered by the arbitrator shall be final and binding on the
parties and may be entered in any court having jurisdiction thereof.
3. Each party shall have discovery rights as provided by the
United States Federal Rules of Civil Procedure; provided, however, that all such
discovery shall be commenced and concluded within sixty (60) days of the
initiation of arbitration.
4. It is the intent of the parties that any arbitration shall be
concluded as quickly as reasonably practicable. Unless the parties otherwise
agree, once commenced, the hearing on the
<PAGE>
disputed matters shall be held four days a week until concluded, with each
hearing date to begin at 9:00 a.m. and to conclude at 5:00 p.m. The arbitrators
shall use all reasonable efforts to issue the final award or awards within a
period of five business days after closure of the proceedings. Failure of the
arbitrators to meet the time limits of this Section 9.8(d) shall not be a basis
for challenging the award.
5. The arbitrators shall instruct the non-prevailing party or
parties to pay all costs of the proceedings, including the fees and expenses of
the arbitrators and the reasonable attorneys' fees and expenses of the
prevailing party or parties. If the arbitrators determine that there is not a
prevailing party, each party shall be instructed to bear its own costs and the
fees and expenses of the arbitrators shall be divided among the parties in
accordance with their relative share holdings as of the commencement of the
proceedings.
6. Each party hereto hereby agrees that any legal proceeding
instituted to enforce an arbitration award hereunder will be brought in the
United States Federal Court situated in New York (which shall have sole and
exclusive jurisdiction thereof), and hereby submits to personal jurisdiction
therein and irrevocably waives any objection as to venue therein and further
agrees not to plead or claim in any such court that any such pleading has been
brought in an inconvenient form. Venturian hereby designates, appoints and
empowers Morris M. Sherman, presently having offices at Leonard, Street and
Deinard, Suite 2300, 150 South Fifth Street, Minneapolis, Minnesota 55402, as
Venturian's true and lawful agent for service of process to receive and accept
on its behalf service of process in any such proceeding brought in any such
courts. Atio and Atio (PTY) hereby designate, appoint and empower Stuart M.
Berkson, P.C., presently having offices at 227 West Monroe, Chicago, Illinois
60606, as their true and lawful agent for service of process to receive and
accept on their behalf service of process in any such proceeding bought in any
such courts.
<PAGE>
Sharon hereby designates, appoints and empowers Steven Wolosky, presently having
offices at Olshan Grundman Frome & Rosenzweig LLP, 505 Park Avenue, 16th Floor,
New York, New York 10022-1106, as Sharon's true and lawful agent for service of
process to receive and accept on his behalf service of process in any such
proceeding brought in any such courts. Each of the foregoing parties agree that
the failure of their process agent appointed by such person to give notice of
process to such person shall not impair or affect the validity of service upon
such agent or of any judgment based thereon, and each such person irrevocably
consents to the service of process in any such proceeding by the mailing of
copies thereof by certified mail, postage prepaid, to such person's address for
notice under this Agreement. Nothing herein shall preclude any of the parties
hereto from servicing process in any other matter or in any other jurisdiction
in connection with enforcing an arbitration award hereunder.
I. SECURITY INTEREST.
1. In order to secure the obligation of Atio (PTY) to make full
and timely payment of the Deferred Installments (as defined in Joint Venture
Agreement) and to perform the services under the License Agreement for which it
received the Prepayment, Atio hereby grants to the Corporation a security
interest in 28,000 Shares issued to Atio pursuant to the Joint Venture
Agreement, and in all Shares issued with respect thereto by way of stock
dividend or stock split, and all other distributions thereon and proceeds
thereof (the "Default Shares"). To perfect such security interest, Atio,
contemporaneously with the execution and delivery of this Agreement, is
delivering to Venturian the certificate representing the Default Shares, to be
held by Venturian on behalf of the Corporation in accordance with the terms of
this Section 10.9.
2. Upon the occurrence of an Event of Default (as hereafter
defined) then, at the election of Venturian upon written notice to Atio and Atio
(PTY), automatically and
<PAGE>
immediately without any further action by any party (i) the Deferred
Installments shall become immediately due and payable in full, (ii) the Default
Shares shall be deemed to have been transferred to the Corporation and canceled,
(iii) the number of directors to be designated by Atio and Venturian,
respectively, shall be adjusted in accordance with Paragraph 1.4 (d) above as if
a Capital Contribution had been made by one but not both Principal Shareholders
(with Venturian being able to designate at least one extra director), (iv)
Sections 1.3 and 1.6 of this Agreement shall be terminated and of no further
force or effect, and (v) the intellectual property subject to the License
Agreement shall be transferred to the Corporation. Atio and Atio (PTY) shall
execute such instruments and take such other action as Venturian may reasonably
request to carry out the provisions of this Section 10.9. The foregoing shall
not relieve Atio (PTY) of its obligation to pay the Deferred Installments to the
extent the amount thereof exceeds the value of the Default Shares (at the value
thereof under the Joint Venture Agreement as of the closing of the transactions
thereunder), and Venturian, in its own name or on behalf of the Corporation, may
enforce payment thereof in accordance with Section 10.8 of this Agreement and
Section 10.12 of the Joint Venture Agreement. As used in this Section 10.9,
"Event of Default" means the occurrence of either one or both of the following,
if the same continues for a period of ten days following the delivery of written
notice thereof by Venturian to Atio (PTY): (i) the failure of Atio (PTY) to make
payment of any Deferred Installment in the full amount thereof on or prior to
the date such Deferred Installment is due under the terms of the Joint Venture
Agreement (provided, however, that if such Deferred Installment is due by reason
of the acceleration thereof by the Chief Executive Officer of the Corporation
pursuant to the proviso in subsection 1.2(a)(ii) of the Joint Venture Agreement,
Atio (PTY) shall be entitled to sixty days
<PAGE>
notice, and the opportunity to make such payment during such sixty days, prior
to such failure constituting an Event of Default hereunder), or (ii) the failure
of Atio (PTY) to repay in full all or such portion of the Prepayment as to which
Venturian has demanded repayment if (and only if) (A) Atio (PTY) has failed to
provide within the ten calendar months following the date of this Agreement all
services for which the Prepayment was made, or a dispute exists between
Venturian and Atio (PTY) as to whether such services were so provided, and (B)
Venturian has delivered to Atio (PTY) written notice of such failure and Atio
(PTY) has failed to cure the same within 30 day of its receipt of such notice,
and (C) Venturian has demanded repayment of that portion of the Prepayment for
which it believes in good faith services were not provided in accordance with
the terms of the License Agreement. Upon the occurrence of an Event of Default
under the foregoing clause (ii), any amount of the Prepayment required to be so
repaid shall constitute part of the Deferred Installments for purposes of this
Agreement and any dispute among the parties as to amounts owing by the
Corporation to Atio (PTY) under the License Agreement and the services that Atio
(PTY) is obligated to provide thereunder shall be resolved in accordance with
the terms of the License Agreement.
3. So long as no Event of Default has occurred, Atio shall possess
all of the rights of ownership of the Shares (subject to the other terms of this
Agreement), including without limitation the right to receive any dividends or
other distributions thereon and the right to vote, grant consents or take
written actions with respect thereto. Upon the full and timely payment of all of
the Deferred Installments and the timely performance of all services for which
the Prepayment was made, Venturian shall deliver to Atio the certificate
representing the Shares pledged hereunder together with the executed assignment
separate from certificate.
<PAGE>
J. INABILITY TO MAKE DISTRIBUTIONS. If, at the time the Corporation is
required hereunder to purchase any Shares of any party or make any payments or
distributions hereunder or under any promissory notes issued pursuant hereto, it
is prohibited from doing so under Section 302A.551 of Minnesota Statutes (or
such other provision of a successor or other statute as may govern such
transaction), then notwithstanding anything in this Agreement to the contrary,
the Corporation shall not be required to purchase such Shares or make such
payment or distribution until such time as such purchase would not be so
prohibited; provided, however, that the directors and responsible officers of
the Corporation shall act in good faith in making any determinations or taking
any actions required under Section 302A.551 of Minnesota Statutes or other
provision of law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and the year first above written.
VENTURIAN CORP.
By /s/ Gary B. Rappaport
Its President
ATIO CORPORATION INTERNATIONAL, INC.
By /s/ Willem Ellis
Its Chairman
/s/ Ilan Sharon
Ilan Sharon
VENTURIAN SOFTWARE ENTERPRISES, INC.
<PAGE>
By /s/ Ilan Sharon
Its President
<PAGE>
Atio Corporation (PTY) Ltd., which owns more than 50% of the issued and
outstanding voting securities of Atio Corporation International, Inc., hereby
agrees to observe and be bound by Sections 1.7 and 10.9 hereof and to observe
and be bound by Section 6 and Section 10.8 hereof as fully as if it were a
"Principal Shareholder," a "Shareholder" and "Atio" as named therein.
ATIO CORPORATION (PTY) LTD.
By /s/ Gary Craul
Its Chief Executive
EXHIBIT 10.4
TECHNOLOGY LICENSE AND TRANSFER AGREEMENT
BETWEEN
ATIO CORPORATION USA, INC.
ATIO CORPORATION (PTY) LTD
ATIO CORPORATION INTERNATIONAL, INC.
VENTURIAN CORP.
AND
ILAN SHARON
DATED: NOVEMBER 14, 1997
<PAGE>
AGREEMENT
This Agreement is made and entered into as of the 14 day of November,
1997, by and between Venturian Software Enterprises, Inc. (a company which will
change its name to Atio Corporation USA, Inc. upon execution of the Shareholders
Agreement defined in Section 1.9 of this Agreement and will be referred to as
Atio USA in this Agreement), with its principal place of business in Hopkins,
Minnesota, Atio Corporation (Pty) Ltd ("Atio Pty"), with its principal place of
business in Johannesburg, Republic of South Africa, Atio Corporation
International, Inc. ("Atio Int"), with its principal place of business in
Hopkins, Minnesota, Venturian Corp. ("Venturian"), with its principal place of
business in Hopkins, Minnesota, and Ilan Sharon ("Sharon"), a natural person.
WHEREAS, Atio Int is the owner of a family of computer telephony and
related software products marketed under the name and style "AtioCALL"
(hereinafter "the AtioCALL Products"); and
WHEREAS, Atio USA is engaged in the business of, among other things,
marketing a range of computer telephony and related products under the trademark
"CYBERCALL"; and
WHEREAS, pursuant to a Joint Venture Agreement (the "Joint Venture
Agreement") dated October 23, 1997 among Atio Pty, Atio Int, Venturian Software
Enterprises, Inc., Venturian and Sharon, the parties hereto desire to enter into
an agreement concerning the licensing and transfer of ownership of the AtioCALL
Products under the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements, promises and covenants contained herein, the parties agree as
follows:
<PAGE>
1. Definitions. As used in this Agreement, the following words and
terms shall have the following respective meanings:
1.1 "The AtioCALL Products" shall mean the computer software products
owned by Atio Int and identified in Exhibit A.
1.2 "Changes" shall mean improvements, enhancements, modifications,
upgrades, corrections, alterations, revisions, adaptations, updates, extensions,
new versions, new releases, and derivative works which are made to or based upon
any of the AtioCALL Products.
1.3 "The AtioCALL Product Rights" shall mean all right, title and
interest in and to all intellectual property rights pertaining to the AtioCALL
Products and the pertinent Related Materials, including without limitation all
patent, copyright, trademark, trade secret and other rights and privileges of
ownership.
1.4 "The Related Materials" shall mean the types of materials
identified in Exhibit B pertaining to any of the AtioCALL Products.
1.5 "Effective date of this Agreement" shall mean the date first above
written.
1.6 "Term of this Agreement" shall mean the period commencing on the
effective date of this Agreement and continuing until the date as of which this
Agreement is terminated in accordance with its terms, including all renewals and
extensions hereof.
1.7 "Effective date of termination" shall mean the date as of which
this Agreement is terminated in accordance with its terms.
1.8 "This Agreement" shall mean this Agreement, including Exhibits A -
E which are attached hereto and made a part hereof, as well as any amendments
hereto.
1.9 "Shareholders Agreement" shall mean that certain agreement between
and among Venturian, Atio Int, Sharon and Atio USA of even date herewith.
concerning the transfer of
<PAGE>
shares in Atio USA (formerly known as Venturian Software Enterprises, Inc.) and
certain matters with respect to the governance of Atio USA.
1.10 "Distribution Agreement" shall mean that certain agreement between
Atio USA and Atio Int of even date herewith which will provide for Atio Int's
rights to distribute and market the AtioCALL Products outside of North America
pursuant to the Joint Venture Agreement.
1.11 "Technology Development and Support Agreement" shall mean that
certain agreement to be entered into between and among Atio USA, Atio Pty, Atio
Int, Venturian and Sharon which will provide for the ongoing development and
support of the AtioCALL Products by Atio Pty pursuant to the Joint Venture
Agreement.
2. Grant of License. Atio Int hereby grants to Atio USA, subject to the
terms and conditions of this Agreement, and to the terms and conditions of the
Joint Venture Agreement and the Shareholders Agreement, a royalty free,
worldwide, exclusive license to exercise all rights and privileges of ownership
of the AtioCALL Products, which license shall be irrevocable except as otherwise
expressly provided in this Agreement. Without limiting the generality of the
foregoing, Atio USA shall have the right to make, use, license to others, copy,
distribute, prepare derivative works based upon, make Changes to, and otherwise
exploit the AtioCALL Products, either directly or through third parties. The
license hereby granted shall remain in effect until such time as the AtioCALL
Product Rights are transferred to Atio USA as provided in paragraph 4 or this
Agreement is terminated without such transfer as provided in paragraph 13(b),
(c) or (d).
3. Delivery of the AtioCALL Products and Related Materials. Within
twenty one (21) business days following the effective date of this Agreement,
Atio Int shall deliver to Atio
<PAGE>
USA one (1) copy each of the AtioCALL Products in object code versions and one
(1) copy each of the types of Related Materials identified in Exhibit B for each
of the AtioCALL Products. Such delivery will be made to Atio USA's facility in
Hopkins, Minnesota, delivery charges prepaid by Atio Int. Within thirty (30)
days of the Effective date of this Agreement, Atio Int shall also provide Atio
USA with the source code for any Atio Call Products. Until that time that the
AtioCall Product Rights are transferred to Atio USA as provided in paragraph 4
of this Agreement, or until the termination of the exclusive development period
described in Technology Development and Support Agreement between the parties,
Atio USA will not make any use of such source code unless such use is approved
by the ATIO Pty's manager of product development. Atio Int shall not make
changes to the AtioCALL Products source code and related material without prior
written consent of Atio USA.
4. Transfer of Title to AtioCALL Product Rights. Upon the first to
occur of any of the events specified below, Atio Int hereby transfers, assigns
and conveys to Atio USA all right, title and interest in and to the AtioCALL
Product Rights, free and clear of any lien, claim or other encumbrance. Atio Int
shall thereafter have no proprietary interest in the AtioCALL Products or the
AtioCALL Product Rights and shall engage in no further marketing, distribution,
licensing or other exploitation thereof except as may be expressly authorized by
Atio USA. The events giving rise to such transfer of title shall be:
a. the date upon which shares of Atio USA become listed on a
public exchange;
b. December 31, 1999, provided that Atio USA is then actively
engaged on a continuing basis in the marketing of computer telephony products
and has been continuously so engaged throughout the Term of this Agreement;
<PAGE>
c. Atio Int suspends sales activities of computer telephony
products for more than six months during the Term of this Agreement; or
d. Venturian's election to accelerate the Deferred Installments
under the Joint Venture Agreement upon the occurrence of an Event of Default as
defined in the Shareholders Agreement incidental thereto.
5. Failure of Transfer of Title. If the transfer of the AtioCALL
Product Rights to Atio USA does not occur as provided in Paragraph 4, all
AtioCALL Product Rights will revert to Atio Int as provided in Section 14 of
this Agreement and, Atio USA will assign, transfer and convey all right, title
and interest in the CYBERCALL trademark to Venturian and Sharon, jointly. Upon
such assignment, transfer and conveyance, Venturian and Sharon will grant to
Atio Int a limited, non-exclusive, non-transferable, royalty free license to use
the CYBERCALL trademark, for a period of three (3) years from the date of
transfer for the sole purpose of marketing and distributing the AtioCALL
Products outside of Canada, the United States and Mexico and Atio Int and Atio
Pty will grant to Venturian a right to distribute the AtioCALL Products in the
United Sates, Canada and Mexico for a period of three (3) years from the date of
such assignment, transfer and conveyance subject to terms and conditions similar
to those found in the Distribution Agreement (including a price discount of
eighty percent (80%)) between the parties of even date herewith.
6. Source of Rights Granted. The licenses and transfer of rights
granted under this Agreement are made pursuant to any and all patent, copyright,
trademark, trade secret, contract and other rights in the AtioCALL Products that
Atio Int now has or hereafter acquires, anywhere in the world.
<PAGE>
7. Atio Int and Atio Pty Joint and Several Representations and
Warranties.
7.1 Due Authorization and Absence of Breach. The execution, delivery
and performance of this Agreement by Atio Int and Atio Pty and the consummation
by Atio Int and Atio Pty of the transactions contemplated hereby have been duly
authorized by all necessary corporate action of Atio Int and Atio Pty. This
Agreement has been duly executed and delivered by Atio Int and Atio Pty and is a
valid and binding obligation of Atio Int and Atio Pty, enforceable in accordance
with its terms. Neither the execution and delivery of this Agreement by Atio Int
or Atio Pty nor the consummation by Atio Int or Atio Pty of the transactions
contemplated hereby will: (a) violate any provision of the Memorandum and
Articles of Association of Atio Int or Atio Pty or of any law, ordinance or
regulation or any decree or order of any court or administrative or other
governmental body that is either applicable to, binding upon or enforceable
against Atio Int or Atio Pty; or (b) result in any breach of or default under
any mortgage, contract, agreement, indenture, will, trust or other instrument
that is either binding upon or enforceable against Atio Int or Atio Pty or the
assets or properties of Atio Int or Atio Pty; or (c) violate any legally
protected right of any individual or entity or give to any individual or entity
a right or claim against Atio Int, Atio Pty, Atio USA, Venturian, Sharon or the
assets or properties of any of them, except for any right or claim that is
related to any claim against Venturian Software Enterprises, Inc. prior to the
date of this Agreement. Neither Atio Int nor Atio Pty will enter into any other
agreement, grant any license, undertake any obligation or commit any act which
would prevent its performance or limit the rights of Atio USA, Venturian or
Sharon hereunder.
7.2 Intellectual Property. Atio Int and Atio Pty jointly and severally
represent and warrant that:
<PAGE>
a. The AtioCALL Product Rights constitute all trademarks, service
marks, copyrights, patents, application for the foregoing, know-how, trade
secrets, confidential information, software, technical information, data,
process, technology, plans, drawings, blueprints and other intellectual property
of any nature whatsoever used by Atio Int or Atio Pty in connection with or
necessary for the ownership, use, marketing, sale, licensing and continued
development of the AtioCALL Products, including, without limitation, to the
extent so used or necessary: (i) all registered and unregistered trademarks,
service marks and applications therefor (collectively, the "AtioCALL Marks");
(ii) all copyrights in both published works and unpublished works (collectively,
the AtioCALL Copyrights"); (iii) all patents, patent applications and inventions
and discoveries that may be patentable (collectively, the "AtioCALL Patents");
and (iv) all know-how, trade secrets, confidential information, software,
technical information, data, process, technology, plans, drawings and blueprints
(collectively, the "AtioCall Trade Secrets"). Atio Int is the owner of all
right, title and interest in and to all of the AtioCALL Product Rights, free and
clear of any liens, security interests, charges, encumbrances, equities and
other adverse claims of any nature whatsoever, and has the right to use, exploit
and transfer the AtioCALL Product Rights without payment to any third party. No
AtioCALL Product Right, nor any aspect thereof, is infringed nor, to best of the
knowledge of Atio Int and Atio Pty, has any AtioCALL Product Right, or any
aspect thereof, been challenged or threatened in any way. No AtioCALL Product or
AtioCALL Product Right, nor any aspect thereof, infringes or violates or is
alleged to infringe or violate any patent, copyright, trademark, trade secret or
other proprietary or other right of any person or entity. The representations
and warranties contained in this paragraph will apply to all AtioCALL Products
and will continue to be true throughout the term of this Agreement.
<PAGE>
b. Exhibit D contains a complete and accurate list and summary
description of all licenses, leases, agreements, contracts, obligations,
promises and understandings (whether written or oral and whether express or
implied) relating to the AtioCALL Product Rights or to which the AtioCALL
Product Rights are subject (the "AtioCALL Agreements"). Neither Atio Int nor
Atio Pty is in breach of or default under any of the AtioCALL Agreements and no
event or omission has occurred, or circumstance exists, that, with the giving of
notice or the lapse of time or both, would constitute such a breach or default.
To the best of Atio Int and Atio Pty's knowledge, no other party is in breach of
or default under any AtioCALL Agreement, and no event, act or omission has
occurred, or circumstance exists, that, with the giving of notice or the passage
of time or both, would constitute such a breach or default. Neither Atio Int nor
Atio Pty has received any notice of any alleged breach or default under, or
other dispute or disagreement with respect to, any of the AtioCALL Agreements
and, to the best of Atio Int and Atio Pty's knowledge, no such dispute or
disagreement exists, except as set forth in Exhibit D.
c. Exhibit E sets forth a true and complete list and summary
description of all AtioCALL Marks and all registrations filed with respect
thereto in any jurisdiction. All AtioCALL Marks that have been registered are
currently in compliance with all formal legal requirements (including the timely
post-registration filing of affidavits of use and incontestability and renewal
applications) of the jurisdiction in which they have been registered, and to the
best of Atio Int and Atio Pty's knowledge are valid and enforceable in such
jurisdictions. Atio Int and Atio Pty further warrants that they will pay all
maintenance fees or taxes falling due within the term of this Agreement. No
AtioCALL Product Mark has been or is now involved in any opposition,
invalidation or cancellation and, to Atio
<PAGE>
Int and Atio Pty's best knowledge, no such action is threatened with respect to
any of the AtioCALL Marks. To Atio Int and Atio Pty's knowledge there is no
potentially interfering trademark or trademark application of any third party.
All products and materials containing an AtioCALL Mark bear the proper
registration notice where required by law.
d. There are no copyright registrations in any jurisdiction. None
of the subject matter of any of the AtioCALL Copyrights is a derivative work
based on the work of a third party. All works encompassed by the AtioCALL
Copyrights have been marked with the proper copyright notice, when required by
the law of any jurisdiction.
e. With respect to each AtioCALL Trade Secret, the documentation
relating thereto is current, accurate and sufficient in detail and content to
identify and explain it and to allow its full and proper use without reliance on
the knowledge or memory of any individual. Atio Int and Atio Pty have taken all
reasonable precautions to protect the secrecy, confidentiality and value of the
AtioCALL Trade Secrets. The AtioCALL Trade Secrets are not part of the public
knowledge or literature and, to Atio Int and Atio Pty's best knowledge, have not
been used, divulged or appropriated either for the benefit of any person or
entity (other than Atio Int and/or Atio Pty) or to the detriment of the AtioCALL
Products or the AtioCALL Product Rights.
f. There are and have been no filings made with respect to the
AtioCALL Patents in any jurisdiction. To Atio Int and Atio Pty's best knowledge,
there is no potentially interfering patent or patent application of any third
party in any jurisdiction.
7.3 Operation of The AtioCALL Products. Atio Int and Atio Pty jointly
and severally warrant that the AtioCALL Products identified in Exhibit A will in
all respects conform to and perform in accordance with the descriptions and
specifications contained in Exhibit C and in any technical or user documentation
produced by Atio Int or Atio Pty pertaining to the AtioCALL Products identified
in Exhibit A. Except for failures resulting from
<PAGE>
Changes made subsequent to Atio Int's delivery of the AtioCALL Products
identified in Exhibit A to Atio USA, Atio Int will reimburse Atio USA for all
expenses reasonably incurred in correcting any failure of an AtioCALL Product
identified in Exhibit A to so conform or perform which is reported to Atio Int
during the term of this Agreement or within twelve (12) months following the
effective date of termination of this Agreement.
7.4 Survival of Representations and Warranties. The representations and
warranties contained in this section 7 will survive until December 31, 1999,
except as to any claims of which written notice is given prior to the end of
such period.
8. Indemnity by Atio Int and Atio Pty.
8.1 Intellectual Property Claims. Atio Int and Atio Pty, jointly and
severally, will indemnify Atio USA, its resellers and end users customers
against, and hold them harmless from, any and all claims, liabilities, damages,
costs and expenses, including attorneys' fees, relating to or arising out of any
claim that any of the AtioCALL Products identified in Exhibit A infringes upon
or violates any patent, copyright, trademark, trade secret or other intellectual
property rights of any third party.
8.2 Product Capability and Performance Claims. Except for consequential
or incidental damages, Atio Int will indemnify Atio USA and hold it harmless
against any loss, damage, liability, cost or expense, including reasonable
attorneys' fees, arising out of any claim that results in a final judgment or
similar determination that an AtioCALL Product identified in Exhibit A, as and
when delivered by Atio Int to Atio USA, was in fact defective as and when
delivered by Atio Int to Atio USA, provided that Atio USA promptly reports to
Atio Int any problem that has arisen which may be attributable to or is claimed
to be attributable to a defect
<PAGE>
or failure in an AtioCALL Product identified in Exhibit A, so that Atio Int may
conduct its own investigation into the problem and correct any failure or defect
Atio Int discovers.
8.3 Indemnity not a Limitation of Remedies. The indemnities provided in
this section shall not limit the entitlement of any party to any other remedy
that may be available at law or equity in the event of any wrongful act or
omission of the other, including without limitation any breach of this
Agreement.
8.4 Limitation on Indemnification Claims. Notwithstanding anything in
this Agreement to the contrary, the aggregate liability of Atio Int and Atio Pty
for any intellectual property claim or defective product claim shall not exceed
$500,000.
8.5 Indemnification Procedure on Third Party Intellectual Property and
Product Claims. The indemnification procedure for third party intellectual
property and product claims under this Agreement shall be the same as the
indemnification procedure provided in Sections 9.5 and 9.6 of the Joint Venture
Agreement.
9. Preservation of Value. Throughout the term of this Agreement, each
of the parties to this Agreement will do all things reasonably necessary to
protect and preserve the commercial value of the AtioCALL Products and the
AtioCALL Product Rights. Without limiting the generality of the foregoing, Atio
Int and Atio Pty will not, without Atio USA's prior written consent, permit any
governmental entity or other third party to obtain any lien, security interest,
charge, encumbrance, equity or other adverse claim of any nature whatsoever with
respect to the existing or future AtioCALL Products or AtioCALL Product Rights.
10. Atio USA Trademarks and Trade Names. Atio Int acknowledges that
Atio USA has acquired the trademark "CyberCall" and intends to use that mark in
connection with the marketing of the AtioCALL Products. Atio USA may market the
AtioCALL Products under
<PAGE>
Atio USA's own name and under such trademarks as Atio USA may desire. Neither
this Agreement nor any action taken by Atio USA hereunder will convey any rights
in Atio USA's name or trademarks to Atio Int. Atio Int shall neither have nor
claim any right, title or interest in Atio USA's name or any Atio USA trade
name, trademark or service mark, and, except as provided in this Agreement, Atio
Int shall make no use whatsoever of Atio USA's name or any of Atio USA's
trademarks or service marks without Atio USA's prior written consent. The use by
Atio USA of Atio USA's name or trademarks to identify or market the AtioCALL
Products shall not preclude or limit Atio USA's ability to use its name or the
same trademarks in connection with any other products or services.
11. Trade Secret Business Information of the Parties. In addition to
the AtioCALL Trade Secrets, each party acknowledges that the business plans,
marketing plans, financial information and similar information of the other
constitutes trade secret information; provided, however, that, as used herein,
"trade secret information" does not include information which was known to the
recipient prior to its receipt from the other party, information which is
independently developed by the recipient without reference to or use of
information received from the other party, or information which would not
qualify as trade secret information under the Uniform Trade Secrets Act. Each
party agrees not to use any trade secret information of the other for any
purpose not expressly authorized by this Agreement and will not disclose any
trade secret information of the other to any third party without the prior
written consent of the other, except pursuant to an order of a court or other
governmental authority of competent jurisdiction.
12. Other Documents and Assistance in Furtherance of this Agreement.
Each of the parties to this Agreement will execute any and all applications,
assignments and other documents and will render all assistance which any of the
others may reasonably request in furtherance of
<PAGE>
the rights granted under this Agreement. Without limitation of the foregoing,
Atio Int and Atio Pty will obtain, execute and deliver to Atio USA all documents
and instruments necessary to effect and perfect the transfer of ownership of the
AtioCALL Product Rights pursuant to paragraph 4.
13. Term and Termination. This Agreement is effective upon the date
first above written and shall continue in effect until the first to occur of:
a. the transfer of ownership of the AtioCALL Product Rights to
Atio USA as provided in paragraph 4; or
b. December 31, 1999, if the transfer of the AtioCALL Product
Rights to Atio USA has not occurred because none of the events specified in
paragraph 4(a), (c) or (d) has occurred and Atio USA is not then actively
engaged on a continuing basis in the marketing of computer telephony products
and has not been continuously so engaged throughout the Term of this Agreement;
or
c. the closing of a merger of Atio Int and Atio USA or any other
transaction whereby Atio Int acquires all of the capital stock or assets of Atio
USA; or
d. Upon five (5) days written notice to Atio USA upon the
occurrence of any of the following events:
(i) Admission of Atio USA of insolvency or bankruptcy or its
inability or failure generally to pay its debts as they become due, or if Atio
USA makes an assignment for the benefit of creditors or applies for or consents
to the appointment of a trustee, custodian or receiver for it (as the case may
be) or for a major part of its business and/or assets;
<PAGE>
(ii) The appointment of a trustee in bankruptcy, custodian or
receiver for Atio USA of all or part of its assets and the party fails to obtain
a discharge of such appointment within ninety (90) days thereafter;
(iii) The institution of bankruptcy, reorganization,
insolvency or liquidation proceedings, or other proceedings for relief under any
bankruptcy law or similar law for the relief of debtors, by or against Atio USA,
and, if instituted against Atio USA by third parties, such party allows or
consents to the proceedings or fails to obtain dismissal, stay or other
nullification of such proceedings within ninety (90) days after the institution
of the proceedings; or
(iv) Any other liquidation or dissolution of Atio USA,
whether voluntary or involuntary.
14. Consequences of Termination. Upon the termination of this
Agreement:
a. If pursuant to paragraph 13(b) or (d), the license granted in
Paragraph 2 of this Agreement shall terminate, and all AtioCALL Product Rights
shall revert to Atio Int and Atio USA shall, and shall require its remarketers
to, cease to promote, market or advertise the AtioCALL Products, except that
Atio USA and its remarketers may continue to produce and distribute the AtioCALL
Products: (i) as necessary to fulfill contracts existing and bids outstanding on
the effective date of termination and (ii) in accordance with paragraph 5 of
this Agreement.
b. Notwithstanding any termination of this Agreement and the
license granted herein, Atio USA and its remarketers shall continue to have the
right to retain object code copies of the AtioCALL Products and copies of the
Related Materials and to make such
<PAGE>
copies, distribution and use thereof as is necessary to fulfill obligations to
resellers and end users under contracts entered into pursuant to this Agreement.
c. Termination of this Agreement shall not affect the rights of
any end user to which a license for use of the AtioCALL Products is granted
under this Agreement.
d. The termination of this Agreement for any reason shall not
affect the rights and obligations of the parties under paragraphs
5,8,10,11,20,21 and 22 or any other obligation or liability which any party has
to any other under this Agreement and which, by its nature, would be expected to
survive termination.
e. All representations and warranties shall survive termination of
this Agreement until December 31, 1999.
15. Notices. Any notice hereunder shall be deemed given when personally
delivered in writing or when dispatched via express courier and shall be deemed
received when personally delivered in writing, or ninety six (96) hours after
being sent via express courier, properly addressed to the party to whom it is
intended at the address set forth below or at such other address of which notice
is given in accordance herewith:
If to Atio USA: Atio Corporation USA, Inc.
11111 Excelsior Boulevard
Hopkins, MN 55343
Attention: Gary B. Rappaport
with a copy to: Leonard, Street and Deinard
Suite 2300
150 South Fifth Street
Minneapolis, MN 55402
Attention: Morris M. Sherman
If to Atio Pty: Atio Corporation (PTY) Ltd.
P.O. Box 4467
Rivonia 2128
Republic of South Africa
<PAGE>
Attention: Gary Craul
with a copy to: McDermott, Will & Emery
227 West Monroe Street, Suite 310
Chicago, IL 60606-5096
Attention: Stuart M. Berkson, P.C.
If to Atio Int: Atio Corporation International, Inc.
11111 Excelsior Blvd.
Hopkins, MN 55343
Attention: Willem Ellis
with a copy to: McDermott, Will & Emery
227 West Monroe Street, Suite 310
Chicago, IL 60606-5096
Attention: Stuart M. Berkson, P.C.
If to Venturian: Venturian Corp.
11111 Excelsior Boulevard
Hopkins, MN 55343
Attention: Gary B. Rappaport
with a copy to: Leonard, Street and Deinard
Suite 2300
150 South Fifth Street
Minneapolis, MN 55402
Attention: Morris M. Sherman
If to Sharon: Ilan Sharon
1111 Excelsior Boulevard
Hopkins, MN 55343
16. Relationship of the Parties. Nothing in this Agreement shall be
construed as creating any joint venture, partnership or agency relationship
between the parties for any purpose whatsoever or as constituting any party as
the legal representative of any other, and no party shall have the right or the
authority to assume, create or incur any liability or obligation of any kind,
express or implied, against or in the name of or on behalf of any other.
<PAGE>
17. Force Majeure. Except as otherwise specifically provided in this
Agreement, none of the parties hereto shall be liable for any delay or failure
in performing any obligation under this Agreement due to any cause beyond its
reasonable control.
18. Non-Waiver. The failure by any party at any time to enforce any of
the provisions of this Agreement or any right or remedy available hereunder or
at law or in equity, or to exercise any option herein provided, shall not
constitute a waiver of such provision, right, remedy or option or in any way
affect the validity of this Agreement. The waiver of any default by any party
shall not be deemed a continuing waiver, but shall apply solely to the instance
to which such waiver is directed.
19. Assignment and Binding Effect.
19.1 Assignment. None of the parties hereto may assign, delegate, or
otherwise transfer this Agreement or any of its rights or obligations hereunder
without the prior written consent of all of the others, which consent shall not
be unreasonably withheld, except that any party may without such consent assign
this Agreement in its entirety to a successor pursuant to a corporate
reorganization, merger, or sale of substantially all of that party's assets.
19.2 Binding Effect and Benefit. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
20. Confidentiality of Agreement. Each of the parties will treat the
terms and conditions of this Agreement as confidential, and none of the parties
will disclose any of the terms or conditions hereof to any other person or party
except as necessary to protect or enforce its rights hereunder or as may be
reasonably necessary for financial or regulatory reporting purposes as required
by law or pursuant to compulsory process.
<PAGE>
21. Choice of Law, Construction, and Dispute Resolution.
a. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the United States of America and the
state of New York applicable to contracts made and to be performed therein. The
parties hereby agree to exclude the application of the United Nations Convention
on Contracts for the International Sale of Goods. Every provision of this
Agreement shall be construed, to the extent possible, so as to be valid and
enforceable. If any provision of this Agreement so construed is determined to be
invalid, illegal, or otherwise unenforceable, such provision shall be deemed
severed from this Agreement, and all other provisions shall remain in full force
and effect.
b. Arbitration; Legal Proceedings.
i. The parties shall attempt in good faith to resolve any
dispute arising out of or relating in any manner to this Agreement, the breach,
termination or validity thereof or the transactions contemplated herein
(including, without limitation, any claim for indemnification pursuant to
section 11 hereof and any statutory or common law claim) promptly by negotiation
between representatives of each of the parties to such dispute, each of whom has
authority to settle the controversy. Any of the parties hereto may give any of
the others written notice that a dispute exists (a "Notice of Dispute"). The
Notice of Dispute shall include a statement of such party's position and the
name and title of the representative who will represent such party. Within ten
(10) days of the delivery of the Notice of Dispute, the parties' respective
representatives shall meet at a mutually acceptable time and place, and
thereafter as long as they reasonably deem necessary, to attempt to resolve the
dispute. All documents and other information or data on which each party relies
concerning the dispute shall be furnished or made
<PAGE>
available on reasonable terms to the other party at or before the first meeting
of the parties as provided by this paragraph.
ii. Any controversy or claim arising out of or relating to
this Agreement, the breach, termination or validity thereof, or the transactions
contemplated herein (including, without limitation, any claims for
indemnification pursuant to section 8 hereof and any statutory or common law
claim), if not settled by negotiation as provided in paragraph (a) of this
section 24(b), shall be settled by arbitration in New York, New York, in
accordance with the CPR Rules for Non-Administered Arbitration of Business
Disputes, by three arbitrators. Any party may initiate arbitration twenty (20)
days following the delivery of a Notice of Dispute if the dispute has not then
been settled by negotiation, or sooner if any other party to the dispute fails
to participate in negotiation in accordance with paragraph (i) above. The three
arbitrators shall be appointed as provided by CPR Rule 5, Selection of
Arbitrators by the parties. The arbitrators shall have no power to add or
detract from the agreements of the parties and shall not have the authority to
make any ruling or award that does not conform to the terms and conditions of
this Agreement or the applicable law. Without limitation of the foregoing, the
arbitrators shall have no power to terminate this Agreement other than in
accordance with its terms and shall have no power to grant any license not
expressly granted by this Agreement. The arbitrators shall have no authority to
award punitive damages. The arbitration procedure shall be governed by the
United States Arbitration Act, 9 U.S.C. ss. 1-16, and the award rendered by the
arbitrator shall be final and binding on the parties and may be entered in any
court having jurisdiction thereof.
<PAGE>
iii. Each party shall have discovery rights as provided by
the United States Federal Rules of Civil Procedure; provided, however, that all
such discovery shall be commenced and concluded within sixty (60) days of the
initiation of arbitration.
iv. It is the intent of the parties that any arbitration
shall be concluded as quickly as reasonably practicable. Unless the parities
otherwise agree, once commenced, the hearing on the disputed matters shall be
held four days a week until concluded, with each hearing date to begin at 9:00
a.m. and to conclude at 5:00 p.m. The arbitrators shall use all reasonable
efforts to issue the final award or awards within a period of five business days
after closure of the proceedings. Failure of the arbitrators to meet the time
limits of this paragraph (iv) shall not be a basis for challenging the award.
v. The arbitrators shall instruct the non-prevailing party
(parties) to pay all costs of the proceedings, including the fees and expenses
of the arbitrators and the reasonable attorneys' fees and expenses of the
prevailing party (parties). If the arbitrators determine that there is not a
prevailing party, each party shall be instructed to bear its own costs and to
pay one-half of the fees and expenses of the arbitrators.
vi. Each party hereto hereby agrees that any legal proceeding
instituted to enforce an arbitration award hereunder will be brought in the U.S.
federal courts situated in New York (which shall have sole and exclusive
jurisdiction thereof), and hereby submits to personal jurisdiction therein and
irrevocably waives any objection as to venue therein, and further agrees not to
plead or claim in any such court that any such proceeding has been brought in an
inconvenient forum. Atio USA and Venturian each hereby designates, appoints and
empowers Morris M. Sherman, presently having offices at Leonard, Street and
Deinard, Suite 2300, 150 South Fifth Street, Minneapolis, Minnesota 55402, as
its true and lawful agent
<PAGE>
for service of process to receive and accept on its behalf service of process in
any such proceeding brought in any such courts. Atio Pty and Atio Int each
hereby designates, appoints and empowers Stuart M. Berkson, P.C., presently
having offices at 227 West Monroe Street, Chicago, Illinois, as its true and
lawful agent for service of process to receive and accept on its behalf service
of process in any such proceeding brought in any such courts. Each of the
foregoing parties agrees that the failure of the process agent appointed by such
person to give notice of process to such person shall not impair or affect the
validity of service upon such agent or of any judgment based thereon, and each
such person irrevocably consents to the service of process in any such
proceeding by the mailing of copies thereof by certified mail, postage prepaid,
to such person's address for notice under this Agreement. Nothing herein shall
preclude any of the parties hereto from serving process in any other manner or
in any other jurisdiction in connection with enforcing an arbitration award
hereunder.
22. Non-Solicitation of Employees. During the term of this Agreement
and for a period of six (6) months thereafter, none of the parties hereto will
communicate with any employee of any other party hereto concerning the
employment or possible employment of such employee by the first party without
the prior written consent of the other party.
23. Integration. This Agreement, together with the Joint Venture
Agreement, the Distribution Agreement, the Technology Development and Support
Agreement and the Shareholders Agreement, sets forth the entire agreement and
understanding of the parties hereto regarding the subject matter hereof and
supersedes any prior representations, statements, proposals, negotiations,
discussions, understandings, or agreements regarding the same subject matter. To
the extent any provisions in this Agreement conflict with any provision in the
Joint Venture Agreement or the Shareholders Agreement, the other Agreement shall
control in each
<PAGE>
instance of such conflict. This Agreement may not be modified or amended except
by a writing signed by the party against whom the modification or amendment is
sought to be enforced.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
VENTURIAN SOFTWARE ENTERPRISES, INC. ATIO CORPORATION (PTY) LTD
By /s/ Ilan Sharon By /s/ Gary Craul
Its President Its Chief Executive
ATIO CORPORATION VENTURIAN CORP.
INTERNATIONAL, INC.
By /s/ Willem Ellis By /s/ Gary B. Rappaport
Its Chairman Its President
/s/ Ilan Sharon
ILAN SHARON
<PAGE>
EXHIBIT A
THE ATIOCALL PRODUCTS
1. The ATIOCALL CTI SERVER
1.1. IVR, FAX and VOICE PROCESSING module
1.2. ATIOCALL telesales/telemarketing module (Prodial)
1.3. ATIOCALL Web-Connect module
2. The ATIOCALL client applications
2.1. ATIOCALL UNIVERSAL AGENT POSITION (UAP) application
2.2. ATIOCALL Power Agent application
2.2.1. ATIOCALL Power Agent - Individual Mode
2.2.2. ATIOCALL Power Agent - Workgroups Mode
2.2.3. ATIOCALL Power Agent - Call Centre Mode
2.3. ATIOCALL CALL CENTRE MANAGEMENT applications
2.3.1. ATIOCALL CALL CENTRE MONITOR
2.3.2. ATIOCALL CONFIGURATION BUILDER
2.3.3. ATIOCALL STATISTICS MANAGER
2.3.4. ATIOCALL HEALTH MONITOR
2.4. ATIOCALL customer interaction application generator
3. Telesales / telemarketing: ATIOCALL ProDIAL
3.1. Campaign Manager
3.2. application script generator
3.3. Telemarketer
3.4. Campaign Server
3.5. Statistics Manager
4. Using ATIOCALL in the customer contact zone
On entering the ATIOCALLTM system, the caller will be routed to
the first available and appropriate agent or will be routed to
the Voice Response Unit (VRU) for queuing. The next agent will
notified about the call type (new policy, enquiry, etc.) being
delivered to her and the applicable application for that service
will be popped on the screen. Via the ATIOCALL Universal Agent
Application (UAP), agents will have the ability to end the call
or to route the caller to another ACD group or specific
agent/supervisor. The agent can also consult with a specialist
or supervisor and transfer or initiate a three-way conference.
All this will be done via the soft phone on the screen and the
agent not need to know how the physical telephone instrument
works. Calls that enter the VRU because no agents are available
will hear a set of pre-recorded messages which can be changed
dynamically by the supervisor. These messages can include
position-in-the-queue and time-to-answer announcements,
marketing messages and/or soothing music. For convenience sake,
messages can be recorded and downloaded via any multi-media PC.
5. Call centre management and operations
5.1. MONITORING THE CALL CENTRE: Call Centre Monitor (CCM)
5.2. CONFIGURING THE CALL CENTRE: Configuration Builder (CB)
5.3. SYSTEM MONITORING: Health Monitor (HM)
EXHIBIT 10.5
DISTRIBUTION AGREEMENT
BETWEEN
ATIO CORPORATION USA, INC.
AND
ATIO CORPORATION INTERNATIONAL, INC.
NOVEMBER 14, 1997
<PAGE>
THIS AGREEMENT is made and entered into this 14 day of November, 1997,
the effective date by and between Venturian Software Enterprises, Inc. ( a
company which is changing its name to Atio Corporation USA, Inc. and will be
referred to in this Agreement as "Atio USA"), with its principal place of
business in Hopkins, Minnesota, and Atio Corporation International, Inc.
("DISTRIBUTOR"), with its principal place of business in Hopkins, Minnesota.
WHEREAS, Atio USA is engaged in the marketing, maintenance and support
of computer telephony products and related services, including, among others,
the CyberCall Products (as hereinafter defined); and
WHEREAS, DISTRIBUTOR proposes to engage in the marketing and
distribution of the CyberCall Products to end users outside the United States,
Canada, and Mexico ("North America") (the "Territory"); and
WHEREAS, Atio USA and DISTRIBUTOR each desire that Atio USA grant to
DISTRIBUTOR certain distribution rights with respect to the CyberCall Products,
including the right to appoint dealers to market and distribute the same to end
users subject to the limitations set forth herein;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements, promises and covenants contained herein, Atio USA and DISTRIBUTOR
agree as follows:
1. Products Covered by Agreement
1.1 The products covered by this Agreement shall be those products
listed in Schedule I of this Agreement and any new version, revision, update or
upgrade thereof which is furnished to DISTRIBUTOR by Atio USA in accordance with
paragraph 8.1(c) (collectively the CyberCall Products"); provided, however, that
in its sole discretion, Atio USA may at any time:
<PAGE>
a. notify DISTRIBUTOR in writing of Atio USA's intention to add to
the CyberCall Products any other software products which Atio USA then has the
authority to market, together with the prices to be paid by DISTRIBUTOR with
respect to such products, whereupon such additional software products shall
become CyberCall Products covered by this Agreement unless DISTRIBUTOR, within
thirty (30) days of receiving such notice, gives written notice to Atio USA that
DISTRIBUTOR rejects the proposed additional products;
b. upon at least thirty (30) days advance written notice to
DISTRIBUTOR, eliminate a product from the CyberCall Products if and when Atio
USA ceases to market such product to end users; or
c. upon at least thirty (30) days advance written notice to
DISTRIBUTOR, modify the specifications or substitute components of the CyberCall
Products; provided that such modification or substitution does not materially
diminish the functional capabilities of the CyberCall Products.
2. Appointment of Distributor and Dealers
2.1 Appointment of Distributor. Subject to the terms and conditions of
this Agreement, Atio USA hereby appoints DISTRIBUTOR, and DISTRIBUTOR hereby
agrees to become, a distributor of the CyberCall Products. Atio USA grants to
DISTRIBUTOR, for the term of this Agreement, the exclusive right and license to
purchase from Atio USA and resell licenses for use of the CyberCall Products
within the Territory defined in this Agreement.
2.2 Appointment of Dealers. Throughout the term of this Agreement,
DISTRIBUTOR may appoint and authorize Dealers (including Value Added Resellers)
to market and distribute the CyberCall Products and to purchase from DISTRIBUTOR
and resell to end users the same Product Licenses as DISTRIBUTOR may purchase
from Atio USA
<PAGE>
hereunder; provided that: a) any such dealer appointment must be pursuant to a
written Dealer Agreement in a form approved in advance by Atio USA; which
approval shall not be unreasonably withheld; b) DISTRIBUTOR shall not authorize
any third party to market or distribute the CyberCall Products or sell licenses
for the use thereof without the advance written approval of Atio USA, which
approval shall not be unreasonably withheld, unless such authorization
terminates on or before the effective date of termination of this Agreement; and
c) if, with Atio USA's advance written approval, which approval shall not be
unreasonably withheld, DISTRIBUTOR enters into any agreement with any third
party authorizing such third party to engage in any such activities beyond the
effective date of termination of this Agreement, DISTRIBUTOR will assign all of
its rights under such agreement to Atio USA concurrently with the termination of
this Agreement.
3. Geographic Scope
3.1 Geographic Scope. Atio USA hereby appoints DISTRIBUTOR as the
exclusive distributor of the CyberCall Products outside North America ("the
Territory") during the term of this Agreement. As such, DISTRIBUTOR may,
directly and through its Dealers, distribute the CyberCall Products to end users
for installation and use at sites located anywhere within the Territory. Atio
USA will not distribute the CyberCall Products for installation and use within
the Territory during the term of this Agreement except through DISTRIBUTOR.
DISTRIBUTOR will not market or distribute the CyberCall Products or sell
licenses for their installation or use outside the Territory, nor will
DISTRIBUTOR authorize any other person or party to engage in any such activities
outside the Territory. Distributor represents and warrants that, as of the
Effective Date of this Agreement, it has not granted to any third party any
right to
<PAGE>
engage in any such activities outside or within the Territory except for those
parties identified in Schedule IV.
3.2 Atio USA may license certain technology related to the CyberCall
Products to equipment manufacturers or software producers located in North
America who export their products to the Territory and that desire to make their
products compliant with the functional and operational specifications of the
CyberCall Products. In no event will any such license arrangement be deemed a
sale or distribution of the CyberCall Products for purposes of paragraph 3.1
above, even if the rights granted to such persons include the right to market,
distribute and sell licenses for use of the CyberCall Products on an OEM or VAR
basis, provided, however, that Atio USA agrees to facilitate DISTRIBUTOR's
partnering with such persons in the Territory.
4. Marketing and End User Support by Distributor
4.1 DISTRIBUTOR'S Obligations. Throughout the term of this Agreement,
DISTRIBUTOR will:
a. employ reasonable resources and efforts to market and support
the CyberCall Products so as to promote the sales of licenses for the use of the
CyberCall Products within the Territory;
b. offer to all end user customers who purchase licenses for use
of the CyberCall Products from DISTRIBUTOR or its Dealers an opportunity to
purchase annual maintenance agreements with respect thereto on such specific
terms and at such prices as DISTRIBUTOR and its Dealers are able to negotiate
with them. DISTRIBUTOR will promptly notify Atio USA of each end user customer
that purchases or renews such an annual maintenance agreement. With each such
notice, DISTRIBUTOR will submit to Atio USA an
<PAGE>
order for maintenance which identifies the end user customer, states the number
of seats authorized by the applicable license, and specifies the beginning and
end dates of the annual maintenance period. DISTRIBUTOR will furnish to all such
end users who are covered by active annual maintenance agreements all new
versions, revisions, updates or upgrades of the CyberCall Products and the
benefit of problem resolution services that Atio USA furnishes to DISTRIBUTOR
pursuant to paragraph 8.1(d);
c. through its field sales and support offices, provide to all end
user customers who purchase maintenance agreements from DISTRIBUTOR or one of
its Dealers, at such prices and on such terms as DISTRIBUTOR may negotiate with
its customers, first level support with respect to the CyberCall Products. As
used herein, "first level support" means telephone support with respect to
failure of the CyberCall Products to perform as described in the user
documentation;
d. through its primary technical support center, provide to all
end user customers who purchase maintenance agreements from DISTRIBUTOR or one
of its Dealers, at such prices and on such terms as DISTRIBUTOR may negotiate
with its customers, second level support with respect to the CyberCall Products.
As used herein, "second level support" means technical and user level support
with respect to failures of the CyberCall Products to perform as described in
the user documentation;
e. refer to Atio USA all failures of the CyberCall Products to
perform as described in the user documentation that are not resolved by
DISTRIBUTOR'S first and second level support efforts. Only DISTRIBUTOR'S
integration team personnel may contact Atio USA for such assistance;
<PAGE>
f. with respect to each CyberCall Product license sold by
DISTRIBUTOR or one of its Dealers to an end user customer, DISTRIBUTOR will pay
to Atio USA, annually in advance for each year in which such end user purchases
or renews a maintenance agreement from DISTRIBUTOR with respect thereto, fifty
percent (50%) of the Atio USA Manufacturer's Suggested Retail Price for the
CyberCall Product annual end user maintenance fee ("MSRP") in effect at the
commencement of the annual maintenance period (or at that price or percentage of
MSRP as mutually agreed to by the parties on a country by country basis);
g. provide regular, not more than monthly, information on sales
activities and product problem identification (including any solutions to such
problems developed by DISTRIBUTOR) concerning the CyberCall Product within the
Territory. This may be a by product of any communications and support system
that will be established between the parties;
h. provide monthly forecasts of sales of CyberCall Product
licenses by the Distributor and its Dealers, rolling forward for at least twelve
months;
i. provide ongoing information to Atio USA regarding market
potential by market segment, strategy, tactics, region and target accounts and
discuss such information with Atio USA at least once in each calendar quarter
(as used in this Agreement, "calendar quarter" means January 1 March 31, April 1
- - June 30, July 1 - September 30, and October 1 - December 31);
j. comply with all applicable treaties, conventions, and
governmental laws, rules and regulations, both domestic and foreign, which bear
upon any action taken under or pursuant to this Agreement;
k. refrain during the term of this Agreement from marketing,
distributing or selling any other product which is competitive with any of the
CyberCall Products;
<PAGE>
l. at its own expense, prepare such versions of the CyberCall
Products and pertinent documentation in languages other than English as may be
appropriate for marketing the same in particular locations throughout the
Territory. Atio USA hereby grants to DISTRIBUTOR the rights and license
necessary to engage in such activities, and, upon reimbursement to DISTRIBUTOR
of the expenses for preparing such versions, DISTRIBUTOR shall assign, transfer
and convey to Atio USA all right, title and interest, including copyright
ownership, of all such versions of the CyberCall Products and related
documentation prepared by or for DISTRIBUTOR; and
m. throughout the term of this Agreement, DISTRIBUTOR shall, and
shall require its Dealers to, refer exclusively to Atio USA any potential
dealers or end user customers outside the Territory from whom DISTRIBUTOR or any
of its Dealers receives inquiries concerning any of the CyberCall Products.
5. Purchase and Sale of Product Licenses
5.1 Purchase and Sale of Product Licenses. Throughout the term of this
Agreement, DISTRIBUTOR shall purchase from Atio USA, and Atio USA shall sell to
DISTRIBUTOR, such licenses for use of the CyberCall Products as DISTRIBUTOR
shall order from time to time from Atio USA; provided, however, that each order
submitted by DISTRIBUTOR shall set forth the name and address of the end user
customer and any other information that appears in purchase order forms, which
shall not contain any terms or conditions in addition to or contrary to the
terms of this Agreement, furnished by Atio USA, shall set forth the number of
seats for which the license is ordered, shall be subject to acceptance by Atio
USA and shall be governed by the terms and conditions of this Agreement. Any
other information that appears in the purchase order form shall be considered
void unless agreed to in writing by Distributor. Any
<PAGE>
purchase order not accepted by Atio USA within thirty (30) days from date of
submission will be deemed rejected. Distributor may cancel at any time any
purchase order prior to the date of shipment set forth in the purchase order. No
additional or inconsistent terms of any purchase order submitted by DISTRIBUTOR
shall be binding unless specifically agreed to in writing by Atio USA. Each such
license shall be accompanied by one copy of the CyberCall Products and related
user documentation and shall specify the number of seats for which it may be
used..
5.2 Requirement of Signed End User License Agreement. DISTRIBUTOR shall
not release a copy of any CyberCall Product to any third party except for end
users who have first entered into a license agreement with Atio USA for the use
thereof. Any such license agreement with Atio USA shall be substantially in the
form attached hereto as Schedule III or such other form as may be furnished by
Atio USA or by DISTRIBUTOR with written approval by Atio USA, which approval
shall not be unreasonably withheld, and must be signed by a duly authorized
representative of the end user customer. It shall be adequate if the customer's
signed agreement to be bound by the terms and conditions of the Atio USA license
is set forth in a contract with DISTRIBUTOR to which the Atio USA license is
attached as an exhibit.
6. Trial and Test Site Licenses
6.1 During the term of this Agreement, Atio USA will, at the request of
DISTRIBUTOR, grant limited trial or test site licenses for the use of the
CyberCall Products to prospective end user customers of DISTRIBUTOR or its
Dealers. Each such license: a) will be in writing and signed by a duly
authorized representative of the prospective customer; b) will be limited in
duration to a period not exceeding thirty (30) days; c) will restrict the use of
the CyberCall Products to trial and testing purposes only; and d) will require
that, at the end of the
<PAGE>
trial or test period, the end user will either: (i) enter into a fee bearing
license for use of the CyberCall Products; or (ii) return or destroy all copies
of the CyberCall Products
7. Training of Distributor' Dealers
7.1 Training of DISTRIBUTOR's Dealers. DISTRIBUTOR will provide all
necessary training to its Dealers.
8. Product Support, Consultation and Updates
8.1 Support, Consultation and Updates. Throughout the term of this
Agreement, Atio USA will:
a. consider business proposals from DISTRIBUTOR for participation
in shared promotional activities within the Territory, including press
relations, exhibitions, seminars, and strategic advertising. Where this activity
produces inquiries and opportunities within the Territory, Atio USA will pass
these for immediate follow up to DISTRIBUTOR. Where this activity produces
inquiries and opportunities outside the Territory, DISTRIBUTOR will pass these
for immediate follow up to Atio USA;
b. for a period of thirty (30) days following delivery of the
CyberCall Products to each end user customer who purchases a license for use of
the same from DISTRIBUTOR or one of its Dealers, and for as long thereafter as
such end user customer purchases annual maintenance with respect thereto,
furnish DISTRIBUTOR with such telephone support as DISTRIBUTOR may request with
respect to failures of the CyberCall Products to perform for such end user
customer as described in the user documentation. DISTRIBUTOR will pay all long
distance telephone charges associated with such support;
c. promptly furnish DISTRIBUTOR, for distribution to end user
customers who are entitled thereto under existing warranty or maintenance
agreements, such new versions,
<PAGE>
revisions, updates or upgrades of the CyberCall Products and problem resolution
services as Atio USA provides generally to end users of the CyberCall Products
who subscribe for CyberCall Product maintenance agreements with Atio USA or who
are entitled thereto under warranty; and
d. throughout the term of this Agreement, Atio USA shall refer
exclusively to DISTRIBUTOR any potential dealers or end user customers located
inside the Territory from whom Atio USA receives inquiries concerning any of the
CyberCall Products.
9. Shipment and Delivery
9.1 Shipment, Delivery, Title and Risk of Loss. All CyberCall Products
will be delivered to DISTRIBUTOR F.O.B. (as such term is defined in Publication
No. 460 of the International Chamber of Commerce) . Atio USA's shipping point,
freight, shipping and insurance charges prepaid, and delivery to DISTRIBUTOR
will be deemed to occur upon delivery to the common carrier. In the absence of a
specific, written request from DISTRIBUTOR, Atio USA will select the common
carrier and the method of shipment. DISTRIBUTOR will pay (or reimburse Atio USA
for) all freight, shipping and insurance costs associated with delivery of
products to DISTRIBUTOR. Title to and ownership of all tangible items, and risk
of loss of or damage to products in shipping, shall pass to DISTRIBUTOR upon
delivery to the common carrier.
10. Pricing, Invoicing and Payment
10.1 Prices. For each CyberCall Product license purchased by
DISTRIBUTOR from Atio USA during the first twelve months of this Agreement,
DISTRIBUTOR will pay to Atio USA the amount specified in Schedule II or a
mutually agreed to price for the number of seats for which the license is
purchased. For each CyberCall Product license purchased by DISTRIBUTOR from Atio
USA after the first twelve months of this Agreement,
<PAGE>
DISTRIBUTOR will pay to Atio USA the most favorable price concurrently granted
by Atio USA to any distributor of the CyberCall Products.
10.2 Dealer Kits. For a period of ninety days following the effective
date of this Agreement, DISTRIBUTOR may purchase an unlimited number of Dealer
Kits from Atio USA at Atio USA's cost of producing such Dealer Kits. Each Dealer
Kit shall include a five seat license for use of the CyberCall Products by
DISTRIBUTOR or one of its Dealers for non-production marketing or promotion of
the CyberCall Products or for training. Dealer Kits shall only be sold by the
Distributor to Dealers who desire to use the CyberCall Products for marketing,
promotion or training purposes at more than one location and may not otherwise
be resold by DISTRIBUTOR or its Dealers.
10.3 Suggested Prices for Reference Only. Atio USA's suggested end user
prices are used herein solely as a reference point and for the convenience of
the parties. DISTRIBUTOR and its Dealers shall be free to set their own prices
for the CyberCall Products, and Atio USA shall not restrict the freedom of
DISTRIBUTOR or its Dealers to set their own prices for any products or services
they sell. DISTRIBUTOR and its Dealers shall each be free to publicize and
advertise its chosen resale pricing for the CyberCall Products. DISTRIBUTOR will
keep Atio USA's discount schedules in strict confidence and will not disclose
the same to any Dealer, end user or other third party.
10.4 Sales Taxes. DISTRIBUTOR will pay or reimburse Atio USA for any
sales, use, excise or other taxes or other governmental charges which Atio USA
is required to pay or collect by virtue of the payment of royalties or other
amounts under this Agreement, exclusive of taxes upon the income of Atio USA.
<PAGE>
10.5 Invoicing. Upon shipment of any CyberCall Product ordered by
DISTRIBUTOR, Atio USA shall invoice DISTRIBUTOR for each unit of product
shipped, including the price to be paid by DISTRIBUTOR therefor, and also any
applicable taxes, shipping and insurance charges pertaining thereto which
DISTRIBUTOR owes to Atio USA. .. Upon receipt of notice that an end user
customer of DISTRIBUTOR or of one of its Dealers has purchased or renewed annual
maintenance for the CyberCall Products and an accompanying order for
maintenance, Atio USA will invoice DISTRIBUTOR for the amount due to Atio USA
with respect thereto. Atio USA will invoice DISTRIBUTOR for other charges
permitted under this Agreement at or about the times such charges are incurred.
10.6 Payment. Payment terms of all invoices issued by Atio USA to
DISTRIBUTOR are net sixty (60) days from date of invoice. Any amount not paid
when due will accrue a finance charge at the rate of one and one-half percent
(1-1/2%) per month or the highest rate permitted by law, whichever is less,
until fully paid. In the event that DISTRIBUTOR fails to pay any Atio USA
invoice when due, Atio USA will have the right to require prepayment or other
payment arrangements satisfactory to Atio USA as a condition of any future
deliveries of products or services to DISTRIBUTOR. All payments shall be made in
United States Dollars, free of any withholding tax and free of any currency
controls or other restrictions.
11. Distributor's Minimum Performance Objectives
11.1 Notwithstanding anything to the contrary in this Agreement, in no
event shall DISTRIBUTOR be required to purchase any specific amount of products
and/or services under this Agreement.
12. Reports, Records and Audits
<PAGE>
12.1 Records and Audits. Throughout the term of this Agreement and for
a period of four years thereafter, DISTRIBUTOR will keep complete and accurate
written books, accounts and records of such information as may be necessary to
determine its compliance with the terms and conditions of this Agreement.
DISTRIBUTOR will allow an independent certified public accountant serving as
Atio USA's agent, upon thirty days advance written notice, and only once per
calendar year unless substantial non-compliance by DISTRIBUTOR is discovered, to
inspect, audit and analyze the books, records, documents and accounting
procedures and practices of DISTRIBUTOR relevant to this Agreement. Any such
auditor shall agree in advance to treat such information in the manner required
by paragraph 12.2. Any such inspection, audit and analysis shall be conducted
during normal business hours at the place(s) where such books, accounts and
records are normally maintained. Atio USA shall bear its own costs associated
with any such inspection, audit and analysis. Upon completion of any such audit,
the auditor shall render a written report stating whether or not DISTRIBUTOR
appears to be in compliance with this Agreement.
12.2 Confidential Treatment. Information furnished or otherwise made
available to the auditor pursuant to this section 12 will be held in confidence
by the auditor, will be used by the auditor solely for the purpose of verifying
compliance with this Agreement and rendering a summary report as specified in
paragraph 12.1, will not be disclosed by the auditor to any person or party
other than Atio USA and the DISTRIBUTOR, and will not be disclosed to Atio USA
unless it is the auditor's opinion that DISTRIBUTOR is not in substantial
compliance with this Agreement, in which case the auditor may disclose to Atio
USA and DISTRIBUTOR only information concerning the claimed noncompliance. Once
the information has been disclosed to
<PAGE>
Atio USA, the parties will confer with respect to the claimed noncompliance to
determine mutually whether DISTRIBUTOR is in substantial compliance with this
Agreement.
13. Trademarks, Trade Names and Promotional Materials
13.1 Atio USA Name and Trademarks. Throughout the term of this
Agreement, DISTRIBUTOR and its Dealers shall market the CyberCall Products only
under the trademark "CYBERCALL" or such trademarks and trade names as Atio USA
shall designate. The name Atio USA and the trademark CYBERCALL are and shall
remain the exclusive property of Atio USA . This Agreement conveys no rights in
Atio USA's name or trademarks to DISTRIBUTOR, and neither DISTRIBUTOR nor its
Dealers shall use Atio USA's name or trademarks except, in accordance with
proper trademark usage, for the purpose of marketing and distributing the
CyberCall Products.
13.2 DISTRIBUTOR Name and Trademarks. This Agreement conveys no rights
in DISTRIBUTOR'S name or trademarks to Atio USA. Atio USA shall neither have nor
claim any right, title or interest in DISTRIBUTOR'S name or any DISTRIBUTOR
trade name, trademarks or service marks.
13.3 Promotional and Advertising Materials. To the extent DISTRIBUTOR
so desires, Atio USA will furnish DISTRIBUTOR with copies of advertising,
marketing and related literature and materials produced by Atio USA, in return
for which DISTRIBUTOR will pay Atio USA an amount equal to Atio USA's actual
cost of producing copies furnished to DISTRIBUTOR, plus shipping and related
costs. DISTRIBUTOR may, at its own expense, produce advertising, marketing and
related literature and materials pertaining to the CyberCall Products for the
purposes of advertising and marketing the CyberCall Products, provided that
DISTRIBUTOR and its Dealers make no unauthorized use of Atio USA's name or
trademarks.
<PAGE>
DISTRIBUTOR will not make any claims or representations or give any warranties
or guaranties regarding the CyberCall Products that are inconsistent with, or in
addition to, those made by Atio USA, except at its own risk and liability.
14. Atio USA Warranties and Warranty Disclaimer
14.1 General. Atio USA represents and warrants that, as of the
effective date of this Agreement: and throughout the Term of this Agreement i)
Atio USA has the lawful authority to enter into this Agreement and perform all
of its duties and obligations contained herein including compliance with all
representations; ii) Atio USA is free of any obligation or restriction that
would prevent it from entering into or performing all of its duties and
obligations under this Agreement; and iii) ATIO USA has sufficient right, title
and interest in the CyberCall Products to grant the rights contained herein to
DISTRIBUTOR or any Dealer; .. Atio USA will not during the term of this
Agreement enter into any other agreement, grant any license, undertake any
obligation or commit any act which would prevent its performance or limit the
rights of DISTRIBUTOR hereunder. Atio USA hereby passes through to DISTRIBUTOR,
its Dealers and customers the benefit of all warranties, indemnities and related
undertakings that appear for their benefit in Atio USA's agreement(s) with its
supplier(s). Upon execution of this Agreement, Atio USA will provide DISTRIBUTOR
with a copy of the pertinent sections of such agreement(s).
14.2 CYBERCALL PRODUCT WARRANTY DISCLAIMER. ALL CYBERCALL PRODUCTS ARE
FURNISHED BY ATIO USA AND ACCEPTED BY DISTRIBUTOR "AS IS," WITHOUT ANY WARRANTY
WHATSOEVER EXCEPT FOR SUCH WARRANTIES CONTAINED IN SECTION 14.1 ABOVE AND ANY
OTHER WARRANTIES, IF ANY, AS DISTRIBUTOR, ITS DEALERS OR END USERS MAY RECEIVE,
BY OPERATION OF
<PAGE>
LAW OR OTHERWISE, FROM A THIRD PARTY MANUFACTURER OR THIRD PARTY LICENSOR OF
SUCH PRODUCTS. ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, ARE
SPECIFICALLY EXCLUDED AND DISCLAIMED BY ATIO USA. ATIO USA DOES NOT WARRANT THAT
THE CYBERCALL PRODUCTS OR THE ASSOCIATED USER DOCUMENTATION WILL MEET
DISTRIBUTOR'S, A DEALER'S OR ANY END USER'S REQUIREMENTS OR THAT THE OPERATION
OF LICENSED SOFTWARE WILL BE UNINTERRUPTED OR ERROR FREE. EXCEPT AS EXPRESSLY
PROVIDED IN SUCH WARRANTIES, IF ANY, AS DISTRIBUTOR, ITS DEALERS OR END USERS
MAY RECEIVE FROM THIRD PARTY MANUFACTURERS OR LICENSORS, THE ENTIRE RISK AS TO
THE QUALITY AND PERFORMANCE OF PRODUCTS FURNISHED BY ATIO USA IS WITH THE USER.
15. LIMITATION OF ATIO USA LIABILITY
15.1 LIMITATION OF ATIO USA LIABILITY. IN NO EVENT WILL ATIO USA BE
LIABLE TO DISTRIBUTOR, ANY DEALER OR END USER, OR ANY OTHER PERSON FOR ANY LOST
PROFITS, LOST SAVINGS, LOST DATA, OR OTHER SPECIAL, CONSEQUENTIAL OR INCIDENTAL
DAMAGES ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY PRODUCT OR SERVICE
FURNISHED OR TO BE FURNISHED BY ATIO USA UNDER THIS AGREEMENT OR THE USE
THEREOF, EVEN IF ATIO USA HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSS OR
DAMAGE, AND THE AGGREGATE LIABILITY OF ATIO USA UPON ANY CLAIMS HOWSOEVER
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY PRODUCTS OR SERVICES
FURNISHED OR TO BE FURNISHED BY ATIO USA
<PAGE>
UNDER THIS AGREEMENT WILL IN ANY EVENT BE ABSOLUTELY LIMITED TO THE AMOUNT PAID
TO ATIO USA UNDER THIS AGREEMENT; PROVIDED, HOWEVER, THAT NOTHING IN THIS
AGREEMENT SHALL OPERATE TO RELIEVE ATIO USA FROM LIABILITY FOR THE
INDEMNIFICATION CONTAINED IN SECTION 17, ITS OWN GROSSLY NEGLIGENT, WILLFUL OR
WANTON RECKLESSNESS OR INTENTIONAL TORTS, INCLUDING DAMAGES TO PROPERTY OR
INJURY OR DEATH TO PERSONS.
16. Distributor Warranties
16.1 DISTRIBUTOR represents and warrants that, as of the effective date
of this Agreement, it has the lawful authority to enter into this Agreement and
is free of any obligation or restriction that would prevent it from entering
into or performing under this Agreement. DISTRIBUTOR will not during the term of
this Agreement enter into any other agreement, grant any license, undertake any
obligation or commit any act which would prevent its performance or limit the
rights of Atio USA hereunder.
17. Indemnification
17.1 DISTRIBUTOR will indemnify and hold Atio USA harmless from and
against any and all claims, liability, costs and expenses (including reasonable
attorneys' fees) arising out of (a) the improper installation, support or
maintenance of the CyberCall Products by DISTRIBUTOR or its Dealers (except for
improper installation, support or maintenance made in reliance upon information,
advice or instructions received from Atio USA in writing, including CyberCall
Product documentation, specifications or training), (b) any misrepresentations
by DISTRIBUTOR or its Dealers in respect of the CyberCall Products (except for
misrepresentations made in reliance upon information, advice or instructions
received from Atio
<PAGE>
USA in writing, including CyberCall Product documentation, specifications, or
training)), or (c) any grossly negligent, wrongful or intentional acts or
omissions on the part of DISTRIBUTOR or its Dealers which give rise to claims
against Atio USA by third parties. EXCEPT FOR THE FOREGOING, IN NO EVENT WILL
DISTRIBUTOR BE LIABLE TO ATIO USA FOR ANY LOST PROFITS, LOST SAVINGS, OR OTHER
SPECIAL, CONSEQUENTIAL OR INCIDENTAL DAMAGES ARISING OUT OF OR RELATING TO THIS
AGREEMENT, EVEN IF DISTRIBUTOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSS
OR DAMAGE; PROVIDED, HOWEVER, THAT NOTHING IN THIS AGREEMENT SHALL OPERATE TO
RELIEVE DISTRIBUTOR FROM LIABILITY FOR THE INDEMNIFICATION CONTAINED IN THIS
SECTION 17 OR ITS OWN NEGLIGENT, WILLFUL OR WANTON RECKLESSNESS OR INTENTIONAL
TORTS, INCLUDING DAMAGES TO PROPERTY OR INJURY OR DEATH TO PERSONS.
17.2 Atio USA will indemnify and hold DISTRIBUTOR harmless from and
against any and all claims, liabilities, costs and expenses (including
reasonable attorney's fees) arising out of Atio USA's grossly negligent,
wrongful or intentional acts or omissions which give rise to claims against
DISTRIBUTOR by third parties.
7.3 Regarding any claim or action brought against the DISTRIBUTOR, its
parent or their subsidiaries or affiliates by any person or entity, based on or
in connection with a claim that the CyberCall Product or the DISTRIBUTOR's use
of, possession of or dealings with the CyberCall Product infringes a title,
non-disclosure agreement, patent, copyright trademark, trade secret,
intellectual property or any other proprietary right, Atio USA shall defend such
claim or action (including appeals) at its expense and shall pay (when due) all
costs, attorney(s) fees, damages, settlements and other amounts awarded or
agreed to in connection with any such claim
<PAGE>
or action. If the DISTRIBUTOR is enjoined, precluded or advised by its counsel
or Atio USA to refrain from using the CyberCall Product because of any such
infringement or any infringement claim or allegation, Atio USA shall
immediately, according to mutually acceptable terms, and at Atio USA's expense,
either: a) procure for the DISTRIBUTOR the right to continue using the CyberCall
Product; b) after notification to the DISTRIBUTOR, replace or modify same so
that it becomes non-infringing, providing that, in the DISTRIBUTOR's opinion,
the replacement or modification will not materially and adversely affect the
performance of the CyberCall Product or significantly lessen in any the utility
of the CyberCall Product to the DISTRIBUTOR or c) after demonstrating to the
DISTRIBUTOR the failure of good faith effort to achieve either of the above two
options, accept return of the CyberCall Product at Atio USA's expense and refund
that portion of the license fees based on a five (5) year straight-line
amortization. The provisions of this paragraph shall apply notwithstanding and
unlimited by any other provision(s) in this Agreement and shall survive this
Agreement.
18. NOTICES
18.1 Any notice hereunder shall be deemed given when personally
delivered in writing, when dispatched via overnight courier or when mailed as
described below and shall be deemed received when personally delivered in
writing or twenty four (24) hours after being sent via overnight express
courier, properly addressed to the party to whom it is intended at the address
set forth below or at such other address of which notice is given in accordance
herewith:
If to Atio USA: Atio Corporation USA, Inc.
11111 Excelsior Boulevard
Hopkins, MN 55343
Attention: Gary B. Rappaport
with a copy to: Leonard, Street and Deinard
Suite 2300
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150 South Fifth Street
Minneapolis, MN 55402
Attention: Morris M. Sherman
If to DISTRIBUTOR: ATIO Corporation International, Inc.
11111 Excelsior Boulevard
Hopkins, MN 55343
Attention: Willem Ellis
with a copy to: McDermott, Will & Emery
227 West Monroe Street, Suite 310
Chicago, IL 60606-5096
Attention: Stuart M. Berkson, P.C.
19. TERM
19.1 Term. This Agreement is effective as of the date first above
written and shall continue in force and effect for an Initial Term of five (5)
years or until that earlier date on which the Technology License and Transfer
Agreement between the parties of even date herewith (the "Technology Agreement")
is terminated because the AtioCALL Product Rights (as such term is defined in
the Technology Agreement) have reverted to Atio in accordance with paragraph 5
of the Technology Agreement. This Agreement may be renewed for additional terms
upon the mutual agreement of the parties.
19.2 Licenses and Royalty Obligations. All Product Licenses granted to
end users pursuant to this Agreement, and all obligations of end users and Atio
USA thereunder, shall survive any termination of this Agreement.
19.3 Upon the termination of this agreement:
a. Except as permitted in paragraph 19.3(c), DISTRIBUTOR shall,
and shall require its Dealers to, cease to promote, market or advertise the
CyberCall Products;
b. All amounts due from either party to the other shall be
immediately due and payable;
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c. DISTRIBUTOR and its Dealers may retain and continue to purchase
and distribute the CyberCall Products and related documentation as necessary to
fulfill contracts existing and bids outstanding on the effective date of
termination.
d. DISTRIBUTOR shall, and shall require its Dealers to, promptly
destroy all copies in their possession of the CyberCall Products, related
documentation and marketing materials, except for those things which the
DISTRIBUTOR and its Dealers are permitted to retain under section 19.3(c).
19.4 Termination of this Agreement shall not affect the rights of any
end user to which a license for use of the CyberCall Products is granted under
this Agreement.
19.5 Rights and Obligations Surviving Termination. The termination of
this Agreement for any reason shall not affect the rights and obligations of the
parties under sections 12-26 or any other obligation or liability which either
party has to the other under this Agreement and which, by its nature, would be
expected to survive termination. All causes of action accruing prior to the
termination of this Agreement shall similarly survive termination unless
otherwise barred by applicable statutes of limitations.
20. Relationship Of The Parties
20.1 Nothing in this Agreement shall be construed as creating any joint
venture, partnership or agency relationship between the parties for any purpose
whatsoever or as constituting either party as the legal representative of the
other, and neither party shall have the right or the authority to assume, create
or incur any liability or obligation of any kind, express or implied, against or
in the name of or on behalf of the other.
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21. Force Majeure
21.1 Except as otherwise specifically provided in this Agreement,
neither Atio USA nor DISTRIBUTOR shall be liable for any delay or failure in
performing any obligation under this Agreement due to any cause beyond its
reasonable control.
22. Non-Waiver
22.1 The failure by either party at any time to enforce any of the
provisions of this Agreement or any right or remedy available hereunder or at
law or in equity, or to exercise any option herein provided, shall not
constitute a waiver of such provision, right, remedy or option or in any way
affect the validity of this Agreement. The waiver of any default by either party
shall not be deemed a continuing waiver, but shall apply solely to the instance
to which such waiver is directed.
23. Assignment and Binding Effect
23.1 Assignment. Neither Atio USA nor DISTRIBUTOR may assign, delegate,
or otherwise transfer this Agreement or any of its rights or obligations
hereunder without the prior written consent of the other, which consent shall
not be unreasonably withheld, except that either party may without such consent
assign this Agreement in its entirety to a successor pursuant to a corporate
reorganization, merger, or sale of substantially all of that party's assets.
23.2 Binding Effect and Benefit. This Agreement shall be binding upon
and inure to the benefit of Atio USA and DISTRIBUTOR and their respective
successors and permitted assigns.
24. Confidentiality Of Agreement
24.1 Each of the parties will treat the terms and conditions of this
Agreement as confidential, and neither of the parties will disclose any of the
terms or conditions hereof to any
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other person or party except as necessary to protect or enforce its rights
hereunder or as may be reasonably necessary for financial or regulatory
reporting purposes as required by law or pursuant to compulsory process.
25. Export Control and Legal Compliance.
25.1 Registration. If any approval with respect to this Agreement, or
the registration thereof, shall be required at any time during the term of this
Agreement, with respect to giving legal effect to this Agreement in the
Territory, or with respect to compliance with exchange regulations or other
requirements so as to assure the right of remittance abroad of United States
dollars pursuant to Section 10 hereof, DISTRIBUTOR shall immediately take
whatever steps may be necessary in this respect, and any charges incurred in
connection therewith shall be for the account of DISTRIBUTOR. DISTRIBUTOR shall
keep Atio USA currently informed of its efforts in this connection. Atio USA
shall be under no obligation to ship CyberCall Products to DISTRIBUTOR hereunder
until DISTRIBUTOR has provided Atio USA with satisfactory evidence that such
approval or registration is not required or that it has been obtained.
25.2 Export Compliance. Atio USA and DISTRIBUTOR shall comply with all
applicable laws including, without limitation, the export control law of the
United States of America and prevailing regulations which may be issued from
time to time by the United States Department of Commerce, the Office of
Munitions Control, the United States Department of State, and any other export
control regulations of the United States of America and those countries involved
in transactions concerning the exporting, importing, and reexporting of
CyberCall Products purchased or licensed in accordance with this Agreement.
DISTRIBUTOR shall also comply with the United States Foreign Corrupt Practices
Act and shall indemnify Atio
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USA from any failure to comply or violation of such act by DISTRIBUTOR. The
provisions of this section shall survive any termination of this Agreement.
25.3 Export Licensing. Atio USA hereby agrees that it shall obtain any
necessary export license or other such similar necessary documentation prior to
exportation of any products or technical data acquired by DISTRIBUTOR from Atio
USA under this Agreement. DISTRIBUTOR shall not sell, export, reexport,
transfer, divert, or otherwise dispose of any such product or technical data,
directly or indirectly, to any person or firm, or country or countries
prohibited by the laws or regulations of the United States of America, or by the
laws of DISTRIBUTOR's country. Further, DISTRIBUTOR shall notify any person
obtaining such products or technical data from DISTRIBUTOR of the need to comply
with such laws and regulations.
25.4 Software Registration. With regard to Software provided under this
Agreement, DISTRIBUTOR agrees to comply with any import regulations and
registration requirements applicable in the country in which such Software is
distributed by DISTRIBUTOR.
26. Choice of Law, Construction, and Dispute Resolution.
a. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the United States of America and the state of New
York applicable to contracts made and to be performed therein. The parties
hereby agree to exclude the application of the United Nations Convention on
Contracts for the International Sale of Goods. Every provision of this Agreement
shall be construed, to the extent possible, so as to be valid and enforceable.
If any provision of this Agreement so construed is determined to be invalid,
illegal, or otherwise unenforceable, such provision shall be deemed severed from
this Agreement, and all other provisions shall remain in full force and effect.
<PAGE>
b. Arbitration; Legal Proceedings.
i. The parties shall attempt in good faith to resolve any dispute
arising out of or relating in any manner to this Agreement, the breach,
termination or validity thereof or the transactions contemplated herein
(including, without limitation, any claim for indemnification pursuant to
section 17 hereof and any statutory or common law claim) promptly by negotiation
between a representative of the DISTRIBUTOR and a representative of Atio USA,
each of whom has authority to settle the controversy. Either Atio USA or
DISTRIBUTOR may give the other written notice that a dispute exists (a "Notice
of Dispute"). The Notice of Dispute shall include a statement of such party's
position and the name and title of the representative who will represent such
party. Within ten (10) days of the delivery of the Notice of Dispute, the
parties' respective representatives shall meet at a mutually acceptable time and
place, and thereafter as long as they reasonably deem necessary, to attempt to
resolve the dispute. All documents and other information or data on which each
party relies concerning the dispute shall be furnished or made available on
reasonable terms to the other party at or before the first meeting of the
parties as provided by this paragraph.
ii. Any controversy or claim arising out of or relating to this
Agreement, the breach, termination or validity thereof, or the transactions
contemplated herein (including, without limitation, any claims for
indemnification pursuant to section 17 hereof and any statutory or common law
claim), if not settled by negotiation as provided in paragraph (a) of this
section 25(b), shall be settled by arbitration in New York, New York, in
accordance with the CPR Rules for Non-Administered Arbitration of Business
Disputes, by three arbitrators. Either party may initiate arbitration twenty
(20) days following the delivery of a Notice of Dispute if the dispute has not
then been settled by negotiation, or sooner if the other party fails to
<PAGE>
participate in negotiation in accordance with paragraph (i) above. The three
arbitrators shall be appointed as provided by CPR Rule 5, Selection of
Arbitrators by the parties. The arbitrators shall have no power to add or
detract from the agreements of the parties and shall not have the authority to
make any ruling or award that does not conform to the terms and conditions of
this Agreement or the applicable law. Without limitation of the foregoing, the
arbitrators shall have no power to terminate this Agreement other than in
accordance with its terms and shall have no power to grant any license not
expressly granted by this Agreement. The arbitrators shall have no authority to
award punitive damages. The arbitration procedure shall be governed by the
United States Arbitration Act, 9 U.S.C. ss. 1-16, and the award rendered by the
arbitrator shall be final and binding on the parties and may be entered in any
court having jurisdiction thereof.
iii. Each party shall have discovery rights as provided by the
United States Federal Rules of Civil Procedure; provided, however, that all such
discovery shall be commenced and concluded within sixty (60) days of the
initiation of arbitration.
iv. It is the intent of the parties that any arbitration shall be
concluded as quickly as reasonably practicable. Unless the parities otherwise
agree, once commenced, the hearing on the disputed matters shall be held four
days a week until concluded, with each hearing date to begin at 9:00 a.m. and to
conclude at 5:00 p.m. The arbitrators shall use all reasonable efforts to issue
the final award or awards within a period of five business days after closure of
the proceedings. Failure of the arbitrators to meet the time limits of this
paragraph (iv) shall not be a basis for challenging the award.
v. The arbitrators shall instruct the non-prevailing party to pay
all costs of the proceedings, including the fees and expenses of the arbitrators
and the reasonable attorneys' fees and expenses of the prevailing party. If the
arbitrators determine that there is not a
<PAGE>
prevailing party, each party shall be instructed to bear its own costs and to
pay one-half of the fees and expenses of the arbitrators.
vi. Each party hereto hereby agrees that any legal proceeding
instituted to enforce an arbitration award hereunder will be brought in the U.S.
federal courts situated in New York (which shall have sole and exclusive
jurisdiction thereof), and hereby submits to personal jurisdiction therein and
irrevocably waives any objection as to venue therein, and further agrees not to
plead or claim in any such court that any such proceeding has been brought in an
inconvenient forum. Atio USA hereby designates, appoints and empowers Morris M.
Sherman, presently having offices at Leonard, Street and Deinard, Suite 2300,
150 South Fifth Street, Minneapolis, Minnesota 55402, as Atio USA's true and
lawful agent for service of process to receive and accept on its behalf service
of process in any such proceeding brought in any such courts. DISTRIBUTOR hereby
designates, appoints and empowers Stuart M. Berkson, P.C., presently having
offices at 227 West Monroe Street, Chicago, Illinois, as DISTRIBUTOR's true and
lawful agent for service of process to receive and accept on DISTRIBUTOR's
behalf service of process in any such proceeding brought in any such courts.
Each of the foregoing parties agrees that the failure of the process agent
appointed by such person to give notice of process to such person shall not
impair or affect the validity of service upon such agent or of any judgment
based thereon, and each such person irrevocably consents to the service of
process in any such proceeding by the mailing of copies thereof by certified
mail, postage prepaid, to such person's address for notice under this Agreement.
Nothing herein shall preclude any of the parties hereto from serving process in
any other manner or in any other jurisdiction in connection with enforcing an
arbitration award hereunder.
<PAGE>
27. Integration
27.1 This Agreement (and the portions of the Technology Agreement
referenced in this Agreement) sets forth the entire agreement and understanding
between Atio USA and DISTRIBUTOR regarding the subject matter hereof and
supersedes any prior representations, statements, proposals, negotiations,
discussions, understandings, or agreements regarding the same subject matter.
This Agreement may not be modified or amended except by a writing signed by the
party against whom the modification or amendment is sought to be enforced.
28. Escrow
28.1 Upon transfer of the AtioCALL Products Rights to AtioUSA pursuant
to the Technology Agreement, the parties shall enter into an independent escrow
arrangement that provides, among other things, for the release of the source
code to the CyberCall Product to DISTRIBUTOR in the event that Atio USA either
(i) is unable or unwilling to timely support or maintain the CyberCall Products,
(ii) is no longer in the business contemplated by this Agreement, (iii) ceases
to exist in its present corporate form, or (iv) files or has filed against it a
petition of bankruptcy (and such petition is not discharged within ninety (90)
days of date of filing), or is adjudicated bankrupt, or otherwise becomes
subject to any proceeding under applicable bankruptcy or insolvency laws which
would not permit Atio USA to meet its obligations under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
VENTURIAN SOFTWARE ENTERPRISES, INC. ATIO CORPORATION
INTERNATIONAL, INC.
<PAGE>
By /s/ Ilan Sharon By /s/ Willem Ellis
Its President Its /s/ Chairman
<PAGE>
SCHEDULE I
THE CYBERCALL PRODUCTS
1. CyberCall Products
<PAGE>
SCHEDULE II
CYBERCALL PRODUCT PRICES
Discounts: Atio International will receive a 90% discount from the then current
Manufacturer's suggested Retail Price for Cybercall ( "MSRP") on sales in Africa
and an 80% discount from MSRP on all sales other than those made in Africa. In
order to meet the demands of a particular market or country the parties may
agree to mutually to establish different pricing or discounts.
Atio USA Annual Maintenance Fee
Atio USA's suggested end user fee for annual maintenance agreements
with respect to the CyberCall Products will be mutually agreed to by the parties
but no less than ten percent (10%) of the Atio USA suggested end user price of
the CyberCall Product in effect at the commencement of the annual maintenance
period. An end user customer who failed to purchase an annual maintenance
agreement for the CyberCall products commencing upon the expiration of the
manufacturer's warranty or who has failed to renew annual maintenance may not
thereafter purchase an annual maintenance agreement without first paying to Atio
USA the amount of maintenance fees such customer would have paid if it had kept
its annual maintenance agreement in effect continuously.
Nothing in this Schedule shall in any way govern the prices to be charged by the
Distributor, its Dealers, or any other party for sales of the Software, Software
Maintenance Agreements or related services, all such resellers being free to
determine the prices at which they will sell such products and services.
<PAGE>
SCHEDULE III
CYBERCALL
SOFTWARE LICENSE AGREEMENT
1. Grant of License. Atio Corporation USA, Inc. ("Atio USA") hereby
grants to Licensee a non-exclusive, non-transferable and non-assignable license
to use the CyberCall computer software and associated user documentation which
accompany this Agreement (all referred to herein as the "Licensed Software") in
accordance with the terms and conditions of this Agreement.
2. Scope of Permitted Use. Throughout the term of this License
Agreement, Licensee shall have the right to use the Licensed Software for
Licensee's own business purposes for the number of seats for which a license fee
is paid. Licensee may make only such copies of the Licensed Software as are
reasonably necessary for Licensee's own use and archival or backup purposes.
3. WARRANTY DISCLAIMER. THE LICENSED SOFTWARE IS FURNISHED BY ATIO USA
AND DISTRIBUTOR AND ACCEPTED BY LICENSEE "AS IS," WITHOUT ANY WARRANTY
WHATSOEVER. ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTIES OF
TITLE, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, ARE SPECIFICALLY
EXCLUDED AND DISCLAIMED. NEITHER ATIO USA NOR DISTRIBUTOR DOES NOT WARRANT THAT
THE LICENSED SOFTWARE WILL MEET LICENSEE'S REQUIREMENTS OR THAT THE OPERATION OF
THE LICENSED SOFTWARE WILL BE UNINTERRUPTED OR ERROR FREE, AS BETWEEN ATIO USA
AND DISTRIBUTOR AND LICENSEE, THE ENTIRE RISK AS TO THE SELECTION, QUALITY AND
PERFORMANCE OF THE LICENSED SOFTWARE IS WITH LICENSEE.
4. LIMITATION OF LIABILITY. IN NO EVENT WILL ATIO USA OR DISTRIBUTOR BE
LIABLE TO LICENSEE OR ANY OTHER PERSON FOR ANY LOST PROFITS, LOST SAVINGS, LOST
DATA, OR OTHER SPECIAL, CONSEQUENTIAL OR INCIDENTAL DAMAGES ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY PRODUCT OR SERVICE FURNISHED OR TO BE
FURNISHED BY ATIO USA OR DISTRIBUTOR UNDER THIS AGREEMENT OR THE USE THEREOF,
EVEN IF EITHER ATIO USA OR DISTRIBUTOR HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH LOSS OR DAMAGE, AND THE AGGREGATE LIABILITY OF ATIO USA AND DISTRIBUTOR
UPON ANY CLAIMS HOWSOEVER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
PRODUCTS OR SERVICES FURNISHED OR TO BE FURNISHED BY ATIO USA AND DISTRIBUTOR
UNDER THIS AGREEMENT WILL IN ANY EVENT BE ABSOLUTELY LIMITED TO THE AMOUNT PAID
TO ATIO USA OR DISTRIBUTOR UNDER THIS AGREEMENT; PROVIDED, HOWEVER, THAT NOTHING
IN THIS AGREEMENT SHALL OPERATE TO RELIEVE ATIO USA OR DISTRIBUTOR
<PAGE>
FROM LIABILITY FOR ITS OWN WILLFUL OR WANTON RECKLESSNESS OR INTENTIONAL TORTS.
5. Proprietary Expression and Information. Atio USA or its licensor
claims copyright ownership of the Licensed Software, and that the ideas,
procedures, processes, systems, methods of operation, and concepts embodied
within the Licensed Software are trade secret information of Atio USA or its
licensor. This license is not a sale of a copy of the Licensed Software and does
not render Licensee the owner of a copy of the Licensed Software. Ownership of
the Licensed Software and all components and copies thereof shall at all times
remain with Atio USA or its licensor, regardless of who may be deemed the owner
of the tangible media in or on which the Licensed Software may be copied,
encoded or otherwise fixed.
6. Restrictions Upon Duplication, Reverse Engineering and Disclosure.
Any copy of the Licensed Software made by Licensee must bear the same copyright
and other proprietary notices that appear on the copy furnished to Licensee by
Atio USA. Except to the extent such a restriction is preempted by applicable
law, Licensee will not attempt to "reverse engineer" the Licensed Software, nor
shall Licensee permit any other person to do so. Licensee will make reasonable
efforts to prevent any unauthorized copying of the Licensed Software or
disclosure or use of Atio USA's or Atio USA's licensor's trade secret
information, and Licensee will advise its employees who are permitted access to
the Licensed Software of the restrictions upon duplication, reverse engineering,
disclosure and use contained in this Agreement. Licensee will be liable for any
unauthorized copying, reverse engineering and/or disclosure by its employees or
agents.
7. Restriction upon Transfer. Licensee will not lease, rent, sell,
pledge, assign, sublicense, loan or otherwise transfer to any third party any
part of the Licensed Software or any copy thereof or any of Licensee's rights
under this Agreement without the prior written consent of Atio USA.
8. Termination. The license hereby granted will terminate automatically
and immediately in the event that: a) Licensee violates any of the provisions of
paragraphs 2, 6 or 7 above. In the event of termination, Licensee will, within
fifteen (15) days, either return all copies of the Licensed Software to Atio USA
or destroy the same and certify to Atio USA in writing that all copies not
returned to Atio USA have been destroyed.
9. Non-Waiver. The failure by either party at any time to enforce any
of the provisions of this Agreement or any right or remedy available hereunder
or at law or in equity, or to exercise any option herein provided, shall not
constitute a waiver of such provision, right, remedy or option or in any way
affect the validity of this Agreement. The waiver of any default by either party
shall not be deemed a continuing waiver, but shall apply solely to the instance
to which such waiver is directed.
10. Severability and Choice of Law. Every provision of this Agreement
shall be construed, to the extent possible, so as to be valid and enforceable.
If any provision of this Agreement so construed is held by a court of competent
jurisdiction to be invalid, illegal or
<PAGE>
otherwise unenforceable, such provision shall be deemed severed from this
Agreement, and all other provisions shall remain in full force and effect. This
Agreement shall in all respects be governed by and interpreted, construed and
enforced in accordance with the laws of the United States of America and the
state of Minnesota. Any action between Atio USA and Distributor and Licensee
will be venued in a state or federal court situated within the state of
Minnesota, and Licensee irrevocably submits itself to the personal jurisdiction
of such courts for such purpose.
11. Assignment and Binding Effect. Atio USA may assign, delegate and/or
otherwise transfer this Agreement or its rights and obligations hereunder to any
person or entity which purchases or otherwise succeeds to the business of Atio
USA to which this Agreement pertains. Licensee may not assign, delegate or
otherwise transfer this Agreement or any of its rights or obligations hereunder
without the prior written consent of Atio USA. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
permitted assigns.
12. Entire Agreement. This Agreement sets forth the entire agreement
and understanding between Atio USA and Licensee regarding the subject matter
hereof and supersedes any prior representations, advertisements, statements,
proposals, negotiations, discussions, understandings, or agreements regarding
the same subject matter. This Agreement may not be modified or amended except by
a writing signed by the party against whom the same is sought to be enforced.
Atio Corporation USA, Inc. ______________________________________
(Licensee)
Number of Concurrent Seats ______ By ___________________________________
Its __________________________________
Date _________________________________
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SCHEDULE IV
PARTIES AUTHORIZED BY ATIO INT. TO ENGAGE IN
SPECIFIED ACTIVITIES OUTSIDE OR WITHIN THE TERRITORY
Atio Corporation Europe
Atio Corporation Asia Pacific
Atio Corporation Pty
Atio Corporation Hong Kong
