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Exhibit 2.1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
SAFLINK CORPORATION
AND
JOTTER TECHNOLOGIES INC.
DATED DECEMBER 15, 2000
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THIS ASSET PURCHASE AGREEMENT ("Agreement"), dated this 15th day of
December, 2000 (the "Closing Date"), is made by and between SAFLINK Corporation,
a Delaware corporation ("Purchaser") and Jotter Technologies Inc., a Delaware
Corporation ("Jotter"). Jotter, including any and all subsidiaries,
predecessors and affiliated entities (including Mindquake Interactive, Inc., an
Alberta corporation) under its control is referred to herein as "Seller", and
Seller and Purchaser are collectively referred to as the "Parties," and each
separately, a "Party."
WITNESSETH:
WHEREAS, Purchaser develops, markets and sells biometric enabled software
products; and
WHEREAS, Seller develops and markets toolbar utilities; and
WHEREAS, Purchaser wishes to acquire, and Seller wishes to sell, certain
assets of Seller on the terms and conditions specified herein; and
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereto intending to be legally bound hereby agree as
follows:
ARTICLE I
DEFINITIONS
1.1. Certain Definitions. The terms defined in this Section 1.1 shall, for
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all purposes of this Agreement, have the meanings herein specified:
"Blue Sky" shall mean any applicable state securities laws and regulations.
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"Governmental Entity" shall mean any court, administrative agency or commission
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or other governmental body, authority or instrumentality and shall include
securities commissions or regulatory authorities of each province or territory
of Canada.
"Hazardous Substances" shall mean any pollutant, contaminant, material,
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substance or waste regulated, restricted or prohibited by any Legal Requirements
to be hazardous, toxic, radioactive, biohazardous or otherwise a danger to
health or the environment, including but not limited to "hazardous substances"
as defined under the Federal Comprehensive Environmental Responsibility, Cleanup
and Liability Act of 1980 or any "hazardous wastes" as defined under the Federal
Resource Conservation Recovery Act of 1976.
"Legal Requirements" shall mean any law, statute, constitution, principle of
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common law, ordinance, code, decree, rule, regulation, guideline, by-law,
direction, order, ruling or requirement issued, enacted, adopted, promulgated,
implemented or otherwise put into effect by or under the authority of any court
or other Governmental Entity.
The term "patent" shall mean any and all patents and patent applications,
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including any divisions, substitutions, continuations, continuations-in-part,
reissues, reexaminations, or extensions thereof, and all corresponding foreign
patents and patent applications filed or issued in any country which are based
upon or derived from such patents or patent applications.
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"Person" or "person" shall mean any natural person, corporation, trust, limited
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liability company, partnership, Governmental Entity or other entity.
"SEC" shall mean the U.S. Securities and Exchange Commission.
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"Signing Date" shall be the same as the "Closing Date", as defined in the
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Recitals.
"Subsidiary" of a specified entity means a corporation whose voting securities
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are owned directly or indirectly by the specified entity in such amounts as are
sufficient to elect at least a majority of the Board of Directors.
The terms "contract" and "obligation" include every contract, agreement,
commitment, understanding and promise, whether written or oral.
1.2. Other Definitions. In addition to the terms defined in Section 1.1,
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certain other terms are defined elsewhere in this Agreement, and, whenever such
terms are used in this Agreement, they shall have their respective defined
meanings, unless the context expressly or by necessary implication otherwise
requires.
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1. Assets Being Sold. Upon the terms and subject to the conditions set
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forth in this Agreement, Seller shall sell, assign, and transfer to Purchaser,
and Purchaser shall purchase and accept the assignment, transfer and delivery
from Seller of, all of the right, title and interest of Seller in and to the
assets, properties, and rights of Seller used in or relating to the operation of
the business of Seller as heretofore conducted (the "Business") and which are
identified in Schedule 4.4 as well as all rights of Seller in and to the
Proprietary Rights as such term is hereinafter defined, all as the same shall
exist on the Closing Date (such assets collectively referred to herein as the
"Assets"), other than those assets identified on Schedule 2.3 (the "Excluded
Assets").
2.2. Disclaimed Liabilities. Except for obligations of Seller under
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contracts specifically agreed by Purchaser to be assigned by Seller to
Purchaser, and arising after the Closing Date, Purchaser shall assume no
liabilities or obligations of Seller and hereby disclaims the assumption of any
debts or obligations, contractual or otherwise, known or unknown, contingent or
inchoate liabilities ("the Liabilities") of Seller.
2.3. Excluded Assets. The parties agree that the Assets shall specifically
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not include the Excluded Assets set forth on Schedule 2.3, all of the Seller'
right, title and interest in and to which, as the same exist as of the date
hereof or as of the Closing Date, shall be retained by Seller. Purchaser shall
not assume and shall exclude from the Assets purchased any cash, accounts
receivable, prepaid expenses, deposits, and customer lists as of the Closing
Date, and any other assets listed as Excluded Assets. As a further point of
clarification and not in limitation of the foregoing, the parties agree that
Purchaser is purchasing only assets and not capital stock, partnership interests
or other equity or ownership interests or intercompany notes receivable or
payable held by any party hereto other than listed on Schedule 4.4.
2.4. Non-delivered Assets. Notwithstanding anything else contained in this
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Agreement, in the event that an Asset is not delivered by Seller to Purchaser on
the Closing Date
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(a "Non-delivered Asset"), Seller shall deliver such Asset to Purchaser as soon
as Seller has actual knowledge of the existence of such Non-delivered Asset.
2.5. Assignment. Notwithstanding anything contained in this Agreement to
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the contrary, this Agreement shall not constitute an agreement to assign any of
the Assets, if the attempted assignment of the same, as a result of the absence
of the consent or authorization of a third party, would constitute a breach or
default under any lease, agreement, encumbrance or commitment or would in any
way adversely affect the rights, or increase the obligations, of any party or
any subsidiary with respect thereto or would otherwise affect the ability of
Purchaser to receive the benefit of the Assets. If any such consent or
authorization is not obtained, or if an attempted assignment would be
ineffective or would adversely affect the rights or benefits or increase the
obligations of Purchaser with respect to any such Assets, then the Parties shall
enter into such reasonable cooperative arrangements (including without
limitation, sublease, agency, partial closing, management, indemnity or payment
arrangements and enforcement at the cost and for the benefit of Purchaser of any
and all rights of Seller against an involved third party) to provide for
Purchaser the benefit of such Assets. Any transfer or assignment to Purchaser by
Seller or a subsidiary of Seller, of any such Assets which shall require such
consent or authorization of a third party that is not obtained, shall be made
subject to such consent or authorization being obtained.
2.6. Bill of Sale. The sale, conveyance, assignment, transfer and delivery
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of the Assets will be effected by delivery by Seller to Purchaser of (i) a bill
of sale from Seller ("Bill of Sale"), in the form of Exhibit 2.6, and (ii) such
other good and sufficient instruments of conveyance, transfer and assignment
(together with the Bill of Sale, the "Instruments of Transfer") as shall be
necessary to vest in Purchaser full right, title and interest in and to the
Assets and Proprietary Rights, free and clear of all claims and liens whether
absolute, accrued, contingent or otherwise.
ARTICLE III
PURCHASE PRICE AND PAYMENT
3.1 Purchase Price. In consideration of the sale, transfer, conveyance,
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and assignment of the Assets by Seller at the Closing and in reliance upon the
representations, warranties, and covenants made herein by Seller, Purchaser
agrees to pay to Seller consideration (the "Consideration") consisting of the
following:
(a) Five million one hundred thousand (5,100,000) shares (the
"Shares") of common stock, par value $0.01 per share, of Purchaser (the "Common
Stock"); and
(b) An unsecured promissory note in the principal amount of one
million seven hundred thousand dollars (US$1,700,000) with a term of two (2)
years (the "Note Term"), in the form of Exhibit 3.1(b) (the "Promissory Note")
which shall be delivered by Purchaser to Jotter on the Closing Date.
3.2. Allocation. The Consideration to be paid by Purchaser to Seller
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pursuant to Section 3.1 hereof, shall be allocated among the Assets in the
manner provided for in Section 8.1 of this Agreement.
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3.3. Escrow. Subject to the provisions of Section 7.3, all of the Shares
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shall be issued to the escrow agent (the "Escrow Agent") designated by and under
the terms of an escrow agreement substantially in the form attached hereto as
Exhibit 3.3 (the "Escrow Agreement"). The Shares shall be delivered by Purchaser
to the Escrow Agent within forty five (45) days of the Closing Date. Subject to
the provisions of Sections 6.4 and 7.3, such Shares delivered to the Escrow
Agent shall be delivered to Jotter as follows: (i) three hundred and fifty
thousand (350,000) Shares ninety (90) days after the Closing Date (the "First
Release Date"), and (ii) at a rate of two hundred and fifty thousand (250,000)
Shares per month after the First Release Date, under the conditions provided in
the Escrow Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
All representations and warranties contained herein shall survive the
Closing Date and none shall merge into any other document. As of the Closing
Date, Seller hereby represents and warrants to Purchaser the following:
4.1. Corporate Standing. Seller is duly organized, validly existing, and
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in good standing under the laws of the state or jurisdiction of its
incorporation. Seller has all requisite power and authority to own, lease and
operate its properties and to carry on its Business as now being conducted.
Seller is duly qualified as a foreign corporation to transact business, and is
in good standing in, each jurisdiction in which the nature of Seller's
activities make such qualification necessary, except where the failure to so
qualify would not have a material adverse effect on Seller or any of its
Business.
4.2. Authority. Seller has all requisite corporate power and authority to
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enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Seller and approved by a majority of the
shareholders of Seller in accordance with its constituent documents and
applicable law. This Agreement has been duly executed and delivered by Seller,
and constitutes a valid and binding obligation of Seller, enforceable in
accordance with its terms subject to the effect of applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
federal or state laws affecting the rights of creditors and the effect or
availability of rules of law governing specific performance, injunctive relief
or other equitable remedies (regardless of whether any such remedy is considered
in a proceeding at law or in equity). The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby do not
conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, any provision of the certificate of
incorporation or bylaws or other constituent documents of Seller. Without
limiting the generality of the foregoing, no consent, waiver, approval, order or
authorization of, or registration, declaration or filing (each a "Consent") by
any Person is required by or with respect to Seller in connection with the
execution and delivery of this Agreement by Seller or the consummation by Seller
of the transactions contemplated.
4.3. Financial Statements. In order to enable Purchaser to comply with its
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reporting obligations under the Securities Exchange Act of 1934 as amended (the
"Exchange Act"), Seller has furnished to Purchaser its audited consolidated
balance sheets as of December 31, 1999 and 1998, and its audited consolidated
statements of operations, stockholders' equity and cash flows for the fiscal
year ended December 31, 1999 and for the period from June 1, 1998 (inception) to
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December 31, 1998, and its unaudited statements of operations, stockholders'
equity and cash flows for the nine (9) months ended September 30, 2000. The
balance sheet at September 30, 2000 is hereinafter referred to as the "Seller
Balance Sheet," and all such financial statements are hereinafter referred to
collectively as the "Seller Financial Statements." Except as set forth in
Schedule 4.3, the Seller Financial Statements are complete and accurate in all
material respects, have been prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis during the
periods involved, are in accordance with Seller's books and records, and fairly
present or will fairly present the financial position of Seller and the results
of its operations as of the date and for the periods indicated thereon, subject
in the case of the unaudited portion of the Seller Financial Statements to
normal year-end audit adjustments which will not be material individually and in
the aggregate.
4.4. Assets.
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(a) The Assets comprise all of the assets, properties, and rights of
every type and description, real, personal, and mixed used in the Business.
Except as set forth in Schedule 4.4(a), Jotter has good and marketable title to
all of the Assets (except for those Proprietary Rights, for which Seller has
valid and enforceable licenses), free and clear of all mortgages, options,
leases, covenants, conditions, agreements, liens, security interests, adverse
claims, restrictions, charges, encumbrances or rights of others. There exists
no restriction on the use or transfer of any of the Assets. Schedule 4.4
includes, among other things:
(i) all furniture, fixtures, telecommunications and other
equipment and other fixed assets of Seller located at the Leased
Premises (as hereinafter defined);
(ii) all hardware and software and all databases and database
systems used by Seller, whether owned, leased, or licensed by
Seller;
(iii) all domain names and rights to their use as held by
Seller;
(iv) all trademarks, trademark applications, or service marks,
including any existing or pending registrations or applications
for registration therefor of Seller;
(v) all patents and applications for patents of Seller;
(vi) all copyrights owned by Seller and all rights of Seller
under any copyright laws, together with any copyright
registrations and applications for registration therefor;
(vii) all contracts, leases, licenses, agreements, or
commitments (oral or written) of Seller, whether fully performed
or wholly or partially executory on the Closing Date relating to
any Proprietary Rights used by Seller in the Business;
(viii) all permits of Seller relating to the operations of Seller
in Canada;
(ix) all leasehold improvements relating to the leased property
defined as the leasehold of Seller at 9119 82/nd/ Avenue, Suite
300, Edmonton, Alberta (the "Leased Premises");
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(x) all supplies and inventory of Seller, whether in possession
of Seller, or a third party;
(xi) all of the goodwill and going concern value of Seller; and
(xii) all telephone numbers of Seller.
(b) Except as set forth in Schedule 4.4 attached hereto, the Assets
are in good operating condition and repair, ordinary wear and tear excepted, and
are satisfactory for the purposes for which such assets are being used in the
Business. Seller does not own, nor has it since the date of its formation owned,
or have any interest in real estate, other than its leasehold interest in the
Leased Premises. All contracts, whether written or oral, to be assigned to
Purchaser are in good standing and in full force and effect and there has been
and there is no default thereunder by any party thereto. None of the parties to
such contracts other than the Seller have given Seller any reason to believe
that it intends to change its business relations with Seller or the Business in
any material adverse manner. To the knowledge of Seller, the operations of
Seller at the Leased Premises do not violate any applicable material building
code, zoning requirement or classification, or pollution control ordinance or
statute relating to the property or to such operations, and such non-violation
is not dependent, in any instance, on so-called non-conforming use exemptions.
(c) To the knowledge of Seller, there are no Hazardous Substances in
the Environment at, in, on, under or around the Leased Premises. Seller has not
disposed of, handled, stored, transported or used any Hazardous Substances on or
about such property except in full compliance with all Legal Requirements.
Seller has not disposed of, handled, stored, transported or used any materials
at any site being investigated or remediated for contamination or possible
contamination of the Environment. Seller and its predecessor entities have
conducted its business in accordance with all Legal Requirements relating to
Hazardous Substances. To the best of Seller's knowledge, there has been no
release of Hazardous Substances at, in, on, under or around the Leased Property.
For the purposes of this paragraph, "Environment" shall mean the air, land,
water, plant, animal and human life, safety and health and ecological systems
and any part or combination of the foregoing.
4.5. Taxes. Seller has prepared in good faith and duly and timely filed
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(taking into account any extensions of time within which to file), or will
prepare and file within thirty (30) days of Closing, all Tax Returns required
to be filed by it and each member of its affiliated group, and all such Filed
Tax Returns are or will be true, complete and accurate. Seller has paid all
Taxes that are shown as due on such filed Tax Returns, or that is required to be
withheld from amounts owing to any employee, creditor or third party, other than
those unpaid Taxes listed on Schedule 4.5 attached hereto. Seller has collected
all Taxes required to be collected and has remitted such Taxes to the proper
authorities as required. No notice of deficiency or assessment has been
received from any taxing authority with respect to liabilities for Taxes of
Seller or its Subsidiaries in respect of the Assets which have not been fully
paid or finally settled. Neither Seller nor any of the Assets are subject to
any lien for Taxes.
As used in this Agreement: (i) the term "Tax" (including, with correlative
meaning, the term "Taxes") includes all federal, state, provincial, local,
municipal and foreign income, profits, franchise, gross receipts, environmental,
customs duty, capital stock, capital, large corporation, severance, stamp,
payroll, sales, employment, unemployment, Canada Pension, Alberta Pension,
health, workers compensation, disability, use, transfer, property, withholding,
excise, production, value added, goods and services, occupancy and other taxes,
duties, imposts or assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to
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such amounts and any interest in respect of such penalties and additions and any
such Tax required to be collected or remitted to any Governmental Entity and any
penalties for failing to collect or remit such Tax; and (ii) the term "Tax
Return" includes all returns and reports (including elections, declarations,
disclosures, schedules, estimates, filings, declarations, statements, and
information returns) required to be supplied to any Governmental Entity relating
to Taxes.
4.6. Year 2000 Compliance. All computer software and hardware products
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that are licensed, sold or otherwise distributed to others by Seller and, to
Seller's knowledge, all computer software and hardware products that are owned
by Seller, exclusively licensed to Seller or are otherwise required for the
conduct of its Business, are Year 2000 Compliant. As used herein, "Year 2000
Compliant" shall mean, with respect to any such software or hardware, the
ability of such software or hardware to perform the following date-related
functions:
(a) consistently handle date information before, during and after
January 1, 2000, including, but not limited to, accepting date input, providing
date output and performing calculations on dates or portions of dates;
(b) function accurately in accordance with the documentation
relating to the applicable software or hardware and without interruption before,
during and after January 1, 2000, without any change in operations associated
with the advent of the century;
(c) respond to two-digit date input in a way that resolves any
ambiguity as to the century;
(d) store and provide output of date information in ways that are
unambiguous as to century; and
(e) recognize the year 2000 as a leap year.
4.7. Proprietary Rights.
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(a) Schedule 4.7 (the "Intellectual Property Disclosure Schedule")
sets forth in paragraph (a) thereof a complete and accurate list of all patents,
patent applications, copyrights, trademarks, trade names, service marks and
logos owned or used by Seller or in which it has any rights or licenses, and all
applications therefor and registrations and registration applications thereof,
which shall be transferred to Purchaser as an Asset. Such list specifies, as
applicable: (i) the title of the patent, trademark, trade name, service mark,
copyright or application therefor or registration thereof; (ii) the jurisdiction
by or in which such patent, trademark, trade name, service mark or copyright has
been issued or registered or in which an application has been filed, including
the registration or application numbers; and (iii) material licenses,
sublicenses and similar agreements to which Seller is a party or pursuant to
which any other party is authorized to use, exercise or receive any benefit from
any Proprietary Rights of Seller. The Intellectual Property Disclosure Schedule
sets forth a complete and accurate description of all agreements of Seller with
each officer, employee, shareholder, director, contractor or consultant of
Seller providing Seller with title and ownership to patents, patent
applications, trade secrets and inventions developed or used by Seller in its
Business, all of which agreements are valid, enforceable and legally binding
(subject to the effect or availability of rules of law governing specific
performance, injunctive relief or other equitable remedies).
(b) Seller owns or possesses valid and enforceable licenses or other
rights to use all computer software and hardware, source code, patents,
patent applications, trademarks,
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trademark applications, trade secrets, service marks, trade names, logos, trade
dress, copyrights, inventions, business and marketing plans, industrial property
rights, copyrights, trademarks, trade names, logos and service marks (and all
goodwill associated therewith, including, without limitation, the right to the
names "Jotter" and "Jotter Technologies"), and applications therefor, and all
technical information, customer lists, management information systems, drawings,
designs, processes and quality control data and all similar materials recording
or evidencing proprietary expertise or information, or other rights with respect
thereto (collectively referred to as "Proprietary Rights"), used or currently
proposed to be used in the Business, and the same are sufficient to conduct the
Business as it has been and is now being conducted or as it is currently
proposed to be conducted, and shall be transferred to the Purchaser pursuant to
this Agreement as an Asset. Except as set forth in paragraph (b) of the
Intellectual Property Disclosure Schedule, Seller is the owner of all right,
title, and interest in and to each of the Proprietary Rights, free and clear of
all liens, security interests, charges, encumbrances, equities, and other
adverse claims, and has the right to use, sell, license, sublicense, assign and
dispose, in each case without payment to a third party, all of the Proprietary
Rights and the products, processes and materials covered thereby. Except as set
forth in paragraph (b) of the Intellectual Property Disclosure Schedule, there
is no contract with Seller pursuant to which any Person has any right (whether
or not currently exercisable) to use, license or otherwise exploit any
Proprietary Right.
(c) The operations of Seller as currently and formerly conducted and
as planned to be conducted do not conflict with or infringe, and, to the
knowledge of Seller, no person or entity has asserted that such operations or
past operations conflict with or infringe, any Proprietary Rights, owned,
possessed or used by any third party. There are no claims, disputes, actions,
proceedings, suits or appeals pending against Seller or any affiliate of Seller
with respect to any Proprietary Rights, and, to the knowledge of Seller, none
has been threatened against Seller or any affiliate of Seller. There are no
facts or facts overtly alleged to Seller which would reasonably serve as a basis
for any claim that Seller does not have the right to use and to transfer the
right to use, free of any rights or claims of others, all Proprietary Rights
utilized in the development, manufacture, use, sale or other disposition of any
or all products or services presently being used, furnished or sold in the
conduct of the Business of the Seller as it has been or is now being conducted.
The Proprietary Rights referred to in the preceding sentence are free of any
unresolved ownership disputes with respect to any third party and there is no
unauthorized use, infringement or misappropriation of any of such Proprietary
Rights by any third party, including any employee or former employee of Seller
or its Subsidiaries, nor is there any breach of any license, sublicense or other
agreement authorizing another party to use such Proprietary Rights. Neither
Seller nor any of its Subsidiaries has entered into any agreement (i) granting
any third party the right to bring infringement actions with respect to,
otherwise to enforce rights with respect to, any such Proprietary Rights, or
(ii) agreeing to indemnify anyone or any entity for or against any interference,
infringement, misappropriation or other conflict with respect to any Proprietary
Right.
(d) Paragraph (d) of the Intellectual Property Disclosure Schedule
contains a complete and accurate list of any proceedings before any patent or
trademark authority to which Seller is a party, a description of the subject
matter of each proceeding, and the current status of each proceeding, including,
without limitation, interferences, priority contests, opposition, and protests.
Such list includes any pending applications for reissue or reexamination of a
patent. Seller has the exclusive right to file, prosecute and maintain any such
applications for patents, copyrights or trademarks and the patents and
registrations that issue therefrom.
(e) All patents and registered trademarks, service marks, and other
company, product or service identifiers and registered copyrights held by Seller
are valid and enforceable,
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are currently in compliance with formal legal requirements and are not subject
to any maintenance or renewal fees or taxes or actions falling due within ninety
(90) days after the Closing Date.
(f) Except as set forth in paragraph (f) of the Intellectual
Property Disclosure Schedule, all fees to maintain the rights of Seller in the
Proprietary Rights, including, without limitation, patent and trademark
registration and prosecution fees and all professional fees in connection
therewith, which have been presented for payment, have been paid by Seller or
will be paid by Seller before the Closing Date.
(g) Except as set forth in paragraph (g) of the Intellectual
Property Disclosure Schedule, all disclosures of trade secrets of Seller to
third parties have been pursuant to non-disclosure agreements pursuant to which
the confidentiality and use of such information has been protected. Seller has
taken reasonable measures and precautions to maintain the secrecy and
confidentiality of the Proprietary Rights used or proposed to be used in the
conduct of the Business, the value of which to Seller is contingent upon
maintenance of the confidentiality thereof.
(h) Seller has secured valid and binding written assignments from all
persons who, in any capacity (including current and former consultants,
independent contractors, directors, officers and employees) contributed to the
creation or development of Seller's Proprietary Rights of all right, title and
interest to such contributions that Seller or its Subsidiaries do not already
own by operation of law. No current or former employee, officer, director,
shareholder, consultant or independent contractor of or to Seller has any right,
claim or interest in or with respect to any Proprietary Right.
(i) Except as set forth in paragraph (g) of the Intellectual
Property Disclosure Schedule, each current and former employee and officer of
and consultant and independent contractor to Seller has executed a written
confidentiality agreement and a written assignment of inventions agreement that
assigns to Seller all rights to any inventions, improvements, discoveries, or
information relating to the Business conducted or to be conducted by Seller, and
all such agreements are in the forms provided to Purchaser with no exceptions or
exclusions. To the knowledge of Seller, no employee, consultant or contractor of
Seller is in violation of any term of any employment contract, proprietary
information agreement, inventions agreement, non-competition agreement,
consulting agreement, or any other contract or agreement relating to the
relationship of any such employee with Seller or any previous or affiliated
employer. To the knowledge of Seller, no employee of Seller has entered into any
contract that restricts or limits in any way the scope or type of work in which
the employee may be engaged to anyone other than Seller or requires the employee
to transfer, assign, or disclose information concerning his work to anyone other
than Seller.
(j) No internally developed product, system, program or software
module designed, developed, sold, licensed or otherwise made available by Seller
to any person, and to the knowledge of Seller, no third-party product, system,
program or software module sold, licensed or otherwise made available by Seller
to any person, contains any "back door," "time bomb," "Trojan horse," "worm,"
"drop dead device," "virus" or other software routine or hardware component
designed to permit unauthorized access or to disable or erase software, hardware
or data without the consent of the user.
(k) Except as set forth in paragraph (k) of the Intellectual
Property Disclosure Schedule, Seller has not disclosed or delivered to any
Person, or permitted the disclosure or delivery to any escrow agent or other
Person, of any Seller Source Code. No event
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has occurred, and no circumstance or condition exists, that (with or without
notice or lapse of time) will, or could reasonably be expected to, result in the
disclosure or delivery to any Person of any Seller Source Code. Paragraph (k) of
the Intellectual Property Disclosure Schedule identifies each contract pursuant
to which Seller has deposited or is required to deposit with an escrow holder or
any other Person any Seller Source Code, and further describes whether the
execution of this Agreement or the consummation of any of the transactions
contemplated hereby could reasonably be expected to result in the release or
disclosure of any Seller Source Code. "Seller Source Code" means any source
code, or portion, aspect or segment of any source code, relating to any
Proprietary Right owned by or licensed to Seller or otherwise used by Seller.
4.8. Information Provided By Seller. Any information furnished by or on
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behalf of Seller to Purchaser in writing pursuant to this Agreement as of the
date such information is required by this Agreement to be so furnished, and any
information contained in the Schedules referred to in this Agreement, does not
not contain any untrue statement of a material fact and does not omit to state
any material fact necessary to make any statement, in light of the circumstances
under which such statement is made, not misleading.
4.9. Investment Experience. Seller has received and read, and is familiar
---------------------
with all documents provided to Seller from Purchaser, including the Purchaser
SEC Documents (as defined hereinafter). Seller acknowledges that Seller has had
an opportunity to ask questions of and receive answers from Purchaser's officers
and representatives concerning the affairs of Purchaser. Seller is familiar with
the nature of and risks attending investments in securities of technology
companies and has determined that Seller can bear the economic risk associated
with ownership of the Shares and can afford a complete loss in the value of such
Shares. Seller, by itself or together with its purchaser representative, has
sufficient knowledge and experience in financial and business matters so as to
be capable of evaluating the merits and risk of its investment in the Shares,
received as part of the Consideration. Seller also represents that it has not
been organized for the purpose of acquiring the Shares.
4.10. Ownership of the Shares for Investment Purposes. Seller is taking
-----------------------------------------------
ownership of the Shares for investment purposes only and for its own account,
and not as a nominee or agent, and not with a view to, or for sale in connection
with, the distribution of any part thereof. Seller has no present intention of
selling, granting any participation in, or otherwise distributing the Shares
except pursuant to an effective Registration Statement and in accordance with
Section 7.8 and the Securities Act (defined below) and as permitted by the
Escrow Agreement.
4.11. Accredited Investor. Seller is an "accredited investor" as defined in
-------------------
Rule 501 of Regulation D promulgated under the Securities Act of 1933, as
amended (the "Securities Act").
4.12. Restricted Securities. Seller understands that the Shares are
---------------------
"restricted securities" under the federal securities laws in as much as they are
being acquired in a transaction not involving a public offering and that such
Shares may be resold without registration under the Securities Act, only in
certain limited circumstances. Seller acknowledges that the certificates
evidencing the Shares shall bear a legend reflecting such restrictions, as
described in Section 10.4 of this Agreement.
4.13. Residency. Jotter is a non-resident of Canada for the purposes of the
---------
Income Tax Act (Canada) ("ITA").
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
5.1. Organization. Purchaser is a corporation duly incorporated, validly
------------
existing and in good standing under the laws of the State of Delaware.
Purchaser is duly qualified to do business and is in good standing in the State
of Delaware and in each of the other jurisdictions in which it owns or leases
property or conducts business, except where the failure to be so qualified would
not have a material adverse effect on the business of Purchaser. Purchaser has
all requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted, and possesses all licenses,
franchises, rights and privileges material to the conduct of its business.
5.2. Authority. Purchaser has all requisite corporate power and authority
---------
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and delivered by Purchaser, and constitutes a valid and binding obligation of
Purchaser, enforceable in accordance with its terms, subject to the effect of
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar federal or state laws affecting the rights of
creditors and the effect or availability of rules of law governing specific
performance, injunctive relief or other equitable remedies (regardless of
whether any such remedy is considered in a proceeding at law or in equity). The
execution and delivery of this Agreement, and the consummation of the
transactions contemplated, hereby do not conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both) under
any provision of the certificate of incorporation or bylaws of Purchaser.
Without limiting the generality of the foregoing, no Consent of any Person
is required by or with respect to Purchaser in connection with the execution and
delivery of this Agreement by Purchaser or the consummation by Purchaser of the
transactions contemplated.
5.3. Capital Structure. The authorized capital stock of Purchaser consists
-----------------
of 50,000,000 shares of Common Stock and 1,000,000 shares of Preferred Stock,
$0.01 par value ("Purchaser Preferred Stock"). At the close of business on
September 30, 2000: (i) 26,076,680, shares of Common Stock were issued and
outstanding; (ii) 3,250,717 shares of Common Stock were reserved for issuance
upon exercise of options (the "Purchaser Options") under Purchaser's Stock
Incentive Plan, of which options to purchase 2,465,980 shares were outstanding;
(iii) 414,248 shares of Common Stock were reserved for issuance upon exercise of
options outside of Purchaser's Stock Incentive Plan; and (iv) 908,604 shares
were reserved for issuance upon exercise of warrants ("Purchaser Warrants").
5.4. SEC Documents. Purchaser has made available to Seller a true and
-------------
complete copy of Purchaser's Form 10-K for the year ended December 31, 1999 and
any other statement, report, registration statement or definitive proxy
statement filed by Purchaser with the SEC since January 1, 2000 to the Closing
Date (the "Purchaser SEC Documents"). As of their respective filing dates, the
Purchaser SEC Documents comply or will comply in all material respects with the
requirements of the Exchange Act or the Securities Act, and none of the
Purchaser SEC Documents contain or will contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading, except to the
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extent corrected by a subsequently filed Purchaser SEC Document. Without
limiting the foregoing, each of the consolidated balance sheets included in or
incorporated by reference into the Purchaser SEC Documents fairly presented the
consolidated financial position of Purchaser and its subsidiaries as of its date
and each of the consolidated statements of operations, stockholders' equity and
cash flows included in or incorporated by reference into the Purchaser SEC
Documents fairly presented the results of operations, stockholders' equity and
cash flows of Purchaser and its subsidiaries for the period set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which would not be material and the absence of certain footnote
disclosures), in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved.
5.5. No Conflict. The execution and delivery of this Agreement by
-----------
Purchaser and the performance of its obligations hereunder or thereunder, (i)
are not in violation or breach of, and will not conflict with or constitute a
default under, any of the terms of the certificate of incorporation or bylaws of
Purchaser, or any contract, agreement or commitment binding upon Purchaser or
any of its assets or properties, other than violations, breaches, conflicts, or
defaults which individually or in the aggregate would not have a material
adverse effect on Purchaser; (ii) will not result in the creation or imposition
of any lien, encumbrance, equity or restriction in favor of any third party upon
any of the assets or properties of Purchaser; and (iii) will not to the actual
knowledge of Purchaser conflict with or violate any applicable law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over Purchaser or any of its assets
or properties.
5.6. Shares of Common Stock. The Shares will, when issued and delivered to
----------------------
Seller in accordance with this Agreement, be duly authorized, validly issued,
fully paid and nonassessable.
5.7. Information Provided. Purchaser has received and read, and is
--------------------
familiar with all documents provided to Purchaser from Seller. Purchaser
acknowledges that Purchaser has had an opportunity to ask questions of and
receive answers from Seller's officers and representatives concerning the
affairs of Seller.
5.8. False and Misleading Statements. None of the written information
-------------------------------
furnished by Purchaser to Seller in connection with the transaction contemplated
by this Agreement is false or misleading in any material respect or contains any
misstatement of material fact, or omits to state any material facts required to
be stated in order to make the statements therein not false or misleading in
light of the circumstances in which they were made.
ARTICLE VI
CLOSING DATE DELIVERIES
6.1. Deliveries by Seller. At the Closing, Seller shall deliver to
--------------------
Purchaser the following:
(a) Certificate signed by the President of Seller to the effect that
each of the representations and warranties made by the Seller hereunder is true
and correct as of the Closing Date (or, if any such representation or warranty
is untrue or incorrect, specifying the respect in which it is untrue or
incorrect);
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(b) A copy of resolutions adopted by the Board of Directors and the
controlling shareholders of Seller, certified by its Secretary, authorizing or
ratifying the execution and delivery of this Agreement, and the performance by
Seller of its obligations hereunder and thereunder;
(c) An opinion of Normand & Shaughnessy, PA, counsel for Seller,
addressed to Purchaser in substantially the form attached hereto as Exhibit
6.1(c);
(d) The Bill of Sale for use in the United States and Canada in
substantially the form attached hereto as Exhibit 2.6, executed by Seller;
(e) Any other Instruments of Transfer necessary to effect the
transfer or assignment of the Assets and Proprietary Rights to Purchaser, as
reasonably requested by Purchaser, executed by Seller;
(f) All necessary consents, approvals, and subject to Section 7.3,
clearance certificates of third parties including any Governmental Entity.
(g) The Non-Compete Agreements in substantially the form attached
hereto as Exhibit 6.1(g), executed by the Seller and each of its affiliates.
6.2. Deliveries by Purchaser. At the Closing, Purchaser shall deliver to
-----------------------
Seller or the Escrow Agent, as applicable:
(a) The Promissory Note; and
(b) A certificate signed by the President of Purchaser, certifying
that each of the representations and warranties made by Purchaser hereunder is
true and correct as of the Closing Date (or, if any such representation or
warranty is untrue or incorrect, specifying the respect in which it is untrue or
incorrect).
6.3. Closing. Subject to the provisions of Section 6.1, the actual
-------
consummation of the transactions contemplated by this Agreement (the "Closing")
shall take place on the Closing Date, which as defined in the Recitals, shall be
on the date of signing this Agreement, at such place as may be mutually agreed
upon in writing by Seller and Purchaser.
6.4. Rescission. If Seller fails to deliver the requisite certificate
----------
pursuant to Section 7.3 or if Purchaser is required to deduct, withhold or pay
any amount under any other provisions of applicable Tax Legal Requirements (as
defined below) pursuant to Section 7.3, Purchaser shall have the right to
rescind this Agreement. If Purchaser exercises its right of rescission, (i)
this Agreement shall be deemed null and void as of the Closing Date and the
Instruments of Transfer shall have no force or effect, (ii) Seller shall return
Promissory Note for cancellation and Purchaser will have no further liability to
Seller, and (iii) the Purchaser shall cause the Escrow Agent to deliver to
Purchaser all Shares held in escrow pursuant the Escrow Agreement Upon receipt
of all the Shares held in escrow and the Promissory Note, Purchaser shall
undertake to transfer and deliver to Jotter the Assets.
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ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. Employees. On or after the Closing Date, Purchaser shall make offers
---------
of employment to substantially all of the full-time employees of Seller (the
"Employee"), other than employees identified by Purchaser as set forth on
Schedule 7.1(a). Consistent with Purchaser's employee benefit plans, all of
Seller's employees who become employees of Purchaser following the Closing Date
shall receive, for the period of their employment with the Purchaser, benefits
that are generally made available to Purchaser's employees and, to the extent
not prohibited by law, shall receive service credit (other than for benefit
accrual under a defined benefit pension plan) that includes their employment by
Seller prior to the Closing Date, and Purchaser shall assume any obligations to
pay accrued vacation for the Employees to the extent set forth on Schedule
7.1(b). Any such employment of such former employees of Seller shall not limit
any right of Purchaser to terminate any employee with or without cause following
the Closing Date. Seller agrees to reimburse any employee who is hired by
Purchaser, and to hold Purchaser harmless, for any accrued vacation or overtime
payroll balance relating to such employee's employment with Seller through the
Closing Date.
7.2. Canadian Goods & Services Tax Election. Purchaser and Seller shall
--------------------------------------
jointly make the election provided for under section 167 of the ETA so that no
Goods and Services Tax ("GST") will be payable in respect of the sale and
transfer of the Assets. In this regard:
(a) Purchaser warrants to Seller that Purchaser will be registered
for purposes of Part IX of the Excise Tax Act ("ETA") and that Purchaser's GST
registration number is 889216016RT0001;
(b) Seller represents and warrants to Purchaser that Seller is
registered for purposes of Part IX of the ETA and that Seller's GST registration
number is 873100929RT0001; and
(c) Seller represents and warrants to Purchaser that the Assets
constitute a business or part of a business that was established or carried on
by Seller and that Seller is providing to Purchaser all or substantially all of
the property that can reasonably be regarded as being necessary for Purchaser to
be capable of carrying on the business or part of a business.
(d) Purchaser shall file the election with the Canada Customs &
Revenue Agency not later than the day on or before which the return under
Division V of Part IX of the ETA is required to be filed for Purchaser's first
reporting period in which GST would, but for the election, have become payable
in respect of the supply of any property or service made under this Agreement.
7.3. Certificate Pursuant to Section 116 of the Income Tax Act (Canada).
-----------------------------------------------------------------
(a) Within thirty (30) days of the Closing Date, Jotter shall
deliver to the Purchaser a certificate issued pursuant to Subsection 116(2) of
the ITA, with respect to such of the Assets of Jotter as constitute "Taxable
Canadian Property", as that term is defined in the ITA. Each such certificate
shall have as the "certificate limit" as defined in Subsection 116(2) of the
ITA, an amount no less than the cost to the Purchaser of such Taxable Canadian
Property.
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(b) In the event that Jotter fails to deliver the requisite
certificate or if the Purchaser is required to deduct or withhold any amount
under any other provision of applicable Tax Legal Requirements, the Purchaser
shall be entitled to deduct and withhold from the Consideration such amounts as
the Purchaser deems necessary to meet its obligations pursuant to section 116 of
the ITA or any other provision of applicable Tax Legal Requirements (including
interest and penalties payable in respect of such obligations), provided that
such withheld amount shall not be remitted prior to two (2) business days prior
to the date such amount is required by applicable Legal Requirements to be
remitted (the "Remittance Date") and where such certificate or a certificate
issued pursuant to Subsection 116(4), satisfactory to the Purchaser, is
delivered prior to such Remittance Date, such withheld amount shall be released
to Seller or the Escrow Agent in accordance with Section 3.3 except to the
extent that amounts were withheld or deducted pursuant to another provision of
applicable Tax Legal Requirements. To the extent that amounts are so withheld or
deducted, such withheld or deducted amounts shall be treated for all purposes
hereof as having been paid to the Seller as consideration for the Assets in
accordance with this Agreement. The Purchaser, as agent for the Seller, is
hereby authorized, in its sole discretion, to sell or otherwise dispose of the
Consideration, or mortgage, pledge, assign or otherwise use the Consideration as
security for the purpose of borrowing funds or establishing credit, or itself
take title to the Consideration to provide sufficient funds to enable it to
comply with its obligations under section 116 of the ITA or other provision of
applicable Legal Requirements. If the Purchaser is unable to borrow sufficient
funds as agent for the Seller or if the proceeds of such sale are insufficient
to fund the required withholding, the Seller shall forthwith pay to the
Purchaser the deficiency. The Seller shall bear all costs and expenses
associated with any sale or borrowing by the Purchaser pursuant to the
provisions of this Section 7.3.
(c) In the event that Purchaser elects to deduct or withhold from
the Consideration such amounts as Purchaser deems necessary to meet its
obligations pursuant to Section 7.3(b), (i) Purchaser shall cause the Escrow
Agent to deliver to Purchaser the Shares to be deducted or withheld from the
Consideration, and (ii) Jotter shall return the Promissory Note to Purchaser for
the issuance of a new promissory note reflecting the new principal balance upon
the receipt of a written request from Purchaser.
7.4. Lease. Promptly following the Closing Date, Purchaser shall undertake
-----
to negotiate the terms of a lease or sublease agreement with the owner of the
Leased Premises or such owner's agent for the purpose of obtaining the right to
use the Leased Premises on substantially the same economic terms as currently
enjoyed by Seller. Seller agrees to use its best efforts to assist Purchaser in
such negotiations and further agrees to waive any right to receive notice of
termination of the current lease relating to the Leased Premises and to promptly
vacate such property upon receipt of a written notice to quit or notice of
termination either from Purchaser or the landlord of the Leased Premises. Seller
further agrees to permit Purchaser to utilize the Leased Premises on a temporary
basis pending execution of a lease or sublease agreement relating to the Leased
Premises. The Consideration shall be deemed full consideration for such
temporary use of the Leased Premises which in no event will exceed sixty (60)
days.
7.5. Name Change. Promptly following the Closing Date, Seller shall take
-----------
such action as shall be necessary to change its corporate name and any business
names or trade names or marks utilized by it to exclude any reference to Jotter
or any derivative thereof. Seller shall likewise discontinue any use of the name
"Jotter" or any derivation thereof on any publication, forms, advertisements,
websites, signs, business cards or other stationery within ten (10) days of the
Closing Date.
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7.6. Non-Compete. Seller agrees that until the later to occur of twenty-
-----------
four (24) months after the Closing Date, neither Seller nor its affiliates will
directly or indirectly engage in any business that relates to toolbar and
internet utility applications and/or products or services utilizing biometrics.
7.7. Board Representation. Following the Closing Date, Purchaser shall
--------------------
increase the size of its Board of Directors by two and will have Glenn
Argenbright and Robert Smibert named to fill such vacancies.
7.8. Registration Rights.
-------------------
(a) Following the Closing Date, Purchaser shall use commercially
reasonable efforts to register the Shares under the Securities Act by filing
with the SEC a Form S-3 registration statement relating to the public sale or
transfer of the Shares in market transactions within sixty (60) days after the
Closing Date (the "Registration Statement"). Seller agrees that in connection
with any sale or disposition of Shares subject to such Registration Statement it
shall utilize such underwriter or broker as may be selected from time to time by
Purchaser in its sole discretion.
(b) Purchaser shall bear and pay all expenses incurred by Purchaser
in connection with any registration, filing or qualification of Shares with
respect to any registration pursuant to this Section 7.8, including (without
limitation) all registration, filing and qualification fees, printers' and
accounting fees relating or apportionable thereto, fees and disbursements of
counsel for Purchaser, and Blue Sky filing fees, but excluding (i) the fees and
disbursements of counsel for Seller, (ii) stock transfer taxes that may be
payable by Seller, and (iii) all brokerage or similar commission relating to the
Shares, all of which shall be borne by Seller.
(c) Purchaser shall keep such Registration Statement described in
paragraph (a) effective for a period of time terminating at such time as Seller
shall have completed the offering and sale of the Shares described in such
Registration Statement, provided, however, that if such Registration Statement
is filed pursuant to Rule 415 of the Securities Act, Purchaser shall keep such
Registration Statement effective as long as Purchaser is required pursuant to
rights granted to parties other than Seller.
(d) The rights of Seller to distribute Shares pursuant to the
Registration Statement described in paragraph (a) may be suspended by Purchaser
on the occurrence of the following events:
(i) Purchaser has made a determination to conduct a public
offering;
(ii) Purchaser is about to make a normal course disclosure
containing information of a material nature;
(iii) there then exists material, non-public information
relating to Purchaser which, in the good faith determination of
its Board of Directors, would adversely affect the Purchaser by
the continued compliance with this Agreement or the continued
distribution of the Shares by Seller;
(iv) Purchaser is engaged in any activity at any time that, in
the good faith determination of its Board of Directors, would be
adversely affected
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<PAGE>
by the continued compliance with this Agreement or the continued
distribution of the Shares.
(e) Purchaser shall use commercially reasonable efforts to minimize
the length of any suspension:
(i) under (d)(i), to a period beginning on the day that notice
of a suspension is given to Seller and ending on the earlier of:
(A) the date of disclosure of the public offering, or (B) the
date which is 30 days after the beginning of the suspension,
provided that during such suspension, Purchaser will proceed with
commercially reasonable efforts to file the appropriate
documentation in respect of, and otherwise complete, such public
offering as expeditiously as practicable;
(ii) under (d)(ii), to a period of not more than three (3)
business days;
(iii) under (d)(iii), if the activity is a prospective
acquisition by Purchaser, to a period beginning when the notice
of suspension is given to Seller and ending on the earlier of:
(A) the public disclosure of the transaction and the making of
all required filings under the Securities Act or Exchange Act, or
(B) the date on which discussion regarding the acquisition are
terminated.
(iv) under (d)(iii), for any reason other than a prospective
acquisition by Purchaser, to a period beginning when the notice
of suspension is given to Seller and ending on the earlier of:
(A) the disclosure of the activity, or (B) the reason is no
longer operative; and
(v) under (d)(iv), to a period beginning on the day that notice
of a suspension is given to Seller and ending on the date which
is 30 days after the beginning of the suspension.
(f) It shall be a condition precedent to the obligations of Purchaser
to take any action pursuant to this Section 7.8 that Seller shall furnish to
Purchaser such information (including information regarding itself, the Shares
held by it and to be disposed of by it, and the intended method of disposition
of such securities) as shall be required to effect the registration of the
Shares.
(g) Upon the receipt by Seller of any notice from Purchaser of (i)
the existence of any fact or the happening of any event as a result of which the
prospectus included in a Registration Statement filed pursuant to paragraph (a),
as such Registration Statement is then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing, (ii) the existence of any facts or events
resulting in the suspension of Purchaser's obligations to file and keep
effective a Registration Statement as provided in paragraph (a) above, (iii) the
issuance by the SEC of any stop order or injunction suspending or enjoining the
use or the effectiveness of such Registration Statement or the initiation of any
proceedings for that purpose, or the taking of any similar action by the
securities regulators of any state or other jurisdiction, or (iv) the request by
the SEC or any other federal or state governmental agency for amendments or
supplements to such Registration Statement or related prospectus or for
additional information related thereto, Seller shall immediately discontinue
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disposition of the Shares covered by such registration or prospectus (other than
in transactions exempt from the registration requirements under the Securities
Act) until receipt of the supplemental or amended prospectus or until Seller is
advised in writing by Purchaser that the use of the applicable prospectus may be
resumed or, in the case of a notice pursuant to clause (ii) above, until
Purchaser's obligations referred to therein are no longer suspended.
(h) Seller shall notify Purchaser in writing of Seller's intention to
sell Shares under the Registration Statement described in paragraph (a) not less
than five (5) business days prior to the expected date of such sale by faxing
the "Takedown Request" attached hereto as Exhibit 7.8(h)(i) to Purchaser at the
address set forth in Section 10.1. During this period, Purchaser will review the
prospectus to determine if a suspension pursuant to paragraph (d) or (g) is
necessary or appropriate. If Purchaser does not notify Seller of a suspension
pursuant to paragraph (d) or (g), Seller may conclude the proposed sale, on the
proposed date of sale, strictly in accordance with the Takedown Request. Seller
will notify Purchaser of each sale under the Registration Statement in
accordance with the Takedown Request within 24 hours of the sale by faxing the
"Notification of Sale attached hereto as Exhibit 7.8(h)(ii) to Purchaser at the
address set forth in Section 10.1.
(i) In the event any shares are included in a Registration Statement
under this Agreement:
(A) To the extent permitted by law, Purchaser will indemnify and
hold harmless Seller and each person, if any, who controls Seller
within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages or liabilities (joint or
several) to which it may become subject under the Securities Act,
the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively, a
"Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such Registration
Statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements
thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make
the statements therein not misleading, or (iii) any violation or
alleged violation by Purchaser of the Securities Act, the
Exchange Act, any state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any
state securities law; and Purchaser will reimburse Seller for any
legal or other expenses reasonably incurred by it in connection
with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity
agreement contained in this Section 7.8 shall not apply to
amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the
consent of Purchaser (which consent shall not be unreasonably
withheld), nor shall Purchaser be liable in any such case for any
such loss, claim, damage, expense, liability or action to the
extent that it arises out of or is based upon a Violation which
arises out of or is based upon information furnished in writing
expressly for use in connection with such registration by Seller;
provided, further, that Purchaser will not be liable to Seller or
any controlling person with respect to any loss, claim,
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damage, expense or liability arising out of or based upon any
untrue statement or alleged untrue statement or omission or
alleged omission to state a material fact in any preliminary
prospectus which is corrected in an amended, supplemented or
final prospectus provided to Seller if the claimant asserting
such loss, claim, damage, expense or liability purchased from
Seller and was not sent or given a copy of such amended,
supplemented or final prospectus at or prior to the sale of
Shares to such claimant.
(B) To the extent permitted by law and as a condition to the
registration of Shares, Seller will agree to indemnify and hold
harmless Purchaser, each of its directors, each of its officers
who have signed the Registration Statement and each person, if
any, who controls Purchaser within the meaning of the Securities
Act, against any losses, claims, damages or liabilities (joint or
several) to which Purchaser or any such director, officer or
controlling person may become subject, under the Securities Act,
the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each
case to the extent (and only to the extent) that such Violation
arises out of or is based upon information furnished in writing
by Seller expressly for use in connection with such registration;
and Seller will agree to reimburse any legal or other expenses
reasonably incurred by Purchaser or any such director, officer or
controlling person in connection with investigating or defending
any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this Section
7.8 shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is
effected without the consent of Seller, which consent shall not
be unreasonably withheld.
(C) Promptly after receipt by an indemnified party under this
paragraph (i) or notice of the commencement of any action
(including any governmental action), such indemnified party will,
if a claim in respect thereof is to be made against any
indemnifying party under this paragraph (i), deliver to the
indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate
in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party shall have
the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying
party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party
represented by such counsel in such proceeding. It is
understood, however, that an indemnifying party shall not, in
connection with any proceeding or related proceedings, be liable
for the reasonable fees and expenses of more than one separate
firm for all indemnified parties. The failure to deliver written
notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such
19
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indemnifying party of any liability to the indemnified party
under this paragraph (i), but the omission so to deliver written
notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise
than under this paragraph (i).
(D) The obligations of Purchaser and Seller under this paragraph
(i) shall survive the completion of any offering of the Shares
pursuant to a registration statement under this Agreement and are
in addition to and not in lieu of the other indemnification
rights and obligations of the Parties specified elsewhere in this
Agreement.
(j) Purchaser's obligations pursuant to this Section 7.8 (other than
paragraph (i)) shall terminate as to Seller of the Shares on the date when
Seller is eligible to sell all of the Shares pursuant to Rule 144 or Rule 145
under the Securities Act during any 90-day period.
(k) In the event that the Registration Statement is not declared
effective by the SEC within ninety (90) days of the Closing Date, SAFLINK shall
make a prepayment on the Promissory Note in the amount of twenty thousand
dollars ($20,000) (the "Prepayment"). On the last day of each month subsequent
to the Prepayment that the Registration Statement has not been declared
effective by the SEC, SAFLINK shall make an additional prepayment in the amount
of twenty thousand dollars ($20,000). SAFLINK shall not be obligated to make
aggregate payments in excess of the principal balance of the Promissory Note.
7.9. Notice. After the Closing, the Parties shall cooperate, to the extent
------
practicable and reasonable, in giving joint notice of the consummated
transactions to each customer, creditor, distributor, sales representative and
supplier of the Business of Seller.
7.10. Workers' Compensation Act Certificate'. Seller agrees to procure and
--------------------------------------
deliver to Purchaser as soon as reasonably possible after the Closing Date the
certificate dated as at the Closing Date required under section 128 of the
Workers' Compensation Act (Alberta).
7.11. Costs and Documentation Related to Transfer of Assets. Purchaser
-----------------------------------------------------
shall pay all fees, costs, and expenses related to the transfer of all Assets
from the Seller to the Purchaser, provided, however, that Seller shall pay all
fees, costs, and expenses as described Sections 7.3(b) and 10.3. Seller and its
authorized representatives shall provide and execute any documentation required
to effect the transfer of the Assets.
ARTICLE VIII
TAX MATTERS
8.1. Allocation of Consideration. Purchaser and Seller shall endeavor in
---------------------------
good faith to agree upon an allocation among the Assets of the Consideration
consistent with Section 1060 of the Internal Revenue Code (the "Code") and the
Treasury Regulations thereunder within sixty (60) days of the date of this
Agreement. In the event that the Parties cannot agree on a mutually satisfactory
allocation within said time period, an independent accounting firm shall, at
Seller's and Purchaser's joint expense (to be shared equally), determine the
appropriate allocation. The finding of such independent accounting firm shall be
binding on the Parties. Upon determination of the allocation by agreement of the
Parties or by binding determination of the independent
20
<PAGE>
accounting firm, Purchaser and Seller agree to file Internal Revenue Service
Form 8594, and all federal, state, local and foreign Tax Returns, in accordance
with such allocation. Purchaser and Seller shall report the transactions
contemplated by this Agreement for federal Tax and all other Tax purposes as a
sale and purchase of the Assets and not as a tax-free reorganization and in a
manner consistent with the allocation determined pursuant to this Section 8.1.
Purchaser and Seller agree to provide the other promptly with any information
required to complete Form 8594. Purchaser and Seller shall notify and provide
the other Party with reasonable assistance in the event of an examination, audit
or other proceeding regarding the agreed upon allocation of the Consideration.
8.2. Prorations. Purchaser and Seller agree that all of the Tax and other
----------
items normally prorated or adjusted (but not income taxes), such as personal
property, occupancy, and business operation taxes, customer prepayments and
utilities related to the business and operation of the Assets shall be prorated
as of the Closing Date, with Seller liable to the extent such items relate to
the Assets for any time period prior to and including the Closing Date, and
Purchaser liable to the extent such items relate to the Assets for periods
commencing after the Closing Date. Purchaser and Seller hereby agree to
indemnify the other Party against and hold it harmless from such items for which
it is responsible.
8.3. Transfer Taxes. Pursuant to Section 7.2 Purchaser and Seller have
--------------
made the election provided for under Section 167 of the ETA so that no GST will
be payable in respect of the sale and transfer of the Assets. Notwithstanding
any other provision of this Agreement, all transfer and sales taxes incurred in
connection with this Agreement and the transactions contemplated hereby shall be
borne by Seller and Seller agrees to indemnify Purchaser against and hold it
harmless from liability for all such taxes.
8.4. Tax Indemnification Generally. Except for any prorated items
-----------------------------
described in Section 8.2, Seller hereby agrees to indemnify Purchaser against
and hold it harmless from all liability for Taxes of Seller attributable to any
period, whether before or after the Closing Date, including without limitation,
any income taxes or other Taxes resulting from the transactions contemplated by
this Agreement, unpaid Taxes listed on Schedule 4.5 hereto, and any liability
resulting from a failure of Seller to fulfill any obligation under this Article
VIII.
8.5. Survival. All rights and obligations provided for in this Article
--------
VIII shall remain in force notwithstanding any other provision of this
Agreement.
8.6. Priority of Article. In the event of a conflict between the
-------------------
provisions of this Article VIII and any other provision of this Agreement, the
provisions of this Article VIII shall control.
ARTICLE IX
INDEMNIFICATION
9.1. Indemnification from Seller. From and after the Closing Date, Seller
---------------------------
shall indemnify and hold harmless Purchaser and its officers, directors,
employees, Subsidiaries, shareholders, affiliates, successors and permitted
assigns ("Purchaser Indemnitees") from all Losses (as hereinafter defined)
resulting from (i) a breach or inaccuracy of any representation, warranty,
covenant or agreement by Seller under this Agreement, (ii) any liabilities or
obligations of Seller not expressly assumed by Purchaser, or any events
occurring at or prior to the Closing Date giving rise to liability (whether such
liabilities or events were known, unknown or could not
21
<PAGE>
be known by Seller at or prior to the Closing Date), relating to Seller or the
Business or the Assets, (iii) any liabilities arising at, prior to or subsequent
to the Closing Date (whether such liabilities or events were known, unknown or
could not be known by or prior to the Closing Date), relating to any products
manufactured, any services rendered, or the conduct of any other business by
Seller at or prior to the Closing Date; (iv) any liabilities, arising under any
applicable Bulk Sales Act or the Uniform Commercial Code, or statutes of similar
import; (v) unpaid fees listed on Schedule 4.7 hereto; (vi) any liabilities of
Seller relating to the conduct of its operations following the Closing,
including liabilities relating to Excluded Assets and the Liabilities; or (vii)
any taxes, interest or penalties arising under Section 116 of the ITA.
9.2. Indemnification from Purchaser. From and after the Closing Date,
------------------------------
Purchaser shall indemnify and hold harmless Seller from all Losses resulting
from (i) a breach or inaccuracy of any representation, warranty, covenant or
agreement by Purchaser under this Agreement, or (ii) any liabilities and
obligations arising after the Closing Date and expressly assumed by Purchaser.
9.3. Notice. The Indemnified Party (as hereinafter defined) shall give
------
prompt written notice to the Indemnifying Party of any claim or event known to
it which does or may give rise to a claim by the Indemnified Party against the
Indemnifying Party based on this Agreement, stating the nature and basis of said
claims or events and the amounts thereof, to the extent known. Such notice shall
be given in accordance with Section 10.1 hereof. Such notice shall be a
condition precedent to any liability of the Indemnifying Party hereunder.
Notwithstanding the foregoing, the failure to give reasonably prompt written
notice by the Indemnified Party shall not defeat a claim made pursuant hereto
except to the extent that the Indemnifying Party can establish that it has been
injured by such delay.
9.4. Defense of Claims. In the event of any claim, action, suit or
-----------------
proceeding made or brought by third parties against the Indemnified Party, the
Indemnified Party shall give written notice of such claim, action, suit or
proceeding as described in Section 9.3 above, with a copy of the claim, process
and all legal pleadings with respect thereto. After notification, the
Indemnifying Party shall participate in and, jointly with any other Indemnifying
Party similarly notified, assume the defense thereof, with counsel reasonably
satisfactory to such Indemnified Party at the time of such assumption. The
Indemnified Party shall have the right to employ its own counsel and such
counsel may participate in such action, but the fees and expenses of such
counsel shall be at the expense of the Indemnified Party, when and as incurred,
unless (i) the employment of counsel by such Indemnified Party has been
authorized by the Indemnifying Party, or (ii) the Indemnifying Party shall not
in fact have employed counsel to assume the defense of such action reasonably
satisfactory to the Indemnified Party at the time of the Indemnifying Party's
assumption of the defense. If clause (ii) of the preceding sentence shall be
applicable, then counsel for the Indemnified Party shall have the right to
direct the defense of such claim, action, suit or proceeding on behalf of the
Indemnified Party. The Indemnified Party and the Indemnifying Party, as the case
may be, shall be kept fully informed of such claim, action, suit or proceeding
at all stages thereof whether or not such party is represented by its own
counsel.
9.5. Offset. Notwithstanding the generality of the foregoing, the full
------
amount of the Shares delivered to the Escrow Agent pursuant to Section 3.3
(the "Escrow Fund") shall be available as security for the satisfaction of all
of the indemnifiable Losses which Purchaser Indemnitees may suffer or incur. In
the event that the Escrow Fund is insufficient to satisfy all of the
indemnifiable Losses which Purchaser Indemnitees may suffer or incur, the
Purchaser shall be enititled to offset such unsatisfied Losses against the
principal and interest owed under the Promissory Note.
22
<PAGE>
9.6. Definitions.
-----------
(a) As used herein, the term "Losses" means any and all claims,
demands, actions, costs, losses, damages and liabilities, including without
limitation reasonable attorneys' fees and costs incurred in the investigation
and defense of a claim, demand, cost, loss or liability.
(b) As used herein, the term "Indemnifying Party" shall mean the
person or persons against whom a party (the "Indemnified Party") makes a claim
for indemnification hereunder.
ARTICLE X
GENERAL
10.1. Notice. All notices required to be given under the terms of this
------
Agreement or which any of the Parties may desire to give hereunder (the
"Notices") shall be in writing and delivered personally or sent by express
delivery, or by facsimile, or by registered or certified mail, with proof of
receipt, postage and expenses prepaid, return receipt requested, addressed as
follows:
If to Purchaser:
SAFLINK Corporation
18650 N.E. 67th Court
Suite 210
Redmond, WA 98052
Attention: Chief Financial Officer
Fax: 425-497-1778
with a copy to:
Baker & McKenzie
815 Connecticut Avenue, NW
Washington, DC 20006-4078
Attention: Thomas J. Egan, Jr., Esq.
Fax: 202-452-7074
and if to Seller:
Jotter Technologies Inc.
8880 Cal Center Drive, # 190
Sacramento, CA 95826
Attention: Glenn Argenbright
Fax: 916-361-1354
with a copy to:
Normand & Shaughnessy, PA,
15 High Street
Manchester, NH 03103
Attention: Jason M. Craven
23
<PAGE>
Fax: 603-647-0333
or to such other persons as may be designated in writing by the parties, by
a notice given as aforesaid.
10.2. Receipt of Notice. Any notice given in accordance with Section 10.1
-----------------
shall be deemed to have been given: if delivered personally, when received; if
sent via express delivery or registered or certified mail, postage prepaid and
return receipt requested, when received; or, if delivered by facsimile, 24 hours
after transmission confirmation by the transmitting machine unless, within those
24 hours the intended recipient has informed the sender that the transmission
was received in an incomplete or garbled form, or the transmission report of the
sender indicates a faulty or incomplete transmission. If such receipt is on a
day that is not a business day or is later than 5 p.m. (local time) on a
business day, the notice shall be deemed to have been given and served on the
next business day.
10.3. Headings; Construction. The descriptive headings of the several
----------------------
sections of this Agreement are inserted for convenience of reference only and
are not intended to affect the meaning or interpretation of this Agreement. The
Parties agree that any rule of construction to the effect that ambiguities are
to be resolved against the drafting party shall not be applied in the
construction or interpretation of this Agreement.
10.4. Legend. It is understood that the certificates evidencing the Shares
------
may bear the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT UNDER SUCH ACT IN EFFECT
WITH RESPECT TO THE SHARES OR AN OPINION OF COUNSEL SATISFACTORY TO PURCHASER
THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF
SUCH ACT."
(b) Any legend required by applicable state securities laws.
10.5. Counterparts. This Agreement may be executed in counterparts, and
------------
when so executed each counterpart shall be deemed to be an original, and said
counterparts together shall constitute one and the same instrument.
10.6. Schedules and Exhibits. All Exhibits and Schedules attached hereto
----------------------
are by this reference incorporated herein and made a part hereof for all
purposes as if fully set forth herein, and each disclosure in any Schedule shall
be deemed to be a representation and warranty made by the disclosing party. The
disclosures in any Schedule must relate only to the representations and
warranties in the Section of this Agreement to which they expressly relate and
not to any other representation or warranty in this Agreement. In the event of
any inconsistency between the statements in the body of this Agreement and those
in the Schedules hereto (other than an exception expressly set forth as such in
the Schedules with respect to a specifically identified representation or
warranty), the statement in the body of this Agreement will control.
10.7. Applicable Law; Venue; Waiver of Jury Trial. This Agreement shall be
-------------------------------------------
governed by, construed and enforced in accordance with the laws of the State of
Delaware as applied to contracts entered into solely between residents of, and
to be performed entirely in, such state. The parties hereto do hereby
irrevocably submit to the jurisdiction of any state or federal
24
<PAGE>
court located in the State of Delaware, solely in respect of the interpretation
and enforcement of the provisions of this Agreement and in respect of the
transactions contemplated hereby waive, and agree not to assert, as a defense in
any action, suit or proceeding for the interpretation or enforcement hereof,
that is not subject thereto or that such action, suit or proceeding may not be
brought or is not maintainable in said courts or that the venue thereof may not
be appropriate or that this Agreement may not be enforced in or by such courts,
and the parties hereto irrevocably agree that all claims with respect to such
action or proceeding shall be heard and determined in such a state or federal
court. The parties hereby consent to and grant any such court jurisdiction over
the person of such parties and over the subject matter of such dispute and agree
that mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 10.1 hereof, or in such other
manner as may be permitted by law, shall be valid and sufficient service
thereof.
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY
UNDERSTANDS AND WITH THE ADVICE OF COUNSEL HAS CONSIDERED THE IMPLICATIONS OF
THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH
SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
10.8. Severability. If, for any reason whatsoever, any one or more of the
------------
provisions of this Agreement shall be held or deemed to be unenforceable or
invalid as applied to any particular case or in all cases, such circumstances
shall not have the effect of rendering such provision invalid in any other case
or of rendering any of the other provisions of this Agreement inoperative,
unenforceable or invalid. Furthermore, upon the request of any party hereto, the
Parties to this Agreement shall add, in lieu of such invalid or unenforceable
provisions, provisions as similar in terms to such invalid or unenforceable
provisions as may be possible and legal, valid and enforceable.
10.9. Remedies Cumulative. The rights and remedies of the parties to this
-------------------
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power or privilege under this Agreement or
any document referred to herein will operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of any other right, power
or privilege. Without limiting the generality of the foregoing, neither the
Purchaser Indemnitees' exercise nor their failure to exercise their right to
make a claim against the Escrow Fund shall constitute an election of remedies or
limit the Purchaser Indemnitees in any manner in the enforcement of any remedies
that may be available to them under this Agreement or otherwise.
10.10. Specific Performance. The parties hereto agree and acknowledge that,
--------------------
in the event of a breach of any provision of this Agreement, the aggrieved party
may be without an
25
<PAGE>
adequate remedy at law. The parties therefore agree that in the event of a
breach of any provision of this Agreement the aggrieved party may elect to
institute and prosecute proceedings in any court of competent jurisdiction to
obtain specific performance or to enjoin the continuing breach of such
provision, as well as to obtain damages for breach of this Agreement and to
obtain reasonable attorneys' fees. By seeking or obtaining any such relief, the
aggrieved party will not be precluded from seeking or obtaining any other relief
to which it may be entitled.
10.11. Further Assurances. Subject to the terms and conditions of this
------------------
Agreement, the parties hereto shall do and perform or cause to be done and
performed all such further actions and things and shall execute and deliver all
such other agreements, certificates, instruments or documents as any other party
hereby may reasonably request in order to carry out the intent and purposes of
this Agreement and the consummation of the transactions contemplated hereby.
10.13. Expenses with Respect to Transaction. Seller and Purchaser agree
------------------------------------
that each will pay all fees, costs, and expenses incurred by it in connection
with the negotiation and consummation of this transaction, including, without
limitation, the fees and expenses of its attorneys, accountants, and other
persons.
10.14. Brokers. Each of Seller and Purchaser hereby agrees to indemnify
-------
and save and hold harmless the other party from and against any and all claims,
losses, damages, costs or expenses of any kind or character (including
attorneys' fees) arising out of or resulting from any agreement, arrangement or
understanding alleged to have been made by such party with any broker or finder
in connection with this Agreement or the transactions contemplated hereby.
[Signatures On Following Page]
26
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of
the day and year first above written.
SAFLINK CORPORATION
/s/ Jeffrey P. Anthony
----------------------------
By: Jeffrey P. Anthony
Its: Chief Executive Officer
JOTTER TECHNOLOGIES, INC.
/s/ Glenn Argenbright
---------------------------
By: Glenn Argenbright
Its: President
27
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - DEFINITIONS................................................... 1
1.1 Certain Definitions................................................. 1
1.2 Other Definitions................................................... 2
ARTICLE II - PURCHASE AND SALE OF ASSETS.................................. 2
2.1 Assets Being Sold................................................... 2
2.2 Disclaimed Liabilities.............................................. 2
2.3 Excluded Assets..................................................... 2
2.4 Non-delivered Assets................................................ 2
2.5 Assignment.......................................................... 3
2.6 Bill of Sale........................................................ 3
ARTICLE III - PURCHASE PRICE AND PAYMENT.................................. 3
3.1 Purchase Price...................................................... 3
3.2 Allocation.......................................................... 3
3.3 Escrow.............................................................. 4
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF SELLER..................... 4
4.1 Corporate Standing.................................................. 4
4.2 Authority........................................................... 4
4.3 Financial Statements................................................ 4
4.4 Assets.............................................................. 5
4.5 Taxes............................................................... 6
4.6 Year 2000 Compliance................................................ 7
4.7 Proprietary Rights.................................................. 7
4.8 Information Provided By Seller...................................... 10
4.9 Investment Experience............................................... 10
4.10 Ownership of the Shares for Investment Purposes..................... 10
4.11 Accredited Investor................................................. 10
4.12 Restricted Securities............................................... 10
4.13 Residency........................................................... 10
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PURCHASER................... 11
5.1 Organization........................................................ 11
</TABLE>
28
<PAGE>
<TABLE>
<S> <C>
5.2 Authority........................................................... 11
5.3 Capital Structure................................................... 11
5.4 SEC Documents....................................................... 11
5.5 No Conflict......................................................... 12
5.6 Shares of Common Stock.............................................. 12
5.7 Information Provided................................................ 12
5.8 False and Misleading Statements..................................... 12
ARTICLE VI - CLOSING DATE DELIVERIES...................................... 12
6.1 Deliveries by Seller................................................ 12
6.2 Deliveries by Purchaser............................................. 13
6.3 Closing............................................................. 13
ARTICLE VII - ADDITIONAL AGREEMENTS....................................... 14
7.1 Employees........................................................... 14
7.2 Canadian Goods & Services Tax Election.............................. 14
7.3 Certificate Pursuant to Section 116 of the Income Tax Act (Canada).. 14
7.4 Lease............................................................... 15
7.5 Name Change......................................................... 15
7.6 Non-Compete......................................................... 16
7.7 Board Representation................................................ 16
7.8 Registration Rights................................................. 16
7.9 Notice.............................................................. 20
7.10 Workers' Compensation Act Certificate............................... 20
ARTICLE VIII - TAX MATTERS................................................ 20
8.1 Allocation of Consideration......................................... 20
8.2 Prorations.......................................................... 21
8.3 Transfer Taxes...................................................... 21
8.4 Tax Indemnification Generally....................................... 21
8.5 Survival............................................................ 21
8.6 Priority of Article................................................. 21
ARTICLE IX - INDEMNIFICATION.............................................. 21
9.1 Indemnification from Seller......................................... 21
9.2 Indemnification from Purchaser...................................... 22
9.3 Notice.............................................................. 22
9.4 Defense of Claims................................................... 22
</TABLE>
29
<PAGE>
<TABLE>
<S> <C>
9.5 Escrow Offset....................................................... 22
9.6 Definitions......................................................... 23
ARTICLE XV - GENERAL...................................................... 23
10.1 Notice............................................................. 23
10.2 Receipt of Notice.................................................. 24
10.3 Headings; Construction............................................. 24
10.4 Legend............................................................. 24
10.5 Counterparts....................................................... 24
10.6 Schedules and Exhibits............................................. 24
10.7 Applicable Law; Venue; Waiver of Jury Trial........................ 24
10.8 Severability....................................................... 25
10.9 Remedies Cumulative................................................ 25
10.10 Specific Performance............................................... 25
10.11 Further Assurances................................................. 26
10.12 Expenses with Respect to Transaction............................... 26
10.13 Brokers............................................................ 26
</TABLE>
List of Schedules
-----------------
Schedule 2.3...................................................Excluded Assets
Schedule 4.3.................Incomplete Items on Seller's Financial Statements
Schedule 4.4............................................................Assets
Schedule 4.4(a).....................................Assets Not Owned By Seller
Schedule 4.4(b)...................................Assets Not In Good Condition
Schedule 4.5......................................................Unpaid Taxes
Schedule 4.7..........................IntellectualProperty Disclosure Schedule
Schedule 7.1(a)......................................................Employees
Schedule 7.1(b)................................Employees with Accrued Vacation
List of Exhibits
----------------
Exhibit 2.6............................Bill of Sale (United States and Canada)
Exhibit 3.1....................................................Promissory Note
Exhibit 3.3...................................................Escrow Agreement
Exhibit 6.1(c)...........................Opinion of Normand & Shaughnessy, PA.
Exhibit 6.1(g)...........................................Non-Compete Agreement
Exhibit 7.8(h)(i).............................................Takedown Request
Exhibit 7.8(h)(ii)........................................Notification of Sale
30
