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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 29, 1997
WavePhore, Inc.
(Exact name of Registrant as specified in its Charter)
Indiana 0-24858 86-0491428
(State or other (Commission (I.R.S. Employer
Jurisdiction of File No.) Identification No.)
Incorporation)
3311 North 44th Street, Phoenix, Arizona 85018
(Address and Zip Code of Principal Executive Offices)
Registrant's telephone number, including area code: (602) 952-5500
N/A
(Former name or former address, if changed since last report.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 29, 1997, WavePhore, Inc., an Indiana corporation (the
"Company"), through its wholly-owned subsidiary WavePhore Newscast, Inc., a
Delaware Corporation ("WavePhore Newscast"), purchased substantially all of the
assets and assumed certain of the liabilities (the "Acquired Business") of
Paracel Online Systems, Inc., a California corporation ("Paracel Online") of
Dallas, Texas, in consideration for cash and future consideration based on
achieving certain future financial performance, pursuant to an Agreement for the
Purchase and Sale of Assets among the Company, WavePhore Newscast, Paracel
Online and Paracel, Inc., dated May 29, 1997 (the "Asset Purchase Agreement").
Prior to this transaction, Paracel Online operated the Acquired
Business under the name "Paracel Online Systems, Inc.". The Acquired Business is
engaged in the delivery of customized and aggregated news service derived from
newspapers, newswires and news magazines to business customers worldwide
utilizing proprietary and licensed technology.
The Acquired Business receives information from a wide variety of
national and international sources, including many of the world's most respected
publishers, continuously throughout the day via satellite and other methods of
electronic transmission. Utilizing its proprietary "NewsCenter" technology, the
information is processed in Newscast Today servers and then delivered to
customers' personal computers principally via the public internet, and also via
Lotus Notes networks and e-mail servers. Each customer of the Newscast Today
service has at least one custom-defined profile. Such profiles pinpoint topics,
competitors, industry terms and companies in which they are interested, as well
as those which are most relevant to the customer's business or personal
requirements. The Acquired Business utilizes Fast Data Finder(TM) ("FDF(TM)")
text filtering and categorization technology developed by Paracel, Inc. The Fast
Data Finder uses the custom-built profiles as road maps for filtering the
information for each customer. The FDF is a massively-parallel hardware
accelerator for high-precision, large-scale text profiling which enables the
filtering of raw information and customization of information on a very large
scale. The Acquired Business delivers customized news to more than 30,000 users
from more than 2,500 sources worldwide pursuant to information provider
agreements with companies such as Dow Jones, Information Access Company,
Intell.X, Phillips Business News, Ziff Davis and Speer Communications.
The Acquired Business and WavePhore Inc.'s existing Newscast business
are now operated within WavePhore Newscast, Inc. as a wholly-owned subsidiary of
the Company. The combination of the Acquired Business with WavePhore, Inc.'s
Newscast division enables WavePhore Newscast to provide customized, real-time
information to more than 125 corporate customers serving over 81,000 knowledge
workers. The Acquired Business adds Internet capability to WavePhore Newscast's
intranet distribution service, and brings the number of news and information
sources now available through WavePhore Newscast to more than 3,000.
The Company expects to retain the employees of Paracel Online as
employees of WavePhore Newscast and expects to continue the Acquired Business
operations and utilize the acquired assets in the same manner as they were
operated and utilized prior to this acquisition transaction. The acquired assets
generally consist of cash, accounts receivable, prepaid expenses, furniture and
fixtures, office
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and computer equipment, leasehold improvements and intangibles.
As of the closing date of the acquisition transaction, the Acquired
Business had approximately 26 employees. The Acquired Business is located in
leased facilities in Dallas, Texas. The Company intends to consolidate most of
the WavePhore Newscast operations in this facility.
Pursuant to the Asset Purchase Agreement, the Company, through
WavePhore Newscast, Inc., paid $3,000,000 to Paracel Online at the closing, and
agreed to pay an additional $6,000,000 one hundred eighty (180) days after the
May 29, 1997 closing date. The Asset Purchase Agreement also provides for the
delivery of additional consideration to Paracel Online if the Acquired Business
and the combined WavePhore Newscast Business, respectively, achieve certain
minimum financial performance in 1997 and 1998, respectively. Fifty percent
(50%) of any such additional consideration may be paid in the Company's Common
Shares based upon the then current value of such shares.
The value of the assets purchased from Paracel Online and the amount
and type of consideration paid and to be paid by the Company for such assets
were determined by negotiations among the parties to the transaction.
The $3,000,000 cash payment made to Paracel Online at the closing date
was made from the Company's available funds. The Company expects to fund
additional cash payments required under the Asset Purchase Agreement through
outside funding. Although the Company is currently evaluating various financing
proposals from third parties, the Company has not finalized any such financing
arrangements as of the date of this Report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
7(a) AND 7(b).
It is impractical to file with this Report the financial statements and
pro forma financial information required by Item 7(a) and 7(b) of Form 8-K. Such
statements and information will be filed by amendment as soon as they are
completed and available, but in no event later than 60 days after the date on
which this Report must be filed.
7(c). EXHIBITS
The following exhibits are furnished as required by Item 7(c):
Exhibit
Number Description
- ------ -----------
2 Agreement for the Purchase and Sale of Assets by and
among WavePhore, Inc., WavePhore Newscast, Inc.,
Paracel Online Systems, Inc. and Paracel, Inc., dated
May 29, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WAVEPHORE, INC.
Date: June 12, 1997 By: /s/ David E. Deeds
-------------------------
David E. Deeds, Chairman,
Chief Executive Officer
and President
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EXHIBIT 2
AGREEMENT FOR THE PURCHASE
AND
SALE OF ASSETS
BY AND AMONG
WAVEPHORE, INC.,
WAVEPHORE NEWSCAST, INC.,
PARACEL ONLINE SYSTEMS, INC.,
AND
PARACEL, INC.
DATED MAY 29, 1997
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TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS........................................................................................... 1
1.1 Definitions......................................................................... 1
1.2 Other Definitions................................................................... 3
ARTICLE 2
PURCHASE AND SALE OF ASSETS........................................................................... 3
2.1 Purchase and Sale of the Assets..................................................... 3
2.2 Assumed Liabilities................................................................. 4
2.3 Liabilities Not Being Assumed....................................................... 5
2.4 Closing Balance Sheet............................................................... 6
2.5 The Purchase Price.................................................................. 6
(a) Closing Payment.................................................... 6
(b) Deferred Payment................................................... 6
2.6 Additional Revenue Incentive Payments............................................... 6
(a) First Incentive Payment............................................ 6
(b) Second Incentive Payment........................................... 7
(c) Third Incentive Payment............................................ 7
2.7 Adjustments to Purchase Price....................................................... 8
(a) Definitions........................................................ 9
2.8 Maximum Deliverable WavePhore Common Stock.......................................... 10
2.9 Registration Rights................................................................. 10
(a) Registration....................................................... 10
(b) Qualification...................................................... 10
(c) Indemnification.................................................... 11
(d) Fees and Costs..................................................... 11
(e) Exchange Act Filings............................................... 11
(f) Delay in Registration.............................................. 11
2.10 Allocation of Purchase Price........................................................ 12
2.11 Taxes............................................................................... 12
2.12 Transfer Fees....................................................................... 13
ARTICLE 3
GRANT OF RIGHTS AND
AGREEMENT NOT TO COMPETE.............................................................................. 13
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3.1 Intellectual Property............................................................... 13
3.2 Online Technology................................................................... 13
3.3 Shareholder's Marks................................................................. 13
3.4 Grant............................................................................... 13
3.5 Shareholder's Ongoing Business in Biotechnology..................................... 15
3.6 Exclusivity and Competitive Licenses................................................ 15
3.7 Assistance with Third Party Licenses................................................ 16
3.8 Technology Transfer and Upgrade Assistance.......................................... 16
3.9 Agreement Not to Compete............................................................ 16
3.10 Acknowledgment; Relief for Violation................................................ 17
3.11 Severability........................................................................ 17
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
AND SHAREHOLDER....................................................................................... 18
4.1 Organization and Qualification...................................................... 18
4.2 Authority Relative to This Agreement................................................ 18
4.3 Capitalization...................................................................... 18
4.4 Financial Statements................................................................ 19
4.5 Subsidiaries........................................................................ 19
4.6 Absence of Undisclosed Liabilities.................................................. 19
4.7 Absence of Certain Developments..................................................... 19
4.8 Real Estate......................................................................... 21
4.9 Title to Acquired Assets............................................................ 22
4.10 Litigation.......................................................................... 22
4.11 Consents............................................................................ 22
4.12 Solvency; Bulk Sales................................................................ 22
4.13 Taxes............................................................................... 22
4.14 Licenses and Permits................................................................ 23
4.15 Compliance with Laws................................................................ 23
4.16 Contracts........................................................................... 23
4.17 Accounts Receivable................................................................. 24
4.18 [Intentionally Omitted]............................................................. 24
4.19 Restrictions on Business Activities................................................. 24
4.20 Intellectual Property............................................................... 24
4.21 Environmental Matters............................................................... 25
4.22 Employees........................................................................... 29
4.23 Employee Benefit Plans.............................................................. 29
4.24 Insurance........................................................................... 30
4.25 Warranties.......................................................................... 31
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4.26 Brokers and Finders................................................................. 31
4.27 No Default.......................................................................... 31
4.28 Transactions with Affiliated Parties................................................ 31
4.29 Books and Records................................................................... 31
4.30 HSR Act............................................................................. 31
4.31 Investment Representations.......................................................... 32
4.32 Disclosure.......................................................................... 33
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF WAVEPHORE AND NEWSCAST ............................................................................ 33
5.1 Organization and Standing........................................................... 33
5.2 Authority of Purchaser.............................................................. 33
5.3 Restrictions........................................................................ 34
5.4 Brokers and Finders................................................................. 34
5.5 Litigation.......................................................................... 34
5.6 HSR Act............................................................................. 34
5.7 SEC Documents....................................................................... 34
5.8 SEC Filings......................................................................... 34
ARTICLE 6
COVENANTS OF SELLER AND SHAREHOLDER................................................................... 35
6.1 Access to Information............................................................... 35
6.2 Conduct of Business................................................................. 35
6.3 Business Relationships.............................................................. 36
6.4 Corporate Matters................................................................... 36
6.5 Insurance........................................................................... 36
6.6 Employees........................................................................... 36
6.7 New Business........................................................................ 36
6.8 Liability and Waiver................................................................ 37
6.9 Agreements.......................................................................... 37
6.10 Warranties at Closing............................................................... 37
6.11 Confidentiality..................................................................... 37
6.12 Books and Records................................................................... 37
6.13 Closing............................................................................. 37
ARTICLE 7
COVENANTS OF PURCHASER................................................................................ 38
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7.1 Confidentiality..................................................................... 38
7.2 Closing............................................................................. 38
7.3 Sageware Profiles................................................................... 38
7.4 Sageware Release.................................................................... 38
7.5 Defense Cooperation................................................................. 38
ARTICLE 8
CONDITIONS PRECEDENT TO PERFORMANCE
BY NEWSCAST AND WAVEPHORE............................................................................. 39
8.1 Accuracy of Representations and Warranties.......................................... 39
8.2 Performance of Seller............................................................... 39
8.3 No Material Changes................................................................. 39
8.4 Officer's Certificate............................................................... 39
8.5 Absence of Litigation............................................................... 40
8.6 Chief Financial Officer's Certificate............................................... 40
8.7 Consents............................................................................ 40
8.8 Approval of Documents............................................................... 40
8.9 Additional Agreements............................................................... 40
8.10 Opinion of Counsel.................................................................. 40
8.11 Board Resolutions................................................................... 40
ARTICLE 9
CONDITIONS PRECEDENT TO PERFORMANCE
BY SELLER AND SHAREHOLDER............................................................................. 41
9.1 Accuracy of Representations and Warranties.......................................... 41
9.2 Performance of Purchaser............................................................ 41
9.3 Board Resolution.................................................................... 41
9.4 Opinion of Counsel.................................................................. 41
9.5 Additional Agreements............................................................... 41
9.6 Approval of Documents............................................................... 41
ARTICLE 10
THE CLOSING........................................................................................... 41
10.1 Closing............................................................................. 41
10.2 Seller's and Shareholder's Obligations.............................................. 42
10.3 Purchaser's Obligations............................................................. 43
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ARTICLE 11
INDEMNIFICATION....................................................................................... 43
11.1 Nature of Statements................................................................ 43
11.2 Survival of Representations and Warranties.......................................... 44
11.3 Indemnification of Purchaser by Seller and Shareholder.............................. 44
11.4 Indemnification of Seller and Shareholder by Purchaser.............................. 44
11.5 Procedure for Indemnification....................................................... 45
11.6 Limits on Indemnity................................................................. 46
11.7 Right to Set-Off.................................................................... 47
(a) Notice of Claims................................................... 47
(b) Withholding of Funds............................................... 48
(c) Determination of Claims............................................ 48
(d) Disbursal Following Claim Determination............................ 48
11.8 Arbitration......................................................................... 48
ARTICLE 12
POST CLOSING.......................................................................................... 49
12.1 Solicitation of Employees........................................................... 49
12.2 Proposed Budget..................................................................... 49
12.3 Seller and Shareholder Deliveries................................................... 49
12.4 Shareholder's Guarantee............................................................. 49
ARTICLE 13
TERMINATION........................................................................................... 50
13.1 Termination......................................................................... 50
13.2 Effect of Termination............................................................... 50
ARTICLE 14
MISCELLANEOUS......................................................................................... 50
14.1 Bulk Transfer and Liens............................................................. 50
14.2 Written Agreement to Govern......................................................... 51
14.3 Public Announcement................................................................. 51
14.4 Severability........................................................................ 51
14.5 Notices and Other Communications.................................................... 51
14.6 Counterparts........................................................................ 52
14.7 Governing Law....................................................................... 52
14.8 Successors and Assigns.............................................................. 52
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14.9 Further Assurances......................................................... 53
14.10 Gender and Number.......................................................... 53
14.11 Schedules and Exhibits..................................................... 53
14.12 Waiver of Provisions....................................................... 53
14.13 Specific Performance....................................................... 53
14.14 Costs...................................................................... 53
14.15 Article and Section Headings............................................... 54
14.16 Amendment.................................................................. 54
14.17 Expenses................................................................... 54
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INDEX OF SCHEDULES
2.1(a) 1996 Balance Sheet
2.1(b) Accounts Receivable
2.1(b) Equipment
2.1(d) Leases
2.1(e) Motor Vehicles
2.1(f) Contracts
2.1(g) Books and Records
2.1(h) Licenses, Permits, and Dealer Authorizations
2.1(i) Intellectual Property
2.1(j) Royalty Rights, Security Deposits, and Refunds
2.1(l) Goodwill
2.1(m) Prepaid Items
2.1(n) Telephone Numbers
2.1(o) Additional Items
3.2 Certain Technology Owned by Seller and/or Shareholder
4.1 Corporate Power and Authority
4.6 Disclosed Liabilities
4.7 Certain Developments
4.8 Leases
4.9 Encumbrances on Acquired Assets
4.10 Litigation
4.11 Necessary Consents
4.14 Necessary Licenses and Permits
4.16 Contracts
4.21 Environmental Matters
4.22 Employees
4.23 Employee Benefit Plans
4.24 Insurance
4.25 Warranties
4.31 Addresses of Seller and Shareholder
EXHIBIT
- -------
A Bill of Sale and Assignment and Assumption
B Assignment of Licenses and Permits
C Consulting Agreement
D Dispute Resolution Procedures
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AGREEMENT FOR THE PURCHASE
AND SALE OF ASSETS OF
PARACEL ONLINE SYSTEMS, INC.
This Agreement for the Purchase and Sale of Assets (the "Agreement") is
made as of the 29th day of May, 1997 by and among WAVEPHORE, INC., an Indiana
corporation ("WavePhore") and WAVEPHORE NEWSCAST, INC., a Delaware corporation
("Newscast") (collectively WavePhore and Newscast shall be referred to as
"Purchaser"); PARACEL ONLINE SYSTEMS, INC., a California corporation ("Seller");
and PARACEL, INC., a California corporation ("Shareholder")
W I T N E S S E T H:
WHEREAS, Seller is the wholly owned subsidiary of Shareholder; and
WHEREAS, Newscast is the wholly owned subsidiary of WavePhore; and
WHEREAS, Seller and Shareholder are making certain representations,
warranties, covenants and indemnities herein as an inducement to Purchaser to
enter into this Agreement; and
WHEREAS, WavePhore is making certain representations, warranties,
covenants and indemnities herein as an inducement to Seller to enter into this
Agreement; and
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, substantially all of the assets of Seller on the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the covenants and mutual agreements
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in reliance upon the
representations and warranties contained herein, the parties do hereby agree as
follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. For purposes of this Agreement, the following
definitions shall apply to the following terms:
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"AVERAGE MARKET PRICE" shall mean the average per share closing price
of WavePhore Common Stock, as reported on the Nasdaq National Market
for the five most recent trading days.
"BUSINESS" shall mean Seller's business news service, operating under
the name "Paracel Online Systems" or any variation thereof, engaged in
the delivery of customized and aggregated news service derived from
newspapers, newswires, and news magazines to business customers
worldwide.
"CLOSING BALANCE SHEET" shall have the meaning set forth in Section
2.4.
"COMBINED DIVISION" shall mean the operation of the POS Division
combined with the Newscast Division.
"FIELD OF USE" shall mean the field of business news services engaged
in the delivery of customized and aggregated news service derived from
newspapers, newswires, and news magazines to business customers.
"GAAP" shall mean generally accepted United States accounting
principles, consistently applied. As applied to Seller, GAAP means
those accounting principles and practices (a) which are recognized as
such by the Financial Accounting Standards Board, (b) which are applied
for all periods in a manner consistent with the manner in which such
principles and practices were applied to the most recent financial
statements of Seller furnished to Purchaser, and (c) which are
consistently applied for all periods so as to reflect the financial
condition, and results of operations and cash flows of Seller.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"KNOWLEDGE", "KNOWN" and words of similar import as applied to Seller
or Shareholder with respect to any matters shall mean knowledge of
employees and officers of Seller and Shareholder who have within their
job responsibilities the duty to monitor such matters.
"NEWSCAST DIVISION" shall mean the "Newscast" business of WavePhore to
be transferred to Newscast.
"POS DIVISION" shall mean the operation of the Business and Acquired
Assets by Newscast, but not including the Newscast Division.
"REVENUE" shall mean all gross revenues from the sale or license of
products and services determined in accordance with GAAP.
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"WAVEPHORE COMMON STOCK" shall mean the no par voting common stock of
WavePhore.
1.2 Other Definitions. All other capitalized terms used in this
Agreement shall have the meaning ascribed to them herein.
ARTICLE 2
PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale of the Assets. Upon the terms and subject to the
conditions set forth herein, and in reliance on the respective representations
and warranties of the parties, Seller agrees to sell, transfer, assign, and
deliver to Purchaser, and Purchaser agrees to purchase from Seller, all of
Seller's right, title, and interest in and to those assets, rights, and
properties of Seller of every kind, character, and description, whether
tangible, intangible, real, personal, or mixed and wherever located, relating to
or used directly or indirectly in the operation of Seller's Business, including,
without limitation, the following assets used directly or indirectly in the
operations of the Business (hereinafter, the "Acquired Assets"):
(a) All of the assets reflected on the Closing Balance Sheet
of Seller and all assets subsequently acquired, except for the Excluded Assets
reflected thereon and those assets disposed of in the ordinary course of
business consistent with the past practices and this Agreement. Schedule 2.1(a)
sets forth the March 31, 1997 Balance Sheet of Seller ("March 1997 Balance
Sheet");
(b) The trade accounts and other receivables specified in
Schedule 2.1(b) hereto;
(c) The furniture, improvements, fixtures, equipment,
supplies, tools for maintenance and repair, other goods, and all other
appurtenances in and to the premises, as specified hereto, including but not
limited to, computer hardware and software, peripherals, communication products
and accessories, and all other supplies and materials, as specified in Schedule
2.1(c) hereto;
(d) Seller's interests, claims and rights, including all
deposits, under certain leases, as specified in Schedule 2.1(d) hereto;
(e) The motor vehicles used in the operation of the Business,
including but not limited to, any automobiles and trucks, as specified in
Schedule 2.1(e) hereto;
(f) All title, claims, and rights under Contracts, Offers,
notes, evidences of indebtedness, and purchase and sale orders, as specified in
Schedule 2.1(f) hereto;
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(g) All customer lists and information, supplier lists and
information, employee files (to the extent permitted by applicable law),
operating manuals, catalogs, technical information sheets, pricing sheets,
advertising and display materials, and brochures and other materials and data
associated with, used, or employed by Seller; and copies of all books of
account, records, files, and invoices, as specified in Schedule 2.1(g) hereto;
(h) All title, claims, and rights under any government or
municipal licenses, permits, and dealer authorizations issued to Seller by any
computer hardware or software vendor, as specified on Schedule 2.1(h) hereto;
(i) Such rights to the Online Technology and Intellectual
Property, as specified in Article 3, Section 4.20, and Schedule 3.2,
respectively, hereto;
(j) All royalty rights, security deposits, and rights and
claims to refunds and adjustments of any kind, as specified in Schedule 2.1(j)
hereto;
(k) An amount in immediately available funds equal to the net
positive balance remaining in Seller's bank accounts after all outstanding
checks paying payables have cleared and all final payroll checks have cleared;
(l) The goodwill of the Business whether or not carried on
Seller's balance sheet, as specified in Schedule 2.1(l) hereto;
(m) All prepaid items, including, without limitation,
insurance, including any cash surrender value thereof, prepaid taxes, prepaid
expenses, and prepaid rent, as specified in Schedule 2.1(m) hereto;
(n) All title, claims, and rights in telephone numbers and
listings assigned to Seller, as specified in Schedule 2.1(n) hereto; and
(o) Any additional items of tangible or intangible property
used or owned by Seller in connection with the Business which are not included
above.
The sale of the Acquired Assets relating to the Business shall be made
free and clear of all liabilities, obligations, and encumbrances, except for
those liabilities, obligations, and encumbrances specifically assumed by
Purchaser under Section 2.2 hereof.
2.2 Assumed Liabilities. Upon the terms and subject to the conditions
set forth herein, at the Closing, Purchaser shall assume:
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(a) All liabilities or obligations reflected on the Closing
Balance Sheet in accordance with GAAP; and
(b) All other liabilities or obligations incurred in or
arising in the ordinary course of Seller's Business whether or not such
liabilities are required to be disclosed on the Closing Balance Sheet in
accordance with GAAP (provided, however, that Purchaser shall assume only up to
Thirty Thousand Dollars ($30,000) of liabilities not recorded on the Closing
Balance Sheet that should have been recorded in accordance with GAAP),
including, without limitation, all obligations relating to the period after the
Closing Date under the written or oral agreements identified on the Schedules
hereto or not required to be so identified in accordance with the
representations relating to such Schedules that were entered into in the
ordinary course of Seller's Business, consistent with past practices and this
Agreement (the foregoing liabilities described in this Section 2.2(a) and (b)
shall be referred to herein as (the "Assumed Liabilities")).
Purchaser shall discharge the Assumed Liabilities in accordance with
their terms. It is expressly understood and agreed that Purchaser shall not be
liable for any of the obligations or liabilities of Seller of any kind or nature
other than those specifically assumed by Purchaser under this Section 2.2.
2.3 Liabilities Not Being Assumed. Anything contained herein to the
contrary notwithstanding, Seller shall remain responsible for and Purchaser
shall not assume any of the following liabilities or obligations, whether fixed
or contingent, known or unknown, matured or unmatured, executory or
non-executory, of Seller, which liabilities and obligations shall at and after
the Closing remain the exclusive responsibility of Seller (the "Excluded
Liabilities"):
(a) All liabilities and obligations of Seller or Shareholder
under this Agreement or obligations of Seller or Shareholder with respect to or
arising out of the consummation of the transactions contemplated by this
Agreement;
(b) All liabilities and obligations of Seller for Seller's
fees and expenses and taxes incurred by Seller in connection with, relating to,
or arising out of the consummation of the transactions contemplated by this
Agreement, except as specifically contemplated herein;
(c) Any liabilities or obligations or expenses of the Seller
or Shareholder related to pending or threatened litigation of Seller or the
Shareholder or otherwise related to the Business or Acquired Assets as of the
Closing Date and disclosed (or that should have been disclosed) on Schedule
4.10;
(d) Any lien, encumbrance or claim affecting the title to the
Acquired Assets including the Intellectual Property;
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(e) Any liabilities, obligations or expenses relating to any
environmental matter or condition disclosed (or that should have been disclosed)
in Schedule 4.21;
(f) All amounts payable by Seller to its Shareholder; and
(g) All liabilities or obligations of or relating to Seller or
the Business that are not Assumed Liabilities.
Seller shall discharge or make an adequate provision for all Excluded
Liabilities and, without limitation of the foregoing, if Seller shall liquidate,
dissolve, or wind-up after the Closing, Seller shall pay, post security for, or
otherwise make provision for all Excluded Liabilities prior thereto as provided
under law and Shareholder expressly agrees to guarantee the payment of all
Excluded Liabilities for which payment is required.
2.4 Closing Balance Sheet. Seller shall deliver to Purchaser a closing
balance sheet dated as of the Closing (the "Closing Balance Sheet"). The Closing
Balance Sheet shall be prepared in accordance with GAAP; without limitation of
the foregoing, Seller shall make appropriate accruals for any severance or
vacation pay or other obligations or liabilities due or related to Seller's
employees. The Closing Balance Sheet shall be delivered within ten (10) business
days after the Closing.
2.5 The Purchase Price. Subject to the provisions of Sections 2.6 and
2.7 below, the aggregate purchase price to be paid by Purchaser to Seller for
the Acquired Assets (the "Total Purchase Price") will be the amounts specified
in this Section 2.5, and will be paid by Purchaser to Seller as follows:
(a) Closing Payment. The amount payable at Closing shall be
Three Million Dollars ($3,000,000), in the form of immediately available funds.
(b) Deferred Payment. Purchaser shall pay to Seller Six
Million Dollars ($6,000,000), in the form of immediately available funds,
payable 180 days after the Closing Date (the "Deferred Payment Date").
2.6 Additional Revenue Incentive Payments. The Total Purchase Price may
be increased pursuant to the following "Additional Revenue Incentive Payments":
(a) First Incentive Payment. In that event that the Revenue of
the POS Division for the 1997 calendar year (which shall include the sum of (i)
the Revenue of Seller from the period January 1, 1997 to the Closing Date, plus
(ii) the Revenue of Purchaser from the Closing Date to December 31, 1997 of the
POS Division (the "1997 POS Revenue")) equals or exceeds Eight Hundred Thousand
Dollars ($800,000), Purchaser shall deliver to Seller a cash payment
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equal to the First Incentive Payment Value (as defined below), in the form of
immediately available funds, payable March 31, 1998; provided, however, that in
lieu of 50% of such payment, and except as provided in Section 2.8, Purchaser,
in its sole discretion, may deliver to Seller on March 31, 1998 an amount of
WavePhore Common Stock having an aggregate value equal to 50% of the First
Incentive Payment Value based upon the Average Market Price of WavePhore Common
Stock ending one day prior to March 31, 1998. As used herein, "First Incentive
Payment Value" shall be equal to Four Million Dollars ($4,000,000) multiplied by
a fraction, the numerator of which shall be the Revenue of the POS Division for
the 1997 calendar year, and the denominator of which shall be One Million Two
Hundred Thousand Dollars ($1,200,000); provided, however, that the First
Incentive Payment Value shall not exceed Four Million Dollars ($4,000,000).
(b) Second Incentive Payment. Subject to Purchaser's right to
set-off pursuant to Section 11.7, Purchaser shall deliver to Seller a cash
payment equal to the Second Incentive Payment Value (as defined below), in the
form of immediately available funds, payable on March 31, 1999; provided,
however, that in lieu of 50% of such payment, and except as provided in Section
2.8, Purchaser, in its sole discretion, may deliver to Seller on March 31, 1999
an amount of WavePhore Common Stock having an aggregate value equal to 50% of
the Second Incentive Payment Value based upon the Average Market Price of
WavePhore Common Stock ending one day prior to March 31, 1999. As used herein,
"Second Incentive Payment Value" shall be equal to Five Million Dollars
($5,000,000) multiplied by a fraction, the numerator of which shall be the
Revenue of the Combined Division for the 1998 calendar year, and the denominator
of which shall be Eight Million Dollars ($8,000,000); provided, however, that
the Second Incentive Payment Value shall not exceed Five Million Dollars
($5,000,000).
(c) Third Incentive Payment. Subject to Purchaser's right to
set-off pursuant to Section 11.7, in the event that the Revenue of the Combined
Division for the 1998 calendar year equals or exceeds Twelve Million Five
Hundred Thousand Dollars ($12,500,000), Purchaser shall deliver to Seller a cash
payment equal to the Third Incentive Payment Value (as defined below), in the
form of immediately available funds, payable on March 31, 1999; provided,
however, that in lieu of 50% of such payment, and except as provided in Section
2.8, Purchaser, in its sole discretion, may deliver to Seller on March 31, 1999
an amount of WavePhore Common Stock having an aggregate value equal to 50% of
the Third Incentive Payment Value based upon the Average Market Price of
WavePhore Common Stock ending one day prior to March 31, 1999. As used herein,
"Third Incentive Payment Value" shall be equal to that amount, if any, as shall
represent 40% of the Revenue of the Combined Division for the 1998 calendar year
which is in excess of Twelve Million Five Hundred Thousand Dollars
($12,500,000); provided, however, that the Third Incentive Payment Value shall
not exceed Two Million Dollars ($2,000,000).
(d) In order to facilitate the calculation of any Additional
Revenue Incentive Payments to Seller hereunder, the POS Division shall be
accounted for as a separate division in
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1997 and the Combined Division shall be accounted for as a separate division in
1998. For the purpose of this Section 2.6, all Revenue generated or derived from
the Acquired Assets and derivations therefrom shall be considered POS Revenue
without regard to the division or subsidiary or other affiliated entity,
including joint ventures, of Purchaser within which it was booked. Purchaser
shall deliver to Seller and Shareholder proposed budgets for 1997 and 1998 for
the POS and the Combined Divisions in accordance with Section 12.2 ("Proposed
Budget"). Such Proposed Budget shall set forth Purchaser's present reasonable,
good faith belief as to the estimate of resources necessary, and Purchaser's
intention to fund, to meet or exceed the revenue targets set forth in this
Agreement.
(e) Together with the payment by Purchaser of any Incentive
Payments, Purchaser shall deliver to Seller financial statements which are
reasonably necessary to support the calculation of such Incentive Payment in
accordance with this Agreement. If Seller disputes the amount of any Incentive
Payment provided for herein, Seller shall notify Purchaser within thirty (30)
days after the delivery of such payment. If Seller gives notice of a dispute
within such thirty (30) day period, promptly thereafter Purchaser and its
accountants shall meet and consult with Seller and/or its accountants to use
their best efforts to resolve and settle such dispute.
If Purchaser and Seller are unable, in good faith, to resolve any
dispute regarding the calculation of an Incentive Payment due Seller with
respect thereto within thirty (30) calendar days after receipt by Purchaser of
notice of dispute from Seller, then a "Big 6" accounting firm or office of
national repute (other than the firm currently serving as auditors for Purchaser
or Seller) as may be mutually agreed upon by Purchaser and Seller (the
"Accounting Arbitrator") shall be employed as arbitrator hereunder to settle
such dispute as soon as practicable. The parties shall give the Accounting
Arbitrator access to all documents, facilities and personnel within their
respective control reasonably necessary to perform its function as arbitrator.
The parties agree that the Accounting Arbitrator shall decide only matters
involving differences as to accounting practices and principles and other
matters relating to the calculation of the Incentive Payment due Seller pursuant
to this Agreement, and not to any non-accounting matters involving the
construction or interpretation of this Agreement. Any arbitration pursuant to
this Section 2.6(e) shall be conducted in Phoenix, Arizona, in accordance with
the then existing Commercial Arbitration Rules of the American Arbitration
Association. The Accounting Arbitrator determination with respect to any dispute
by Seller hereunder shall be final and binding on all parties, and judgment on
the arbitration award may be enforced in any court having jurisdiction over the
subject matter of the controversy. The parties shall bear equally the cost of
all fees and expenses of the Accounting Arbitrator for such services.
2.7 Adjustments to Purchase Price. If, at any time prior to December
31, 1998, there occurs an "Event of Sale" (as defined below) of the POS Division
or the Combined Division, the Additional Revenue Incentive Payments payable to
Seller by Purchaser, as set forth in Section 2.6 may be adjusted (the "Sale
Payment") as set forth in this Section 2.7.
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(a) Definitions. The following terms, when used in this
Section 2.7, shall have the following meanings:
"EVENT OF SALE" shall mean a sale, merger, or other business
combination of all or substantially all of the POS Division or
Combined Division, except to or with an entity with respect to
which WavePhore controls directly or indirectly 80% or more of
the equity or voting interest.
"EVENT DATE" shall mean the date on which there occurs an
Event of Sale.
"SALE PROCEEDS" shall mean all consideration received by
Purchaser, if any, in connection with the Event of Sale.
(b) If an Event of Sale occurs at any time after the Closing
Date but prior to January 1, 1998, then in lieu of the Additional Revenue
Incentive Payments set forth in Section 2.6, Purchaser shall deliver to Seller
an amount equal to 50% of the Sale Proceeds until such Sale Proceeds reach $22
million, after which 100% of such Sale Proceeds shall be retained by Purchaser.
(c) If an Event of Sale occurs at any time after December 31,
1997 but prior to January 1, 1999, Seller shall receive the First Incentive
Payment, to the extent earned, plus an additional amount calculated as follows:
in lieu of the Second and Third Incentive Payments as set forth in Section 2.6,
Purchaser shall deliver to Seller a portion of the Sale Proceeds in the ratio
that (i) $7 million bears to (ii) the sum of $9 million plus the amount of the
First Incentive Payment earned and paid plus the gross book value of assets
(including cash) contributed by Purchaser to the Combined Division from and
after the Closing Date, until Seller shall have received $7 million, after which
100% of the Sales Proceeds shall be retained by Purchaser.
(d) Purchaser shall pay the Sale Payment, in cash promptly
following any Event of Sale, provided, however, if Purchaser receives
consideration other than cash, then Purchaser shall pay the balance of the Sale
Payment the earlier of (i) the date any Additional Revenue Incentive Payments
pursuant to Section 2.6 would otherwise be due; or (ii) upon conversion of the
consideration to cash. For purposes of this Section 2.7(d), consideration other
than cash shall be valued upon its receipt by Purchaser at its fair market
value.
(e) Purchaser covenants and agrees that until December 31,
1998, it shall not without the prior written consent of Seller, which consent
shall not be unreasonably withheld, sell any of the Acquired Assets if (i) such
sale either individually or cumulatively would exceed 20% of the book value of
such Acquired Assets, or (ii) would impair or have a material adverse affect on
Seller's ability to achieve the Additional Revenue Incentive Payments; and that
to the extent
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Purchaser sells more than 20% of the Acquired Assets at a gain, such gain shall
be included in the calculation of Revenue for the calendar year in which such
sale occurs, pursuant to Section 2.6 hereof; provided, however, that no
Intellectual Property included in the Acquired Assets may be sold prior to
December 31, 1998 except with the prior consent of Shareholder, which consent
shall not be unreasonably withheld.
2.8 Maximum Deliverable WavePhore Common Stock. Notwithstanding
anything to the contrary in Sections 2.6, or 2.7 above, in no event shall the
aggregate amount of WavePhore Common Stock delivered or deliverable to Seller by
Purchaser pursuant to Sections 2.6, or 2.7 (i) have voting power with respect to
the WavePhore Common Stock equal to or in excess of 20% of the voting power
outstanding with respect to the WavePhore Common Stock on the Closing Date, or
(ii) equal or exceed 20% of the amount of WavePhore Common Stock outstanding on
the Closing Date. In the event that the foregoing limitation shall prevent
Purchaser from delivering WavePhore Common Stock to Seller in accordance with
Sections 2.6, or 2.7, Purchaser shall be required to deliver cash to Seller
rather than WavePhore Common Stock, as otherwise set forth in Sections 2.6, or
2.7.
2.9 Registration Rights. In the event that Purchaser elects to deliver
shares of WavePhore Common Stock to Seller pursuant to Section 2.6, the
following shall apply:
(a) Registration. WavePhore shall proceed as expeditiously as
possible to prepare and file a registration statement with the Securities and
Exchange Commission ("SEC") under the Securities Act of 1933, as amended (the
"Securities Act") on Form S-3 or such other form as appropriate covering the
registration of all the WavePhore Common Stock for sale by Seller or
Shareholder, and shall use its best efforts to cause such registration statement
to become effective as of the date of delivery or as soon as practicable, and in
any event within thirty (30) days, thereafter. WavePhore shall also prepare and
file with the SEC such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period of not less than six months or
such longer period as may be necessary to complete the sale of the WavePhore
Common Stock in the manner set forth therein. WavePhore shall furnish to Seller
and Shareholder such number of copies of such registration statement, each
amendment and supplement thereto, the prospectus included in such registration
statement and such other documents as they may reasonably request in order to
facilitate the disposition of the WavePhore Common Stock.
(b) Qualification. WavePhore shall use its best efforts to
qualify or register such WavePhore Common Stock under the securities or Blue Sky
laws of such jurisdictions as Seller or Shareholder may reasonably request and
do any and all other acts and things which may be reasonably necessary to enable
Seller or Shareholder to sell the WavePhore Common Stock in such jurisdictions.
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(c) Indemnification. WavePhore shall indemnify Seller and
Shareholder, their officers and directors and each person who controls Seller or
Shareholder (within the meaning of the Securities Act) against all losses,
claims, damages, liabilities and expenses caused by any untrue or alleged untrue
statement of material fact contained in any registration statement, prospectus,
or preliminary prospectus or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are caused by or contained in
any information furnished in writing to WavePhore by Seller or Shareholder
expressly for use therein or by Seller's or Shareholder's failure to deliver a
copy of the registration statement or prospectus or any amendments or
supplements thereto after WavePhore has furnished Seller or Shareholder with a
sufficient number of the same. In connection with any underwritten offering,
WavePhore shall indemnify such underwriters, their officers and directors and
each person who controls such underwriters (within the meaning of the Securities
Act) to the same extent as provided above with respect to the indemnification of
Seller and Shareholder. Seller and Shareholder shall indemnify WavePhore, its
officers and directors and each person who controls WavePhore (within the
meaning of the Securities Act) against all losses, claims, damages, liabilities
and expenses caused by any untrue or alleged untrue statement of material fact
contained in any registration statement, prospectus, or preliminary prospectus
or any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, to
the extent the same are caused by or contained in any information furnished in
writing to WavePhore by Seller or Shareholder expressly for use therein.
(d) Fees and Costs. With respect to each inclusion of shares
of WavePhore Common Stock owned by Seller or Shareholder in a registration
statement pursuant to this Section 2.9, all fees, costs and expenses of and
incidental to such registration shall be borne by WavePhore; provided, however,
that Seller and Shareholder shall bear their own underwriting discount and
commissions.
(e) Exchange Act Filings. WavePhore will take all actions
reasonably necessary to remain eligible to use a registration statement on Form
S-3 or, if it shall fail to do so, shall file a registration statement on such
other form as may be necessary to fulfill its obligations hereunder. Following
the effectiveness of any registration statement filed by WavePhore pursuant to
this Section 2.9, WavePhore will use its best efforts to file on a timely basis
with the SEC all information required under Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended, and shall use its best efforts to
take all action that may be required as a condition to the eligibility to use
Form S-3 and to the availability of Rule 144 under the Securities Act (or any
successor exemptive rule hereinafter in effect) with respect to WavePhore Common
Stock.
(f) Delay in Registration. In the event WavePhore is unable to
register WavePhore Common Stock delivered under Section 2.6 within thirty (30)
days of the date of
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delivery, but does register such WavePhore Common Stock within ninety (90) days
of the date of delivery, Seller or Shareholder shall be entitled to receive from
WavePhore an amount in cash within ten (10) days after the registration is
declared effective equal to the amount by which the Average Market Price used to
determine the Additional Revenue Incentive Payment with respect to which such
shares were delivered is more than the Average Market Price on the date that
such registration becomes effective multiplied by the applicable number of
shares. In the event WavePhore is unable to register WavePhore Common Stock
delivered under Section 2.6 within ninety (90) days of the date of delivery,
Seller or Shareholder shall have the option to surrender all or any portion of
such shares to WavePhore no later than ten (10) business days after the
expiration of such 90-day period in exchange for payment by WavePhore in cash of
the Average Market Price used to determine the Additional Revenue Incentive
Payment with respect to which such shares were delivered multiplied by the
number of shares surrendered.
2.10 Allocation of Purchase Price. The Total Purchase Price to be paid
by Purchaser for the Acquired Assets shall be allocated as follows: The Total
Purchase Price shall be allocated among the Acquired Assets in accordance with
Internal Revenue Code 1060 and the regulations promulgated thereunder and in the
manner mutually agreed to by Purchaser and Seller or Shareholder as promptly as
reasonably practicable following the Closing, and Seller and Purchaser hereby
agree to report this transaction for federal tax purposes in accordance with
such allocation of the Purchase Price. Such allocation shall be reported by
Purchaser and Seller on Internal Revenue Service Form 8594 Asset Acquisition
Statement which will be filed with Purchaser's and Seller's Federal Income Tax
Return for the tax year that includes the Closing Date. The parties further
agree to coordinate their accounting for the transaction. The parties agree that
the covenant not-to-compete is inseparable from and given to protect the
goodwill and therefore none of the Total Purchase Price shall be allocated to
the covenant not to compete set forth in Article 3 hereof. The increase in the
Total Purchase Price resulting from Additional Revenue Incentive Payments under
Section 2.6 or adjustments to Additional Revenue Incentive Payments under
Section 2.7 shall be allocated among the Acquired Assets in the manner mutually
agreed to by Purchaser and Seller or Shareholder as promptly as reasonably
practicable following each of such payments, and Purchaser and Seller or
Shareholder shall report such payments for federal tax purposes in accordance
with such allocation. Such allocation shall be reported by Purchaser and Seller
or Shareholder by filing a supplemental asset acquisition statement on Internal
Revenue Service Form 8594 for the taxable year which includes such payments.
2.11 Taxes. Purchaser shall pay all sales and use taxes arising out of
the transfer of the Acquired Assets and Seller shall pay its portion, prorated
as of the Closing Date, of state and local real and personal property taxes.
Purchaser shall not be responsible for any payroll, excise, income, business,
occupation, withholding, or similar tax, or any taxes of any kind related to any
period prior to the Closing Date.
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2.12 Transfer Fees. Seller shall pay any and all transfer and
assumption fees and expenses relating to the sale of the Acquired Assets by
Seller to Purchaser, including, without limitation, all sales or use taxes or
levies related, directly or indirectly, in any way to the classification or
transfer of accounts receivable, inventory, fixed assets, or intangibles
contemplated under this transaction to be accomplished prior to the Closing
Date.
ARTICLE 3
GRANT OF RIGHTS AND
AGREEMENT NOT TO COMPETE
3.1 Intellectual Property. The intellectual property of Seller and
Shareholder that is the subject of this Agreement is owned or licensed by
Shareholder and has been used by Seller to operate the Business as a license
terminable at the will of Shareholder and consists of Online Technology and
Shareholder's Marks, as defined below.
3.2 Online Technology. Seller and Shareholder warrant and represent
that Schedule 3.2 contains a description of all of the technology owned or
licensed by Seller and/or Shareholder and currently used to support the
operations and to provide goods and services associated with the Business,
including NewsCenter, Paracel Today, and BioView Today. NewsCenter is a
self-contained software system owned by Shareholder. Paracel Today and BioView
Today are applications of the system developed for specific purposes and owned
by Shareholder. The technology listed in Schedule 3.2 is hereinafter referred to
as "Online Technology", and shall include all rights to patents, copyrights, and
all applications therefor, schematics, algorithms, technology, know how,
computer programs, applications (in both source code and object code form),
databases, platform integrations, trade secrets and tangible or intangible
proprietary information or material owned or licensed by Seller and/or
Shareholder and associated with the items listed in Schedule 3.2 or otherwise
associated with the Business. Online Technology does not include, however, any
rights to any third party licenses or the Fast Data Finder (the "FDF") acquired
by Shareholder from TRW, Inc. in an agreement dated June 5, 1992 (the "TRW
Agreement"), the rights to which shall be governed by Sections 3.4(d)-(g) of
this Agreement.
3.3 Shareholder's Marks. Paracel Today, Paracel, BioView Today, and
BioView are trademarks and service marks owned by Shareholder ("Shareholder's
Marks"). They are not registered but application for registration is being
prepared, and registration will be sought by Shareholder.
3.4 Grant.
(a) Shareholder grants to Purchaser a fully paid-up,
irrevocable, worldwide, nonexclusive (except as set forth in Section 3.6)
license, with right of sublicense, to:
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(i) integrate the Online Technology into its
products, and to use, copy, modify, sublicense, and otherwise
distribute the Online Technology in conjunction with its
products;
(ii) use, copy, modify, sell and otherwise distribute
user manuals, sales, marketing and promotional materials,
packaging designs, art work, and other similar items relating
to the Online Technology and incorporating the Shareholder's
Marks; and
(iii) use, modify, sublicense, and copy the Online
Technology and develop derivative materials as appropriate to
maintain and support its products.
(b) Improvements, modifications, and derivatives of the Online
Technology that are developed by Purchaser shall be owned by Purchaser.
(c) So long as Online Technology or a derivative thereof is
the principal technology used by Purchaser within the Business, but no longer
than ten (10) years following the date of Closing, Purchaser may use, without
royalty compensation, Shareholder's Marks, subject in all cases to necessary and
reasonable restrictions by Shareholder, or its assignee, to assure that the
marks are not being improperly used.
(d) For a period of one (1) year following the Closing,
Shareholder will provide maintenance free of charge on FDF products transferred
to Purchaser hereunder; thereafter maintenance will be provided, so long as
Shareholder provides such maintenance to other customers, at the price offered
to its most favored of those customers. In the event that Shareholder ceases to
provide such maintenance, or fails to provide such maintenance in accordance
with reasonable standards to be agreed upon by the parties within 30 days
following the date of Closing, Shareholder shall provide to Purchaser, free of
charge, all available information relevant to the maintenance of FDF products.
(e) After the Closing, Shareholder and Purchaser shall
negotiate in good faith to conclude mutually agreeable and reciprocal Value
Added Reseller ("VAR") Agreements for Shareholder to act as a VAR for BioView
Today and Purchaser to act as a VAR for FDF Technology. Such VAR Agreements
shall be entered into no later than 45 days after the date of Closing. Until
Purchaser has received qualification and becomes a Value Added Reseller,
Shareholder agrees to fulfill Purchaser's requirements for Licensed Products as
defined in the TRW Agreement on terms no less favorable than accorded to any
other buyer of such Licensed Products.
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(f) Shareholder covenants that it will maintain in full force
and effect the TRW Agreement until the last to expire of the "Licenses" or
"Patents" as those terms are defined in the TRW Agreement.
(g) FDF Technology. FDF technology refers to the hardware text
profiling technology known as Fast Data Finder or FDF including any current
version of "ServerOne," the operating system software for the FDF, developed and
marketed by Shareholder under an exclusive license from TRW Inc. ("FDF
Technology"). For the purposes of this Section 3.4(g), FDF Technology includes
any text filtering and text profiling systems developed and marketed by
Shareholder using the technology and patents licensed under the TRW Agreement
including the current generation FDF 3 technology and its successors.
For as long as Purchaser is active in the Business, and uses
the FDF Technology as its principal technology for filtering and profiling
textual data, Shareholder agrees to sell FDF Technology to Purchaser at prices
and on terms no less favorable than those offered to its most favored customers.
For a period of five (5) years following the Closing, provided
that Purchaser is active in the Business and uses the FDF Technology as its
principal technology for filtering and profiling text in the Business, and to
the extent that Shareholder may legally do so, Shareholder further agrees not to
sell, license, or supply FDF Technology to any party that Shareholder knows will
use, or can reasonably be expected to use, the same in competition with
Purchaser in the Business.
For a period of one (1) year following the Closing,
Shareholder will provide maintenance free of charge on FDF Technology
transferred to Purchaser hereunder; thereafter maintenance will be provided, so
long as Shareholder provides such maintenance to other customers, at the price
offered to the most favored of those customers.
3.5 Shareholder's Ongoing Business in Biotechnology. Notwithstanding
any other provisions of this Article 3, Shareholder shall have the right to
engage in the business of marketing, selling, and distributing
information-distribution products and related services to buyers in the fields
of bioinformatic and pharmaceuticals research. Purchaser shall not use "Bioview"
as a trademark except in conjunction with current products and derivatives
thereof of the Business.
3.6 Exclusivity and Competitive Licenses. For a period of five (5)
years from the Closing Date, except as provided for in Paragraph 3.5, all rights
in the Online Technology granted to Purchaser under this Article 3 shall be
exclusive and solely accorded to Purchaser in the Field of Use. Shareholder
shall not grant any right in the Online Technology to any other party in the
Field of Use, and shall not grant any licenses to any third party to use or
distribute any portion
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of the Online Technology for the manufacture or distribution of products or
provision of services in the Field of Use. To the extent that Shareholder grants
any further licenses relating to the Online Technology, Shareholder shall
require and enforce warranties and covenants from its licensees that the Online
Technology shall not be used or distributed in the Field of Use.
3.7 Assistance with Third Party Licenses. To the extent transferable
without additional cost to Shareholder or Seller, Seller shall transfer or
otherwise make available to Purchaser all rights for use of third party
technology (except for technology embodied in the TRW Agreement) and any
associated rights that are used in conjunction with the Business ("Third Party
Licenses"). Upon the effective transfer of such Third Party Licenses, Purchaser
shall assume responsibility for payment of license fees and maintenance fees for
such Third Party Licenses.
3.8 Technology Transfer and Upgrade Assistance. For a period of one (1)
year following the Closing, Shareholder agrees to make reasonable efforts to
assist Purchaser in the technology transfer and continuing development of the
Online Technology as may be requested by Purchaser ("Assisted Upgrades").
Assisted Upgrades shall include assignment of Shareholder's current Paracel
Today development team (Andrew Oliver, Ocie Mitchell, and Debra Dell 'Oca) to
the continuing development of NewsCenter and Paracel Today through the delivery
of the upgrade known as Paracel Today 4.0, anticipated around September 1997, to
the extent that they remain employees of Shareholder, and to the extent that
their services are desired by Purchaser. Shareholder agrees to charge, and
Purchaser agrees to pay, all time, material, and incidental costs associated
with Assisted Upgrades at Shareholder's lowest commercial rates and at terms no
less favorable than those offered to its most favored customers.
Until December 31, 1998, each party shall make available to
the other, free of charge, a copy of any and all corrections, fixes, routine
upgrades, and routine maintenance of the Online Technology and the FDF
Technology, as they are released by the party. Each party further agrees to
grant to the other all rights and licenses as described in this Article 3 for
any and all such items provided pursuant to this paragraph. Notwithstanding the
foregoing, Purchaser shall charge for mainteneance of the FDF Technology in
accordance with Section 3.4(g) commencing one (1) year after Closing.
3.9 Agreement Not to Compete. Except as provided for in Paragraph 3.5,
in consideration of the Total Purchase Price set forth herein and as an
inducement to Purchaser to enter into this Agreement, each of Seller and
Shareholder and any of their direct or indirect subsidiaries, hereby covenant
and agree that except as otherwise agreed it will not after the Closing Date for
a period of five (5) years after the Closing:
(a) Engage, directly or indirectly, either as principal,
partner, joint venturer, consultant, agent, or proprietor (other than as an
owner of 1% or less of the outstanding stock of a public corporation whose stock
is traded on a recognized public exchange but not including
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WavePhore, Inc.) or in any other manner participate in the ownership,
management, operation, or control of any person, firm, partnership, limited
liability company, corporation, or other entity which engages in the business of
selling any products or services which are competitive with the Business as
continued by Purchaser or any of its affiliates; or
(b) Directly or indirectly solicit for employment any person
who is an employee of Purchaser; or
(c) Directly or indirectly solicit for employment any person
who, as of the Closing Date, is any employee of Seller who thereafter becomes an
employee of Purchaser.
3.10 Acknowledgment; Relief for Violation. Each of Seller and
Shareholder hereby agree that the period(s) of time provided for in this Article
3, and the territorial restrictions and other provisions and restrictions set
forth herein, are reasonable and necessary to protect Purchaser and its
successors and assigns in the use and employment of the goodwill of the Business
conducted by Seller prior to the Closing Date and sold by Seller to Purchaser
pursuant to this Agreement. Each of Seller and Shareholder further agree that
damages cannot compensate Purchaser in the event of a violation of the above
agreement not to compete, and that, if such violation should occur, injunctive
relief shall be essential for the protection of Purchaser and its successors and
assigns. Accordingly, each of Seller and Shareholder hereby covenant and agree
that, in the event any of the provisions of the agreement not to compete shall
be violated or breached, Purchaser shall be entitled to obtain injunctive relief
against the party or parties violating such covenants, without bond but upon due
notice, in addition to such further or other relief as may pertain at equity or
law. Petition for or obtainment of such an injunction by Purchaser shall not be
considered an election of remedies or a waiver of any right to assert any other
remedies which Purchaser has at law or in equity. No waiver of any breach or
violation hereof shall be implied from forbearance or failure by Purchaser to
take action thereon.
3.11 Severability. Each of Seller and Shareholder agree that, if any
provision with respect to this Article 3 shall be adjudicated to be invalid or
unenforceable, such provision shall be deleted from this Agreement, but such
deletion is to apply only with respect to the operation of such provision in the
particular jurisdiction in which such adjudication is made; provided, however,
that to the extent any provision hereof is deemed unenforceable by virtue of its
scope in terms of area or length of time, but may be made enforceable by
limitations thereon, each of Seller and Shareholder agrees that the same shall
be enforceable to the fullest extent permissible under the laws and public
policies applied in such jurisdiction in which the enforcement is sought. Each
of Seller and Shareholder further agrees that the amount(s) paid by Purchaser
under this Agreement shall not limit, restrict, or otherwise be deemed to
establish the amount of damages suffered by Purchaser by reason of any breach of
this Article 3.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
AND SHAREHOLDER
As of the date hereof and as of the Closing Date, Seller and
Shareholder, jointly and severally, hereby represent and warrant to Purchaser
each of the following:
4.1 Organization and Qualification. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. Shareholder is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. Except as disclosed in
Schedule 4.1, each of Seller and Shareholder has the requisite corporate power
and authority to own and operate its properties and to carry on its business as
now conducted in every jurisdiction where the failure to do so would have a
material adverse effect on its business, properties or ability to conduct the
business currently conducted by it. The copies of the Articles of Incorporation
and Bylaws of Seller and Shareholder previously furnished to Purchaser are
correct and complete and reflect all amendments thereto.
4.2 Authority Relative to This Agreement. Each of Seller and
Shareholder has the requisite corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement by Seller and Shareholder and the consummation by Seller and
Shareholder of the transactions contemplated hereby have been duly authorized by
Seller and Shareholder, and no other corporate proceedings on the part of Seller
and Shareholder are necessary to authorize this Agreement and such transactions.
This Agreement has been duly executed and delivered by Seller and Shareholder
and, assuming the due authorization, execution and delivery by Purchaser,
constitutes a valid and binding obligation of each, enforceable in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization or other similar laws relating to the
enforcement of creditors' rights generally and by general principles of equity.
Neither Seller nor Shareholder is subject to, or obligated under, any provision
of (a) its Articles of Incorporation or Bylaws, (b) any material agreement,
arrangement or understanding, (c) any material license, franchise or permit, or
(d) any law, regulation, order, judgment or decree, which would be breached or
violated, or in respect of which a right of termination or acceleration would
arise or any encumbrance on any of its or any of its subsidiaries' assets would
be created, by its execution, delivery and performance of this Agreement and the
consummation by it of the transactions contemplated hereby.
4.3 Capitalization. All of the issued and outstanding shares of common
stock or other equity securities of Seller are validly issued, fully paid and
nonassessable, and are owned free and clear by Shareholder, and there are no
other shares of capital stock of Seller outstanding. There are no outstanding
subscriptions, options, rights, warrants, convertible securities, or other
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agreements or commitments obligating Seller to issue or to transfer from
treasury any additional shares of its capital stock.
4.4 Financial Statements. Seller has delivered to Purchaser (i) the
unaudited balance sheet of Seller for the year ended December 31, 1996, and (ii)
the unaudited statement of operations for the year ended December 31, 1996
(collectively the "Unaudited Financial Statements"). Seller's Unaudited
Financial Statements are complete and correct and in accordance with the books
of account and records of Seller, and present fairly Seller's financial
position. The Unaudited Financial Statements have been prepared in accordance
with GAAP. The Unaudited Financial Statements and the financial statements of
Seller for the fiscal year ended December 31, 1995 are capable of being audited
in accordance with GAAP.
4.5 Subsidiaries. Seller does not own, directly or indirectly, any
interest or investment (whether equity or debt) in any corporation, partnership,
limited liability company, joint venture, trust, or other entity.
4.6 Absence of Undisclosed Liabilities. Except for Assumed Liabilities,
Seller has no obligations or liabilities of any nature, whether known or
unknown, absolute, accrued, contingent or otherwise and whether due or to become
due, arising out of or relating to the Business, except (a) as and to the extent
disclosed or reserved against in the March 1997 Balance Sheet and (b) for
liabilities and obligations that (i) were incurred after the date of the March
1997 Balance Sheet in the ordinary course of business consistent with prior
practice and (ii) individually and in the aggregate are not material to the
Business and have not had or resulted in, and will not have or result in, a
material adverse effect.
4.7 Absence of Certain Developments. Except as set forth in Schedule
4.7, since March 31, 1997, Seller has not:
(a) changed its accounting methods or practices (including any
change in depreciation or amortization policies or rates) or revalued any of its
assets;
(b) redeemed or purchased, directly or indirectly, any shares
of its capital stock, or declared or paid any dividends or distributions with
respect to any shares of its capital stock;
(c) issued or sold any equity securities of it, securities
convertible into or exchangeable for equity securities of it, warrants, options
or other rights to acquire equity securities of it, or bonds or other securities
of it;
(d) borrowed any amount under existing lines of credit or
otherwise or incurred or become subject to any indebtedness, except as
reasonably necessary for the ordinary operation
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of Seller's business and in a manner and in amounts that are in keeping with the
historical practice of Seller;
(e) discharged or satisfied any lien or encumbrance or paid
any liability, other than current liabilities and related liens (or current
installments due on intermediate or long-term liabilities) paid or satisfied in
the ordinary course of business;
(f) sold, assigned, transferred, mortgaged, pledged or
subjected to any lien, charge or other encumbrance, any tangible assets,
properties, or rights of Seller, except as incurred in the ordinary course of
business consistent with the past practices of Seller;
(g) sold, assigned or transferred (including without
limitation transfers to any employees, shareholders or affiliates of Seller) any
patents, trademarks, trade names, copyrights, trade secrets or other intangible
assets, or disclosed any proprietary or confidential information to any person
other than Purchaser, except in the ordinary course of business;
(h) materially changed the pricing or royalties set or charged
by Seller to its customers or licensees or agreed to any material change in the
pricing or royalties set or charged by persons who have licensed Intellectual
Property (as defined in Section 4.20) to Seller;
(i) canceled, waived or compromised any right, claim or debt,
or changed any payment practice, other than the write-off or compromise of any
account receivable in the ordinary course of business and consistent with past
practice;
(j) suffered any material theft, damage, destruction or loss
of or to any property or properties owned or used by it, whether or not covered
by insurance;
(k) increased the annualized level of compensation of or
granted any extraordinary bonuses, benefits or other forms of direct or indirect
compensation to any employee, officer, director or consultant, or terminated,
amended or otherwise modified any plans for the benefit of employees;
(l) made any loans or advances to, or guarantees for the
benefit of, any persons (other than advances to sales personnel in the ordinary
course of business);
(m) engaged or agreed to engage in any extraordinary
transactions or distributions except in the ordinary course of business;
(n) taken any other action or entered into any other
transaction other than in the ordinary course of business and in accordance with
past custom and practice, or entered into any transaction with the Shareholder;
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(o) suffered or permit to have occurred any material adverse
changes in the business, operations, financial condition, property, or affairs
of Seller, as a result of any occurrence or development or threatened occurrence
or development, whether or not insured against, which would materially adversely
affect the properties or assets, or the business operations or affairs of
Seller;
(p) failed to pay its debts or obligations when due;
(q) made any agreements to do any of the things described in
the preceding clauses (a) through (p).
4.8 Real Estate.
(a) Seller does not own any real estate.
(b) Schedule 4.8 sets forth a list of all leases of real
property and improvements relating to the Business ("Leases"), in each case,
setting forth (i) the lessor and lessee thereof and the date and term of each of
the Leases, (ii) the street address of each property covered thereby, and (iii)
a brief description (including size and function) of the principal improvements
and buildings thereon (the "Leased Premises"). The Leases are in full force and
effect and have not been amended, Seller has a valid and existing leasehold
interest under each such Lease for the term set forth therein, and neither
Seller nor any other party thereto is in material default or material breach
under any such Lease. No event has occurred which, with the passage of time or
the giving of notice or both, would cause a breach of or default under any of
such Leases, except for breaches or defaults which in the aggregate could not
reasonably be expected to have a material adverse effect on the Business.
(c) The properties set forth on Schedule 4.8 constitute all of
the real estate used or occupied by Seller in connection with the Business, and
each such property has access, sufficient for the conduct of the business
conducted thereon, to public roads and to all utilities, including electricity,
sanitary and storm sewer, potable water, natural gas and other utilities, used
in the operation of the Business.
(d) Seller is not in violation of any applicable zoning
ordinance or other law, regulation, or requirement relating to the operation of
any of the properties used in the Business, including, without limitation,
applicable environmental protection and occupational health and safety laws and
regulations, and Seller has not received any notice of any such violation, or of
the existence of any condemnation proceeding with respect to any properties
owned or leased by it.
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4.9 Title to Acquired Assets. The Acquired Assets constitute all
property necessary for the operation of the Business as now conducted, and such
property is in good working condition. Seller is the owner, beneficially and of
record, of all of the Acquired Assets free and clear of all liens, encumbrances,
security agreements, equities, options, claims, charges, and restrictions,
except as described in Schedule 4.9.
4.10 Litigation. Except as set forth on Schedule 4.10, there are no
suits, claims, actions, arbitrations, investigations, or proceedings entered
against, now pending, or, to the Seller's or Shareholder's Knowledge, threatened
against Seller or Shareholder, jointly or severally, before any court,
arbitration, administrative or regulatory body, or any governmental agency which
may result in any judgment, order, award, decree, liability, or other
determination which will or could reasonably be expected to have any material
adverse effect upon Seller or Shareholder, the Acquired Assets, or the Business.
Neither Seller nor Shareholder is subject to any continuing court or
administrative order, writ, injunction, or decree applicable to it or to the
Business, Acquired Assets, or to employees, and Seller is not in default with
respect to any order, writ, injunction, or decree of any court or federal,
state, municipal, or other governmental department, commission, board, agency,
or instrumentality.
4.11 Consents. Except as otherwise disclosed on Schedule 4.11, neither
Shareholder nor Seller is required to obtain any consents or other approvals
from any governmental agency, bureau, or authority, or other person, including
any lender, vendor, or lessor in order to effect the transaction contemplated
hereby.
4.12 Solvency; Bulk Sales. The transfer of the Acquired Assets is not
fraudulent to any creditor or equity interest holder of Seller. There is no
Texas bulk sales or bulk transfer law applicable to the sale of the Acquired
Assets hereunder.
4.13 Taxes. Seller, and Shareholder with respect to Seller, have filed
all federal, foreign, state, county and local income, excise, property, sales
and other tax returns which are required to be filed by them, and all such
returns are true and correct; all taxes due and payable (whether or not shown on
any tax return) by Seller have been paid; Shareholder and Seller file a
consolidated tax return; Seller's portion of any provision for taxes is included
in Shareholder's Balance Sheet and as of the Closing Date, Shareholder will
accrue an amount sufficient to cover Seller's portion of any tax liability;
Seller has paid all taxes due and payable by it or which it is obligated to
withhold from amounts owing to any employee, creditor, or third party; Seller
has not waived any statute of limitations in respect of taxes or agreed to any
extension of time with respect to a tax assessment or deficiency; to the best
Knowledge of Seller and Shareholder, the assessment of any additional taxes
relating to Seller for periods for which returns have been filed is not
expected; and Seller has not received notice of any unresolved questions or
claims concerning the tax liability of Seller. Seller is not a party to a tax
sharing or allocation agreement
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nor does Seller owe any amount under such agreement. Neither Seller nor the
Acquired Assets are subject to any federal sales tax upon sale or other
disposition thereof.
4.14 Licenses and Permits. Schedule 4.14 sets forth a list of all of
the licenses, franchises, certificates, permits, easements, consents, rights,
and privileges, including, without limitation, those of any federal, state, or
local governmental or regulatory body, that are necessary and appropriate to the
operation of the Business by the Seller. All such items are in full force and
effect and true and correct copies thereof have heretofore been furnished to
Purchaser.
4.15 Compliance with Laws. Seller is not in default under or in
violation of any applicable statute, law, ordinance, decree, order, rule,
regulation, franchise, permit, or license of any governmental body, which had or
may have a material adverse affect upon any property or assets of Seller, or
upon Seller's Business, condition (financial or other) or results of operations
or the Acquired Assets.
4.16 Contracts. Except as set forth in Schedule 4.16 hereto, there is
no legally enforceable contract, agreement, commitment, or arrangement
("Contract"), or any outstanding unaccepted offer ("Offer"), whether written or
oral, express or implied, fixed or contingent, having a value of greater than
Five Thousand Dollars ($5,000.00), to which Seller is a party or by which any
property or asset of Seller is bound; provided, however, that the Contracts and
Offers set forth on Schedule 4.16 include all service contracts to which Seller
is a party regardless of value. Seller has made available to Purchaser true and
correct copies of all written (and has furnished to Purchaser accurate and
complete written summaries of all material provisions of all oral) Contracts and
Offers, all as presently in effect. Seller is not in default in the payment of
any obligation under, or in the performance of any material covenant or
obligation to be performed by such party pursuant to, any Contract. Except only
as to contracts, agreements, and other documents listed in Schedule 4.16
attached hereto or any other Schedule attached hereto, Seller is not a party to
or bound by any written or oral:
(a) Contract not made in the ordinary course of business;
(b) employment or independent contractor agreement;
(c) Contract with any labor union or association;
(d) bonus, pension, profit sharing, retirement, stock
purchase, hospitalization, medical reimbursement, insurance, or other plan
providing employee benefits;
(e) lease with respect to any property, real or personal,
whether as lessor or lessee;
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(f) continuing Contract for the future purchase of materials,
supplies, or equipment;
(g) Contract or commitment for capital expenditures;
(h) Contract continuing over a period of more than thirty (30)
days from its date;
(i) Contract for the lease, operation, or maintenance of any
machinery or equipment; or
(j) Contract or agreement to pay any royalties or fees with
respect to any sales of Seller.
4.17 Accounts Receivable. Except to the extent collected since March
31, 1997, all accounts receivable reflected on the March 1997 Balance Sheet, and
all accounts receivable of Seller accruing between March 31, 1997 and the
Closing Date are and will be (i) bona fide claims against debtors for sales or
other charges, (ii) subject to no Known defenses, set-offs, or counterclaims,
and (iii) collectible in accordance with their terms, other than to the extent
of the reserves set forth on the March 1997 Balance Sheet. All such accounts
receivable of Seller arose in the ordinary course of business and are carried at
values determined in accordance with GAAP.
4.18 [Intentionally Omitted].
4.19 Restrictions on Business Activities. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order, or decree to
which Seller is a party or otherwise binding on Seller which has or reasonably
could be expected to have the effect of prohibiting or impairing any business
practice of Seller, the Acquired Assets (tangible or intangible), or the conduct
of the Business.
4.20 Intellectual Property.
(a) Seller and Shareholder warrant and represent that (i) it
owns, or is licensed or otherwise possesses legally enforceable rights to use,
all patents, trademarks, trade names, service marks, copyrights, and all
applications therefor, maskworks, net lists, schematics, algorithms technology,
know-how, computer software programs or applications (in both source code and
object code form), platform integration and databases, trade secrets and
tangible or intangible proprietary information or material that are used in the
Business as currently conducted (the "Intellectual Property"); and (ii) as of
the Closing Date the Intellectual Property will function substantially in
accordance with the description set forth in Schedule 3.2.
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(b) Seller and Shareholder warrant and represent that Schedule
3.2 contains a true and correct description of (i) the Online Technology, (ii)
Third Party Licenses, (iii) patents and trademarks used in the Business.
(c) Seller and Shareholder warrant and represent that, except
for End User Licenses and information provider agreements, the execution and
delivery of this Agreement by Seller and Shareholder, and the consummation of
the transactions contemplated hereby, will neither cause Seller or Shareholder
to be in violation or default under any license, sublicense or agreement, nor
entitle any other party to any such license, sublicense or agreement to
terminate or modify such license, sublicense or agreement. Except for End-User
Licenses and information provider agreements granted to Seller or Shareholder,
and except as set forth on Schedule 3.2, Seller or Shareholder is the sole and
exclusive owner or licensee of, with all right, title and interest in and to
(free and clear of any liens or encumbrances), the Intellectual Property rights,
and has sole and exclusive rights (and is not contractually obligated to pay any
compensation to any third party in respect thereof) to the use thereof or the
material covered thereby in connection with the services or products in respect
of which the Intellectual Property rights are being used.
(d) Except as disclosed in Schedule 4.10, no claims with
respect to the Intellectual Property rights have been asserted or are threatened
by any person nor are there any Known valid grounds for any bona fide claims (i)
to the effect that the manufacture, sale, licensing or use of any Seller or
Shareholder product infringes on any copyright, patent, trade secret or other
proprietary right of any third party, (ii) against the use by Seller or
Shareholder of any trade secrets, copyrights, maskworks, patents, technology,
know-how or computer software programs and applications used in Seller's
Business as currently conducted, or (iii) challenging the ownership by Seller or
the validity or effectiveness of any of the Intellectual Property rights. All
licenses to Intellectual Property patents, and registered trademarks, service
marks and copyrights held by Seller are valid and subsisting. There is no Known
unauthorized use, infringement or misappropriation of any of the Intellectual
Property rights by any third party, including any employee or former employee of
Seller. No Intellectual Property right or product of Seller or Shareholder is
subject to any outstanding decree, order, judgment, or stipulation restricting
in any manner the transfer or licensing thereof by Seller.
(e) Seller has required its employees and contractors with
access to its Intellectual Property rights and proprietary and confidential
information to execute proprietary information and confidentiality agreements
substantially in Seller's standard forms and has provided Purchaser with copies
of all such forms.
4.21 Environmental Matters.
(a) Seller has at all times been in full compliance with all
Environmental Laws governing its Business, operations, properties, and assets,
including, without limitation: (i) all
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requirements relating to the Discharge and Handling of Hazardous Substances or
other Wastes defined below); (ii) all requirements relating to notice, record
keeping, and reporting; (iii) all requirements relating to obtaining and
maintaining Permits for the ownership of its properties and assets and the
operation of the Business, including Permits relating to the Handling and
Discharge of Hazardous Substances and other Wastes; or (iv) all applicable
writs, orders, judgments, injunctions, governmental communications, decrees,
informational requests, or demands issued pursuant to, or arising under, any
Environmental Laws.
(b) There are no (and there is no basis for any) orders,
warning letters, notices of violation (collectively "Notices") or proceedings
pending or threatened against or involving Seller, the Business, or the Acquired
Assets issued by any governmental authority or third party with respect to any
Environmental Laws or Permits issued to Seller thereunder in connection with,
related to, or arising out of the ownership by Seller of its properties or
assets or the operation of the Business which have not been resolved to the
satisfaction of the issuing governmental authority or third party in a manner
that would not impose any obligation, burden, or continuing liability on
Purchaser in the event that the transactions contemplated by this Agreement are
consummated, or which could have a material adverse effect on Seller's Business,
financial condition, or results of operations including, without limitation: (i)
Notices or proceedings related to Seller being a potentially responsible party
for a federal or state environmental cleanup site or for corrective action under
any applicable Environmental Laws; (ii) Notices or proceedings in connection
with any federal or state environmental cleanup site, or in connection with any
of the real property or premises where Seller has transported, transferred, or
disposed of other Wastes; (iii) Notices or proceedings relating to Seller being
responsible to undertake any response or remedial actions or clean-up actions of
any kind; or (iv) Notices or proceedings related to Seller being liable under
any Environmental Laws for personal injury, property damage, natural resource
damage, or clean up obligations.
(c) Except as set forth on Schedule 4.21, Seller has not
Handled or Discharged, nor allowed or arranged for any third party to Handle or
Discharge, Hazardous Substances or other Waste to, at, or upon: (i) any location
other than a site lawfully permitted to receive such Hazardous Substances or
other Waste; (ii) any of the leased real property; or (iii) any site (x) which,
pursuant to CERCLA or any similar state law has been placed on the National
Priorities List or its state equivalent; or (y) with respect to which the
Environmental Protection Agency or the relevant state agency or other
Governmental Authority has notified Seller that such Governmental Authority has
proposed or is proposing to place on the National Priorities List or its state
equivalent. There has not occurred, nor is there presently occurring, a
Discharge, or threatened Discharge, of any Hazardous Substance on, into, or
beneath the surface of, or adjacent to, any of Seller's real property in an
amount or otherwise requiring a Notice or report to be made to a Governmental
Authority or in violation of any applicable Environmental Laws.
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(d) Schedule 4.21 identifies the operations and activities,
and locations thereof, which have been conducted and are being conducted by
Seller, on any of Seller's real property or leased property which have involved
the Handling or Discharge of Hazardous Substances.
(e) Schedule 4.21 identifies the locations to which Seller has
transferred, transported, hauled, moved, or disposed of Waste over the past five
(5) years and the types and volumes of Waste transferred, transported, hauled,
moved, or disposed of to each such location.
(f) Except as set forth on Schedule 4.21, Seller does not use,
and has never used, any Aboveground Storage Tanks or Underground Storage Tanks,
and there are not now nor have there ever been any Underground Storage Tanks
beneath any of Seller's leased real property that are required to be registered
under applicable Environmental Laws.
(g) Schedule 4.21 identifies (i) all environmental audits,
assessments, or occupational health studies undertaken since January 1, 1994 by
Seller or its agents or undertaken by any Governmental Authority or any third
party, relating to or affecting Seller or any of Seller's real property or
leased real property; (ii) the results of any ground, water, soil, air, or
asbestos monitoring undertaken by Seller or its agents or undertaken by any
Governmental Authority or any third party, relating to or affecting Seller or
any of Seller's leased real property which indicate the presence of Hazardous
Substances at levels requiring a notice or report to be made to a Governmental
Authority or in violation of any applicable Environmental Laws; (iii) all
material written communications between Seller or Shareholder and any
Governmental Authority arising under or related to Environmental Laws; and (iv)
all outstanding citations issued under OSHA, or similar state or local statutes,
laws, ordinances, codes, rules, regulations, orders, rulings, or decrees,
relating to or affecting either Seller or any of Seller's real property or
leased property.
(h) For purposes of this Section 4.21, the following terms
shall have the meanings ascribed to them below:
"ABOVEGROUND STORAGE TANK" shall have the meaning ascribed to
such term in Section 6901 et seq., as amended, of RCRA, or any
applicable state or local statute, law, ordinance, code, rule,
regulation, order ruling, or decree governing Aboveground
Storage Tanks.
"DISCHARGE" means any manner of spilling, leaking, dumping,
discharging, releasing, or emitting, as any of such terms may
further be defined in any Environmental Law, into any medium
including, without limitation, ground water, surface water,
soil, or air.
"ENVIRONMENTAL LAWS" means all federal, state, regional, or
local statutes, laws, rules, regulations, codes, orders,
plans, injunctions, decrees, rulings, and changes
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or ordinances or judicial or administrative interpretations
thereof, or similar laws of foreign jurisdictions where Seller
conducts business, whether currently in existence or hereafter
enacted or promulgated, any of which govern (or purport to
govern) or relate to pollution, protection of the environment,
public health and safety, air emissions, water discharges,
hazardous or toxic substances, solid or hazardous waste, or
occupational health and safety, as any of these terms are or
may be defined in such statutes, laws, rules, regulations,
codes, orders, plans, injunctions, decrees, rulings, and
changes or ordinances, or judicial or administrative
interpretations thereof, including, without limitation: the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendment
and Reauthorization Act of 1986, 42 U.S.C. Section 9601, et
seq. (collectively "CERCLA"); the Solid Waste Disposal Act, as
amended by the Resource Conversation and Recovery Act of 1976
and subsequent Hazardous and Solid Waste Amendments of 1984,
42 U.S.C. Section 6901 et seq. (collectively "RCRA"); the
Hazardous Materials Transportation Act, as amended, 49 U.S.C.
Section 1801, et seq.; the Clean Water Act, as amended, 33
U.S.C. Section 1311, et seq.; the Clean Air Act, as amended,
42 U.S.C. Section 7401-7642; the Toxic Substances Control Act,
as amended, 15 U.S.C. Section 2601 et seq.; the Federal
Insecticide, Fungicide, and Rodenticide Act as amended, 7
U.S.C. Section 136-136y ("FIFRA"); the Emergency Planning and
Community Right-to-Know Act of 1986 as amended, 42 U.S.C.
Section 11001, et seq. (Title III of SARA) ("EPCRA"); and the
Occupational Safety and Health Act of 1970, as amended, 29
U.S.C. Section 651, et seq. ("OSHA").
"HANDLE" means any manner of generating, accumulating,
storing, treating, disposing of, transporting, transferring,
labeling, handling, manufacturing, or using, as any of such
terms may further be defined in any Environmental Law, of any
Hazardous Substances or Waste.
"HAZARDOUS SUBSTANCES" shall be construed to include any toxic
or hazardous substance, material, or waste, and any other
contaminant, pollutant, or constituent thereof, whether
liquid, solid, semi-solid, sludge, and/or gaseous, including
without limitation, chemicals, compounds, by-products,
pesticides, asbestos containing materials, petroleum or
petroleum products, and polychlorinated biphenyls, the
presence of which requires investigation or remediation under
any Environmental Laws or which are or become regulated,
listed, or controlled by, under, or pursuant to any
Environmental Laws, including, without limitation, RCRA,
CERCLA, the Hazardous Materials Transportation Act, the Toxic
Substances Control Act, the Clean Air Act, the Clean Water
Act, FIFRA, EPCRA, and OSHA, or any similar state statute, or
any future amendments to, or regulations implementing such
statutes, laws, ordinances, codes, rules, regulations,
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orders, rulings, or decrees, or which has been or shall be
determined or interpreted at any time by any Governmental
Authority to be a hazardous or toxic substance regulated under
any other statute, law, regulation, order, code, rule, order,
or decree.
"UNDERGROUND STORAGE TANK" shall have the meaning ascribed to
such term in Section 6901 et seq., as amended, of RCRA, or any
applicable state or local statute, law, ordinance, code, rule,
regulation, order ruling, or decree governing Underground
Storage Tanks.
"WASTE" shall be construed to include agricultural wastes,
biomedical wastes, biological wastes, bulky wastes,
construction and demolition debris, garbage, household wastes,
industrial solid wastes, liquid wastes, recyclable materials,
sludge, solid wastes, special wastes, used oils, white goods,
and yard trash as those terms are defined under any applicable
Environmental Laws.
4.22 Employees. Set forth on Schedule 4.22 is a list of names, current
annual rates of salary, bonus, employee benefits, accrued vacation and sick
time, sick pay, and other compensation and benefits and perquisites, including
the provision of Seller owned automobiles, of all the present officers and
directors of Seller, as well as of the employees and agents of Seller whose work
relates, directly or indirectly, to the operation of the Business. To the
Knowledge of Seller and Shareholder, no key employee of Seller, and no group of
Seller's other employees, has any plans to terminate his, her, or its
employment. Seller is not a party to any collective bargaining agreement, Seller
has no material labor relations problems pending, and Seller's labor relations
are satisfactory in all material respects. Seller has complied with all laws
relating to the employment of labor, including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining, and the payment of
social security and other taxes. Except as set forth on Schedule 4.22, Seller
may terminate any employee, with or without cause, without liability or
obligation other than for salary accrued through the date of any such
termination.
4.23 Employee Benefit Plans.
(a) With respect to the employees and former employees of
Seller, except as set forth in the Schedule 4.23, Seller does not presently
maintain, contribute to or have any liability (including current or potential
multi-employer plan withdrawal liability under Title IV of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) under any (i)
non-qualified deferred compensation or retirement plan or arrangement which is
an "employee pension benefit plan" as such term is defined in Section 3(2) of
ERISA, (ii) defined contribution retirement plan or arrangement designed to
satisfy the requirements of Section 401(a) of the Code, which is an employee
pension benefit plan, (iii) defined benefit pension plan or arrangement designed
to satisfy the requirements of Section 401(a) of the Code, which is an employee
pension
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benefit plan, (iv) "multi-employer plan" as such term is defined in Section
3(37) of ERISA, (v) unfunded or funded medical, health or life insurance plan or
arrangement for present or future retirees or present or future terminated
employees which is an "employee welfare benefit plan" as such term is defined in
Section 3(1) of ERISA, except as required by Section 4980B of the Code or
Sections 601 through 609 of ERISA, or (vi) any other employee welfare benefit
plan.
(b) With respect to each of the employee benefit plans listed
in Schedule 4.23, Seller has furnished to Purchaser true and complete copies of
(i) the plan documents (including any related trust agreements), (ii) the most
recent determination letter received from the Internal Revenue Service, (iii)
the latest actuarial valuation, (iv) the latest financial statement, (v) the
last Form 5500 Annual Report, and (vi) all related trust agreements, insurance
contracts or other funding agreements which implement such employee benefit
plan. Neither Seller nor any of its directors, officers, employees or any other
"fiduciary", as such term is defined in Section 3(21) of ERISA, has any
liability for failure to comply with ERISA or the Code for any action or failure
to act in connection with the administration or investment of such plans.
(c) With respect to each plan listed in the Schedule 4.23: (i)
Seller has performed in all material respects all obligations required to be
performed by it under each such plan and each such plan has been established and
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, rules, and regulations, including
but not limited to the Code and ERISA; (ii) there are no actions, suits or
claims pending or, to the Knowledge of Seller or Shareholder threatened (other
than routine claims for benefits) against any such plan; (iii) each such plan
can be amended or terminated in accordance with its terms, without liability to
Seller, and (iv) to Seller's and Shareholder's Knowledge, there are no inquiries
or proceedings pending or, to the Knowledge of Seller or Shareholder threatened
by the Internal Revenue Service or the Department of Labor with respect to any
such plan.
(d) With respect to the insurance contracts or funding
agreements which implement any of the employee benefit plans listed in the
Schedule 4.23, such insurance contracts or funding agreements are fully insured
or the reserves under such contracts are sufficient to pay claims incurred.
(e) Each plan listed in the Schedule 4.23 that is intended to
be qualified under Section 401(a) of the Code has been determined by the
Internal Revenue Service to so qualify and each trust created thereunder has
been determined by the Internal Revenue Service to be exempt from tax under
Section 501(a) of the Code and, to the Knowledge of Seller or Shareholder,
nothing has occurred since the date of the most recent determination that would
be reasonably likely to cause any such plan or trust to fail to qualify under
Section 401(a) of the Code.
4.24 Insurance. Schedule 4.24 lists and briefly describes each
insurance policy and fidelity bond maintained by Seller with respect to its
properties, assets, employees and officers
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and directors of Seller and sets forth the date of expiration of each such
insurance policy. All of such insurance policies are in full force and effect
and Seller is not in default with respect to its obligations under any of such
insurance policies. There is no claim of Seller pending under any of such
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds. To the best of Seller's or
Shareholder's Knowledge, there is no threatened termination of, or material
premium increase with respect to, any of such policies. To Seller's or
Shareholder's Knowledge, the insurance coverage of Seller is customary for
corporations of similar size engaged in similar lines of businesses.
4.25 Warranties. Except as set forth on Schedule 4.25, Seller has not
given or made any express warranties to third parties with respect to any
products sold or services performed by Seller. Seller has no Knowledge of any
state of facts or the occurrence of any event forming the basis of any present
claim against Seller for liability due to any express or implied warranty.
4.26 Brokers and Finders. Neither Shareholder nor Seller has not dealt
with any broker, finder, or other person entitled to any broker's or finder's
fee, commission, or other similar compensation in connection with the
transaction contemplated hereby.
4.27 No Default. There has been no default in any material respect in
any obligation to be performed by Seller under any contract, lease, agreement,
commitment, or undertaking to which it is a party or by which it or its assets
or properties are bound, nor has Seller waived any material right under any such
contract, lease, agreement, commitment, or undertaking.
4.28 Transactions with Affiliated Parties. To the best of Seller's or
Shareholder's Knowledge, no employee, agent, officer, or director of Seller or
any of their spouses or children, any trust of which any such person is the
grantor, trustee, or beneficiary, any corporation of which any such person or
party is a shareholder, employee, officer, or director, or any partnership in
which any such person or party owns an interest (all such persons and entities
being herein referred to collectively as "Affiliated Parties" and individually
as "Affiliated Party") has any agreement with Seller or any interest in any
property, tangible or intangible, used in or pertaining to the Business. To the
best of Seller's or Shareholder's Knowledge, no Affiliated Party has any
ownership interest, directly, indirectly, or beneficially, in any competitor or
potential competitor, supplier, or customer of Seller.
4.29 Books and Records. The books and records of account of the Seller
are correct and reflect a true record of all financial affairs of the Seller as
prepared in the normal course of business through the date hereof, and the
minute books and other records of Seller fairly reflect the meetings and
proceedings of the Seller and its Board of Directors and Shareholder.
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4.30 HSR Act. Neither Seller nor Shareholder nor any "acquired person"
of which Seller may be deemed to be a part of has $100 million or more in assets
or annual net sales, all as determined in accordance with the HSR Act as of
Seller's latest reporting date.
4.31 Investment Representations. Seller and Shareholder represent that:
(a) They have been advised that the WavePhore Common Stock has
not been registered under the Securities Act nor qualified under any state
securities laws on the grounds that no distribution or public offering of the
WavePhore Common Stock is to be effected, and that in this connection the
Purchaser is relying in part on the representations of Seller and Shareholder
set forth herein.
(b) The WavePhore Common Stock is being acquired for Seller's
and Shareholder's own account for the purpose of investment and not with a view
to distribution or resale thereof, and that neither has any present intention of
selling, granting any participation in, or otherwise distributing the WavePhore
Common Stock that it acquires.
(c) Seller and Shareholder are able to bear the economic risks
of an investment in the WavePhore Common Stock acquired by them pursuant to this
Agreement and without materially impairing its financial condition, can hold the
WavePhore Common Stock for an indefinite period of time and can afford to suffer
complete loss on its investment.
(d) Seller and Shareholder each have such knowledge and
experience in financial and business matters as to be capable of evaluating the
risks and merits of acquiring the WavePhore Common Stock. Neither Seller nor
Shareholder has been formed or organized for the specific purpose of acquiring
the WavePhore Common Stock. Seller and Shareholder have received all the
information it has requested from the Purchaser it considers necessary or
appropriate for deciding whether to accept the WavePhore Common Stock.
(e) Seller and Shareholder are aware that the WavePhore Common
Stock may be resold without registration or qualification under the Securities
Act and applicable state securities laws only in certain limited circumstances
and if certain conditions are met. Seller and Shareholder are also aware that
none of the WavePhore Common Stock may be sold pursuant to Rule 144 adopted
under the 1933 Act unless certain conditions have been met and until Seller or
Shareholder have held the WavePhore Common Stock for at least the holding period
required by such rule.
(f) Seller and Shareholder acknowledges that the certificates
representing the WavePhore Common Stock, when issued, shall contain the
following legend, as well as any legends regarding applicable state securities
laws:
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THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933; THEY HAVE BEEN
ACQUIRED BY THE HOLDER FOR INVESTMENT AND
MAY NOT BE PLEDGED, HYPOTHECATED, SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT AS MAY BE AUTHORIZED UNDER THE
SECURITIES ACT OF 1933, AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER.
(g) Seller and Shareholder represent that the address or
addresses set forth below its name on Schedule 4.31 hereto is or are the true
and correct addresses of Seller and Shareholder, as the case may be, and, if not
the principal place of business of Seller or Shareholder, then it is the address
from which Seller or Shareholder negotiated the investment of the WavePhore
Common Stock.
4.32 Disclosure. Neither this Agreement nor any of the schedules or
exhibits hereto contains any untrue statement of a material fact or omits a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances in which they were made, not misleading, and there is
no fact which has not been disclosed to Purchaser that materially affects
adversely or could reasonably be anticipated to materially affect adversely the
assets, financial condition or operating results, customer, employee or supplier
relations, business condition or prospects, or financing arrangements of Seller.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF WAVEPHORE AND NEWSCAST
As of the date hereof and as of the Closing Date, WavePhore and
Newscast, jointly and severally, hereby represent and warrant to Seller and
Shareholder the following:
5.1 Organization and Standing. Newscast is a duly organized and validly
existing corporation in good standing under the laws of the State of Delaware
and has all the requisite corporate power to enter into and perform this
Agreement. WavePhore is a duly organized and validly existing corporation in
good standing under the laws of the State of Indiana and has all the requisite
corporate power to enter into and perform this Agreement.
5.2 Authority of Purchaser. Each of Newscast and WavePhore is duly
authorized to execute and deliver this Agreement and to perform its obligations
hereunder, and all required corporate action with respect thereto has been duly
and validly taken, and this Agreement is
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binding upon Newscast and WavePhore and enforceable in accordance with its
terms, and Seller has received certified copies of all resolutions pertaining to
such authorizations.
5.3 Restrictions. Purchaser is not subject to any restriction,
agreement, law, judgment, or decree which would prohibit or be violated by the
execution, delivery, or performance hereof.
5.4 Brokers and Finders. Purchaser has not dealt with any broker,
finder, or other person entitled to any broker's or finder's fee, commission, or
other similar compensation in connection with the transaction contemplated
hereby.
5.5 Litigation. There is no suit, claim, arbitration, investigation,
action, or proceeding entered against, now pending, or, to the Purchaser's
knowledge, threatened against Purchaser before any court, arbitration,
administrative, or regulatory body or any governmental agency which may result
in any judgment, order, award, decree, liability, or other determination which
will, or could reasonably be expected to, materially impair the ability of the
Purchaser to fulfill and perform its obligations under this Agreement.
5.6 HSR Act. Neither Newscast or WavePhore nor any "acquiring person"
of which Purchaser may be deemed to be a part of has $100 million or more in
assets or annual net sales, all as determined in accordance with the HSR Act as
of Seller's latest reporting date.
5.7 SEC Documents. Purchaser has delivered to Seller and Shareholder
true and correct copies of its Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, its Form 10-Q for period ended March 31, 1997, all as
filed with the SEC (collectively, "SEC Documents"). The SEC Documents contain an
audited balance sheet of Purchaser as of December 31, 1996 and the related
audited statements of operation and cash flow for the year then ended, and the
unaudited balance sheet of the Purchaser as of March 31, 1997 and the related
unaudited statements of operation and cash flow for the period then ended (the
"Company Financials"). The Company Financials are correct in all material
respects and have been prepared in accordance with GAAP applied on a basis
consistent throughout the periods indicated and consistent with each other. The
Company Financials present fairly the financial condition and operating results
and cash flows of the Purchaser as of the dates and during the periods indicated
therein.
5.8 SEC Filings. Purchaser has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding twelve months and all such reports, registration statements and other
documents complied, in all material respects with the requirements of such Act.
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ARTICLE 6
COVENANTS OF SELLER AND SHAREHOLDER
Seller and Shareholder hereby covenant and agree that from the date of
this Agreement until the Closing Date:
6.1 Access to Information. Purchaser and its counsel, accountants, and
other representatives will have full access during normal business hours to all
properties, books, accounts, records, contracts, and documents of or relating to
Seller so that Purchaser may have full opportunity to make such investigation as
it shall desire to make of the affairs of Seller. Seller shall furnish or cause
to be furnished to Purchaser and its representatives all data and information
concerning Seller's business, finances, and properties that may reasonably be
requested.
6.2 Conduct of Business. Except as specifically contemplated in this
Agreement, from the date of this Agreement to the Closing Date, the Business
will be operated only in the ordinary course, and, in particular, Seller,
without the prior written consent of Purchaser, will not:
(a) cancel or permit any insurance to lapse or terminate,
unless renewed or replaced by like coverage;
(b) be in default under any material contract, agreement,
commitment, or undertaking of any kind;
(c) knowingly violate or fail to comply with all laws
applicable to it or its properties or business;
(d) commit any act or permit the occurrence of any event or
the existence of any condition of the type described in clauses (a) through (p)
of Section 4.7;
(e) enter into any contract, agreement, or other commitment of
the type described in Section 4.16;
(f) fail to maintain and repair its assets and properties in
accordance with good standards of maintenance and as required in any leases or
other agreements pertaining thereto;
(g) merge, consolidate or agree to merge or consolidate with
or into any other corporation or other entity; or
(h) agree to do any of the acts listed above.
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6.3 Business Relationships. Seller will use its best efforts to
preserve its business organizations intact, to keep available to Purchaser its
present officers and employees, and to preserve its present relationships with
customers, suppliers, and others having business relationships with Seller.
6.4 Corporate Matters. Seller will not:
(a) amend its Articles of Incorporation or Bylaws;
(b) issue any additional shares of its capital stock or
declare any dividends thereon;
(c) issue or create any warrants, obligations, subscriptions,
options, convertible securities, or other commitments under which any additional
shares of its capital stock of any class might be directly or indirectly
authorized, issued, or transferred from treasury; or
(d) agree to do any of the acts listed above.
6.5 Insurance. Seller will continue to carry its existing insurance and
will not, without Purchaser's written consent, increase or decrease such
amounts.
6.6 Employees. Seller shall not do, or agree to do, without Purchaser's
written consent, any of the following acts:
(a) grant any increase in salaries payable, or to become
payable by it, to any officer, employee, sales agent, or representative;
(b) increase benefits payable to any officer, employee, sales
agent, or representative under any bonus or pension plan or other contract or
commitment; or
(c) modify any collective bargaining agreement to which it is
a party or by which it may be bound.
6.7 New Business. Seller will not, without Purchaser's written consent,
do or agree to do any of the following acts:
(a) enter into any contract, commitment, or transaction not in
the usual and ordinary course of business; or
(b) sell or dispose of any capital assets.
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6.8 Liability and Waiver. Seller will not do, or agree to do, any of
the following acts:
(a) pay any obligation or liability, fixed or contingent,
other than current liabilities;
(b) waive or compromise any right or claim; or
(c) cancel, without full payment, any note, loan, or other
obligation owing to Seller.
6.9 Agreements. Seller will not modify, amend, cancel, or terminate any
of its existing contracts or agreements, or agree to do any of those acts except
with Purchaser's written consent.
6.10 Warranties at Closing. All representations and warranties of
Seller set forth in this Agreement and in any written statements delivered to
Purchaser by Seller under this Agreement will also be true and correct as of the
Closing Date as if made on that date.
6.11 Confidentiality. Seller and its officers, directors, and other
representatives will hold in strict confidence, and will not divulge,
communicate, use to the detriment of Purchaser or for the benefit of any other
person or persons, or misuse in any way, any financial information or other data
obtained in connection with this Agreement, including, without limitation, any
confidential information or trade secrets of Purchaser, personnel information,
secret processes, know how, customer lists, formulas, or other technical data;
and if the transactions contemplated by this Agreement are not consummated,
Seller and its officers, directors, and other representatives will return to
Purchaser all such data and information as Purchaser may reasonably request,
including, without limitation, work sheets, test reports, manuals, lists,
memoranda, and other documents prepared by or made available to Seller in
connection with this transaction.
6.12 Books and Records. Shareholder will make available to Purchaser,
at Purchaser's request and expense, from time to time, all books and records of
Seller relating, directly or indirectly, to the Business which are reasonably
necessary with respect to Purchaser's ongoing operations, relating to any
transaction on or after January 1, 1994, for inspection or copying by Purchaser
at any reasonable time for a six (6) year period after the Closing Date, and to
offer same to Purchaser, from time to time, at Purchaser's expense, prior to the
destruction of all or any part thereof.
6.13 Closing. Shareholder and Seller shall use their best efforts to
cause the conditions specified in Article 8 to be satisfied at or as soon as
practicable after the date hereof.
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ARTICLE 7
COVENANTS OF PURCHASER
Purchaser hereby covenants and agrees that from the date of this
Agreement until the Closing Date:
7.1 Confidentiality. Purchaser and its officers, directors, and other
representatives will hold in strict confidence, and will not divulge,
communicate, use to the detriment of Seller or Shareholder or for the benefit of
any other person or persons, or misuse in any way, any financial information or
other data obtained in connection with this Agreement, including, without
limitation, any confidential information or trade secrets of Seller, personnel
information, secret processes, know how, customer lists, formulas, or other
technical data; and if the transactions contemplated by this Agreement are not
consummated, Purchaser will return to Seller all such data and information as
Seller may reasonably request, including, without limitation, work sheets, test
reports, manuals, lists, memoranda, and other documents prepared by or made
available to Purchaser in connection with this transaction.
7.2 Closing. Purchaser will use its best efforts to cause the
conditions specified in Article 9 to be satisfied at or as soon as practicable
after the Closing Date.
7.3 Sageware Profiles. For a period of two years after the Closing, if
Purchaser acquires Knowledge that it has in its possession profiles of Sageware,
Inc. ("Sageware") which were delivered to Shareholder or Seller by Sageware
prior to the Closing, or derivatives thereof, Purchaser will not use them in the
Business but will promptly return them or destroy them, as may be reasonably
directed in writing by Sageware.
7.4 Sageware Release. For a period of two years after the Closing,
Purchaser will not enter into a written contract with Sageware, without
obtaining for Purchaser, Shareholder and Seller a full release from Sageware
with respect to any claims it may have with respect to profiles delivered to
Shareholder or Seller by Sageware prior to the Closing.
7.5 Defense Cooperation. In the event of any suit or claim against
Shareholder or Seller with respect to profiles delivered to Shareholder or
Seller by Sageware prior to the Closing, Purchaser shall reasonably cooperate
with Shareholder or Seller in the defense of such suit or claim, including
making available personnel of Purchaser for depositions, interrogatories and
testimony, as may be reasonably requested by counsel for Shareholder or Seller.
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ARTICLE 8
CONDITIONS PRECEDENT TO PERFORMANCE
BY NEWSCAST AND WAVEPHORE
All obligations of Purchaser to proceed with Closing and to consummate
the transactions contemplated hereby are subject to fulfillment and satisfaction
by Seller or Shareholder, as the case may be, on or before the Closing Date of
each of the conditions precedent set forth in this Article 8. Purchaser may
waive any or all of these conditions in whole or in part without prior notice to
Seller; provided, however, that no waiver of a condition shall constitute a
waiver by Purchaser of any of its other rights or remedies, at law or in equity,
if Seller shall be in default of any of its representations, warranties, or
covenants under this Agreement.
8.1 Accuracy of Representations and Warranties. The representations and
warranties of Seller and Shareholder contained herein and in any certificate or
other writing delivered pursuant hereto or in connection herewith shall be true
and correct in all material respects on and as of the Closing Date as though
made at that time.
8.2 Performance of Seller. Shareholder and Seller shall have duly
performed or complied with all of the covenants, acts, and obligations to be
performed or complied with by Seller hereunder at or prior to the Closing Date.
8.3 No Material Changes. During the period from December 31, 1996 to
the Closing Date, there shall not have been any material adverse change in the
Acquired Assets, the Business, or the financial condition or results of
operations of the Seller, and the neither the Acquired Assets nor the Seller
shall have sustained any material casualty or other loss, damage, or destruction
that materially affects Seller's ability to conduct a material part of its
business. Since March 31, 1997, no indebtedness shall have been incurred by
Seller other than accounts payable, taxes, and similar liabilities incurred in
the ordinary course of business. Without limiting the generality of the
foregoing, Seller shall not have incurred any liability or have engaged in any
conduct since March 31, 1997, that would have a material adverse effect on
Purchaser with respect to the transaction contemplated hereunder.
8.4 Officer's Certificate. Purchaser shall have received a certificate,
dated the Closing Date, signed and verified by Seller's President or Vice
President and Chief Financial Officer certifying, and Shareholder's President or
Vice President and Chief Financial Officer certifying, in such detail as
Purchaser and its counsel may reasonably request, that the conditions specified
in Section 8.1, Section 8.2, and Section 8.3, above, have been fulfilled.
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8.5 Absence of Litigation. No action, suit, or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened on or before the Closing Date.
8.6 Chief Financial Officer's Certificate. Purchaser shall have
received from the Chief Financial Officer of Seller a letter, dated the Closing
Date, that on the basis of a review (not an audit) of the latest available
accounting records of Seller, consultations with other responsible officers of
Seller, and other pertinent inquiries that he or she may deem necessary, he or
she has no reason to believe that during the period from March 31, 1997, to the
Closing Date, there has been any change in the financial condition or results of
operations of the Business, except changes incurred in the ordinary and usual
course of business during that period that in the aggregate are not materially
adverse, and other changes or transactions, if any, contemplated by this
Agreement.
8.7 Consents. All necessary agreements and consents of any parties to
the consummation of the transactions contemplated by this Agreement, or
otherwise pertaining to the matters covered by it, excluding information
providers and end user license agreements identified as such and set forth on
Schedule 4.16, shall have been obtained by Seller and delivered to Purchaser.
8.8 Approval of Documents. The form and substance of all certificates,
instruments, opinions, and other documents delivered to Purchaser under this
Agreement shall be satisfactory in all respects to Purchaser and its counsel.
8.9 Additional Agreements.
(a) Purchaser and Shareholder shall have entered into a
Consulting Agreement and Distribution Agreement in form and substance mutually
acceptable to the parties.
(b) Purchaser shall have entered into employment agreements
with each of Peter White and Thomas White in form and substance acceptable to
Purchaser.
8.10 Opinion of Counsel. Seller shall have delivered to Purchaser an
opinion of counsel dated as of the Closing Date, in form and substance
acceptable to Purchaser and its counsel.
8.11 Board Resolutions. Seller and Shareholder shall have delivered to
Purchaser certified copies of the resolutions of their respective Board of
Directors authorizing the execution of this Agreement and the consummation of
the transactions contemplated herein.
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ARTICLE 9
CONDITIONS PRECEDENT TO PERFORMANCE
BY SELLER AND SHAREHOLDER
All obligations of Seller to proceed with Closing are subject to
fulfillment and the satisfaction on or before the Closing Date of each of the
conditions precedent set forth in this Article 9, unless otherwise waived, in
writing, by Seller:
9.1 Accuracy of Representations and Warranties. The representations and
warranties of Purchaser contained herein and in any certificate or other writing
delivered pursuant hereto or in connection herewith shall be true and correct in
all material respects on and as of the Closing Date as though made at that time.
9.2 Performance of Purchaser. Purchaser shall have duly performed or
complied with all of the covenants, acts, and obligations to be performed or
complied with by Purchaser hereunder at or prior to the Closing Date.
9.3 Board Resolution. Purchaser shall have delivered to Seller a
certified copy of the resolution of Purchaser's Directors authorizing the
execution of this Agreement by Purchaser and the consummation of the transaction
contemplated herein.
9.4 Opinion of Counsel. Purchaser shall have delivered to Seller an
opinion of counsel dated as of the Closing Date in form and substance acceptable
to Seller and its counsel.
9.5 Additional Agreements. Purchaser and Shareholder shall have entered
into a Consulting Agreement and Distribution Agreement in form and substance
acceptable to parties.
9.6 Approval of Documents. The form and substance of all certificates,
instruments, opinions, and other documents delivered to Seller and Shareholder
under this Agreement shall be satisfactory in all respects to Seller and
Shareholder and their counsel.
ARTICLE 10
THE CLOSING
10.1 Closing. The closing with respect to the transaction contemplated
by this Agreement (the "Closing") shall take place on May 29, 1997, at the
offices of Snell & Wilmer L.L.P., One Arizona Center, Phoenix, Arizona, or at
such other time as may be agreed to by Seller and Purchaser. For purposes of
this Agreement, the "Closing Date" shall be deemed to be May 29, 1997.
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10.2 Seller's and Shareholder's Obligations. In addition to any other
documents required to be delivered by Seller or Shareholder at Closing, Seller
or Shareholder shall deliver to Purchaser at Closing the following documents:
(a) An executed Bill of Sale and Assignment and Assumption
Agreement in the form attached hereto as Exhibit A and other instruments of
transfer, with full warranties of title, dated as of the Closing Date, conveying
to Purchaser all of Seller's or Shareholder's right, title, and interest in and
to the Acquired Assets, all in form and substance satisfactory to Purchaser;
(b) Lease assignments and estoppel certificates with respect
to each parcel of real estate or any item of personal property which is leased
by Seller and which is to be assumed by Purchaser hereunder, properly executed
and acknowledged by Seller, and accompanied by all consents of lessors required
by this Agreement and the leases being assigned;
(c) Executed assignments of all assignable licenses and
permits issued to Seller by any governmental entity or vendor in accordance with
Exhibit B hereto;
(d) All books, records, and other data relating to the
Business as set forth in Section 2.1(g)(other than corporate records);
(e) Instruments of assignment and transfer of all other
property of Seller of every kind and description and wherever situated;
(f) Officers' Certificate as provided for in Section 8.4
hereof;
(g) Chief Financial Officer's Certificate as provided for in
Section 8.6 hereof;
(h) Certified resolutions of the Board of Directors of Seller
as provided for in Section 8.11 hereof; and
(i) The consents as provided for in Section 8.7 hereof.
(j) Such other documents as Purchaser or its counsel or any
lender or lessor of Purchaser may reasonably request in order to effectuate the
transactions contemplated under this Agreement.
(k) Consulting Agreement by and between Shareholder and
Newscast with respect to Consulting Services of Shareholder's employees in the
form of Exhibit C hereto.
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Seller and Shareholder, at any time before or after the Closing, will
execute, acknowledge, and deliver any further deeds, assignments, conveyances,
and other assurances, documents, and instruments of transfer, reasonably
requested by Purchaser, and will take any other action consistent with the terms
of this Agreement that may reasonably be requested by Purchaser, for the purpose
of assigning, transferring, granting, conveying, and confirming to Purchaser, or
reducing to possession, any or all property to be conveyed and transferred by
this Agreement. If requested by Purchaser, Seller and Shareholder further agree
to prosecute or otherwise enforce in its own name for the benefit of Purchaser,
any claims, rights, or benefits that are transferred to Purchaser by this
Agreement and that require prosecution or enforcement in Seller's name. Any
prosecution or enforcement of claims, rights, or benefits under this Section
shall be solely at Purchaser's expense, unless the prosecution or enforcement is
made necessary by a breach of this Agreement by Seller or Shareholder. Seller
and Shareholder further agrees to provide all necessary assistance and execute
any papers deemed essential by Purchaser, its successors, assigns and legal
representatives, to Purchaser's full protection and title in and to the
intellectual property hereby transferred, including such assistance and papers
as may be deemed necessary to secure patents relating to such intellectual
property, whether domestic or foreign, and perfection of title thereto.
10.3 Purchaser's Obligations. Purchaser shall deliver to Seller at
Closing the following documents and consideration:
(a) The Closing Payment of Three Million Dollars ($3,000,000);
(b) Executed counterparts of such of the closing documents of
Seller and Shareholder as shall require acceptance by Purchaser; and
(c) Certified resolutions of the Board of Directors of
Purchaser as provided for in Section 9.3 hereof.
(d) A certificate, dated the Closing Date, signed and verified
by Purchaser's President or Vice President and Chief Financial Officer
certifying, in such detail as Seller and its counsel may reasonably request,
that the conditions specified in Section 9.1, Section 9.2, and Section 9.3,
above, have been fulfilled.
ARTICLE 11
INDEMNIFICATION
11.1 Nature of Statements. All statements contained herein, in any
Schedule or Exhibit hereto, or in any certificate or other written instrument
delivered by or on behalf of Seller, Shareholder or Purchaser pursuant to this
Agreement, or the collateral documents executed in
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connection with the closing of the transaction contemplated hereby, shall be
deemed representations and warranties by Seller or Purchaser, as the case may
be.
11.2 Survival of Representations and Warranties. Regardless of any
investigation at any time made by, or on behalf of any party hereto, or of any
information any party may have in respect thereof, all representations and
warranties made hereunder or pursuant hereto or in connection with the Closing
which are in writing and designated as representations or warranties shall
survive until December 31, 1998 except for a breach of a representation or
warranty related to environmental matters which shall survive for two (2) years
after the Closing or to Intellectual Property, which shall survive for five (5)
years after the Closing.
11.3 Indemnification of Purchaser by Seller and Shareholder. Subject to
Section 11.6 hereof, Seller and Shareholder shall indemnify, defend, and hold
harmless Newscast and WavePhore and their direct and indirect parent companies,
subsidiaries, and affiliates, and their respective officers, directors, and
shareholders, successors and assigns, from and against any and all costs,
expenses, losses, damages, fines, penalties, or liabilities (including, without
limitation, interest which may be imposed in connection therewith, court costs,
litigation expenses, reasonable attorneys' fees, and accounting fees) ("Actual
Loss") incurred by Purchaser, directly or indirectly, with respect to, in
connection with, arising from, resulting from, arising out of, or in connection
with:
(a) A breach by Seller or Shareholder of any representation or
warranty made by Seller or Shareholder and contained in this Agreement or in any
certificate or other document delivered by said parties to Purchaser hereunder
or thereunder;
(b) A breach by Seller or Shareholder of any covenant,
restriction, or agreement made by or applicable to Seller or Shareholder and
contained in this Agreement or in any certificate or other document delivered by
said parties to Purchaser hereunder or thereunder; and
(c) Except for any Assumed Liabilities, any other claim, debt,
suit, cause of action, investigation, or proceeding of any kind whatsoever,
whether instituted or commenced prior to or after the Closing Date and which
relates to or arises from the business or assets of Seller on or before the
Closing Date.
The parties hereby agree that claims arising out of Section 11.3(a) and
Section 11.3(b) above, and to the extent practicable claims arising out of
Section 11.3(c) above, shall be resolved by arbitration pursuant to the
procedure set forth in Section 11.8 below.
11.4 Indemnification of Seller and Shareholder by Purchaser. Purchaser
shall indemnify, defend, and hold Seller and Shareholder harmless from and
against any and all costs, expenses, losses, damages, fines, penalties, or
liabilities (including, without limitation, interest
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that may be imposed in connection therewith, court costs, litigation expenses,
reasonable attorneys' fees, and accounting fees) ("Actual Loss") incurred by
Seller or Shareholder with respect to, in connection with, arising from, or
resulting from, arising out of, or in connection with:
(a) A breach by Purchaser of any representation or warranty
made by Purchaser and contained in this Agreement or in any certificate or other
document delivered by Purchaser to Seller hereunder or thereunder;
(b) A breach by Purchaser of any covenant, restriction, or
agreement made by or applicable to Purchaser and contained in this Agreement or
in any certificate or other document delivered by Purchaser to Seller hereunder
or thereunder;
(c) All loss, expense, or damage suffered as the direct result
of Purchaser's failure to pay those liabilities expressly assumed under this
Agreement; and
(d) Any other claim, suit, cause of action, investigation, or
proceeding of any kind whatsoever instituted or commenced after the Closing Date
which relates to or arises from Purchaser's operation of Seller's business after
the Closing Date, except for any claims arising out of Seller's or Shareholder's
liabilities to Purchaser or obligations to Purchaser herein.
The parties hereby agree that claims arising out of Section 11.4(a) and
Section 11.4(b) above, and to the extent practicable claims arising out of
Section 11.4(c) and Section 11.4(d) above, shall be resolved by arbitration
pursuant to the procedure set forth in Section 11.8 below.
11.5 Procedure for Indemnification.
(a) The party which is entitled to be indemnified hereunder
(the "Indemnified Party") shall promptly give notice hereunder to the party
required to indemnify (the "Indemnifying Party") after obtaining written notice
of any claim as to which recovery may be sought against the indemnifying party
because of the indemnity in Section 11.3 and Section 11.4 hereof and, if such
indemnity shall arise from the claim of a third party, shall permit the
Indemnifying Party to assume the defense of any such claim and any litigation
resulting from such claim. Notwithstanding the foregoing, the right to
indemnification hereunder shall not be affected by any failure of an Indemnified
Party to give such notice, or delay by an Indemnified Party in giving such
notice unless, and then only to the extent that, the rights and remedies of the
Indemnifying Party shall have been prejudiced as a result of the failure to
give, or delay in giving, such notice. Failure by an Indemnifying Party to
notify an Indemnified Party of its election to defend any such claim or action
by a third party within thirty (30) days after notice thereof shall have been
given to the Indemnifying Party shall be deemed a waiver by the Indemnifying
Party of its right to defend such claim or action.
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(b) If the Indemnifying Party assumes the defense of such
claim or litigation resulting therefrom, the obligations of the Indemnifying
Party hereunder as to such claim shall include taking all steps necessary in the
defense or settlement of such claim or litigation and holding the Indemnified
Party harmless from and against any and all damages caused by or arising out of
any settlement approved by the Indemnifying Party or any judgment in connection
with such claim or litigation. The Indemnifying Party shall not, in the defense
of such claim or any litigation resulting therefrom, consent to entry of any
judgment (other than a judgment of dismissal on the merits without costs) except
with the written consent of the Indemnified Party, or enter into any settlement
(except with the written consent of the Indemnified Party) which does not
include as an unconditional term thereof the giving by the claimant or the
plaintiff to the Indemnified Party a release from all liability in respect of
such claim or litigation. Anything in this Section 11.5 to the contrary
notwithstanding, the Indemnified Party may, with counsel of its choice and at
its expense, participate in the defense of any such claim or litigation.
(c) If the Indemnifying Party shall not assume the defense of
any such claim by a third party or litigation resulting therefrom after receipt
of notice from such Indemnified Party, the Indemnified Party may defend against
such claim or litigation in such manner as it deems appropriate, and unless the
Indemnifying Party shall deposit with the Indemnified Party a sum equivalent to
the total amount demanded in such claim or litigation plus the Indemnified
Party's estimate of the costs of defending the same, the Indemnified Party may
settle such claim or litigation on such terms as it may deem appropriate and the
Indemnifying Party shall promptly reimburse the Indemnified Party for the amount
of such settlement and for all damages incurred by the Indemnified Party in
connection with the defense against or settlement of such claim or litigation.
(d) The Indemnifying Party shall promptly reimburse the
Indemnified Party for the amount of any judgment rendered with respect to any
claim by a third party in such litigation and for all damage incurred by the
Indemnified Party in connection with the defense against such claim or
litigation, whether or not resulting from, arising out of, or incurred with
respect to, the act of a third party.
11.6 Limits on Indemnity.
(a) Notwithstanding any other provision of this Agreement to
the contrary, except as set forth below, the parties agree that the
indemnification obligation of the Seller and Shareholder under Sections 11.3 and
of Purchaser under Section 11.4 shall be capped at a total amount of $2,000,000;
provided, however, if the total indemnification obligation of Seller and
Shareholder under Section 11.3 equals or exceeds $2,000,000 and if there are
additional claims or assessments on account of a breach of warranty with respect
to title to Intellectual Property pursuant to Section 4.20, then the total
indemnification cap on all obligations of the Seller and
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Shareholder under Section 11.3 shall be increased to a total amount of equal to
70% of the Total Purchase Price (but only for purposes of covering such
incremental Intellectual Property liabilities or claims).
(b) Seller and Shareholder on the one hand, and Purchaser on
the other hand, will have no obligation to indemnify the other party from and
against any Actual Loss resulting from, arising out of, relating to or caused by
breach of any representation or warranty of the other party until the aggregate
Actual Losses suffered by reason of all such breaches is in excess of
$150,000.00, and then only for such loss in excess of $150,000.00. For purposes
of determining whether the $150,000 amount has been exceeded, no breach of a
representation or warranty which results in an Actual Loss of $5,000 or less
shall be considered. All indemnity payments under Section 11.3 hereof shall be
considered adjustments to the Total Purchase Price.
(c) The foregoing limitations shall not apply in the event of
fraud, intentional misrepresentations or breach of any covenant not to compete
or confidentiality provision, breach of the covenants set forth in Article 3
including Sections 3.4, 3.6, 3.7, and 3.9, or for any obligation relating to the
payment of money, or issuance of stock, or to Excluded Liabilities as described
in Section 2.3, including Assumed Liabilities of Seller not recorded on the
Closing Balance Sheet of Seller in excess of Thirty Thousand Dollars ($30,000),
which shall not be subject to the cap on indemnification or the deductible of
$150,000. Further, nothing herein shall be deemed to preclude Purchaser from
seeking injunctive or other equitable relief to enforce any covenant not to
compete or confidentiality provision.
(d) The Indemnified Party shall take all commercially
reasonable steps to mitigate all Actual Losses, including, but not limited to,
availing itself of any reasonable and prudent defenses, limitations, rights of
contribution, and claims against third parties and other rights at law, and
shall provide such evidence and documentation of the nature and extent of any
Actual Loss as may be reasonably requested by the Indemnifying Party.
(e) Any recovery of Actual Loss pursuant to this Article 11
shall be net of the dollar amount of aggregate insurance proceeds receivable by
the Indemnified Party with respect to such Actual Loss in excess of $150,000
provided, however, an Indemnified Party shall not be obligated to procure
insurance to mitigate a loss.
11.7 Right to Set-Off. At Purchaser's election, any amounts payable by
Newscast or WavePhore pursuant to Sections 2.6(b) and (c), 2.7 or 11.3 hereof
may be set off against claim(s) by Purchaser against Seller or Shareholder under
the following procedure:
(a) Notice of Claims. If Purchaser elects to setoff under this
Section 11.7, Purchaser shall notify Seller of its intention to setoff amounts
it believes in good faith are subject to indemnification by providing Seller
with a written certificate signed by an officer of Purchaser,
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which briefly sets forth the basis of the claim and also recites an estimate,
determined in good faith, of the amount Purchaser intends to set-off. If the
estimated amount of the claim is not set forth in the notice of the claim,
Purchaser will provide further notice to Seller setting forth Purchaser's
estimate of the amount of such claim after it is reasonably able to make such
estimate. Purchaser may revise its estimate of any claim by notice to Seller.
(b) Withholding of Funds. Purchaser shall deposit in an
interest bearing escrow account at an independent financial institution (the
"Account"), that portion of the Second and/or Third Revenue Incentive Payment
sufficient to pay such claim until there has been a Determination of such claim
(as defined in Section 11.7(c)).
(c) Determination of Claims. The determination of a claim
("Determination") asserted pursuant to this Section 11.7 shall be made as
follows:
(i) The claim shall be deemed to have resulted in a
Determination in favor of Purchaser and to have resulted in a liability
of Seller and/or Shareholder, in the amount estimated by Purchaser, on
the 30th day after Purchaser gives Seller the estimated amount of such
claim, unless prior thereto the Seller or Shareholder give notice to
Purchaser that it or they dispute the claim.
(ii) If a claim asserted hereunder is disputed by
Seller and/or Shareholder in the manner provided above, the
Determination of such claim shall be made in accordance with the
dispute resolution procedures of Section 11.8 of this Agreement.
(d) Disbursal Following Claim Determination. Promptly after
the receipt of notice of the Determination of a claim (which notice shall be in
the form of the final arbitration award), the escrow agent shall withdraw the
disputed funds from the Account and forward the payment (along with any accrued
interest) to Seller or to Purchaser, as the case may be, pursuant to the
Determination.
11.8 Arbitration. Any dispute, controversy or claim, whether
contractual or non-contractual, between Purchaser and Seller or Shareholder
arising directly or indirectly out of or connected with this Agreement, relating
to the breach or alleged breach of any representation, warranty, or agreement
under this Agreement or otherwise relating to the indemnification obligations
set forth under this Article 11, unless mutually settled by Purchaser and Seller
or Shareholder, shall be resolved in accordance with the dispute resolution
procedures attached hereto as Exhibit D, which are incorporated herein by this
reference except for the Accounting Arbitration procedures which shall apply
where applicable; provided, however, that a suit or an application for an
equitable remedy such as a restraining order, preliminary injunction, permanent
injunction or specific performance shall not be submitted to the dispute
resolution in Exhibit D
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except by agreement of all the parties to the dispute but may be pursued in any
court of competent jurisdiction.
ARTICLE 12
POST CLOSING
12.1 Solicitation of Employees. For a period of five (5) years
following Closing, Purchaser shall not directly or indirectly solicit for
employment any person who is an employee of Shareholder without consent of
Shareholder.
12.2 Proposed Budget. Purchaser covenants and agrees that it shall
deliver no later than thirty (30) days following the Closing the Proposed Budget
of the POS Division and Combined Division for 1997 and shall deliver the pro
forma Budget for 1998 no later than forty-five (45) days after Closing.
12.3 Seller and Shareholder Deliveries.
(a) Seller and Shareholder shall use its best efforts to
deliver at Closing, and in any event no later than fifteen (15) days after the
Closing, the audited balance sheet and the related statements of operations and
cash flow for the year ended December 31, 1996 and the unaudited statement of
operations for the period commencing January 1, 1997 and ending on March 31,
1997, and shall deliver no later than 30 days after the Closing the audited
balance sheet and the related statements of operations and cash flow for the
year ended December 31, 1995 ("Seller's Financial Statements"). Seller's
Financial Statements shall have been prepared in accordance with GAAP and shall
fairly present the financial position of Seller as of the dates thereof and the
results of its operations and cash flow for the periods then ended. Purchaser
and Seller shall share equally the cost of the audit of the financial statements
of Seller for the fiscal year ended December 31, 1995.
(b) Seller shall deliver the Closing Balance Sheet to
Purchaser within ten (10) business days after Closing.
(c) Seller shall deliver to Purchaser, in immediately
available funds, the amount set forth in Section 2.1(k) not later than thirty
(30) days after the Closing.
12.4 Shareholder's Guarantee. Shareholder covenants that it will
guarantee the payment and performance of Seller's obligations under this
Agreement.
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ARTICLE 13
TERMINATION
13.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) By mutual written consent of duly authorized officers of
Purchaser and Seller;
(b) By Purchaser if, pursuant to its due diligence review,
Purchaser determines in its sole discretion that conditions, circumstances, or
facts of or affecting the state of Seller's Business are not satisfactory to it;
(c) By either Purchaser or Seller if the other party breaches
any of its material representations, warranties, or covenants contained herein
and, if such breach is curable, such breach is not cured within five (5)
business days after notice thereof;
(d) By either Purchaser or Seller if the transactions
contemplated herein shall not have been consummated on or before May 31, 1997 or
such later date as may be mutually agreed upon by the parties; provided,
however, that no party shall have the right to terminate this Agreement
unilaterally if the event giving rise to such right is primarily attributable to
such party or to any affiliated party.
13.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 13.1, this Agreement shall become void and
there shall be no liability or further obligation hereunder on the part of
Purchaser or Seller or their respective shareholders, officers, or directors.
ARTICLE 14
MISCELLANEOUS
14.1 Bulk Transfer and Liens. In the event Purchaser receives any
notice or claim of lien upon any of Seller's assets which lien is not satisfied
or released as of the Closing Date, and Purchaser becomes obligated to pay any
amounts due in connection with such lien other than as directed herein as part
of the Assumed Liabilities, Purchaser shall have the right in addition to any
other remedy to offset against any remaining payments due Seller, which offset
shall be in lieu of the payment of such amounts. Purchaser shall comply with the
terms of all notices and orders issued by such authorities, and shall have no
responsibility for the correctness or accuracy of such notices and orders. If
any such offset is made, then Purchaser's rights and interests shall be assigned
to Seller, who can then seek recovery from the third party responsible for said
offset.
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14.2 Written Agreement to Govern. This Agreement sets forth the entire
understanding and supersedes all prior oral or written agreements among the
parties hereto relating to the subject matter contained herein, and merges all
prior and contemporaneous discussions among them. No party hereto shall be bound
by any definition, condition, representation, warranty, covenant, or provision
other than as expressly stated in this Agreement or as hereafter set forth in a
written instrument executed by such party or by a duly authorized representative
of such party.
14.3 Public Announcement. The parties hereto shall not issue any press
release or public announcement, including announcements by any party for general
reception by or dissemination to employees, agents, or customers, with respect
to this Agreement and the other transactions contemplated by this Agreement
without the prior written consent of the other parties hereto (which consent
shall not be withheld unreasonably); provided, however, that Purchaser may make
any disclosure or announcement that, in the opinion of its counsel, it is
obligated to make pursuant to applicable law or regulation of Nasdaq or any
national securities exchange, as applicable, in which case Purchaser shall
reasonably consult with Seller prior to making such disclosure or announcement;
provided further, that, upon execution of this Agreement, Purchaser may make a
public announcement of such occurrence in a press release reviewed by Seller
prior to publication.
14.4 Severability. The parties hereto expressly agree that it is not
the intention of any party hereto to violate any public policy, statutory, or
common law rules, regulations, treaties, or decisions of any government or
agency thereof. If any provision of this Agreement is judicially or
administratively interpreted or construed as being in violation of any such
provision, such articles, sections, sentences, words, clauses, or combinations
thereof shall be inoperative, and the remainder of this Agreement shall remain
binding upon the parties hereto.
14.5 Notices and Other Communications. Every notice or other
communication required, contemplated, or permitted by this Agreement by any
party shall be in writing and shall be delivered either by personal delivery,
telegram, private courier service, or by certified or registered mail, postage
prepaid, return receipt requested, addressed to the party to whom intended at
the following address:
(a) If to Newscast or WavePhore:
WavePhore, Inc.
3311 North 44th Street
Phoenix, Arizona 85018
Attention: David E. Deeds, CEO
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With a copy to:
Douglas J. Reich, General Counsel
WavePhore, Inc.
3311 North 44th Street
Phoenix, Arizona 85018
(b) If to Seller or Shareholder:
Paracel, Inc.
80 South Lake Avenue, Suite 650
Pasadena, CA 91101-2616
Attention: Kwang-I-Yu, CEO
With a copy to:
Anthony J. Van Patten
Arndt & Van Patten
523 West Sixth Street, Suite 310
Los Angeles, CA 90014
or at such other address as the intended recipient shall from time to time
designate by written notice delivered in accordance herewith. Notice by courier
or certified or registered mail shall be effective on the date it is officially
recorded as delivered to the intended recipient by return receipt or the date of
attempted delivery where delivery is refused by the intended recipient. All
notices and communications required, contemplated, or permitted by this
Agreement to be delivered in person shall be deemed to have been delivered to
and received by the addressee, and shall be effective, on the date of personal
delivery. Any notice transmitted by telegram shall be deemed to have been
delivered to and received by the addressee, and shall be effective, on the date
said notice is delivered to the telegram company for transmission.
14.6 Counterparts. This Agreement may be executed in any number of
counterparts, and each counterpart shall constitute an original instrument, but
all such separate counterparts shall constitute one and the same agreement.
14.7 Governing Law. The validity, construction, and enforceability of
this Agreement shall be governed in all respects by the laws of the State of
Arizona, without regard to its conflict of laws rules.
14.8 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, personal
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representatives, successors, and assigns; provided, however, that this Agreement
may not be assigned by Seller or Shareholder without the prior written consent
of Purchaser.
14.9 Further Assurances. At any time on or after the date hereof, the
parties hereto shall each perform such acts, execute and deliver such
instruments, assignments, endorsements and other documents and do all such other
things consistent with the terms of this Agreement as may be reasonably
necessary to accomplish the transaction contemplated in this Agreement or
otherwise carry out the purpose of this Agreement.
14.10 Gender and Number. The masculine, feminine, or neuter pronouns
used herein shall be interpreted without regard to gender, and the use of the
singular or plural shall be deemed to include the other whenever the context so
requires.
14.11 Schedules and Exhibits. The Schedules and Exhibits referred to
herein and attached hereto, are incorporated herein by such reference as if
fully set forth in the text hereof.
14.12 Waiver of Provisions. The terms, covenants, representations,
warranties, and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any party at
any time to require performance of any provisions hereof shall, in no manner,
affect the right at a later date to enforce the same. No waiver by any party of
any condition, or breach of any provision, term, covenant, representation, or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or of the breach of any other provision,
term, covenant, representation, or warranty of this Agreement.
14.13 Specific Performance. Each party's obligations under this
Agreement are unique. If any party should default in its obligations under this
Agreement, the parties each acknowledge that it would be extremely impracticable
to measure the resulting damages; accordingly, the nondefaulting party, in
addition to any other available rights or remedies, may sue in equity for
specific performance, and the parties each expressly waive the defense that a
remedy in damages will be adequate. Notwithstanding any breach or default by any
of the parties of any of their respective representations, warranties,
covenants, or agreements under this Agreement, if the purchase and sale
contemplated by it shall be consummated at the Closing, each of the parties
waives any rights that it or he may have to rescind this Agreement or the
transaction consummated by it; provided, however, this waiver shall not affect
any other rights or remedies available to the parties under this Agreement or
under the law.
14.14 Costs. If any legal action or any arbitration or other proceeding
is brought for the enforcement of this Agreement, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Agreement, the successful or
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prevailing party or parties shall be entitled to recover reasonable attorneys'
fees and other costs incurred in that action or proceeding, in addition to any
other relief to which it or they may be entitled.
14.15 Article and Section Headings. The Article and Section headings in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
14.16 Amendment. This Agreement may be amended only by an instrument in
writing executed by all parties hereto.
14.17 Expenses. Except as otherwise expressly provided herein, each
party shall bear its own expenses incident to this Agreement and the
transactions contemplated hereby, including without limitation, all fees of
counsel, consultants, and accountants.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
PARACEL ONLINE SYSTEMS, INC., a California
corporation
By: /s/ Peter M. White
---------------------------------------------
Peter M. White
Its: President
PARACEL INC., a California corporation
By: /s/ Kwang-I Yu
---------------------------------------------
Kwang-I Yu
Its: President
WAVEPHORE NEWSCAST, INC., a Delaware
corporation
By: /s/ David E. Deeds
---------------------------------------------
David E. Deeds
Its: Chairman of the Board and Chief Executive
Officer
WAVEPHORE, INC., an Indiana corporation
By: /s/ David E. Deeds
---------------------------------------------
David E. Deeds
Its: Chairman of the Board and Chief Executive
Officer
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EXHIBIT A
BILL OF SALE AND ASSUMPTION AGREEMENT
KNOW ALL MEN BY THESE PRESENTS, that Paracel Online Systems, Inc., a
California corporation ("Seller") does hereby sell, convey, transfer, assign
and set over unto WavePhore Newscast, Inc., a Delaware corporation, its
successors and assigns ("Purchaser") all of Seller's rights, title, and
interest in and to the Acquired Assets as that term is defined in that certain
Agreement of Purchase and Sale of Assets by and among Seller, Paracel, Inc.,
WavePhore, Inc., an Indiana corporation, and Purchaser dated May 29, 1997
("Asset Purchase Agreement"). The Excluded Assets are specifically excluded
from this Bill of Sale and Assumption Agreement and title with respect to such
Assets will remain with Seller and/or Shareholder as the case may be. Purchaser
hereby assumes and agrees to pay and perform when due the Assumed Liabilities.
All capitalized terms used herein and not otherwise defined shall have the same
meaning as set forth in the Asset Purchase Agreement.
As provided in the Asset Purchase Agreement, Seller represents,
warrants and covenants that it is the lawful owner of the assets being conveyed
hereby and except as noted in the various exhibits and schedules to the Asset
Purchase Agreement, and with respect to certain liabilities to be expressly
assumed by Purchaser pursuant to the terms of the Asset Purchase Agreement,
such assets are free from all liens, claims and encumbrances, and Seller will
warrant and defend the same to Purchaser and its successors and assigns in
accordance with the terms and provisions of the Asset Purchase Agreement.
Except with respect to the representations and warranties contained in
Article 3 and 4 of the Asset Purchase Agreement, the assets and properties
hereby sold, conveyed, and assigned are being sold, conveyed, and assigned in
an "AS IS" condition, and Seller makes no representations or warranties,
whether express or implied, including, without limitation, any warranty of
merchantability or fitness for any particular purpose that may be implied by
applicable state law.
Seller covenants with Purchaser that it will do, execute, and deliver
or cause to be done, executed, and delivered all such further acts, documents,
or things, including without limitation, transfers, assignments, conveyances,
powers of attorney, and assurances for better assuring, conveying, and
confirming unto Purchaser, its successors and assigns, all and singular, the
entire right, title, and interest of Seller throughout the world in, to, and
under the assets and properties hereby transferred, sold, assigned, and
conveyed or intending so to be as Purchaser, its successors and assigns, shall
reasonably require, provided, however, that in no event shall Seller be required
to incur out-of-pocket expenses in connection with such actions.
<PAGE> 65
This Bill of Sale and Assumption Agreement shall inure to the benefit
of, and shall bind Seller and Purchaser and their respective successors and
assigns.
This instrument may be executed in multiple counterparts, all of which
when taken together shall constitute a single instrument.
IN WITNESS WHEREOF, the undersigned Seller have executed this Bill of
Sale and Assumption Agreement this 29th day of May, 1997.
SELLER:
PARACEL ONLINE SYSTEMS, INC., a
California corporation
By: /s/ Peter M. White
--------------------
Peter M. White
Its: President
PARACEL, INC., a California corporation
By: /s/ Kwang-I Yu
----------------
Kwang-I Yu
Its: President
WAVEPHORE NEWSCAST, INC., a Delaware
corporation
By: /s/ David E. Deeds
--------------------
David E. Deeds
Its: President and Chief Executive Officer
2
<PAGE> 66
WAVEPHORE, INC., an Indiana corporation
By: /s/ David E. Deeds
--------------------
David E. Deeds
Its: President and Chief Executive
Officer
3
<PAGE> 67
EXHIBIT D
DISPUTE RESOLUTION PROCEDURES
All claims, disputes and other matters in controversy (herein called
"dispute") arising directly or indirectly out of or related to this Agreement,
or the breach thereof, whether contractual or noncontractual, and whether during
the term or after the termination of this Agreement, shall be resolved
exclusively according to the procedures set forth in this Exhibit D.
A. Negotiation. The parties shall attempt to settle disputes arising
out of or relating to this Agreement or the breach thereof by a meeting of two
designated representatives of each party within five (5) days after a request by
either of the parties to the other party asking for the same.
B. Mediation. If such dispute cannot be settled at such meeting either
party within five (5) days of such meeting may give a written notice (a "Dispute
Notice") to the other party setting forth the nature of the dispute. The parties
shall attempt in good faith to resolve the dispute by mediation in Denver,
Colorado under the Commercial Mediation Rules of the American Arbitration
Association ("AAA") in effect on the date of the Dispute Notice. The parties
shall select a person who will act as the mediator under this Paragraph B within
five (5) days of the Dispute Notice. If the dispute has not been resolved by
mediation as provided above within thirty (30) days after delivery of the
Dispute Notice, then the dispute shall be determined by arbitration in
accordance with the provisions of Paragraph C hereof.
C. Arbitration. Any dispute that is not settled through mediation as
provided in Paragraph B above shall be resolved by arbitration in Denver,
Colorado governed by the Federal Arbitration Act, 9 U.S.C. Section 1 et seq, and
administered by the AAA under its Commercial Arbitration Rules in effect on the
date of the Dispute Notice, as modified by the provisions of this Section C, by
a single arbitrator. The arbitrator selected, in order to be eligible to serve,
shall be a lawyer with at least 15 years experience specializing in either
general commercial litigation or general corporate and commercial matters. In
the event the parties cannot agree on a mutually acceptable single arbitrator
from the list submitted by the AAA, the AAA shall appoint the arbitrator who
shall meet the foregoing criteria. The arbitrator shall base the award on
applicable law and judicial precedent and, unless both parties agree otherwise,
shall include in such award the findings of fact and conclusions of law upon
which the award is based. Judgment on the award rendered by the arbitrator may
be entered in any court having jurisdiction thereof.
Notwithstanding the foregoing:
56
<PAGE> 68
(a) Upon the application by either party to a court for an
order confirming, modifying or vacating the award, the court shall have the
power to review whether, as a matter of law based on the findings of fact
determined by the arbitrator, the award should be confirmed, modified or vacated
in order to correct any errors of law made by the arbitrator. In order to
effectuate such judicial review limited to issues of law, the parties agree (and
shall stipulate to the court) that the findings of fact made by the arbitrator
shall be final and binding on the parties and shall serve as the facts to be
submitted to and relied on by the court in determining the extent to which the
award should be confirmed, modified or vacated.
(b) Either party shall have the right to apply to any court
for an order to enforce any of the ownership and confidentiality provisions
contained in the Agreement.
D. Costs and Attorneys' Fees. If either party fails to proceed with
mediation or arbitration as provided herein or unsuccessfully seeks to stay such
mediation or arbitration, or fails to comply with any arbitration award, or is
unsuccessful in vacating or modifying the award pursuant to a petition or
application for judicial review, the other party shall be entitled to be awarded
costs, including reasonable attorneys' fees, paid or incurred by such other
party in successfully compelling such arbitration or defending against the
attempt to stay, vacate or modify such arbitration award and/or successfully
defending or enforcing the award.
E. Tolling of Statute of Limitations. All applicable statutes of
limitations and defenses based upon the passage of time shall be tolled while
the procedures specified in this Exhibit D are pending. The parties will take
such action, if any, required to effectuate such tolling.
57
