SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
Date of Report: March 18, 1999
ASA International Ltd.
-----------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Delaware O-14741 02-0398205
- ---------------------------- ------------ ----------------------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification Number)
10 Speen Street, Framingham, MA 01701
- ---------------------------------------- -----------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 508-626-2727
<PAGE>
TABLE OF CONTENTS
FORM 8-K
March 18, 1999
Item Page
- ---- ----
Item 2. Disposition of Assets 1
Item 7. Exhibit and Financial Statements 2
Signature 4
Exhibit and Financial Statements E-1
<PAGE>
Item 2. Disposition of Assets
Effective March 3, 1999 (the "Time of Closing") and pursuant to that
certain Asset Purchase Agreement (the "Purchase Agreement") of even date by and
between ASA International Ltd. (the "Registrant") and CommercialWare, Inc., a
Delaware corporation (the "Purchaser"), the Registrant sold substantially all of
the assets of the Registrant's CommercialWare Division ("CWI") to the Purchaser.
In addition and pursuant to the Purchase Agreement, the Registrant transferred
to the Purchaser certain of the liabilities of CWI. In connection therewith
and pursuant to the Purchase Agreement, the Registrant received (i) cash in the
amount of $4,000,000, (ii) a promissory note in the amount of $1,700,000 (the
"Note"), (iii) a promissory note in the amount of $500,000 (the "Junior Note"),
(iv) 30,000 shares of the Purchaser's common stock, par value $.01 per share
("Purchaser's Common Stock"), and (v) one (1) share of Purchaser's Series A
Preferred Stock ("Purchaser's Preferred Stock").
Purchaser's Common Stock and Purchaser's Preferred Stock shall in each case
have rights and preferences as set forth in the Purchaser's Amended and Restated
Certificate of Incorporation. The shares of the Purchaser's Common Stock and
Purchaser's Preferred Stock issued to the Registrant pursuant to clauses (iv)
and (v) above represented as of the Time of Closing approximately 10% of the
issued and outstanding capital stock of the Purchaser on a fully diluted basis,
in accordance with that certain shareholder agreement entered into by the
Purchaser, the Registrant, and certain other parties (the "Shareholder
Agreement").
In addition and as more fully set forth in the Purchase Agreement, the
Registrant granted to the Purchaser an exclusive, royalty free, and worldwide
license and right to use the Customer Intangibles (as defined in the Purchase
Agreement) for a period of ten years beginning on the Time of Closing. In
exchange for such license, the Purchaser is to pay to the Registrant a license
fee of $300,000, payable $100,000 on each of the first three anniversaries of
the Time of Closing. The consideration to be paid was determined by negotiations
between the parties. The Registrant will account for its investment in the
Purchaser under the cost method.
As of the Time of Closing, the remaining shares of the Purchaser's capital
stock were owned by the KK/SS Partnership (72.58%), Spencer Trask Securities,
Inc. (8.96%), William Dioguardi (4.48%), Sumner Kaufman (0.40%) and Donald Askin
("Askin") (3.58%). Askin is a former officer of the Registrant, and
simultaneously with the consummation of the Purchase Agreement, Askin resigned
all of his positions with the Registrant.
Item 7. Exhibit and Financial Statements
The following exhibits and financial statements are filed herewith:
a. Financial statements of business acquired (not applicable).
b. Pro forma financial information for the Registrant.
The following unaudited pro forma condensed consolidated financial
statements are filed with this report:
Pro forma Condensed Consolidated Balance Sheet
at September 30, 1998 F-1 to F-2
Pro forma Condensed Consolidated Statements of Operations.
Year Ended December 31, 1997 F-3
Nine Months Ended September 30, 1998 F-4
The pro forma condensed consolidated balance sheet of the Registrant as of
September 30, 1998, reflects the financial position of the Registrant after
giving effect to the disposition of the assets and assumption of the liabilities
discussed in Item 2 and assumes the disposition took place on September 30,
1998. The pro forma condensed consolidated statements of operations for the
fiscal year ended December 31, 1997, and the nine months ended September 30,
1998, assume that the disposition occurred on December 31, 1996, and are based
on the operations of the Registrant for the year ended December 31, 1997 and the
nine months ended September 30, 1998, respectively.
The unaudited pro forma condensed consolidated financial statements have
been prepared by the Registrant based upon assumptions deemed proper by it. The
unaudited pro forma condensed consolidated financial statements are not
necessarily indicative of the future financial position or results of operations
or actual results that would have occurred had the transaction been in effect as
of the dates presented.
The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the Registrant's historical financial statements and
related notes.
c. Exhibits
Exhibit
No. Title
- ------- -----
2 Asset Purchase Agreement dated as of March 3, 1999
4.1 Shareholder Agreement dated as of March 3, 1999
4.2 Promissory Note dated as of March 3, 1999
4.3 Security Agreement dated as of March 3, 1999
4.4 Trademark Assignment dated as of March 3, 1999
4.5 Trademark Security Agreement dated as of March 3, 1999
4.6 Sub-Lease and Consent Agreement dated as of March 3,
1999
4.7 Subordinated Promissory Note dated as of March 3, 1999
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
ASA International Ltd.
By: /s/ Terrence C. McCarthy
-------------------------------
Terrence C. McCarthy
Vice President and Treasurer
Date: March 18, 1999
<PAGE>
PRO FORMA FINANCIAL INFORMATION
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
AT SEPTEMBER 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
----Pro Forma Adjustments----
Historical CWI (a) Other Pro Forma
------------- --------- ------------- -----------
ASSETS
CURRENT ASSETS:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 3,141,071 $ - $4,000,000(b) $ 7,141,071
Receivables - net 8,154,070 2,018,207 - 6,135,863
Computer hardware held for resale 91,899 - - 91,899
Other current assets 808,161 80,242 - 727,919
----------- ---------- ------------- -----------
TOTAL CURRENT ASSETS 12,195,201 2,098,449 4,000,000 14,096,752
PROPERTY AND EQUIPMENT - NET 4,949,360 253,411 - 4,695,949
NOTE RECEIVABLE FROM CWI - - 1,700,000(b) 1,700,000
SOFTWARE - NET 3,089,183 765,181 - 2,324,002
COST EXCEEDING NET ASSETS
ACQUIRED - NET 701,207 609,761 - 91,446
OTHER ASSETS 1,252,985 - 155,000(b) 1,407,985
----------- ----------- ------------- -----------
$22,187,936 $ 3,726,802 $5,855,000 $24,316,134
=========== =========== ============= ===========
- ------------------------------------------------------------------------------------------
(a) To eliminate the assets and liabilities included in the balance sheet of the
Company's CWI business as of September 30, 1998.
(b) To reflect the exchange of the cash ($4,000,000), note ($1,700,000), and 10%
interest in CWI ($155,000) for the net assets of CWI. The Company did not
reflect the $500,000 Junior Note as part of the proceeds due to the
uncertainty of the ultimate collection of this Note.
(c) To reflect transaction costs and liabilities incurred by the Company,
including estimated taxes on gain from sale, including estimated taxes on
gain from sale.
</TABLE>
<PAGE>
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
AT SEPTEMBER 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
----Pro Forma Adjustments----
Historical CWI (a) Other Pro Forma
---------- ---------- -------------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C> <C> <C>
Accounts payable $ 1,676,397 $ 228,449 $ - $ 1,447,948
Accrued expenses 4,395,811 1,374,509 (2,014,000)(c) 5,035,302
Other current liabilities 2,568,292 570,607 - 1,997,685
----------- ---------- -------------- -----------
TOTAL CURRENT LIABILITIES 8,640,500 2,173,565 (2,014,000) 8,480,935
LONG-TERM OBLIGATIONS, NET OF
CURRENT MATURITIES 3,945,751 - - 3,945,751
DEFERRED TAXES 616,000 - - 616,000
LONG-TERM LIABILITIES 283,985 - - 283,985
COMMITMENTS - - - -
SHAREHOLDERS' EQUITY:
Common stock 43,768 - - 43,768
Additional paid-in capital 7,793,773 1,152,172 - 6,641,601
Retained earnings 2,790,470 401,065 (3,841,000) 6,230,405
Cumulative translation adjustments 30,555 - - 30,555
----------- ---------- -------------- -----------
10,658,566 1,553,237 (3,841,000) 12,946,329
Less: treasury stock, at cost 1,956,866 - - 1,956,866
----------- ---------- -------------- -----------
8,701,700 1,553,237 (3,841,000) 10,989,463
----------- ---------- -------------- -----------
$22,187,936 $3,726,802 $(5,855,000) $24,316,134
=========== ========== ============== ===========
- ------------------------------------------------------------------------------------------
(a) To eliminate the assets and liabilities included in the balance sheet of the
Company's CWI business as of September 30, 1998.
(b) To reflect the exchange of the cash ($4,000,000), note ($1,700,000), and 10%
interest in CWI ($155,000) for the net assets of CWI. The Company did not
reflect the $500,000 Junior Note as part of the proceeds due to the
uncertainty of the ultimate collection of this Note.
(c) To reflect transaction costs and liabilities incurred by the Company,
including estimated taxes on gain from sale.
</TABLE>
<PAGE>
PRO FORMA FINANCIAL INFORMATION
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
----Pro Forma Adjustments----
Historical CWI(a) Other(b) Pro Forma
---------- ------------ -------- -----------
REVENUE
<S> <C> <C> <C> <C>
Services $ 5,323,734 $ 3,628,420 $ - $ 1,695,314
Product licenses 14,005,494 2,136,823 100,000 11,968,671
Computer and add-on hardware 6,177,507 1,837,908 - 4,339,599
----------- ------------ ---------- -----------
NET REVENUE 25,506,735 7,603,151 100,000 18,003,584
COST OF REVENUE
Services 4,992,025 2,418,874 - 2,573,151
Product licenses and development 8,010,547 953,960 - 7,056,587
Computer and add-on hardware 3,326,174 1,657,114 - 1,669,060
----------- ----------- ---------- ------------
TOTAL COST OF REVENUE 16,328,746 5,029,948 - 11,298,798
EXPENSES
Marketing and sales 4,487,322 1,163,476 - 3,323,846
General and administrative 2,974,903 346,167 - 2,628,736
Amortization of goodwill 230,355 84,766 - 145,589
----------- ----------- ---------- ------------
TOTAL EXPENSES 7,692,580 1,594,409 - 6,098,171
EARNINGS FROM OPERATIONS 1,485,409 978,794 100,000 606,615
INTEREST EXPENSE (419,039) (3,436) - (415,603)
INTEREST INCOME 90,780 - 120,020 210,800
OTHER EXPENSE (184,000) - - (184,000)
----------- ----------- ---------- ------------
EARNINGS BEFORE INCOME TAXES 973,150 975,358 220,020 217,812
INCOME TAXES 585,000 542,072 88,008 130,936
----------- ----------- ---------- ------------
NET EARNINGS $ 388,150 $ 433,286 $ 132,012 $ 86,876
=========== =========== ==========
============
EARNINGS PER COMMON SHARE:
BASIC $ .12 $ - $ - $ .03
=========== =========== ========== ============
DILUTED $ .11 $ - $ - $ .02
=========== =========== ========== ============
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES
OUTSTANDING:
BASIC 3,278,689 - - 3,278,689
=========== =========== ========== ============
DILUTED 3,494,754 - - 3,494,754
=========== =========== ========== ============
- ------------------------------------------------------------------------------------------
(a) To eliminate the profit and loss of CWI for the entire period.
(b) To reflect interest income on the $1,700,000 note receivable, license fee
income, and the related tax effect.
</TABLE>
<PAGE>
PRO FORMA FINANCIAL INFORMATION
ASA INTERNATIONAL LTD. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
----Pro Forma Adjustments----
Historical CWI(a) Other(b) Pro Forma
---------- ----------- ---------- -----------
REVENUE
<S> <C> <C> <C> <C>
Services $13,231,288 $ 3,278,469 $ - $ 9,952,819
Product licenses 6,157,002 1,053,869 75,000 5,178,133
Computer and add-on hardware 5,241,849 2,166,287 - 3,075,562
------------ ------------ ---------- -----------
NET REVENUE 24,630,139 6,498,625 75,000 18,206,514
COST OF REVENUE
Services 8,402,914 2,292,676 - 6,110,238
Product licenses and development 3,330,520 587,429 - 2,743,091
Computer and add-on hardware 4,677,440 2,186,976 - 2,490,464
------------ ----------- ---------- ------------
TOTAL COST OF REVENUE 16,410,874 5,067,081 - 11,343,793
EXPENSES
Marketing and sales 4,344,308 804,261 - 3,540,047
General and administrative 2,683,341 396,545 - 2,286,796
Amortization of goodwill 161,637 73,809 - 87,828
------------ ----------- ---------- ------------
TOTAL EXPENSES 7,189,286 1,274,615 - 5,914,671
EARNINGS FROM OPERATIONS 1,029,979 156,929 75,000 948,050
INTEREST EXPENSE (516,413) (1,176) - (515,237)
INTEREST INCOME 93,891 - 90,015 183,906
------------ ----------- ---------- ------------
EARNINGS BEFORE INCOME TAXES 607,457 155,753 165,015 616,719
INCOME TAXES 365,000 60,441 66,006 370,565
------------ ----------- ---------- ------------
NET EARNINGS $ 242,457 $ 95,312 $ 99,009 $ 246,154
============ =========== ==========
============
EARNINGS PER COMMON SHARE:
BASIC $ .07 $ - $ - $ .07
=========== =========== ========== ============
DILUTED $ .07 $ - $ - $ .07
=========== =========== ========== ============
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES
OUTSTANDING:
BASIC 3,456,362 - - 3,456,362
=========== =========== ========== ============
DILUTED 3,634,908 - - 3,634,908
=========== =========== ========== ============
- ------------------------------------------------------------------------------------------
(a) To eliminate the profit and loss of CWI for the entire period.
(b) To reflect interest income on the $1,700,000 note receivable, license fee
income, and the related tax effect.
</TABLE>
EXHIBIT 2
ASSET PURCHASE AGREEMENT
by and between
CommercialWare, Inc., a Delaware corporation,
and
ASA International Ltd., a Delaware corporation
Dated as of March 3, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I....................................................................1
PURCHASE AND SALE OF ASSETS................................................1
SECTION 1.1 DEFINITION..................................................1
SECTION 1.2 DESCRIPTION OF ASSETS TO BE ACQUIRED........................1
SECTION 1.3 NON-ASSIGNMENT OR SUBCONTRACTING OF CERTAIN ASSETS..........2
SECTION 1.4 EXCLUDED ASSETS.............................................2
SECTION 1.5 CUSTOMER INTANGIBLES........................................2
ARTICLE II...................................................................3
LIABILITIES OF SELLER......................................................3
SECTION 2.1 ASSUMPTION OF LIABILITIES...................................3
SECTION 2.2 LIABILITIES NOT ASSUMED.....................................3
ARTICLE III..................................................................3
PURCHASE PRICE.............................................................3
SECTION 3.1 CONSIDERATION...............................................3
SECTION 3.2 PAYMENT OF PURCHASE PRICE...................................3
SECTION 3.3 POST-CLOSING ADJUSTMENT TO PURCHASE PRICE...................4
SECTION 3.4 SECURITY....................................................4
SECTION 3.5 ALLOCATION OF PURCHASE PRICE................................4
ARTICLE IV...................................................................4
REPRESENTATIONS AND WARRANTIES OF PURCHASER................................4
SECTION 4.1 ORGANIZATION................................................4
SECTION 4.2 AUTHORIZATION...............................................5
SECTION 4.3 CAPITALIZATION OF PURCHASER.................................5
SECTION 4.4 NO BREACH OR VIOLATION......................................5
SECTION 4.5 BROKERS.....................................................5
SECTION 4.6 LITIGATION..................................................5
ARTICLE V....................................................................6
REPRESENTATIONS AND WARRANTIES OF SELLER...................................6
SECTION 5.1 ORGANIZATION; GOOD STANDING; POWER..........................6
SECTION 5.2 AUTHORIZATION OF SELLER.....................................6
SECTION 5.3 FINANCIAL STATEMENTS........................................6
SECTION 5.4 ABSENCE OF CERTAIN CHANGES AND EVENTS.......................6
SECTION 5.5 UNDISCLOSED LIABILITIES.....................................7
SECTION 5.6 ACCOUNTS RECEIVABLE.........................................7
SECTION 5.7 INVENTORY...................................................7
SECTION 5.8 TITLE TO ASSETS.............................................8
SECTION 5.9. TAXES.......................................................8
SECTION 5.10 COMPLIANCE WITH LAWS........................................8
SECTION 5.11 CONSENTS....................................................8
SECTION 5.12 INTELLECTUAL PROPERTY.......................................9
SECTION 5.13 CONTRACTS..................................................10
SECTION 5.14 LITIGATION.................................................10
SECTION 5.15 NO BREACH OR VIOLATION.....................................10
SECTION 5.16 BROKERS....................................................11
SECTION 5.17 ENVIRONMENTAL MATTERS......................................11
SECTION 5.18 SUFFICIENCY OF ASSETS......................................11
SECTION 5.19 PRODUCT WARRANTIES AND PRODUCT LIABILITY...................11
SECTION 5.20 EMPLOYEES AND EMPLOYEE BENEFIT PLANS.......................11
SECTION 5.21 INSURANCE..................................................13
SECTION 5.22 FULL DISCLOSURE............................................13
ARTICLE VI..................................................................13
COVENANTS.................................................................13
SECTION 6.1 MAINTENANCE OF BUSINESS....................................13
SECTION 6.2 ACCESS TO INFORMATION......................................13
SECTION 6.3 CONFIDENTIALITY............................................14
SECTION 6.4 CONSENTS...................................................14
SECTION 6.5 RECEIVABLES PAYMENTS.......................................14
SECTION 6.6 NOTIFICATION OF CERTAIN MATTERS............................14
SECTION 6.7 FURTHER ACTION.............................................14
SECTION 6.8 COVENANTS AGAINST DISCLOSURE...............................15
SECTION 6.9 USE OF NAME................................................15
SECTION 6.10 MEDICAL AND DENTAL INSURANCE...............................15
ARTICLE VII.................................................................15
CLOSING...................................................................15
SECTION 7.1 TIME OF CLOSING............................................15
SECTION 7.2 DELIVERIES BY SELLER.......................................15
SECTION 7.3 DELIVERIES BY PURCHASER....................................16
SECTION 7.4 FURTHER ASSURANCES.........................................16
ARTICLE VIII................................................................16
CONDITIONS PRECEDENT TO OBLIGATIONS.......................................16
SECTION 8.1 CONDITIONS TO OBLIGATIONS OF PURCHASER.....................16
SECTION 8.2 CONDITIONS TO OBLIGATIONS OF SELLER........................17
ARTICLE IX..................................................................19
INDEMNIFICATION...........................................................19
SECTION 9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS............................................19
SECTION 9.2 INDEMNIFICATION............................................19
SECTION 9.3 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO
THIRD-PARTY CLAIMS........................................19
SECTION 9.4 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO
NON-THIRD PARTY CLAIMS....................................20
SECTION 9.5 LIMITATIONS................................................20
SECTION 9.6 SET-OFF AGAINST NOTE.......................................21
SECTION 9.7 ARBITRATION................................................21
ARTICLE X...................................................................21
RESTRICTIVE COVENANT......................................................21
SECTION 10.1 SCOPE......................................................21
SECTION 10.2 INJUNCTIVE RELIEF..........................................22
SECTION 10.3 OTHER REMEDIES.............................................22
SECTION 10.4 MODIFY.....................................................22
ARTICLE XI..................................................................22
TERMINATION AND ABANDONMENT...............................................22
SECTION 11.1 TERMINATION................................................22
SECTION 11.2 PROCEDURE AND CONSEQUENCES OF TERMINATION..................23
ARTICLE XII.................................................................23
MISCELLANEOUS PROVISIONS..................................................23
SECTION 12.1 NOTICE.....................................................23
SECTION 12.2 ENTIRE AGREEMENT...........................................23
SECTION 12.3 BINDING EFFECT; ASSIGNMENT.................................24
SECTION 12.4 EXPENSES OF TRANSACTION; TAXES.............................24
SECTION 12.5 WAIVER; CONSENT............................................24
SECTION 12.6 THIRD-PARTY BENEFICIARIES..................................24
SECTION 12.7 COUNTERPARTS...............................................24
SECTION 12.8 SEVERABILITY...............................................24
SECTION 12.9 GOVERNING LAW..............................................24
SECTION 12.10 ATTORNEYS' FEES............................................25
SECTION 12.11 COOPERATION AND RECORDS RETENTION..........................25
SECTION 12.12 ARBITRATION................................................25
EXHIBITS
AA Purchaser's Amended and Restated Certificate of Incorporation
A Form of Shareholders Agreement
BB Form of Junior Promissory Note
B Form of Promissory Note
C Form of Security Agreement
D Bill of Sale
E Opinion of Stroock & Stroock & Lavan LLP
F Form of Assignment and Assumption Agreement
G Opinion of Littman Krooks Roth & Ball, P.C.
H Form of Sublease
<PAGE>
SCHEDULES
1.2(a) List of Equipment
1.2(b) List of Inventory
1.2(c) List of Contracts
1.2(d) List of Intellectual Property
1.2(e) List of Accounts Receivable
2.1 Assumed Liabilities
3.5 Purchase Price Allocation
5 Disclosure Schedule
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is dated as of March 3, 1999 by and between
CommercialWare, Inc., a Delaware corporation ("Purchaser"), and ASA
International Ltd., a Delaware corporation ("Seller").
WHEREAS, Seller is engaged in, among other things, the business of
designing, manufacturing, marketing, selling and servicing computer software
systems for the catalogue direct marketing industry through the Seller's
CommercialWare division (the "Business"); and
WHEREAS, Purchaser desires to acquire from Seller and Seller desires
to transfer to Purchaser the Assets set forth on the Schedules described under
Section 1.1 below, upon the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
SECTION 1.1 DEFINITION. The assets, properties, and rights to be
conveyed, sold, transferred, assigned and delivered to Purchaser pursuant to
Section 1.2 are sometimes hereinafter collectively referred to as the "Assets."
SECTION 1.2 DESCRIPTION OF ASSETS TO BE ACQUIRED. Upon the terms and
subject to the conditions set forth in this Agreement, at the Time of Closing
(as defined in Section 7.1), Seller agrees to convey, sell, transfer, assign,
and deliver to Purchaser, and Purchaser shall purchase from Seller, all rights,
title, and interest of Seller at the Time of Closing in and certain assets,
properties, and rights of Seller which are used primarily in connection with the
Business as set forth below (but excluding the "Excluded Assets," as such term
is defined in Section 1.4 below):
(a) All interests in machinery, equipment, instruments, computer
hardware and software, tooling, hardware and software design libraries, designs,
drawings, blueprint specification sheets, layouts, advertising and promotional
materials, furniture, fixtures, supplies, repair and maintenance parts,
demonstration units and other fixed assets, used primarily in connection with
the Business and specifically listed on SCHEDULE 1.2(A) hereto;
(b) All inventories of raw materials, works-in-process, component
parts, finished goods and supplies, used primarily in connection with the
Business and specifically listed on SCHEDULE 1.2(B) hereto (collectively, the
"Inventory");
(c) All claims and rights under those agreements, contracts, licenses,
leases, franchises, instruments, documents, purchase and sale orders and other
executory commitments related primarily to the Business and specifically listed
on SCHEDULE 1.2(C) hereto (collectively, the "Contracts");
(d) All trademarks, trademark rights, service marks, service mark
rights, copyrights, trade names, trade name rights, fictitious business names,
the rights to the name "CommercialWare" and all variants thereof, works of
authorship, inventions, industrial models, industrial designs, utility models
and certificates of invention, designs, emblems and logos, trade secrets,
know-how, manufacturing formulae, technical information, mask work
registrations, inventions, franchises, franchise rights, supplier lists together
with the goodwill associated therewith and other proprietary rights used
primarily in connection with the Business and specifically listed on SCHEDULE
1.2(D) hereto (collectively, the "Intellectual Property");
(e) All accounts receivable of Seller related to the Business and
specifically listed on SCHEDULE 1.2(E) hereto (collectively, the "Accounts
Receivable");
(f) Copies of books, sales invoices, purchase orders and all other
records which relate to or document the Assets (the "Records"); and
(g) All goodwill of the Business (the "Goodwill").
SECTION 1.3 NON-ASSIGNMENT OR SUBCONTRACTING OF CERTAIN ASSETS.
Notwithstanding anything to the contrary in this Agreement, to the extent that
the assignment or subcontracting hereunder of any of the Assets shall require
the consent of any other party (or in the event that any of the same shall be
nonassignable or unable to be subcontracted), neither this Agreement nor any
action taken pursuant to its provisions shall constitute an assignment or
subcontract or an agreement to assign or subcontract if such assignment or
subcontract or attempted assignment or subcontract would constitute a breach
thereof or result in the loss or diminution thereof, provided, however, that in
each such case, Seller shall use its reasonable commercial efforts to obtain the
consent of such other party to an assignment to Purchaser. If such consent is
not obtained by the Time of Closing, Seller shall cooperate with Purchaser in
any arrangement designed for Purchaser to perform Seller's obligations with
respect to such Asset after the Time of Closing and for Purchaser to receive the
benefits under any such Asset after the Time of Closing, which arrangements may
include enforcement, for the account and benefit of Purchaser of any and all
rights of Seller against any other person arising out of the breach or
cancellation by such other person or otherwise, all of such actions of Seller to
be at the direction and expense of Purchaser.
SECTION 1.4 EXCLUDED ASSETS. Notwithstanding anything to the contrary
set forth in this Agreement, the assets to be transferred to Purchaser pursuant
to this Agreement shall not include any cash or marketable securities as of
January 1, 1999, prepaid taxes or insurance policies, or the Customer
Intangibles, as defined in Section 1.5 below (collectively, the "Excluded
Assets").
SECTION 1.5 CUSTOMER INTANGIBLES. Seller hereby grants to Purchaser an
exclusive, royalty-free, and worldwide license and right to use the Customer
Intangibles in the conduct of the Business, which rights may be sublicensed or
transferred by Purchaser, for a period of ten (10) years beginning on the Time
of Closing (the "License"). In exchange for such License, the Purchaser shall
pay to the Seller a license fee of $300,000, payable $100,000 on each of the
first three anniversaries of the time of Closing (the "License Fee"). During the
term of the License, the Seller shall not use or grant to any other party the
right to use the Customer Intangibles for any purpose which involves the
marketing or sale of computer products or services for the catalogue direct
marketing industry. At the end of the term of the License, the Purchaser shall
have the right to acquire all of Seller's right, title and interest in and to
the Customer Intangibles for a cash payment equal to the fair market value of
the Customer Intangibles on such date, as determined by an appraiser selected by
the Purchaser. For purposes of this Agreement, "Customer Intangibles" shall mean
any and all information regarding the composition, with respect to the Business,
of the customer market, market share, and any other value resulting from the
future provision of goods or services pursuant to relationships with customers
(contractual or otherwise) in the ordinary course of business, including but not
limited to the customer list of the Business.
ARTICLE II
LIABILITIES OF SELLER
SECTION 2.1 ASSUMPTION OF LIABILITIES. Purchaser hereby agrees to
assume, satisfy, or perform when due those current liabilities and obligations
of Seller arising out of or related to the Business (except for liabilities to
the Seller or its subsidiaries) which are listed on the Seller Financial
Statements (as defined below) or on SCHEDULE 2.1 hereto, and (a) are or were
incurred by the Business in the ordinary course of business or (b) arose under
Contracts, including but not limited to all warranty, support and training
obligations and other commitments to customers, vendors and employees of the
Business (collectively, the "Assumed Liabilities").
SECTION 2.2 LIABILITIES NOT ASSUMED. Other than the Assumed
Liabilities, Purchaser shall not assume any liabilities, whether such
liabilities are contingent or otherwise, of Seller in existence on or prior to
the Time of Closing (collectively, the "Excluded Liabilities"). All Excluded
Liabilities shall be retained and paid or discharged by the Seller when due.
Specifically, but not by way of limitation, the Excluded Liabilities shall
include any claims (i) of infringement of a third party's intellectual property
or (ii) arising out of the employment of any individual by the Business (other
than current liabilities incurred in the ordinary course of business such as for
wages and benefits), in each case to the extent that such claims arise out of
the Seller's operation of the Business prior to the Closing.
ARTICLE III
PURCHASE PRICE
SECTION 3.1 CONSIDERATION. Upon the terms and subject to the
conditions contained in this Agreement, in consideration for the Assets and in
full payment therefor, Purchaser will pay, or cause to be paid, the purchase
price set forth in Section 3.2 to Seller.
SECTION 3.2 PAYMENT OF PURCHASE PRICE.
(a) The purchase price ("Purchase Price") to be paid or payable by
Purchaser to Seller for the Assets shall consist of the following: (i) cash in
the amount of Four Million Dollars ($4,000,000) to be paid at the Closing by
certified check or wire transfer (the "Cash Portion of the Purchase Price"),
(ii) a promissory note in the amount of One Million Seven Hundred Thousand
Dollars ($1,700,000) (the "Note"), (iii) a promissory note in the amount of Five
Hundred Thousand Dollars ($500,000) (the "Junior Note"), (iv) 30,000 shares of
the Purchaser's common stock, par value $.01 per share (the "Common Stock"), and
(v) one (1) share of the Purchaser's Series A Preferred Stock (the "Preferred
Stock").
(b) The Common Stock and Preferred Stock shall have rights and
preferences as set forth in Purchaser's Amended and Restated Certificate of
Incorporation, a copy of which is attached hereto as EXHIBIT AA. The shares of
Common Stock and Preferred Stock to be issued pursuant to clauses (iv) and (v)
of the foregoing paragraph shall represent 10% of the issued and outstanding
capital stock of Purchaser on a fully-diluted basis, in accordance with the
shareholder agreement to be entered into by Purchaser, Seller and certain other
parties in the form annexed hereto as EXHIBIT A (the "Shareholder Agreement").
The Junior Note shall be in the form annexed hereto as EXHIBIT BB, and the Note
shall be in the form annexed hereto as EXHIBIT B. The principal amount of the
Note is subject to adjustment pursuant to Section 3.3 hereof.
SECTION 3.3 POST-CLOSING ADJUSTMENT TO PURCHASE Price. As soon as
possible after the Time of Closing but in no event later than thirty (30)
calendar days thereafter, Purchaser shall prepare and deliver to Seller, at
Purchaser's expense, audited financial statements for the Business for the year
ended December 31, 1998 (the "Audited Financial Statements"). Such Audited
Financial Statements shall be prepared in a manner consistent with the
principles, practices and procedures used in the preparation of the Seller
Financial Statements set forth in Section 5.3 below. The principal amount of the
Note shall be reduced to the extent that such Audited Financial Statements
require, in accordance with generally accepted accounting principles, a
restatement of the Seller Financial Statements for the nine-months ended
September 30, 1998, which restatement results in a material adverse change to
such Seller Financial Statements; provided, however, that such adjustment shall
first be subject to the limitation set forth in Section 9.5(a) hereof.
SECTION 3.4 SECURITY. The Note and the License Fee shall be secured by
a first lien and security interest in all of the Intellectual Property and any
intellectual property hereafter developed or acquired by the Purchaser, pursuant
to a Security Agreement in the form annexed hereto as EXHIBIT C.
SECTION 3.5 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated by the parties following the Time of Closing in accordance with
SCHEDULE 3.5 hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller that:
SECTION 4.1 ORGANIZATION. Purchaser is a corporation duly organized,
validly existing, and in good corporate standing under the laws of the State of
Delaware.
SECTION 4.2 AUTHORIZATION. Purchaser has full power and authority to
enter into this Agreement, the Note, the Security Agreement, the Shareholder
Agreement (the Note, the Security Agreement and the Shareholder Agreement are
referred to herein as the "Related Agreements"), to perform its obligations
hereunder and thereunder, and to consummate the transactions contemplated hereby
and thereby. Purchaser has taken all necessary and appropriate action with
respect to the execution and delivery of this Agreement, the Closing Documents
(as defined below) and the Related Agreements, and each of this Agreement and
the Related Agreements constitutes valid and binding obligations of Purchaser,
enforceable in accordance with their respective terms except as limited by
applicable bankruptcy, insolvency, moratorium, reorganization, or other laws
affecting creditors' rights and remedies generally, by general principles of
equity regardless of whether such enforcement is considered in a proceeding in
equity or at law, and except as the indemnification provisions contained in this
Agreement may be limited by principles of public policy.
SECTION 4.3 CAPITALIZATION OF PURCHASER. The authorized capital stock
of Purchaser consists of 1,000,000 shares of Common Stock and 100 shares of
Series A Preferred Stock, of which 290,722 shares of Common Stock and One (1)
share of Series A Preferred Stock will be issued and outstanding immediately
following the Time of Closing, and there are, and will be, immediately following
the Time of Closing, no other shares of capital stock outstanding or any
warrants, options or other rights to acquire capital stock of the Purchaser
outstanding.
SECTION 4.4 NO BREACH OR VIOLATION. Neither the execution and delivery
of this Agreement or the Related Agreements nor the consummation of the
transactions contemplated hereby or thereby will (i) conflict with, or result in
a violation or breach of, or constitute a default under, any provision of
Purchaser's charter or bylaws, or any contract, indenture, mortgage, lease,
agreement, instrument, commitment or other arrangement to which Purchaser is a
party or by which Purchaser or Purchaser's properties are bound; (ii) violate
any judgment, order, permit, license, injunction, writ, decree or award of any
court or any governmental or regulatory authority or administrative agency
against, or binding upon, Purchaser or upon Purchaser's assets or properties; or
(iii) constitute a violation by Purchaser of any statute, law, rule, ordinance
or regulation of any governmental or regulatory authority or administrative
agency.
SECTION 4.5 BROKERS. Purchaser has not incurred any liability to any
broker, finder or agent for any brokerage fees, finders' fees or commissions
with respect to the transactions contemplated by this Agreement.
SECTION 4.6 LITIGATION. There are no claims, suits, actions or legal,
administrative, arbitration or other proceedings or investigations pending or,
to Purchaser's knowledge, threatened by, against or affecting Purchaser or any
of Purchaser's properties or assets or against or affecting any of Purchaser's
officers or directors, which could affect the ability or the right of Purchaser
to complete the transactions contemplated by this Agreement or the Related
Agreements or to fulfill Purchaser's obligations hereunder or thereunder.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in a letter specifically referring to this Article
V (the "Disclosure Letter") delivered by Seller to Purchaser and attached hereto
as SCHEDULE 5, Seller hereby represents and warrants to Purchaser that:
SECTION 5.1 ORGANIZATION; GOOD STANDING; POWER. Seller is a
corporation duly organized, validly existing and in good corporate standing
under the laws the State of Delaware, and has the corporate power and authority
to own, lease, and operate its properties and to carry on its businesses
(including, without limitation, the Business) as the same are now being
conducted. Seller is qualified as a foreign corporation and is in good corporate
standing in such other jurisdictions, set forth in the Disclosure Letter, in
which the conduct of its business or its ownership or leasing of its property
requires such qualification, except where the failure to so qualify would not be
materially adverse to the business of the Seller taken as a whole.
SECTION 5.2 AUTHORIZATION OF SELLER. Seller has full corporate power
and authority to enter into this Agreement and the Related Agreements, to
perform its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby, including, without limitation, the
execution and delivery of this Agreement, the Related Agreements, general
conveyances, bills of sale, assignments, and other documents and instruments
evidencing the conveyance of the Assets or delivered in accordance with Section
7.2 and 7.3 hereunder (the "Closing Documents") and the Related Agreements.
Seller has taken all necessary and appropriate corporate action with respect to
the execution and delivery of this Agreement, the Closing Documents, and the
Related Agreements to which it is a party. This Agreement and the Related
Agreements constitute valid and binding obligations of Seller, enforceable in
accordance with their respective terms except as limited by applicable
bankruptcy, insolvency, moratorium, reorganization, or other laws affecting
creditors' rights and remedies generally, by general principles of equity
regardless of whether such enforcement is considered in a proceeding in equity
or at law, and except as the indemnification provisions contained in this
Agreement may be limited by principles of public policy.
SECTION 5.3 FINANCIAL STATEMENTS. The unaudited financial statements
of the Business as of September 30, 1998 and December 31, 1998 provided to
Purchaser (the "Seller Financial Statements") were prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved and fairly presented the consolidated financial
position of the Business as at the date thereof and the results of its
operations and cash flows for the periods indicated, except that the financial
statements are unaudited and are subject to normal and recurring year end
adjustments which were not or are not expected to be material in amount.
SECTION 5.4 ABSENCE OF CERTAIN CHANGES AND EVENTS. Since September 30,
1998, there has not been, with respect to the Business and the Assets:
(a) Any event, including, without limitation, fire, explosion,
accident, requisition or taking of property by any governmental agency, flood,
drought, earthquake, or other natural event, riot, act of God or a public enemy,
or damage, destruction, or other casualty, whether covered by insurance or not,
which has had a material adverse effect on the Assets;
(b) Any, mortgage, pledge, lien, security interest, hypothecation,
charge, or other encumbrance imposed or agreed to be imposed on or with respect
to the Assets other than liens arising with respect to taxes not yet due and
payable;
(c) Any sale, lease, or disposition of, or any agreement to sell,
lease, or dispose of any of the Assets, other than sales, leases, or
dispositions in the usual and ordinary course of business;
(d) Any modification, waiver, change, amendment, release, rescission,
accord and satisfaction, or termination of, or with respect to, any material
term, condition, or provision of any material contract, agreement, license, or
other instrument to which Seller is a party and relating to the Business or the
Assets, other than any satisfaction by performance in accordance with the terms
thereof in the usual and ordinary course of business;
(e) Any labor disputes or disturbances materially affecting in an
adverse manner the Business, including, without limitation, the filing of any
petition or charge of unfair labor practices with the National Labor Relations
Board;
(f) Any increase in the compensation payable or to become payable by
the Seller to any salaried employees of the Business, or in any insurance,
pension, or other benefits plan, payment or arrangement made for, to or with any
of such salaried employees, except in the ordinary course of business;
(g) Any material contract or other agreement entered into or any
material transaction affecting the Business consummated, except in the ordinary
course of business; or
(h) Any material adverse change in the financial condition or
operation of the Business, or any other event or condition of any character
which materially adversely affects the Assets or the Business.
SECTION 5.5 UNDISCLOSED LIABILITIES. There are no material debts,
liabilities or obligations, direct or indirect, with respect to the Business or
to which the Assets are subject, liquidated, unliquidated, accrued, absolute,
contingent, or otherwise, that are not specifically identified in the Seller
Financial Statements, SCHEDULE 2.1 or the Disclosure Letter.
SECTION 5.6 ACCOUNTS RECEIVABLE. The Accounts Receivable are valid,
genuine and existing, arose or will arise in the ordinary course of business,
and, to Seller's knowledge, are collectible at their recorded amounts (net of
any reserves set forth in the Seller Financial Statements or the Disclosure
Letter).
SECTION 5.7 INVENTORY. The Inventory consists of items that are or
upon delivery to Purchaser will be good and merchantable and to Seller's
knowledge are saleable in the ordinary course of business, subject to any
reserves set forth in the Seller Financial Statements or the Disclosure Letter.
SECTION 5.8 TITLE TO ASSETS. Seller has good, valid and marketable
title to the Assets, free and clear of all mortgages, liens, charges, security
interests or other encumbrances of any nature whatsoever except for liens for
current taxes not delinquent, liens imposed by operation of law and liens
incurred in the ordinary course of business, which in any case do not materially
impair the Assets or detract from the Business.
SECTION 5.9. TAXES. With respect to the Business, all taxes due or
payable by Seller, and all interest and penalties thereon, other than taxes
which are not yet due and payable or are being contested in good faith, have
been paid in full.
SECTION 5.10 COMPLIANCE WITH LAWS. Seller is in compliance in all
material respects with all applicable foreign, federal, state, and local laws,
statutes, licensing requirements, rules, and regulations, and judicial or
administrative decisions applicable to the Business where the failure to so
comply could have a material adverse effect on the Business or the Assets.
SECTION 5.11 CONSENTS. The execution and delivery of this Agreement by
the Seller do not, and the performance of this Agreement and the Related
Agreements by the Seller shall not (including the ability by Seller to transfer
the Assets free and clear of all liens and encumbrances of any kind or nature
whatsoever), require any consent approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, domestic or
foreign, or any other third party.
SECTION 5.12 INTELLECTUAL PROPERTY.
(a) SCHEDULE 1.2(D) sets forth a true and complete list of all items
of Intellectual Property used primarily in the Business, and specifies, where
applicable, the jurisdictions in which each such Intellectual Property has been
issued or registered or in which an application for such issuance and
registration has been filed, including the respective registration or
application numbers and the names of all registered owners. The Business owns,
or is licensed or otherwise possesses valid rights to use all items of
Intellectual Property used in the Business. SCHEDULE 1.2(D) sets forth a
complete list of all material licenses, sublicenses and other agreements to
which the Business is a party and pursuant to which the Business or any other
person is authorized to use any Intellectual Property (excluding object code
end-user licenses granted to end-users in the ordinary course of business that
permit use of software products without a right to modify, distribute or
sublicense the same ("END-USER LICENSES")) or trade secret of the Business (and,
specifically designating the agreements pursuant to which any party is granted a
source code license by the Business), and includes the identity of all parties
thereto. The execution and delivery of this Agreement by the Seller, and the
consummation of the transactions contemplated hereby, will neither cause the
Business to be in violation or default under any such license, sublicense or
agreement, entitle any other party to any such license, sublicense or agreement
nor cause the release of the source code form of any item of Intellectual
Property to any third party.
(b) Except as set forth in SCHEDULE 1.2(D), there are no outstanding
options, licenses or agreements of any kind relating to any Intellectual
Property held by any third party (other than End-User Licenses), nor is the
Business bound by or a party to any options, licenses or agreements of any kind
with respect to the patents, trade secrets, know-how, processes, trademarks,
service marks, trade names, copyrights, licenses, information, proprietary
rights or other rights of any other person or entity.
(c) Except with respect to the persons set forth in SCHEDULE 1.2(D),
each item of such Intellectual Property has been created, conceived of, reduced
to practice or developed by employees or contractors of the Business who have
assigned their rights in such Intellectual Property to the Business. Except with
respect to the persons set forth in SCHEDULE 1.2(D), the Business has taken what
it believes to be reasonable actions to protect the confidentiality of the
confidential Intellectual Property and the enforceability of any trade secrets
with respect thereto, (the parties hereto agreeing that the failure of any of
the Business's employees to sign confidentiality agreements is not an
unreasonable action hereunder). In addition, the Business has taken steps
reasonably calculated to protect the confidentiality of other Intellectual
Property owned by the Business which are not generally available to the public
or customers of the business (the parties hereto agreeing that the failure of
any of the Business's employees to sign confidentiality agreements is not an
unreasonable action hereunder). Except as disclosed in the Disclosure Letter,
each employee of the Business has executed a proprietary information and
inventions agreement and a nondisclosure agreement substantially in the
Business's standard form.
(d) SCHEDULE 1.2(D) identifies each license, sublicense, agreement,
permission and right to use granted by a third party to the Business of any
Intellectual Property, other than end-user licenses related to "off the shelf"
commercial, business or engineering application software products not
incorporated in any way in any product licensed, sold, developed or being
developed by or for the Business ("THIRD PARTY Licenses"). The Seller has
provided Purchaser with copies of all Third Party Licenses. Except as disclosed
on SCHEDULE 1.2(D), the Business is not contractually liable, nor has it made
any contract or arrangement whereby it may become liable, to any Person for any
royalty or other consideration for the use of any Intellectual Property.
(e) To the Seller's knowledge, all computer software included in the
Intellectual Property is year 2000 compliant (that is, (i) it is capable, to the
extent called for, of correctly processing, providing and receiving data within
and between the 20th and 21st centuries (including accounting for all required
leap year calculations) and (ii) all date fields therein use four (4) digit year
fields).
(f) No claims with respect to the Intellectual Property have been
asserted to the Business or are, to the Seller's knowledge, threatened by any
person, (i) to the effect that the manufacture, sale, licensing or use of any of
the products of the Business infringes on any copyright, patent, trademark,
service mark, trade secret or other proprietary right, (ii) against the use by
the Business of any trademarks, service marks, trade names, trade secrets,
copyrights, patents, technology, know-how or computer software programs and
applications used in the Business as currently conducted, or (iii) challenging
the ownership by the Business, validity or effectiveness of any of the
Intellectual Property. All registered trademarks, service marks and copyrights
held by the Business are valid and subsisting. To the Seller's knowledge, the
Business as currently conducted has not and does not infringe on any proprietary
right of any third party. To the Seller's knowledge, there is no unauthorized
use, infringement or misappropriation of any of the Intellectual Property by any
third party, including any employee or former employee of the Business. No
Intellectual Property or product of the Business is subject to any outstanding
decree, order, judgment, or stipulation restricting in any manner the licensing
thereof by the Business.
SECTION 5.13 CONTRACTS. Seller has performed all of its obligations
under the terms of each contract listed on SCHEDULE 1.2(C) to which it is a
party, and is not in default thereunder where such default could have a material
adverse impact on the Business or the Assets.
SECTION 5.14 LITIGATION. There are no claims, suits, actions, or
legal, administrative, arbitration or other proceedings or investigations
pending or, to Seller's knowledge, threatened against or affecting Seller
relating to the Business or involving the Assets, or which could affect the
ability or the right of Seller to complete the transactions contemplated by this
Agreement or the Related Agreements or to fulfill its obligations hereunder or
thereunder.
SECTION 5.15 NO BREACH OR VIOLATION. Neither the execution and
delivery of this Agreement or the Related Agreements nor the consummation of the
transactions contemplated hereby or thereby will (i) conflict with, or result in
a violation or breach of, or constitute a default under, any provision of
Seller's charter or bylaws, or any contract, indenture, mortgage, lease,
agreement, instrument, commitment or other arrangement to which Seller is a
party or by which it or the Assets are bound; (ii) violate any judgment, order,
permit, license, injunction, writ, decree or award of any court or any
governmental or regulatory authority or administrative agency against, or
binding upon, Seller or the Assets; or (iii) constitute a violation by Seller of
any statute, law, rule, ordinance or regulation of any governmental or
regulatory authority or administrative agency.
SECTION 5.16 BROKERS. The Seller has not incurred any liability to any
broker or finder for any brokerage fees, finders' fees or commissions with
respect to the transactions contemplated by this Agreement.
SECTION 5.17 ENVIRONMENTAL MATTERS. With respect to the operation of
the Business, Seller, to its knowledge: (i) has obtained all applicable permits,
licenses and other authorizations which are required under federal, state or
local laws relating to pollution or protection of the environment, including
laws relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials or wastes into ambient
air, surface water, ground water, or land or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
materials or wastes by Seller; (ii) is in compliance with all terms and
conditions of such required permits, licenses and authorization, and also are in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
such laws or contained in any regulations, code, plan, order, decree, judgment,
notice or demand letter issued, entered, promulgated or approved thereunder; and
(iii) has no knowledge of any contaminated soil or groundwater at any of the
properties owned or operated, leased or previously owned or leased by Seller and
used in the Business.
SECTION 5.18 SUFFICIENCY OF ASSETS. The Assets (excluding the Excluded
Assets) include all the assets necessary to operate the Business in the same
manner as the Business was operated by Seller prior to the Closing.
SECTION 5.19 PRODUCT WARRANTIES AND PRODUCT Liability. Seller has
delivered to Purchaser copies of its warranty policies relating to any of
Seller's products related to the Business other than warranties or guarantees
implied by law. With respect to the Business, Seller is not aware of any claim
asserting (a) any damage, loss or injury caused by any product, or (b) any
breach of any express or implied product warranty or any other similar claim
with respect to any product other than standard warranty obligations (to
replace, repair or refund) made by Seller in the ordinary course of business
except for those claims that, if adversely determined against the Business,
would not have a material adverse change on the results of operations or
financial condition of the Business.
SECTION 5.20 EMPLOYEES AND EMPLOYEE BENEFIT PLANS.
(a) The Disclosure Letter lists all employee benefit plans (as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) and all bonus, stock option, stock purchase, incentive,
deferred compensation, supplemental retirement, severance and other similar
fringe or employee benefit plans, programs or arrangements, for the benefit of,
or relating, to, any employee of the Business, (together, the "Employee Plans"),
and a copy of each such Employee Plan has been provided to Purchaser.
(b) (i) There has been no "prohibited transaction", as such term is
defined in Section 406 of ERISA and Section 4975 of the Code, with respect to
any Employee Plan, which could result in any material liability of the Seller;
(ii) all Employee Plans are in compliance in all material respects with the
requirements prescribed by any and all statutes (including ERISA and the Code),
orders, or governmental rules and regulations currently in effect with respect
thereto, and the Seller has performed all material obligations required to be
performed by it under, and is not in any material respect in default under or
violation of, any of the Employee Plans.
(c) The Seller does not have any stated plan or commitment to
establish any new Employee Plan or modify any Employee Plan (except to the
extent required by law or to conform any such Employee Plan to the requirements
of any applicable law, or as required by this Agreement). Each such Employee
Plan which is intended to qualify under Section 401(a) of the Code, has received
(or an application has been filed to receive) a favorable determination letter
from the Internal Revenue Service with respect to such qualification. To the
Seller's knowledge, nothing has occurred since the date of the most recent such
determination letter that would cause such Employee Plan to lose its ability to
rely on such determination letter.
(d) No Employee Plan provides, or has any liability to provide, life
insurance, medical or other employee welfare benefits to any employee upon his
or her retirement or termination of employment for any reason, except as may be
required by statute.
(e) Except as set forth in the Disclosure Letter, the Business does
not have any employment contracts or consulting agreements currently in effect
that are not terminable at will (other than agreements with the sole purpose of
providing for the confidentiality of proprietary information or assignment of
inventions). A list of all employees, officers and consultants of the Business
and their current compensation (including salary, bonus or commission
arrangements or other contingencies) has previously been delivered to Purchaser.
To the knowledge of the Seller, no employee or consultant of the Business is in
violation of any term of any employment contract, patent disclosure agreement,
noncompetition agreement, or any other contract or agreement, or any restrictive
covenant relating to the right of any such employee to be employed thereby, or
to use trade secrets or proprietary information of others, and the employment of
such employees does not subject Company to any liability.
(f) Except as set forth in the Disclosure Letter, the Seller, to the
extent it relates to the Business, (i) is in material compliance with all
applicable foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, immigration or other laws governing
the employment of foreign nationals, terms and conditions of employment and
wages and hours, in each case, with respect to employees; (ii) has withheld all
amounts required by law or by agreement to be withheld from the wages, salaries
and other payments to employees; (iii) is not liable for any arrears of wages or
any taxes or any penalty for failure to comply with any of the foregoing; and
(iv) is not liable for any payment to any trust or other fund or to any
governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
employees (other than routine payments to be made in the normal course of
business and consistent with past practice).
(g) To the extent it relates to the Business (i) no work stoppage or
labor strike against the Seller is pending or, to the knowledge of the Seller,
threatened; (ii) the Seller is not involved in or, to the knowledge of the
Seller, threatened with, any labor dispute, grievance, or litigation relating to
labor, safety or discrimination matters involving any employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in material liability to the Seller; (iii) the Seller, to its
knowledge, has not engaged in any unfair labor practices within the meaning of
the National Labor Relations Act which would, individually or in the aggregate,
directly or indirectly result in a liability to the Seller; and (iv) the Seller
is not presently, nor has it been in the past, a party to, or bound by, any
collective bargaining agreement or union contract with respect to employees and
no collective bargaining agreement is being negotiated by the Seller.
SECTION 5.21 INSURANCE. The Disclosure Schedule lists all insurance
policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Business.
SECTION 5.22 FULL DISCLOSURE. All documents and other papers delivered
by or on behalf of Seller in connection with this Agreement and the transactions
contemplated hereby are to the best of Seller's knowledge true, complete and
authentic. The information furnished by or on behalf of Seller to Purchaser in
connection with this Agreement and the transactions contemplated hereby does not
contain any untrue statement of a material fact and does not omit to state any
material fact necessary to make the statements made, in the context in which
made, not false or misleading.
ARTICLE VI
COVENANTS
SECTION 6.1 MAINTENANCE OF BUSINESS. During the period from the date
hereof through the Time of Closing, Seller shall, with respect to the Business,
(i) not make or grant any increases in salary or other compensation or bonuses
to employees or terminate any employee (other than in the ordinary course of
business and consistent with past practice), (ii) maintain its employee work
force substantially at its present level and not make any adjustment in wages or
hours of work or enter into any union contract or adopt any new pension,
welfare, benefit or severance plan, other than such adjustments or plans which
apply to the Seller's employees generally, (iii) not make any disposition(s),
license(s) or acquisition(s) of rights, assets or properties other than in the
ordinary course of business and consistent with past practice, (iv) not make any
material capital expenditures (v) not enter into any material agreement(s) or
transaction(s), other than in the ordinary course of business and consistent
with past practice, without the prior written consent of the Purchaser, (vi) not
enter into any agreement(s) or transaction(s) with any person or entity who or
which is a stockholder, director, officer, associate or an affiliate of the
Seller, (vii) use its reasonable commercial efforts to preserve intact its
business organization and the goodwill of those persons/entities having business
relationships with it, and (viii) operate the Business in the ordinary course
and consistent with past practice, and (ix) provide cash necessary to operate
the Business until the Time of Closing; provided, however, that (A) any cash
available to the Business as of January 1, 1999 shall be an Excluded Asset as
set forth in Section 1.4 hereof, and (B) the Purchaser shall, at the Time of
Closing, repay to the Seller by certified check or wire transfer, any net cash
advanced to the Business by the Seller after January 1, 1999 (the "Operating
Cash").
SECTION 6.2 ACCESS TO INFORMATION. The Seller shall grant to the
Purchaser and its representatives access during business hours to all of its
books and records, properties and other assets relating to the Assets and/or the
Business. It is understood that all such reviews made by the Purchaser and its
representatives shall be conducted in such manner so as not to interfere unduly
with the operation of the Business. In connection with such review, the
Purchaser and its representatives shall, with the Seller's prior consent (which
consent shall not be unreasonably withheld or delayed), be permitted to contact
and communicate with customers, employees, distributors and suppliers of the
Business, provided that the Purchaser shall inform such parties that it is
contacting them to evaluate a possible transaction with the Seller.
SECTION 6.3 CONFIDENTIALITY. Any and all information, correspondence,
financial statements, records and other documents transmitted or communicated by
the Seller to the Purchaser shall be received and treated in secrecy and
confidence, and shall not be used by the receiving party, or disclosed by the
receiving party to any person or firm, without the prior express written consent
of the disclosing party, except to its employees, agents and representatives
involved in the transactions contemplated by this Agreement, which persons shall
be advised by the Purchaser of the foregoing obligations of confidentiality. If
the Closing does not occur, or at any time upon the request of the Seller, the
Purchaser agrees to return any and all copies of written materials received by
it from the Seller or its agents. The terms of this Section 6.3 shall survive
the termination of this Agreement.
SECTION 6.4 CONSENTS. Each of Seller and Purchaser shall use its
reasonable commercial efforts to obtain all consents of and authorizations by
third parties which may be required for the consummation of the transactions
contemplated hereby and to make all filings with and give all notices to third
parties that may be necessary or required in order to consummate the sale of the
Assets, and shall take additional actions as the other party may reasonably
request to cooperate so that the transactions contemplated by this Agreement may
be expeditiously consummated.
SECTION 6.5 ACCOUNTS RECEIVABLE PAYMENTS. From and after the Time of
Closing, the Seller shall provide to the Purchaser all the cooperation which the
Purchaser may reasonably request in connection with the collection of the
Accounts Receivable by the Purchaser.
SECTION 6.6 NOTIFICATION OF CERTAIN MATTERS. Each party shall give
prompt notice to the other of (i) the occurrence, or non-occurrence, of any
event the occurrence, or non-occurrence, of which would be likely to cause any
representation or warranty contained in this Agreement to be materially untrue
or inaccurate and (ii) any failure of Purchaser or Seller, as the case may be,
to comply with or satisfy any material covenant, condition or agreement to be
complied with or satisfied by it hereunder; PROVIDED, HOWEVER, that the delivery
of any notice pursuant to this Section shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
SECTION 6.7 FURTHER ACTION. Upon the terms and subject to the
conditions hereto, each of the parties hereto shall use all reasonable
commercial efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all other things necessary, proper or advisable to consummate
and make effective as promptly as practicable the transactions contemplated by
this Agreement, to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, and to
otherwise satisfy or cause to be satisfied all conditions precedent to its
obligations under this Agreement.
SECTION 6.8 COVENANTS AGAINST DISCLOSURE. Except as required by law,
no party shall disseminate (except to the parties to this Agreement and their
respective officers, directors and advisors) any press release or announcement
concerning the transactions contemplated by this Agreement or the Related
Agreements or the parties hereto or thereto without the prior written consent of
Seller and Purchaser, which consent shall not be unreasonably withheld or
delayed.
SECTION 6.9 USE OF NAME. Purchaser shall promptly following the Time
of Closing cease using the name ASA International Ltd. or any variant thereof or
reference thereto in its conduct of the Business.
SECTION 6.10 MEDICAL AND DENTAL INSURANCE. Seller shall maintain
through March 14, 1999 the medical and dental insurance that is offered at the
Time of Closing to employees of Seller employed in connection with the Business,
and Purchaser shall promptly reimburse Seller for any fees and related costs
incurred by Seller in connection with maintaining such coverage following the
Time of Closing. On or before March 15, 1999, Purchaser shall have in place and
shall provide to the employees of the Business adequate replacement heath and
dental coverage.
ARTICLE VII
CLOSING
SECTION 7.1 TIME OF CLOSING. The transactions contemplated by this
Agreement shall be completed on March 3, 1999 (the "Time of Closing"), and shall
be effective as of January 1, 1999, unless otherwise agreed to in writing by
Purchaser and Seller. The Closing shall take place at the offices of Stroock &
Stroock & Lavan LLP, 100 Federal Street, Boston, Massachusetts 02110, or at such
other place or date as may be agreed to in writing by Purchaser and Seller. The
"Closing" shall mean the deliveries to be made by the parties hereto at the Time
of Closing in accordance with this Agreement.
SECTION 7.2 DELIVERIES BY SELLER. At the Closing, Seller shall deliver
to Purchaser, all duly and properly executed, the following:
(a) A good and sufficient Bill of Sale for the Assets in the form
attached hereto as EXHIBIT D, selling, delivery, transferring, and assigning to
Purchaser an undivided interest in all of all of Seller's right, title, and
interest to the Assets, free and clear of all mortgages, pledges, liens,
encumbrances, security interests, equities, charges, and restrictions of any
nature whatsoever.
(b) An opinion of Stroock & Stroock & Lavan LLP, counsel to Seller,
dated the date of the Closing, in the form attached hereto as EXHIBIT E.
(c) The Related Agreements.
(d) Valid assignments for all Contracts and other third party consents
which may be required for the consummation of the transactions contemplated
hereby.
(e) The Sublease described in Section 8.1(f) hereof.
(f) The certificate described in Section 8.1(i) hereof.
SECTION 7.3 DELIVERIES BY PURCHASER. At the Closing, Purchaser shall
deliver, or cause to be delivered, to Seller, all duly and properly executed,
the following:
(a) The Cash Portion of the Purchase Price.
(b) The Related Agreements.
(c) An opinion of Littman Krooks Roth & Ball, P.C., counsel to
Purchaser, dated the date of the Closing, in the form attached hereto as EXHIBIT
G.
(d) The Assignment and Assumption Agreement in the form annexed hereto
as EXHIBIT F and any third party consents which may be required for the
consummation of the transactions contemplated hereby.
(e) The certificates described in Section 8.2(i) hereof.
(f) The Sublease.
(g) The Operating Cash described in Section 6.1 hereof.
SECTION 7.4 FURTHER ASSURANCES. At or after the Time of Closing, each
party shall each prepare, execute, and deliver, at the preparer's expense, such
further instruments of conveyance, sale, assignment, or transfer, and shall take
or cause to be taken such other or further action, as any party shall reasonably
request of any other party at any time or from time to time in order to perfect,
confirm, or evidence in Purchaser title to all or any part of the Assets or to
consummate, in any other manner, the terms and provisions of this Agreement or
the Related Agreements.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS
SECTION 8.1 CONDITIONS TO OBLIGATIONS OF PURCHASER. Each and every
obligation of Purchaser to be performed at the Closing shall be subject to the
satisfaction as of or before the Time of Closing, of the following conditions
(unless waived in writing by Purchaser):
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Seller set forth in Article V of this Agreement shall have been true and
correct in all material respects when made and shall be true and correct in all
material respects at and as of the Time of Closing as if such representations
and warranties were made as of such date and time.
(b) PERFORMANCE OF AGREEMENT. All covenants, conditions, and other
obligations under this Agreement and the Related Agreements which are to be
performed or complied with by the Seller, shall have been fully performed and
compiled within all material respects at or prior to the Time of Closing,
including the delivery of the instruments and documents in accordance with
Section 7.2 hereof.
(c) CONSENTS. All necessary agreements and consents of any parties to
any Contracts which are material to the Business and all other necessary
governmental and other consents which in the reasonable judgment of the
Purchaser are necessary in order to consummate the transactions contemplated
hereby, shall have been obtained, and true and complete copies thereof shall
have been delivered to the Purchaser.
(d) ABSENCE OF LITIGATION. No material action, suit or proceeding
before any court or any governmental body or authority against the Seller or the
Assets, or pertaining to the transactions contemplated hereby, shall have
instituted on or before the Time of Closing.
(e) EXECUTION OF RELATED AGREEMENTS. Purchaser shall have received
fully executed copies of the Related Agreements.
(f) EXECUTION OF SUBLEASE. Purchaser shall have received fully
executed copies of the Sublease, in the form annexed hereto as EXHIBIT H,
pursuant to which the Purchaser shall agree to sublease premises at 10 Speen
Street, Framingham, Massachusetts, from the Seller (the "Sublease").
(g) EMPLOYMENT AGREEMENT. Purchaser shall have received fully executed
copies of an employment agreement between Purchaser and Donald Askin ("Askin")
on terms acceptable to Purchaser; provided, however, that in the event Askin
does not enter into such an agreement, Purchaser shall waive this condition in
exchange for Seller's agreement to pay the cost of an executive recruiter to
hire a replacement of Askin.
(h) NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the business, prospects, operations or condition (financial or
otherwise) of the Business ("Adverse Changes") from September 30, 1998, except
such Adverse Changes which result from (i) the termination of Askin's employment
or (ii) as result of Seller entering into this Agreement or the letter of intent
between Spencer Trask & Co. and Seller dated as of November 10, 1998 (the
"Letter of Intent").
(i) CERTIFICATE OF PRESIDENT. Seller shall have delivered to Purchaser
a certificate executed by its President, dated the date of the Closing, to the
effect that the conditions set forth in subsections (a)-(h) of this Section 8.1
have been satisfied.
(j) APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments, opinions, and other documents delivered or to be
delivered to Purchaser and under this Agreement shall be satisfactory to
Purchaser and its counsel.
SECTION 8.2 CONDITIONS TO OBLIGATIONS OF SELLER. Each and every
obligation of Seller to be performed at the Time of Closing shall be subject to
the satisfaction as of or before such time of the following conditions (unless
waived in writing by Seller):
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Purchaser set forth in Article IV of this Agreement shall have been true and
correct in all material respects when made and shall be true and correct at and
as of the Time of Closing as if such representations and warranties were made as
of such date and time.
(b) PERFORMANCE OF AGREEMENT. All covenants, conditions, and other
obligations under this Agreement and the Related Agreements which are to be
performed or complied with by the Purchaser, shall have been fully performed and
compiled within all material respects at or prior to the Time of Closing,
including the delivery of the instruments and documents in accordance with
Section 7.3 hereof.
(c) CONSENTS. All necessary agreements and consents of any parties to
any Contracts which are material to the Business and all other necessary
governmental and other consents which in the reasonable judgment of the Seller
are necessary in order to consummate the transactions completed hereby, shall
have been obtained and true and complete copies thereof shall have been
delivered to the Seller.
(d) ABSENCE OF LITIGATION. No material action, suit or proceeding
before any court or any governmental body or authority against the Purchaser or
Seller, the Assets, or pertaining to the transactions contemplated hereby, shall
have instituted on or before the Time of Closing.
(e) EXECUTION OF RELATED AGREEMENTS. Purchaser shall have fully
executed and delivered copies of the Related Agreements to which Purchaser is a
party.
(f) EXECUTION OF SUBLEASE. Seller shall have received fully executed
copies of the Sublease.
(g) CAPITALIZATION OF PURCHASER. Purchaser shall have received cash of
at least Four Million Dollars ($4,000,000) in exchange for a combination of
subordinated notes and ninety percent (90%) of the outstanding capital stock of
the Purchaser on a fully-diluted basis.
(h) EMPLOYMENT OFFERS. Purchaser shall have offered employment to all
of those employees of Seller employed in connection with the Business with at
least the same compensation and providing comparable benefits (including but not
limited to health, welfare, pension, vacation, savings and severance benefits)
as currently received by such employees, such offers of employment to be
contingent on the Closing. Such offers of employment shall recognize all service
with the Seller prior to the Time of Closing for purposes of eligibility and
vesting under any employee pension or benefit plan maintained or established by
Purchaser, and shall provide such employees full credit for any accrued but
unused vacation or other benefits. The Purchaser shall have reserved shares to
be issued under an employee stock option plan for issuance to certain of the
employees of Seller that become employees of Purchaser after the Closing.
(i) CERTIFICATE OF AUTHORIZED OFFICER. Purchaser shall have delivered
to Seller a certificate executed by an authorized officer of Purchaser, dated
the date of the Closing, to the effect that the conditions set forth in
subsections (a)-(h) of this Section 8.2, have been satisfied.
(j) APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments, opinions, and other documents delivered or to be
delivered to Seller under this Agreement shall be satisfactory to Seller and its
counsel.
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS.
(a) The representations and warranties of Seller set forth in Section
5.17 hereof shall survive for the applicable statute of limitations period; the
representations and warranties of the Seller set forth in Section 5.8 hereof
shall survive indefinitely; and all other representations and warranties and
covenants of each party to this Agreement shall survive until the second
anniversary of the Closing.
(b) As used in this Article IX, any reference to a representation,
warranty, or covenant contained in any, section of this Agreement shall include
the Schedules, Exhibits and disclosure in the Disclosure Letter .
SECTION 9.2 INDEMNIFICATION. The Seller hereby agrees to indemnify,
defend and hold harmless Purchaser and each of its officers, directors,
employees, stockholders and other affiliates ("Affiliates") against any and all
losses, liabilities, damages, demands, claims, suits, actions, judgments, and
causes of action, assessments, costs, and expenses, including, without
limitation, interest, penalties, reasonable attorneys' fees, and all expenses
incurred in investigating, preparing, and defending against any litigation,
commenced or threatened, and any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation (collectively, "Damages"), asserted
against, resulting from, imposed upon, or incurred or suffered by Purchaser and
each of its Affiliates, directly or indirectly, as a result of or arising, from
or in connection with any inaccuracy in or breach or nonfulfillment of any of
the representations, warranties, covenants, or agreements made by the Seller in
this Agreement or any facts or circumstances constituting such an inaccuracy,
breach, or nonfulfillment (all of which shall also be referred to as
"Identifiable Claims"), including, without limitation, liability for an Excluded
Liability which is imposed upon Purchaser as transferee of the Assets.
SECTION 9.3 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO THIRD-PARTY
CLAIMS.
(a) If Purchaser determines to seek indemnification under this Article
IX with respect to the existence of a claim giving rise to Damages resulting
from the assertion of liability by third parties, Purchaser shall give notice to
Seller within 60 days of Purchaser becoming aware of any such Identifiable Claim
or of facts upon which any such Identifiable Claim will be based; the notice
shall set forth such material information with respect thereto as is then
reasonably available to Purchaser. In case any such liability is asserted
against Purchaser, and Purchaser notifies Seller thereof, Seller will be
entitled, if it so elects by written notice delivered to Purchaser within 15
days after receiving Purchaser's notice, to assume the defense thereof with
counsel satisfactory to Purchaser. Notwithstanding the foregoing, (i) Purchaser
shall also have the right to employ its own counsel in any such case, but the
fees and expenses of such counsel shall be at the expense of Purchaser unless
Purchaser shall reasonably determine that there is a conflict of interest
between Purchaser, and Seller with respect to such Identifiable Claim or there
are or may be legal defenses available to Purchaser, which are different from or
additional to those available to Seller or a difference of position or potential
difference of position exists between Seller and Purchaser, that would make such
separate representation advisable in the reasonable opinion of counsel to
Purchaser, in which case the fees and expenses of such counsel will be borne by
Seller, (ii) Purchaser shall not have any obligation to give any notice of any
assertion of liability by a third party unless such assertion is in writing, and
(iii) the rights of Purchaser to be indemnified hereunder in respect of
Identifiable Claims resulting from the assertion of liability by third parties
shall not be adversely affected by its failure to give notice pursuant to the
foregoing unless, and, if so, only to the extent that, Seller is materially
prejudiced thereby. With respect to any assertion of liability by a third party
that results in an Identifiable Claim, the parties hereto shall make available
to each other all relevant information in their possession material to any such
assertion.
(b) In the event that Seller, within 15 days after receipt of the
aforesaid notice of an Identifiable Claim, falls to assume the defense of
Purchaser against such Identifiable Claim, Purchaser shall have the right to
undertake the defense, compromise, or settlement of such action on behalf of and
for the account, expense, and risk of Seller.
(c) Notwithstanding anything in this Article IX to the contrary,
Purchaser shall have the right to participate in such defense, compromise, or
settlement and Seller shall not, without Purchaser's written consent (which
consent shall not be unreasonably withheld), settle or compromise any
Identifiable Claim or consent to entry of any document in respect thereof unless
such settlement, compromise, or consent includes as an unconditional term
thereof the giving by the claimant or the plaintiff to Purchaser a release from
all liability in respect of such Identifiable Claim.
SECTION 9.4 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO NON-THIRD
PARTY CLAIMS. In the event that Purchaser asserts the existence of a claim
giving rise to Damages (but excluding claims resulting from the assertion of
liability by third parties), it shall give written notice to Seller. Such
written notice shall state that it is being given pursuant to this Section 9.4,
specify the nature and amount of the claim asserted. If Seller, within thirty
(30) days after the mailing of notice by Purchaser, shall not give written
notice to Purchaser announcing its intent to contest such assertion of
Purchaser, such assertion shall be deemed accepted and the amount of claim shall
be deemed a valid claim. In the event, however, that Seller contests the
assertion of a claim by giving such written notice to Purchaser within said
period, then the parties shall act in good faith to reach agreement regarding
such claim. In the event that arbitration shall arise with respect to any such
claim, the prevailing party shall be entitled to reimbursement of costs and
expenses incurred in connection with such litigation including reasonable
attorneys' fees, if the parties hereto, acting in good faith, cannot reach
agreement with respect to such claim within ten (10) days after such notice.
SECTION 9.5 LIMITATIONS. Notwithstanding anything else in this
Agreement, except as provided herein:
(a) There shall be no liability to Seller or any Affiliate from
indemnification under this Article IX until the total of all claimed losses
exceeds One Hundred Thousand Dollars ($100,000), in which case all claimed
losses in the aggregate in excess of One Hundred Thousand Dollars ($100,000)
shall be recoverable;
(b) No claim for indemnification may be made by Purchaser more than
two (2) years following the Time of Closing; provided, however, that (i) claims
related to an alleged breach of the representations and warranties of Seller set
forth in SECTION 5.17 may be made during the applicable statute of limitations
period, and (ii) claims related to an alleged breach of the representations and
warranties of Seller set forth in SECTION 5.8 may be made at any time;
(c) The maximum amount for which Seller shall indemnify Purchaser
pursuant to this Article IX shall be Three Million Dollars ($3,000,000);
provided, however, that such limitation shall not apply to claims based upon an
alleged breach by Seller of (i) its obligation to pay the Excluded Liabilities,
(ii) the representations and warranties of Seller set forth in Section 5.12
hereof, or (iii) Seller's obligations pursuant to Article X hereof; and
(d) If the Purchaser is covered by insurance for Damages that are
subject of indemnification, the Purchaser shall recover only an amount equal to
its Damages, net of any insurance proceeds or other recoveries received by
Purchaser with regard thereto.
SECTION 9.6 SET-OFF AGAINST NOTE OR LICENSE FEE. Any amount to which
Purchaser shall become entitled pursuant to the provisions of this Article IX
shall be paid, to the extent possible, as an offset to any unpaid principal or
interest outstanding on the Note or any unpaid portion of the License Fee.
SECTION 9.7 ARBITRATION. Any dispute arising under this Article IX
shall be resolved by arbitration pursuant to the provisions of Section 12.12
herein.
ARTICLE X
RESTRICTIVE COVENANT
SECTION 10.1 SCOPE. Seller agrees that for a period of three (3) years
from the Time of Closing, Seller shall not directly or indirectly, engage (a)
individually, (b) as an officer, (c) as a director, (d) as an employee, (e) as a
consultant, (f) as an advisor, (g) as an agent (whether a salesperson or
otherwise), (h) as a broker, or (i) as a partner, coventurer, stockholder or
other proprietor owning directly or indirectly more than five percent (5%)
interest in any firm, corporation, partnership, trust, association, or other
organization which is engaged in the design, development, production, marketing
or sale of computer products or services for the catalogue direct marketing
industry. In addition, Seller agrees that it will not, directly or indirectly,
use, communicate, disclose or disseminate to any person, firm or corporation any
confidential information regarding the clients, customers or business practices
of the Business. Seller also agrees that it shall not, directly or indirectly,
take any action which constitutes an interference with or a disruption of any of
the Business' activities including, without limitation, the solicitation of
Business' customers, employees, or agents. The restrictive covenant described in
this Article X is intended to apply throughout the world.
SECTION 10.2 INJUNCTIVE RELIEF. Seller acknowledges that the
restrictions contained in Section 10.1, in view of the nature of the business in
which Purchaser is engaged, are reasonable and necessary in order to protect the
legitimate interests of Purchaser, and that any violation thereof could result
in irreparable injuries to Purchaser. Seller acknowledges that, in the event of
a breach or threatened breach of the restrictions of Section 10.1, Purchaser
shall be entitled to obtain from any court of competent jurisdiction,
preliminary and permanent injunctive relief restraining Seller from any
violation of the foregoing.
SECTION 10.3 OTHER REMEDIES. Nothing herein shall be construed as
prohibiting Purchaser from pursuing any other remedies available for such breach
or threatened breach, including recovery of damages and an equitable accounting
of all earnings, profits and other benefits arising from such violation, from
Seller.
SECTION 10.4 MODIFY Seller acknowledges its intention that Purchaser
shall have the broadest possible protection of the value of the business of
Purchaser in the trade area set forth above consistent with public policy, and
it will not violate the intent of the parties if any court of competent
jurisdiction should determine, in an appropriate decree, that, consistent with
established precedent of the forum state, the public policy of such state
requires a more limited restriction in geographical area or duration of the
aforesaid covenant.
ARTICLE XI
TERMINATION AND ABANDONMENT
SECTION 11.1 TERMINATION. This Agreement may be terminated and the
transactions herein contemplated may be abandoned at any time notwithstanding
board or stockholder approval, but not later than the Time of Closing:
(a) at any time by the written agreement of the Seller and the
Purchaser;
(b) by Purchaser or Seller, if there has been a material breach of any
representation, warranty, covenant or agreement set forth in this Agreement and
the breaching party fails to cure within five (5) business days after notice
thereof is given;
(c) by Purchaser or Seller, if any permanent injunction or other order
of a court or other competent authority preventing the sale of Assets shall have
become final and nonappealable or, in Purchaser's or Seller's reasonable good
faith judgment, shall render unlikely within a reasonable period of time the
consummation of the sale of Assets on the terms contemplated hereby;
(d) by Purchaser or Seller, if any governmental or administrative
agency shall have issued a temporary restraining order, preliminary injunction
or permanent injunction or other order preventing, the consummation of the sale
of Assets or any litigation shall be pending, the ultimate resolution of which
is likely to (i) result in the issuance of such an order or injunction, or the
imposition against Purchaser or Seller, of substantial damages if the sale of
Assets is consummated, (ii) prohibit Purchaser's ownership or operation of all
or a material portion of the Business as a result of the sale of Assets, (iii)
materially limit or restrict Purchaser's conduct or operation of the Business
after the Time of Closing, or (iv) render Purchaser or Seller unable to
consummate the sale of Assets. In the event any such order or injunction shall
have been issued, each party agrees to use its reasonable efforts to have any
such injunction lifted; or
(e) by Purchaser or Seller if, on or before February 25, 1999 the
condition set forth in Section 8.2(g) has not been satisfied.
SECTION 11.2 PROCEDURE AND CONSEQUENCES OF Termination. In the event
of termination pursuant to Section 11.1 hereof, written notice thereof shall
forthwith be given to the other party and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned without further action. If
this Agreement is terminated as provided herein, neither party hereto shall have
any further obligation or liability to the other party, except as that (i) the
provisions of Section 6.3 and Section 12.4 hereof shall survive such
termination; and (ii) in the event of a termination pursuant to Section 10.1(b),
the non-breaching party shall be entitled to recover its actual out-of-pocket
expenses incurred in connection with the transactions contemplated by this
Agreement from the breaching party.
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.1 NOTICE. All notices and other communications required or
permitted under this Agreement shall be delivered to the parties at the address
set forth below, or at such other address that they designate by notice to all
other parties in accordance with this Section 12.1. Any party delivering notice
to Purchaser shall deliver a copy to 535 Madison Avenue, 18th Floor, New York,
New York 10022, Attention: President, and Littman Krooks Roth & Ball, P.C.,
Third Avenue, New York, New York 10017, Attention: Bruno Dov Lerer, Esq. Any
party delivering notice to Seller shall deliver a copy to: 10 Speen Street,
Framingham, Massachusetts 01701, Attention: President, and Stroock & Stroock
Lavan LLP, 100 Federal Street, 33rd Floor, Boston, Massachusetts 02110,
Attention: Paul D. Broude, Esq. All notices and communications shall be deemed
to have been received: (i) in the case of personal delivery, on the date of such
delivery; (ii) in the case of telex or facsimile transmission, on the date on
which the sender receives confirmation by telex or facsimile transmission that
such notice was received by the addressee, provided that a copy of such
transmission is additionally sent by mail as set forth in (iv) below; (iii) in
the case of overnight air courier, on the second business day following the day
sent, with receipt confirmed by the courier, and (iv) in the case of mailing by
first class certified or registered mail, postage prepaid, return receipt
requested, on the fifth business day following such mailing.
SECTION 12.2 ENTIRE AGREEMENT. This Agreement, the exhibits and
schedules hereto, and the documents referred to herein embody the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof, and supersede all prior and contemporaneous agreements and
understandings, oral or written, relative to said subject matter, including but
not limited to the Letter of Intent.
SECTION 12.3 BINDING EFFECT; ASSIGNMENT. This Agreement and the
various rights and obligations arising hereunder shall inure to the benefit of
and be binding upon Seller, the Purchaser, and their respective successors and
permitted assigns. Neither this Agreement nor any of the rights, interests, or
obligations hereunder shall be transferred or assigned (by operation of law or
otherwise) by any party without the prior written consent of the other parties
hereto.
SECTION 12.4 EXPENSES OF TRANSACTION; TAXES. Each party shall bear its
own costs and expenses in connection with this Agreement and the transactions
contemplated hereby. Seller shall pay all applicable sales, use, excise,
transfer, documentary and any other similar taxes arising out of the purchase
and sale of the Assets.
SECTION 12.5 WAIVER; CONSENT. This Agreement may not be changed,
amended, terminated, augmented rescinded, or discharged (other than by
performance), in whole or in part, except by a writing executed by the parties
hereto, and no waiver of any of the provisions or conditions of this Agreement
or any of the rights of a party hereto shall be effective or binding unless such
waiver shall be in writing and signed by the party claimed to have given or
consented thereto. Except to the extent that a party hereto may have otherwise
agreed in writing, no waiver by that party of any condition of this Agreement or
breach by the other party of any of its obligations or representations hereunder
or thereunder shall be deemed to be a waiver of any other condition or
subsequent or prior breach of the same or any, other obligation or
representation by the other party, nor shall any forbearance by the first party
to seek a remedy for any noncompliance or breach by the other party be deemed to
be a waiver by the first party of its rights and remedies with respect to such
noncompliance or breach.
SECTION 12.6 THIRD-PARTY BENEFICIARIES. Except as otherwise expressly
provided for in this Agreement, nothing herein, expressed or implied, is
intended or shall be construed to confer upon or give to any person, firm,
corporation, or legal entity, other than the parties hereto, any rights,
remedies, or other benefits under or by reason of this Agreement.
SECTION 12.7 COUNTERPARTS. This Agreement may be executed
simultaneously in multiple counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
SECTION 12.8 SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
SECTION 12.9 GOVERNING LAW. This Agreement shall in all respects be
construed in accordance with and governed by the laws of the State of New York
without regard to its conflict of laws provisions. Subject to the provisions of
Section 12.12 hereof, any suit or action arising in connection herewith shall be
exclusively brought in the federal or state courts located in New York County,
New York.
SECTION 12.10 ATTORNEYS' FEES. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement or to protect the
rights obtained hereunder the prevailing party shall be entitled to its
reasonable attorneys' fees, costs, and disbursements in addition to any other
relief to which it may be entitled.
SECTION 12.11 COOPERATION AND RECORDS RETENTION. Seller and Purchaser
shall (i) each provide the other with such assistance as may reasonably be
requested by them in connection with the preparation of any tax return,
statement, report, form or other document (hereinafter collectively a "Tax
Return"), or in connection with any audit or other examination by any taxing
authority or any judicial or administrative proceedings relating to liability
for taxes, (ii) each retain and provide the other, with any records or other
information which may be relevant to any such Tax Return, audit or examination,
proceeding or determination, and (iii) each provide the other with any final
determination of any such audit or examination, proceeding or determination that
affects any amount required to be shown on any Tax Return of the other for any
period.
SECTION 12.12. ARBITRATION. The parties hereby covenant, stipulate and
agree that any controversy or claim arising out of, or relating to this
Agreement, or breach thereof, shall be settled by binding expedited arbitration
in accordance with the Commercial Arbitration Rules, before a single arbitrator
of the American Arbitration Association in New York City, New York. Judgment
upon the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
SELLER:
By: /s/ Terrence McCarthy
---------------------------------
Title: Vice President and Treasurer
PURCHASER:
By: /s/ Donald Askin
----------------------------
Title: Chief Operating Officer
EXHIBIT 4.1
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT dated as of March 3, 1999 by and between
COMMERCIALWARE, INC., a Delaware Corporation (the "Company"), ASA INTERNATIONAL
LTD., a Delaware corporation ("Shareholder"), THE KK/SS PARTNERSHIP ("KK/SS"),
DONALD ASKIN ("Askin"), WILLIAM DIOGUARDI ("Dioguardi"), SUMNER KAUFMAN
("Kaufman") and SPENCER TRASK SECURITIES, INC. ("STSI") (KK/SS, Askin,
Dioguardi, Kaufman and STSI are collectively referred to as the "ST Group").
WHEREAS, pursuant to that certain Asset Purchase Agreement made as of
even date by and among the Company and Shareholder (the "Asset Purchase
Agreement"), the Company has agreed to cause to be issued to Shareholder 30,000
shares of the Company's Stock (as defined below) and one (1) share of the
Company's Series A Preferred Stock (as defined below);
WHEREAS, pursuant to the Asset Purchase Agreement, Shareholder shall
receive a promissory note in the amount of $1,700,000 (the "Senior Note") and a
License Fee in the amount of $300,000 (the "License Fee");
WHEREAS, the Company has borrowed an aggregate of $5,000,000 from the
ST Group and the Shareholder, which indebtedness is evidenced by promissory
notes (the "Junior Notes");
WHEREAS, the Company desires that Alfred C. Angelone, President and
Chief Executive Officer of Shareholder, and certain other individuals each serve
as a Director of the Company; and
WHEREAS, the parties desire to provide for certain restrictions and
other matters relating to the transfer of the capital stock of the Company by
the ST Group and Shareholder;
NOW, THEREFORE, it is agreed as follows:
1. ISSUE OF STOCK. The Company hereby agrees to issue to the Shareholder,
and the Shareholder agrees to accept, 30,000 shares of the Company's Stock and
one (1) share of the Company's Series A Preferred Stock, each with rights and
preferences as set forth in the Company's Amended and Restated Certificate of
Incorporation, a copy of which is attached hereto as EXHIBIT A. Such shares and
any shares of capital stock of the Company acquired by the Shareholder as a
result of any subdivision, combination or reclassification of outstanding shares
of Stock into a greater or smaller number of shares, recapitalization,
reorganization, stock split, stock dividend or similar event, purchase (pursuant
to Section 5 below), issuance (pursuant to Section 7 below) or conversion (as
set forth on EXHIBIT A attached hereto) are referred to herein as the "Shares"
and such Shares are subject to the terms and conditions of this Agreement. For
purposes herein, "Fully Diluted" shall mean the sum of (i) all issued and
outstanding shares of the Company's common stock, par value $.01 per share (the
"Stock"), and (ii) the total maximum number of shares of Stock issuable upon (a)
the exercise of all Options, (b) the conversion or exchange of all Convertible
Securities, and (c) the conversion or exchange of all Convertible Securities
issuable upon the exercise of any Options. For purposes herein, "Options" shall
mean any rights to subscribe for or to purchase, or any options or warrants for
the purchase of, Stock, and "Convertible Securities" shall mean any stock or
securities convertible into or exchangeable for Stock (including the Series A
Preferred Stock).
2. DELIVERY OF SHARES. At the Time of Closing (as defined in the Asset
Purchase Agreement), the Company will issue and deliver to the Shareholder
certificates registered in the Shareholder's name representing the Shares.
3. INVESTMENT REPRESENTATIONS.
(A) REPRESENTATIONS OF SHAREHOLDER. This Agreement is made in reliance
upon the Shareholder's express representations that (i) the Shares are being
acquired for the Shareholder's own account for the purpose of investment and not
with a view to, or for sale in connection with, the distribution thereof, nor
with any present intention of distributing or selling the Shares, (ii) the
Shares will not be sold without registration under the Securities Act of 1933,
as amended (the "Securities Act"), or an exemption therefrom, (iii) the
Shareholder (and/or agents of the Shareholder) prior to the receipt of the
Shares has had the opportunity to ask questions of and receive answers from
representatives of the Company concerning the finances, operations and business
of the Company, and (iv) the Shareholder can bear the economic risk of losing
its investment in the Shares and has adequate means for providing for its
current financial needs and contingencies.
(B) SECURITIES LEGEND. Until such time as the Shares shall have been
registered under the Securities Act, or shall have been transferred in
accordance with an opinion of counsel satisfactory to the Company that such
registration is not required, stop transfer instructions shall be issued to the
Company's transfer agent, if any, or, if the Company transfers its own
securities, a notation shall be made in the appropriate records of the Company
with respect to the Shares, and the certificates representing the Shares shall
bear a legend substantially as follows:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 or applicable state securities laws.
These shares have not been acquired with a view to distribution or
resale, and may not be sold, mortgaged, pledged, hypothecated or
otherwise transferred without an effective registration statement for
such shares under the Securities Act of 1933 and any applicable state
securities laws, or an opinion of counsel satisfactory to the Company
that registration is not required under the Securities Act of 1933 or
under applicable state securities laws."
The Shareholder further understands and acknowledges that (i) there is
not now available, and may not be available when the Shareholder wishes to sell
its Shares, the adequate current public information with respect to the Company
which would permit offers or sales of the Shares pursuant to Rule 144
promulgated under the Securities Act, and, therefore, compliance with Regulation
A of the Securities Act or some other exemption from the registration and
prospectus delivery requirements of the Securities Act will be required for any
such offer or sale, and (ii) the Company is under no obligation to register the
Shares under the Securities Act or to make Rule 144 available.
4. TERM. This Agreement shall expire on the earlier to occur of: (i) the
closing of an underwritten public offering of shares of Stock of the Company
pursuant to an effective registration statement filed under the Securities Act
or any successor statute (the "Qualified Public Offering"), or (ii) the
occurrence of an Organic Change. For purposes of this Agreement, an "Organic
Change" shall include the transfer or sale of all, or substantially all, of the
capital stock or assets of the Company to any other person or entity, or the
merger or consolidation of the Company with another entity where such other
entity is the surviving entity (other than a merger or consolidation relating to
a change of state of incorporation of the Company). The Company shall give the
Shareholder thirty (30) days advance written notice of any anticipated Organic
Change.
5. SHAREHOLDER RIGHT OF FIRST REFUSAL.
If at any time during the term of this Agreement the Company proposes to
sell any Stock or any securities convertible or exercisable for any Stock to any
party (other than the issuance of Stock or the granting of Options from or in
respect of the Pool as set forth in Section 7 below) (the "Company Offer"), the
Company shall give written notice to the Shareholder (the "Shareholder Option
Notice") setting forth its desire to sell such Stock (the "Company Offered
Shares"), which Shareholder Option Notice shall be accompanied by a photocopy of
the original executed Company Offer and shall set forth at least the name and
address of the Offeror and the price and terms of such offer.
Upon the receipt of the Shareholder Option Notice, the Shareholder shall
have an option to purchase up to that amount of the Company Offered Shares which
will maintain Shareholder's proportionate ownership interest of Stock on a Fully
Diluted basis after the proposed sale to such Offeror (the "Shareholder
Portion"). Such option granted to Shareholder shall be exercisable by giving,
within 14 business days after the receipt of the Shareholder Option Notice (the
"Shareholder Exercise Period"), a counter-notice in writing to the Company. If
the Shareholder elects to purchase any of the Shareholder Portion, Shareholder
shall be obligated to purchase, and the Company shall be obligated to sell to
the Shareholder, such amount of the Shareholder Portion so elected at the price
(per share) and terms indicated in the Company Offer, within 14 days from the
date of the Shareholder's receipt of the Shareholder Option Notice.
The Company may sell any or all of such Company Offered Shares which the
Shareholder has not so elected to purchase during 90 days following the
expiration of the Shareholder Exercise Period, provided that such sale shall
only be made pursuant to the terms of the Company Offer. If any or all such
Company Offered Shares are not sold pursuant to the Company Offer within such
time period, the unsold Company Offered Shares shall remain subject to the terms
of this Agreement.
6. SHAREHOLDER RIGHT OF PARTICIPATION IN ST GROUP SALES.
If at any time any member of the ST Group ("Seller") desires to sell all or
any part of Seller's Stock and has received in writing a bona fide offer (the
"STC Bona Fide Offer") for the purchase of such Stock from an Offeror, Seller
shall give written notice to the Shareholder (the "Shareholder Participation
Notice") setting forth its desire to sell such Stock (the "STC Offered Shares"),
which Shareholder Participation Notice shall be accompanied by a photocopy of
the original executed STC Bona Fide Offer and shall set forth at least the name
and address of the Offeror and the price and terms of such offer.
Upon the receipt of the Shareholder Participation Notice, the Shareholder
shall have the right to sell to the Offeror, at the same price per share and on
the same terms and conditions as involved in such sale by Seller, that amount of
Stock which is equal to the lesser of the STC Offered Shares and the Shareholder
Participation Amount. For purposes herein, the "Shareholder Participation
Amount" shall be equal to the Shares multiplied by a fraction, the numerator of
which is the number of STC Offered Shares and the denominator of which is the
aggregate number of shares of capital stock of the Company owned by Seller,
calculated on a Fully Diluted basis.
Such right by Shareholder to sell the Shareholder Participation Amount
shall be exercisable by giving, within 30 business days after the receipt of the
Shareholder Participation Notice, a notice in writing to Seller of Shareholder's
desire to exercise such right.
The Shareholder and Seller shall sell to the Offeror all, or at the option
of the Offeror, any part of the shares proposed to be sold by them at not less
than the price and upon other terms and conditions, if any, not more favorable
to the Offeror than those in the STC Bona Fide Offer, provided however, that any
purchase of less than all of such shares by the Offeror shall be made from the
Shareholder and Seller PRO RATA based upon the relative amount of the shares
that each of the Shareholder and Seller is otherwise entitled to sell pursuant
to the foregoing provisions of this Section.
7. RIGHTS AS SHAREHOLDER; ADJUSTMENTS.
It is understood that the Shareholder has the right to vote all of the
Shares held by the Shareholder and that it shall be entitled to all dividends or
distributions made by the Company arising in respect of the Shares, in cash,
stock or other property, including warrants, options or other rights, and the
Company covenants that it shall treat all Stock equally in connection with any
such dividends or distributions. Upon the happening of any event described in
Section 1 above, the Company will provide a new certificate representing the
Shares as appropriately adjusted.
8. SUBORDINATION OF JUNIOR NOTES. The parties hereby agree that the payment
and performance covenants and obligations of the Company under the Junior Notes
shall be (i) subordinate in all respects, including, without limitation,
payment, lien and bankruptcy, to the covenants and obligations of the Company
under the Senior Note and the License Fee, and (ii) pari passu among the Junior
Notes. The parties hereto agree that no payments (including payments of interest
and/or principal), prepayments or other distributions will be paid or payable by
the Company under the terms of the Junior Notes until such time as the
obligations of the Company under the Senior Note and the License Fee have paid
and satisfied in full, at which time any payments to be made in respect of the
Junior Notes shall be made pari passu.
9. REGISTRATION RIGHTS. If at any time the Company shall determine to
register under the Securities Act any of its Stock, other than on Form S-4 or
Form S-8 or their then equivalents, it shall send to the Shareholder written
notice of such determination. Upon the written request from the Shareholder
within thirty (30) days after receipt of any such notice from the Company, the
Company, at the Company's expense, will use its best efforts to include in such
registration statement all or any part of the shares of Stock issuable upon the
conversion of the Shares that the Shareholder requests to be registered, except
that if, in connection with any offering involving an underwriting of Stock to
be issued by the Company, the managing underwriter shall impose a limitation on
the number of shares of such Stock which may be included in any such
registration statement because, in its judgment, such limitation is necessary to
effect an orderly public distribution, and such limitation is imposed PRO RATA
among the holders of such Stock having an incidental right to include such Stock
in the registration statement according to the amount of such Stock which each
holder had requested to be included pursuant to such right, then the Company
shall be obligated to include in such registration statement only such limited
portion of the Shares with respect to which the Shareholder has requested
inclusion hereunder. In the event of such a PRO RATA limitation, no shares of
Stock held by persons not having such an incidental right may be included in the
registration statement.
10. BOARD OF DIRECTORS. During the term of this Agreement, the parties
hereto will take all necessary actions to ensure that Alfred C. Angelone, and so
long as each is an employee of the Company, each of Donald Askin, Eric Kim and
Amish Mehta, each is elected as a member of the Company's board of directors.
11. ACCESS TO INFORMATION. The Company shall permit, upon reasonable
request and notice, the Shareholder or any agent or representative thereof, to
examine and make copies of and extracts from the records and books of account
of, and visit and inspect the properties of the Company, and to discuss the
affairs, finances and accounts of the Company with any of its officers,
directors, key employees, attorneys and independent accountants.
12. SPECIFIC ENFORCEMENT. Because the Shares cannot be readily purchased or
sold in the open market, and for other reasons, the parties hereby acknowledge
and agree that they may be irreparably damaged in the event that this Agreement
is not specifically enforced. Upon a breach or threatened breach of the terms,
covenants and/or conditions of this Agreement by either party, the other party
shall, in addition to all other remedies, be entitled to a temporary or
permanent injunction, without showing any actual damage, and/or a decree for
specific performance, in accordance with the provisions hereof.
13. LEGEND. All certificates evidencing any of the Shares subject to this
Agreement shall also bear a legend substantially as follows during the term of
this Agreement:
"The shares represented by this certificate are subject to
restrictions on transfer and may not be sold, exchanged, transferred,
pledged, hypothecated or otherwise disposed of except in accordance
with and subject to all the terms and conditions of a certain
Shareholder Agreement between the Company and the holder of this
certificate, a copy of which the Company will furnish to the holder of
this certificate upon request and without charge."
14. GOVERNING LAW; SUCCESSORS AND ASSIGNS. This Agreement shall be
construed in accordance with and governed by the internal laws of the State of
New York and shall be binding upon the heirs, personal representatives,
executors, administrators, successors and assigns of the parties.
15. NOTICES. Notices given hereunder shall be deemed to have been duly
given on the date of personal delivery or on the date of postmark, if mailed by
registered or certified mail, to the party being notified at his address
specified on the signature page hereof or such other address as he may
subsequently notify the other party in writing.
16. COMPENSATION. The Company covenants and agrees that it will not pay to
its management compensation in excess of that compensation customarily paid to
management in companies of similar size, of similar maturity, and in similar
businesses and all management compensation and all policies relating thereto
shall be approved in a advance by a majority of the members of the Company's
Board of Directors.
17. ENTIRE AGREEMENT AND AMENDMENTS. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and may not
be modified, amended or terminated except by an agreement signed by the parties
hereto.
18. WAIVERS. No waiver of any breach or default hereunder shall be
considered valid unless in writing, and no such waiver shall be deemed a waiver
of any subsequent breach or default of the same or similar nature.
19. SEVERABILITY. If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other severable provision
of this Agreement, and this Agreement shall be carried out as if any such
illegal, invalid or unenforceable provision were not contained herein.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as an instrument under
seal as of the date and year first above written.
COMMERCIALWARE, INC. ASA INTERNATIONAL LTD.
By: /s/ Donald Askin By: /s/ Terrence C. McCarthy
Title: Chief Operating Officer Title: Vice President and Treasurer
THE KK/SS PARTNERSHIP SPENCER TRASK SECURITIES, INC.
By:/s/ Spencer Segura By: /s/ William Dioguardi
- ---------------------- ------------------------
Title: Partner Title: President
/s/ Donald Askin /s/ William Dioguardi
- --------------------------- ---------------------------
Donald Askin William Dioguardi
/s/ Sumner Kaufman
- ------------------------
Sumner Kaufman
Exhibit 4.2
PROMISSORY NOTE
$1,700,000 MARCH 3, 1999
FOR VALUE RECEIVED, the undersigned, CommercialWare, Inc., a Delaware
corporation ("Borrower"), promises to pay to ASA International Ltd., a Delaware
corporation ("Payee"), or order, the principal amount of One Million Seven
Hundred Thousand Dollars ($1,700,000), plus interest thereon at a fixed rate
equal to 7.06% per annum. Interest shall in all cases be calculated on the basis
of actual days elapsed and a 365 day year.
All outstanding principal and accrued interest hereunder shall be due and
payable on the third anniversary hereof (the "Maturity Date").
The principal amount of this Note (and resulting interest calculation) is
subject to adjustment pursuant to Sections 3.3 and 9.6 of that certain Asset
Purchase Agreement of even date by and among Borrower and Payee (the "Asset
Purchase Agreement").
Any payments, including any prepayments, received by Payee on account of
this Note prior to demand or acceleration shall be applied first, to any costs,
expenses or charges then owed Payee by Borrower, second, to accrued and unpaid
interest, and third, to the unpaid principal balance, in inverse order of their
maturities. Any payments so received after demand or acceleration shall be
applied in such manner as Payee may, in its sole discretion, determine.
Payee, at its option, may declare the entire unpaid balance of this Note
and all accrued and unpaid interest thereon to be immediately due and payable
without demand, notice or protest (which are hereby waived) upon the occurrence
of any one or more of the following events (each, an "Event of Default"): (a)
the failure to pay principal of this Note within ten (10) days of the due date;
(b) the failure to pay interest on this Note within ten (10) days of the due
date; (c) the acceleration of any material portion of indebtedness of Borrower
from any lender other than Payee; (d) a proceeding being filed or commenced
against Borrower for dissolution or liquidation, or Borrower voluntarily or
involuntarily terminating or dissolving or being terminated or dissolved; (e)
insolvency of, the appointment of a custodian, trustee, liquidator or receiver
for any of the property of, or an assignment for the benefit of creditors by, or
the filing of a petition under bankruptcy, insolvency or debtor's relief law by
or against, Borrower (and in the case of the filing of an involuntary petition
against Borrower, if the proceeding commenced by such filing is not dismissed
within ninety (90) days of such filing); (f) the entry of any judgment against
Borrower that makes Borrower's ability to satisfy its obligations hereunder
reasonably doubtful, which lien is not discharged or judgment is not satisfied
or appealed from (with execution or similar process stayed) within thirty (30)
days of its imposition or entry; (g) a default under Section 5 of that certain
Security Agreement of even date by and between Borrower and Payee; (h) the sale
of all or substantially all of Borrower's business or assets, or the sale of
capital stock by Borrower or the merger of Borrower with another corporation
that results in the shareholders of Borrowers on the date hereof owning less
than fifty percent (50%) of the outstanding capital stock of Borrower or the
surviving company in a merger; (i) the payment of any dividends by Borrower on
its capital stock; or (j) or the failure to cure any material breach of any
obligation of Borrower to Payee arising out of, or relating to, that certain
Asset Purchase Agreement of even date by and among Borrower, Payee and other
parties (and agreements contemplated thereunder), within thirty (30) after
receiving notice of such breach by Payee, subject to the rights of Borrower and
Payee to demand arbitration to determine the existence of such breach in the
manner set forth in said Asset Purchase Agreement.
No delay or omission by Payee in exercising or enforcing any of Payee's
powers, rights, privileges or remedies hereunder shall operate as a waiver
thereof on that occasion or on any other occasion. No waiver of any default
hereunder shall operate as a waiver of any other default hereunder, nor as a
continuing waiver.
Borrower will pay on demand all reasonable costs and expenses of
collection, including reasonable attorneys' fees incurred or paid by Payee in
enforcing this Note on default.
Borrower hereby waives presentment, demand, notice and protest, and also
waives any delay on the part of Payee.
This Note shall be binding upon Borrower and each endorser and guarantor
hereof and upon their respective successors and assigns, and shall inure to the
benefit of Payee and its successors, endorsees and assigns. This Note may not be
amended except by an instrument in writing signed by Borrower and Payee.
This Note is secured by a security agreement dated the date hereof (the
"Security Agreement") granting Payee a security interest in certain assets of
Borrower. This Note is entitled to all the benefits of the Security Agreement
and specific reference is hereby made to same for all purposes.
This Note shall be governed by and construed in accordance with the laws of
the State of New York.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed as of the
date first written above.
COMMERCIALWARE, INC.
By: /s/ Donald Askin
------------------------------
Title: Chief Operating Officer
Exhibit 4.3
SECURITY AGREEMENT
THIS AGREEMENT is dated as of March 3, 1999, and is entered into by and
between CommercialWare, Inc., a Delaware corporation with a principal place of
business at 10 Speen Street, Framingham, Massachusetts 01701 (the "Debtor") and
ASA International Ltd., a Delaware corporation with a principal place of
business at 10 Speen Street, Framingham, Massachusetts 01701 (the "Secured
Party").
NOW THEREFORE, in consideration of the provisions herein contained, and for
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereto agree as follows:
1. CREATION OF SECURITY INTEREST
The Debtor hereby grants to the Secured Party a security interest in the
collateral described in Section 2 below to secure the payment of the Debtor's
Obligations to the Secured Party described in Section 3 below.
2. COLLATERAL
The property which is subject to the security interest created by this
Agreement consists of the following (hereinafter referred to as the
"Collateral"):
All intellectual property of the Debtor, whether now owned or
hereafter acquired, or in which Debtor may now have or hereafter
acquired an interest, wherever located, including all trademarks,
trademark rights, service marks, service mark rights, copyrights,
trade names, trade name rights, fictitious business names, the rights
to the name "CommercialWare" and all variants thereof, works of
authorship, inventions, industrial models, industrial designs, utility
models and certificates of invention, designs, emblems and logos,
trade secrets, know-how, manufacturing formulae, technical
information, mask work registrations, inventions, franchises,
franchise rights, customer and supplier lists together with the
goodwill associated therewith and other proprietary rights used
primarily in connection with the business of the Debtor, any and all
substitutions therefor and replacements thereof, and any and all
additions and accessions thereto, and all proceeds and products
thereof.
The Debtor shall permit the Secured Party and/or its agents and
representatives to inspect the Collateral upon request during the Debtor's
normal business hours and upon reasonable notice to the Debtor.
3. DEBTOR'S OBLIGATIONS
This Agreement secures the payment of all amounts and performance of all
obligations of the Debtor (the "Obligations") as provided in (i) the License
granted pursuant to Section 1.5 of the Asset Purchase Agreement between the
Debtor and the Secured Party (the "Purchase Agreement"); and (ii) that certain
Promissory Note in the principal amount of $1,700,000 from the Debtor to the
Secured Party, dated the date hereof (the "Note").
4. COVENANTS OF DEBTOR
(a) The places where all records relating to the Collateral are presently
kept, and the Debtor's only places of business, are listed on Schedule A hereto.
The Debtor shall notify Secured Party not less than five (5) days before any
change is intended to be made in the foregoing addresses.
(b) The Debtor shall at all reasonable times and from time to time upon due
notice allow the Secured Party, by or through any of its officers, agents,
attorneys or accountants, to examine or inspect the Collateral wherever located
and to examine, inspect and make extracts from the Debtor's books and records.
The Debtor shall do, make, execute and deliver all such additional and further
acts, things, deeds, assurances and instruments as Secured Party may reasonably
require, to vest more completely in and assure to Secured Party its rights
hereunder and in or to the Collateral.
(c) The Debtor shall not sell, encumber, grant a security interest in or
dispose of or permit the sale, encumbrance or disposal of any Collateral without
the Secured Party's prior written consent.
(d) The Debtor shall perform any and all steps reasonably requested by the
Secured Party to perfect the Secured Party's security interest in the
Collateral, such as executing and filing financing or continuation statements in
form and substance satisfactory to the Secured Party, executing collateral
assignments of patents and trademarks (including filings at the United States
Patent and Trademark Office), and making notations of such security interest on
certificates of title. The Debtor hereby nominates and appoints the Secured
Party as attorney-in-fact to do all acts and things which the Secured Party may
deem reasonably necessary or advisable to perfect and continue perfected the
security interests created by this Agreement.
(e) The Debtor hereby covenants that (a) the Debtor will promptly pay any
and all taxes, assessments and governmental charges upon the Collateral prior to
the date penalties are attached thereto, except to the extent that such taxes,
assessments and charges shall be contested in good faith by the Debtor; (b) the
Debtor will immediately notify the Secured Party of any event causing a
substantial loss or diminution in the value of all or any material part of the
Collateral and an estimate of the amount of such loss or diminution; and (c) the
Debtor will not use the Collateral in violation of any statute or ordinance and
will keep the Collateral free from any adverse lien, security interest or
encumbrance, except as permitted herein, in good condition and will not waste or
destroy the same.
5. DEFAULT
Upon the occurrence of (i) the failure by the Debtor to observe any
provision or perform any other obligation set forth in this Agreement or the
Purchase Agreement; or (ii) an Event of Default as defined in the Note; the
Debtor shall be in default hereunder, and the Secured Party shall be entitled to
any and all remedies available under the Uniform Commercial Code in force in the
Commonwealth of Massachusetts on the date of this Agreement, including, but not
limited to, the repossession, sale or other disposition of all or any portion of
the Collateral. Any sale or other disposition of the Collateral may be at public
or private sale upon such terms and in such manner as the Secured Party
reasonably deems advisable, having due regard to compliance with any statute or
regulation which might affect, limit or apply to the Secured Party's disposition
of the Collateral. The Secured Party may conduct any such sale or other
disposition of the Collateral upon the Debtor's premises. The Secured Party
shall give the Debtor at least the minimum notice required by law of the date,
time and place of any proposed public sale, and of the date after which any
private sale or other disposition of the Collateral may be made. The Secured
Party may purchase the Collateral, or any portion of it, at any such sale.
6. GOVERNING LAW/BINDING EFFECT
This Agreement shall be construed according to the laws of the Commonwealth
of Massachusetts and shall be binding upon the successors and assigns of the
Debtor, and shall inure to the benefit of the successors and assigns of the
Secured Party.
7. WAIVERS
The Secured Party shall have the right to enforce any remedies hereunder
alternatively, successively or concurrently. A waiver of any default of the
Debtor shall not be a waiver of any subsequent, similar or other default. No
delay in the exercise of any of the Secured Party's rights or remedies hereunder
shall constitute a waiver of such right or remedy.
8. TERMINATION
This Agreement shall terminate when all of the Obligations have been paid
and the terms and covenants hereof have been performed in full. As soon as
practical following such termination, the Secured Party shall make the
appropriate governmental and regulatory filings (including a filing at the
United States Patent and Trademark Office) to terminate the Secured Party's
security interest in the Collateral.
Notwithstanding anything to the contrary contained herein, this Agreement
may be terminated by the Debtor with the prior consent of the Secured Party,
which consent shall not be unreasonably withheld, provided, however, that the
Debtor substitutes collateral security and/or guaranties for the Obligations of
equal or greater value than the Collateral, and expenses paid in connection with
such substitution (including reasonable legal or other necessary expenses) shall
be paid by the Debtor.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the date first above written.
WITNESS: DEBTOR:
COMMERCIALWARE, INC.
/s/ Bernice S. Wolk By: /s/ Donald Askin
- ----------------------- ------------------------------
Title: Chief Operating Officer
WITNESS: SECURED PARTY:
ASA INTERNATIONAL LTD.
/s/ MaryAnn Bishop By: /s/ Terrence C. McCarthy
- ----------------------- --------------------------------
Title: Vicr President and Treasurer
<PAGE>
SCHEDULE A
PLACES OF BUSINESS
1. 10 Speen Street, Framingham, Massachusetts 01701.
Exhibit 4.4
TRADEMARK ASSIGNMENT
WHEREAS, ASA International Ltd., a Delaware corporation ("Assignor")
and CommercialWare, Inc., a Delaware corporation("Assignee"), have entered into
that certain Asset Purchase Agreement (the "Asset Purchase Agreement") as of
March 3, 1999;
WHEREAS, pursuant to the Asset Purchase Agreement, Assignor agreed to
assign all of its right, title and interest in a certain Trademark (as defined
below) to Assignee.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Assignor has sold, assigned,
transferred and set over, and by these presents does hereby sell, assign,
transfer and set over, unto Assignee, its successors, legal representatives and
assigns, Assignor's entire right, title and interest, including the right to sue
for and collect past damages, in, to and under the trademarks, now existing or
hereafter acquired, including all registrations, applications, and renewals
thereof, together with that part of the good will of the business symbolized
thereby (any and all being the "Trademark") for the following Trademark:
MARK COUNTRY REG # REG DATE STATUS
Mozart United States 2,153,597 4/28/98 issued
IN TESTIMONY WHEREOF, Assignor has set his hand and seal to this
Assignment as of March 3, 1999.
WITNESS: ASA INTERNATIONAL LTD.
/s/ MaryAnn Bishop By: /s/ Terrence C. McCarthy
- -------------------- -------------------------
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
Middlesex County, ss. March 3, 1999
Then personally appeared the above-named [NAME] Terrence C. McCarthy,
[TITLE] Vice President + Treasurer as aforesaid, to me known and known to me to
be the individual who executed the foregoing instrument and acknowledged that he
executed the same as his free act and deed before me,
/s/ Pearl R. Blatz
--------------------------
, Notary Public
My commission expires: 9/07/01
Exhibit 4.5
TRADEMARK SECURITY AGREEMENT
WHEREAS, CommercialWare, Inc., a Delaware corporation ("Grantor") and ASA
International Ltd., a Delaware corporation ("Secured Party") have entered into
that certain Asset Purchase Agreement (the "Asset Purchase Agreement") as of
March 3, 1999 (the "Time of Closing");
WHEREAS, pursuant to the Asset Purchase Agreement, Grantor and Secured
Party have entered into, among other agreements, that certain Security Agreement
(the "General Security Agreement") as of the Time of Closing; and
WHEREAS, pursuant to the Asset Purchase Agreement, Grantor has agreed to
grant to Secured Party a security interest in, among other assets, a certain
Trademark (as defined below).
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Grantor hereby collaterally assigns
and pledges, and grants to the Secured Party, a security interest in and lien
on, and confirms and ratifies the pledge, grant, and lien on, all of Grantor's
right, title and interest in and to the trademarks, now existing or hereafter
acquired, including all registrations, applications, and renewals thereof,
together with that part of the good will of the business symbolized thereby (any
and all being the "Trademark"), including products, advertising, and packaging
embodying the Trademark, and all proceeds from the sale, use, or lease of the
Trademark and products, to secure performance of the terms of the General
Security Agreement, in each case for the following Trademark:
MARK COUNTRY REG # REG DATE STATUS
Mozart United States 2,153,597 4/28/98 issued
The provisions in the General Security Agreement under the headings
"Debtor's Obligations", "Covenants of Debtor", "Default", "Subordination of
Security Interest", "Governing Law/Binding Effect", "Waivers" and "Termination"
are hereby incorporated herein by reference.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of March 3, 1999.
WITNESS: GRANTOR:
COMMERCIALWARE, INC.
/s/ Bernice S. Wolk By: /s/ Donald Askin
- ------------------------ ----------------------
Title: Chief Operating Officer
WITNESS: SECURED PARTY:
ASA INTERNATIONAL LTD.
/s/ MaryAnn Bishop
- -------------------------- By: /s/ Terrence C. McCarthy
----------------------------
Title: Vice President and Treasurer
COMMONWEALTH OF MASSACHUSETTS
Middlesex County, ss. March 3, 1999
Then personally appeared the above-named [NAME] Terrence DC. McCarthy,
[TITLE] Vice President + Treasurer as aforesaid, to me known and known to me to
be the individual who executed the foregoing instrument and acknowledged that he
executed the same as his free act and deed before me,
/s/ Pearl R. Blatz
--------------------------------------
, Notary Public
My commission expires: 9/7/01
COMMONWEALTH OF MASSACHUSETTS
Middlesex County, ss. March 3, 1999
Then personally appeared the above-named [NAME] Donald Askin,
[TITLE] Chief Operating Officer as aforesaid, to me known and known to me to be
the individual who executed the foregoing instrument and acknowledged that he
executed the same as his free act and deed before me,
/s/ Pearl R. Blatz
--------------------------------------
, Notary Public
My commission expires: 9/7/01
Exhibit 4.6
SUBLEASE AND CONSENT AGREEMENT
This Sublease and Consent Agreement ("Sublease") by and among ASA
International Ltd., COMMERCIALWARE, INC. and 10 SPEEN STREET, LLC is made as of
March 3, 1999.
RECITALS
WHEREAS, 10 Speen Street, LLC and ASA International Ltd. (hereinafter, "ASA
International" or "LESSOR" as the context may require) have entered into that
certain master lease as of September 15, 1998 whereby ASA International has
leased the entire Building (as defined below) from 10 Speen Street, LLC (the
"Master Lease"); and
WHEREAS, ASA International and CommercialWare, Inc. (hereinafter,
"CommercialWare" or "LESSEE" as the context may require) intend to enter into a
sublease under the terms and conditions as set forth herein;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
TERMS
1. & 2. PARTIES AND PREMISES.
ASA INTERNATIONAL, a Delaware corporation, with a principal place of
business at 10 Speen Street, Framingham, MA 01701 does hereby sublease to
COMMERCIALWARE, a Delaware corporation, with a principal place of business at 10
Speen Street, Framingham, MA 01701, and the LESSEE hereby subleases the
following described Premises:
approximately 8,836 square feet of rentable third floor space located
at 10 Speen Street, Framingham, MA 01701.
("Premises") together with the right to use in common, with others entitled
thereto, the hallways, stairways, and elevators, necessary for access to said
Premises, and the lavatories nearest thereto. The entire building at 10 Speen
Street, Framingham, MA of which the Premises is a part shall be referred to
herein as the "Building".
3. TERM.
The term of this Sublease shall commence as of the date hereof (the
"Commencement Date") and end August 31, 1999 (the "Expiration Date") (the
"Term").
4. RENT.
The LESSEE shall pay to the LESSOR a base rent ("Base Rent") at the
rate of Fourteen Thousand Seven Hundred Twenty Seven Dollars ($14,727) per
month, payable in advance on the first of each month. If the Commencement Date
is not the first day of a month, then the prorated Base Rent for the period from
the Commencement Date to the last day of the month in which the Commencement
Date occurs shall be payable on the first day of the month after the month in
which the Commencement Date occurred.
Any payment of Base Rent or any other monetary sum due hereunder from
LESSEE to LESSOR which is more than ten (10) days late shall bear interest at
the rate of one (1%) percent per month.
5. SECURITY DEPOSIT.
Intentionally Deleted
6. RENT ADJUSTMENT.
A. Tax CALCULATION. Intentionally Omitted.
B. OPERATING EXPENSES. The parties hereby agree that LESSEE shall
pay to LESSOR as operating expense that portion of the operating
expense of the Building that is attributable to LESSEE's
occupancy of the Premises, determined by following the
methodology used immediately prior to the date hereof that was
used to determine that portion of the operating expense that was
attributable to LESSOR's CommercialWare division.
7. UTILITIES.
The LESSOR agrees to provide all other utility service and to furnish
reasonably hot and cold water and reasonable heat and air conditioning to the
Premises, the hallways, stairways, elevators, and lavatories during normal
business hours on regular business days of the heating and air conditioning
seasons of each year, to furnish elevator service and to light passageway and
stairway during business hours, all subject to interruption due to any accident,
to the making of repairs, alterations, or improvements, to labor difficulties,
to trouble in obtaining fuel, electricity, service, or supplies from the sources
from which they are usually obtained for said building, or to any cause beyond
the LESSOR's control.
Notwithstanding anything to the contrary contained herein, in the
event there is any failure or defect in service furnished to the Premises by
LESSOR's direct control (as opposed to a public service utility company) or
LESSOR determine to make any repairs, additions, alterations, replacements,
decorations or improvements in the Building or the Premises, and LESSEE shall be
unable for a least twenty-four (24) hours to operate its business in the
Premises in substantially the same manner as such business was operated prior to
such interruption, the Base Rent shall be reduced on a per diem basis in the
proportion in which the area of the unusable portion of the Premises (i.e., the
portion of the Premises in which LESSEE is unable to operate its business in
substantially the same manner as such business was operated prior to such
interruption) bears to the total area of the Premises, for each day subsequent
to the aforesaid twenty-four (24) hour period that such portion of the Premises
remains unusable. If any such interruption continues for a period in excess of
thirty (30) days, in addition to any other rights LESSEE may have, LESSEE shall
have the right to terminate this Sublease upon notice to LESSOR.
LESSOR shall have no obligation to provide utilities or equipment
other than the utilities and equipment within the Premises as of the
Commencement Date of this Sublease. In the event LESSEE requires additional
utilities or equipment, the installation and maintenance thereof shall be
LESSEE's sole obligation, provided that such installation shall be subject to
the written consent of the LESSOR.
8. USE OF SUBLEASED PREMISES.
The LESSEE shall use the Premises only for the purpose of executive
and general offices in connection with the development and marketing of software
and other related matters, but for no other purpose.
9. COMPLIANCE WITH LAWS.
A. The LESSEE acknowledges that no trade or occupation shall be
conducted in the Premises or use made thereof which will be unlawful, improper,
unreasonably noisy or offensive, or contrary to any law or any municipal by-law
or ordinance in force in the city or town in which the Premises are situated, or
which tend to degrade the economic status of the building.
B. (i) LESSEE shall not introduce on or transfer to the Premises, any
hazardous materials (as herein defined); nor dump, flush, or otherwise dispose
of any hazardous materials into the drainage, sewage, or waste disposal systems
serving the Premises or Building in violation of applicable law; nor generate,
store, use, release, spill, or dispose of any hazardous materials in or on the
Premises or the Building, or transfer any hazardous materials from the Premises
to any other location in violation of applicable law; and not commit or suffer
to be committed in or on the Premises or Building any act which would require
any reporting or filing of any notice with any governmental agency pursuant to
any statues, laws, codes, ordinances, rules or regulations, present or future,
applicable to the Building or to hazardous material (hereinafter collectively
called "Environmental Laws").
(ii) LESSEE agrees that if it or anyone claiming under it shall
generate, store, release, spill, dispose of, or transfer to the Premises or
Building any hazardous materials, it shall forthwith remove the same, at its
sole cost and expense in the matter provided by all applicable Environmental
Laws, regardless of when such hazardous materials shall be discovered.
Furthermore, LESSEE shall pay any fines, penalties, or other assessments imposed
by any governmental agency with respect to any such hazardous materials and
shall forthwith repair and restore any portion of the Premises or Building which
it shall disturb in so removing any such hazardous materials to the condition
which existed prior to LESSEE's disturbance thereof.
(iii)LESSEE agrees to deliver to LESSOR and any notices, orders, or
similar documents received by LESSEE from any governmental agency or official
concerning any violation of any Environmental Law or with respect to any
hazardous materials affecting the Premises or Building and LESSOR shall deliver
to LESSEE any notices it receives from any governmental agency or officer.
(iv) For purposes of this Sublease, the term "hazardous materials"
shall mean and include any oils, petroleum products, asbestos, and any other
toxic or hazardous wastes, materials, and such substances which are defined,
determined, or identified as such in any Environmental Laws, or in any judicial
or administrative interpretations of "Environmental Laws."
C. Notwithstanding anything to the contrary contained in this
Sublease, (i) LESSOR shall be responsible, at LESSOR's sole cost and expense, to
comply with any legal requirements relating to the physical condition of all
parts of the Premises if there is a change in the applicable legal requirements
and the changed legal requirements apply to all real estate generally and not
just to the specific manner of use of the Premises by LESSEE, and (ii) LESSOR
shall be responsible, at LESSOR's sole cost and expense, for compliance with any
governmental, encapsulation, or other treatment of any asbestos containing
materials or other hazardous materials located within or about the Premises, and
for the removal of any asbestos or asbestos containing materials or other
hazardous materials within or about the Premises, unless the presence of any
such asbestos or other hazardous materials was caused by LESSEE.
10. FIRE INSURANCE.
The LESSEE shall not permit any use of the Premises which will make
voidable any insurance on the property of which the Premises are a part, or on
the contents of said property or which shall be contrary to any law or
regulation from time to time established by the New England Fire Insurance
Rating Association, or any similar body succeeding to its powers. The LESSEE
shall on demand reimburse the LESSOR, and all other tenants, all extra insurance
premiums caused by the LESSEE's specific use of the Premises. Notwithstanding
anything to the contrary contained in this Sublease, LESSOR represents and
warrants to LESSEE that LESSEE's reasonable use of the Premises for the purposes
specified herein will not in and of itself violate LESSOR's insurance policies
which shall be in effect immediately prior to the beginning of the Term of this
Lease nor increase the premiums therefor.
11. MAINTENANCE.
A. LESSEE'S OBLIGATIONS. The LESSEE agrees to maintain the
nonstructural portions of the Premises in good condition, damage by fire and
other casualty only excepted, and whenever necessary, to replace plate glass and
other glass therein, acknowledging that the Premises are now in good order and
the glass whole. The LESSEE shall not permit the Premises to be overloaded,
damaged, stripped, or defaced, nor suffer any waste. LESSEE shall obtain written
consent of LESSOR before erecting any sign on the Premises, which consent shall
not be unreasonably withheld or delayed. LESSEE shall be responsible for the
maintenance, repair, and if, as a result of the LESSEE's negligence, it is
required, replacement of all electrical, plumbing, heating, air conditioning,
ventilation, and other mechanical installations located entirely on, or serving
only, the Premises.
B. LESSOR'S OBLIGATIONS. The LESSOR agrees to maintain the structure
of the building of which the Premises are a part in the same condition as it is
on the Commencement Date or as it may be put in during the term of this
Sublease, reasonable wear and tear, damage by fire and other casualty only
excepted, unless such maintenance is required solely and directly because of the
conduct of LESSEE, its agents, employees or contractors. LESSOR shall be
responsible only for maintaining the building's mechanical and electrical
systems which serve more than one leased space. Except for repairs to the
Premises that LESSEE must make under Section 11A hereof, LESSOR shall pay for
and make all other repairs and replacements to the Premises and the Building
that are required in order to allow LESSEE safe use of the Premises for the
stated conduct of its business, or that in the opinion of a reasonable person
should be made to assure LESSEE's continued safe use of the Premises for the
stated conduct of its business. LESSOR shall not be required to maintain the
interior surface of exterior walls, windows, doors or plate glass (except when
maintenance of the same is caused by LESSOR's negligence or failure to perform
its obligations under this Section). LESSOR shall make such repairs under this
Section promptly after LESSOR learns of the need for such repairs but in any
event within thirty (30) days after LESSEE notifies LESSOR of the need for such
repairs (except when the repairs require more than thirty (30) days for the
performance and LESSOR commences the repairs on or within thirty (30) days and
diligently pursues the repair to completion). If LESSOR fails to make such
repairs within thirty (30) days after LESSEE's notice and if LESSOR is not
diligently pursuing such repairs, and if the failure to make such repairs
materially adversely affects LESSEE's permitted use of the Premises, LESSEE may,
at its option, perform such repairs and bill the LESSOR for the costs of such
repairs, and if LESSOR fails to pay such bill within thirty (30) days, LESSEE
may deduct the cost thereof from the installments of Base Rent next falling due.
Notwithstanding the foregoing, in the event of an emergency, LESSEE may give
LESSOR such shorter notice as is practicable under the circumstances, and if
LESSOR fails to make such repairs as soon as reasonably practicable, LESSEE may,
at its option, perform such repairs repairs and bill the LESSOR for the costs of
such repairs, and if LESSOR fails to pay such bill within thirty (30) days,
LESSEE may deduct the cost thereof from the installments of Base Rent next
falling due.
12. ALTERATIONS - ADDITIONS.
The LESSEE shall not make structural alterations or additions to the
Premises, but may make non-structural alterations provided the LESSOR consents
thereto in writing, which consent shall not be unreasonably withheld or delayed.
All such allowed alterations shall be at LESSEE's expense and shall be in
quality at least equal to the present construction. LESSEE shall not permit any
mechanic's liens, or similar liens, to remain upon the leased Premises for labor
and material furnished to LESSEE or claimed to have been furnished to LESSEE in
connection with work of any character performed or claimed to have been
performed at the direction of LESSEE and shall cause any such lien to be
released of record forthwith without cost to LESSOR. Any alterations or
improvements made by the LESSEE shall become the property of the LESSOR at the
termination of occupancy as provided herein.
13. ASSIGNMENT - SUBLEASING.
LESSEE shall not assign, sublet, underlet, mortgage, pledge or
encumber (collectively referred to as "Transfer") this Sublease without LESSOR's
prior written consent which consent shall not be unreasonably withheld or
delayed. LESSOR's refusal to consent to a Transfer for any use or purpose other
than specifically stated in paragraph 8 herein shall not be deemed to be
unreasonable withholding of consent.
In the event the LESSEE desires to Transfer this Sublease to a
proposed new LESSEE to whom LESSOR is required to give its reasonable consent
pursuant to the foregoing paragraph, LESSOR shall have the option of either (1)
allowing LESSEE to Transfer this Sublease, in which case LESSEE shall remain
primarily liable upon all the terms, conditions, and covenants hereof, will bind
any Transferee to the terms and provisions of this Sublease and will pay to
LESSOR the amount by which the sum of rent, additional rent due to taxes, and
all other money or consideration it received from a Transferee exceeds the sum
of all monetary obligations which LESSEE owes to LESSOR for the period of such
Transfer; or (2) terminating this Sublease and relieving LESSEE of all its
future obligations hereunder. In the event that LESSOR decides to terminate this
Sublease, it shall be free to enter into a new Sublease with the proposed new
Tenant or anyone else on whatever terms and conditions it chooses.
Consent by LESSOR, whether express or implied, to any Transfer shall
not constitute a waiver of LESSOR's right to prohibit any subsequent Transfer;
nor shall such consent be deemed a waiver of LESSOR's right to terminate this
Sublease upon any subsequent Transfer.
Notwithstanding anything to the contrary contained in this Sublease
but subject to the final sentence of this paragraph, LESSEE may, upon thirty
(30) days written notice to LESSOR but without LESSOR's prior written consent,
and without LESSOR having any right to terminate this Sublease or share in any
consideration or profit therefor, assign or transfer its entire interest in this
Sublease and the leasehold estate hereby created, or sublease the entire demised
premises, to a successor corporation of LESSEE, which for the purposes of this
Sublease shall mean either (a) any corporation or other business entity which
controls, is controlled by, or under common control with, LESSEE (a "Related
Corporation"), or (b) a corporation or other business entity into which or with
which LESSEE, its corporate successors or assigns, is merged or consolidated, in
accordance with applicable statutory provisions of the merger or consolidation
of corporations, provided that by operation of law or by effective provisions
contained in the instruments of merger or consolidation the liabilities of the
corporations or other business entities participating in such merger or
consolidation are assumed by the corporation or other business entity surviving
such merger or consolidation, or (c) a corporation or other business entity
acquiring substantially all of LESSEE's assets located in the Premises, or (d)
any successor to a successor corporation becoming such by any of the methods
described in subdivisions (a), (b) and (c) above; provided, however, that LESSEE
shall have no such right to assign or transfer to a Successor Corporation unless
LESSEE shall not be in default in the performance of any of its obligations
under this Sublease beyond the applicable notice and cure period and with
respect to subdivision (c) above, as of the date of such transfer, the purchaser
has the reasonable financial ability to perform its obligations with respect to
this Sublease and/or the Premises. For the purposes hereof "control" shall be
deemed to mean ownership of not less than fifty percent (50%) of all of the
voting stock of such corporation, or not less than fifty percent (50%) of all of
the legal and equitable interest in any other business entity, or the possession
of the power, directly or indirectly, to direct or cause the direction of
management and policy of a corporation or other business entity, whether through
the ownership of voting securities, common directors or officers, the
contractual right to manage the business affairs of such business entity, or
otherwise. Notwithstanding anything to the contrary contained in this Sublease
(x) any sale or transfer of Lessee's capital stock through any public exchange,
or redemption or issuance of additional stock of any class, shall not be deemed
an assignment, subletting or any other transfer of this Sublease or the Premises
and (y) any successor corporation may use the demised premises only for the
permitted use described in Section 8 above, provided however that with LESSOR's
prior written consent, which shall not be unreasonably withheld or delayed, such
successor corporation may use the demised premises for any other lawful retail
use which is not in conflict with the principle use of any existing tenant of
the Building at the time of such assignment. Notwithstanding the foregoing, (i)
LESSEE may not Transfer this Sublease to any entity that in LESSOR's reasonable
opinion is a direct competitor of LESSOR without LESSOR's prior written consent,
which may be withheld or delayed in LESSOR's sole discretion, and (ii) in the
event of any Transfer by LESSEE described hereunder, LESSEE shall remain jointly
and severally liable to LESSOR for any and all obligations arising out of the
transferee's tenancy.
14. SUBORDINATION.
Intentionally deleted.
15. LESSOR'S ACCESS.
The LESSOR or agents of the LESSOR may, at reasonable times, enter to
view the Premises and remove placards and signs not approved and affixed as
herein provided, and make repairs and alterations as LESSOR should elect to do
and may show the premises to others provided, however, that showings for
reletting will be confined to a time within the three (3) months before
expiration of the term. At any time within three (3) months before expiration of
the terms, LESSOR may affix to any suitable part of the Premises a notice for
letting or selling the Premises or property of which the Premises are a part and
keep the same so affixed without hindrance or molestation.
16. INDEMNIFICATION AND LIABILITY.
To the extent not covered by insurance, LESSEE covenants with LESSOR
to pay, protect, indemnify, and save harmless, to the extent permitted by law,
LESSOR and any partner, officer, director, agent, employee, or beneficiary of
LESSOR, holders of mortgages on the Building and any other party having an
interest in the Building from and against any and all liabilities, costs,
expenses, causes of action, injuries, accidents, injunctions, or penalties of
any nature (including court costs and reasonable attorney's fees), resulting
from a claim by or on behalf of any person, party, or governmental authority
whatsoever on account of injury, death, damage, or loss to person or property in
or upon the Premises, or any area adjacent to or in proximity to the Premises,
arising out of any act, negligence, or omission of LESSEE, or arising as a
result of any use or occupancy of, or travel over or upon the Premises, or any
area adjacent to or in proximity to the Premises, by LESSEE or by any person
claiming by, through, or under LESSEE (including, without limitation, all
patrons, guests, employees, agents, contractors, and customers of LESSEE), or
arising out of any delivery to or services supplied to the Premises, or on
account of or based upon anything whatsoever done on the Premises, or any area
adjacent to or in proximity to the Premises, by LESSEE or by any person claiming
by, through, or under LESSEE, except if the same was caused by the negligence or
willful misconduct of LESSOR, its agents, or employees; and, if required by law,
to keep all of LESSEE's employees working in or about the Premises covered by
workers, compensation insurance. In respect to all of the foregoing, LESSEE
shall indemnify and hold harmless LESSOR from and against all costs, expenses
(including reasonable attorneys' fees) and liabilities incurred in or in
connection with any such claim, action, or proceeding brought thereon.
The removal of snow and ice from the sidewalks bordering upon the
Building shall be LESSOR's responsibility.
17. LESSEE'S LIABILITY INSURANCE.
The LESSEE shall maintain, with respect to the Premises and the
property of which the Premises are a part, comprehensive public liability
insurance in the amount of One Million Dollars ($1,000,000), combined
single-limit bodily injury and property damage in responsible companies
qualified to do business in Massachusetts and in good standing therein, insuring
the LESSOR as well as LESSEE against injury to persons or damage to property as
provided. The LESSEE shall deposit with the LESSOR certificates for such
insurance at, or prior to, commencement of the term and thereafter within thirty
(30) days prior to the expiration of any such policies. All such insurance
certificates shall provide that such policies shall not be canceled without at
least ten (10) days prior written notice to each assured named therein.
18. FIRE, CASUALTY - EMINENT DOMAIN.
Should a substantial portion of the Premises, or of the property of
which they are a part, be substantially damaged by fire or other casualty, or be
taken by eminent domain, the LESSOR may elect to terminate this Sublease. When
such fire, casualty, or taking renders the Premises substantially unsuitable for
their intended use, a just and proportionate abatement of rent shall be made,
and the LESSEE may elect to terminate this Sublease if:
(a) The LESSOR fails to give written notice within thirty (30) days
of its intention to restore Premises, or
(b) The LESSOR fails to restore the Premises to a condition
substantially suitable for their intended use within seventy-five
(75) days of said fire, casualty, or taking, or
(c) If said fire, casualty, or taking happens within nine (9) months
of the expiration date.
The LESSOR reserves, and the LESSEE grants to the LESSOR, all rights
which the LESSEE may have for damages or injury to the Premises for any taking
by eminent domain, except for damage to the LESSEE's fixtures, property, or
equipment.
The LESSOR shall have the right voluntarily to elect to demolish the
Building of which the Premises are a part, or any part thereof, provided it
gives LESSEE at least one (1) year prior termination notice, after which this
Sublease shall terminate and be of no further recourse to either party hereto.
19. DEFAULT AND BANKRUPTCY.
In the event that:
(a) The LESSEE shall default beyond any applicable notice and cure
period in the payment of any installment of rent or other sum herein specified
and such default shall continue for seven (7) days after written notice thereof;
or
(b) The LESSEE shall default beyond any applicable notice and cure
period in the observance or performance of any other of the LESSEE's covenants,
Subleases, or obligations hereunder and such default shall not be corrected
within thirty (30) days after written notice thereof or, if such default shall
reasonably require longer than thirty (30) days to cure, shall not within said
period commence and diligently proceed to cure such default; or
(c) The LESSEE shall be declared bankrupt or insolvent according to
law, or, if any assignment shall be made of LESSEE's property for the benefit of
creditors, then the LESSOR shall have the right thereafter, while such default
beyond any applicable notice and cure period continues to declare the term of
this Sublease ended. The LESSEE shall indemnify the LESSOR against all loss of
rent and other Payments which the LESSOR may incur by reason of such termination
during the residue of the term. If the LESSEE shall default, beyond any
applicable notice and cure period, in observance or performance of any
conditions or covenants on LESSEE's part to be observed or performed under or by
virtue of any of the provisions in any article of this Sublease, the LESSOR,
without being under any obligation to do so and without thereby waiving such
default, may remedy such default for the account and at the expense of the
LESSEE. If the LESSOR makes any expenditures or incurs any obligations for the
payment of money in connection therewith, including but not limited to,
reasonable attorney's fees in instituting, prosecuting, or defending any action
or proceeding, such sums paid or obligation incurred with interest at the rate
of 12% per annum and costs, shall be paid to the LESSOR by the LESSEE as
additional rent.
20. NOTICE.
Any notice from the LESSOR to the LESSEE relating to the Premises or
to the occupancy thereof, shall be deemed duly served if mailed to the LESSEE's
principal place of business at 10 Speen Street, Framingham, Massachusetts 01701,
Attention: Donald Askin, registered or certified mail, return receipt requested,
postage prepaid, addressed to the LESSEE. Any notice from the LESSEE to the
LESSOR relating to the Premises or to the occupancy thereof, shall be deemed
duly served, if mailed to the LESSOR by registered or certified mail, return
receipt requested, postage prepaid, addressed to the LESSOR at such address as
the LESSOR may from time to time advise in writing. All rent notices shall be
paid and sent to the LESSOR at: ASA International Ltd., 10 Speen Street,
Framingham, MA 01701, Attention: Accounting Department.
21. SURRENDER.
The LESSEE shall at the expiration or other termination of this
Sublease remove all LESSEE's goods and effects from the Premises, (including,
without hereby limiting the generality of the foregoing, all signs and lettering
affixed or painted by the LESSEE, either inside or outside the Premises). LESSEE
shall deliver to the LESSOR the Premises and all keys, locks thereto, and other
fixtures connected therewith and all alterations and additions made to or upon
the Premises, in good condition, damage by fire or other casualty only expected.
If the Sublease term terminates by acceleration or expiration of time and LESSEE
does not surrender the Premises and remove his effects from the Premises, and
LESSOR obtains an order of eviction from a court, then LESSOR may enter the
Premises for the purpose of removing LESSEE's goods and effects, without
prejudice to any other remedies, and LESSOR may remove and store such goods and
effects at LESSEE's expense, LESSEE hereby granting LESSOR an irrevocable power
of attorney to accomplish the same.
22. BROKERAGE.
Intentionally Deleted.
23. RELEASES AND WAIVER OF SUBROGATION.
LESSOR and LESSEE hereby release each other from any and all liability
or responsibility to the other or anyone claiming through or under them by way
of subrogation or otherwise for any loss or damage to property caused by fire or
any of the extended coverage or supplementary contract casualties, even if such
fire or other casualty shall have been caused by the fault or negligence of the
other party, or anyone for whom such party may be responsible, provided,
however, that this release shall be applicable and in force and effect only to
the extent permitted by law and only with respect to loss or damage occurring
during such time as the releasor to recover thereunder. LESSOR and LESSEE each
agree that it will request its insurance carriers to include in its policies
whether or not such policies are required hereunder, such a clause or
endorsement. In any of LESSEE'S insurance policies with respect to the Premises
which do not contain a waiver of subrogation rights, LESSEE shall have LESSOR
designated as one of the insured.
24. HOLDOVER.
If the LESSEE remains on the Premises beyond the expiration Date, such
holding over shall not be deemed to create any Tenancy at will, but the LESSEE
shall be a Tenant at sufferance only, at a daily rate equal to two (2) times the
rent and other charges for the last month under this Sublease. However, all
other conditions of this Sublease to be performed by LESSEE shall continue in
force.
25. LIABILITY.
LESSEE hereby agrees that any judgment, decree, or award obtaining
against the LESSOR which is related to this Sublease, the Premises, or the
LESSEE's use or occupancy of the Premises or the building, whether at law or in
equity, shall be satisfied out of the LESSOR's equity in the land and building,
and further agrees to look only to such assets and to no other assets of the
LESSOR for satisfaction. LESSOR's liability for maintenance and repair shall
always be limited to the cost of making such repair or accomplishing such
maintenance or repair. In no event shall LESSOR be liable for consequential or
any indirect damages.
26. NON-WAIVER PROVISION.
No acceptance by LESSOR of a lesser sum than the rent, additional
rent, or any other charge then due shall be deemed to be other than on account
of the earliest installment of such rent or charge due, nor shall any
endorsement or statement on any check or any charge be deemed an accord and
satisfaction, and LESSOR may accept such check or payment without prejudice to
LESSOR's right to recover the balance of such installment or pursue any other
remedy provided in this Sublease.
No provisions of this Sublease shall be deemed to have been waived by
LESSOR or LESSEE unless such waiver is in writing signed by LESSOR or LESSEE. No
assent, express or implied, by either party to any breach of any Sublease or
condition herein contained on the part of the other to be performed or observed,
and no 'waiver, express or implied, of any such agreement or condition, shall be
deemed to be a waiver or an assent to any succeeding breach of the same or any
other agreement or condition. No act or thing done by LESSOR, its agents, or
employees, during the Term shall be deemed an acceptance of a surrender of the
Premises. The delivery of keys to any of LESSOR's agents or employees shall not
operate as a termination of this Sublease or a surrender of the Premises.
27. NO OFFER TO SUBLEASE.
Intentionally Deleted.
28. PARTIAL INVALIDITY.
The invalidity of one or more phrases, sentences, clauses, or articles
shall not affect the remaining portions of this Sublease, and if any part of
this Sublease should be declared invalid by the final order, decree, or judgment
of a court of competent jurisdiction, this Sublease shall be construed as if
such invalid phrases, sentences, clauses, or articles had not been inserted.
29. NO RECORDING.
This Sublease shall not be recorded.
30. PARKING.
LESSEE shall have, in common with other Tenants, access to the parking
areas at 10 Speen Street.
31. ADDENDA.
Intentionally Deleted.
32. RULES.
From time to time, the LESSOR has and will adopt reasonable rules for
the safety, benefit, and convenience of all tenants and other persons in the
Building (attached hereto as Exhibit "A", which is incorporated herein by
reference). LESSEE shall at all times comply with, and shall cause its
employees, agents, licensees, and invitees to comply with the Rules from time to
time in effect.
33. LESSEE ACCESS TO PREMISES.
LESSEE shall have access to the Building and the Premises twenty-four
(24) hours a day, seven (7) days per week.
34. ENTIRE AGREEMENT.
This Sublease contains the entire agreement between the parties hereto
with respect to the subject matter of this Sublease. LESSEE acknowledges and
agrees that it has not relied upon any statement, representation, agreement, or
warranty except such as are set out in this Sublease.
35. AMENDMENT OR MODIFICATION.
Unless otherwise specifically provided in this Sublease, no amendment,
modification, or supplement to this Sublease shall be valid or binding unless
set out in writing and executed by the parties hereto in the same manner as the
execution of this Sublease.
36. WAIVER OF JURY TRIAL.
Except as otherwise provided under this Sublease, any controversy or
claim arising out of, or relating to, this Sublease or the existence, validity,
breach, or termination thereof will be finally settled by compulsory arbitration
in accordance with the commercial arbitration rules of the American Arbitration
Association, Boston, Massachusetts, and nowhere else. The Arbitration award
shall be the exclusive remedies of the parties for all claims, counter claims,
or issues presented or plead to the arbitrators and each party hereby waives,
any right to jury trial in any forum. LESSOR and LESSEE each shall bear their
own expenses, costs and fees, including legal fees unless otherwise ordered.
37. ESTOPPEL CERTIFICATES.
LESSOR and LESSEE agree that at any time and from time to time, upon
not less than ten (10) days' prior written request by the other, each will
execute, acknowledge, and deliver to the requesting party a statement in writing
certifying that this Sublease is unmodified and in full force and effect (or, if
there have been modifications, that the same are in full force and effect as
modified and starting the modifications), that to the knowledge of such party no
uncured defaults beyond any applicable notice and cure periods exist, and the
dates to which the rent and other charges due hereunder have been paid in
advance, if any, it being intended that any such statement delivered pursuant to
this section 37 may be relied upon by any mortgagee or prospective mortgagee or
purchaser of the Property.
38. CLEANING.
LESSOR will clean the premises daily after normal business hours. Said
cleaning to be comparable to that of comparable office buildings in the area.
39. SUBORDINATION OF SUBLEASE AND NON-DISTURBANCE OF LESSEE
Notwithstanding anything contained herein, this Sublease is and shall
be subject and subordinate at all times to all the terms, covenants and
conditions of the Master Lease; provided, however, that so long as the LESSEE is
not in material default of any of the terms, covenants and conditions of this
Sublease beyond any applicable notice and cure period, 10 Speen Street, LLC or
its successor in interest, including, without limitation, its successor in
interest through foreclosure proceedings or a deed in lieu of foreclosure,
hereby agrees not to disturb the LESSEE in its possession of the Premises.
40. MISCELLANEOUS
Whenever the right of approval or consent is given to a party pursuant
to this Sublease, that party shall not unreasonably withhold, condition or delay
its consent unless this Sublease expressly provides otherwise.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE>
41. CONSENT
10 Speen Street, LLC hereby consents to this Sublease upon and subject
to the terms and conditions contained herein.
IN WITNESS WHEREOF, the said parties hereto set their hands and seals
this 3rd day of March, 1999.
LESSOR: ASA INTERNATIONAL LTD. LESSEE: COMMERCIALWARE, INC.
/s/ Terrence C. McCarthy /s/ Donald Askin, COO
--------------------------- ---------------------------------
By: Terrence C. McCarthy By:
Vice President & Treasurer
Address: Address:
10 Speen Street 10 Speen Street
Framingham, MA 01701 Framingham, MA 01701
THE UNDERSIGNED ACCEPTS AND AGREES
TO BE BOUND BY THE PROVISIONS OF
PARAGRAPH 41 HEREOF:
10 SPEEN STREET, LLC
By: ASA Properties, Inc., its managing member
By: /s/ Terrence C. McCarthy
-------------------------------
Terrence C. McCarthy,
Vice President and Treasurer
<PAGE>
SUBLEASE AGREEMENT BETWEEN
ASA INTERNATIONAL LTD., LESSOR
AND
COMMERCIALWARE, INC., LESSEE
DATED AS OF MARCH 3, 1999
EXHIBIT A: RULES AND REGULATIONS
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors, or halls shall not be obstructed or encumbered
by any LESSEE or used for any purpose other than for ingress to and egress from
the Premises and for delivery of merchandise and equipment in a prompt and
efficient manner using elevators and passageways designated for such delivery by
LESSOR. There shall not be used in any space, or in the public hall of the
building, either by a LESSEE or by jobbers or others in the delivery or receipt
of merchandise, any hand trucks, except those equipped with rubber tires and
sideguards.
2. The water and wash closets and plumbing fixtures shall not be used
for any purpose other than those for which they were designated or constructed
and no sweepings, rubbish, rags, acids, or other substances shall be deposited
therein, and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the LESSEE who, or whose clerks,
agents, employees, or visitors, shall have caused it.
3. No LESSEE shall sweep or throw or permit to be swept or thrown from
the Premises any dirt or other substances into any of the corridors or halls,
elevators, or out of the doors or windows or stairways of the Building and
LESSEE shall not use, keep, or permit to be used or kept any foul or noxious gas
or substance in the Premises or permit or suffer the Premises to be occupied or
used in a manner offensive or objectionable to LESSOR or other occupants of the
Building by reason of unreasonable noise, odors, and/or vibrations, or
unreasonably interfere in any way with other LESSEES or those having business
therein, nor shall any animals or birds be kept in or about the Building.
Smoking or carrying lighted cigars or cigarettes in the elevators of the
Building is prohibited.
4. No awnings or other projections shall be attached to the outside
walls of the Building without the prior written consent of LESSOR.
5. No sign, advertisement, notice, or other lettering shall be
exhibited, inscribed, painted, or affixed by any LESSEE on any part of the
outside of the Premises or the Building or on the inside of the Premises if the
same is visible from the outside of the Premises without the prior written
consent of LESSOR which consent shall not be unreasonably withheld or delayed,
except that the name of LESSEE may appear on the entrance door of the Premises.
In the event of the violation of the foregoing by any LESSEE, LESSOR
may remove same without any liability, and may charge the reasonable expense
incurred by such removal to LESSEE or LESSEES violating this rule. Interior
signs on doors and directory tablet shall be inscribed, painted, or affixed for
each LESSEE by LESSOR at the expense of such LESSEE, and shall be of a size,
color, and style reasonably acceptable to LESSOR.
6. Except with prior written consent of LESSOR, which consent shall
not be unreasonably withheld or delayed and as LESSOR may direct, no LESSEE
shall mark, paint, drill into, or in any way deface any part of the Premises or
the Building of which they form a part or cut or string wires, lay linoleum, or
other similar floor covering, so that the same shall come in direct contact with
the floor of the Premises, and, if linoleum or other similar floor covering is
desired to be used, an interlining of builder's deadening felt shall be first
affixed to the floor, by a paste or other material, soluble in water, the use of
cement or other similar adhesive material being expressly prohibited.
7. Except with the prior written consent of LESSOR, which consent
shall not be unreasonably withheld or delayed, no additional locks or bolts of
any kind shall be placed upon an-.- of the doors or windows by any LESSEE, nor
shall any changes be in existing locks or mechanism thereof. If requested,
LESSEE shall provide LESSOR with a copy of a key for all new locks or bolts.
Each LESSEE shall, upon the termination of his Tenancy, restore to LESSOR all
keys either furnished to or otherwise procured by, such LESSEE. In the event of
the loss of any keys furnished to LESSEE, LESSEE shall pay to LESSOR the cost
thereof.
8. Freight, furniture, business equipment, merchandise and bulky
matter of, any description shall be delivered to and removed from the Premises
only on the freight elevators and through the service entrances and corridors or
in an alternative way approved by LESSOR and only during hours and in a manner
approved by LESSOR, which approval shall not be unreasonably withheld or
delayed.
9. Canvassing, soliciting, and peddling in the Building is prohibited
and each LESSEE shall cooperate to prevent the same.
10. LESSOR shall have the right to prohibit any advertising by any
LESSEE which, in LESSOR's opinion, tends impair the reputation of the Building
or its desirability as building for offices, and upon written notice from
LESSOR, LESSEE shall refrain from or discontinue such advertising.
11. Except for those items necessary for the cleaning and maintenance
of LESSEE's business, including office supplies, which shall be properly stored
to minimize the risk of fire and explosion, LESSEE shall not bring or permit to
be brought or kept in or on the Premises, any inflammable, combustible, or
explosive fluid, material, chemical or substance, or cause or permit any
offensive odors of cooking or other process, at any unusual or other
objectionable odors to permeate in or emanate from the Premises.
Exhibit 4.7
SUBORDINATED PROMISSORY NOTE
$500,000
MARCH 3, 1999
FOR VALUE RECEIVED, the undersigned, CommercialWare, Inc., a Delaware
corporation ("BORROWER"), promises to pay to ASA International, Ltd. ("PAYEE"),
or order, the principal amount of Five Hundred Thousand Dollars ($500,000), plus
interest thereon at a fixed rate equal to 5% per annum. Interest shall in all
cases be calculated on the basis of actual days elapsed and a 365 day year.
This Note is one of a series of notes containing identical terms issued of
even date herewith (collectively, the "JUNIOR NOTES") and referenced in a
certain Shareholders Agreement of even date herewith by and among the Borrower
and the holders of such notes (the "SHAREHOLDERS AGREEMENT").
All outstanding principal and accrued interest hereunder shall be due and
payable on the fifth anniversary hereof (the "MATURITY DATE").
Any payments, including any prepayments, received by Payee on account of
this Note prior to demand or acceleration shall be applied first, to any costs,
expenses or charges then owed Payee by Borrower, second, to accrued and unpaid
interest, and third, to the unpaid principal balance, in inverse order of their
maturities. Any payments so received after demand or acceleration shall be
applied in such manner as Payee may, in its sole discretion, determine.
Payee, at its option, may declare the entire unpaid balance of this Note
and all accrued and unpaid interest thereon to be immediately due and payable
without demand, notice or protest (which are hereby waived) upon the occurrence
of any one or more of the following events (each, an "Event of Default"): (a)
the failure to pay principal of this Note within ten (10) days of the due date;
(b) the failure to pay interest on this Note within ten (10) days of the due
date; (c) the acceleration of any material portion of indebtedness of Borrower
from any lender other than Payee; (d) a proceeding being filed or commenced
against Borrower for dissolution or liquidation, or Borrower voluntarily or
involuntarily terminating or dissolving or being terminated or dissolved; (e)
insolvency of, the appointment of a custodian, trustee, liquidator or receiver
for any of the property of, or an assignment for the benefit of creditors by, or
the filing of a petition under bankruptcy, insolvency or debtor's relief law by
or against, Borrower (and in the case of the filing of an involuntary petition
against Borrower, if the proceeding commenced by such filing is not dismissed
within ninety (90) days of such filing); (f) the entry of any judgment against
Borrower that makes Borrower's ability to satisfy its obligations hereunder
reasonably doubtful, which lien is not discharged or judgment is not satisfied
or appealed from (with execution or similar process stayed) within thirty (30)
days of its imposition or entry; (g) the sale of all or substantially all of
Borrower's business or assets, or the sale of capital stock by Borrower or the
merger of Borrower with another corporation that results in the shareholders of
Borrower on the date hereof owning less than fifty percent (50%) of the
outstanding capital stock of Borrower or the surviving company in a merger; or
(h) the payment of any dividends by Borrower on its capital stock.
No delay or omission by Payee in exercising or enforcing any of Payee's
powers, rights, privileges or remedies hereunder shall operate as a waiver
thereof on that occasion or on any other occasion. No waiver of any default
hereunder shall operate as a waiver of any other default hereunder, nor as a
continuing waiver.
Borrower will pay on demand all reasonable costs and expenses of
collection, including reasonable attorneys' fees incurred or paid by Payee in
enforcing this Note on default.
Borrower hereby waives presentment, demand, notice and protest, and also
waives any delay on the part of Payee.
This Note shall be binding upon Borrower and each endorser and guarantor
hereof and upon their respective successors and assigns, and shall inure to the
benefit of Payee and its successors, endorsees and assigns. This Note may not be
amended except by an instrument in writing signed by Borrower and Payee.
The payment and performance covenants and obligations of the Borrower under
the Junior Notes shall be (i) subordinate in all respects, including, without
limitation, payment, lien and bankruptcy, to the covenants and obligations of
the Company under (A) the Senior Note and the License Fee, as such terms are
defined in the Shareholder Agreement, and (B) any indebtedness incurred by the
Borrower to any bank or financial institution or to finance receivables
(collectively, "SENIOR INDEBTEDNESS"); and (ii) pari passu among the Junior
Notes. Borrower and Payee agree that no payments (including payments of interest
and/or principal), prepayments or other distributions will be paid or payable by
the Borrower under the terms of the Junior Notes until such time as the
obligations of the Borrower under the Senior Note and the License Fee have paid
and satisfied in full, at which time any payments to be made in respect of the
Junior Notes shall be made pari passu. Payee agrees to execute and deliver any
document requested by the holder of any Senior Indebtedness to effectuate the
terms of this subordination provision.
This Note shall be governed by and construed in accordance with the laws of
the State of New York.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed as of the
date first written above.
COMMERCIALWARE, INC.
By: /s/ Donald Askin
------------------------------
Title: Chief Operating Officer
