SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
(Amendment No. )
Check the appropriate box:
_ Preliminary Information Statement
_ Confidential, for use of
the Commission Only (as per-
mitted by Rule 14c-5(d)(2))
X Definitive Information Statement
NEW PARADIGM SOFTWARE CORP.
- ---------------------------------------------------------------------------
(Name Of Registrant As Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
_ $125 per Exchange Act Rule 0-11(c)(1)(ii), or 14c-5(g).
_ Fee computed on table below per Exchange Act Rules 14c-
5(g) and 0-11.
(1) Title of each class of securities to which transaction
applies:
- ---------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
- ---------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined): 1/50th of 1% of the purchase price payable to the
Registrant under the Purchase Agreement = $410
- ---------------------------------------------------------------------------
(4) Proposed maximum aggregate value of the transaction:
$2,050,000
- ---------------------------------------------------------------------------
(5) Total fee paid:
X Fee paid previously with preliminary materials.
X Check Box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
(1) Amount Previously Paid:
$410.00
- ---------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
Schedule 14C
- ---------------------------------------------------------------------------
(3) Filing Party:
New Paradigm Software Corp.
- ---------------------------------------------------------------------------
(4) Date Filed:
5/23/97
- ---------------------------------------------------------------------------
<PAGE>
June 6, 1997 LOGO
DEAR SHAREHOLDER:
On behalf of the Board of Directors and management, we
cordially invite you to a Special Meeting of Shareholders
(the "Shareholders Meeting") to be held Friday, June 27, 1997,
at 11:00 A.M., at the principal executive offices of the
Corporation, 733 Third Avenue, 7th Floor, New York City. In
the pages that follow you will find the Information Statement
describing the formal business to be transacted at the
Shareholders Meeting. Please read it carefully.
At the Shareholders Meeting, there will be a management discussion
of the proposed sale of the COPERNICUS product and related
assets to VIE Systems, Inc. In addition, time will be made
available for shareholders to discuss the formal business as
well as to ask other questions about New Paradigm Software
Corp.'s operations.
Sincerely,
/s/ Daniel A. Gordon
Daniel A. Gordon
Chairman of the Board
<PAGE>
June 6, 1997 LOGO
Re: NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD JUNE
27, 1997
To the Shareholders of New Paradigm Software Corp.:
A Special Meeting of Shareholders of New Paradigm Software
Corp. (the "Corporation") will be held at the principal
executive offices of the Corporation, 733 Third Avenue, 7th
Floor, New York, New York 10017, Friday, June 27, 1997, at
11 A.M., for the purpose of considering and voting upon the
following proposal ("Proposal 1"):
1. The President or any other officer of the Corporation is
hereby authorized, at the direction of the Board of
Directors, to sell the Corporation's COPERNICUS software
product and related assets to VIE Systems, Inc. for
consideration of not less than $2,050,000 and a 5% royalty
payable after 12 months.
Information relating to the above matter is set forth in the
accompanying Information Statement.
In accordance with the By-Laws of the Corporation, only
shareholders of record at the close of business on May 13,
1997 shall be entitled to notice of and to vote at the
Shareholders Meeting.
By Order of the Board of Directors,
/s/ Matthew Fludgate
Matthew Fludgate
Secretary
<PAGE>
New Paradigm Software Corp.
733 Third Avenue, 7th Floor
New York, New York 10017
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 27, 1997
PRELIMINARY INFORMATION STATEMENT
To the Shareholders of New Paradigm Software Corp.:
This statement is furnished in connection with a Special
Meeting of Shareholders of New Paradigm Software Corp. (the
"Corporation") to be held at 11 A.M. on June 27, 1997, at the
principal executive offices of the Corporation, 733 Third
Avenue, 7th Floor, New York, New York, and at any adjournment
thereof (the "Shareholders Meeting").
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY
This Information Statement is being mailed to shareholders of the
Corporation commencing on June 6, 1997.
VOTING SECURITIES
The securities of the Corporation entitled to vote at the
Shareholders Meeting are shares of Common Stock, par value $.01
per share (the "Common Stock"), outstanding on May 13, 1997
(the "Record Date") and shares of Series "C" Redeemable
Preferred Stock, par value $.25 per share (the "Series
Redeemable C Preferred Stock"). On the Record Date, there
were 2,451,729 shares of Common Stock outstanding and 800,000
shares of Series C Redeemable Preferred Stock outstanding.
Each share of Common Stock is entitled to one vote and each
share of Series C Redeemable Preferred Stock is entitled to
four votes.
VOTING PROCEDURES
Under the New York Business Corporation Law (the "BCL") and
the Corporation's By-Laws, the presence, in person or by
proxy, of the holders of a majority of the outstanding shares
of Common Stock entitled to vote on a particular matter is
necessary to constitute a quorum of shareholders to take
action at the Shareholders Meeting with respect to such
matter. For these purposes, shares which are present, or
represented by a proxy, at the Shareholders Meeting will be
counted for quorum purposes regardless of whether the holder
of the shares or proxy fails to vote on any particular matter
or whether a broker with discretionary authority fails to
exercise its discretionary voting authority with respect to
any particular matter. Once a quorum of the shareholders is
established, under the BCL and the Corporation's By-Laws,
each matter will be decided by a majority of the votes cast
on the matter, except as otherwise provided by law or the
Corporation's Certificate of Incorporation. For voting
purposes (as opposed to for purposes of establishing a
quorum) abstentions and broker non-votes will not be counted
in whether each matter has been approved, except for Proposal
1. The required vote for approval of Proposal 1 is not less
than 66 2/3 % of the votes entitled to be cast at the
Shareholders Meeting.
PRINCIPAL SECURITY HOLDERS
The following table indicates the beneficial ownership of the
Corporation's voting stock as of May 1, 1997, by (1) each of
the directors and nominees, (2) each of the executive
officers of the Corporation, (3) all directors, nominees and
executive officers of the Corporation as a group and (4) each
person or entity which beneficially owned in excess of five
percent of each class of voting stock, based upon information
supplied by each of the directors, nominees, executive
officers and five percent beneficial owners:
<TABLE>
<CAPTION>
Right to Sole Right to Shared Total Number of Percent of Voting
Name of Voting and Voting and Shares Beneficially Stock Beneficially
Beneficial Owner Investment Power Investment Power Owned Owned
<S> <C> <C> <C> <C>
Mark Blundell 70,666(b) 199,999(c) 250,665 10%
John Brann 69,333(d) 199,999(c) 249,332 10%
Daniel Gordon 35,333(e) 0 35,333 1%
Lancer Holdings, Inc 199,999(f) 0 199,999 8%
Midland Associates 619,999(g) 0 619,999 24%
Michael Taylor 10,000(h) 0 10,000 0%
Matthew Fludgate 25,508(i) 0 25,508 1%
Robert Trump 3,400,000(j) 619,999(k) 4,019,999 29%
All Directors and
Executive Officers of
the Corporation as a
group (a total of
4 persons) 141,507(l) 199,999(c) 341,506 14%
<FN>
<F1>
(a) The shares of Common Stock beneficially owned by each
person or by all directors and executive officers as a group,
and the shares included in the total number of shares of
Common Stock outstanding used to determine the percentage of
shares of Common Stock beneficially owned by each person and
such group, have been adjusted in accordance with Rule 13d-3
under the Securities Exchange Act of 1934 to reflect the
ownership of shares issuable upon exercise of outstanding
options, warrants or other common stock equivalents which are
exercisable within 60 days. As provided in such Rule, such
shares issuable to any holder are deemed outstanding for the
purpose of calculating such holder's beneficial ownership but
not any other holder's beneficial ownership.
<F2>
(b) Consists of (i) 26,667 shares of Common Stock, (ii)
5,333 shares of Common Stock issuable upon exercise of
warrants issued in a 1994 private placement of the
Corporation's securities (the "1994 Warrants"), and (iii)
38,666 shares of Common Stock issuable upon exercise of
options granted under the Corporation's employee and
executive option plans.
<F3>
(c) Represents the holdings of Lancer Holdings, Inc. of which
Mr. Blundell and Mr. Brann are each 33% owners and directors
and officers. Consists of 166,666 shares of Common Stock and
33,333 shares of Common Stock issuable upon exercise of
warrants held by Lancer Holdings, Inc.
<F4>
(d) Consists of (i) 26,667 shares of Common Stock, (ii) 4,000
shares of Common Stock issuable upon exercise of 1994
Warrants, and (iii) 38,666 shares of Common Stock issuable
upon exercise of options granted under the Corporation's
employee and executive option plans.
<F5>
(e) Consists of (i) 10,000 shares of Common Stock and 10,000
shares of Common Stock underlying 1993 Warrants issuable upon
exercise of Directors' Options granted in 1993 to non-
employee directors of the Corporation and (ii) 15,333 shares
of Common Stock issuable upon exercise of options granted
under the Corporation's employee option plan.
<F6>
(f) Consists of 166,666 shares of Common Stock and 33,333
shares of Common Stock issuable upon exercise of warrants
held by Lancer Holdings, Inc.
<F7>
(g) Consists of 439,999 shares of Common Stock and 180,000
shares of Common Stock issuable upon exercise of warrants.
These securities were previously owned by Management
Technologies, Inc. ("MTI") and transferred to Midland
Associates in satisfaction of a loan to MTI by Midland
Associates.
<F8>
(h) Consists of 10,000 shares of Common Stock issuable upon
exercise of options granted under the Corporation's employee
option plan.
<F9>
(i) Consists of (i) 534 shares of Common Stock, , (ii) 1,307
shares of Common Stock issuable upon exercise of 1994
Warrants, and (iii) 23,667 shares of Common Stock issuable
upon exercise of options granted under the Corporation's
employee option plan.
<F10>
(j) Consists of (i) 200,000 shares of Common Stock issuable
upon exercise of 1994 Warrants, and (ii) 800,000 shares of
Series C Redeemable Preferred Stock which entitles holders to
4 votes per share.
<F11>
(k) Represents the holdings of Midland Associates. Consists
of the securities listed in note g above.
<F12>
(l) Consists of all of the above securities in notes c,e,h, & i.
</FN>
</TABLE>
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and in accordance therewith files reports,
including annual and quarterly reports, proxy statements and
other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other
information may be inspected and copied at prescribed rates
at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the following Regional Offices
of the Commission: 7 World Trade Center, New York, New York,
10048, and 500 West Madison Street, Chicago, Illinois 60661.
Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street,
N.W., Washington D.C. 20549 at prescribed rates. The
Commission also maintains a Web site on the World Wide Web
that contains reports, proxy and information statements and
other information regarding registrants that file
electronically with the Commission. The address of such site
is http://www.sec.gov. The Corporation's fiscal year ends on
March 31 of each year.
The Corporation has filed with the Commission this
Information Statement on Schedule 14C under the Exchange Act
with respect to Proposal 1. This Information Statement does
not contain all the information set forth in the Registration
Statement and the exhibits and schedules thereto filed by the
Corporation on Form S-3, as amended, with the Commission
under the Securities Act of 1933, as amended. For further
information pertaining to the Corporation, the voting
securities and Proposal 1, reference is made to such
Registration Statement and the exhibits and schedules
thereto, which may be inspected without charge at the public
reference facilities of the Commission identified above.
Copies of such documents may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents, which are on file (file number 0-
26336) with the Commission, are incorporated herein by
reference and made a part hereof:
(a) The Corporation's 8-K dated May 23, 1997;
(b) The Corporation's Annual Report on Form 10-KSB for the
fiscal year ended March 31, 1996;
(c) The Corporation's quarterly Report on Form 10-QSB dated
February 14, 1997; and
(d) The description of the Corporation's Common Stock and the
Redeemable Warrants contained in the Corporation's
Registration Statement on Form 8-A, filed with the Commission
on June 28, 1995, under Section 12(g) of the Exchange Act, as
amended by Form 8-A/A filed with the Commission on August 2,
1995.
The Corporation will provide without charge to each person to
whom a copy of this Information Statement is delivered, on
written or oral request of such person, a copy of any or all
of the information incorporated by reference in the
Information Statement (not including exhibits to such
information unless such exhibits are specifically
incorporated by reference into such information). Such
request should be directed to Mr. Matthew Fludgate, Business
Manager, New Paradigm Software Corp., 733 Third Avenue, 7th
Floor, New York, New York, 10017 (telephone number (212) 557-
0933).
CAUTIONARY STATEMENT
This Information Statement contains statements relating to
future results of the Corporation (including certain
projections and business trends) that are "forward-looking
statements" as defined in the Private Securities Litigation
Reform Act of 1995. Actual results may differ materially from
those projected as a result of certain risks and
uncertainties, including but not limited to those described
under "Special Considerations." Readers are cautioned not to
place undue reliance on these forward-looking statements,
which speak only as of the date hereof. The Corporation does
not undertake any obligation to release publicly any
revisions to these forward-looking statements to reflect
events or circumstances after the date hereof or to reflect
the occurrence of unanticipated events.
COPERNICUS(R) is a registered trademark of New Paradigm
Software Corp.
PROPOSAL 1
Adoption of a resolution of the Shareholders
permiting the sale of the Corporation's
COPERNICUS product which constitutes
substantially all of the assets of the
Corporation
As of May 9, 1997 the Corporation entered into an agreement,
attached hereto as Appendix A (the "Agreement"), to sell,
subject to shareholder approval, the rights to its COPERNICUS
product and certain related assets to VIE Systems, Inc., a
Delaware Corporation ("VIE") for $2,050,000 in cash and a 5%
royalty on future COPERNICUS related sales payable commencing
after the first 12 months. The COPERNICUS product and the
related assets represent substantially all of the
Corporation's assets. The Corporation, as a New York
corporation, is subject to the New York Business Corporation
Law, including Section 909, which requires the Corporation to
obtain shareholder approval by a vote of at least 66 2/3% to
sell substantially all of its assets.
The Board of Directors believes that this transaction is in
the best interest of its shareholders because it (i) gives
the Corporation significant working capital, (ii) entitles
the Corporation to an interest in future COPERNICUS revenues
which VIE may generate, and (iii) reduces expenses
significantly. Management believes that by securing the
right, subject to certain conditions, to embed COPERNICUS
into applications that the Corporation may develop or
acquire, the Corporation will have a competitive advantage in
marketing such products. See "Plan of Operation".
Accordingly, the Board of Directors recommends that you vote
FOR this resolution.
VIE SYSTEMS, INC.
VIE was incorporated in 1997 for the purpose of (i) acquiring
certain assets, including the COPERNICUS product from New
Paradigm Software Corp., and (ii) building a business to
market, sell, develop, implement and support COPERNICUS to
and for mid- to large-size organizations worldwide. VIE has
represented to the Corporation in writing that it will
capitalize itself with not less than $4,000,000, $2,050,000
of which will be used to complete Proposal 1, if approved.
VOTING AGREEMENTS
By executing voting agreements (the "Voting Agreements") in
connection with the proposed transaction, Mr. Robert Trump,
Midland Associates, Lancer Holdings, Mark Blundell, and John
Brann, together representing 68.1% of the voting rights of the
Corporation eligible to vote at the Shareholders Meeting, have
agreed to vote in favor of Proposal 1.
CIRCUMSTANCES AND BACKGROUND LEADING TO THE PROPOSED
TRANSACTION
The Corporation's management and Board of Directors have
actively explored options for preserving stockholder value
while overcoming the liquidity problems which the Corporation
has experienced. Many potential transactions were pursued
and examined. In addition, the Corporation approached many
prospective investors in, and potential acquirers of, the
COPERNICUS asset. These included many investor groups and
large software companies both in the U.S. and overseas.
Summarized below are the steps taken by the Corporation in
arriving at Proposal 1.
September 1996
By September 1996 it was obvious to management that the
Corporation would need to raise significant additional funds
in order to proceed with its business plan. The direct sales
which had been expected had not materialized and revenues
were therefore below the Corporation's expectations. The
Corporation decided to reduce costs by eliminating its direct
sales force, all of whom were released at that time. The
Corporation was at the time negotiating with several parties
with a view to establishing U.S. and international
distribution via third party channels. Management decided to
focus the Corporation's activities on promoting and
supporting these third party distributors. In September 1996,
the Corporation reached a verbal agreement with International
Business Machines Corporation ("IBM") to sign a distribution
agreement (the "IBM Agreement") whereby IBM would distribute
the Corporation's COPERNICUS product with IBM's MQ Series
message-passing middleware.
October 1996
In light of the verbal agreement with IBM, the Corporation
was able to arrange a best efforts private placement with its
investment bankers, Josephthal, Lyon and Ross Incorporated.
At this time, the Corporation's stock was trading at a daily
high of $2.00 or above, reaching a high of $3 1/8 on October
18, 1996. The private placement was intended to raise
approximately $3 million and was conditional upon the actual
signing of the IBM Agreement. The financing was documented
and meetings with various other investment banks who were
interested in participating in the private placement were
held. Although the principal business points of the IBM
Agreement had been agreed, it took considerably longer than
either the Corporation or IBM expected to complete the legal
formalities and the agreement was not finally signed until
December 18, 1996.
September - December 1996
During this time, the Corporation's management pursued a
number of other alternatives to raising the funding necessary
to sustain the Corporation until the sales expected through
IBM and the other distributors materialized. It was
considered highly unlikely that significant revenues would
arise from these sources before the second half of 1997 at
the earliest. Discussions were held with a number of
companies who expressed an interest in merging with the
Corporation. However, none of the proposals which management
was able to solicit proved satisfactory (e.g., no immediate
injection of funds, extreme dilution to existing
stockholders, minimal revenue contribution by the other
party). Discussions also took place over a period of several
months with a major vendor of middleware about a possible
acquisition of the Corporation or the COPERNICUS product, but
these were preempted when that vendor acquired another
company with a product which was perceived by them to be
competitive with COPERNICUS.
December 1996
The Corporation also investigated the possibility of a
placement to European investors under Regulation S of the
Securities Act. A presentation to relevant investors by a
representative of the Corporation's management took place in
the first week of December 1996, and appeared to generate
considerable interest. Nevertheless, during December the
Corporation's stock price fell from a high of $2.00 on
December 5, 1996 to a low of $1.00 on December 31, 1996 as
investors began to grow concerned about the Corporation's
liquidity problems and the likelihood of a delisting from the
Nasdaq SmallCap market. Under these circumstances, the
interest of overseas investors disappeared and the
Corporation's investment bankers advised that a private
placement with U.S. investors was now impossible. Due to the
Corporation's liquidity crisis, all employees not absolutely
essential to the maintenance of current business and the
relationship with IBM were terminated as of December 31,
1996.
January 1997
In January and February 1997, the Corporation engaged in
lengthy discussions with a high-net worth individual with
considerable experience in the enterprise software market.
The investor carried out certain due diligence on COPERNICUS
and an investment of $2 million in exchange for a 51%
interest in the Corporation was discussed. As the two
parties moved toward documenting the proposed transaction,
the investor withdrew, based on the investor's unwillingness
to invest in a small and troubled public company.
Loan from Mr. Robert Trump
In order to continue operating, the Corporation solicited a
$150,000 loan from Mr. Robert Trump which was received on
January 16, 1997. The terms of this loan were as follows:
o Advance: $150,000.
o Term: 6 months (to expire July 14th, 1997).
o Interest Rate: To be paid in warrants, see below.
o Warrants: 150,000 three-year warrants with an
exercise price of $2.00 per share, in lieu
of interest.
Other terms: The 180,000 Midland Warrants, held by Midland
Associates, an affiliate of Mr. Trump, were amended as
follows: The expiration date was changed from August 11,
1998 to January 16, 2002 and the strike price reduced from
$3.75 to $2.00 per share. See "Certain Transactions".
February 1997
During late January and early February 1997, the Corporation
reached an advanced stage of negotiating a transaction with
another public company whereby the other company would sell
to the Corporation a subsidiary with assets in excess of $1.5
million and inject $1 million cash into the Corporation in
exchange for 10 million shares of the common stock of the
Corporation. The effect of this transaction would have been
to increase the Corporation's assets to the point where the
Corporation would have fulfilled the requirements for
continued listing on the Nasdaq SmallCap market. However,
during the due diligence process, it was discovered that the
resulting combination would have had a significantly greater
negative cash flow than had originally been foreseen. There
were also some unresolved valuation questions relating to the
subsidiary which it was proposed the Corporation would
acquire. The parties therefore decided not to proceed with
the transaction.
The VIE transaction - preliminary negotiations
In mid-February of 1997, the Corporation began discussion
with representatives of the group of investors who eventually
formed VIE Systems, Inc. in order to offer to acquire
COPERNICUS. The group of investors included the high net
worth individual with whom the Corporation had been
conducting detailed discussions in January 1997. This
investor group (which is referred to hereafter as VIE
notwithstanding that VIE Systems, Inc. was not actually
formed until some time later) initially offered $1.6 million
and a 5% equity stake in VIE in order to acquire COPERNICUS
and its related assets. This offer was received in writing
on February 20, 1997. In light of other indications which
had been received, it seemed that a better price could be
obtained, and this offer was therefore declined. However,
negotiations continued and the terms of the offer were
improved.
March 1997
On March 3, 1997, the Corporation's common stock was delisted
from the Nasdaq SmallCap market on the grounds that the
Corporation failed to meet the $2 million in total assets
requirement for continued listing. The stock began trading
on the Nasdaq Bulletin Board.
Series C Redeemable Preferred Stock
On March 13, 1997, Mr. Robert Trump agreed to advance the
Corporation a further $50,000 which the Corporation urgently
required in order to continue its operations and meet its
payroll obligations. The earlier $150,000 advance and the
March 13, 1997 $50,000 advance were combined into $200,000 to
be used to subscribe for 800,000 Series C Redeemable
Preferred shares, $0.01 par value, with the following
principal terms:
o Each Series C Preferred Share has four (4) votes on any
matter to be put to a vote of the Corporation's
stockholders.
o The Series C Redeemable Preferred Stock can be redeemed at
the Corporation's option at any time upon payment of
$200,000.
o The Series C Redeemable Preferred Stock can be redeemed at
the holder's option following any investment in the
Corporation or a sale of any of the Corporation's assets
where the proceeds are $2,000,000 or more.
o The Series C Redeemable Preferred Stock will have
preference in the event of any liquidation of the
Corporation to the extent of $200,000.
The Corporation therefore intends to redeem the Series C
Redeemable Preferred Stock using $200,000 of the proceeds of
the sale in the event that Proposal 1 is approved.
Level 8 Systems Inc.
Throughout the negotiations with VIE, the Corporation
continued to aggressively pursue other potentially interested
parties. Several of them indicated strong interest, and one,
Level 8 Systems Inc. ("Level 8") made a formal offer to the
Corporation. In order to move quickly, Level 8 verbally
offered to make an immediate advance of $550,000 to the
Corporation to enable it to make crucial payments to
employees and creditors. After further negotiation, a
written offer was made early on March 19, 1997. At this
point the Corporation had received a verbal offer from VIE to
acquire COPERNICUS and therefore sought a better offer from
Level 8. This was not immediately forthcoming, however
Level 8 did agree to improve the terms of its offer, to
include an immediate cash infusion. The offer accepted by
the Corporation was made later on the same day (March 19,
1997) with the following terms:
o Advance: $550,000.
o Term: 120 days (expiring July 17, 1997).
o Interest Rate: 10% per annum.
o Collateral: Secured by the COPERNICUS product and
related assets.
o Additional Terms: The Corporation was free to continue to
negotiate with VIE and other third parties. In the event
that the Corporation were to sell COPERNICUS on or before
the repayment of the loan, a break-up fee would be payable
to Level 8 of $100,000. The proposed sale of COPERNICUS to
VIE as described herein would represent such a sale, and it
is therefore envisaged that the break-up fee will be paid
to Level 8 from the proceeds of the sale in the event that
Proposal 1 is approved.
The Board of Directors of the Corporation believed that it
was imperative to receive a significant cash infusion of some
kind since many of the employees were actively seeking other
employment, as they had not received salary for some time.
It was considered necessary to retain at least certain key
employees in order to protect the value of COPERNICUS. This
value would erode swiftly in the event that no staff were
available to maintain the existing customers and to support
the IBM sales effort. Therefore, despite the risks of not
being able to achieve a satisfactory offer for COPERNICUS
during the 120 days, the Board decided to proceed with the
transaction and preserve the COPERNICUS business as a going
concern in order to have the best opportunity to achieve
maximum stockholder value from the COPERNICUS asset.
The only other offer which the Corporation had managed to
confirm at the time was a verbal offer from an investor to
invest $500,000 in the Corporation in exchange for a 70%
equity interest in the Corporation. The advantage of this
proposed transaction was that it did not impose the same time
constraint with respect to negotiating a satisfactory offer
as the Level 8 secured loan. The disadvantage was that it
would require securing an offer more than three times as high
in order to lock in the same value for existing stockholders.
In view of the fact that employees had left for more secure
employment and that more were likely to do so, the ability of
the Corporation to maintain the value of the COPERNICUS asset
over a period longer than 120 days was limited, and it was
thus decided to proceed with the Level 8 proposal.
The VIE transaction - later negotiations
On March 20, 1997, after being advised of Level 8's serious
interest, VIE made a substantially increased offer to the
Corporation, with the following principal terms:
o VIE would acquire COPERNICUS and certain related assets for
$2 million in cash plus a 10% share in VIE. The parties
would immediately enter into a purchase agreement, conditional
upon shareholder approval, which would take effect following
stockholder approval.
o VIE would immediately advance $400,000 as a secured loan
while the Corporation sought stockholder approval for the
sale. This would represent a prepayment of the purchase
price.
o The Corporation would provide undertakings from the
required majority of stockholders to vote in favor of the
sale at the stockholders meeting.
o The Corporation would obtain stockholder approval within 60
days.
o Pending the stockholders meeting, VIE would immediately
receive a world-wide non-exclusive license for COPERNICUS
together with a perpetual exclusive license in the United
States for the health-care, financial services, food,
airline and hotel industries and an assignment of the IBM
contract. There would be a 5% royalty under this license
payable to the Corporation. Any payments under the license
prior to closing the purchase agreement would constitute
prepayments under the purchase agreement.
o If for any reason the sale was not approved by shareholders
or there was a change of control of the Corporation, or in
certain other circumstances defined as "Break-up events",
VIE would have received a break-up fee of the greater of
$250,000 and 50% of the difference in the value of the cash
components of the two competing offers.
While this offer appeared to be the most favorable yet
received from the point of view of stockholder value, the
Corporation had a number of concerns. Among other points,
these included the sweeping nature of the proposed interim
license (particularly the perpetual nature of the exclusive
license and the fact that it covered all areas where the
Corporation had experienced any success in licensing
COPERNICUS), the lack of any provision for the Corporation to
continue to utilize COPERNICUS in any fashion and the
probability of the Corporation's interest in VIE being
diluted by the need for further financing.
After further discussions with VIE it became apparent that
there was a willingness on both sides to negotiate a mutually
satisfactory transaction.
The Corporation therefore duly gave notice to Level 8 that it
had received a written offer. Level 8 declined to match the
terms of the offer and instead made the following offer,
which it termed "Final" on March 27, 1997:
Level 8 would acquire COPERNICUS and related assets, the
Corporation would receive $700,000 in cash and $300,000 in
Level 8 Stock.
In view of Level 8's unwillingness to match the terms of the
VIE offer (the Corporation judged the value of Level 8's
offer to be significantly lower than that of the VIE offer)
and VIE's apparent readiness to negotiate an acceptable
proposal, the Corporation entered into a letter agreement to
negotiate with VIE on March 31, 1997. This agreement allowed
the Corporation to continue to solicit interest in
COPERNICUS and investments in the Corporation during the
negotiations and if there were to be such a sale or
investment there would be a break-up fee payable to VIE of
$150,000, unless VIE had previously broken off negotiations.
Through April and the first week of May negotiations with VIE
continued on both business points and on the most appropriate
legal language until the agreements described in "The VIE
Agreements" were entered into as of May 9, 1997.
THE VIE AGREEMENTS
The License Agreement
As of May 9, 1997 the Corporation entered into a license
agreement (the "VIE License") to license certain rights to
its COPERNICUS product and to assign certain agreements to
VIE. The VIE License gives VIE a five year exclusive right to
market COPERNICUS to the financial services, healthcare, food
and government industries in the United States and Canada. It
also allows VIE to act as a non-exclusive distributor to all
other industries within the United States and gives VIE
worldwide non-exclusive distribution rights for all
industries until the termination of the license. Under the
VIE License the Corporation receives a five percent royalty
on all license fees received by VIE relating to the
COPERNICUS product. The license also permits VIE to produce
the product on additional platforms and enhance the product
as it sees fit. The source code for the product may not be
distributed to another party without the prior written
consent of the Corporation. Finally, the Corporation has
assigned to VIE certain agreements, including a distribution
agreement with IBM. The VIE License will terminate with the
closing under the purchase agreement if Proposal 1 is
approved by the shareholders.
The Asset Purchase Agreement
The Corporation entered into a purchase agreement (the
"Agreement") as of May 9, 1997, with VIE in which the
Corporation, subject to shareholder approval, agreed to
transfer, convey and assign to VIE all rights in and to its
COPERNICUS software, the "New Paradigm Architecture", related
intellectual property rights and the business, activities and
operations of the Corporation of or related to COPERNICUS,
and certain other specified tangible assets of the
Corporation (with all such business, activities and
operations of or related to the COPERNICUS software and the
"New Paradigm Architecture" engaged in by or through the
Corporation being referred to herein as the "COPERNICUS
Business"). Capitalized items used herein and not otherwise
defined shall have the meanings specified in the Agreement.
The Agreement is attached hereto as Appendix A. Significant
provisions of the Agreement include:
Purchased Assets The Corporation agreed to sell and deliver
to VIE all of the Corporation's right, title and interest to
the hardware and other tangible assets of the Corporation,
and all intellectual property and other related assets, of or
used in the COPERNICUS Business and existing on the Closing
Date, except for certain Excluded Assets. The assets conveyed
include, inter alia, trademarks, patents, copyrights,
contracts, programs, documentation, customer lists and
receivables related to the COPERNICUS Business.
The Agreement provides that the purchased assets do not
include any real property owned or leased by the Corporation
or those assets referred to in the Bill of Sale as "Excluded
Assets" which include all of the assets used solely in, and
accounts receivable related exclusively to, the business
conducted by the Corporation's two subsidiaries, New Paradigm
Commerce, Inc. and New Paradigm Inter-Link, Inc.
(collectively, the "Subsidiary COPERNICUS Businesses"), and
certain assets used jointly in the Subsidiary COPERNICUS
Businesses and the COPERNICUS Business.
Purchase Price The purchase price under the Agreement is
payable as follows:
At the Closing, VIE shall pay to or for the benefit of the
Corporation One Million Eight Hundred Thousand Dollars
($1,800,000), plus (i) the amount, in excess of $50,000,
payable and paid by the Corporation to Level 8 Systems, Inc.
in respect of a break-up fee, but in no event more than a
total of $50,000, less (ii) any payments made to the
Corporation pursuant to the License Agreement (as defined in
the Agreement) and less (iii) any Liabilities Adjustment (as
defined in the Agreement), by certified check, bank check or
wire transfer in immediately available funds (the "Closing
Payment"). The Corporation expects the Closing Payment to be
$1,850,000.
At the Closing, VIE shall pay to the Escrow Agent under an
Escrow Agreement (the "Escrow Agreement"), the sum of Two
Hundred Thousand Dollars ($200,000) (the "Escrow Fund"), such
amount to be held and dealt with as provided in the Escrow
Agreement (the "Escrow Agreement"). The escrow period shall
expire on the date six (6) months after the Closing Date,
except with respect to claims on the Escrow Fund made prior
to such date.
The Royalty The Agreement specifies that beginning from and
after the first anniversary of the Closing Date, VIE shall
pay to the Corporation a royalty equal to 5% of the Net
Revenue of VIE commencing on and after the first anniversary
of the Closing Date, determined, calculated and payable as
set forth below (the "Royalty").
The Royalty is equal to five percent (5%) of "Net Revenue" of
VIE commencing on and after the first anniversary of the
Closing Date. For purposes of the Agreement, "Net Revenue"
shall be equal to the amount of cash received and retained by
VIE from the sale, license and distribution of the computer
programs known and/or marketed as "COPERNICUS" software (the
"COPERNICUS Programs"), less the sum of (i) any applicable
credits, discounts and rebates, including, but not limited
to, quantity, dealer, distributor and promotional credits,
discounts, adjustments and rebates, and (ii) taxes (such as
sales, use or similar taxes) paid or payable by VIE in
connection with such sale or license. If VIE refunds or
issues a credit memo on a customer's price due to customer
dissatisfaction or other valid reason, this negative price
shall result in a reduction in Net Revenue and therefore a
reduction of the Royalty due to the Corporation. If any
COPERNICUS Program is included by VIE in a program or
combination of programs, the aggregate functionality of which
extends beyond such COPERNICUS Program, and which additional
functionality is either (l) distinct from the collective
functionality of the COPERNICUS Program, and/or (2)
separately available from VIE and/or any person other than
VIE (without royalty payable hereunder), then the Net Revenue
attributable to the sale, license or distribution of such
product shall be proportionately allocated among all
significant components of such combination product. From and
after the Closing Date, VIE agrees not to materially alter
its pricing policies with respect to the sale, license or
distribution of the COPERNICUS Programs for purposes of
reducing or otherwise negating its obligation to pay the
Royalty to the Corporation (for example, by increasing its
charges for maintenance fees or consulting services at the
expense of license fees so as to reduce the Net Revenue
calculation).
The Royalty shall be paid to the Corporation on a quarterly
basis, within fifteen (15) days following the close of each
calendar quarter commencing with the first calendar quarter
following the first anniversary of the Closing Date (each
such payment being referred to herein as a "Royalty
Payment").
The Corporation shall be entitled to have the applicable
books and records of VIE examined for purposes of showing
compliance with the Agreement (an "Audit") by an independent
public accountant mutually acceptable to the Corporation and
VIE. The fees expenses of the accounting firm shall be borne
by the Corporation unless the firm's determination of the
Royalty payable in respect of the period that is subject to
the Audit exceeds the Royalty calculated as payable by VIE by
5% or more. The Corporation shall not be entitled to conduct
an Audit more than once in any calendar year.
Notwithstanding anything to the contrary contained in the
Agreement, VIE shall have the right, in its sole and absolute
discretion, to cause an immediate termination its obligation
to pay any future Royalty to the Corporation, if at any time
on or prior to the fourth (4th) anniversary of the Closing
Date, VIE provides written notice to the Corporation of its
intention to effect its termination right under the royalty
portion of the Agreement and pays to or for the benefit of
the Corporation, together with such termination notice, an
amount equal to the greater of (a) all Royalties previously
paid to the Corporation (or accrued as payable as of the date
of such notice) and (b) $1,000,000 (the "Termination
Payment"). The Corporation shall have the obligation to
accept such Termination Payment when tendered. Upon
tendering of the Termination Payment, VIE's obligation to pay
any Royalty accruing from and after the date the Termination
Payment is tendered to the Corporation shall immediately
cease and be of no further force or effect.
In the event that at any time prior to the fourth (4th)
anniversary of the Closing Date, VIE shall transfer to an
unrelated third party all of its rights and interest in and
to the COPERNICUS Programs, and such purchaser does not
assume, by operation of law or otherwise, the Royalty
obligations under the royalty section of the Agreement, VIE
shall be required to pay to the Corporation, on or prior to
the closing of such sale transaction, an amount equal to the
Termination Payment.
In the event that at any time following the fourth (4th)
anniversary of the Closing Date, VIE shall transfer to an
unrelated third party all of its rights and interest in and
to the COPERNICUS Programs, and such purchaser does not
assume, by operation of law or otherwise, the Royalty
obligations under the royalty section of the Agreement, VIE
shall be required to pay to the Corporation, on or prior to
the closing of such sale transaction, an amount equal to the
greater of (i) the Termination Payment and (ii) five percent
(5%) of the consideration actually received by VIE for the
COPERNICUS Programs in connection with such sale.
Liabilities Undertaking VIE shall, at the Closing, execute
and deliver to the Corporation a Liabilities Undertaking (the
"Liabilities Undertaking"), the provisions of which shall,
effective upon the Closing, be deemed incorporated in the
Agreement by reference as if set forth in full in the
Agreement. Except as expressly set forth in the Liabilities
Undertaking, VIE shall not assume or be responsible for any
debts, commitments, obligations or liabilities of the
Corporation of any nature whatsoever. Liabilities not
asssumed by VIE include, inter alia, shareholder liabilities,
post-closing obligations, benefit plan obligations, taxes and
legal claims arising on or before the Closing Date.
Contemporaneous Actions and Deliveries Contemporaneously
with the execution and delivery of the Agreement, the
Corporation and/or VIE will take actions and execute and/or
deliver agreements, assets and documentation including:
1. The Corporation and VIE will have entered into the License
Agreement.
2. The Corporation will have loaned to VIE until the Closing
(at which time it will be transferred to VIE) the hardware,
COPERNICUS Business Materials and other tangible assets
necessary to enable VIE to exploit the License.
3. Robert Trump, Mark Blundell, John Brann, Lancer Holdings,
Inc. and Midland Associates will have each entered into the
voting agreements with respect to the shares of preferred
stock or common stock owned by them (the "Voting
Agreements").
4. John Brann and Diran Cholakian (collectively, the
"Designated Employees") will have each terminated their
employment with the Corporation and entered into an
Employment Agreement with VIE, respectively (the "Employment
Agreements")
Operation of the COPERNICUS Business (a) Commencing
with the date of the Agreement, the Corporation irrevocably
appointed VIE as its exclusive agent to operate the
COPERNICUS Business on behalf of the Corporation, including,
without limitation, the exclusive right to develop, market,
license and support the Programs and to service, on a
subcontract basis, the IBM Agreement and all of the Assumed
Contracts (as defined in the Agreement). Between the date of
the Agreement and the Closing (and thereafter if the Closing
shall occur), the Corporation shall not incur any
obligations, grant any licenses, contract on behalf of or
otherwise take part in any of the operations of the
COPERNICUS Business without the prior written consent of VIE.
In connection therewith, VIE agreed to perform, in accordance
with the terms thereof, the unperformed and unfulfilled
obligations of the Corporation to perform maintenance and
support services from and after the date of the Agreement
under the IBM Agreement and the Assumed Contracts, and to
assume those contractual liabilities of the Corporation
specifically listed by the Corporation (the "Assumed
Liabilities"). Except for the Assumed Liabilities (and from
and after the Closing Date, those liabilities specifically
listed on the Liabilities Undertaking), VIE shall not assume
or be responsible for any debts, commitments, obligations or
liabilities of the Corporation of any nature whatsoever. VIE
also agrees that (i) it will not amend the IBM Agreement or
any of the Assumed Contracts until such time as such contract
shall have been assigned to VIE, or incur any contractual
obligation on behalf of the Corporation without the
Corporation's prior written consent if the Corporation would
be required to assume, perform or satisfy such obligation in
the event that the Closing does not occur, and (ii) it shall
commence a reasonable sales effort with respect to the
licensing of the COPERNICUS Programs and shall otherwise
conduct the COPERNICUS Business in a commercially reasonable
manner. Without in any way limiting VIE's rights under the
License Agreement, the foregoing authorization shall
terminate in the event that the Closing shall not occur
within one hundred eighty (180) days from the date of the
Agreement.
Subject to the royalty payable under the License Agreement,
from and after the date of the Agreement, as its fee for
performing the Corporation's obligations under the IBM
Agreement and the Assumed Contracts and assuming the Assumed
Liabilities, VIE shall be entitled to receive and retain any
and all amounts paid and payable from and after the date of
the Agreement to the Corporation in respect of the IBM
Agreement and the Assumed Contracts, including, without
limitation, those payments in respect of accounts receivable
and work-in-process in existence on or prior to the date of
the Agreement. In the event that any such amounts are
received by the Corporation and not promptly paid over to
VIE, VIE shall be entitled to deduct all such unpaid amounts
from the Closing Payment.
Notwithstanding the foregoing, in the event that Shareholder
Authorization (as defined in the Agreement) shall not be
obtained and the Closing shall not occur, following the
termination of the Agreement, VIE shall return to the
Corporation the Loaned Assets (in as-is condition and subject
to depletion due to use) and the Corporation shall once again
be entitled to operate the COPERNICUS Business, subject only
to the License Agreement, with respect to all industries
other than the Licensed Industries. It is understood and
agreed that the License Agreement (and the provisions of the
Agreement incorporated into the License Agreement by
reference) shall survive any such termination of the
Agreement and VIE shall be entitled to retain all of the
rights granted pursuant to the License Agreement.
Capitalization of VIE VIE will capitalize itself with not
less than four million dollars ($4,000,000) within seven (7)
days of the date of the Agreement, and agreed to maintain not
less than two million dollars ($2,000,000) in a liquid
investment or money market account until the earlier to occur
of (a) the Closing and (b) July 17, 1997. As of May 20, 1997,
VIE notified the Corporation that this has taken place.
Deliveries of the Corporation Documents to be delivered
to VIE by the Corporation at the closing include, among
others:
1. The Bill of Sale, executed by the Corporation;
2. An Assignment of Copyrights, an Assignment of Patents, and
an Assignment of Trademarks, in each case in recordable form,
each executed by the Corporation (collectively, the
"Proprietary Rights Assignments");
3. Possession and control over, (i) the Programs in machine
readable Object Code and Source Code for computers, (ii) the
Programs' Documentation in machine readable form or in paper
or in other electronic medium (including, but not limited to
user Documentation, technical Documentation, production
materials and marketing materials) in the possession of the
Corporation, (iii) a copy (in paper and electronic form) of
the Lists, (iv) copies of all agreements, commitments,
records and other data relating to the Purchased Assets
reasonably necessary for the marketing and licensing of the
Programs by VIE, (v) all master artwork in existence on the
Closing Date used for current advertising and packaging in
suitable form, and (vi) all COPERNICUS Business Materials and
other tangible and intangible property constituting part of
the Purchased Assets;
4. Instruments of Assignment and Assumption (each a "Contract
Assignment" and collectively the "Contract Assignments"),
with respect to the Worldwide Vendor Agreement and related
agreements between the Corporation and International
COPERNICUS Business Machines the Corporation (the "IBM
Agreement") and each of the other Contracts as set out by the
Corporation (the "Assumed Contracts"), executed by the
Corporation as assignor and, if such consent is required by
the terms of such Contract, consented to in writing (in form
and substance reasonably required by VIE) by each applicable
contracting party; and together with the IBM Agreement and
each such Contract Assignment, the form of Estoppel
Certificate attached to the Contract Assignments, executed by
each applicable contracting party;
5. A Confidentiality and Non-Competition Agreement in favor
of VIE executed by the Corporation, Mark Blundell and John
Brann (collectively, the "Non-Compete Agreements"), provided
that John Brann shall only be required to be a party to the
Non-Compete in the event that he shall not then be bound by
the terms of the Employment Agreement with VIE; and
6. Written confirmation from the Corporation to VIE, in form
and substance reasonably acceptable to VIE, that effective
upon the Closing, the License Agreement shall terminate and
be of no further force and effect.
Deliveries of VIE Deliveries to be made by VIE at the
closing include, among others:
1. the Closing Payment to the Corporation;
2. the Escrow Fund to the Escrow Agent;
3. the Escrow Agreement, executed by VIE; and
4. the Liabilities Undertaking, executed by VIE.
Conditions Precedent to VIE's Obligations The
obligations of VIE under the Agreement to proceed with the
purchase and other transactions contemplated, are, at the
option of VIE in its sole discretion, subject to the
fulfillment of all of the following conditions, among others,
at or prior to the Closing:
1. No action, suit, proceeding or investigation shall have
been instituted against VIE or the Corporation and be
continuing before or by any court, tribunal or governmental
body or agency or have been threatened, and be unresolved, to
restrain or prevent, or to obtain substantial damages by
reason of, any of the transactions contemplated;
2. Since the date of the Agreement, there shall not have
occurred any material adverse change in the condition
(financial or otherwise), business, properties, assets,
liabilities, prospects or results of the Corporation or the
COPERNICUS Business, or in the value or utilizability of the
Purchased Assets to VIE, except for such change caused by VIE
in connection with its operation of the COPERNICUS Business
following the date of the Agreement (it being acknowledged by
VIE that the continued deterioration in the Corporation's
working capital position consistent with recent months,
absent any other adverse change or occurrence not
contemplated by the Agreement, shall not constitute a
material adverse change);
3. All consents necessary to the assignment of the IBM
Agreement shall have been obtained by the Corporation, and
there shall have been delivered to VIE an executed
counterpart reasonably satisfactory in form and substance to
VIE and its counsel of such consent and IBM shall not have
notified the Corporation or VIE of its intent to terminate
the IBM Agreement;
4. All consents necessary to the assignment of the Assumed
Contracts shall have been obtained by the Corporation, and
there shall have been delivered to VIE executed counterparts
reasonably satisfactory in form and substance to VIE and its
counsel, of all such consents; and
5. The Agreement and each exhibit to the Agreement to which
the Corporation is a party shall have been duly authorized,
and the consummation of the transactions contemplated and
thereby shall have been duly approved, by written consent or
affirmative vote of the requisite holders of shares of
capital stock of the Corporation entitled to vote thereon, as
required by the New York Business the Corporation Law, as
amended (the "NYBCL"), the Certificate of Incorporation of
the Corporation and all applicable federal and state
securities laws ("Shareholder Authorization").
Conditions Precedent to the Corporation's Obligations
The obligations of the Corporation under the Agreement to
proceed with the sale and the other transactions
contemplated, are, at the option of the Corporation in its
sole discretion, subject to the fulfillment of all of the
following conditions, among others, at or prior to the
Closing:
1. No action, suit, proceeding or investigation shall have
been instituted against VIE or the Corporation and be
continuing before or by any court, tribunal or governmental
body or agency or have been threatened, and be unresolved, to
restrain or prevent, or to obtain substantial damages by
reason of, any of the transactions contemplated;
2. The representations and warranties of VIE contained in the
Agreement or any certificates or documents delivered in
accordance with the Agreement shall be true and correct at
the time of the Closing with the same force and effect as
though such representations and warranties were made at that
time except for changes expressly permitted by the Agreement;
and
3. Shareholder Authorization shall have been obtained.
Representations and Warranties of the Corporation
Customary representations and warranties typically found in
agreements similar to the Agreement, including, among others:
1. Corporate organizational matters.
2. Requisite corporate power and authority and due execution
and delivery of documents.
3. No conflicts and no consents.
4. Financial Statements.
5. Except as otherwise indicated the Corporation has
conducted its business only in the ordinary course in a
manner consistent with past practices. Without limiting the
foregoing, since March 31, 1996, the Corporation has not:
a. incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except
current liabilities for trade or business obligations
incurred in the ordinary course of business and consistent
with its prior practice, none of which liabilities, in any
case or in the aggregate, materially and adversely affects
the condition (financial or otherwise), prospects or results
of operations of the Corporation or the COPERNICUS Business
or the Purchased Assets;
b. mortgaged, pledged or subjected to any Lien any of its
property, business or assets, tangible or intangible;
c. sold, transferred, leased to others or otherwise disposed
of any assets used in or necessary to conduct the COPERNICUS
Business, or licensed any of the Programs, or canceled or
compromised any material debt or claim, or waived or released
any right of substantial value of or relating to the
Purchased Assets and/or the COPERNICUS Business;
d. received any notice of actual or threatened termination of
any contract, lease or other agreement or other business
relationship or suffered any damage, destruction or loss
(whether or not covered by insurance) which, in any case or
in the aggregate, has had or could have a materially adverse
effect on the condition (financial or otherwise), prospects
or results of operations of the Corporation or of or on the
COPERNICUS Business or the Purchased Assets;
e. encountered any labor union organizing activity, had any
actual or threatened employee strikes, work-stoppages, slow
downs or lockouts, or had any material change in its
relations with its employees, agents, customers or suppliers
or any governmental regulatory authority or self-regulatory
authorities;
f. made any capital expenditures or capital additions or
betterment in excess of an aggregate of $250,000;
g. transferred or granted any rights under, or entered into
any settlement regarding the breach or infringement of, any
license, patent, copyright, trademark, trade name, service
mark or other Proprietary Rights, or modified any then
existing rights with respect thereto of or relating to the
Purchased Assets and/or the COPERNICUS Business;
h. instituted, settled or agreed to settle any litigation,
action or proceeding before any court or governmental body
relating to the Corporation or any of its assets, properties
or rights;
i. suffered any damage, destruction, loss, change, event or
condition which, in any case or in the aggregate, has had or
may have a material adverse effect on the condition
(financial or otherwise), prospects or results of operations
of the Corporation or of or on the COPERNICUS Business or the
Purchased Assets, including, without limitation, any change
in revenues, costs, levels or types of warranty or defective
product claims, or relations with employees, landlords,
agents, customers or suppliers;
j. entered into any transaction, contract or commitment other
than in the ordinary course of business, or paid or agreed to
pay any brokerage, finder's fee, or other compensation in
connection with, or incurred any severance pay obligations or
"break-up" fee obligations by reason of, the Agreement or the
transactions contemplated;
k. received any notice from any customer or supplier that it,
nor has knowledge that any customer or supplier, intends to
cease doing business with the Corporation, which, in any
case, has had or could have a material adverse effect on the
condition (financial or otherwise), prospects or results of
operations of the Corporation or of or on the COPERNICUS
Business or the Purchased Assets;
l. made any purchase commitment in excess of the normal,
ordinary and usual requirements of the COPERNICUS Business or
made any material change in its selling, pricing, advertising
or personnel practices inconsistent with the Corporation's
prior practice relating to the COPERNICUS Business; or
m. entered into any agreement or made any commitment to take
any of the types of actions described in any of subsections
(a) through (l) above.
6. No Liens on Purchased Assets.
7. Purchased Assets in good operating condition and repair,
suitable for the purposes used and adequate and sufficient
for the operation of the COPERNICUS Business.
8. The Purchased Assets constitute all of the assets,
properties, and rights necessary to conduct the COPERNICUS
Business as presently conducted (other than an office, office
supplies and telephones). None of the Excluded Assets are
assets, properties or rights necessary to conduct the
COPERNICUS Business as presently conducted. The Subsidiary
COPERNICUS Businesses do not compete or conflict with the
COPERNICUS Business.
9. The Corporation has delivered to VIE true and complete
copies of each of the Contracts prior to the execution of the
Agreement. To the best of the Corporation's knowledge, all
of the Contracts are in full force and effect with respect to
the Corporation in accordance with their terms and there is
no violation or default under the Contracts and to the best
of the Corporation's knowledge no event has occurred or
circumstance exists which with notice or lapse of time or
both would constitute an event of default, or give rise to a
right of termination or cancellation, or result in the loss
or adverse modification of any right or benefit thereunder.
No party to any Contract has given the Corporation written
notice of or made a claim with respect to, and the
Corporation is not otherwise aware of, any material breach or
default under any thereof. To the best of the Corporation's
knowledge, the Corporation enjoys peaceful possession and
quiet enjoyment of the Purchased Assets, tangible and
intangible, held under license; and all such licenses are in
good standing, in full force and effect and are valid,
binding and enforceable obligations of the Corporation, and
to the best of the Corporation's knowledge, of the licensors
thereunder. None of the Contracts impose any obligation on
the Corporation other than to provide service in the ordinary
course. Except as otherwise disclosed to VIE, there have
been no oral or written modifications to the terms or
provisions of any of the Contracts. No amount payable or
reserved under any Contract has been assigned or anticipated
and no amount payable under any Contract is in arrears or has
been collected in advance and to the best of the
Corporation's knowledge, there exists no offset or defense to
payment of any amount under a Contract.
10. The Corporation owns or possesses the perpetual and
royalty-free licenses and other rights to use all Proprietary
Rights used in or necessary to conduct the COPERNICUS
Business as it is presently operated, including, without
limitation, any necessary to develop, market, license and
support the Programs, all of which are in good standing and
uncontested and free and clear of any Liens and rights of
others of any kind. No Proprietary Rights are owned or
licensed or held by any shareholder, director, officer,
consultant or employee of the Corporation, or by any entity
controlled by or affiliated with the Corporation or by any of
such persons, including, without limitation, Management
Technologies, Inc., Lancer Holdings, Inc., or Midland
Associates, all such Proprietary Rights being owned or
licensed by the Corporation itself. Except as otherwise
disclosed to VIE, to the best of the Corporation's knowledge,
the Corporation is not infringing upon or otherwise acting
adversely to any copyrights, trademarks, trademark rights,
service marks, service names, trade names, patents, patent
applications, licenses or trade secrets or other proprietary
rights or intellectual property of any other person or
entity. No claim, suit, demand, proceeding or investigation
is pending, has been asserted or is threatened by or against
the Corporation with respect to, based on or alleging
infringement of any such rights or the proprietary rights or
intellectual property of any third party, or challenging the
validity or effectiveness of any license for such rights, and
the Corporation knows of no basis for any such claim, suit,
demand, proceeding or investigation.
11. The Corporation has the exclusive right to manufacture,
develop, publish, market, license and sell the Programs.
Except as otherwise disclosed in writing to VIE, no person or
entity other than the Corporation may manufacture, develop,
publish, market, license or sell all or any part of the
Programs without the prior consent of the Corporation (in the
Corporation's sole discretion) and the Corporation has not
given any such consent and the Corporation owns all right,
title and interest in and to the Programs and the exclusive
right to apply for copyright and patent protection therefor.
To the best of the Corporation's knowledge, no director,
officer, employee or independent contract of the Corporation
has in his or her personal possession outside the offices of
the Corporation, for safekeeping, convenience of work or
otherwise, any proprietary material of the Corporation. None
of the individuals or entities who have performed services in
connection with the development of any of the Programs, as
employees or as independent contractors, or any other
employee of the Corporation, holds any proprietary or other
ownership rights with respect to such Programs and each of
such employees and independent contractors has signed an
employment contract or confidentiality agreement with the
Corporation, which contains a covenant prohibiting the use or
disclosure of confidential information and proprietary
rights.
12. Except for commercially available off-the-shelf software
and software which is otherwise available in the public
domain, and except for the software used solely in connection
with the Subsidiary COPERNICUS Businesses, the Corporation
has disclosed a true and complete list of all software
licensed to, owned, developed, or published by the
Corporation, including, without limitation, the Programs, as
well as a description of any instructions or sequences of
instructions, in whatever form embodied, which are included
in any of the Programs and which requires the consent
(whether subject to royalty or otherwise) of a party other
than the Corporation in order for any of the Programs to be
sold, transferred, used, licensed, updated, enhanced or
modified or integrated with other software by the
Corporation, VIE or any other party together with true and
correct copies of all contracts between or among the
Corporation, on the one hand, and such authors or licensors,
on the other hand. There has been no publication or public
distribution of any of the Source Code of any of the Programs
that would in any way affect the right of the Corporation or
VIE to seek copyright protection for such Programs. With
respect to the Contracts pertaining to Programs entered into
by the Corporation, the Corporation has licensed the Programs
and not sold them, thus retaining ownership of the underlying
software, and has not granted any exclusive licenses in
respect thereof. The Corporation is not aware of any claims
actually or purporting to be within the scope of any warranty
coverage, express or implied, afforded to licensees of any
Programs or of any errors, omissions or failures to perform.
There are no bugs in the Programs reasonably detectable with
normal use of the Programs except as disclosed by the
Corporation in the Disclosure Schedules, all of which can be
corrected by VIE without unreasonable effort or expense.
13. The Corporation is not a party to or bound by any oral or
written contract or understanding relating to or which might
interfere with the full exploitation of any rights or
property being transferred to VIE under the Agreement or
which restricts its right to enter into the Agreement or to
perform in accordance with the Agreement. The Corporation
has not entered into any agreements not conveyed in the
Agreement to VIE in the Agreement which involves the
publication, development, manufacture or marketing of any
computer software in substantial competition with any of the
Programs; and has not entered into any transactions with
respect to any assets, liabilities or business operations
referred to or contemplated by the Agreement with any party
other than VIE, except in the ordinary course of business.
Except as otherwise set forth, no part of any of the
Proprietary Rights, including, without limitation, any source
code, is subject to or held in escrow or is in any third
party's possession.
14. No litigation.
15. No violations, all requisite licenses.
16. No illegal gifts or benefits.
17. Payment of taxes.
18. ERISA compliance; no labor disputes.
19. All Receivables constituting any part of the Purchased
Assets have arisen only from bona fide transactions in the
ordinary course of business and are collectible in accordance
with their terms.
20. No environmental issues or liabilities to the best
knowledge of the Corporation.
21. SEC compliance.
22. The information statement and related materials
(collectively, the "Information Statement") to be prepared by
the Corporation and used in connection with the Corporation's
Special Meeting of Shareholders, relating to the
authorization of the Agreement, the sale of the Purchased
Assets and other transactions contemplated (the "Special
Meeting") will, when prepared by the Corporation and
distributed to the shareholders, comply in all material
respects with the provisions of the NYBCL and the 1934 Act
and the rules and regulations promulgated thereunder and will
not, at the time of the mailing of the Information Statement
to the holders of capital stock of the Corporation (the
"Shareholders") or at the Closing Date, contain any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to
make the statements therein, in the light of the
circumstances under which they are made, not misleading;
provided, that the Corporation makes no representation with
respect to information concerning VIE supplied by VIE to the
Corporation for inclusion in the Information Statement. The
manner and conduct of the Special Meeting by the Corporation
shall comply in all material respects with the provisions of
the NYBCL and the 1934 Act and the rules and regulations
promulgated thereunder.
23. The Corporation listed 5 Persons (within the meaning of
Rule 14a-2(b)(2) promulgated under the 1934 Act), specifying
the number of shares of common stock or preferred stock of
the Corporation owned or believed by the Corporation to be
controlled by each such person and the percentage ownership
of each such person based on the number of shares entitled to
be voted at the Special Meeting. Such persons are the owners
of or control the vote of greater than two-thirds of the
shares of capital stock of the Corporation entitled to vote
at the Special Meeting and also the requisite number of
shares of each class and series of capital stock of the
Corporation entitled to vote thereat and have duly and
validly approved at the Special Meeting the matters covered
by the Information Statement, as required by the NYBCL, the
Certificate of Incorporation of the Corporation and all
applicable federal and state securities laws.
24. Customer list and status.
25. Solvency.
26. No representation or warranty by the Corporation
contained in the Agreement nor any written statement or
certificate furnished or to be furnished by or on behalf of
the Corporation to VIE in connection with the Agreement
contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact
required to make the statements in the Agreement or therein
contained, under the circumstances under which made, not
misleading or necessary in order to provide a prospective
purchaser of the Purchased Assets with adequate information
as to the operations of the Corporation, the COPERNICUS
Business and the Purchased Assets and the Corporation has
disclosed to VIE in writing all material adverse facts known
to it relating to the same. The representations and
warranties contained in the Agreement or any document
delivered in connection with the Agreement shall not be
affected or deemed waived by reason of the fact that VIE
and/or any of its representatives knew or should have known
that any such representation or warranty is or might be
inaccurate in any respect.
Representations and Warranties of VIE Customary
representations and warranties typically found in agreements
similar to the Agreement, including, among others:
1. Corporate organizational matters.
2. Requisite corporate power and authority and due execution
and delivery of documents.
Covenants of the Corporation 1. Without in any way
limiting the provisions of the Agreement, during the period
from the date of the Agreement to and including the Closing
Date, the Corporation shall not take any action which might
result in any material change in the operations of the
COPERNICUS Business or which might have a materially adverse
effect on the value of the Purchased Assets or the COPERNICUS
Business other than changes made with the prior written
consent of VIE. Without limiting the generality of the
foregoing, prior to the Closing, the Corporation will not,
without the prior written consent of VIE:
a. dissolve, liquidate, merge or consolidate or sell or
otherwise dispose of all or any substantial portion of
its assets or obligate itself to do so, unless such
transaction is specifically conditioned upon, and will
not occur until after, the Closing, and will otherwise
not involve or have any effect on or otherwise conflict
with the COPERNICUS Business or the transactions
contemplated by the Agreement;
b. sell, transfer, lease or otherwise dispose of any
assets or properties of or related to the COPERNICUS
Business, or license any of the Programs;
c. amend, modify, change, alter, terminate, rescind or
waive any rights or benefits under any Contract;
d. fail to maintain the Purchased Assets in reasonably
good condition, repair and working order, reasonable and
ordinary wear and tear excepted;
e. perform, take any action or incur or permit to exist
any of the acts, transactions, events or occurrences of
a type which would be inconsistent with or render untrue
any of the representations or warranties set forth in
the Agreement had the same occurred after the Balance
Sheet Date and prior to the date thereof;
f. cancel, compromise or modify or agree to cancel,
compromise or modify any Receivable; or
g. cancel any of the current insurance policies or any
of the coverage thereunder maintained for the protection
of any of the Purchased Assets or the COPERNICUS
Business, or the operation thereof.
2. During the period from the date of the Agreement to the
Closing Date, the Corporation shall give VIE prompt written
notice of any change in, or any of the information contained
in, the representations and warranties made by it in or
pursuant to the Agreement or the Disclosure Schedules or of
any event or circumstance which if it had occurred on or
prior to the date thereof, would cause any of such
representations or warranties not to be true or correct.
3. During the period from the date of the Agreement to the
Closing Date, VIE and its counsel, accountants and other
representatives shall be given, during normal business hours,
full access to and copies of all of the books, tax returns,
contracts, commitments, records, facilities and properties of
the Corporation pertaining to the COPERNICUS Business or
constituting any part of the Purchased Assets, work papers of
accountants of the Corporation pertaining to the COPERNICUS
Business and all personnel of the Corporation, and they shall
be furnished with all such documents and information with
respect to the affairs of the Corporation pertaining to the
COPERNICUS Business as may from time to time reasonably be
requested, including without limitation, employee files,
employee benefit files, contracts with the current customer
and vendor base of the COPERNICUS Business, projections of
customer and vendor activities, all computer files, systems
and records, leases, and accounts payable and receivable.
The Corporation and its directors, officers and employees
shall cooperate fully with VIE's investigation, provided that
the Corporation shall not be required to incur any out of
pocket costs in connection therewith. VIE will (and will
cause its representatives to) maintain the confidentiality of
the confidential information it receives from the
Corporation, provided that such information may be disclosed
(in confidence) to lawyers, accountants, prospective lenders
and investors, and other persons or entities involved in the
transactions, and that nothing in the Agreement shall prevent
disclosure or use of any information as may be required by
applicable law or that is at the date of the Agreement or
thereafter becomes generally available to and known by the
public other than by reason of VIE's breach of its
obligations under the confidentiality provision of the
Agreement, or is or becomes available to VIE on a non-
confidential basis from a source that is not known by VIE to
be prohibited from disclosing such information pursuant to a
confidentiality agreement with VIE or its representatives.
Notwithstanding the foregoing, VIE shall be entitled to
utilize all such confidential information in connection with
its operation of the COPERNICUS Business from and after the
date of the Agreement.
4. The Corporation shall hold confidential all information
disclosed to or obtained by it from or concerning VIE or
otherwise arising out of its negotiations with VIE or
investigations of VIE and such information shall not be used
or disclosed except in furtherance of the transactions
contemplated in the Agreement or as otherwise required by
law.
5. During the period from the date of the Agreement to the
Closing Date, the Corporation shall use its best efforts to
preserve intact the present goodwill of the Corporation and
the relationships of the Corporation with customers, dealers,
OEMs, VARs, suppliers, creditors, distributors, consultants,
governmental authorities and others having business relations
with it and the present business organization and personnel
of such the Corporation. The Corporation shall cause to be
paid before they become delinquent all taxes, assessments,
and governmental charges or levies imposed prior to the
Closing Date upon its business or properties and all claims
or demands of materialmen, mechanics, carriers, warehousemen,
landlords, and other similar persons asserted prior to the
Closing Date which, if unpaid, might result in the creation
of a Lien upon any Purchased Assets or otherwise have an
adverse effect on the conduct the COPERNICUS Business.
6. VIE has no obligation to employ any of the Corporation's
employees in its business following the date of the Agreement
or the Closing Date. Notwithstanding any offer or
determination to so employ any employee, VIE shall not be
obligated to maintain any employee for any specific length of
time and, except as otherwise provided by the Employment
Agreements, all such employees shall be employees at will.
The Corporation shall promptly pay all amounts due and
payable to, or accrued in respect of, its employees in the
nature of wages, commissions, salary, insurance and other
benefits (including accrued vacation and sick pay and
unearned bonuses), and shall pay all withholding tax and
similar obligations in each case with respect to all
employees of the Corporation and all periods ending on or
prior to the Closing Date, and with respect to the Designated
Employees, for all periods ending on or prior to the date of
the Agreement.
The Corporation shall be solely responsible for, and shall
indemnify and hold harmless VIE from and against, any and all
claims and obligations, if any, for severance pay,
termination pay and other benefits arising or claimed to
arise out of (i) the termination of employment of any
employee of the Corporation on or prior to the Closing Date,
and with respect to the Designated Employees, on or prior to
the date of the Agreement, (ii) the effect of the
transactions contemplated by the Agreement on the employment
status of any of the employees of the Corporation, including
the Designated Employees and any others which may thereafter
be employed by VIE, and/or (iii) the termination of
employment with VIE within 120 days after the Closing Date of
any employee, including the Designated Employees, who prior
to the Closing Date (or the date of the Agreement in the case
of the Designated Employees) was an employee of the
Corporation and thereafter becomes an employee of VIE (in
this latter case to the same extent as if any such employee
were then still employed by the Corporation, but only with
respect to such severance pay, termination pay or other
benefits which arise or are claimed to arise out of the
employee's employment with the Corporation).
Nothing in this Section or elsewhere in the Agreement,
express or implied, shall be construed to confer any rights
or remedies on any employee of the Corporation. All
liabilities of the Corporation under this Section shall
constitute Excluded Liabilities.
7. The Corporation shall prepare the Information Statement
as promptly as possible after the date of the Agreement and
shall cause the preliminary Information Statement to be filed
with the SEC within fourteen (14) days after the date of the
Agreement. The Corporation shall submit the proposed
Information Statement to VIE and its counsel not less than
two days prior to submitting the Information Statement to the
SEC or the Shareholders. VIE shall promptly furnish the
Corporation with such information concerning VIE as the
Corporation shall reasonably request for inclusion in the
Information Statement, and the Corporation shall be
responsible for all other information included therein. The
Corporation shall cause to be distributed to the Shareholders
of record as of the record date for the Special Meeting, in
accordance with the applicable regulations of the SEC and the
applicable provisions of the NYBCL, a copy of the Information
Statement filed by the Corporation with and cleared by the
SEC. The Corporation shall use commercially reasonable
efforts to mail the Information Statement to Shareholders on
or before May 16, 1997. If prior to the Closing Date either
the Corporation or VIE determines that the Information
Statement needs to be amended or supplemented in order to
comply with the 1934 Act or the rules and regulations
promulgated thereunder or for the Corporation's
representations or warranties in the Agreement to be correct,
VIE or the Corporation, as the case may be, shall notify the
other of such determination and shall deliver to the other
such amendment or supplement as such party believes is
necessary to comply with the applicable regulations of the
SEC and to make such representation and warranty correct.
The Corporation shall consider all such amendments proposed
by VIE, and shall cause all such amendments or supplements
that the parties reasonably believe are necessary to be
mailed to the Shareholders as soon as practicable after such
delivery.
The Corporation shall, through its Board of Directors,
recommend to the Shareholders the adoption of the Agreement
and approval of all matters contemplated by or in furtherance
of the Agreement to be acted on at the Special Meeting, and
shall use all reasonable efforts to make the actions
contemplated by the Special Meeting to be effective on or
before June 20, 1997.
8. Between the date of the Agreement and the Closing Date,
the Corporation shall deliver to VIE true and correct copies
of all information, materials, notices, mailings and other
written communications sent by the Corporation to its
Shareholders or any class or series thereof contemporaneously
with the distribution thereof.
9. The Corporation shall cause to be promptly prepared and
delivered to VIE promptly upon completion (but no later than
May 31, 1997), income statements and balance sheets of the
Corporation for its fiscal quarter ending March 31, 1997 (the
"Interim Financial Statements"). The Interim Financial
Statements shall be prepared in a manner consistent with the
Financial Statements and in accordance with generally
accepted accounting principles, but need not be audited. The
Interim Financial Statements, when delivered to VIE, shall be
deemed "Financial Statements" for purposes of the Agreement
and the representations and warranties set forth in the
Agreement shall be deemed to apply with equal force and
effect as of the date of such delivery and as of the Closing
Date to the Interim Financial Statements.
10. The Corporation shall pay all sales tax, transfer tax,
intangibles tax, filing fees, recording and registration fees
and similar government charges applicable to the transactions
contemplated by the Agreement, including, without limitation,
all taxes and charges payable, if any, upon the transfer of
title to any Purchased Assets. VIE and the Corporation will
cooperate to prepare and file with the proper public
officials, as and to the extent available and necessary, all
appropriate sales tax exemption certificates or similar
instruments as may be necessary to avoid the imposition of
sales, transfer and similar taxes on the transfer of
Purchased Assets pursuant to the Agreement.
11. VIE represents and warrants to the Corporation and the
Corporation represents and warrants to VIE, that no person is
entitled to any brokerage commissions or finder's fees in
connection with the transactions contemplated by the
Agreement as a result of any action taken by it or any of its
affiliates, officers, directors or employees.
12. The Corporation shall use its best efforts to refer all
requests for and forward all orders for products to VIE at
such telephone number and address as VIE from time to time
informs the Corporation. The Corporation and VIE shall each
attempt in good faith to direct or deliver to the other all
incoming mail, telephone or other communications or
deliveries which are not received by the appropriate party
(that is, VIE in the case of matters or materials pertaining
to the COPERNICUS Business and the Corporation in the case of
all other matters or materials).
Break-Up In addition to, and without limiting any of VIE's
rights under or pursuant to the Agreement and the
transactions contemplated, subject to and upon the occurrence
of a "Break-up Event" (as defined below) on or prior to the
expiration of one hundred and eighty (180) days from the date
of the Agreement, the Corporation shall pay, in immediately
available funds, to VIE, at the offices of its counsel in New
York, New York, the "Break-up Fee".
The following shall each be a "Break-up Event":
1. The Corporation (or any successor, assign, trustee or
custodian thereof) shall execute or the Board of Directors of
the Corporation shall authorize or approve (with or without
and whether or not subject to, diligence, financing or other
conditions), or publicly announce or confirm an agreement
with any group, entity or person other than VIE providing for
the acquisition of all or any portion of the Purchased Assets
by such other party, whether by merger, purchase of assets or
stock, purchase of claims against the Corporation or its
estate, plan of reorganization, liquidation or otherwise;
2. A Change of Control of the Corporation shall occur. For
purposes of this paragraph, "Change of Control" shall mean:
(a) a stock purchase of any "person" or "entity" (as
such terms are used in Sections 13(d) and 14(d) (2) of
the Securities Exchange Act of 1934, as amended) who
then owns or by virtue of such purchase becomes the
beneficial owner of, directly or indirectly, voting
securities of the Corporation or of any of the
subsidiaries, or rights or options with respect thereto
or securities convertible into or exchangeable for any
of same, representing 25% or more of the combined voting
power of the then outstanding voting securities of the
Corporation or any of its subsidiaries, and such person
or entity does not sign a Voting Agreement;
(b) any change in the composition of the Board of
Directors of the Corporation in any period which
involves a majority of such directors and such new Board
of Directors does not approve or otherwise seeks to
repudiate the transactions contemplated by the
Agreement, or
(c) any proxy, voting trust, or any voting or other
agreement by any of the shareholders signing the
Agreement, or any management agreement, having the
effect of transferring the power or authority (whether
or not exercised) to influence control (affirmatively or
negatively) over the Corporation, a subsidiary or its
operations, where such agreement seek to repudiate or
would have the effect of repudiating the transactions
contemplated by the Agreement.
Shareholder Authorization shall not be obtained prior to July
17, 1997 (the "Break-up Date"), provided, however, that this
section shall not be a "Break-up Event" if (A) Shareholder
Authorization is not obtained by such date because the SEC
had delayed the release by the Corporation of the Information
Statement to its shareholders to a date less than twenty (20)
days prior to the Break-up Date, and (B) such Information
Statement was filed by the Corporation not later than
fourteen (14) days following the date of the Agreement and
the Corporation had made diligent efforts to timely respond
to all SEC comments given in respect thereof, if any.
The Break-up Fee shall be $250,000; provided, that the
obligation of the Corporation to pay such Break-up Fee shall
be subject to the satisfaction of the following conditions:
(a) VIE shall not have theretofore exercised any right
or stated its intent to terminate or not to perform the
Agreement, except as a consequence of the failure of the
Corporation to perform its obligations under the
Agreement;
(b) the representations and warranties of VIE contained
in the Agreement shall have been true and correct in all
material respects and VIE shall have performed all of
its obligations under the Agreement to the extent
required to be performed on or prior to the date of the
Break-up Event; and
(c) consummation of the transaction contemplated thereby
shall not have been prevented by the failure of any
condition to the obligations of the Corporation set
forth in the Agreement to have been satisfied as a
consequence of any act or omission by VIE.
The obligations of the Corporation to pay the Break-up Fee
shall be absolute and unconditional and shall not be affected
by any circumstances, including, without limitation, any set-
off, counterclaim, recoupment, defense or other right which
the Corporation may have against VIE or any principal
thereof, or anyone else. Neither VIE nor any principal
thereof shall be required to mitigate its or his damages.
The Break-Up Fee shall not constitute liquidated damages and
shall be in addition to, and without limiting any of VIE's
rights under or pursuant to the Agreement and the
transactions contemplated, and shall be in addition to any
other remedies that VIE may have at law, in equity or
otherwise.
If a Break-up Event occurs, VIE shall nevertheless continue
to enforce its rights under the Agreement and be entitled to
make competing bids for any or all of the business the
Corporation (and to present the relative merits of bids it
may make to parties in interest), but in the event that VIE
is the successful bidder, then VIE shall not be entitled to
the Break-up Fee.
No Shop From the date of the Agreement until the expiration
of the "Restricted Period" described below, (a) the
Corporation agrees, directly or indirectly, without VIE's
prior written consent, that it shall not and shall not permit
any subsidiary to (i) offer or convey, sell or license any of
the Purchased Assets or the COPERNICUS Business, (ii) issue,
sell or purchase any shares of any class or series of any of
the issued and outstanding capital stock of the Corporation
or any security convertible into or exchangeable for such
stock or any option or warrant with respect to such stock
(except options granted under existing stock option plans and
shares of the Corporation capital stock issuable upon the
exercise or conversion of options, rights, or securities
presently outstanding), or (iii) merge or consolidate with
another entity, and (b) the Corporation will not solicit,
entertain, continue, respond to or encourage inquiries or
proposals, or enter into, pursue, or carry on any discussions
or negotiations, with respect to any transaction of the type
referred to in clause (a) above with any person or entity
other than VIE. The Corporation will immediately cease and
cause to be terminated any existing activities, discussions
or negotiations with any parties conducted in respect of any
such transaction. The Corporation will promptly advise VIE
of the identity of any offeror and communicate to VIE the
terms of any oral inquiry or proposal which it may receive
and deliver to VIE a copy of any such offer in writing.
Without limiting the rights of VIE to pursue any remedies,
the parties agree that damages are not an adequate remedy for
a breach of this Section and that the obligations under the
Agreement may be specifically enforced. The "Restricted
Period" shall continue until the expiration of the earlier of
(a) one hundred and eighty (180) days after the date of the
execution and delivery of the Agreement by all parties and
(b) the Closing. Notwithstanding the foregoing, the
Corporation shall be entitled to enter into any of the
foregoing transactions, provided that such transaction is
specifically conditioned upon, and will not occur until
after, the Closing, and will otherwise not involve or have
any effect on or otherwise conflict with the COPERNICUS
Business or the transactions contemplated by the Agreement.
OEM License Subject to the terms of the Agreement and the
schedules and exhibits of the Agreement, including, without
limitation, the Non-Compete Agreement, from and after the
Closing, VIE agrees to grant to the Corporation, on a
product-by-product basis, an OEM license (an "OEM") to
utilize the COPERNICUS programs in a non-competitive software
product to be developed or sold by the Corporation (a
"Product"), provided that (a) any such OEM shall be on
substantially similar terms and conditions as VIE's
arrangements with its other OEM's and otherwise on VIE's
standard form and (b) VIE shall have the right to refuse to
grant to the Corporation an OEM for any reasonable business
reason, including, without limitation, any of the following:
1. The proposed Product is not consistent with VIE's business
plan or relates to an area or field in which VIE does not
wish its products utilized;
2. VIE desires to enter the market with a product similar to
the Product;
3. VIE has previously granted, or desires to grant, an OEM to
an alternative vendor for a similar product or related field;
4. VIE does not wish to do business with any party affiliated
or involved with the Corporation in the development or sale
of the Product for any reason whatsoever;
5. The Corporation's financial status is below the standard
required by VIE for its VARs, OEMs or distributors, or VIE
believes, in its sole discretion, that the Corporation's
financial situation at such time not sufficient to provide
adequate support for the Product;
6. VIE, in its sole discretion, believes the Product or any
potential use thereof to be competitive with any product sold
or licensed by VIE or otherwise competitive with VIE's
business; or
7. (A) VIE, or any of its subsidiaries, shall become subject
to the reporting requirements of the Securities Exchange Act
of 1934, (B) VIE shall effect a sale of the assets of or
relating to the COPERNICUS programs, (C) any person who is
not a stockholder of VIE as of the Closing (or any affiliate
of any such stockholder) shall hold 25% or more of the equity
of VIE or (D) VIE shall have tendered to the Corporation the
Termination Payment.
Obligations to Indemnify VIE assumes and agrees to save,
indemnify and hold harmless the Corporation from and against,
and shall on demand reimburse the Corporation for:
1. Any and all loss, liability, damage or deficiency suffered
or incurred by the Corporation by reason of any
misrepresentation or breach of warranty by VIE or
nonfulfillment of any covenant or agreement to be performed
or complied with by VIE under the Agreement or in any
agreement, certificate, document or instrument executed by
VIE and delivered to the Corporation pursuant to or in
connection with the Agreement; and
2. Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including
reasonable attorneys' fees, incident to any of the foregoing,
or reasonably incurred in investigating or attempting to
avoid the same or to oppose the imposition thereof, or in
enforcing any of the obligations under this indemnity
provision.
The Corporation assumes and agrees to save, indemnify and
hold harmless VIE from, against and in respect of, and shall
on demand reimburse VIE for:
1. any and all loss, liability, damage or deficiency suffered
or incurred by VIE by reason of any misrepresentation, breach
of warranty or nonfulfillment of any covenant or agreement to
be performed or complied with by the Corporation under the
Agreement or any agreement, certificate, document or
instrument executed by the Corporation and delivered to VIE
pursuant to or in connection with the Agreement;
2. any and all loss, liability, damage, cost or expense
suffered or incurred by VIE in respect of or in connection
with any and all debts, liabilities and obligations of, and
any and all violation of laws, rules, regulations, codes or
orders by the Corporation, direct or indirect, fixed,
contingent, legal, statutory, contractual or otherwise, which
exist at or as of the Closing Date or which arise after the
Closing Date but which are based upon or arise from any act,
transaction, circumstance, sale of goods or services, state
of facts or other condition which occurred or existed on or
before the Closing Date, whether or not then known, due or
payable, except to the extent specifically assumed by VIE
under the terms of the Agreement;
3. any and all loss, liability, damage, cost or expense
suffered or incurred by VIE based on or arising out of the
infringement or alleged infringement of any of the Programs
as they exist on the date of the Agreement of the proprietary
rights of any third party (provided that any such claim
pursuant to this subparagraph (iii) is made within three
years of the date of the Agreement);
4. any and all loss, liability, damage, cost or expense
suffered or incurred by VIE based on or arising out of any
defective or allegedly defective product or service warranty
and/or third party liability claims (whether alleged in
contract, tort, strict liability or otherwise), which exist
at or as of the Closing Date or which arise after the Closing
Date but which are based upon or arise from any act,
transaction, circumstance, sale of goods or services, state
of facts or other condition which occurred or existed on or
before the Closing Date, including, without limitation, any
products manufactured, assembled, sold or distributed by the
Corporation or its predecessors in interest at any time;
5. any and all loss, liability, damage, cost or expense
suffered or incurred by VIE based on or arising from (A) the
presence of any Hazardous Substance on or about any premises
occupied by the Corporation or any hazardous discharge on or
prior to the Closing Date, and/or any environmental
complaint, and/or the failure to obtain any license or permit
required in connection with any Hazardous Substance or
hazardous discharge or the retention, disposal, treatment or
use thereof, and/or arising out of any noncompliance with any
environmental, health or safety law, ordinance, rule or
regulation (each, an "Environmental Requirement"), in each
case, based on or arising from any act, transaction, state of
facts or other condition which occurred or existed on or
before the Closing Date, whether or not then known, (B) any
personal injury (including wrongful death) or property damage
(real or personal) arising out of or related to any hazardous
discharge, the presence, use, disposal or treatment of a
Hazardous Substance, or noncompliance with any Environmental
Requirement, on or prior to the Closing Date, and/or (C) any
environmental complaint and/or any demand of any government
agency or authority prior to, on or after the Closing Date
which is based upon or in any way related to any hazardous
discharge, the presence, use, disposal or treatment of a
Hazardous Substance, and/or noncompliance with any
Environmental Requirement on or prior to the Closing Date,
and including, without limitation and in each such case under
this clause (v), the reasonable costs and expenses of all
remedial action and clean-up, attorney and consultant fees,
investigation, sampling and laboratory fees, court costs and
litigation expense and costs arising out of emergency or
temporary assistance or action undertaken by or as required
by any duly authorized regulatory body in connection with any
of the foregoing;
6. any and all taxes, including, without limitation, income,
franchise, property, sales, use, added value, employees'
income withholding and social security taxes, and all
assessments or governmental charges imposed by the United
States or by any foreign country or by any state,
municipality, subdivision or instrumentality of the United
States or of any foreign country, or by any other taxing
authority, which are due or payable by the Corporation in
connection with or arising out of the operation of the
Corporation's business on or prior to the Closing Date and
all interest and penalties thereon;
7. any and all loss, liability, damage, cost or expense
suffered or incurred by VIE by reason of any claims of or
entitlements to severance pay, termination pay and/or other
benefits arising or accruing or claimed to arise or accrue
with respect to any employee of the Corporation, whether by
reason of or in connection with any of the transactions
contemplated by the Agreement or otherwise to the extent
based on any employment of such employee by the Corporation;
and
8. any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including,
without limitation, reasonable attorneys' fees, incident to
any of the foregoing or reasonably incurred in investigating
or attempting to avoid the same or to oppose the imposition
thereof, or in enforcing any of the obligations under this
indemnity provision.
Specific Performance Therefore, VIE shall have the right
specifically to enforce the performance of the Corporation
under the Agreement without the necessity of posting any bond
or other security, and the Corporation waives the defense in
any such suit that VIE has an adequate remedy at law and
agree not to interpose any opposition, legal or otherwise, as
to the propriety of specific performance as a remedy.
Law To Govern The Agreement shall be construed and enforced
in accordance with the internal laws of the State of New
York, without regard to principles of conflict of laws.
The Escrow Agreement
Upon the closing of the Agreement, an escrow agreement (the
"Escrow Agreement") between the Corporation and VIE appointing
Golenbock, Eisman, Assor & Bell as escrow agent (the "Escrow
Agent") between the two parties will become effective. Under the
Escrow Agreement VIE will deliver, upon closing of the Agreement,
$200,000 into a bank account (the "Escrow Account"). VIE is
entitled to make a claim against the cash held in the Escrow
Account for reasons that include, without limitation,
reimbursement for amounts paid to suppliers, vendors, licensees
or licensors of the Corporation or related to the Purchased
Assets. The Escrow Agent is to withhold funds equal to a reasonable
amount under the claim. For a period of 10 days the Escrow Agent
will make no payments to VIE unless written permission from the
Corporation is given. Following that period, the Escrow Agent will
disperse funds equal to the claim or, should the Corporation object
to the amount or reason of the claim, the parties will, in good
faith try to resolve the claim and, failing to do so, the
parties agree to binding arbitration or a final judgment of a
court of competent jurisdiction.
On the 30th day from the signing of the Escrow Agreement the
Escrow Agent will release $100,000 less any claims previously
paid out of the Escrow Account. The remainder of the funds,
less any claims paid out of the Escrow Account, in the Escrow
Account will be released to the Corporation on the 60th day
from the signing of the Escrow Agreement.
ACCOUNTING TREATMENT OF PROPOSAL 1
The Corporation expects to account for Proposal 1
approximately as follows:
<TABLE>
<S> <C> <C> <C>
Debit Credit
Gain on disposal of assets: $1,400,000
Costs of the transaction: $50,000
Reduction in fixed assets: $50,000 (primarily computer hardware)
Reduction in other assets: $550,000 (COPERNICUS intellectual property
rights)
Cash: $2,050,000
</TABLE>
FEDERAL TAXATION
The Corporation believes that its net operating loss carried
forward is sufficient to offset the anticipated gain in
connection with the sale of COPERNICUS and the related
assets. For this reason the Corporation believes that there
will be no taxes due and payable from the proceeds of the
sale.
PLAN OF OPERATION
Should Proposal 1 be approved by the shareholders, the
Corporation intends to devote a significantly larger portion
of its resources to the development of its Internet business.
The Corporation believes that its remaining staff have
significant Internet experience. The Corporation currently
develops web pages and Internet-based software for several
organizations including Novartis and the Association of the
Bar of the City of New York. The Corporation is also
evaluating a number of opportunities to expand its Internet
business through the acquisition of related businesses. The
Corporation is not currently in negotiations with any
companies, and cannot be assured of locating companies from
which it could acquire Internet-related businesses or
products on favorable terms.
The Corporation has plans to develop other new products and
services related to the Internet. Plans exist to launch an
Internet registry for famous and other trademarks in the
second quarter of fiscal 1998, a multi-level-marketing
Internet service provider (ISP) in the third quarter, and a
suite of software products to assist enterprises in managing
dynamic interactive web sites in the fourth quarter.
None of these products has been completed and feasibility
studies in the likely commercial success of such products
will need to be carried out prior to their launch. The
Corporation will require additional capital resources to
successfully develop and market these and any other products
and will consequently seek to conclude additional financing
arrangements as soon as possible. Given the uncertainty of
the Corporation's financial position until Proposal 1 has
been approved, management considers it unlikely that any such
financing arrangements can be concluded prior to the
Shareholders Meeting.
Under the VIE purchase agreement, VIE has agreed to license,
subject to certain conditions and on a product by product
basis, the COPERNICUS product to the Corporation for
incorporation into software products which the Corporation
may develop or acquire (an "OEM License"). The Corporation
intends to use its position as a public company to purchase
other software products in vertical industries and use
COPERNICUS, under the OEM License, to give the acquired
products a competitive advantage by allowing them greater
ease of integration. While the Corporation has been
evaluating several opportunities to acquire such software
products or the companies producing the products in which to
embed COPERNICUS, it is not currently in negotiations with
any companies, and cannot be assured of locating companies
from which it could acquire such products under favorable
terms. The Corporation is not currently developing any
software products in which COPERNICUS could be embedded.
SPECIAL CONSIDERATIONS
Stockholders should carefully consider the following factors
when deciding whether or not to approve Proposal 1.
Need for Additional Financing; Equity Offerings
Planned
The Corporation is currently seeking capital from several
sources and is discussing several proposals with investment
banking firms to raise approximately $2-3 million of
additional capital by the issuance of further equity
securities and or debt in order to finance the Corporation
through the end of the fiscal year ending March 31, 1998.
However, there can be no assurances that any such financing
will be available or, if it is available, that it will be
available on acceptable terms. Unless the market price of the
Corporation's common stock increases significantly over its
market price on May 13, 1997, additional issuances of equity
securities would cause significant dilution to the holders of
common stock.
The Corporation will need additional financing prior to late
1997 and earlier if opportunities arise which require
significant investment. Additionally, the Corporation may
require significant additional financing to complete any
acquisition. Such financing may be raised through exercise of
warrants, offerings of additional equity or debt securities,
joint ventures or other collaborative relationships,
borrowings and other sources. There can be no assurance that
additional financing will be available or, if it is
available, that it will be available on acceptable terms.
If adequate funds are not available to satisfy either short-
or long-term capital requirements, the Corporation may be
required to limit its operations significantly and may be
unable to carry out its plan of operation.
New Technology; Uncertain Adoption of the Internet as
a Medium of Commerce and Communications.
The Corporation's success in the future will depend on the
development of products and services for use on the Internet.
As is typical in the case of a new and rapidly evolving
industry, demand and market acceptance for recently
introduced products and services are subject to a high level
of uncertainty. The industry is young and has few proven
products. Moreover, critical issues concerning the
commercial use of the Internet (including security,
reliability, cost, ease of use and access, and quality of
service) remain unresolved and may impact the growth of
Internet use. There can be no assurance that investing and
communication over the Internet or private networks will
become widespread, or that the Corporation's products for
commerce and communication over the Internet or private
network will become widely adopted for these purposes.
Significant research and development expenditures are
likely to be required in connection with the development of
the Corporation's Internet business.
Because the market for the Corporation's Internet services is
new and evolving, it is difficult to predict the future
growth rate, if any, and size of this market. There can be
no assurance that the market for the Corporation's services
will develop, that the Corporation's services will be
adopted, or that individual personal computer users in
business or at home will use the Internet or private networks
for commerce and communication. If the market fails to
develop, develops more slowly than expected or becomes
saturated with competitors, or if the Corporation's services
do not achieve market acceptance, the Corporation's business,
operating results and financial condition will be materially
adversely affected.
Possibility of Acquisitions
One of the Corporation's strategies to attempt to achieve
growth is predicated upon the acquisition of one or more
software products or companies producing products into which
the Corporation could embed COPERNICUS. The Corporation believes
that this strategy would allow the Corporation to provide a
competitive advantage to such software products. There is no
current agreement, arrangement or understanding relating to any
acquisition. The Corporation receives and expects to continue to
receive inquiries as to its interest in acquiring other products
and companies and forming other possible business combinations.
There can be no assurance that the Corporation will find suitable
acquisition candidates or that an acquisition or other business
combination can be completed upon terms acceptable to the
Corporation. Additionally, the Corporation may require
significant additional financing to complete any acquisition.
There can be no assurance that financing will be available
or, if it is available, that it will be available on
acceptable terms. Generally, shareholders of the Corporation
do not have the power to vote to approve an acquisition of
another company.
Competition
The market for Internet-based services is new, intensely
competitive, rapidly evolving and subject to rapid
technological change. The Corporation expects competition to
persist, intensify and increase in the future. Many of the
Corporation's current and potential competitors have longer
operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical
and marketing resources than the Corporation. Such
competition could materially adversely affect the
Corporation's business, operating results and financial
condition. There can be no assurance that the Corporation
will be able to compete successfully against current or
future competitors or that competitive pressures faced by
the Corporation will not materially adversely affect its
business, operating results and financial condition.
New Service Development and Technological Change
If the Corporation is unable to develop on a timely basis new
services or enhancements, or if such new services or
enhancements do not achieve market acceptance, the
Corporation's business, operating results and financial
condition will be materially adversely affected.
Concentration of Share Ownership
Robert S. Trump owns 800,000 shares of the Corporation's
Series "C" Redeemable Preferred Stock, each of which has the
right to vote the equivalent of four shares of Common Stock.
Mr. Trump also owns warrants issued in a private placement of
the Corporation's securities for which a closing was held in
October 1994 (the "1994 Warrants) which are exercisable for
200,000 shares of Common Stock Midland Associates, a general
partnership, owns 439,999 shares of Common Stock
(representing approximately 20% of the outstanding shares of
Common Stock). Midland Associates also owns warrants (the
"Midland Warrants") which are exercisable for an additional
180,000 shares of Common Stock. Assuming exercise of all such
warrants, Midland Associates together with Mr. Trump would
own 819,999 shares of Common Stock (representing
approximately 24% of the outstanding shares of Common Stock),
and have the right to vote 4,019,999 shares (representing
approximately 71% of the outstanding voting rights of the
Corporation.)
By executing Voting Agreements in connection with the
proposed transaction, Mr. Robert Trump, Midland Associates,
Lancer Holdings, Mark Blundell, and John Brann, together
representing 68.1% of the voting rights (not including
unexercised warrants and options) of the Corporation
eligible to vote at the Special Meeting, have agreed to vote
in favor of Proposal 1.
Such shareholders will be able to have significant influence
on matters submitted to the Corporation's shareholders. See
"Voting Securities."
Government Regulation and Legal Uncertainties
The Corporation is not currently subject to direct regulation
by any government agency, other than regulations applicable
to businesses generally, and there are currently few laws or
regulations directly applicable to access to or commerce on
the Internet. Due to the increasing popularity and use of
the Internet, it is possible that a number of laws and
regulations may be adopted with respect to the Internet,
covering issues such as user privacy, pricing and
characteristics and quality of products and services. The
adoption of any such laws or regulations may decrease the
growth of the Internet, which could in turn decrease the
demand for the Corporation's products and increase the
Corporation's cost of doing business or otherwise have an
adverse affect on the Corporation's business, operating
results and financial condition. Moreover, the applicability
to the Internet of existing laws governing issues such as
property ownership, libel and personal privacy is uncertain.
Any such export restrictions, new legislation or regulation
or unlawful exportation could have a material adverse impact
on the Corporation's business, operating results and
financial condition.
Management's Broad Discretion in Application of
Proceeds
The net proceeds of the proposed transaction will be applied
to debt repayment, redemption of the Corporation's Series C
Redeemable Preferred Stock, working capital and other general
corporate purposes of the Corporation. Accordingly, the
Corporation's management will have broad discretion in the
use of proceeds of the proposed sale. In addition, the
Corporation may use a portion of the net proceeds for the
acquisition of one or more software products or software
companies. There is no current agreement, arrangement or
understanding relating to any acquisition. Generally,
shareholders of the Corporation do not have the power to vote
to approve an acquisition of another company. See "Special
Considerations -- Possibility of Acquisitions" and "Use of
Proceeds."
Dependence on the Internet
Sales of the Corporation's services will depend in large part
upon the continued development of the infrastructure and related
services for providing Internet access and carrying Internet
traffic. The Internet relies on this infrastructure, such as a
reliable network backbone or timely development of complimentary
products, such as high speed modems, to enhance its commercial
viability. There can be no assurance that this infrastructure or
these products will be developed, or, if developed, that the Internet
will become a viable commercial marketplace. If the Internet does
not become a viable commercial marketplace, the Corporation's business,
operating results and finacial condition will be materially adversely
affected.
Dependence on Key Personnel
The Corporation's performance is substantially dependent upon
the performance of its executive officers and key employees.
Given the Corporation's early stage of development in the
Internet business, the Corporation is dependent upon its
ability to retain and motivate high quality personnel,
especially its management and highly skilled development
teams. The loss of the services of any of its executive
officers or other key employees could have a material adverse
affect on the business, operating results and financial
condition of the Corporation. The Corporation's future
success also depends on its continuing ability to identify,
hire, train, and retain other highly qualified technical and
managerial personnel. Competition for such personnel is
intense, and there can be no assurance that the Corporation
will be able to attract, assimilate or retain other highly
qualified technical and managerial personnel in the future.
The inability to attract and retain the necessary technical
and managerial personnel could have a material adverse affect
upon the Corporation's business, operating results or
financial condition.
Uncertain Protection of Intellectual Property
The Corporation's success and ability to compete is dependent
in part upon the development of proprietary technology.
While the Corporation will rely on trademark, trade secret
and copyright law to protect its technology, the Corporation
believes that factors such as the technological and creative
skills of its personnel, new product developments, frequent
site enhancements, name recognition and reliable site
maintenance are more essential to establishing and
maintaining a leadership position on the Internet. The
Corporation currently has no patents or patent applications
pending. There can be no assurance that others will not
develop technologies that are similar or superior to
the Corporation's technology. The Corporation generally
enters into confidentiality or license agreements with its
employees, consultants and vendors, and generally
controls access to and distribution of its software,
documentation and other proprietary information. Despite
these precautions, it may be possible for a third party to
copy or otherwise obtain and use the Corporation's technology
without authorization, or to develop similar technology
independently. In addition, effective copyright and trade
secret protection may be unavailable or limited in certain
foreign countries, and the global nature of the Internet
makes it virtually impossible to control. Despite the
Corporation's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of the
Corporation's site or to obtain and use information that the
Corporation regards as proprietary. Policing unauthorized
use of the Corporation's products is difficult. There can be
no assurance that the steps taken by the Corporation will
prevent misappropriation of its technology or that such
agreements will be enforceable. In addition, litigation may
be necessary in the future to enforce the Corporation's
intellectual proprietary rights, to protect the Corporation's
trade secrets, to determine the validity and scope of the
proprietary rights of others, or to defend against claims of
infringement or invalidity. Such litigation could result in
substantial costs and diversion of resources and could have a
material adverse affect on the Corporation's business,
operating results and financial condition.
Failure to Adopt Proposal 1
In the event that Proposal 1 is not adopted by the
shareholders, the Corporation will have insufficient liquid
resources to meet its liabilities, and in the event that
further investment in the Corporation is not available, would
be unable to continue operations. Level 8 Systems, Inc. has a
lien on the COPERNICUS product and related assets. Should the
Corporation's Board of Directors decide that a reorganization
or a petition for bankruptcy is necessary, it is unlikely
that shareholders would receive any return on their
investment in the Corporation.
SELECTED FINANCIAL DATA
The selected financial data of the Corporation presented
below for, and as of the end of, the fiscal years ended March
31, 1995 and 1996 have been derived from the financial
statements of the Corporation, which financial statements
have been audited by BDO Seidman LLP, independent certified
public accountants. The selected financial data of the
Corporation presented below for, and as of the end of, the
three-month periods ended December 30, 1995 and 1996 have
been derived from the unaudited financial statements of the
Corporation.
Statement of Operations Data
<TABLE>
<C> <C> <C> <C>
Year Ended Year Ended Quarter Ended Quarter Ended
March 31, March 31, December 31, 1995 December 31, 1996
1995 1996 (Unaudited) (Unaudited)
Revenues $64,600 $425,952 $141,306 $211,756
Expenses 1,976,898 3,684,090 1,047,846 760,027
Loss from
operations (1,912,498) (3,258,138) (906,540) (548,271)
Other income
(expense) (68,085) (302,154) (47,077) 789
Net Loss $(1,980,583 $(3,560,292) $(953,617) $(547,482)
Net Loss per
common Share $ (1.69) $ (2.04) $ (.54) $ (.22)
Weighted average
common shares
outstanding 1,174,749 1,743,472 1,774,405 2,451,729
Balance Sheet Data
March 31, March 31, December 31, 1995 December 31, 1996 December 31, 1996
1995 1996 (Unaudited) (Unaudited) (Unaudited)
as adjusted (1) as adjusted (2)
Total Assets $1,051,892 $3,113,868 $ 1,241,033 $2,199,033 $3,132,033
Total current
assets 423,812 2,284,095 379,205 1,027,205 1,027,205
Total current
liabilities 432,629 237,841 740,697 1,290,697 740,697
Long-term debt 1,820,175 0 0 0 0
Total
liabilities 2,252,804 237,841 740,697 1,290,697 1,290,697
Deficit (2,573,900) (6,134,192) (8,370,776) (8,162,776) (6,879,776)
Total
shareholders'
equity (capital
deficit) $(1,200,912) $2,876,027 $ 500,336 $ 700,336 $ 500,336
<FN>
<F1>
(1) Adjusted to give effect to (i) the sale of the EDI unit
by the Corporation for $6,000 and a note with a present value
of approximately $300,000, (ii) receipt of $150,000 from Mr.
Robert Trump in exchange for a note, (iii) receipt of a
further $50,000 and surrender of the $150,000 note by Mr.
Trump in exchange for 800,000 shares of Series "C" Redeemable
Preferred Stock and (iv) receipt of a $550,000 loan from Level 8
Systems, Inc. See "Certain Transactions".
<F2>
(2) Adjusted to give effect to (i) the transactions set forth
in (1) above (ii) the receipt of $2,050,000 by the
Corporation, (iii) the sale of the COPERNICUS asset by the
Corporation, (iv) the repayment of $667,000 representing the
principal, interest and break-up fees from the Level 8 loan,
and (v) the payment of $200,000 to redeem the Series "C"
Redeemable Preferred Stock. See "Use of Proceeds".
</FN>
</TABLE>
USE OF PROCEEDS
The Corporation expects to use the proceeds from the sale of
COPERNICUS and related assets as follows:
Use Estimated Estimated Percentage
Amount of Net Proceeds
Redemption of Series C Redeemable
Preferred Stock1 $ 200,000 10
Repayment of Level 8 Secured Loan(2) 670,000 33
Termination and bonus payments3 100,000 5
Working Capital 1,080,000 52
$ 2,050,000 100%
Notes:
1. Exactly $200,000 of the proceeds will be used to redeem
the 800,000 shares of Series C Preferred Stock.
2. Approximately $670,000 of the proceeds will be used to
repay the principal, breakup fee ($100,000) and interest
(approximately $20,000 as of June 30) on the Level 8 Systems,
Inc. secured loan. See "Certain Transactions".
3. Certain employees who will join VIE under the terms of
the Agreement will receive termination or bonus payments and
a previous employee will receive a payment under a
termination agreement. In total these are expected to amount
to $100,000. Mr. John Brann has agreed to lend $30,000 of
his termination payment to the Corporation. See "Certain
Transactions".
The Corporation may use a portion of the net proceeds for the
acquisition of one or more software products into which
COPERNICUS could be incorporated under its OEM License or
software companies into whose products COPERNICUS could be
incorporated. There is no current agreement, arrangement or
understanding relating to any acquisition. The Corporation
receives and expects to continue to receive inquiries as to
its interest in acquiring other products and companies and
forming other possible business combinations. There can be no
assurance that the Corporation will find suitable acquisition
candidates or that an acquisition or other business
combination can be completed upon terms acceptable to the
Corporation. Additionally, the Corporation may require
additional financing to complete any acquisition. See "Plan
of Operation".
The Corporation intends to invest the net proceeds of the
COPERNICUS sale, in short-term investment grade interest-
bearing investments until they are utilized.
CERTAIN TRANSACTIONS
General
The following is a discussion of certain transactions entered
into by the Corporation with officers, directors,
securityholders and affiliates thereof. The Corporation
believes that the terms of these transactions were no less
favorable to the Corporation than would have been obtained
from a non-affiliated third party for similar transactions at
the time of entering into such transactions.
Transactions with VIE
Voting Agreements - Mark Blundell, the Chief Executive
Officer and a Director of the Corporation, John Brann, a
former Officer and Director of the Corporation, Mr. Robert
Trump and Midland Associates beneficial owners of the
Corporation, and Lancer Holdings, Inc., a company controlled
by Mr. Blundell and Mr. Brann, have entered into voting
agreements with VIE. Under the voting agreements the above
named parties, who together account for $68.1% of the voting
rights entitled to vote at the Shareholders Meeting, have
agreed to vote in favor of Proposal 1.
Other Transactions
Loan from Robert Trump-Series C Redeemable Preferred Shares -
On January 15, 1997 Mr. Robert Trump loaned the Corporation
$150,000 in exchange for a six-month non-interest bearing
note, and a change in the Midland Warrants. On March 15, 1997
Mr. Trump advanced the Corporation an additional $50,000 and
surrendered the note which he held in return for 800,000
Series "C" Redeemable Preferred Shares.
Secured Loan from Level 8 - On March 20, 1997 Level 8
Systems, Inc. loaned the Corporation $550,000, secured by a
first priority lien on COPERNICUS and related assets. This
loan has a maturity date of July 17, 1997. Level 8 had
certain rights to acquire COPERNICUS, invest in the
Corporation and a right of first refusal on any other offers
for COPERNICUS. These rights have all now expired.
Termination Agreement - On May 13, 1997 the Corporation
entered into an agreement with John Brann, the former
Secretary and Vice President of the Corporation, to terminate
his employmennt with the Corporation (the "Termination Agreement")
pursuant to an employment agreement dated July 14, 1993 as amended.
Termination of Mr. Brann's employment is a condition under the purchase
agreement with VIE. As consideration for the termination under the Termination
Agreement the Corporation agreed to pay Mr. Brann a total of $50,000 on
the earlier of (i) the closing of the purchase agreement
between the Corporation and VIE, or (ii Mr. Brann entering
into employment with VIE.
The Corporation will receive a $30,000 loan from Mr. Brann to be
repaid under the following terms (a) 50% of all royalties due to the
Corporation under the purchase agreement with VIE up to a total of $40,000, or
(b) full payment of the principal of the loan at any time
including interest at 8% per annum.
The Corporation has been verbally informed by VIE that it
intends to employ Mr. Brann. The Corporation has also been
informed that Mr. Brann will be granted certain stock options
in VIE in connection with such employment.
Market for the Common Stock and Redeemable Warrants
The following table sets forth, for the periods indicated,
the high and low sale prices for the Common Stock and
Redeemable Warrants as reported by the NASDAQ SmallCap Market
through March 3, 1997 and afterwards as reported on the
Nasdaq Bulletin Board:
Common Stock Redeemable Warrants
1996 Fiscal Quarters High Low High Low
Second Quarter
(Commencing August
11, 1995)(1) $7.50 $5.00 $2.00 $0.75
Third Quarter 6.50 4.50 1.625 0.75
Fourth Quarter 6.125 4.75 1.625 1.125
1997 Fiscal Quarter
First Quarter 6.00 1.875 1.375 0.375
Second Quarter 3.00 1.125 0.875 0.25
Third Quarter 3.125 1.00 0.75 0.25
Fourth Quarter (2) 1.813 0.50 0.25 0.063
1998 Fiscal Quarter
First Quarter
(1) The initial public offering of the Common Stock and
Redeemable Warrants commenced on August 11, 1995. The initial
public offering prices of the Common Stock and Redeemable
Warrants were $6.50 per share and $.10 per Redeemable
Warrant.
(2) The following table sets forth, for the periods
indicated, the high and low bid quotations for the Common
Stock and Redeemable Warrants as reported by the National
Quotation Bureau, Inc.
The foregoing sales prices and quotations reflect inter-
dealer prices, without retail mark-up, mark-down or
commission. The foregoing quotations may not represent actual
transactions.
<PAGE>
APPENDIX A
AGREEMENT OF PURCHASE AND SALE OF ASSETS
This Agreement (the "Agreement") is entered into as of
May 9, 1997, by and between VIE Systems, Inc., a Delaware
corporation ("Buyer"), and New Paradigm Software Corp., a New
York corporation ("Seller").
W I T N E S E T H:
WHEREAS, Seller desires to transfer, convey and assign
to Buyer all rights in and to its COPERNICUS software, the "New
Paradigm Architecture", related intellectual property rights and
the business, activities and operations of Seller of or related
thereto, and certain other specified tangible assets of Seller, on
the terms and subject to the conditions hereinafter set forth
(with all such business, activities and operations of or related
to the COPERNICUS software and the "New Paradigm Architecture"
engaged in by or through Seller being referred to herein as the
"Business").
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter set forth, the parties
hereto hereby agree as follows:
PURCHASE AND SALE OF ASSETS
1.1 Purchased Assets. Subject to and upon the terms
and conditions of this Agreement, on the Closing Date, Seller
shall sell, transfer, convey, assign, and deliver to Buyer
all of Seller's right, title and interest to the hardware and other
tangible assets of Seller listed on Schedule 1.1 attached hereto
(and not previously transferred to Buyer) (the "Equipment"), and
all intellectual property and other related assets (other than
hardware and other tangible assets) of or used in the Business, of
every kind, nature and description, owned, leased or licensed,
wherever located and whether or not carried or reflected on the
books or records of Seller, as the same shall exist on the Closing
Date, except for the Excluded Assets (as hereinafter defined),
including, without limiting the generality of the foregoing:
(a) all trademarks, trademark applications, trade
names, designs, logos and service marks owned or used by
Seller in the Business, including without limitation, "COPERNICUS", and
the other names, designs and logos set forth on Schedule 1.1(a)
hereto, and any names similar to or any derivation or
variation of any and all such names, designs and logos, and the goodwill
pertaining thereto and the right to fully exploit such names
(collectively, "Marks");
(b) all copyrights and copyright applications
owned or used by Seller in the Business, including without
limitation, the copyrights and copyright applications set
forth on Schedule 1.1(b) hereto (collectively, "Copyrights");
(c) all patents and patent applications owned or
used by Seller in the Business, including without limitation, the
patent applications set forth on Schedule 1.1(c) hereto, and the
goodwill pertaining thereto and the right to fully exploit, and
enforce infringement claims in respect of, such patents
(collectively, "Patents");
(d) all of the right, title and interest
(including by reason of license or lease) of Seller in or to any
software, computer program or software product owned, used,
developed or being developed by or for Seller and used in or
necessary for the operation of the Business, whether for internal
use (including without limitation, sales, marketing and training
programs) or for sale or license to others, and any software,
computer program or software product, manufactured, published,
licensed and/or marketed by Seller through the Business at any
time prior to the Closing, including, without limitation, all
software which pertains to and consists of or which is
incorporated, integrated, bundled, merged or otherwise included as
part of or within the computer programs known and/or marketed as
"COPERNICUS" and more fully described on Schedule 1.1(d) hereto,
in all versions and releases, including all run-time systems,
libraries, examples, utilities, data files, manuals, guides and
written and related materials and all Proprietary Rights and
Documentation (as each are hereinafter defined), whether or not
patented or copyrighted, related to the implementation or use
thereof (collectively, "Programs");
(e) all documentation, records and software,
whether in machine or visually readable or other tangible form,
evidencing, representing or containing any Proprietary Rights in
the possession or under the control of Seller relating to a
Program or used in or necessary to the Business, including,
without limitation, any manuals, functional and design
specifications, user and programmer instructions, sales and
marketing training and instructions, flow charts and diagrams,
coding constructions, alpha and beta testing notes, error reports
and logs, patches and patch instructions, itemizations of
development tools, and all other writings which might be necessary
or helpful to a skilled programmer or skilled software salesperson
or marketeer to understand, maintain and enhance any Program
(collectively, "Documentation");
(f) all mailing lists and lists and records of
customers and prospects and related information and data base or
bases used by Seller in connection with the Business, including
without limitation, the names of all persons actually known to
have licensed or purchased products or services of or from the
Business, other users of such products and services known to
Seller and user prospects of such products and services known to
Seller, together with file layouts and other information related
to such products and services necessary to the convenient
processing of such information by Buyer (collectively, the
"Lists");
(g) all know-how and other intellectual property
of Seller relating to or necessary for the operation of the
Business, including, without limitation, the "New Paradigm
Architecture" described on Schedule 1.1(g) hereto, and all trade
secrets, vendor information, lists and data bases, proprietary
processes, methods and apparatus, information not known to the
general public, each literary work, whether or not copyrightable,
ideas, concepts, designs, discoveries, formulae, patents, patent
applications, product and service developments, inventions,
improvements, disclosures, software, source codes and materials,
object codes and materials, algorithms, techniques, architecture,
mask work rights, prototypes, engineering and design models,
information with respect to firmware and hardware, and any
information relating to any product or program which has either
been developed, acquired or licensed for or by Seller and used in
or necessary for the operation of the Business, including the
maintenance, modification or enhancement thereof, all vendor and
customer sales and purchase records and files of or related to the
Business, and all publishing, outsourcing, fulfillment, reseller
and manufacturing information (collectively, together with the
Marks, Copyrights, Patents, Lists and Programs, "Proprietary
Rights");
(h) each contract, agreement, lease, license,
franchise, purchase order, sale order, permit, instrument,
commitment, arrangement and understanding (in each case, whether
written or oral and including all amendments thereto) to which
Seller is a party or by which it is bound or under which it has
any rights or is entitled to benefits, relating to the Business,
including, without limitation, all license, supply, purchase,
distribution, OEM, VAR, dealer, advertising and promotional
services agreements and agreements for software acquisition,
development, publishing, support, maintenance, outsourcing,
manufacture and fulfillment, reseller and manufacture, including,
without limitation, those listed on Schedule 1.1(h) hereto
(collectively, "Contracts");
(i) the non-exclusive right to all restrictive and
negative covenants, non-competition, proprietary property and
confidentiality agreements in favor of Seller, including, without
limitation, those with any and all former or current employees,
consultants, customers, vendors or others having access to
Proprietary Rights or rendering services to Seller in connection
with the Business;
(j) all inventory, samples, goods-in-transit,
work-in-process, raw materials, promotional materials and other
materials and supplies of every kind, nature and description used
or which are used in or necessary for the operation of the
Business (other than generic office supplies), including, without
limitation, all physical copies of items constituting any part
thereof such as user manuals and diskettes, and all advertising,
artwork, templates and related creative materials for
advertisements, catalog insertions, page layouts, promotional and
product literature and displays, sales literature, marketing
materials, brochures, pamphlets and packaging and printed material
related to any of the foregoing, in each case, in which Seller has
any right, title or interest and of the type sold or offered for
sale by or through the Business (collectively, "Business Materials");
(k) all accounts, notes and other receivables of
Seller arising from the Business or products or services sold by
or through the Business (whether payable in cash or product)
outstanding as of the Closing Date, and all rights of Seller under
any security agreements with respect thereto, including rights to
all files and documentation substantiating Seller's rights to said
Receivables in sufficient diary form to effect an efficient
collection of said receivables (collectively, "Receivables");
(l) the proceeds of any insurance, and the right
to receive the proceeds of any insurance, with respect to any
claims which have been or may be asserted in connection with any
of the Purchased Assets (as hereinafter defined) and the right to
continue and maintain any insurance with respect thereto;
(m) all unfilled sales, purchase orders and
commitments of or related to the Business made or entered into by
Seller in the ordinary course of its business and all rights which
Seller may have against its licensors and other suppliers under
express or implied warranties related to the Business or products
or services sold or offered by or through the Business, and the
right to receive mail and other communications and shipments of
merchandise addressed to Seller related to the Business;
(n) all books and records necessary for the use of
any of the Purchased Assets and used in or necessary for the
operation of the Business, and all of the goodwill of the Business
as a going concern.
The business, properties, assets, licenses, franchises, goodwill
and rights to be sold, transferred, conveyed, assigned, granted
and/or delivered to Buyer are hereinafter sometimes collectively
referred to as the "Purchased Assets". The Purchased Assets shall
be transferred to Buyer at the Closing pursuant to the form of
Bill of Sale annexed as Exhibit 1.1 hereto (the "Bill of Sale").
1.2 Excluded Assets. Notwithstanding anything to the
contrary contained in this Agreement, it is understood that Seller
is not selling and Buyer is not acquiring any real property owned
or leased by Seller or those assets referred to in the Bill of
Sale as "Excluded Assets" which include all of the assets used
solely in, and accounts receivable related exclusively to, the
business conducted by Seller's two subsidiaries, New Paradigm
Commerce, Inc. and New Paradigm Inter-Link, Inc. (collectively,
the "Subsidiary Businesses"), and those certain assets used
jointly in the Subsidiary Businesses and the Business which
are listed on Schedule 1.2 hereto and in Schedule A to the Bill
of Sale.
1.3 Title to Purchased Assets. At the Closing, Seller
shall deliver or cause to be delivered to Buyer all right, title
and interest of Seller in and to the Purchased Assets, free and
clear of any and all mortgage, pledge, hypothecation, assignment,
deposit arrangement, claim, encumbrance, lien (statutory or
other), preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever
(including any conditional sale or other title retention agreement
or any financing statement filed under the Uniform Commercial Code
or comparable law of any jurisdiction) (collectively, "Liens").
1.4 Satisfaction of Liabilities. (a) On or prior to
the Closing, Seller shall cause all Liens securing indebtedness of
Seller or otherwise in, on or against any of the Purchased Assets
to be released and to cause to be delivered at the Closing
releases and discharges of all Liens relating to any of such
indebtedness (including, without limitation, all required Form
UCC-3 releases) in form and substance reasonably satisfactory to
Buyer.
(a) On or prior to the Closing, Seller shall cause
all past due indebtedness owing to suppliers, vendors, licensees
or licensors of or related to the Purchased Assets and/or the
Business to be satisfied in full (or shall make arrangements for
such payments to be made on terms acceptable to such suppliers,
vendors, licensees and licensors and approved in writing by Buyer,
which approval shall not be unreasonably withheld). Without
limiting any of Buyer's rights under Section 3.3 hereto, following
the Closing, Buyer shall be entitled, but shall have no obligation
whatsoever, following written notice to Seller (which notice shall
specify the indebtedness to be repaid and any proposed offset), to
satisfy any such unpaid or unresolved indebtedness, on behalf of
Seller, and offset any amount so paid against the Escrow Fund (as
hereinafter defined) and/or any amounts payable to Seller in
connection herewith, including, without limitation, from amounts
payable by Buyer in respect of the Royalty.
1.5 Assignments of Contracts. Buyer and Seller
acknowledge that certain of the Contracts included in the
Purchased Assets, and the rights and benefits thereunder, may not,
by their terms, be assignable. Anything in this Agreement to the
contrary notwithstanding, this Agreement shall not constitute an
agreement to assign any such Contract if an attempted assignment
thereof, without the consent of a third party thereto, would
constitute a breach thereof or adversely affect the rights under
any such Contract of Buyer or Seller thereunder. In such event,
Seller will cooperate with Buyer and use its best efforts to
provide for Buyer all benefits to which Seller is entitled under
such Contracts, and any transfer or assignment to Buyer by Seller
of any such Contract or any right or benefit arising thereunder or
resulting therefrom which shall require the consent or approval of
any third party shall be made subject to such consent or approval
being obtained. Seller shall use its best efforts to obtain such
consents and approvals. If and when any such consent or approval
shall be obtained or such Contract shall otherwise become
assignable to Buyer, Seller shall promptly assign all of its
rights thereunder to Buyer. Until such time, Seller shall not
enter into any amendment of any such Contract without the prior
written consent of Buyer. Notwithstanding anything to the
contrary herein, Seller shall not be obligated to incur any
additional financial obligation or liability to the party under
any Contract for which such consent or approval is required.
PURCHASE PRICE; LIMITED ASSUMPTION OF LIABILITIES
2.1 Purchase Price. Subject to and upon the terms and
conditions of this Agreement, Buyer shall pay or deliver to or for
the benefit of Seller, in full payment and consideration for the
Purchased Assets, a total amount (the "Purchase Price") payable as
follows:
(a) At the Closing, Buyer shall pay to or for the
benefit of Seller One Million Eight Hundred Thousand Dollars
($1,800,000), plus (i) the amount, in excess of $50,000, payable
and paid by Seller to Level 8 Systems, Inc. in respect of a break-
up fee, but in no event more than a total of $50,000, less
(ii) any payments made to Seller pursuant to the License Agreement
(as hereinafter defined) and less (iii) any Liabilities Adjustment
(as hereinafter defined), by certified check, bank check or wire
transfer in immediately available funds (the "Closing Payment").
(b) At the Closing, Buyer shall pay to the Escrow
Agent under the Escrow Agreement in the form of Exhibit 2.1(b)
hereto (the "Escrow Agreement"), the sum of Two Hundred Thousand
Dollars ($200,000) (the "Escrow Fund"), such amount to be held and
dealt with as provided in the Escrow Agreement. As more fully set
forth in the Escrow Agreement, the escrow period shall expire on
the date six (6) months after the Closing Date, except with
respect to claims on the Escrow Fund made prior to such date.
(c) Beginning from and after the first anniversary
of the Closing Date, Buyer shall pay to Seller a royalty equal to
5% of the Net Revenue (as defined in Schedule 3.2 hereto) of Buyer
commencing on and after the first anniversary of the Closing Date,
as the same shall be determined, calculated and payable in
accordance with, and containing such other terms and provisions as
are set forth in, Schedule 2.1(c) hereto (the "Royalty").
2.2 Allocation of Purchase Price. The parties hereto
hereby agree that the Purchase Price shall be allocated in
accordance with Schedule 2.2 hereto.
2.3 Liabilities Undertaking. Buyer shall, at the
Closing, execute and deliver to Seller a Liabilities Undertaking
(the "Liabilities Undertaking") in the form of Exhibit 2.3 hereto,
the provisions of which shall, effective upon the Closing, be
deemed incorporated herein by reference as if set forth in full
herein. Except as expressly set forth in the Liabilities
Undertaking, Buyer shall not assume or be responsible for any
debts, commitments, obligations or liabilities of Seller of any
nature whatsoever. Without limiting the generality of the
foregoing, Buyer shall not assume any of the following (herein
collectively referred to as the "Excluded Liabilities"):
(a) any obligation or liability of Seller to
distribute to its shareholders or otherwise apply all or any part
of the Purchase Price received hereunder;
(b) any obligation or liability of Seller based
upon acts or omissions of Seller occurring after the Closing Date;
(c) Seller's obligations under any stock option or
profit-sharing plans or under any outstanding qualified or non-
qualified stock options;
(d) any brokerage or finder's fee payable by
Seller in connection with the transactions contemplated
hereby;
(e) any liabilities of Seller to any of its
present or former shareholders as such arising out of any action
by Seller in connection with the transactions contemplated hereby;
(f) any and all obligations of Seller for
indebtedness for borrowed money or other amounts payable to third
parties in the nature of "break-up" fees, including without
limitation, any amounts payable to Level 8 Systems, Inc. (subject
only to Buyer's obligation to pay Seller the amount specified in
Section 2.1(a)(i) hereof);
(g) any and all debts, liabilities and obligations
of Seller incurred or accrued with respect to any period, or
circumstances, or state of facts or occurrences, on or prior to
the Closing Date, relating to bonuses, salaries, wages, incentive
compensation, compensated absences, workmen's compensation, FICA,
unemployment taxes, employee benefits, deferred compensation, wage
continuation, severance, termination, pension, section 401(k)
plans, cafeteria, retirement, profit-sharing or similar plans or
arrangements and any and all vacation, holiday or sick pay or
leave incurred or accrued with respect to any employees of Seller
whether or not such employees become employees of Buyer, and any
and all liabilities or obligations incurred or accrued under
Benefit Plans (as hereinafter defined), including, without
limitation, contractual and statutory wage continuation,
severance, reemployment assistance, termination pay and other
benefits;
(h) any and all domestic and foreign federal,
state and local income, payroll, property, sales, use, franchise
or value added tax liabilities, imposed on Seller or with respect
to income or activities of Seller, including assessments and
governmental charges or levies imposed in respect of such taxes;
(i) any and all obligations and liabilities of
Seller arising under this Agreement (including, without
limitation, indemnification obligations and obligations to pay
expenses arising out of this Agreement), or from its failure to
perform any of its agreements contained herein or incurred by it
in connection with the consummation of the transactions
contemplated hereby, or for which Seller is responsible under this
Agreement, including, without limitation, fees of lawyers,
accountants and other advisors;
(j) any and all liabilities and obligations with
respect to claims, suits, legal, administrative, arbitral or other
actions, proceedings and judgments with respect to causes of
action or disputes arising, and other non-contractual liabilities
of Seller asserted or imposed, or arising out of, any events
occurring, or circumstances or state of facts existing, on or
prior to the Closing Date, or any product liability or warranty
claim with respect to products sold, licensed or distributed or
services rendered by Seller prior to the Closing Date;
(k) any and all leases of real property or
improvements thereon, including, without limitation, any and all
premises occupied by Seller, all leases of tangible personal
property not specifically assumed pursuant to the Liabilities
Undertaking hereto; and
(l) any commitment, liability or obligation under
any contracts or other agreements other than those liabilities
under the Contracts specifically assumed by Buyer pursuant to the
Liabilities Undertaking.
2.4 Collection of Accounts Receivable. Without
limiting Section 3.2(b) hereof, Seller agrees that after the
Closing Date Buyer shall have the right and authority to collect
for its own account all Receivables and other items which shall be
included within the Purchased Assets and to endorse with the name
of Seller any checks received on account of any such Receivables
or other items.
CONTEMPORANEOUS ACTIONS AND DELIVERIES; OTHER AGREEMENTS
3.1 Contemporaneous Actions and Deliveries.
Contemporaneously with the execution and delivery of this
Agreement, Seller and/or Buyer have taken the following actions
and executed and/or delivered the following agreements, assets and
documentation:
(a) Seller and Buyer have entered into the License
Agreement attached as Exhibit 3.1(a) hereto (the "License
Agreement").
(b) Seller has loaned to Buyer until the Closing
(at which time it will be transferred to Buyer) the hardware,
Business Materials and other tangible assets necessary to enable
Buyer to exploit the License, including, without limitation, those
assets listed on Schedule 3.1(b) hereto (the "Loaned Assets").
(c) Robert Trump, Mark Blundell, John Brann,
Lancer Holdings, Inc. and Midland Associates have each entered
into the voting agreements with respect to the shares of preferred
stock or common stock owned by them, attached as Exhibit 3.1(c)
hereto (the "Voting Agreements").
(d) Chadbourne & Parke LLP, counsel to Seller, has
delivered to Buyer the legal opinion with respect to the
transactions contemplated hereby attached as Exhibit 3.1(d) hereto
(the "Signing Legal Opinion").
(e) John Brann and Diran Cholakian (collectively,
the "Designated Employees") have each terminated their employment
with Seller and entered into an Employment Agreement with Buyer,
in the form attached as Exhibit 3.1(e)(i) and Exhibit 3.1(e)(ii)
hereto, respectively (the "Employment Agreements")
(f) Seller has delivered to Buyer a certificate of
the Secretary or an Assistant Secretary of Seller, dated the date
hereof as to (i) the resolutions of the Board of Directors of
Seller authorizing the execution, delivery and performance of this
Agreement and the License Agreement, and the consummation of the
transactions contemplated herein and therein; and (ii) the
incumbency and signatures of the officers of Seller executing all
such agreements.
3.2 Operation of the Business. (a) Commencing with
the date hereof, Seller hereby irrevocably appoints Buyer as its
exclusive agent to operate the Business on behalf of Seller,
including, without limitation, the exclusive right to develop,
market, license and support the Programs and to service, on a
subcontract basis, the IBM Agreement and all of the Assumed
Contracts (as hereinafter defined). Between the date hereof and
the Closing (and thereafter if the Closing shall occur), Seller
shall not incur any obligations, grant any licenses, contract on
behalf of or otherwise take part in any of the operations of the
Business without the prior written consent of Buyer. In
connection therewith, Buyer agrees to perform, in accordance with
the terms thereof, the unperformed and unfulfilled obligations of
Seller to perform maintenance and support services from and after
the date hereof under the IBM Agreement and the Assumed Contracts,
and to assume those contractual liabilities of Seller specifically
listed on Schedule 3.2 hereto (the "Assumed Liabilities"). Except
for the Assumed Liabilities (and from and after the Closing Date,
those liabilities specifically listed on the Liabilities
Undertaking), Buyer shall not assume or be responsible for any
debts, commitments, obligations or liabilities of Seller of any
nature whatsoever. Buyer also agrees that (i) it will not amend
the IBM Agreement or any of the Assumed Contracts until such time
as such contract shall have been assigned to Buyer, or incur any
contractual obligation on behalf of Seller without Seller's prior
written consent if Seller would be required to assume, perform or
satisfy such obligation in the event that the Closing does not
occur, and (ii) it shall commence a reasonable sales effort with
respect to the licensing of the COPERNICUS Programs and shall
otherwise conduct the Business in a commercially reasonable
manner. Without in any way limiting Buyer's rights under the
License Agreement, the foregoing authorization shall terminate in
the event that the Closing shall not occur within one hundred
eighty (180) days from the date hereof.
(a) Subject to the royalty payable under the License
Agreement, from and after the date hereof, as its fee for
performing Seller's obligations under the IBM Agreement and the
Assumed Contracts and assuming the Assumed Liabilities, Buyer
shall be entitled to receive and retain any and all amounts paid
and payable from and after the date hereof to Seller in respect of
the IBM Agreement and the Assumed Contracts, including, without
limitation, those payments in respect of accounts receivable and
work-in-process in existence on or prior to the date hereof. In
the event that any such amounts are received by Seller and not
promptly paid over to Buyer, Buyer shall be entitled to deduct all
such unpaid amounts from the Closing Payment.
(b) Notwithstanding the foregoing, in the event
that Shareholder Authorization (as hereinafter defined) shall not
be obtained and the Closing shall not occur, following the
termination of this Agreement, Buyer shall return to Seller the
Loaned Assets (in as-is condition and subject to depletion due to
use) and Seller shall once again be entitled to operate the
Business, subject only to the License Agreement, with respect to
all industries other than the Licensed Industries. It is hereby
understood and agreed that the License Agreement (and the
provisions of this Agreement incorporated into the License
Agreement by reference) shall survive any such termination of this
Agreement and Buyer shall be entitled to retain all of the rights
granted pursuant to the License Agreement.
3.3 Liabilities Adjustment. Without limiting any of
its rights under the Agreement, and except for Assumed
Liabilities, at or prior to the Closing, Buyer may, but shall have
no obligation to, assume all other trade and other accounts
payable and accrued expenses payable and other indebtedness and
liabilities of Seller of or related to the Business, and reduce
the Closing Payment dollar-for-dollar by the amount of any such
liabilities of Seller so assumed (the "Liabilities Adjustment").
Buyer agrees to give Seller not less than five (5) days prior
written notice of its intention to assume and satisfy any such
liabilities of Seller.
3.4 Further Assurances. At any time and from time to
time after the date hereof, at Buyer's request, and without
further consideration therefor, Seller will execute and deliver
such other instruments or agreements as Buyer may reasonably deem
necessary in order more effectively to transfer to Buyer, and to
confirm Buyer's interest in, the License, and to assist Buyer in
exercising all rights with respect thereto. Buyer and Seller
hereby agree to cooperate to effectively vest in Buyer the rights
transferred to Buyer pursuant to this Article 3.
3.5 Capitalization of Buyer. Buyer will capitalize
itself with not less than four million dollars ($4,000,000) within
seven (7) days of the date hereof, and agrees to maintain not less
than two million dollars ($2,000,000) in a liquid investment or
money market account until the earlier to occur of (a) the Closing
and (b) July 17, 1997.
4
Closing; Deliveries; Conditions Precedent.
4.1 Closing. (a) The Closing under this Agreement
(the "Closing") shall take place at the offices of Golenbock,
Eiseman, Assor & Bell, 437 Madison Avenue, New York, New York,
10022, at 10:00 A.M. local time on June 20, 1997, or such other
date, place or time as the parties hereto shall mutually agree
upon (the date of the Closing being called the "Closing Date").
In the event either of the parties is entitled not to close on the
scheduled date because a condition to the Closing set forth in
Section 4.5 or 4.6 hereof has not been met (or waived by the party
or parties entitled to waive it), such party may postpone the
Closing from time to time until the condition has been met,
but in no event to a date later than December 31, 1997. Any such
postponement shall not effect the rights or remedies to which a
party is entitled to in respect of any breach of non-compliance
with this Agreement.
(a) All proceedings to be taken and all documents
to be executed and delivered by all parties at the Closing shall
be deemed to have been taken and executed simultaneously and no
proceedings shall be deemed taken nor any documents executed or
delivered until all have been taken, executed and delivered.
4.2 Deliveries of Seller. At the Closing Seller shall
deliver to Buyer:
(a) the Bill of Sale, executed by Seller;
(b) an Assignment of Copyrights in the form of
Exhibit 4.2(b)-1 hereto, an Assignment of Patents in the form of
Exhibit 4.2(b)-2, and an Assignment of Trademarks in the form of
Exhibit 4.2(b)-3, in each case in recordable form, each executed
by Seller (collectively, the "Proprietary Rights Assignments");
(c) possession and control over, (i) the Programs
in machine readable Object Code and Source Code for computers,
(ii) the Programs' Documentation in machine readable form or in
paper or in other electronic medium (including, but not limited to
user Documentation, technical Documentation, production materials
and marketing materials) in the possession of Seller, (iii) a
copy (in paper and electronic form) of the Lists, (iv) copies of
all agreements, commitments, records and other data relating to
the Purchased Assets reasonably necessary for the marketing and
licensing of the Programs by Buyer, (v) all master artwork in
existence on the Closing Date used for current advertising and
packaging in suitable form, and (vi) all Business Materials and
other tangible and intangible property constituting part of the
Purchased Assets; and
(d) Instruments of Assignment and Assumption in
the forms attached as Exhibit 4.2(d) hereto (each a "Contract
Assignment" and collectively the "Contract Assignments"), with
respect to the Worldwide Vendor Agreement and related agreements
between Seller and International Business Machines Corporation
(the "IBM Agreement") and each of the other Contracts listed on
Schedule 4.2(d) hereto (the "Assumed Contracts"), executed by
Seller as assignor and, if such consent is required by the terms
of such Contract, consented to in writing (in form and substance
reasonably required by Buyer) by each applicable contracting
party; and together with the IBM Agreement and each such Contract
Assignment, the form of Estoppel Certificate attached to the
Contract Assignments, executed by each applicable contracting party;
(e) a Confidentiality and Non-Competition
Agreement in favor of Buyer in the forms of Exhibit 4.2(e) hereto,
executed by Seller, Mark Blundell and John Brann (collectively,
the "Non-Compete Agreements"), provided that John Brann shall only
be required to be a party to the Non-Compete in the event that he
shall not then be bound by the terms of the Employment Agreement
with Buyer;
(f) the legal opinion of Chadbourne & Parke LLP in
the form of Exhibit 4.2(f), hereto, executed by Chadbourne & Parke
LLP (the "Closing Legal Opinion");
(g) a long form certificate of subsistence of
Seller, issued as of a recent date by the Secretary of State of
the State of New York;
(h) written confirmation from Seller to Buyer, in
form and substance reasonably acceptable to Buyer, that effective
upon the Closing, the License Agreement shall terminate and be of
no further force and effect;
(i) a certificate of the Secretary or an Assistant
Secretary of Seller, dated the Closing Date, in form and substance
reasonably satisfactory to Buyer, as to (i) the resolutions of the
Board of Directors of Seller authorizing the execution, delivery
and performance of this Agreement and each exhibit hereto to which
it is a party and the consummation of the transactions
contemplated herein and therein; (ii) certification that
Shareholder Authorization has been duly and properly
obtained, and
(iii) the incumbency and signatures of the officers of Seller
executing this Agreement and any Seller Documents (as hereinafter
defined); and
(j) all other documents, materials, items and
property required by the terms of this Agreement to be delivered
to Buyer under or to effect the provisions of this Agreement.
4.3 Deliveries of Buyer. At the Closing, Buyer will
deliver to Seller or the Escrow Agent, as the case may be:
(a) the Closing Payment to Seller;
(b) the Escrow Fund to the Escrow Agent;
(c) the Escrow Agreement, executed by Buyer;
(d) the Liabilities Undertaking, executed by
Buyer;
(e) the legal opinion of Golenbock, Eiseman, Assor
& Bell in the form of Exhibit 4.3(e) hereto, executed by
Golenbock, Eiseman, Assor & Bell;
(f) a certificate of good standing of Buyer,
issued as of a recent date by the Secretary of State of the State
of Delaware;
(g) a certificate of the Secretary or an Assistant
Secretary of Buyer, dated the Closing Date, in form and substance
reasonably satisfactory to Seller, as to (i) the resolutions of
the Board of Directors of Buyer authorizing the execution delivery
and performance of this Agreement and each exhibit hereto to which
it is a party and the consummation of the transactions
contemplated herein and therein; and (ii) the incumbency and
signatures of the officers of Buyer executing this Agreement and
each exhibit hereto to which it is a party; and
(h) all other documents required by the terms of
this Agreement to be delivered to Seller at the Closing under or
to effect the provisions of this Agreement.
4.4 Further Assurances. At any time and from time to
time after the Closing, at Buyer's request, and without further
consideration therefor, Seller will execute and deliver such other
instruments of sale, transfer, conveyance, assignment and
confirmation as Buyer may reasonably deem necessary in order more
effectively to transfer, convey and assign to Buyer, and to
confirm Buyer's title to, all of the Purchased Assets, whether
tangible or intangible, to put Buyer in actual possession and
operating control thereof, and to assist Buyer in exercising all
rights with respect thereto. Buyer and Seller hereby agree to
cooperate to effectively transfer the Business to Buyer.
4.5 Conditions Precedent of Buyer. The obligations of
Buyer under this Agreement to proceed with the purchase and other
transactions contemplated hereby, are, at the option of Buyer in
its sole discretion, subject to the fulfillment of all of the
following conditions at or prior to the Closing, and Seller shall
use its best efforts to cause each such condition to be fulfilled:
(a) No Litigation. No action, suit, proceeding or
investigation shall have been instituted against Buyer or Seller
and be continuing before or by any court, tribunal or governmental
body or agency or have been threatened, and be unresolved, to
restrain or prevent, or to obtain substantial damages by reason
of, any of the transactions contemplated hereby;
(b) Representations. The representations and
warranties of Seller contained in this Agreement, and any
Schedules hereto and any certificate or documents delivered in
accordance with this Agreement shall be true and correct at the
time of the Closing with the same force and effect as though such
representations and warranties were made at that time except for
changes expressly permitted by this Agreement;
(c) Performance of Covenants. Each covenant,
agreement and obligation required by the terms of this Agreement
to be complied with and performed by Seller at or prior to the
Closing shall have been duly and properly complied with and
performed;
(d) No Material Adverse Change. Since the date of
this Agreement, there shall not have occurred any material adverse
change in the condition (financial or otherwise), business,
properties, assets, liabilities, prospects or results of Seller or
the Business, or in the value or utilizability of the Purchased
Assets to Buyer, except for such change caused by Buyer in
connection with its operation of the Business following the date
hereof (it being acknowledged by Buyer that the continued
deterioration in Seller's working capital position consistent
with
recent months, absent any other adverse change or occurrence not
contemplated by this Agreement, shall not constitute a material
adverse change for purposes of this Section 4.5(d);
(e) Assignment of IBM Agreement; No Cancellation.
All consents necessary to the assignment of the IBM Agreement
shall have been obtained by Seller, and there shall have been
delivered to Buyer an executed counterpart reasonably satisfactory
in form and substance to Buyer and its counsel of such consent and
IBM shall not have notified Seller or Buyer of its intent to
terminate the IBM Agreement;
(f) Consents. All consents necessary to the
assignment of the Assumed Contracts shall have been obtained by
Seller, and there shall have been delivered to Buyer executed
counterparts reasonably satisfactory in form and substance to
Buyer and its counsel, of all such consents;
(g) Shareholder Authorization. This Agreement and
each exhibit hereto to which Seller is a party shall have been
duly authorized, and the consummation of the transactions
contemplated hereby and thereby shall have been duly approved, by
written consent or affirmative vote of the requisite holders of
shares of capital stock of Seller entitled to vote thereon and by
the written consent or affirmative vote of the requisite holders
of the shares of each class and series of capital stock of Seller
entitled to vote thereon, as required by the New York Business
Corporation Law, as amended (the "NYBCL"), the Certificate of
Incorporation of Seller and all applicable federal and state
securities laws ("Shareholder Authorization");
(h) Certificate. There shall have been delivered
to Buyer a certificate executed by the President of Seller, dated
the date of the Closing, certifying that the conditions set forth
in subsections (a) through (f) of this Section 4.5 have been fulfilled;
(i) Certain Agreements. Each other document,
instrument and agreement contemplated by Section 4.2 shall have
been executed and delivered by each party thereto other than
Buyer; and
(j) Opinion of Counsel. Buyer shall have received
the Closing Legal Opinion, in form and substance reasonably
satisfactory to Buyer.
4.6 Conditions Precedent of Seller. The obligations of
Seller under this Agreement to proceed with the sale contemplated
hereby and to proceed with the other transactions contemplated
hereby, are, at the option of Seller in its sole discretion,
subject to the fulfillment of all of the following conditions at
or prior to the Closing, and Buyer shall use its best efforts to
cause each such condition to be fulfilled:
(a) No Litigation. No action, suit, proceeding or
investigation shall have been instituted against Buyer or Seller
and be continuing before or by any court, tribunal or governmental
body or agency or have been threatened, and be unresolved, to
restrain or prevent, or to obtain substantial damages by reason
of, any of the transactions contemplated hereby;
(b) Representations. The representations and
warranties of Buyer contained in this Agreement or any
certificates or documents delivered in accordance with this
Agreement shall be true and correct at the time of the Closing
with the same force and effect as though such representations and
warranties were made at that time except for changes expressly
permitted by this Agreement;
(c) Performance of Covenants. Each covenant,
agreement and obligation required by the terms of this Agreement
to be complied with and performed by Buyer at or prior to the
Closing, shall have been duly and properly complied with and
performed;
(d) Certificate. There shall have been delivered
to Seller a certificate executed by an officer of Buyer, dated the
date of the Closing, certifying that the conditions set forth in
subsections (a), (b) and (c) of this Section 4.6 have been
fulfilled;
(e) Certain Agreements. Each other document,
instrument and agreement contemplated by Section 4.3 shall have
been executed and delivered by each party thereto other than
Seller; and
(f) Shareholder Authorization. Shareholder
Authorization shall have been obtained.
5
Representations and Warranties of Seller.
Seller hereby represents and warrants to Buyer as follows:
5.1 Organization, Standing and Qualification;
Subsidiaries. (a) Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State
of New York and has all requisite power and authority and is
entitled to own, lease and operate its properties and to carry on
its business as and in the places such properties are now owned,
leased or operated and where such business is presently conducted.
Seller is qualified to do business and is in good standing in
each state or jurisdiction listed in Schedule 5.1 of the
Disclosure Schedule delivered by Seller in connection and
concurrently with the execution and delivery of this Agreement
(the "Disclosure Schedule"), which states constitute all states in
which the failure to be so qualified could have a material adverse
effect on the condition (financial or otherwise), business,
properties, assets, liabilities, prospects or results of the
operations of Seller. The copies of the Certificate of
Incorporation and By-Laws of Seller delivered by Seller to Buyer
are complete and correct.
(a) No part or aspect of the Business has been
conducted through any direct or indirect subsidiary or any direct
or indirect affiliate of Seller.
5.2 Authority; Options. (a) Seller has all requisite
power and authority to enter into this Agreement, and each other
agreement, document and instrument to be executed or delivered by
it in accordance with this Agreement, including, without
limitation, the License Agreement, the Bill of Sale, the
Proprietary Rights Assignments and the Contract Assignments (the
"Seller Documents"), and to carry out the transactions
contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the Seller Documents by Seller
have been duly authorized and approved by its board of directors
and, except for Shareholder Authorization (as hereinafter
defined), no other corporate proceedings on the part of Seller are
necessary to authorize this Agreement, the Seller Documents and
the transactions contemplated hereby and thereby, provided,
however, that the consent or approval by the shareholders of
Seller is not required for Seller to enter into the License
Agreement in order to have such agreement be a legal, valid and
binding obligation of Seller enforceable in accordance with its
terms. This Agreement has been duly authorized, executed and
delivered by Seller and is the legal, valid and binding obligation
of Seller enforceable in accordance with its terms, and each of
the Seller Documents has been duly authorized by Seller and is, or
upon execution and delivery by Seller of any thereof at the
Closing will be, a legal, valid and binding obligation of Seller
enforceable in accordance with its terms.
(a) Except as set forth on Schedule 5.2(b) of the
Disclosure Schedule, there are no outstanding subscriptions,
options, warrants, calls, puts, contracts, demands, commitments,
convertible securities or other agreements or arrangements of any
character or nature whatever under which Seller or any shareholder
or trustee thereof or holder of a beneficial interest therein is
or may become obligated to issue, assign, purchase, acquire or
transfer, (i) shares of the capital stock or securities of, or
beneficial interest or equity interests in, Seller, or (ii) any of
the Purchased Assets (except for non-exclusive licenses entered
into in the ordinary course of business on customary terms and
conditions).
5.3 No Violation. Except as required under the NYBCL
and the Securities Exchange Act of 1934, as amended (the "1934
Act"), and except as set forth in Schedule 5.3 of the Disclosure
Schedule, neither the execution or delivery of this Agreement, nor
the consummation of the transactions contemplated herein, will
with or without the giving of notice or the lapse of time or both
(a) violate or conflict with any provision of Seller's Certificate
of Incorporation or Bylaws, as each may have been amended, (b)
result in (i) a breach of, or violate, or be in conflict with or
constitute a default under, or result in the termination or
cancellation of, or accelerate the performance required under, any
security instrument, mortgage, note, debenture, indenture, loan,
lease, contract, agreement or other instrument, to which Seller is
a party or by which it or any of its properties or assets are
bound, or (ii) the loss or adverse modification of any lease,
franchise, license or other contractual right or other
authorization granted to or otherwise held by Seller or with
respect to the Purchased Assets, (c) require the consent of any
party to any such agreement or commitment to which Seller is a
party or by which any of its properties or assets are bound, (d)
result in the creation or imposition of any Lien upon any property
or assets of Seller, (e) require any consent, approval,
authorization, order, filing, registration or qualification of or
with any court or governmental authority or arbitrator to which
Seller is subject or by which any of its properties or assets may
be bound or affected.
5.4 Financial Statements. Seller has delivered to
Buyer copies of the audited and unaudited financial statements of
Seller listed on Schedule 5.4 of the Disclosure Schedule (the
"Financial Statements"), including without limitation, the audited
balance sheet of Seller as at March 31, 1996 (the "Balance Sheet")
and the unaudited balance sheet and income statement of Seller for
the quarter ended March 31, 1997. All of the Financial Statements
are complete and correct, have been prepared from the books and
records of Seller in accordance with generally accepted accounting
principles consistently applied and maintained throughout the
periods indicated and fairly present the financial condition of
Seller as at their respective dates and the results of operations
of Seller for the periods covered thereby. Such Financial
Statements do not contain any items of special or nonrecurring
income or any other income not earned in the ordinary course of
business except as expressly specified therein, and include all
adjustments, which consist only of normal recurring accruals,
necessary for such fair presentation.
5.5 Absence of Undisclosed Liabilities. Except as and
to the extent reflected or reserved against on the face of the
Balance Sheet (including the notes thereto), or set forth on
Schedule 5.5 of the Disclosure Schedule, as of the Balance Sheet
Date, Seller had no material debts, liabilities or obligations
(whether absolute, accrued, contingent or otherwise) relating to
or arising out of any act, transaction, circumstance or state of
facts which occurred or existed on or before March 31, 1996 (the
"Balance Sheet Date"), whether or not then known, due or payable.
5.6 Absence of Changes or Events. Except as set forth
on Schedule 5.6 of the Disclosure Schedule, since the Balance
Sheet Date Seller has conducted its business only in the ordinary
course in a manner consistent with past practices. Without
limiting the foregoing, since such date, Seller has not:
(a) incurred any obligation or liability,
absolute, accrued, contingent or otherwise, whether due or to
become due, except current liabilities for trade or business
obligations incurred in the ordinary course of business and
consistent with its prior practice, none of which liabilities, in
any case or in the aggregate, materially and adversely affects the
condition (financial or otherwise), prospects or results of
operations of Seller or the Business or the Purchased Assets;
(b) mortgaged, pledged or subjected to any Lien
any of its property, business or assets, tangible or
intangible;
(c) sold, transferred, leased to others or
otherwise disposed of any assets used in or necessary to conduct
the Business, or licensed any of the Programs, or canceled or
compromised any material debt or claim, or waived or released any
right of substantial value of or relating to the Purchased Assets
and/or the Business;
(d) received any notice of actual or threatened
termination of any contract, lease or other agreement or other
business relationship or suffered any damage, destruction or loss
(whether or not covered by insurance) which, in any case or in the
aggregate, has had or could have a materially adverse effect on
the condition (financial or otherwise), prospects or results of
operations of Seller or of or on the Business or the Purchased
Assets;
(e) encountered any labor union organizing
activity, had any actual or threatened employee strikes, work-
stoppages, slow downs or lockouts, or had any material change in
its relations with its employees, agents, customers or suppliers
or any governmental regulatory authority or self-regulatory
authorities;
(f) made any capital expenditures or capital
additions or betterment in excess of an aggregate of $250,000;
(g) transferred or granted any rights under, or
entered into any settlement regarding the breach or infringement
of, any license, patent, copyright, trademark, trade name, service
mark or other Proprietary Rights, or modified any then existing
rights with respect thereto of or relating to the Purchased Assets
and/or the Business;
(h) instituted, settled or agreed to settle any
litigation, action or proceeding before any court or governmental
body relating to Seller or any of its assets, properties or rights;
(i) suffered any damage, destruction, loss,
change, event or condition which, in any case or in the aggregate,
has had or may have a material adverse effect on the condition
(financial or otherwise), prospects or results of operations of
Seller or of or on the Business or the Purchased Assets,
including, without limitation, any change in revenues, costs,
levels or types of warranty or defective product claims, or
relations with employees, landlords, agents, customers or
suppliers;
(j) entered into any transaction, contract or
commitment other than in the ordinary course of business, or paid
or agreed to pay any brokerage, finder's fee, or other
compensation in connection with, or incurred any severance pay
obligations or "break-up" fee obligations by reason of, this
Agreement or the transactions contemplated hereby;
(k) received any notice from any customer or
supplier that it, nor has knowledge that any customer or supplier,
intends to cease doing business with Seller, which, in any case,
has had or could have a material adverse effect on the condition
(financial or otherwise), prospects or results of operations of
Seller or of or on the Business or the Purchased Assets;
(l) made any purchase commitment in excess of the
normal, ordinary and usual requirements of the Business or made
any material change in its selling, pricing, advertising or
personnel practices inconsistent with Seller's prior practice
relating to the Business; or
(m) entered into any agreement or made any
commitment to take any of the types of actions described in any of
subsections (a) through (m) above.
5.7 Title to and Condition of Purchased Assets; Leases.
(a) Seller does not own any real property. Except for the
assets subject to Personal Property Leases (as hereinafter
defined), Seller has good and marketable title to all of the
Purchased Assets which it owns or uses in the Business or purports
to own. Except as set forth in Schedule 5.7(a) of the Disclosure
Schedule, none of the Purchased Assets are subject to any Lien of
any nature whatsoever, direct or indirect, whether accrued,
absolute, contingent or otherwise.
(a) All of the tangible Purchased Assets are in
good operating condition and repair, are suitable for the purposes
used and are adequate and sufficient for the operation of the
Business. Seller enjoys peaceful possession of all leasehold
interests and personal property constituting any part of the
Purchased Assets and held under lease or license.
(b) The Purchased Assets constitute all of the
assets, properties, and rights necessary to conduct the Business
as presently conducted (other than an office, office supplies and
telephones). None of the Excluded Assets are assets, properties
or rights necessary to conduct the Business as presently
conducted. The Subsidiary Businesses do not compete or conflict
with the Business.
(c) Seller has delivered to Buyer true and
complete copies of each of the Contracts prior to the execution of
this Agreement. To the best of Seller's knowledge, all of the
Contracts are in full force and effect with respect to Seller in
accordance with their terms and there is no violation or default
under the Contracts and to the best of Seller's knowledge no event
has occurred or circumstance exists which with notice or lapse of
time or both would constitute an event of default, or give rise to
a right of termination or cancellation, or result in the loss or
adverse modification of any right or benefit thereunder. No party
to any Contract has given Seller written notice of or made a claim
with respect to, and Seller is not otherwise aware of, any
material breach or default under any thereof. To the best of
Seller's knowledge, Seller enjoys peaceful possession and quiet
enjoyment of the Purchased Assets, tangible and intangible, held
under license; and all such licenses are in good standing, in full
force and effect and are valid, binding and enforceable
obligations of Seller, and to the best of Seller's knowledge, of
the licensors thereunder. None of the Contracts impose any
obligation on Seller other than to provide service in the ordinary
course. Except as set forth on Schedule 5.7(d) to the Disclosure
Schedule, there have been no oral or written modifications to the
terms or provisions of any of the Contracts. No amount payable or
reserved under any Contract has been assigned or anticipated and
no amount payable under any Contract is in arrears or has been
collected in advance and to the best of Seller's knowledge, there
exists no offset or defense to payment of any amount under a
Contract.
5.8 Proprietary Rights. (a) Seller owns or possesses
the perpetual and royalty-free licenses and other rights to use
all Proprietary Rights used in or necessary to conduct the
Business as it is presently operated, including, without
limitation, any necessary to develop, market, license and support
the Programs, all of which are in good standing and uncontested
and free and clear of any Liens and rights of others of any kind.
No Proprietary Rights are owned or licensed or held by any
shareholder, director, officer, consultant or employee of Seller,
or by any entity controlled by or affiliated with Seller or by any
of such persons, including, without limitation, Management
Technologies, Inc., Lancer Holdings, Inc., or Midland Associates,
all such Proprietary Rights being owned or licensed by Seller
itself. Except as set forth on Schedule 5.8(a) of the Disclosure
Schedule, to the best of Seller's knowledge, Seller is not
infringing upon or otherwise acting adversely to any copyrights,
trademarks, trademark rights, service marks, service names,
trade names, patents, patent applications, licenses or trade
secrets or other proprietary rights or intellectual property of any
other person or entity. No claim, suit, demand, proceeding or
investigation is pending, has been asserted or is threatened
by or against Seller with respect to, based on or alleging
infringement of any such rights or the proprietary rights or intellectual
property of any third party, or challenging the validity or
effectiveness of any license for such rights, and Seller knows of
no basis for any such claim, suit, demand, proceeding or investigation.
(a) Seller has the exclusive right to manufacture,
develop, publish, market, license and sell the Programs. Except
as set forth on Schedule 5.8(b)(i) of the Disclosure Schedule, no
person or entity other than Seller may manufacture, develop,
publish, market, license or sell all or any part of the Programs
without the prior consent of Seller (in Seller's sole discretion)
and Seller has not given any such consent and Seller owns all
right, title and interest in and to the Programs and the exclusive
right to apply for copyright and patent protection therefor. To
the best of Seller's knowledge, no director, officer, employee or
independent contract of Seller has in his or her personal
possession outside the offices of Seller, for safekeeping,
convenience of work or otherwise, any proprietary material of
Seller. None of the individuals or entities who have performed
services in connection with the development of any of the
Programs, as employees or as independent contractors, or any other
employee of Seller, holds any proprietary or other ownership
rights with respect to such Programs and each of such employees
and independent contractors has signed an employment contract or
confidentiality agreement with Seller in the form annexed to
Schedule 5.8(b)(ii) of the Disclosure Schedule, which contains a
covenant prohibiting the use or disclosure of confidential
information and proprietary rights.
(b) Except for commercially available off-the-
shelf software and software which is otherwise available in the
public domain, and except for the software used solely in
connection with the Subsidiary Businesses, Schedule 5.8(c)(i) of
the Disclosure Schedule contains a true and complete list of all
software licensed to, owned, developed, or published by Seller,
including, without limitation, the Programs, as well as a
description of any instructions or sequences of instructions, in
whatever form embodied, which are included in any of the Programs
and which requires the consent (whether subject to royalty or
otherwise) of a party other than Seller in order for any of
the Programs to be sold, transferred, used, licensed, updated,
enhanced or modified or integrated with other software by Seller,
Buyer or any other party together with true and correct copies of
all contracts between or among a Seller, on the one hand, and such
authors or licensors, on the other hand. There has been no
publication or public distribution of any of the Source Code of
any of the Programs that would in any way affect the right of
Seller or Buyer to seek copyright protection for such Programs.
With respect to the Contracts pertaining to Programs entered into
by Seller, Seller has licensed the Programs and not sold them,
thus retaining ownership of the underlying software, and has not
granted any exclusive licenses in respect thereof. Seller is not
aware of any claims actually or purporting to be within the scope
of any warranty coverage, express or implied, afforded to licensees of any
Programs or of any errors, omissions or
failures to perform. There are no bugs in the Programs reasonably
detectable with normal use of the Programs except as set forth in
Schedule 5.8(c)(ii) of the Disclosure Schedule, all of which can
be corrected by Buyer without unreasonable effort or expense.
(c) Seller is not a party to or bound by any oral
or written contract or understanding relating to or which might
interfere with the full exploitation of any rights or property
being transferred to Buyer under this Agreement or which restricts
its right to enter into this Agreement or to perform in accordance
herewith. Seller has not entered into any agreements not conveyed
herein to Buyer which involves the publication, development,
manufacture or marketing of any computer software in substantial
competition with any of the Programs; and has not entered into any
transactions with respect to any assets, liabilities or business
operations referred to or contemplated by this Agreement with any
party other than Buyer, except in the ordinary course of business.
Except as set forth on Schedule 5.8(d) of the Disclosure
Schedule, no part of any of the Proprietary Rights, including,
without limitation, any source code, is subject to or held in
escrow or is in any third party's possession.
5.9 Litigation. (a) Except as set forth on Schedule
5.9(a) of the Disclosure Schedule, there is no action, suit,
proceeding, arbitration or investigation pending against, asserted
by, or affecting Seller or the transactions contemplated by this
Agreement, nor to the best of the knowledge of Seller, any basis
therefor or threat thereof which, in any case or in the aggregate,
could if adversely determined have a material adverse effect on
the business, assets, liabilities, operations or financial
condition of Seller, the Business or the Purchased Assets or the
use thereof by Buyer. Neither Seller nor any of its subsidiaries
is subject to any court or administrative order, writ, injunction
or decree, applicable to it or to its business, property or
employees, nor is it 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, domestic or foreign.
(a) Schedule 5.9(b) of the Disclosure Schedule
sets forth a complete list and description of all defective
product or service warranty and/or third party liability claims,
made against Seller during the past three years, together with the
resolution thereof (whether under insurance policies or otherwise).
5.10 Compliance; Permits. (a) Neither Seller, nor any
officer or director thereof has violated any law, rule,
regulation, order, judgment or decree applicable to Seller, any of
its employees, any of the Purchased Assets and/or any aspect of
the Business, including without limitation, any laws, rules,
regulations, ordinances, codes, orders, judgments or decrees as to
zoning, building requirements or standards, import, export,
environmental, health and/or safety matters, which violation could
have a material adverse effect on the condition (financial or
otherwise), business, properties, assets, liabilities, prospects
or results of the operations of Seller, the Purchased Assets or
the Business. Seller has all licenses, consents, certificates,
franchises, permits, and authorizations issued by any department,
board, commission, bureau or instrumentality ("Governmental
Licenses") necessary to conduct the Business in the manner that it
is currently conducted by it, and none of operations of Seller are
being conducted in any manner which violates in any material
respect any of the terms of conditions under which such
Governmental License was granted. Each Governmental License has
been duly obtained, is valid and in full force and effect, and is
not subject to any pending or, to the knowledge of Seller,
threatened administrative or judicial proceeding to revoke, cancel
or declare such Governmental License invalid in any respect. No
Governmental Licenses by their terms will terminate or lapse by
reason of the transaction contemplated by this Agreement.
5.11 Absence of Certain Business Practices. Neither
Seller nor any officer, employee or agent of Seller, nor any other
person acting on its behalf, has, directly or indirectly, within
the past five years given or agreed to give any gift or similar
benefit to any customer, supplier, governmental employee or other
person who is or may be in a position to help or hinder the
business of Seller (or assist Seller in connection with any actual
or proposed transaction) which (a) might subject Seller to any
damage or penalty in any civil, criminal or governmental
litigation or proceeding, (b) if not given in the past, might have
had an adverse effect on the assets, business or operations of
Seller or the Business, or (c) if not continued in the future,
might adversely affect Seller's assets, business, operations or
prospects or the Business or which might subject Seller to suit or
penalty in any private or governmental litigation or proceeding.
5.12 Schedules. Schedule 5.12 of the Disclosure
Schedule hereto contains a true, complete and accurate list and
description of the following:
(a) all real property in which Seller has an
ownership, leasehold or other interest or which is used by Seller
in connection with the conduct of its business (the "Properties");
(b) all material items of hardware and other
equipment, owned, leased or used by Seller in the Business, and
setting forth with respect to all such listed property a summary
description of all leases relating thereto, identifying the
parties thereto, the rental or other payment terms, expiration
date and cancellation and renewal terms thereof (the "Personal
Property Leases");
(c) all sales, agency, supply, purchase,
distribution, OEM, VAR, dealer, advertising, promotional, support,
maintenance, outsourcing, manufacture and fulfillment agreements
or franchises, and agreements for software acquisition,
development agreements, author agreements and publishing
agreements of or relating to the Purchased Assets or the Business,
and all agreements providing for the services of an independent
contractor to which Seller is a party or by which it is bound and
which relate to any of the Purchased Assets or the conduct of the
Business, including, without limitation, a true and complete
itemized description of all contracts between Seller and software
developers, licensors and authors or pursuant to which any royalty
or similar payment shall be payable;
(d) all contracts, agreements, commitments,
purchase orders, leases, licenses or other understandings or
arrangements to which Seller is a party or by which it or any of
its property is bound or affected, relating to the Business,
except for (i) those listed on Schedule 5.12(c) of the Disclosure
Schedule (ii) entered into in the ordinary course of business that
are terminable by Seller on less than 30 days' notice without any
penalty or consideration, and (iii) involve payments or receipts
during the entire life of such contracts by Seller of less than
$2,000 in the case of any single contract but not more than
$10,000 in the aggregate;
(e) all guarantees, loan agreements, indentures,
mortgages and pledges, all conditional sale or title retention
agreements, security agreements, equipment obligations, leases or
lease purchase agreements as to items of personal property
(excluding equipment obligations, leases or lease purchase
agreements not relating to the Purchased Assets), in each case to
which Seller is a party or by which it is bound or under which it
has rights;
(f) all employment and consulting agreements,
including, without limitation, obligations for severance,
reemployment assistance, termination, deferred compensation, or
vacation pay, to which Seller is a party or by which it is bound;
(g) as of a date no earlier than May 9, 1997, all
of Seller's accounts receivables relating to or arising out of the
Business, together with information as to each such listed
receivable which has been outstanding for more than 30 days;
(h) as of a date no earlier than May 9, 1997, all
of Seller's accounts payable relating to or arising out of the
Business;
True and complete copies of all contracts,
agreements, plans, arrangements, commitments and documents
required to be listed or identified pursuant to this Section 5.12
(to the extent in writing or if not in writing, an accurate
summary thereof), together with any and all amendments thereto,
have either been delivered to Buyer or attached to Schedule 5.12
of the Disclosure Schedule.
Except as set forth on Schedule 5.12 of the
Disclosure Schedule, all of the contracts and agreements required
to be listed or identified pursuant to this Section 5.12 (other
than those which have been fully performed) are legal, valid,
binding and enforceable in accordance with their respective terms,
in full force and effect, do not require the consent or approval
of any party to the assignment thereof and will be unaffected by
the sale or other transfer of the Purchased Assets to Buyer
hereunder, and Buyer will be entitled to the full benefits
thereof, and none of such contracts and agreements is with a
governmental agency or authority. To the best of the knowledge of
Seller, there is not under any contract or agreement required to
be listed or identified pursuant to this Section 5.12 any existing
default or event which, after notice or lapse of time, or both,
would constitute a default or result in a right to accelerate or
loss of rights. There have been no oral or written modifications
to the terms or provisions of any of such agreements. No amount
payable or reserved under any such agreement has been assigned or
anticipated and no amount payable under any such agreement is in
arrears or has been collected in advance and to the best of the
knowledge of Seller, there exists no offset or defense to payment
of any amount under such an agreement.
5.13 Taxes. Seller has paid or made adequate provision
for the payment of all taxes, fees, assessments and charges,
including, without limitation, income, property, sales, use,
franchise, added value, employees' income withholding and social
security taxes, imposed by the United States or by any foreign
country, or by any state, municipality or instrumentality of any
of same or by any other taxing authority, and for all penalties
and interest thereon, which has or may become due for or during
all periods ending, and in respect of all operations, on or prior
to the Closing Date. All tax returns required to be filed in
connection therewith have been accurately prepared and filed and
all deposits required by law to be made by Seller with respect
thereto have been duly made. Seller is not a party to any pending
action, proceeding or audit by any governmental authority for
assessment or collection of any amount of taxes for which it may
be directly or indirectly liable, and there is no claim for
assessment or collection of any amount of taxes for which it may
be directly or indirectly liable.
5.14 Employee Benefits; Labor Matters. (a) All
pension, retirement, profit-sharing, deferred compensation, bonus,
incentive, medical, vision, dental and other health insurance,
life insurance or any other employees benefit plan, arrangement or
understanding and any trusts or insurance contracts maintained in
connection therewith (collectively, "Benefit Plans"), conform to,
and the administration thereof is in material compliance with, all
applicable laws and regulations, including, without limitation,
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the Internal Revenue Code of 1986, as amended (the
"Code"), and comparable foreign laws, rules and regulations, and
neither the operation or administration of any such Benefit Plan,
nor the transactions contemplated by this Agreement will result in
any liability to Seller or Buyer under or in respect of any of
such Benefit Plans, in Buyer incurring or suffering any liability,
or have any adverse effect on the financial condition, assets
liabilities or results of operations of Seller, Buyer or the
Business. All contributions required, by law or by contract, to
be made to any Benefit Plans subject to ERISA or any foreign law
for any plan year, or other period on the basis of which
contributions are required, ending before the date hereof, have
been made as of the date hereof. Seller has complied in all
material respects with all reporting and disclosure requirements
with respect to each Benefit Plan. No such Benefit Plan
(including any trust created thereunder), nor any trustee or
administrator thereof, has engaged in any transaction prohibited
by ERISA or any foreign law, or by Section 4975 of the Code, which
could subject Seller, or such Plan to any penalty imposed under
ERISA or any foreign law or to any tax imposed by Section 4975 of
the Code or any foreign law or, if any such transaction has
occurred, it has been corrected within the meaning of Section 4975
of the Code or such foreign law, and all applicable taxes and
penalties with respect thereto have been paid. No "reportable
event" as that term is defined in ERISA has occurred with respect
to any of the Benefit Plans. No liability to the Pension Benefit
Guaranty Corporation or comparable foreign authority has been or
is expected to be incurred with respect to any of such Benefit
Plans. Seller does not participate, maintain or contribute to (or
within the preceding three years participated, maintained or
contributed to) and has no liability or obligation under or with
respect to any multi-employer plan governed by or subject to ERISA
or any foreign law, nor has it participated, maintained,
contributed or incurred any liability in respect of any thereof
within the last three fiscal years. Seller has no liability or
obligation with respect to any Benefit Plan or trust related
thereto that may have been terminated prior to the date
hereof.
(a) Seller has complied in all material respects
with all applicable laws, rules and regulations relating to the
employment of labor, including those relating to hiring, wages,
hours, collective bargaining and the payment and withholding of
taxes, and has withheld all amounts required by law, regulation or
agreement to be withheld from the wages or salaries of its
employees and is not liable for any arrears of wages or any taxes
or penalties for failure to comply with any of the foregoing.
Seller has not engaged in any unfair labor practice, and there is
no unfair labor practice, sexual harassment or other employment-
related complaint pending, or, to the knowledge of Seller,
threatened against Seller or any officer, director or employee
thereof. There do not exist any pending workmen's compensation
claims against Seller that are not adequately provided for by
insurance, or any pending or, to the knowledge of Seller,
threatened claims that the workplace of Seller is unsafe or that
Seller has engaged in unfair labor practices, employment
discrimination or wrongful discharge. No union, trade, guild or
collective bargaining unit represents any employees of Seller, and
no union organizing or election activities involving any non-union
employees of Seller is now in progress or, to the best of Seller's
knowledge, threatened.
5.15 Accounts Receivables. All Receivables
constituting any part of the Purchased Assets have arisen only
from bona fide transactions in the ordinary course of business and
are collectible in accordance with their terms.
5.16 Environmental Matters. (a) As a result of
Seller's action or inaction, and to the best knowledge of Seller,
no Hazardous Substance (as hereinafter defined) is present or at
any time has been stored, treated, recycled, released, disposed of
or discharged on, about, from or affecting the Properties in any
material amounts, and Seller has no liability or potential
liability which is based upon or related to the environmental
conditions under or about the Properties.
(a) Neither Seller nor, to the knowledge of
Seller, any prior or current owner, tenant or occupant of any of
Properties, has received (i) any notification or advice from or
given any report or notice to any governmental agency or authority
involving the use, handling, transport, presence, spill, escape,
leakage, release, remediation or clean-up of any Hazardous
Substance on or about any of the Properties or caused by Seller or
any affiliate of Seller or (ii) any complaint, order, citation or
notice with regard to any emission, discharge, storage or
disposal, any Hazardous Substance or any other environmental,
health or safety matter affecting any of the Properties, or any
property or location at any time occupied or used by any Seller,
under any other federal, state or local law, ordinance, rule or
regulation.
(b) To the best of Seller's knowledge, there are
no fuel or gasoline storage tanks presently in use or at any time
abandoned in, on or under any of the Properties. None of the
Properties contains any asbestos or asbestos-containing materials.
(c) The term "Hazardous Substance" as used in this
Agreement shall include, without limitation, gasoline, oil and
other petroleum products, explosives, radioactive materials and
related and similar materials, and any other substance or material
defined as a hazardous, toxic or polluting substance or material
by any federal, state or local law, ordinance, rule or regulation,
including asbestos and asbestos-containing materials, PCBs and
urea formaldehyde foam insulation.
5.17 SEC Filings. Seller has filed with the Securities
and Exchange Commission (the "SEC") all notices, prospectuses,
offering statements and registration statements required to be
filed in connection with the offer or sale of securities by Seller
under the Securities Act of 1933, as amended (the "Securities
Act"), and the rules and regulations promulgated thereunder. All
such notices, prospectuses, offering statements and registration
statements comply in all material respects with the requirements
of the Securities Act, and the rules and regulations promulgated
thereunder, and such notices, prospectuses, offering statements
and registration statements at the date of filing thereof with the
SEC did not contain an untrue statement of any material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading
in light of the circumstances under which they were made. In
addition, Seller has filed with the SEC all reports and proxy
statements required to be filed by Seller under the 1934 Act, and
the rules and regulations promulgated thereunder, and such reports
and proxy statements at the date of filing thereof with the SEC
did not contain an untrue statement of any material fact nor omit
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light
of the circumstances under which they were made. Seller has
delivered to Buyer copies of (i) all notices, prospectuses,
offering statements and registration statements filed with the SEC
by Seller under the Securities Act since August 11, 1995; and (ii)
all reports and definitive proxy statements filed with the SEC by
Seller under the 1934 Act since such date.
5.18 Information Statement. (a) The information
statement and related materials (collectively, the "Information
Statement") to be prepared by Seller in accordance with Section
7.7 and used in connection with Seller's Special Meeting of
Shareholders described in Section 7.8, relating to the
authorization of this Agreement, the sale of the Purchased Assets
and other transactions contemplated hereby (the "Special Meeting")
will, when prepared by Seller and distributed to the shareholders,
comply in all material respects with the provisions of the NYBCL
and the 1934 Act and the rules and regulations promulgated
thereunder and will not, at the time of the mailing of the
Information Statement to the holders of capital stock of Seller
(the "Shareholders") or at the Closing Date, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which
they are made, not misleading; provided, that Seller makes no
representation with respect to information concerning Buyer
supplied by Buyer to Seller for inclusion in the Information
Statement. The manner and conduct of the Special Meeting by
Seller shall comply in all material respects with the provisions
of the NYBCL and the 1934 Act and the rules and regulations
promulgated thereunder.
(a) Set forth on Schedule 5.18 to the Disclosure
Schedule is a list of not more than ten (10) persons (within the
meaning of Rule 14a-2(b)(2) promulgated under the 1934 Act),
specifying the number of shares of Common Stock or Preferred Stock
of Seller owned or believed by Seller to be controlled by each
such person and the percentage ownership of each such person based
on the number of shares entitled to be voted at the Special
Meeting. Such persons are the owners of or control the vote of
greater than two-thirds of the shares of capital stock of Seller
entitled to vote at the Special Meeting and also the requisite
number of shares of each class and series of capital stock of
Seller entitled to vote thereat and have duly and validly approved
at the Special Meeting the matters covered by the Information
Statement, as required by the NYBCL, the Certificate of
Incorporation of Seller and all applicable federal and state
securities laws.
5.19 Customers and Suppliers. Set forth in Schedule
5.19 of the Disclosure Schedule is a list of the names and
addresses of the seven (7) largest customers and the ten (10)
largest suppliers (measured by dollar volume of purchases or sales
in each case) of the Business and the percentage of the business
of the Business which each such customer or supplier represented
during each of the years ended March 31, 1997 and 1996. Except as
set forth in Schedule 5.19 of the Disclosure Schedule, there
exists no actual or threatened termination, cancellation or
limitation of, or any modification or change in, the business
relationship of Seller with any supplier or customer listed such
Schedule 5.19.
5.20 Solvency. On the date hereof, the present fair
saleable value of the assets of Seller, on a going-concern basis,
exceeds the amount that will be required to be paid on or in
respect of its existing debts and other liabilities (including
contingent liabilities) as they mature. After giving effect
to the transactions contemplated hereby, Seller will have sufficient
capital for it to carry on its business as proposed to be
conducted, including its existing capital needs.
5.21 Disclosure. No representation or warranty by
Seller contained in this Agreement nor any written statement or
certificate furnished or to be furnished by or on behalf of Seller
to Buyer in connection herewith contains or will contain any
untrue statement of a material fact, or omits or will omit to
state any material fact required to make the statements herein or
therein contained, under the circumstances under which made, not
misleading or necessary in order to provide a prospective
purchaser of the Purchased Assets with adequate information as to
the operations of Seller, the Business and the Purchased Assets
and Seller has disclosed to Buyer in writing all material adverse
facts known to it relating to the same. The representations and
warranties contained in this Agreement or any document delivered
in connection with this Agreement shall not be affected or deemed
waived by reason of the fact that Buyer and/or any of its
representatives knew or should have known that any such
representation or warranty is or might be inaccurate in any
respect.
6
Representations and Warranties of Buyer
Buyer represents and warrants to Seller that:
6.1 Organization and Standing. Buyer is a corporation
duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate
power and authority to enter into this Agreement and to carry out
the transactions contemplated hereby.
6.2 Authority of Buyer. The execution, delivery and
performance of this Agreement and all the agreements and
instruments of Buyer relating hereto and the consummation of the
transactions contemplated hereby shall have been duly authorized
by all necessary corporate action on the part of Buyer at or prior
to the Closing; this Agreement has been duly executed by a duly
authorized officer of Buyer; and this Agreement and such
agreements and instruments constitute the legal, valid and binding
obligations of Buyer, enforceable against Buyer in accordance with
their terms.
7
Covenants of Seller
7.1 Conduct of Business. Without in any way limiting
the provisions of Article 3 of this Agreement, during the period
from the date of this Agreement to and including the Closing Date,
Seller shall not take any action which might result in any
material change in the operations of the Business or which might
have a materially adverse effect on the value of the Purchased
Assets or the Business other than changes made with the prior
written consent of Buyer. Without limiting the generality of the
foregoing, prior to the Closing, Seller will not, without the
prior written consent of Buyer:
(a) dissolve, liquidate, merge or consolidate or
sell or otherwise dispose of all or any substantial portion of its
assets or obligate itself to do so, unless such transaction is
specifically conditioned upon, and will not occur until after, the
Closing, and will otherwise not involve or have any effect on or
otherwise conflict with the Business or the transactions
contemplated by this Agreement;
(b) sell, transfer, lease or otherwise dispose of
any assets or properties of or related to the Business, or license
any of the Programs;
(c) amend, modify, change, alter, terminate,
rescind or waive any rights or benefits under any Contract;
(d) fail to maintain the Purchased Assets in
reasonably good condition, repair and working order, reasonable
and ordinary wear and tear excepted;
(e) perform, take any action or incur or permit to
exist any of the acts, transactions, events or occurrences of a
type which would be inconsistent with or render untrue any of the
representations or warranties set forth in Section 5.6 hereof had
the same occurred after the Balance Sheet Date and prior to the
date hereof;
(f) cancel, compromise or modify or agree to
cancel, compromise or modify any Receivable; or
(g) cancel any of the current insurance policies
or any of the coverage thereunder maintained for the protection of
any of the Purchased Assets or the Business, or the operation
thereof.
7.2 Changes in Information. During the period from the
date of this Agreement to the Closing Date, Seller shall give
Buyer prompt written notice of any change in, or any of the
information contained in, the representations and warranties made
by it in or pursuant to this Agreement or the Disclosure Schedule
or of any event or circumstance which if it had occurred on or
prior to the date hereof, would cause any of such representations
or warranties not to be true or correct.
7.3 Access to Information. During the period from the
date of this Agreement to the Closing Date, Buyer and its counsel,
accountants and other representatives shall be given, during
normal business hours, full access to and copies of all of the
books, tax returns, contracts, commitments, records, facilities
and properties of Seller pertaining to the Business or
constituting any part of the Purchased Assets, work papers of
accountants of Seller pertaining to the Business and all personnel
of Seller, and they shall be furnished with all such documents and
information with respect to the affairs of Seller pertaining to
the Business as may from time to time reasonably be requested,
including without limitation, employee files, employee benefit
files, contracts with the current customer and vendor base of the
Business, projections of customer and vendor activities, all
computer files, systems and records, leases, and accounts payable
and receivable. Seller and its directors, officers and employees
shall cooperate fully with Buyer's investigation, provided that
Seller shall not be required to incur any out of pocket costs in
connection therewith. Buyer will (and will cause its
representatives to) maintain the confidentiality of the
confidential information it receives from Seller, provided that
such information may be disclosed (in confidence) to lawyers,
accountants, prospective lenders and investors, and other persons
or entities involved in the transactions, and that nothing herein
shall prevent disclosure or use of any information as may be
required by applicable law or that is at the date hereof or
hereafter becomes generally available to and known by the public
other than by reason of Buyer's breach of its obligations under
this Section 7.3, or is or becomes available to Buyer on a non-
confidential basis from a source that is not known by Buyer to be
prohibited from disclosing such information pursuant to a
confidentiality agreement with Buyer or its representatives.
Notwithstanding the foregoing, Buyer shall be entitled to utilize
all such confidential information in connection with its operation
of the Business from and after the date hereof.
7.4 Confidentiality. Seller shall hold confidential
all information disclosed to or obtained by it from or concerning
Buyer or otherwise arising out of its negotiations with Buyer or
investigations of Buyer and such information shall not be used or
disclosed except in furtherance of the transactions contemplated
herein or as otherwise required by law.
7.5 Preservation of Business. During the period from
the date of this Agreement to the Closing Date, Seller shall use
its best efforts to preserve intact the present goodwill of Seller
and the relationships of Seller with customers, dealers, OEMs,
VARs, suppliers, creditors, distributors, consultants,
governmental authorities and others having business relations with
it and the present business organization and personnel of such
Seller. Seller shall cause to be paid before they become
delinquent all taxes, assessments, and governmental charges or
levies imposed prior to the Closing Date upon its business or
properties and all claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords, and other similar persons
asserted prior to the Closing Date which, if unpaid, might result
in the creation of a Lien upon any Purchased Assets or otherwise
have an adverse effect on the conduct the Business.
7.6 Employees. (a) Buyer has no obligation to employ
any of Seller's employees in its business following the date
hereof or the Closing Date. Notwithstanding any offer or
determination to so employ any employee, Buyer shall not be
obligated to maintain any employee for any specific length of time
and, except as otherwise provided by the Employment Agreements,
all such employees shall be employees at will.
(a) Seller shall promptly pay all amounts due and
payable to, or accrued in respect of, its employees in the nature
of wages, commissions, salary, insurance and other benefits
(including accrued vacation and sick pay and unearned bonuses),
and shall pay all withholding tax and similar obligations in each
case with respect to all employees of Seller and all periods
ending on or prior to the Closing Date, and with respect to the
Designated Employees, for all periods ending on or prior to the
date hereof.
(b) Seller shall be solely responsible for, and
shall indemnify and hold harmless Buyer from and against, any and
all claims and obligations, if any, for severance pay, termination
pay and other benefits arising or claimed to arise out of (i) the
termination of employment of any employee of Seller on or prior to
the Closing Date, and with respect to the Designated Employees, on
or prior to the date hereof, (ii) the effect of the transactions
contemplated by this Agreement on the employment status of any of
the employees of Seller, including the Designated Employees and
any others which may hereafter be employed by Buyer, and/or (iii)
the termination of employment with Buyer within 120 days after the
Closing Date of any employee, including the Designated Employees,
who prior to the Closing Date (or the date hereof in the case of
the Designated Employees) was an employee of Seller and thereafter
becomes an employee of Buyer (in this latter case to the same
extent as if any such employee were then still employed by Seller,
but only with respect to such severance pay, termination pay or
other benefits which arise or are claimed to arise out of the
employee's employment with Seller).
(c) Nothing in this Section 7.6 or elsewhere in
this Agreement, express or implied, shall be construed to confer
any rights or remedies on any employee of Seller. All liabilities
of Seller under this Section shall constitute Excluded Liabilities.
7.7 Preparation of Information Statement; Action by
Shareholders. (a) Seller shall prepare the Information Statement
as promptly as possible after the date hereof and shall cause the
preliminary Information Statement to be filed with the SEC within
fourteen (14) days after the date hereof. Seller shall submit the
proposed Information Statement to Buyer and its counsel not less
than two days prior to submitting the Information Statement to the
SEC or the Shareholders. Buyer shall promptly furnish Seller with
such information concerning Buyer as Seller shall reasonably
request for inclusion in the Information Statement, and Seller
shall be responsible for all other information included therein.
Seller shall cause to be distributed to the Shareholders of record
as of the record date for the Special Meeting, in accordance with
the applicable regulations of the SEC and the applicable
provisions of the NYBCL, a copy of the Information Statement filed
by Seller with and cleared by the SEC. Seller shall use
commercially reasonable efforts to mail the Information Statement
to Shareholders on or before May 16, 1997. If prior to the
Closing Date either Seller or Buyer determines that the
Information Statement needs to be amended or supplemented in
order to comply with the 1934 Act or the rules and regulations
promulgated thereunder or for Seller's representations or
warranties in Section 5.18 to be correct, Buyer or Seller, as the
case may be, shall notify the other of such determination and
shall deliver to the other such amendment or supplement as such
party believes is necessary to comply with the applicable
regulations of the SEC and to make such representation and
warranty correct. Seller shall consider all such amendments
proposed by Buyer, and shall cause all such amendments or
supplements that the parties reasonably believe are necessary to
be mailed to the Shareholders as soon as practicable after such
delivery.
(a) Seller shall, through its Board of Directors,
recommend to the Shareholders the adoption of this Agreement and
approval of all matters contemplated by or in furtherance of this
Agreement to be acted on at the Special Meeting, and shall use all
reasonable efforts to make the actions contemplated by the Special
Meeting to be effective on or before June 20, 1997.
7.8 Information Provided to Shareholders. Between the
date of this Agreement and the Closing Date, Seller shall deliver
to Buyer true and correct copies of all information, materials,
notices, mailings and other written communications sent by Seller
to its Shareholders or any class or series thereof
contemporaneously with the distribution thereof.
7.9 Interim Financial Statements. Seller shall cause
to be promptly prepared and delivered to Buyer promptly upon
completion (but no later than May 31, 1997), income statements and
balance sheets of Company for its fiscal quarter ending March 31,
1997 (the "Interim Financial Statements"). The Interim Financial
Statements shall be prepared in a manner consistent with the
Financial Statements and in accordance with generally accepted
accounting principles, but need not be audited. The Interim
Financial Statements, when delivered to Buyer, shall be deemed
"Financial Statements" for purposes of Section 5.4 hereof and
the representations and warranties set forth in Section 5.4 hereof
shall be deemed to apply with equal force and effect as of the
date of such delivery and as of the Closing Date to the Interim
Financial Statements.
8
Further Agreements.
8.1 Sales and Other Taxes. Seller shall pay all sales
tax, transfer tax, intangibles tax, filing fees, recording and
registration fees and similar government charges applicable to the
transactions contemplated by this Agreement, including, without
limitation, all taxes and charges payable, if any, upon the
transfer of title to any Purchased Assets. Buyer and Seller will
cooperate to prepare and file with the proper public officials, as
and to the extent available and necessary, all appropriate sales
tax exemption certificates or similar instruments as may be
necessary to avoid the imposition of sales, transfer and similar
taxes on the transfer of Purchased Assets pursuant hereto.
8.2 Brokerage and Finder's Fee. Buyer represents and
warrants to Seller and Seller represents and warrants to Buyer,
that no person is entitled to any brokerage commissions or
finder's fees in connection with the transactions contemplated by
this Agreement as a result of any action taken by it or any
of its affiliates, officers, directors or employees.
8.3 Referral. Seller shall use its best efforts to
refer all requests for and forward all orders for products to
Buyer at such telephone number and address as Buyer from time to
time informs Seller. Seller and Buyer shall each attempt in good
faith to direct or deliver to the other all incoming mail,
telephone or other communications or deliveries which are not
received by the appropriate party (that is, Buyer in the case of
matters or materials pertaining to the Business and Seller in the
case of all other matters or materials).
8.4 Break-up Fee. (a) In addition to, and without
limiting any of Buyer's rights under or pursuant to this Agreement
and the transactions contemplated hereby, subject to and upon the
occurrence of a "Break-up Event" (as defined in Subsection 8.4(b)
below) on or prior to the expiration of one hundred and eighty
(180) days from the date hereof, Seller shall pay, in immediately
available funds, to Buyer, at the offices of its counsel in New
York, New York, the "Break-up Fee" specified in subsection 8.4(c)
hereof.
(a) The following shall each be a "Break-up Event":
(i) Seller (or any successor, assign, trustee
or custodian thereof) shall execute or the Board of Directors of
Seller shall authorize or approve (with or without and whether or
not subject to, diligence, financing or other conditions), or
publicly announce or confirm an agreement with any group, entity
or person other than Buyer providing for the acquisition of all or
any portion of the Purchased Assets by such other party, whether
by merger, purchase of assets or stock, purchase of claims against
Seller or its estate, plan of reorganization, liquidation or
otherwise;
(ii) A Change of Control of Seller shall
occur. For purposes of this paragraph, "Change of Control" shall
mean:
(A) a stock purchase of any "person" or
"entity" (as such terms are used in Sections 13(d) and 14(d)
(2) of the Securities Exchange Act of 1934, as amended) who
then owns or by virtue of such purchase becomes the
beneficial owner of, directly or indirectly, voting
securities of Seller or of any of the subsidiaries, or rights
or options with respect thereto or securities convertible
into or exchangeable for any of same, representing 25% or
more of the combined voting power of the then outstanding
voting securities of Seller or any of its subsidiaries, and
such person or entity does not sign a Voting Agreement
referred to in Section 3.1(c) hereof;
(B) any change in the composition of the
Board of Directors of Seller in any period which involves a
majority of such directors and such new Board of Directors
does not approve or otherwise seeks to repudiate the
transactions contemplated by this Agreement, or
(C) any proxy, voting trust, or any
voting or other agreement by any of the shareholders signing
this Agreement, or any management agreement, having the
effect of transferring the power or authority (whether or not
exercised) to influence control (affirmatively or negatively)
over Seller, a subsidiary or its operations, where such
agreement seek to repudiate or would have the effect of
repudiating the transactions contemplated by this Agreement.
(iii) Shareholder Authorization shall not be
obtained prior to July 17, 1997 (the "Break-up Date"), provided,
however, that this subsection (iii) shall not be a "Break-up
Event" if (A) Shareholder Authorization is not obtained by such
date because the SEC had delayed the release by Seller of the
Information Statement to its shareholders to a date less than
twenty (20) days prior to the Break-up Date, and (B) such
Information Statement was filed by Seller not later than fourteen
(14) days following the date hereof and Seller had made diligent
efforts to timely respond to all SEC comments given in respect
thereof, if any.
(b) The Break-up Fee shall be $250,000; provided,
that the obligation of Seller to pay such Break-up Fee shall be
subject to the satisfaction of the following conditions:
(i) Buyer shall not have theretofore
exercised any right or stated its intent to terminate or not to
perform this Agreement, except as a consequence of the failure of
Seller to perform its obligations hereunder;
(ii) the representations and warranties of
Buyer contained in this Agreement shall have been true and correct
in all material respects and Buyer shall have performed all of its
obligations under the this Agreement to the extent required to be
performed on or prior to the date of the Break-up Event; and
(iii) consummation of the transaction
contemplated thereby shall not have been prevented by the failure
of any condition to the obligations of Seller set forth in the
this Agreement to have been satisfied as a consequence of any act
or omission by Buyer.
(c) The obligations of Seller to pay the Break-up
Fee shall be absolute and unconditional and shall not be affected
by any circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which Seller may
have against Buyer or any principal thereof, or anyone else.
Neither Buyer nor any principal thereof shall be required to
mitigate its or his damages. The Break-Up Fee shall not
constitute liquidated damages and shall be in addition to, and
without limiting any of Buyer's rights under or pursuant to this
Agreement and the transactions contemplated hereby, and shall be
in addition to any other remedies that Buyer may have at law, in
equity or otherwise.
(d) If a Break-up Event occurs, Buyer shall
nevertheless continue to enforce its rights under this Agreement
and be entitled to make competing bids for any or all of the
business Seller (and to present the relative merits of bids it may
make to parties in interest), but in the event that Buyer is
the successful bidder, then Buyer shall not be entitled to the Break-
up Fee.
8.5 No Shop. From the date hereof until the expiration
of the "Restricted Period" described below, (a) Seller agrees,
directly or indirectly, without Buyer's prior written consent,
that it shall not and shall not permit any subsidiary to (i) offer
or convey, sell or license any of the Purchased Assets or the
Business, (ii) issue, sell or purchase any shares of any class or
series of any of the issued and outstanding capital stock of
Seller or any security convertible into or exchangeable for such
stock or any option or warrant with respect to such stock (except
options granted under existing stock option plans and shares of
Seller capital stock issuable upon the exercise or conversion of
options, rights, or securities presently outstanding), or
(iii) merge or consolidate with another entity, and (b) Seller
will not solicit, entertain, continue, respond to or encourage
inquiries or proposals, or enter into, pursue, or carry on any
discussions or negotiations, with respect to any transaction of
the type referred to in clause (a) above with any person or entity
other than Buyer. Seller will immediately cease and cause to be
terminated any existing activities, discussions or negotiations
with any parties conducted heretofore in respect of any such
transaction. Seller will promptly advise Buyer of the identity of
any offeror and communicate to Buyer the terms of any oral inquiry
or proposal which it may receive and deliver to Buyer a copy of
any such offer in writing. Without limiting the rights of Buyer
to pursue any remedies, the parties agree that damages are not an
adequate remedy for a breach of this Section and that the
obligations hereunder may be specifically enforced. The
"Restricted Period" shall continue until the expiration of the
earlier of (a) one hundred and eighty (180) days after the date of
the execution and delivery of this Agreement by all parties and
(b) the Closing. Notwithstanding the foregoing, Seller shall be
entitled to enter into any of the foregoing transactions, provided
that such transaction is specifically conditioned upon, and will
not occur until after, the Closing, and will otherwise not involve
or have any effect on or otherwise conflict with the Business or
the transactions contemplated by this Agreement.
8.6 OEM License. Subject to the terms of this
Agreement and the schedules and exhibits hereto, including,
without limitation, the Non-Compete Agreement, from and after the
Closing, Buyer agrees to grant to Seller, on a product-by-product
basis, an OEM license (an "OEM") to utilize the COPERNICUS
programs in a non-competitive software product to be developed or
sold by Seller (a "Product"), provided that (a) any such OEM shall
be on substantially similar terms and conditions as Buyer's
arrangements with its other OEM's and otherwise on Buyer's
standard form and (b) Buyer shall have the right to refuse to
grant to Seller a OEM for any reasonable business reason,
including, without limitation, any of the following:
(i) the proposed Product is not consistent
with Buyer's business plan or relates to an area or field in which
Buyer does not wish its products utilized;
(ii) Buyer desires to enter the market with a
product similar to the Product;
(iii) Buyer has previously granted, or
desires to grant, an OEM to an alternative vendor for a similar
product or related field;
(iv) Buyer does not wish to do business with
any party affiliated or involved with Seller in the development or
sale of the Product for any reason whatsoever;
(v) Seller's financial status is below the
standard required by Buyer for its VARs, OEMs or
distributors, or
Buyer believes, in its sole discretion, that Seller's financial
situation at such time not sufficient to provide adequate support
for the Product; or
(vi) Buyer, in its sole discretion, believes
the Product or any potential use thereof to be competitive with
any product sold or licensed by Buyer or otherwise competitive
with Buyer's business.
(A) Buyer, or any of its subsidiaries, shall become subject to
the reporting requirements of the Securities Exchange Act of 1934,
(B) Buyer shall effect a sale of the assets of or relating to the
COPERNICUS programs, (C) any person who is not a stockholder of
Buyer as of the Closing (or any affiliate of any such stockholder)
shall hold 25% or more of the equity of Buyer or (D) Buyer shall
have tendered to Seller the Termination Payment (as defined in
Schedule 2.1(c) hereto).
9
9.1 Obligation to Indemnify. (a) Buyer hereby assumes
and agree to save, indemnify and hold harmless Seller from and
against, and shall on demand reimburse Seller for:
(i) any and all loss, liability, damage or
deficiency suffered or incurred by Seller by reason of any
misrepresentation or breach of warranty by Buyer or nonfulfillment
of any covenant or agreement to be performed or complied with by
Buyer under this Agreement or in any agreement, certificate,
document or instrument executed by Buyer and delivered to Seller
pursuant to or in connection with this Agreement; and
(ii) any and all actions, suits, proceedings,
claims, demands, assessments, judgments, costs and expenses,
including reasonable attorneys' fees, incident to any of the
foregoing, or reasonably incurred in investigating or attempting
to avoid the same or to oppose the imposition thereof, or in
enforcing any of the obligations under this Section 9.1(a).
(b) Seller hereby assumes and agrees to save,
indemnify and hold harmless Buyer from, against and in respect of,
and shall on demand reimburse Buyer for:
(i) any and all loss, liability, damage or
deficiency suffered or incurred by Buyer by reason of any
misrepresentation, breach of warranty or nonfulfillment of any
covenant or agreement to be performed or complied with by Seller
under this Agreement or any agreement, certificate, document or
instrument executed by Seller and delivered to Buyer pursuant to
or in connection with this Agreement;
(ii) any and all loss, liability, damage,
cost or expense suffered or incurred by Buyer in respect of or in
connection with any and all debts, liabilities and obligations of,
and any and all violation of laws, rules, regulations, codes or
orders by Seller, direct or indirect, fixed, contingent, legal,
statutory, contractual or otherwise, which exist at or as of the
Closing Date or which arise after the Closing Date but which are
based upon or arise from any act, transaction, circumstance, sale
of goods or services, state of facts or other condition which
occurred or existed on or before the Closing Date, whether or not
then known, due or payable, except to the extent specifically
assumed by Buyer under the terms of this Agreement;
(iii) any and all loss, liability, damage,
cost or expense suffered or incurred by Buyer based on or arising
out of the infringement or alleged infringement of any of the
Programs as they exist on the date hereof of the proprietary
rights of any third party (provided that any such claim pursuant
to this subparagraph (iii) is made within three years of the date
hereof);
(iv) any and all loss, liability, damage,
cost or expense suffered or incurred by Buyer based on or arising
out of any defective or allegedly defective product or service
warranty and/or third party liability claims (whether alleged in
contract, tort, strict liability or otherwise), which exist at or
as of the Closing Date or which arise after the Closing Date but
which are based upon or arise from any act, transaction,
circumstance, sale of goods or services, state of facts or other
condition which occurred or existed on or before the Closing Date,
including, without limitation, any products manufactured,
assembled, sold or distributed by Seller or its predecessors in
interest at any time;
(v) any and all loss, liability, damage, cost
or expense suffered or incurred by Buyer based on or arising from
(A) the presence of any Hazardous Substance on or about any
premises occupied by Seller or any hazardous discharge on or prior
to the Closing Date, and/or any environmental complaint, and/or
the failure to obtain any license or permit required in connection
with any Hazardous Substance or hazardous discharge or the
retention, disposal, treatment or use thereof, and/or arising out
of any noncompliance with any environmental, health or safety law,
ordinance, rule or regulation (each, an "Environmental
Requirement"), in each case, based on or arising from any act,
transaction, state of facts or other condition which occurred or
existed on or before the Closing Date, whether or not then known,
(B) any personal injury (including wrongful death) or property
damage (real or personal) arising out of or related to any
hazardous discharge, the presence, use, disposal or treatment of a
Hazardous Substance, or noncompliance with any Environmental
Requirement, on or prior to the Closing Date, and/or (C) any
environmental complaint and/or any demand of any government agency
or authority prior to, on or after the Closing Date which is based
upon or in any way related to any hazardous discharge, the
presence, use, disposal or treatment of a Hazardous Substance,
and/or noncompliance with any Environmental Requirement on or
prior to the Closing Date, and including, without limitation and
in each such case under this clause (v), the reasonable costs and
expenses of all remedial action and clean-up, attorney and
consultant fees, investigation, sampling and laboratory fees,
court costs and litigation expense and costs arising out of
emergency or temporary assistance or action undertaken by or as
required by any duly authorized regulatory body in connection with
any of the foregoing;
(vi) any and all taxes, including, without
limitation, income, franchise, property, sales, use, added value,
employees' income withholding and social security taxes, and all
assessments or governmental charges imposed by the United States
or by any foreign country or by any state, municipality,
subdivision or instrumentality of the United States or of any
foreign country, or by any other taxing authority, which are due
or payable by Seller in connection with or arising out of the
operation of Seller's business on or prior to the Closing Date and
all interest and penalties thereon;
(vii) any and all loss, liability, damage,
cost or expense suffered or incurred by Buyer by reason of any
claims of or entitlements to severance pay, termination pay and/or
other benefits arising or accruing or claimed to arise or accrue
with respect to any employee of Seller, whether by reason of or in
connection with any of the transactions contemplated by this
Agreement or otherwise to the extent based on any employment of
such employee by Seller; and
(viii) any and all actions, suits,
proceedings, claims, demands, assessments, judgments, costs and
expenses, including, without limitation, reasonable attorneys'
fees, incident to any of the foregoing or reasonably incurred in
investigating or attempting to avoid the same or to oppose the
imposition thereof, or in enforcing any of the obligations under
this Section 9.1(b).
9.2 Survival and Other Matters. Each representation,
warranty, indemnity, covenant and agreement of each of the parties
hereto shall survive the Closing; provided, however, that no party
shall be entitled to assert claims against the other for
misrepresentations or breach of warranty under or pursuant to this
Agreement unless the party asserting such claim shall notify the
other in writing of such claim within three (3) years after the
Closing Date; provided, further, that the foregoing limitation on
the survival of representations and warranties shall not apply to
any of the representations and warranties in Sections 5.2, 5.7(a),
5.13 and 5.16 hereof.
9.3 Offsets. Without limiting its other rights and
remedies, Buyer shall have the right to set off the amount of any
claims reasonably asserted by Buyer in good faith that it is
entitled to a deduction or setoff in respect of any obligation
under Section 9.1(b) or otherwise under this Agreement against the
Closing Payment, the Escrow Fund and/or, under any instrument or
agreement executed and delivered by Buyer in accordance with or as
contemplated by this Agreement, including, without limitation, the
License Agreement and the Royalty, in each case at the option of
Buyer, in such order as Buyer shall determine. No such setoff
shall constitute a default under this Agreement or otherwise, it
being agreed that Buyer shall have a period of ten (10) days after
the final and binding resolution of all such good faith claims
and/or disputes relating to such non-payment to pay the amounts
determined as a result of such resolution to be due and payable.
If it shall be determined that Buyer improperly (despite Buyer's
good faith belief that such setoff was proper) withheld any
payment under this Section, such amount shall bear interest at the
rate of ten percent (10%) per annum from the date such amount was
due. The remedies provided for in this Agreement are not
exclusive and shall be in addition to any other remedies that
Buyer may have at law, in equity or otherwise.
10
Miscellaneous
10.1 Specific Performance. Seller agrees that the
Purchased Assets are unique property that cannot be readily
obtained on the open market and that Buyer will be irreparably
injured if this Agreement is not specifically enforced.
Therefore, Buyer shall have the right specifically to enforce the
performance of Seller under this Agreement without the necessity
of posting any bond or other security, and Seller hereby waives
the defense in any such suit that Buyer has an adequate remedy at
law and agree not to interpose any opposition, legal or otherwise,
as to the propriety of specific performance as a remedy. The
remedy of specifically enforcing any or all of the provisions of
this Agreement in accordance with this Section 10.1 shall not be
exclusive of any other rights which Buyer may have to terminate
this Agreement, or of any other rights or remedies which Buyer may
otherwise have under this Agreement or otherwise, all of which
rights and remedies shall be cumulative.
10.2 Binding Agreement; Assignment. All the terms and
provisions of this Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the parties hereto and their
respective heirs, legal representatives, successors and assigns.
This Agreement and all rights of Buyer shall be assignable to one
or more subsidiaries or affiliates of Buyer. Such assignment
shall not relieve Buyer of its obligations hereunder.
10.3 No Public Announcement. No party hereto shall,
without the prior written approval of all of the other parties,
make any press release or other public announcement concerning the
transactions contemplated by this Agreement, except as and to the
extent that Buyer or Seller shall be so obligated by law or the
rules of any stock exchange, in which case such party shall so
advise the other party and Buyer and Seller shall use their
reasonable best efforts to cause a mutually agreeable release or
announcement to be issued; provided that the foregoing shall not
preclude communications or disclosures necessary to implement the
provisions of this Agreement or to comply with accounting and SEC
disclosure or reporting obligations.
10.4 Law To Govern. This Agreement shall be construed
and enforced in accordance with the internal laws of the State of
New York, without regard to principles of conflict of laws.
10.5 Notices. All notices shall be in writing and shall
be deemed to have been duly given to a party hereto if delivered
personally, then on the date of such delivery, or on the fifth day
after being deposited in the mail if mailed via registered or
certified mail, return receipt requested, postage prepaid, or on
the next business day after being sent by recognized national
overnight courier services, in each case, to such party, at the
following respective addresses:
if to Seller, to:
New Paradigm Software Corp.
733 Third Avenue
New York, New York 10017
Attention: President
with a copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Arthur Mitchell, Esq.
if to Buyer, to:
VIE Systems, Inc.
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Attention: Mr. Eric LeGoff
with a copy to:
Golenbock, Eiseman, Assor & Bell
437 Madison Avenue
New York, New York 10022
Attention: A.C. Peskoe, Esq.
or to such other address as any such party may designate in
writing in accordance with this Section 10.5.
10.6 Fees and Expenses. Except as expressly set forth
in this Agreement, each of the parties shall pay its own fees and
expenses with respect to the transactions contemplated hereby.
10.7 Entire Agreement. This Agreement sets forth the
entire understanding of the parties hereto in respect of the
subject matter hereof and may not be modified, amended or
terminated except by a written agreement specifically referring to
this Agreement signed by all of the parties hereto. This
Agreement supersedes all prior agreements and understandings among
the parties with respect to such subject matter.
10.8 Waivers. The failure by any party to this
Agreement to comply with any of its obligations hereunder may be
waived by any Seller in the case of a default by Buyer and by
Buyer in case of a default by Seller. No waiver shall be
effective unless in writing and signed by the party granting such
waiver, and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or similar nature.
10.9 No Third-Party Beneficiaries. Nothing herein,
express or implied, is intended or shall be construed to confer
upon or give to any person, firm, corporation or legal entity,
other than the parties hereto, any rights, remedies or other
benefits under or by reason of this Agreement or any documents
executed in connection with this Agreement.
10.10 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same
agreement.
10.11 Headings. The Section and paragraph headings
contained herein are for the purposes of convenience only and are
not intended to define or limit the contents of said Sections and
paragraphs.
IN WITNESS WHEREOF, the parties have duly executed
this
Agreement as of the date first above written.
NEW PARADIGM SOFTWARE CORP.
By:________________________
VIE SYSTEMS, INC.
By:________________________
<PAGE>
Exhibit 1.1
BILL OF SALE
THIS BILL OF SALE ("Bill of Sale"), dated
, 1997, is entered into by
and between VIE Systems, Inc., a Delaware corporation (the
"Buyer"), and New Paradigm
Software Corp., a New York corporation ("Seller") pursuant to
the terms of the Agreement of
Purchase and Sale of Assets (the "Agreement"), dated as of
May ____, 1997, by and among
Buyer and Seller.
Capitalized terms used herein shall have the same meanings
and definitions as set forth in the
Agreement, unless otherwise specifically defined in this Bill
of Sale.
KNOW ALL MEN BY THESE PRESENTS, that pursuant to the terms and
conditions of the Agreement and for the consideration set
forth therein, the receipt and
sufficiency of which are hereby acknowledged, Seller hereby
grants, conveys, assigns, transfers
and delivers to Buyer all of Seller's right, title, interest
and benefit, of whatever kind and nature,
in and to the Purchased Assets and excepting only those
assets listed on Schedule A hereto (the
"Excluded Assets"), free and clear of any liens, charges and
encumbrances of any nature
whatsoever.
TO HAVE AND TO HOLD the same unto Buyer, its
successors and assigns forever.
All of the terms and provisions of this Bill of
Sale will be binding upon and inure
to the benefit of the parties hereto and their successors and
assigns.
Seller hereby constitutes and appoints Buyer, and
its successors and assigns, the
true and lawful attorney or attorneys of Seller, with full
power of substitution, in the name of
Buyer or in the name of Seller, by and on behalf of and for
the sole benefit of Buyer, its
successors and assigns, to demand and receive from time to
time any and all of the Purchased
Assets, and from time to time to institute and prosecute, in
the name of Seller or otherwise, any
and all proceedings at law, in equity or otherwise, which
Buyer or its successors or assigns, may
deem necessary or desirable in order to receive, collect,
assert or enforce any claim, right or title
of any kind in or to the Purchased Assets hereby transferred,
assigned and conveyed to Buyer and
to defend and compromise any and all actions, suits or
proceedings in respect thereof and to do
all such acts and things and execute any instruments in
relation thereto as Buyer or its successors
or assigns shall deem advisable. Without limitation of the
foregoing, Seller hereby authorize any
officer of Buyer to endorse or assign any instrument,
contract or chattel paper relating to the
Purchased Assets. Seller agrees that the foregoing
appointment made and the powers hereby
granted are coupled with an interest and shall be
irrevocable.
Notwithstanding the foregoing, no provision of this
Bill of Sale shall in any way
modify, replace, amend, change, rescind, waive or in any way
affect the express provisions
(including the warranties, covenants, agreements, conditions,
representations or any of the
obligations and indemnifications, and the limitations related
thereto) set forth in the Agreement,
this Bill of Sale being intended solely to effect the
transfer of property sold and purchased
pursuant to the Agreement in accordance with the Agreement.
IN WITNESS WHEREOF, each of the parties hereto has
executed this Bill of
Sale on the date first above written.
VIE SYSTEMS, INC.
By:_________________________________
Name:
Title:
NEW PARADIGM SOFTWARE CORP.
By:_________________________________
Name:
Title:
<PAGE>
Schedule 2.1(c)
The Royalty
Subject to and upon the terms and conditions of
this
Agreement, Buyer shall pay to Seller a Royalty, determined
and
payable as follows:
1 Calculation of the Royalty. The Royalty shall be
equal to five percent (5%) of "Net Revenue" of Buyer commencing on
and after the first anniversary of the Closing Date. For purposes
hereof, "Net Revenue" shall be equal to the amount of cash
received and retained by Buyer from the sale, license and
distribution of the computer programs known and/or marketed as
"COPERNICUS" software (the "COPERNICUS Programs"), less the sum of
(i) any applicable credits, discounts and rebates, including, but
not limited to, quantity, dealer, distributor and promotional
credits, discounts, adjustments and rebates, and (ii) taxes (such
as sales, use or similar taxes) paid or payable by Buyer in
connection with such sale or license. If Buyer refunds or issues
a credit memo on a customer's price due to customer
dissatisfaction or other valid reason, this negative price shall
result in a reduction in Net Revenue and therefore a reduction of
the Royalty due to Seller. If any COPERNICUS Program is included
by Buyer in a program or combination of programs, the aggregate
functionality of which extends beyond such COPERNICUS Program, and
which additional functionality is either (l) distinct from the
collective functionality of the COPERNICUS Program, and/or (2)
separately available from Buyer and/or any person other than Buyer
(without royalty payable hereunder), then the Net Revenue
attributable to the sale, license or distribution of such product
shall be proportionately allocated among all significant
components of such combination product. From and after the
Closing Date, Buyer agrees not to materially alter its pricing
policies with respect to the sale, license or distribution of the
COPERNICUS Programs for purposes of reducing or otherwise negating
its obligation to pay the Royalty to Seller (for example, by
increasing its charges for maintenance fees or consulting services
at the expense of license fees so as to reduce the Net Revenue
calculation).
2 Payment of the Royalty. The Royalty shall be paid
to Seller on a quarterly basis, within fifteen (15) days following
the close of each calendar quarter commencing with the first
calendar quarter following the first anniversary of the Closing
Date (each such payment being referred to herein as a "Royalty
Payment"). If Seller shall so request in writing, Buyer shall
provide Seller with a statement setting forth the basis for
determination of a Royalty Payment in respect of the period or
periods referenced in such request. Buyer shall, at Seller's sole
cost and expense, permit Seller access, during normal business
hours and on reasonable notice, to those records of Buyer relevant
to the calculation of any such Royalty Payment and shall retain
such records for a period of two years after the close of the
fiscal quarter in which a Royalty Payment is due. Seller shall
keep all such information confidential and not use it for any
purpose other than for determining compliance with this Agreement.
3 Audit. Seller shall be entitled to have the
applicable books and records of Buyer examined for purposes of
showing compliance with this Agreement (an "Audit") by an
independent public accountant mutually acceptable to the parties
hereto, who shall have access to such records during normal
business hours. If Buyer and Seller are unable to agree on the
choice of an accounting firm, they will select by lot a
nationally-recognized firm of independent certified public
accountants (after excluding Buyer's and Seller's regular outside
accounting firm). The fees expenses of the accounting firm shall
be borne by Seller unless the firm's determination of the Royalty
payable in respect of the period that is subject to the Audit
exceeds the Royalty calculated as payable by Buyer by 5% or more.
Seller shall not be entitled to conduct an Audit more than once
in any calendar year.
4 Royalty Termination Right. Notwithstanding anything
to the contrary contained herein, Buyer shall have the right, in
its sole and absolute discretion, to cause an immediate
termination its obligation to pay any future Royalty to Seller
hereunder, if at any time on or prior to the fourth (4th)
anniversary of the Closing Date, Buyer provides written notice to
Seller of its intention to effect its termination right hereunder
and pays to or for the benefit of Seller, together with such
termination notice, an amount equal to the greater of (a) all
Royalties previously paid to Seller (or accrued as payable as of
the date of such notice) pursuant to the provisions of this
Schedule 2.1(c) and (b) $1,000,000 (the "Termination Payment").
Seller shall have the obligation to accept such Termination
Payment when tendered. Upon tendering of the Termination Payment,
Buyer's obligation to pay any Royalty accruing from and after the
date the Termination Payment is tendered to Seller shall
immediately cease and be of no further force or effect.
5 Sale of the COPERNICUS Programs. (a) In the event
that at any time prior to the fourth (4th) anniversary of the
Closing Date, Buyer shall transfer to an unrelated third party all
of its rights and interest in and to the COPERNICUS Programs, and
such purchaser does not assume, by operation of law or otherwise,
the Royalty obligations hereunder, Buyer shall be required to pay
to Seller, on or prior to the closing of such sale transaction, an
amount equal to the Termination Payment.
.1 In the event that at any time following the
fourth (4th) anniversary of the Closing Date, Buyer shall transfer
to an unrelated third party all of its rights and interest in and
to the COPERNICUS Programs, and such purchaser does not assume, by
operation of law or otherwise, the Royalty obligations hereunder,
Buyer shall be required to pay to Seller, on or prior to the
closing of such sale transaction, an amount equal to the greater
of (i) the Termination Payment and (ii) five percent (5%) of the
consideration actually received by Buyer for the COPERNICUS
Programs in connection with such sale.
6 Offset Right. The provisions of this Schedule
2.1(c) are subject to the provisions of Section 9.3 of the
Agreement.
<PAGE>
schedule 2.1 Escrow Agreement
INDEMNIFICATION ESCROW AGREEMENT
AGREEMENT dated as of _______, 1997, among VIE
Systems,
Inc., a Delaware corporation ("Buyer"), having offices at
and New Paradigm Software
Corp.,
a New York corporation ("Seller"), having offices at
, and Golenbock, Eiseman,
Assor &
Bell, having offices at 437 Madison Avenue, New York, New
York
10022 (the "Escrow Agent"). Buyer and Seller are hereinafter
sometimes referred to as the "Parties".
W I T N E S S E T H:
WHEREAS, pursuant to that certain Agreement of
Purchase
and Sale of Assets, dated as of __________, 1997 (the "Purchase
Agreement"), among Buyer and Seller, Buyer is concurrently
herewith purchasing from Seller the Purchased Assets, with any
capitalized term used herein but not otherwise defined having the
meaning ascribed to such term in the Purchase Agreement.
WHEREAS, pursuant to Section 2.1(b) of the Purchase
Agreement, the Parties have agreed that on the date hereof,
$200,000 of the Purchase Price shall be deposited into escrow upon
the terms stated herein.
WHEREAS, the Parties desire to establish with the Escrow
Agent the escrow contemplated by the Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as
follows:
1. Appointment. The Parties hereby appoint and
designate the law firm of Golenbock, Eiseman, Assor & Bell as
the Escrow Agent for the purposes herein set forth, and the
Escrow Agent hereby accepts such appointment, subject to and in
accordance with the provisions of this Escrow Agreement.
2. Deposit. Seller hereby authorizes Buyer to deliver
to the Escrow Agent on behalf of Seller, simultaneously with the
execution and delivery of this Agreement and as partial payment of
the Purchase Price under the Purchase Agreement, $200,000 (such
amount, or any future balance thereof, being referred to herein as
the "Escrow Fund"), to be held in accordance with the terms of
this Agreement in an account of (the "Escrow Account").
3. Claims Procedure.
3. 1 Notice of Claims. At any time prior to the
Second Escrow Termination Date (as hereinafter defined), Buyer may
give notice to the Escrow Agent and Seller that pursuant to the
terms of the Purchase Agreement Buyer is asserting a claim
("Claim") against Seller. Such notice shall constitute the
assertion of such Claim by Buyer against the Escrow Fund held in
escrow hereunder. Buyer shall be entitled to make or assert a
Claim under the Purchase Agreement, including, without limitation,
that it is entitled to (a) reimbursement for amounts paid to
suppliers, vendors, licensees or licensors of Seller of or related
to the Purchased Assets and/or the Business in respect of pre-
Closing Date liabilities of Seller pursuant to Section 1.4(b) of
the Purchase Agreement, or (b) indemnification under the Purchase
Agreement. Upon the receipt of such notice of a Claim by the
Escrow Agent, the Escrow Agent shall hold in escrow hereunder such
portion of the Escrow Fund as shall equal the amount of such Claim
and all other pending Claims hereunder. Notice of a Claim given
to the Escrow Agent and Seller pursuant to this Section 3.1 shall
briefly set forth the basis of the Claim and, if then determinable
by Buyer, a reasonable estimate of the amount thereof, which
estimate may include an estimate of attorneys', accountants' and
other fees to be incurred to resolve such Claim. If the estimated
amount of a Claim is not set forth in the notice of the Claim
given to the Escrow Agent and Seller, Buyer will give a further
notice to the Escrow Agent and Seller setting forth Buyer's
estimate of the amount of such Claim promptly after it is
reasonably able to make such estimate.
3.2 Objection; Delivery. For a period of ten (10)
days after the giving of any such notice of Claim to Seller, the
Escrow Agent shall make no payment of any of the Escrow Funds in
respect thereof unless the Escrow Agent shall have received
written authorization from Seller to make such payment with
respect to such Claim. After the expiration of such ten (10) day
period, the Escrow Agent shall, to the extent of the Escrow Fund,
make payment to Buyer of the amount stated in the notice of such
Claim given by Buyer pursuant to Section 3.1 hereof, unless prior
to the expiration of such ten-day period the Escrow Agent and
Buyer have received written notice from Seller that it disputes
the Claim. In the event of a payment to Buyer, the Claim shall be
deemed to have resulted in a determination in favor of Buyer,
solely for purposes of delivery of the Escrow Fund to Buyer. Any
such written objection by Seller shall specify the amount stated
in the notice of Claim, if any, Seller agrees Buyer is entitled to
in respect of any such Claim. In the event of such specification
by Seller, the Escrow Agent shall, to the extent of the Escrow
Fund, make payment to Buyer of the amount agreed to by Seller in
such notice.
3.3 Determination of Claims. In case Seller
shall, in the manner provided in Section 3.2 hereof, object in
respect of any Claim (or any portion thereof) made by Buyer, then
Seller and Buyer shall, within the seven (7) day period beginning
on the date of the receipt by Buyer of such written objection,
attempt in good faith to agree upon the rights and obligations of
the respective parties with respect to such Claim and how such
Claim shall be paid. If Seller and Buyer so agree, a memorandum
setting forth such agreement shall be prepared and signed by both
parties. The Escrow Agent shall be entitled to rely on any such
memorandum and shall, to the extent of the Escrow Fund and the
direction in such memorandum, make payment to Buyer as provided in
such memorandum. If Seller and Buyer fail to so agree, such
dispute shall be settled either by (a) mutual agreement of Buyer
and Seller, evidenced by single written instructions to the Escrow
Agent, (b) a binding and final arbitration award, provided the
parties have agreed in the Purchase Agreement or otherwise to
arbitration with respect to the matters in dispute, or (c) a final
judgment, order or decree of a court of competent jurisdiction in
the United States of America (the time for appeal therefrom having
expired and no appeal having been perfected), all costs and
expenses of which (including reasonable attorneys' fees) shall be
borne by the party against whom the dispute is settled as
aforesaid. Buyer and Seller agree to proceed in good faith and
use their best efforts to resolve any disputes hereunder in a
timely and commercially reasonable manner. The Escrow Agent shall
be under no duty to institute or defend any such proceedings, and
none of the costs and expenses of any such proceedings shall be
borne by the Escrow Agent. Upon receipt of a certificate of Buyer
as to such determination, the Escrow Agent shall deliver to Buyer
free and clear of any interest of Seller, from the Escrow Fund, an
amount equal to the amount of such Claim payable to Buyer pursuant
to such determination.
4. Term.
(a) the thirtieth (30th) day from the date of this
Agreement (the "First Escrow Termination Date"), and (b) the
sixtieth (60th) day from the date of this Agreement (the "Second
Escrow Termination Date"), respectively, with respect to the
amounts indicated below, except with respect to any then pending
Claim.
4.2 No Claims at Termination. If at the First
Escrow Termination Date there shall be no Claims pending or awards
or judgments outstanding, the Escrow Agent shall deliver to Seller
the lesser of (a) (i) $100,000 minus (ii) any Claims previously
paid out of the Escrow Fund, and (b) the amount of the Escrow
Funds then being held by it. If at the Second Escrow Termination
Date there shall be no Claims pending or awards or judgments
outstanding, the Escrow Agent shall deliver the remainder of the
Escrow Funds then being held by it to Seller, if any.
4.3 Claims at Termination. If at either the First
Escrow Termination Date or the Second Escrow Termination Date
there shall be any Claims pending or awards or judgments
outstanding, the Escrow Agent shall retain, until the final
disposition of such Claim, such amount of the Escrow Fund as shall
equal the amount of such Claim stated in the notice thereof. If
the Escrow Fund is equal to or less than the aggregate of the
outstanding Claims, awards and judgments, the full amount of the
Escrow Fund shall continue to be held in escrow. Any amount not
theretofore delivered to Seller shall be delivered to Seller at
such time or from time to time when the Claim, award or judgment
to which the retained Escrow Funds relate has been fully rendered
as herein provided and all amounts payable as a result thereof
have been paid to Buyer.
4.4 Delivery. Promptly after the determination of
a Claim in accordance with the provisions of Section 3.2 hereof
and promptly after giving receipt of notice of the determination
of a Claim in accordance with the provisions of Section 3.3
hereof, the Escrow Agent shall deliver to Buyer, free and clear of
any interest of Seller therein, from the Escrow Fund, an amount
equal to the amount of such Claim payable to Buyer pursuant to
such determination. If the amount of the Escrow Fund then held by
the Escrow Agent is less than or equal to the amount of such Claim
so payable, the Escrow Agent shall deliver to Buyer all of the
Escrow Fund then held by it, free and clear of any interest of
Seller therein.
4.5 Remedies Cumulative. The rights and remedies
of Buyer under this Agreement are cumulative with, and in addition
to, any and all other rights and remedies which Buyer may have
under the Purchase Agreement.
5. The Escrow Agent.
5.1 Disputes. In the event the Escrow Agent shall
believe there shall be any disagreement among or between the
Parties resulting in adverse claims or demands being made in
connection with the Escrow Fund, or in the event that the Escrow
Agent in good faith is in doubt as to what action it should take
hereunder, the Escrow Agent shall be entitled, at its option, (a)
to refuse to comply with any claims or demands on it as long as
such disagreement shall continue and, in so refusing, shall make
no delivery or other disposition of the Escrow Fund pursuant to
the terms of this Agreement and shall not be or become liable in
any way or to any person for its failure or refusal to comply with
such conflicting or adverse claims or demands and shall be
entitled to continue so to refrain from acting and so to refuse to
act until the Escrow Agent shall have received (i) a final and
non-appealable order of a court of competent jurisdiction
directing delivery of the Escrow Fund, or (ii) a written agreement
executed by Buyer and Seller directing delivery of the Escrow
Fund, in which event the Escrow Agent shall disburse the Escrow
Fund in accordance with such order or agreement, or (b) to place
the Escrow Fund with a proper court and to apply to any court of
competent jurisdiction (including the commencement of immediate
action or suit) to determine the rights of the parties. Any court
order referred to in (i) above shall be accompanied by a legal
opinion by counsel for the presenting party satisfactory to the
Escrow Agent to the effect that said court order is final and non-
appealable. The Escrow Agent shall act on such court order and
legal opinion without further question.
5.2 Performance. To induce the Escrow Agent to
act hereunder, it is further agreed by the parties that:
(a) The duties and obligations of the Escrow
Agent shall be determined solely by the express provisions of this
Agreement. No implied duties or obligations shall be read into
this Agreement against the Escrow Agent. The Escrow Agent shall
not be under any duty to give the Escrow Fund held by it hereunder
any greater degree of care than it gives its own similar property
and shall not be required to invest any funds held hereunder
except as directed in this Agreement. Uninvested funds held
hereunder shall not earn or accrue interest.
(b) The Escrow Agent shall be entitled to rely
upon any order, judgment, certification, demand, notice,
instrument or other writing delivered to it hereunder without
being required to determine the authenticity or the correctness of
any fact stated therein or the propriety or validity of the
service thereof. The Escrow Agent may act in reliance upon any
instrument or signature believed by it in good faith to be genuine
and may assume, if in good faith, that any person purporting to
give notice or receipt or advice or make any statement or execute
any document in connection with the provisions hereof has been
duly authorized to do so.
(c) The Escrow Agent shall not be bound or in
any way affected by any notice of any modification or cancellation
of this Agreement or the Purchase Agreement, or of any fact or
circumstance affecting or alleged to affect rights or liabilities
hereunder other than as is herein set forth, or affecting or
alleged to affect the rights and liabilities of any other person,
unless notice of the same is delivered to the Escrow Agent in
writing, signed by the proper parties to the Escrow Agent's
satisfaction and, in the case of modification of the duties or
responsibilities of the Escrow Agent, unless such modification
shall be satisfactory to the Escrow Agent and approved by the
Escrow Agent in writing.
(d) The Escrow Agent shall not be liable for
any error of judgment, or any action taken by it in good faith and
believed by it to be authorized or within the rights or powers
conferred upon it by this Agreement, except in the case of its
gross negligence, nor shall it be liable for the default or
misconduct of any employee, agent or attorney appointed by it who
shall have been selected with reasonable care. The Parties shall
defend (by attorneys selected by the Escrow Agent), indemnify and
hold harmless the Escrow Agent (and any successor escrow agent)
from and against any and all losses, liabilities, claims, actions,
judgments, damages, costs and expenses arising out of and in
connection with this Agreement or the Escrow Agent's duties or
services hereunder. This indemnity includes, without limitation,
disbursements and reasonable attorneys' fees either paid to retain
attorneys or representing the fair value of legal services
rendered by the Escrow Agent to itself. Without limiting the
foregoing, the Escrow Agent shall in no event be liable in
connection with its investment or reinvestment of any cash
held by
it hereunder, in accordance with the terms hereof, including
without limitation, any liability for any delays (not resulting
from gross negligence) in the investment or reinvestment of the
Escrow Fund or any loss of interest incident to any such
delays.
(e) The Escrow Agent shall not charge a
separate administrative fee for its services as Escrow Agent
hereunder. However, the Parties agree to pay or reimburse the
Escrow Agent upon request for all expenses, disbursements and
advances, including reasonable attorneys' fees, incurred or made
by it in the performance of its duties hereunder.
(f) The Escrow Agent shall be entitled to
consult with counsel of its own choice and shall have full and
complete authorization and protection for any action taken or
suffered by it hereunder in good faith and in accordance with the
opinion of such counsel.
(g) Escrow Agent shall be entitled to
represent or to act as an advisor of Buyer and its affiliates in
any lawsuit or any other matter.
(h) The Escrow Agent does not have any
interest in the Escrow Fund deposited hereunder but is serving as
stakeholder only. Upon payment of the Escrow Fund as herein
provided, the Escrow Agent shall be fully released from all
liability and obligations with respect thereto.
6. Resignation. The Escrow Agent (and any successor
escrow agent) at any time may be discharged from its duties and
obligations hereunder by the delivery to it of notice of
termination signed by the Parties or at any time may resign by
giving written notice to such effect to the Parties. Upon any
such termination or resignation, the Escrow Agent shall deliver
the Escrow Fund to any successor escrow agent designated by the
Parties in writing, or to any court of competent jurisdiction if
no such successor escrow agent is agreed upon, whereupon the
Escrow Agent shall be discharged of and from any and all further
obligations arising in connection with this Agreement. The
termination or resignation of the Escrow Agent shall take effect
on the earlier of (i) the appointment of a successor (including a
court of competent jurisdiction) or (ii) the day that is 30 days
after the date of delivery: (A) to the Escrow Agent of the other
parties' notice of termination or (B) to the other parties hereto
of the Escrow Agent's written notice of resignation. If at that
time the Escrow Agent has not received a designation of a
successor escrow agent, the Escrow Agent's sole responsibility
after that time shall be to keep the Escrow Fund until receipt of
a designation of successor escrow agent or a joint written
disposition instruction by the other parties hereto or an
enforceable order of a court of competent jurisdiction.
(i) submit to the jurisdiction of any New York State or
federal court sitting in New York in any action or proceeding
arising out of or relating to this Agreement, (ii) agree that all
claims with respect to such action or proceeding shall be heard
and determined in such New York State or federal court and
(iii) waive, to the fullest extent possible, the defenses of an
inconvenient forum. The parties hereby consent to and grant any
such court jurisdiction over the persons of such parties and over
the subject matter of any such dispute and agree that delivery or
mailing of process or other papers in connection with any such
action or proceeding in the manner provided hereinabove, or in
such other manner as may be permitted by law, shall be valid and
sufficient service thereof.
8. Notices. All notices, instructions and other
communications required or permitted to be given, forwarded or
transmitted hereunder or necessary or convenient in connection
herewith shall be in writing and shall be deemed to have been duly
given if delivered personally, or three business days after being
sent by registered or certified mail, return receipt requested,
postage prepaid, addressed to the address set forth above, or one
business day after being delivered to a nationally recognized
overnight courier service or when sent by electronic facsimile
transmission, or to such other address as the person to whom
notice is to be given shall have given notice of pursuant
hereto.
9. Miscellaneous. This Agreement shall be binding upon
and inure solely to the benefit of the parties hereto and their
respective successors and assigns and shall not be enforceable by
or inure to the benefit of any other third party except as
provided with respect to the termination of, or resignation by,
the Escrow Agent. No party may assign any of its rights or
obligations under this Agreement without the written consent of
the other parties. No waiver hereunder shall be effective unless
in a writing signed by the party to be charged. This Agreement
may be amended, modified, superseded, or canceled, and any of the
terms hereof may be waived, only by a written instrument executed
by the parties hereto. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the
State of New York, without reference to conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on the date and year first above
written.
VIE SYSTEMS, INC.
By:
Eric LeGoff, President
NEW PARADIGM SOFTWARE CORP.
By:
Mark Blundell, President
GOLENBOCK, EISEMAN, ASSOR & BELL, as
Escrow Agent
By:
<PAGE>
Schedule 3.1
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (the "Agreement") is entered
into as of May 9, 1997 between New Paradigm Software Corp., a
New York corporation ("Licensor"), and VIE Systems, Inc., a
Delaware corporation ("VIE").
WHEREAS, Licensor has developed and owns certain
software products and programs known as "COPERNICUS";
WHEREAS, Licensor and VIE have entered into an
Agreement of Purchase and Sale of Assets (the "Purchase
Agreement"), pursuant to which VIE has agreed to purchase and
Licensor has agreed to sell to VIE, inter alia, certain of
its assets and software known as COPERNICUS;
WHEREAS, this is the License Agreement contemplated
by Section 3.1(a) of the Purchase Agreement;
WHEREAS, in addition to and not in limitation of
the provisions of the Purchase Agreement, and intending this
Agreement to survive in the event that the Closing
contemplated under the Purchase Agreement shall not occur,
VIE desires to obtain a license on the terms and conditions
contained herein; and
WHEREAS, this Agreement is intended to fall within
the purview of 11 U.S.C. 365(n);
NOW, THEREFORE, in consideration of the above and
the mutual promises and covenants herein, the parties hereby
agree as follows (capitalized terms not otherwise defined
herein shall have the meanings specified in the Purchase
Agreement):
1. Definitions. As used herein, the following
terms shall have the following meanings:
"Additional Methods" includes, but is not limited
to, the programs, routines, subroutines, translators,
compilers, assemblers, operating systems, conversion filers,
encryption and encryption algorithms and codes, protocol
modifications made thereto, and all support documentation
related thereto, including, but not limited to, flowcharts,
instructions, end-user manuals, demonstration models and test
aids, including any and all updates and modifications made
thereto, which may be developed by or for VIE for the purpose
of exploiting the distribution of the Programs (as defined
below).
"Affiliate" shall mean any entity having any
relationship, contract, or arrangement with VIE with respect
to any matter which affects or is affected by this Agreement
wherein VIE has or exercises or has the power to exercise,
directly or indirectly (in any manner) control, direction, or
restraint of such entity, or wherein such entity has the
power to exercise, directly or indirectly (in any manner)
control, direction, or restraint of VIE, or wherein such
entity and VIE are subject to common or mutual control,
direction, or restraint.
"Documentation" is the documentation included
within the Source Code and shall mean all written information
relating to the design, use, implementation and correction of
algorithms, mask work rights and other programs, including,
without limitation, any functional and design specifications,
notes on the architecture, use and programmer instructions,
logic, flow charts, principles of operation and diagrams,
coding conventions, alpha and beta testing notes, test
suites, test plans, regression suites, error reports and
logs, patches and patch instructions, project history
documents and other technology or information, proprietary
development tools, and all other writings which are necessary
or helpful to a skilled programmer to create, understand,
maintain, modify, correct errors and enhance any program
thereof without assistance from Licensor, as more fully
described in Schedule A hereto.
"Information" shall mean any and all information
relating to or arising out of the Programs, Source Code,
Documentation and/or Additional Methods, and including,
without limitation, trade secrets and any and all embodiments
and representations of Intellectual Property Rights.
"Intellectual Property Rights" shall include, but
not be limited to, rights associated with the Programs in
know-how, trademarks, copyrights, patents, patent
applications (including without limitation patent
applications set forth in Schedule 1.1(c) of the Purchase
Agreement and proprietary rights with respect thereto, in all
languages and computer platforms, operating systems and
environments, patent reissues, renewals, continuations,
continuations-in-part, or divisions of any patent or patent
application), trade secrets (as defined in the Restatement of
Torts), instructions, improvements, modifications,
suggestions, proposals, programs, ideas, writings, and the
like of any sort whatsoever, and any embodiment thereof
including, but not limited to, computer programs,
documentation of programs, assembly and detailed drawings,
plans, specifications, results of technical investigations
and research, assembly, and parts manuals, and any other
information which are owned or controlled by Licensor.
"Object Code" shall mean the machine readable
Programs which result from the translation of the Source Code
into machine readable.
"Programs" shall mean, alone or in combination, the
programs which make up the COPERNICUS computer programs and
Documentation, including the META system, METAbase
database, UNIVERSAL TRANSLATOR (also known as COPERNICUS),
and any extensions which are dependent upon the foregoing for
their function, as more fully described in Schedule A hereto.
"Source Code" shall mean visual and machine
readable embodiments of an algorithm, mask work rights or
computer program, including the process or method thereof and
the concepts contained therein, and the representation in the
original language in which the program was coded and any
languages into which the same may have been translated,
together with instructions and any other information
necessary or convenient to the compilation and/or editing of
such code into object code, including any and all comments by
authors, procedural code (such as job control language) and
related documentation.
"Trademark" shall mean any term or terms supplied
by Licensor and used in any form or format, style or design,
as applied to the Programs and Additional Methods in whatever
form and identifies business names, trademarks, and service
marks, as well as any goodwill and rights, at common law or
otherwise, pertinent thereto, and refers to trademarks,
service marks and trade names as set forth on Schedule B
hereto.
"Trademark Registrations" shall mean any United
States Trademark Registration or any other domestic
application or registration made by VIE now or hereafter
obtained.
"VIE Improvements" means changes or additions at
any time after the signature of this Agreement made by VIE to
the Programs or Additional Methods, other than maintenance
modifications, which add one or more significant new program
functions to the Programs or Additional methods or
significantly improve their performance by changes in system
design and/or coding.
2. Deliveries. On the date hereof, Licensor
shall deliver to VIE, a master copy of the Programs and
Documentation for use by VIE to publish the same, and a copy
of the Source Code.
3. License Grant.
(a) Grant. Subject to the provisions of this
Agreement, Licensor hereby grants to VIE a license (alone or
in combination with any other programs, products or services)
to use, sublicense, distribute or otherwise commercialize and
exploit the Programs and to translate, modify, make
derivative works of, revise, upgrade, enhance, reproduce,
manufacture, market and distribute the Programs in all
languages and computer platforms, operating systems and
environments; to translate, modify and to make Additional
Methods and to, create VIE Improvements, as follows:
(i) An exclusive license for a period of five
(5) years from the date hereof (the "Exclusive License") for
the United States (including its territories and possessions)
and Canada in and only in the industry fields of financial
services, health care and food and to all federal, state,
provincial and local governments (the "Licensed Industry
Fields");
(ii) In addition to, and without limiting the
Exclusive License, a perpetual non-exclusive license (the
"Non-Exclusive License") in all markets and industries for
all territories throughout the world (the Non-Exclusive
License and the Exclusive License together being hereinafter
referred to as the "License").
(b) The License does not confer upon VIE the right
to sell, assign or transfer, pledge, encumber, subject to any
lien, or otherwise convey title, in whole or in part, whether
or not for value, in the Programs or Intellectual Property
Rights; provided, however VIE shall be permitted to place a
copy of the Source Code in escrow for the benefit of its
sublicensees (including any OEMs).
(c) The License granted pursuant to Section 3(a)
includes the right for VIE to reproduce at its own expense
the Programs and supporting materials contained on magnetic
media in non-printed, machine readable form solely for the
purposes of the License and rights granted hereunder. VIE
may, at its own expense, copy for its own internal use and
for the internal use of its sublicensees (including any
OEMs), all Documentation included as a part of the Programs
as listed in Schedule A attached hereto. VIE shall, on a
quarterly basis, notify Licensor in writing of the number of
copies of programs reproduced. Except as expressly permitted
in this Section 3, VIE shall not copy, reproduce,
remanufacture or duplicate all or any part of any physical or
magnetic version of the Programs or supporting materials.
(d) Sublicensees. VIE shall, consistent with the
scope of and terms applicable to the License, have the right
to grant sublicenses to Affiliates and end users, without
prior written notice to Licensor, and shall have the right to
grant sublicenses to OEMs upon prior written notice to
Licensor. Any sublicense granted by VIE shall be subject to
the confidentiality provisions of Section 12 herein and shall
provide for the return of all copies of the Program to VIE
upon termination of said license.
(e) Trademarks.
(i) Licensor hereby grants to VIE the right
to use any Trademark and any Trademark Registration in
connection with the License hereunder, as, or as part
of, the marks for or in conjunction with any of the
Programs under the existing names or marks of Programs.
Notwithstanding anything to the contrary contained
herein, any use by VIE of any Trademark shall be deemed
a use on behalf of and as agent for Licensor.
(ii) In order to protect the copyrights of
Licensor in, and Trademarks of Licensor used with, the
Programs, Documentation and supporting materials, VIE
agrees to reproduce all proprietary legends of Licensor,
including all copyright and/or trademark notices
contained on the copies of the Program and supporting
materials delivered to VIE pursuant to this Agreement in
or on any copies or partial copies (including those made
with respect to Additional Methods) made by VIE,
including, for the on screen sign-on.
(iii) It is agreed between the parties hereto
that twenty-five percent (25%) of any Royalty (as
hereinafter defined) shall be attributable to use of the
Trademarks.
4. Term. The term of the License shall commence
on the date hereof and terminate either (i) in the event of a
Closing pursuant to the Purchase Agreement, on the effective
date of said Closing; (ii) in the event the Closing under the
Purchase Agreement does not occur , then on the fifth
anniversary of the date hereof with respect to the Exclusive
License but shall not terminate with respect to the Non-
Exclusive License; or (iii) in accordance with the terms of
Section 13 herein.
5. Royalty. During the term of this License,
royalties shall be payable to Licensor at the rate of five
percent (5%) of "Net Revenue" of VIE commencing on the date
hereof (the "Royalty"). For purposes herein, "Net Revenue"
shall be equal to the sums received and retained by VIE from
the sale, license and distribution of the Programs less the
sum of (i) any applicable credits, discounts and rebates,
including, but not limited to, quantity, dealer, distributor
and promotional credits, discounts, adjustments and rebates,
and (ii) taxes (such as sales, use or similar taxes) paid or
payable by VIE in connection with such sale or license. If
VIE refunds or issues a credit memo on a customer's price due
to customer dissatisfaction or other valid reason, this
negative price shall result in a reduction in Net Revenue and
therefore a reduction of the Royalty due to Licensor. If any
Programs is included by VIE in a program or combination of
programs, the aggregate functionality of which extends beyond
any of such Programs, and which additional functionality is
either (1) distinct from the collective functionality of the
Programs, and/or (2) separately available from VIE and/or any
person other than VIE (without royalty payable hereunder),
then the Net Revenue attributable to the sale, license or
distribution of such product shall be proportionately and
fairly allocated among all significant components of such
combination product. From and after the date hereof, VIE
agrees not to materially alter its pricing strategy with
respect to the sale, license or distribution of the Programs
for purposes of reducing or otherwise negating its obligation
to pay the Royalty to Licensor (for example, by increasing
its charges for maintenance fees or consulting services at
the expense of license fees so as to reduce the Net Revenue
calculation).
6. Payment of Royalties.
(i) The Royalty shall be paid to Licensor on
a quarterly basis within fifteen (15) days following the
close of each calendar quarter; provided, however,
royalty payments for the first two quarters hereunder
shall accrue but not be payable until the third calendar
quarter following the date hereof (each such payment
being referred to herein as a "Royalty Payment"). With
each Royalty Payment, VIE shall provide Licensor with a
statement setting forth the basis for determination of
each such Royalty Payment in respect of the period
applicable to the Royalty Payment due. In the event
that the Closing under the Purchase Agreement shall
occur, no Royalty Payments shall be due or payable
pursuant to the terms of this Agreement.
(ii) Records. Vie shall, for itself and its
sublicensees, keep full and accurate written books and
records, for a period of no less than three (3) years
after termination or expiration of this Agreement, in
sufficient detail and in accordance with the terms of
this Agreement, to permit verification of the sums
payable under this Agreement. VIE shall, at Licensor's
sole cost and expense, permit Licensor or any
representative of Licensor to access, during normal
business hours and on reasonable notice, to any such
records of VIE. Licensor shall keep all such
information confidential and not use it for any purpose
other than for determining compliance with this
Agreement.
7. Audit Right. Licensor shall be entitled to
have the applicable books and records of VIE examined for the
purposes of showing compliance with this Agreement (the
"Audit") by a nationally-recognized firm of independent
certified public accountants, during normal business hours,
together with any other relevant records for purposes of
verifying any Royalty Payments as well as, more generally,
the accuracy of statements made, or reports submitted, to
Licensor in connection with the payment of any Royalties
hereunder. Such Audit shall be at Licensor's expense except
in the event that an adjustment upward resulting from
underpayment of Royalties due by VIE is greater than five
(5%) percent of fees due for the period audited, in which
case VIE shall pay all expenses associated with the Audit and
all sums identified as due and interest thereon at the rate
of 1 1/2 percent per month (or maximum rate available by law)
and adjustment in royalties due, whether such underpayment
results from error, omission or otherwise. If VIE objects to
the Licensor's choice of accountants, Licensor and VIE will
select by lot a nationally-recognized firm of independent
certified public accountants (after excluding Licensor's and
VIE's regular outside accounting firms).
8. Assignment of Certain Third Party Contracts.
In the event that the Closing under the Purchase Agreement
shall not occur, all of Licensor's rights under the IBM
Agreement and the other agreements specified in Schedule C
hereto (the "Third Party Contracts") hereto shall be deemed
automatically assigned to VIE pursuant to the terms hereof
(and Licensor shall execute any other instrument reasonably
satisfactory to VIE with respect to such assignment), and
Licensor shall use its best efforts to cause each other
contracting party thereto to consent to such assignment.
Licensor acknowledges that the inability to assign any of
such Third Party Contracts shall not relieve Licensor of any
of its other obligations hereunder. Anything in this License
to the contrary notwithstanding, this Section 8 shall not
constitute an agreement to assign any unassignable Third
Party Contracts if an attempted assignment thereof, without
the consent of a third party thereto, would constitute a
breach thereof or in any way affect the rights of Licensor or
VIE thereunder. Licensor promptly shall use its best efforts
to obtain all of such consents at its own cost and expense
and until such consents are obtained, Licensor will cooperate
with VIE in any arrangement designed to provide for VIE all
rights and benefits under all unassignable Third Party
Contracts, including enforcement for the benefit of VIE of
any and all rights of Licensor against any third party
thereto arising out of the breach or cancellation by such
third party or otherwise, and Licensor shall, without further
consideration therefor, pay, assign and remit to VIE promptly
all monies and, to the extent permitted, all other rights or
consideration received, or which may be received or obtained
in respect of performance of any unassignable Third Party
Contracts. Licensor shall not renew, extend or modify any
such Third Party Contracts without the prior written consent
of VIE.
9. Certain Representations.
(i) The representations and warranties of Licensor
contained in Article 5 of the Purchase Agreement are
incorporated herein by reference as if set forth herein in
their entirety, it being specifically understood that such
incorporated provisions shall have effect herein independent
of their effect in the Purchase Agreement.
(ii) Licensor makes no representations and
warranties with respect to intellectual property rights of
third parties in connection with any such party's software
under Third Party Contracts assigned to VIE in accordance
with Section 8 herein.
(iii) Licensor understands and agrees, on its own
behalf and that of its sublicensees, that in the event that
VIE or any of its licensees or customers shall develop their
own Additional Methods without having had access to
Licensor's Additional Methods, neither Licensor nor its
sublicensees shall hold VIE or its licensees and/or customers
liable with respect to any ownership rights which Licensor
may claim.
10. VIE's Representations.
(i) The representations and warranties of VIE
contained in Section 6 of the Purchase Agreement are
incorporated herein by reference as if set forth herein in
their entirety, it being specifically understood that such
incorporated provisions shall have effect herein independent
of their effect in the Purchase Agreement.
(ii) VIE understands and agrees, on its own behalf
and that of its sublicensees, that in the event that Licensor
or any of its existing licensees or customers shall develop
their own Additional Methods without having had access to
Licensee's Additional Methods, neither VIE nor its
sublicensees shall hold Licensor, its licensees and/or
customers liable with respect to any ownership rights which
VIE may claim.
(iii) VIE hereby represents and warrants that it
shall use the Trademark at all times in a manner which is
consistent with the quality of the Trademark and the goods it
identifies.
11. Indemnification; Limitations. Without
limiting any of the provisions of Section 9 of the Purchase
Agreement, Licensor agrees to indemnify and to hold VIE
harmless from and against and in respect of, and VIE agrees
to indemnify and to hold Licensor harmless from and against
and in respect of, any losses, damages, claims, liabilities,
costs and expenses (including without limitation any
reasonable legal, accounting or other expenses for
investigating or defending any actions or threatened actions)
incurred by the indemnified party in connection with:
(a) any damage or deficiency resulting from
any misrepresentation, breach of warranty or
nonfulfillment of any agreement or covenant on the part
of the indemnifying party under this Agreement;
(b) any and all claims made against the
indemnified party in respect of liabilities or
obligations of the indemnifying party (including
liabilities for taxes) relating to the Programs, the
Intellectual Property Rights, Additional Methods, and
related rights and assets to the extent such liabilities
and obligations of the indemnifying party are not to be
assumed by the indemnified party or are not attributable
to acts or omissions of the indemnified party;
(c) any and all loss, liability, damage, cost
or expense suffered or incurred by VIE based on or
arising out of the infringement or alleged infringement
of any of the Programs as they exist on the date hereof
of the proprietary rights of any third party; and
(d) all reasonable costs and expenses
(including attorneys' fees) incurred by the indemnified
party in connection with any claim, action, suit,
proceeding, demand, assessment or judgment incident to
any of the matters the indemnified party is indemnified
against by the indemnifying party in this Agreement.
12. CONFIDENTIALITY
(a) Information is the essence of this Agreement.
Accordingly, VIE, on behalf of itself and its employees,
agrees that all of said Information shall be held in
confidence by VIE and that VIE shall not disclose the same to
others, nor (directly or indirectly) assist others to use the
same for itself or others except in furtherance of the
transactions contemplated in Section 3 above or as otherwise
required by law. Notwithstanding anything to the contrary
contained above, VIE shall obtain Licensor's express prior
written consent to each disclosure of Source Code to third
parties, which consent shall not be unreasonably withheld.
(b) This requirement of confidentiality extends to
any and all Information previously acquired by VIE from
Licensor and shall survive the termination of this Agreement
for any reason.
(c) VIE shall secure written agreements from its
employees, consultants, agents, licensees, OEMs and customers
(hereinafter a "Person") to hold Information in confidence
which is consistent with VIE's obligations under this
Agreement.
13. Events of Termination.
This Agreement and the License granted herein may
be terminated:
(i) at any time by mutual written consent; or
(ii) by Licensor upon written notice in the event
that VIE shall breach any of the
confidentiality obligations listed in
subparagraphs (a) through (c) below, and such
breach, if curable, is not cured within thirty
(30) days of written notice to VIE from
Licensor that Licensor intends to terminate
this Agreement as a result of such breach (it
being understood that a breach shall only be
deemed incurable if as a result of such breach
the Source Code has been disclosed to any
person or entity from whom a written
obligation of confidentiality consistent with
VIE's obligations under this Agreement, is or
would be impossible to be obtained such that
the obligations would be effective prior to
such disclosure, it being further understood
that this Agreement shall be terminable
immediately upon written notice in the event
of such incurable breach):
(a) VIE shall fail to maintain a corporate
policy wherein its employees having
access to Source Code are required to
execute an employment or confidentiality
agreement requiring such employee to hold
Source Code in confidence consistent with
VIE's obligations under this Agreement;
(b) VIE shall fail to obtain confidentiality
agreements from its consultants
affiliates, or any other third parties
prior to having access to the Source Code
binding such consultants, affiliates, or
third parties to hold the Source Code in
confidence consistent with VIE's
obligations under this Agreement; or
(c) VIE shall make a distribution of the
Source Code to any third party in
contravention of the last sentence of
Section 12(a) above (provided, however,
that a distribution of the Source Code
not authorized or aided by VIE by a
Person subject to a confidentiality
agreement with VIE shall not give the
Licensor the right to terminate this
Agreement pursuant to this Section 13).
(iii) by Licensor in the event that VIE shall have
terminated or suspended its business and
failed to remedy such termination or
suspension within ninety (90) days after
receipt of written notice from the Licensor,
provided, however, that this notice shall not
prejudice the right of Licensor to recover any
royalties or other sums due at the time of
such termination and shall not prejudice any
cause of action or claim Licensor accrued or
may accrue on account of any breach or default
by VIE; or
(iv) by Licensor upon thirty (30) days' written
notice to VIE in the event that the Closing
under the Purchase Agreement shall not have
occurred due solely to a breach by VIE of any
of its obligations under the Purchase
Agreement provided that Licensor shall have
satisfied all of the conditions to Closing as
set forth in Section 4.5 of the Purchase
Agreement.
14. Effect of Termination.
(a) Upon the termination of this Agreement
pursuant to the terms of Section 13 above, VIE shall return
to Licensor all copies of the Programs and supporting
materials or, upon Licensor's request, destroy all such
copies of the Programs for Additional Methods and certify to
Licensor in writing that they have been destroyed. VIE's
obligations regarding confidentiality pursuant to this
Agreement and its obligation to make payments to Licensor for
all sums due pursuant to Section 5 hereof shall survive the
termination of this Agreement; however, except as otherwise
provided in Section 13 hereof, it is expressly agreed that
VIE's failure to pay Royalties when due or its failure to
perform any of its other covenants hereunder shall not be
grounds for termination of the License hereunder and
Licensor's sole remedy for any such breach shall be an action
for monetary damages to the fullest extent permitted by
applicable law.
(b) Upon termination of this Agreement, however
occurring, all accrued royalties on the Programs which have
been made, used, licensed, or otherwise disposed of by or on
behalf of VIE, shall immediately become due and payable to
Licensor. Any Program in existence at the termination of
this Agreement and upon which royalty has not been so paid
shall become immediately due and payable to Licensor.
(c) With respect to all agreements between VIE and
third parties, upon termination of this Agreement for any
reason, any and all rights and benefits to VIE under any such
agreements shall vest in Licensor, at Licensor's option. All
use of any Trademark shall cease and VIE shall return all
copies of the Program(s) and Additional Method(s).
(d) Upon the termination of this Agreement, VIE
shall be entitled to continue to provide maintenance and
support for its existing end users (in the event that
Licensor has not exercised its option as set forth in Section
14(c) above) and Licensor shall grant to VIE a License to
permit VIE to provide such maintenance and support but VIE
shall not be entitled to grant any further sublicense or to
use the Programs to develop further Additional Methods.
15. Expenses. Each of the parties shall pay its
own fees and expenses with respect to the transactions
contemplated hereby.
16. Injunction Relief. (a) VIE agrees that the
obligations and promises of VIE under this Agreement are of a
unique character that gives them particular value. VIE
acknowledges and agrees that a breach of any promise or
covenant regarding confidential Information or Intellectual
Property Rights may result in irreparable and continuing
damage to Licensor for which there may be no adequate remedy
at law and, in the event of such breach, Licensor shall be
entitled to seek injunctive relief and/or a decree for
specific performance, and such other further relief as may be
proper to specifically enforce those covenants, without the
posting of any bond. VIE agrees to pay to Licensor any
reasonable expenses, including but not limited to attorney
fees, incurred in obtaining such specific enforcement (in
addition to any other relief to which Licensor may be
entitled).
(b) Licensor hereby acknowledges and agrees that a
breach of any covenant by Licensor hereunder may result in
irreparable and continuing damage to VIE for which there may
be no adequate remedy at law and, in the event of such
breach, VIE shall be entitled to seek injunctive relief
and/or a decree for specific performance, and such other
further relief as may be proper to specifically enforce those
covenants, without the posting of any bond. Licensor agrees
to pay VIE any reasonable expenses, including but not limited
to attorneys fees, incurred in obtaining such specific
enforcement (in addition to any other relief to which VIE may
be entitled).
17. Jurisdiction; forum; governing law.
(a) This Agreement shall be deemed entered into
the State of New York and shall be construed and governed
solely by the laws of the State of New York applicable to
agreements made to be performed entirely within the State.
(b) For purposes of this Agreement, the parties
hereby irrevocably submit to the exclusive jurisdiction of
any New York State or federal court sitting in New York
county, New York or the Southern District of the State of New
York. Each party irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such suit, action or
proceeding brought in any such court, any claim that any such
court, action or proceeding brought in such a court has been
brought in an inconvenient forum and the right to object,
with respect to any such suit, action or proceeding brought
in any such court, that such court does not have jurisdiction
over such party.
18. Survival of Restrictive Covenants. The
covenants herein concerning Intellectual Property Rights will
be construed as independent of any other provision hereof.
The provisions of Section 5 (royalties), Section 11
(indemnification) and 12 (confidentiality) shall survive the
termination of this Agreement.
19. Effect of Partial Invalidity. If any one or
more of the provisions of this Agreement should be ruled
wholly or partly invalid or unenforceable by a court or other
government body of competent jurisdiction, then: (a) the
validity and enforceability of all provisions to this
Agreement not ruled to be invalid or unenforceable with be
unaffected; (b) the effect of the ruling will be limited to
the jurisdiction of the court or other government body making
the ruling; (c) the provision(s) held wholly or partly
invalid or unenforceable will be deemed amended, and the
court or other government body is authorized to reform the
provision(s), to the minimum extent necessary to render them
valid and enforceable in conformity with the parties' intent
as manifested herein; and (d) if the ruling, and/or the
controlling principle of law or equity leading to the ruling,
is subsequently overruled, modified, or amended by
legislative, judicial, or administrative action, then the
provision(s) in question as originally set forth in this
Agreement will be deemed valid and enforceable to the maximum
extent permitted by the new controlling principle of law or
equity.
20. Notices. All notices shall be in writing and
shall be deemed to have been duly given to a party hereto if
delivered personally, then on the date of such delivery, or
on the fifth day after being deposited in the mail if mailed
via registered or certified mail, return receipt requested,
postage prepaid, or on the next business day after being sent
by recognized national overnight courier services, in each
case, to such party, at the following respective addresses:
if to Licensor, to
New Paradigm Software Corp.
733 Third Avenue
New York, New York 10017
Attention: President
with a copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Arthur M. Mitchell, Esq.
if to VIE, to
VIE Systems, Inc.
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Attention: Mr. Eric LeGoff
with a copy to:
Golenbock, Eiseman, Assor & Bell
437 Madison Avenue
New York, New York 10022
Attention: A.C. Peskoe, Esq.
21. No Third-Party Beneficiaries. Nothing herein,
express or implied, is intended or shall be construed to
confer upon or give to any person, firm, corporation or legal
entity, other than the parties hereto, any rights, remedies
or other benefits under or by reason of this Agreement or any
documents executed in connection with this Agreement.
22. Miscellaneous. This Agreement may be
executed in any number of counterparts, each of which shall
be an original, but all of which together shall constitute
one instrument. The paragraph headings are for convenience
only and are not a part of this agreement. This Agreement
shall inure to the benefit of and be binding upon the parties
and their respective successors and permitted assigns. Any
and all rights and remedies of the parties hereunder shall be
separate and apart from, and in addition to, any and all
rights and remedies of the parties pursuant to the terms of
the Purchase Agreement.
23. Assignment. This Agreement may be freely
assigned by VIE to an Affiliate of VIE, without the prior
written consent of the Licensor, or to a third party with the
prior written consent of the Licensor (which consent shall
not be unreasonably withheld or delayed); provided, each
assignee of this Agreement shall acknowledge in writing to
the Licensor that it will be legally bound by the obligations
of the VIE set forth herein.
IN WITNESS WHEREOF, the parties have duly executed
this Agreement as of the date first above written.
NEW PARADIGM SOFTWARE CORP.
By:
Name:
Title:
VIE SYSTEMS, INC.
By:
Name:
Title:
<PAGE>
Exhibit 3.1(c)
VOTING AGREEMENT
AGREEMENT dated as of this day of
____________, 1997, by and between
the undersigned shareholder and VIE Systems, Inc., a Delaware
corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, the undersigned is a shareholder of New
Paradigm Software Corp., a New York corporation (the
"Company"); and
WHEREAS, the undersigned desires to induce Buyer to
enter into an Agreement of Purchase and Sale of Assets with
the Company, as hereafter amended (the "Purchase Agreement"),
providing for the purchase by Buyer of, inter alia, all of
the assets and business of the Company relating to its
COPERNICUS software and "New Paradigm Architecture" (the
"Sale Transaction"), for the consideration and on the terms
and conditions set forth in the form of Purchase Agreement, a
copy of which has been delivered to the undersigned.
NOW, THEREFORE, in consideration of the foregoing,
the parties do hereby agree as follows:
1. Representations and Warranties. The
undersigned hereby represents and warrants to Buyer that the
undersigned (a) owns of record and beneficially the number of
shares of capital stock of each class or series of the
Company set forth below the undersigned's name below, (b) is
entitled to vote such shares at the Special Meeting (as
defined in the Purchase Agreement), and such shares represent
the number of outstanding shares of common stock of the
Company entitled to vote at the Special Meeting set forth
below the undersigned's name below, and (c) has full power
and authority to make, enter into and carry out the terms of
this Agreement.
2. Agreement to Vote Shares. Until the Expiration
Date, the undersigned shall vote or cause to be voted, and/or
execute a written consent of shareholders with respect to,
all of the shares of capital stock of the Company owned of
record or beneficially by the undersigned and any shares of
capital stock of the Company hereafter acquired by the
undersigned (collectively, the "Shares"), for and in favor of
the Sale Transaction and the transactions contemplated by the
Purchase Agreement at any meeting of shareholders of the
Company called therefor or at any adjournment thereof or by
any consent related thereto (and, if applicable, against any
competing proposals and/or transactions).
3. Conditional Irrevocable Proxy. Concurrently
with the execution and delivery of this Agreement, the
undersigned has executed and delivered to Buyer, pursuant to
Section 212 of the New York Business Corporation Law, an
irrevocable proxy, in the form attached as
Exhibit A hereto, with respect the Shares. Buyer may
exercise such proxy only if it appears that any of the Shares
are or may be voted or a consent given otherwise than in
accordance with this Agreement or the Shares are not voted or
no consent is given.
4. Agreement Not to Transfer Shares. Until the
Expiration Date, the undersigned hereby agrees not to sell,
grant an option for the sale of, assign, transfer, pledge or
otherwise encumber or grant any proxy or voting rights
(except to Buyer) with respect to any of the Shares.
5. Expiration Date. This Agreement shall expire
upon the earliest to occur of (a) the closing of the Sale
Transaction and (b) one hundred and twenty (120) days after
the date of the execution and delivery of the Purchase
Agreement by all parties thereto (the "Expiration Date"),
6. Legend. Upon the request of Buyer,
certificates representing the Shares shall bear the following
legend:
The shares represented by this certificate are
subject to certain voting restrictions set forth in a certain
voting agreement dated __________, 1997, by and among the
parties named therein. A copy of such agreement is on file
at the executive office of the Company.
7. Further Assurances. From and after the date of
this Agreement, the undersigned shall from time to time, at
the request of Buyer and without further consideration, do,
execute and deliver, or cause to be done executed and
delivered (without cost or liability to the undersigned), all
such other and further acts, things, instruments or documents
as may be reasonably requested or required in order to
provide to Buyer the benefits contemplated by this Agreement.
8. Notices. All notices, instructions and other
communications required or permitted to be given, forwarded
or transmitted hereunder or necessary or convenient in
connection herewith shall be in writing and shall be deemed
to have been duly given if delivered personally, or three
business days after being sent by registered or certified
mail, return receipt requested, postage prepaid, addressed to
the address set forth above, or one business day after being
delivered to a nationally recognized overnight courier
service or when sent by electronic facsimile transmission.
Notices shall be sent to the undersigned at its address
indicated below, and to Buyer at 51 John F. Kennedy Parkway,
Short Hills, New Jersey 07078, Attention: President, with a
copy to Golenbock, Eiseman, Assor & Bell, 437 Madison Avenue,
New York, New York 10022, Attention: A.C. Peskoe, Esq., or
to such other persons or addresses as may be designated by
like notice hereunder.
9. Miscellaneous. (a) This Agreement constitutes
the entire agreement between the parties hereto with respect
to the subject matter hereof and may not be modified or
amended nor may any right be waived except by a writing which
expressly refers to this Agreement, states that it is a
modification, amendment or waiver and is signed by all
parties with respect to a modification or amendment or the
party granting the waiver with respect to a waiver. No
course of conduct or dealing and no trade custom or usage
shall modify any provision of this Agreement.
(b) This Agreement shall be governed by and
construed in accordance with the internal laws of the State
of New York, without regard to principles of conflicts of
laws.
(c) This Agreement shall be binding upon and
inure to the benefit of the parties hereto, and their
respective successors and permitted assigns.
(d) The undersigned acknowledges that its
agreement to vote and take (and refrain from taking) other
actions herein, the agreement of the undersigned contained
herein not to sell or otherwise dispose of the Shares covered
by all of the foregoing are unique; and that Buyer will not
have adequate remedies at law if the undersigned fails to
perform any of its obligations under this Agreement.
Accordingly, the undersigned agrees that Buyer shall have the
right (without the necessity of posting any bond) to specific
performance and equitable injunctive relief if the
undersigned shall fail or threaten to fail to perform any of
its obligations under this Agreement. Buyer agrees that the
undersigned shall have no liability for money damages or any
other monetary liability under or pursuant to this Agreement.
(e) In the event that any term or provision
of this Agreement shall be deemed by a court of competent
jurisdiction to be invalid, void or unenforceable, the court
considering the same shall have the power and is hereby
authorized and directed to limit such invalid, void or
unenforceable provision, so that such term or provision is no
longer invalid, void or unenforceable and to enforce the same
as so limited. Subject to the foregoing sentence, in the
event any provision of this Agreement shall be held to be
invalid or unenforceable for any reason, such invalidity or
unenforceability shall attach only to such provision and
shall not affect or render invalid or unenforceable any other
provision of this Agreement.
(f) The representations and warranties of the
contained in this Agreement shall survive the Expiration
Date.
(g) All references to any gender shall be
deemed to include the masculine, feminine or neuter gender,
the singular shall include the plural, and the plural shall
include the singular. The section headings contained herein
are for the purposes of convenience only and are not intended
to define or limit the contents of said sections.
(h) This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the same
document.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date and year above written.
VIE SYSTEMS, INC.
_________________________________
Signature of Shareholder
By:_______________________________
_________________________________
Name of Shareholder
__________________________________
Address of Shareholder
__________________________________
Number of Shares
__________________________________
Number of Shares able to
be Voted
Exhibit A
IRREVOCABLE PROXY FOR
SHARES OF CAPITAL STOCK
OF
NEW PARADIGM SOFTWARE CORP.
PURSUANT TO SECTION 212 OF THE
NEW YORK BUSINESS CORPORATION LAW
KNOW ALL MEN BY THESE PRESENTS:
The undersigned hereby IRREVOCABLY MAKES,
CONSTITUTES, AND APPOINTS VIE Systems, Inc. ("Buyer") the
attorney and proxy of the undersigned for the term hereof
with respect to all of the shares of capital stock of New
Paradigm Software Corp. (the "Company") set forth below (and
any shares hereafter acquired), with full power of
substitution, to vote for and in favor of the purchase by
Buyer of, inter alia, all of the assets and business of the
Company relating to its "COPERNICUS" software and the "New
Paradigm Architecture" (the "Sale Transaction") as
contemplated by the Agreement of Purchase and Sale of Assets
with the Company, as hereafter amended (the "Purchase
Agreement"), and to attend and vote all such shares at any
annual or special meeting of shareholders, and any
adjournments thereof, at which the Sale Transaction or any
other transaction contemplating the sale of any assets or
securities of the Company has been submitted to the
shareholders for approval.
This Proxy and all authority hereby conferred are
granted and conferred in furtherance of and in consideration
for Buyer undertaking to entering into the Purchase Agreement
and shall be deemed irrevocable and coupled with an interest.
The undersigned acknowledges and agrees that Buyer
will use this Proxy to vote in its own self-interest and that
Buyer shall be entitled to vote the Shares notwithstanding
the fact that such vote may inure to the benefit of Buyer.
The terms of this Proxy shall expire upon the
earliest to occur of (i) the closing of the Sale Transaction
and (ii) one hundred and twenty (120) days after the date of
the execution and delivery of the Purchase Agreement by all
parties thereto.
Dated: _______________, 1997.
Number of Shares and
Class Name of Shareholder
Signature of Shareholder
<PAGE>
Exhibit 4.2(e)
CONFIDENTIALITY AND NON-COMPETITION UNDERTAKING
UNDERTAKING, dated as of ____________, 1997, from
New
Paradigm Software Corp. ("Seller"), Mark Blundell *[and John
Brann]* (collectively, "Shareholders" and together with Seller
hereinafter called the "Selling Parties").
W I T N E S S E T H:
WHEREAS, pursuant to an Agreement of Purchase and Sale
of Assets, dated as of _______, 1997 (the "Purchase Agreement"),
Buyer is purchasing from Seller, and the Seller is selling, the
Purchased Assets (as defined in the Purchase Agreement);
WHEREAS, it is a condition precedent to the Purchase
Agreement, that the Selling Parties enter into this
Confidentiality and Non-Competition Undertaking.
NOW, THEREFORE, for good and valuable
consideration, the
receipt of which by the undersigned is hereby acknowledged, and in
order to induce Buyer to purchase the Purchased Assets pursuant to
the terms of the Purchase Agreement, the Selling Parties hereby
jointly and severally undertake and agree as follows:
1. The Selling Parties will not and will not permit any
person or entity directly or indirectly (alone or together with
others) controlling, controlled by, affiliated with or related to,
any of the Selling Parties (collectively "Seller Affiliates"), to,
for a period of three (3) years from the date hereof (or one (1)
year in the case of Mark Blundell) (the "Limited Period"):
(a) directly or indirectly, anywhere throughout
the world (the "Territory"), own, manage, operate or control, or
participate in the ownership, management, operation or control of,
or be connected with or have any interest in, as a stockholder,
agent, consultant, partner or otherwise, or refer or exploit any
customers, business or opportunities to or with, or otherwise
assist in any manner, (i) any business which sells, distributes
or provides "middleware" software products (i.e. products whose
primary functionality or purpose is systems-to-systems
connectivity, message translation or message routing), or any
other products or services which have been sold, distributed
or provided by Seller in the Business (as defined in the Purchase
Agreement) or which are competitive therewith or (ii) any other
business which is competitive within the Territory with any
business (A) heretofore conducted by Seller in the Business and/or
(B) hereafter conducted by Buyer or any of its subsidiaries or
affiliates and reasonably related or substantially similar to any
of the business activities heretofore conducted by Seller in the
Business; provided that the foregoing shall not prohibit the
undersigned from owning less than 1% of any class of securities
listed on a national securities exchange or traded publicly in the
over-the-counter market; or
(b) without the express prior written consent of
Buyer, directly or indirectly employ or attempt to employ or
engage or knowingly arrange or solicit to have any other person or
entity employ or engage any person, who heretofore has been, or
is, on the date hereof in the employ of Buyer or any corporation
or entity controlling, controlled by or under common control with
Buyer (collectively referred to herein as the "Buyer Affiliates"),
or who has heretofore been in the employ of Seller and becomes or
has become an employee of Buyer or any of the Buyer Affiliates,
for a period of two (2) years after such person shall no longer be
employed with Seller, Buyer or any of the Buyer Affiliates.
2. The Selling Parties will not, and will not permit
any of the Seller Affiliates to, at any time, divulge or make
available to any person or entity, except as expressly consented
to in writing by Buyer, or use, any confidential information or
any documents, files or other papers concerning the business or
financial affairs of Buyer or any of the Buyer Affiliates and/or
the business or assets relating to or derived from the Business
(as defined in the Purchase Agreement), except such disclosure
which is otherwise required by applicable law or regulations. The
Selling Parties further agree that, during the Limited Period,
they will refer to Buyer prospective customers who contact them
(it being understood that this shall not constitute an affirmative
obligation on the part of the Selling Parties to seek out or
contact customers for Buyer). The Selling Parties shall not
disparage Buyer or the Business, and shall not, and shall not
permit any of the Seller Affiliates to, commit any act, or in any
way assist others to commit any act, which will injure Buyer or
the business heretofore conducted by Seller.
3. The parties recognize that irreparable damage will
result in the event that the provisions hereof shall not be
specifically enforced. If any dispute arises concerning action
alleged to be in violation of any such provision, the parties
hereto agree that an injunction may be issued restraining such
action pending determination of such controversy and that no bond
or other security shall be required in connection therewith. If
any dispute arises concerning the right or obligation of any party
hereto, such right or obligation shall be enforceable by a decree
of specific performance. Such remedies shall, however, not be
exclusive of and shall be in addition to any other remedies which
Buyer may have, including injunctive relief and actions for damages.
4. In the event that any of the provisions contained
herein would be held to be invalid, prohibited or unenforceable in
any jurisdiction for any reason because of the scope, duration or
area of its applicability or for any other reason, unless narrowed
by construction, such provision shall for purposes of such
jurisdiction only, be construed as if such invalid, prohibited or
unenforceable provision had been more narrowly drawn so as not to
be invalid, prohibited or unenforceable (or if such language
cannot be drawn narrowly enough, the court making any such
determination shall have the power to modify, to the extent
necessary to make such provision or provisions enforceable in such
jurisdiction, such scope, duration or area or all of them, and
such provision shall then be applicable in such modified form).
If, notwithstanding the foregoing, any such provision would be
held to be invalid, prohibited or unenforceable in any
jurisdiction for any reason, such provision, as to such
jurisdiction only, shall be ineffective to the extent of such
invalidity, prohibition or unenforceability, without invalidating
the remaining provisions hereof. No narrowed construction, court-
modification or invalidation of any provision shall affect the
construction, validity or enforceability of such provision in any
other jurisdiction.
5. Each of the Selling Parties represents to Buyer
that the enforcement of the restrictions of this Agreement would
not be unduly burdensome to such Selling Party. The
representations and covenants contained in this Agreement on the
part of the Selling Parties shall be construed as ancillary to and
independent of any other provision of the Purchase Agreement. If
any of the Selling Parties violates any covenant contained in this
Agreement and Buyer brings a legal action for injunctive or other
relief, Buyer shall not, as a result of the time involved in
obtaining the relief, be deprived of the benefit of the full
period of any such covenant. Accordingly, the duration of each
such covenant of any of the Selling Parties shall be deemed to
have been extended as if the Limited Period with respect thereto
began on the date of entry by a court of competent jurisdiction of
a final judgment enforcing such covenant of such Selling Party
under this Agreement.
6. This Agreement shall inure to the benefit of Buyer
and its successors and assigns, and shall be binding upon each of
the Selling Parties and their respective heirs, personal
representatives, successors and assigns, and may not be
modified or terminated orally.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date set forth in the introductory paragraph
hereof.
NEW PARADIGM SOFTWARE CORP.
By:
Mark Blundell
John Brann
<PAGE>
4.2 (F)
OPINION LETTER
VIE Systems, Inc.
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Attn.: Mr. Eric Le Goff
Gentlemen:
We have acted as counsel for New Paradigm Software
Corp. ("NPS"), a New York corporation in connection with the
execution and delivery of the following documents:
a) An Agreement of Purchase and Sale of Assets
between NPS and VIE Systems, Inc. ("VIE") dated May 9, 1997
(the "Purchase Agreement");
b) A License Agreement between NPS and VIE dated
May 9, 1997 (the "License Agreement");
c) A Confidentiality and Non-Competition
Undertaking dated May 9, 1997 by NPS, and Mark Blundell and
John Brann individually (the "Non-Competition
Undertaking"); and
d) An Indemnification Escrow Agreement dated
May 9, 1997 by and among NPS, VIE and Messrs. Golenbock,
Eiseman, Assor and Bell, as escrow agent (the "Escrow
Agreement").
The foregoing are collectively referred to as the Documents.
Capitalized terms used herein shall have the meanings assigned
to said terms in the Documents.
In addition, we wish to call your attention to the
fact that NPS issued 800,000 Series C Redeemable Preferred
Stock, par value $0.01 per share (the "Preferred Shares") to Mr.
Robert Trump on April 11, 1997 pursuant to a resolution of the
Board of Directors of NPS adopted on March 15, 1997 at a meeting
of the Board.
We have reviewed such matters of law and have examined
such documents, records, agreements, and certificates of public
officials and officers of the NPS as we have deemed necessary
for the opinions hereinafter expressed. In such examination, we
have assumed the genuineness of signatures on original documents
and the conformity to original documents of all copies submitted
to us as certified, conformed or photographic copies; and as to
certificates of public officials, we have assumed the same to
have been properly given and to be accurate. As to various
questions of fact material to our opinion, we have relied upon
the attached certificates of officers of NPS. As to any matter
of fact contained in such certificates of officers of the NPS,
we have no reason to believe such certificates to be inaccurate.
On the basis of the foregoing, we are of the opinion that:
1. NPS is a corporation duly organized and validly
existing and in good standing under the laws of the State
of New York and has all requisite corporate power and
authority to carry on its business as now conducted and as
proposed to be conducted.
2. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental
authority on the part of NPS is required in connection with
the consummation of the transactions contemplated by the
Documents or related documents.
3. Subject only to the authorization of the holders
of two-thirds of all outstanding shares entitled to vote
with respect to the transactions contemplated by the
Purchase Agreement at a meeting of the shareholders, all
corporate action on the part of NPS, its officers and
directors necessary for the authorization, execution and
delivery of the Purchase Agreement, the Non-Competition
Agreement and the Escrow Agreement has been taken and the
performance of all obligations of NPS thereunder, and the
Purchase Agreement, the Non-Competition Agreement and the
Escrow Agreement constitute valid and legally binding
obligations of NPS enforceable in accordance with their
respective terms except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws relating to
or affecting the rights of creditors generally, including,
without limitation, laws relating to fraudulent transfers
or conveyances, preferences and equitable subordination.
The enforceability of the NPS's obligations under the
Purchase Agreement, the Non-Competition Agreement and the
Escrow Agreement is subject to general principles of equity
(regardless of whether such enforceability is considered in
a proceeding in equity or at law).
4. The authorization of the shareholders of NPS is
not required for the execution and delivery of the License
Agreement by NPS and all corporate action on the part of
NPS, its officers and directors necessary for the
authorization, execution and delivery of the License
Agreement has been taken and the performance of all
obligations of NPS thereunder, and the License Agreement
constitutes the valid and legally binding obligation of NPS
enforceable in accordance with its terms except as
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, arrangement, moratorium or
other similar laws relating to or affecting the rights of
creditors generally, including, without limitation, laws
relating to fraudulent transfers or conveyances,
preferences and equitable subordination. The
enforceability of the License Agreement is subject to
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or
at law.)
5. The execution, delivery and performance of the
Documents and the consummation of the transactions
contemplated thereby, do not nor will not (i) conflict with
or violate any provisions of the Certificate of
Incorporation or By-Laws of NPS, (ii) to our knowledge,
with or without the giving of notice or the passage of
time, or both, result in a breach of, or violate, or be in
conflict with, or constitute a default under, or permit the
termination of, or cause of permit acceleration under, any
agreement or instrument of any debt or obligation to which
NPS is a party or any of its assets is subject or bound,
(iii) to our knowledge, require the consent of any party to
any agreement to which the NPS is a party, or to which any
of the Purchased Assets is subject or bound, (iv) to our
knowledge, result in the creation or imposition of any lien
upon any of the Purchased Assets, or (v) violate any law,
rule or regulation or, to our knowledge, any order,
judgment, decree or award, of any court, governmental
authority or arbitrator to or by which the NPS or any of
the Purchased Assets is subject or bound; except we note
that prior to the date hereof a UCC-1 financing statement
was executed by NPS in favor of Level 8, Inc. with respect
to the Copernicus software and may be filed by Level 8,
Inc. at any time. Nevertheless, we understand that if such
financing statement is filed, it will be terminated
simultaneously with the Closing under the Purchase
Agreement.
6. The Preferred Shares were duly authorized and
issued to Mr. Robert Trump, are fully-paid and non-
assessable, and such Preferred Shares are entitled to cast
four votes per share (or an aggregate of 3,200,000 votes)
at the Special Meeting or any other meeting of the
shareholders, and if voted, will be counted at the Special
Meeting as outstanding shares of NPS entitled to vote in
favor of the transactions contemplated by the Purchase
Agreement for purposes of compliance by NPS with the
provisions of Section 909 of the Business Corporation Law
of New York.
Very truly yours,
<PAGE>
Exhibit 4.3(e)
GEAB OPINION
1. Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of
Delaware.
2. The execution, delivery and performance of the
Agreement and has been duly and validly authorized by all
necessary corporate action of Buyer. Buyer has duly executed and
delivered the Agreement.
