EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of November 1, 1998 (the "Effective Date"), by and among Global MAINTECH,
Inc., a Minnesota corporation ("GMI"), a wholly owned subsidiary of Global
MAINTECH Corporation ("GMC"), and GMC (solely in its capacity as guarantor), and
Singlepoint Systems, Inc., a Minnesota corporation ("SSI") and wholly owned
subsidiary of GMI, and Enterprise Solutions, Inc., an Ohio corporation
("Enterprise"), d.b.a. Singlepoint Systems, Inc.
WHEREAS, Enterprise is engaged in the business of software development and
professional services (the "Business"); and
WHEREAS, Enterprise desires to sell and assign to GMI, through its wholly
owned subsidiary SSI, and GMI, through SSI, desires to purchase and assume from
Enterprise, substantially all the assets and certain liabilities of Enterprise
that are currently being used by Enterprise in the conduct of the Business.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants contained herein, and intending to be legally bound hereby, the
parties agree as follows:
Section 1. SALE OF TRANSFERRED ASSETS.
1.1 AGREEMENT TO PURCHASE AND SELL. Subject to the terms and
conditions set forth in this Agreement, Enterprise hereby agrees to sell,
grant, transfer, convey, assign and deliver to SSI, and SSI agrees to
purchase, on the Closing Date (as defined below), all of Enterprise's
right, title and interest in and to all of the assets of Enterprise related
to, or used in conjunction with, the Business (collectively, except for the
retained assets set forth in Section 1.10 hereof, the Transferred Assets),
as described in detail on the attached EXHIBIT A, including, but not
limited to:
(a) All of the real property owned by Enterprise and used by
Enterprise in the operation of the Business, all of which real
property is identified in SCHEDULE 1.1(A);
(b) All of the equipment, machinery, vehicles, furniture,
fixtures, furnishings and leasehold improvements owned by Enterprise
and used by Enterprise in the operation of the Business;
(c) Enterprise's interest in all real property leases to which
Enterprise is a party that are used in connection with the Business,
all of which leases are identified in SCHEDULE 1.1(C) hereto.
(d) Enterprise's interest in all personal property leases to
which Enterprise is a party that are used in connection with the
operation of the Business, all of which leases are identified in
SCHEDULE 1.1(D) hereto.
(e) All of Enterprise's inventories of supplies, raw materials,
parts, finished goods, work-in-process, product labels and packaging
materials used in connection with the Business and Enterprise's
interest in all orders or contracts for the purchase of supplies, raw
materials, parts, product labels and packaging materials used in
connection with the Business (collectively, the "Inventory");
(f) Enterprise's interest in all licenses, contracts or
agreements with respect to the Business to which Enterprise is a party
and, including, without limitation, those identified in SCHEDULE
1.1(F);
(g) All unfilled or uncompleted customer contracts, open orders,
commitments or purchase or sales orders received and accepted by
Enterprise in connection with the Business in the ordinary course of
business;
(h) All documents or other tangible materials embodying
technology or intellectual property rights owned by, licensed to or
otherwise controlled by Enterprise and used in connection with the
Business, whether such properties are located on Enterprise's business
premises or on the business premises of Enterprise's suppliers or
customers, including, without limitation all software programs
(including both source and object codes) and related documentation for
software used in or developed for support of the Business;
(i) All rights in trademarks, service marks, trade names,
corporate names, copyrights, mask works, trade secrets or other
intellectual property rights owned by, licensed to or otherwise
controlled by Enterprise or used in, developed for use in or necessary
to the conduct of the Business as now conducted or planned to be
conducted and including the rights to institute or maintain any action
or investigation for and to recover damages for any past infringement
thereof or any actions of unfair competition relating thereto
(collectively, the "Intellectual Property Rights");
(j) All rights in and to the computer software products of
Enterprise known as "Receptor," "ASIP," "AlarmPoint" and "PhonePoint"
in existence immediately prior to the Closing Date and documentation
therefor as more specifically described on SCHEDULE 1.1(J), including
without limitation, all Intellectual Property Rights therein, all
documents, programs, processes, associated results and copies
constituting, describing or relating to such software programs,
including without limitation, descriptions, specifications, source and
object code therefor, source materials and the like (collectively, the
"Software"). Without limiting the foregoing, the Software shall
include any and all modifications, enhancements and improvements
developed, or in process of being developed, by or on behalf of
Enterprise as of the Closing Date, including but not limited to the
source code thereof.
(k) The names "Receptor," "ASIP," "AlarmPoint" and "PhonePoint,"
or any combination of words in which the names "Singlepoint,"
"AlarmPoint," or "PhonePoint" appears or any rights associated with
such names or any right to use such names in all jurisdictions in
which Enterprise either currently uses any such name or has any right
to use any such names.
(l) All of Enterprise's books, records and other documents and
information relating to the Assets or the Business, including, without
limitation, all customer, prospect, dealer and distributor lists,
sales literature, inventory records, purchase orders and invoices,
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sales orders and sales order log books, customer information,
commission records, correspondence, employee payroll and personnel
records, product data, material safety data sheets, price lists,
product demonstrations, quotes and bids and all product catalogs and
brochures;
(m) All accounts or notes receivable (excluding intra-company
accounts) owing to Enterprise that relate to the Business;
(n) The current telephone listings of the Business and the right
to use the telephone numbers currently being used at the principal
offices and other offices or facilities of the Business;
(o) All permits, licenses and other governmental approvals held
by Enterprise with respect to the Business, to the extent they are
assignable;
(p) All prepaid expenses and deposits made by Enterprise with
respect to the Business;
(q) All cash and cash equivalents of Enterprise with respect to
the Business;
(r) All long-term investments of Enterprise relating to the
Business;
(s) Any rights to recovery by Enterprise arising out of
litigation with respect to the Business that is pending prior to or
commences after the Closing Date (as defined below);
(t) To the extent assignable, all insurance policies of
Enterprise obtained in connection with the Business and all rights of
Enterprise (including rights to receive dividends) under or arising
out of such insurance policies;
(u) Goodwill (including all goodwill associated with and
symbolized by the name or names identified in subsection (k) above as
used as a trademark or service xxxx and all goodwill associated with
and symbolized by any other trademark or service xxxx, trade name or
corporate name used in the conduct of the Business as now conducted),
all related tangibles and intangibles which Enterprise uses in the
conduct of the Business and all rights to continue to use the Assets
in the conduct of a going business.
1.2 CREATION OF SINGLEPOINT DIVISION. As soon as practicable after the
Closing Date (as defined below), GMI shall utilize the Transferred Assets
and cause SSI to operate as a division of GMI (the "Singlepoint Division")
having operations substantially similar to Enterprise as it operated prior
to the Closing Date.
1.3 CLOSING. The closing of the sale of the Transferred Assets shall
take place at the offices of Xxxxxx & Xxxxxxx LLP, 000 Xxxxx Xxxxx Xxxxxx,
Xxxxxxxxxxx, Xxxxxxxxx, at 3:00 p.m., Minneapolis time, on November 30,
1998 (the "Closing Date") or at such other place or different time or day
as may be mutually acceptable to the parties hereto. At the closing,
Enterprise shall execute and deliver to SSI the Xxxx of Sale and Assignment
of Assets in substantially the form of
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EXHIBIT B, and SSI shall deliver to Enterprise the Initial Payment (as
defined below), in immediately available funds by wire transfer, pursuant
to Section 1.4.
1.4 CONSIDERATION. The aggregate purchase price (the "Purchase Price")
to be paid in respect of the transactions contemplated hereby shall be
$200,000 in cash, the Shareholder Stock Option (as defined below), the
Employee Stock Options (as defined below) and the Earn Out Payment (as
defined below), if any. The Purchase Price shall be paid as follows:
(a) On the Closing Date, SSI shall pay $200,000 to Enterprise,
which payment is referred to herein as the "Initial Payment."
(b) On the Closing Date, SSI shall cause GMC to issue to the
shareholders of Enterprise, at no cost to the shareholders, options to
purchase 1,700,000 shares of GMC common stock pursuant to GMC's 1989
Stock Option Plan, as amended (the "GMC Option Plan") at an exercise
price (the "Exercise Price") per share equal to the fair market value
of one share of GMC common stock on the date of grant (the
"Shareholder Options"). The Shareholder Options shall be exercisable
during the period beginning 18 months after the Closing Date and shall
end five years from the Closing Date, PROVIDED, HOWEVER that in the
event Singlepoint Division's Adjusted Earnings (as defined below) are
less than an average of $20,000 per month during the 18 month period
following the Closing Date (the "Earn Out Period"), then 1,200,000 of
such options shall be canceled on the last day of the last month of
the Earn Out Period; PROVIDED FURTHER that in the event Singlepoint
Division's Adjusted Earnings (as defined below) are less than an
average of $14,000 per month during the Earn Out Period, then an
additional 100,000 of such options shall be canceled on the last day
of the last month of the Earn Out Period. GMI agrees to lend to the
shareholders of Enterprise funds for the purpose of exercising the
Shareholder Options upon the terms and subject to the conditions
established by GMI and accepted by the shareholder, PROVIDED, HOWEVER,
that the term of any such loan shall not exceed 30 days. SSI shall
cause GMC to maintain effective registration with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as
amended, of the shares issuable upon exercise of the Shareholder
Options.
(c) Within 30 days after the Closing Date, SSI shall cause GMC to
issue to employees of Enterprise, at no cost to the employees, options
to purchase 80,000 shares of GMC common stock pursuant to the GMC
Option Plan at the Exercise Price (the "Employee Stock Options"). The
allocation of the Employee Stock Options shall be as follows: (i)
40,000 shall vest and be exercisable on the date following the end of
the Earn Out Period, and (ii) 40,000 shall vest and be exercisable on
the date following the end of the period beginning 30 months after the
Closing Date. The Employee Stock Options shall expire five years from
the Closing Date.
(d) SSI also shall pay to Enterprise the excess, if any, of (i)
18 multiplied by the Adjusted Earnings (as defined below) over (ii)
the Option Value (as defined
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below), as promptly as practicable after such amounts can be
determined but in no event later than 60 days after the Shareholder
Options first become exercisable as provided in (b) above. The payment
of such excess, if any, is hereinafter referred to as the "Earn Out
Payment." The Earn Out Payment shall be in the form of cash or shares
of GMC common stock. Enterprise shall notify SSI in writing of its
election to receive this payment in cash or stock at least four months
prior to the end of the Earn Out Period. Upon receipt of such notice
by Enterprise, SSI shall have two months to determine whether in its
reasonable belief its available cash is sufficient to pay to
Enterprise the amount of the Earn Out Payment requested by Enterprise
to be paid in cash. In the event SSI reasonably believes its available
cash is insufficient to make such cash payment, SSI may pay to
Enterprise any such insufficiency, up to the total amount of the Earn
Out Payment, in the form of stock. For purposes of making this payment
in stock, GMC common stock shall be valued at a per share price equal
to 85% of the average closing bid price for the last 20 trading days
immediately preceding the last trading day of the Earn Out Period (the
"Closing Price"). "Adjusted Earnings" means the greater of (i) 18
times the after-tax earnings of the Singlepoint Division that are
derived from, or relate to, the sale of the Transferred Assets by
Enterprise for the sum of the first, second, third, tenth, eleventh,
twelfth, thirteenth, fourteenth, fifteenth, sixteenth, seventeenth and
eighteenth month of the Earn Out Period, or (ii) 16 times the
after-tax earnings of the Singlepoint Division that are derived from,
or relate to, the sale of the Transferred Assets by Enterprise for the
sum of the seventh month through the eighteenth month of the Earn Out
Period. Adjusted Earnings shall be calculated in accordance with
Generally Accepted Accounting Principles, consistently applied
("GAAP"), subject to the adjustments, clarifications and exceptions
listed on EXHIBIT C. GMI shall hold in escrow 10 percent of the
Purchase Price available at the end of the Earn Out Period (the
"Escrow Amount") and shall release (i) the entire Escrow Amount from
escrow only in the event the revenues of the Singlepoint Division for
the six month period following the end of the Earn Out Period are at
least 70 percent of the average monthly revenues during the Earn Out
Period, multiplied by six months; or (ii) 50 percent of the Escrow
Amount only in the event the revenues of the Singlepoint Division for
the six month period following the end of the Earn Out Period are at
least 50 percent of the average monthly revenues during the Earn Out
Period, multiplied by six months. Option Value means the sum of the
Initial Payment plus the appreciation, including profits on
Singlepoint Division's sales during the Earn Out Period, on the number
of Shareholder Options not canceled at the end of the Earn Out, which
number shall not be less than 400,000 or greater than 1,700,000
(adjusted for any stock splits or stock dividends), and the price of
which shall be the average daily closing price of GMC common stock
during the month immediately preceding the last month of the Earn Out
Period, such that the total Option Value is equal to either 18 times
or 16 times the monthly after tax earnings of the Singlepoint Division
as described above. In the event such amount is less than zero, the
Option Value shall be deemed to be zero.
(e) Notwithstanding anything herein to the contrary, in the event
the payment to Enterprise pursuant to 1.4(d) is less than $5 million,
SSI shall either (i) pay
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Enterprise the difference or (ii) promptly return the Transferred
Assets, and any related liabilities of the same character and nature
as the Assumed Liabilities (as defined below), to Enterprise effective
as of the date of such return. If SSI elects to return the Transferred
Assets, (i) any outstanding Shareholder Options or Employee Stock
Options shall be canceled; and (ii) Enterprise shall pay to SSI any
cash advanced, excluding the Initial Payment and including profits on
the sale of any Shareholder Options or Employee Options, plus simple
interest thereon at the annual rate of 6% (the "Cash Advance"),
PROVIDED, HOWEVER, that upon the return of the Transferred Assets,
Enterprise shall pay to SSI the amount of the Initial Payment in
addition to the Cash Advance in the event that during the Earn Out
Period either (a) the Software is deemed to be non-functioning by at
least three customers, or (b) the Singlepoint Division does not
generate an average of $50,000 per month in total sales.
1.5 ALLOCATION OF PURCHASE PRICE. SSI and Enterprise have allocated
the Purchase Price among the Transferred Assets as set forth on EXHIBIT D
hereto, which exhibit shall be updated as of the Closing Date in such a
manner as determined by SSI, subject to Enterprise's consent (which shall
not be unreasonably withheld) after taking into account any appraisals
which may be obtained by SSI, any applicable federal treasury regulations,
the fair market value of such items and the final determination of the
Purchase Price. SSI shall prepare for filing all federal and state tax
returns that may be required to be filed with respect to the transaction
provided for herein, PROVIDED, HOWEVER, that neither SSI nor GMI shall be
responsible for the preparation or filing of any federal or state tax
returns of Enterprise. Enterprise shall provide information that may be
required by SSI for the purpose of preparing such tax returns and tax
information on a basis that is consistent with such tax returns prepared by
SSI.
1.6 TAXES. The Purchase Price is exclusive of, and SSI shall pay all
excise, sales, value-added, use, registration, stamp, transfer and other
like taxes imposed or levied by reason of this Agreement and the
transactions contemplated hereby.
1.7 ASSUMPTION OF LIABILITIES. SSI shall assume, pay and perform in
accordance with their terms or otherwise satisfy, as of the Closing Date,
the liabilities of Enterprise as set forth on the financial statements of
Enterprise prepared in accordance with GAAP (the "Assumed Liabilities"),
including, but not limited to those agreements relating to the Transferred
Assets set forth in EXHIBIT A (the "Assumed Contracts").
1.8 EXCLUDED LIABILITIES. Other than set forth above in Section 1.7,
Enterprise shall retain, and SSI shall not assume, and nothing contained in
this Agreement shall be construed as an assumption by SSI of, any
liabilities, obligations or undertakings of Enterprise of any nature
whatsoever, whether accrued, absolute, fixed or contingent, known or
unknown due or to become due, unliquidated or otherwise. Enterprise shall
be responsible for all of the liabilities, obligations and undertakings of
Enterprise not assumed by SSI pursuant to Section 1.7 hereof.
1.9 LIABILITIES FOR EMPLOYMENT CLAIMS. Without limiting the generality
of the foregoing Section 1.8, Enterprise shall retain any liabilities,
obligations or undertakings with respect to employment contracts, employee
terminations, or any other employment-related claims by
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Enterprise's employees, if the cause of origin of such claim arose prior to
the Closing Date and SSI shall assume any such liabilities, obligations or
undertakings if the cause or origin of such obligations arose after the
Closing Date.
1.10 RETAINED ASSETS. Enterprise shall retain, and GMI shall not
purchase the equity as shown on Enterprise's Balance Sheet dated as of
October 31, 1998, a copy of which is attached hereto as EXHIBIT E.
Section 2. REPRESENTATIONS AND WARRANTIES OF SSI, GMI AND GMC. SSI, GMI and
GMC represent and warrant to Enterprise in the case of Section 2.1 and 2.2, and
GMC represents and warrants to Xxxxx Xxxx and Desi Dos Xxxxxx in the case of
Section 2.3, as follows:
2.1 CORPORATE POWER. Each of SSI, GMI and GMC has all requisite
corporate power to execute and deliver this Agreement and all agreements to
be executed and delivered by it pursuant to the terms hereof and to carry
out and perform its respective obligations under the terms of this
Agreement and such other agreements.
2.2 AUTHORIZATION. All corporate action on the part of SSI, GMI and
GMC, necessary for the authorization, execution, delivery and performance
of this Agreement and any other agreements contemplated hereby has been
taken. This Agreement and any other agreements contemplated hereby, when
executed and delivered by SSI and GMI, will constitute valid and binding
obligations of SSI and GMI, enforceable in accordance with their respective
terms.
2.3 STOCK OPTION PLAN. The GMC Option Plan was duly authorized and
adopted by GMC and the Shareholder Options delivered pursuant to Section
1.4(b) have been duly authorized and validly issued in accordance with the
GMC Option Plan.
Section 3. REPRESENTATIONS AND WARRANTIES OF ENTERPRISE. Enterprise
represents and warrants to SSI and GMI as follows:
3.1 ORGANIZATION AND STANDING; ARTICLES AND BYLAWS. Enterprise is a
corporation duly organized and existing under, and by virtue of, the laws
of Ohio and is in good standing under such laws. Enterprise has the
requisite corporate power to own and operate its properties and assets and
to carry on the Business as currently conducted and as proposed to be
conducted. Enterprise is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have
a material adverse effect on its business or properties.
3.2 CORPORATE POWEr. Enterprise has all requisite corporate power to
execute and deliver this Agreement and all agreements to be executed and
delivered by Enterprise pursuant to the terms hereof and to carry out and
perform its obligations under the terms of this Agreement and such other
agreements.
3.3 AUTHORIZATION. All corporate action on the part of Enterprise
necessary for the authorization, execution, delivery and performance of
this Agreement and any other agreements contemplated hereby has been taken
and no other proceedings on the part of Enterprise or its shareholders are
necessary to authorize the execution, delivery and performance of this
Agreement
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and any other agreements contemplated hereby. This Agreement and any other
agreements contemplated hereby, when executed and delivered by Enterprise,
will constitute valid and binding obligations of Enterprise enforceable in
accordance with their respective terms.
3.4 NO CONFLICT. No consent of any person not a party to this
Agreement and no consent of any governmental authority is required to be
obtained on the part of Enterprise to permit the consummation of the
transactions contemplated by this Agreement (including without limitation
the transfer to GMI of all right, title and interest in and to the
Transferred Assets).
3.5 LITIGATION. There is no litigation, investigation, arbitration or
other proceeding pending or, to the knowledge of Enterprise, threatened
against Enterprise, the Transferred Assets the result of which would have a
material adverse effect on the Transferred Assets.
3.6 TITLE. Enterprise has good and marketable title to all of the
Transferred Assets, and all of the Transferred Assets are hereby
transferred to SSI free and clear of restrictions on or conditions to
transfer, license or assign and free and clear of any mortgages, deeds of
trust, pledges, taxes, security interests, liens, leases, licenses,
liabilities, encumbrances, costs, charges and claims of any nature
whatsoever, direct or indirect, whether accrued, absolute, contingent or
otherwise, including, without limitation, any agreement to give any of the
foregoing (collectively, "Liens"). The Transferred Assets constitute all
the necessary assets to operate the Business.
3.7 COPYRIGHTS, TRADEMARKS AND PATENTS.(a) Except as set forth on
SCHEDULE 3.7, Enterprise owns and possesses all right, title and interest
in and to the Transferred Assets free and clear of all Liens and has the
full right to exploit the Intellectual Property Rights associated with the
Transferred Assets without payment of compensation to any other party; (b)
SCHEDULE 3.7 describes all material agreements granting to third parties
any rights in the Intellectual Property Rights relating to the Transferred
Assets; (c) all licenses of such Intellectual Property Rights will be
assumed by, and will become valid agreements of, SSI without the
requirement that any consent to assignment be obtained or any payment be
made (other than future royalties as provided in such agreements); (d)
Enterprise, to its knowledge, has taken all commercially reasonable steps
to acquire, protect and maintain the Intellectual Property Rights
associated with the Transferred Assets; (e) Enterprise has not received any
notice of, nor are there any facts known to Enterprise which indicate a
likelihood of, any infringement or misappropriation by, or conflict from,
any third party with respect to such Intellectual Property Rights or any
such Intellectual Property Rights that are exclusively licensed to
Enterprise; (f) no claim by any third party contesting the validity of any
such Intellectual Property Rights has been made, is currently outstanding
or, to the best knowledge of Enterprise, is threatened; (g) Enterprise has
not received any notice of any infringement, misappropriation or violation
by Enterprise of any intellectual property rights of any third party and
Enterprise, to its knowledge, has not infringed, misappropriated or
otherwise violated any such intellectual property rights; (h) to the
knowledge of Enterprise, no infringement, misappropriation or violation of
any intellectual property rights of any third party has occurred or will
occur with respect to any of the Transferred Assets; and (i) Enterprise has
not entered into any agreement restricting Enterprise from selling, leasing
or otherwise distributing any of its current products or products under
development to any class of customers, in any geographic area, during any
time period or in any segment of the market.
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3.8 COMPLIANCE WITH OTHER INSTRUMENTS. To the extent that any of the
following would have a material adverse effect on the ability of Enterprise
to consummate the transactions contemplated by this Agreement: (a)
Enterprise is not in violation of any term of its Articles of Incorporation
or Bylaws, or in any material respect of any term or provision of any
mortgage, indebtedness, indenture, contract, agreement, instrument,
judgment or decree, order, statute, rule or regulation applicable to
Enterprise and (b) the execution, delivery and performance of and
compliance with this Agreement and any other agreements contemplated
hereby, have not resulted and will not result in any violation of, or
conflict with, or constitute a default under, or result in the creation of,
any Lien upon any of the properties or assets of Enterprise, and there is
no such violation or default that materially and adversely affects the
business of Enterprise as conducted or as proposed to be conducted, or any
of the properties or assets of Enterprise.
3.9 BANKRUPTCY PROCEEDINGS. No petition has been filed by or against
Enterprise for relief under any applicable bankruptcy, insolvency or
similar law; no decree or order for relief has been entered in respect of
Enterprise, voluntarily or involuntarily, under any such law; and no
receiver, liquidator, sequestrator, trustee, custodian or other officer has
been appointed with respect to Enterprise or its assets and liabilities
pursuant to any such law. No warrant of attachment, execution or similar
process has been executed against Enterprise or any of its assets or
properties. Enterprise has not made any assignment for the benefit of
creditors.
3.10 SOFTWARE. Specifically with respect to the Software and without
limiting Section 3.7 hereof, Enterprise hereby represents and warrants as
follows:
(a) Except as set forth on SCHEDULE 3.10(A), Enterprise is the
sole proprietor of the Software and has not granted to any third party
any license for or access to the Software other than object code
licenses to end-users or licenses authorizing the distribution of such
object code licenses to such end-users (directly or through
intermediary distributors);
(b) Enterprise has the full power and authority to exploit
commercially all rights in the Software and has never previously
assigned, transferred or otherwise encumbered these rights, except as
provided in Section 3.10(a);
(c) To Enterprise's knowledge, no portion of the Software has
been obtained from or copied from public domain software, nor put in
the public domain by Enterprise. As used in this paragraph (c),
"public domain" shall mean copyrightable material for which the
copyright or any other intellectual property right therein has been
disclaimed by the owner thereof so that such materials are free to be
used without restriction and without accounting to such owner;
(d) The Software and the reproduction, distribution, preparation
of derivative works based upon, performance of or display of the
Software do not infringe any statutory or common law copyright;
(e) To Enterprise's knowledge, the Software and the reproduction,
preparation of derivative works based upon, performance of or display
of the Software and its use in the conduct of the Business as now
conducted does not infringe or violate any intellectual property right
of any third party;
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(f) The Software delivered, or tested and ready to be delivered,
to customers of Enterprise are free from defects interfering with the
operation of such Software for their intended purpose (except for such
defects which, in the ordinary course of the business of Enterprise
consistent with the past practice of Enterprise, would be corrected by
Enterprise without extraordinary cost) and, to Enterprise's knowledge,
contain no errors or defects which could result in the catastrophic or
substantial failure of a telecommunications transmission system of
which they are a part. The Software is free from viruses, worms,
trojan horses or other such "foreign" code which could interrupt
normal processing, corrupt data, render such software unusable or
otherwise materially interfere with the operations of such Software or
associated software or equipment, except that the Software may include
a "license manager" that protects against improper copying or use and
that provides time and capacity controls if so programmed;
(g) Enterprise has full and exclusive control of the source code
for the Software, except as set forth in SCHEDULE 3.10(G); and
(h) The Software is Year 2000 Compliant, including date century
recognition, calculations which accommodate same century and
multi-century formulas and date values that reflect the century. As
used herein, "Year 2000 Compliant" shall mean the ability of the
Software to provide the following functions:
(i) consistently handle date information before, during and
after January 1, 2000, including but not limited to accepting
date input, providing date output, and performing calculations on
dates or portions of dates;
(ii) function accurately in accordance with all
documentation without interruption before, during and after
January 1, 2000, without any change of operations associated with
the advent of the new century;
(iii) respond to two-digit date input in a way that resolves
any ambiguity as to century in a disclosed, defined and
predetermined manner; and
(iv) store and provide output of date information in ways
that are unambiguous as to century.
3.11 EMPLOYEES. Except as set forth on Schedule 3.11, (a) Enterprise
has complied, in all material respects, with all laws relating to the
employment of labor, including provisions thereof relating to wages, hours,
equal opportunity, collective bargaining and the payment of social security
and other taxes; (b) Enterprise has no labor relations problem pending, and
Enterprise's labor relations are, in its judgment, satisfactory; (c) there
are no workers' compensation claims pending against Enterprise nor is
Enterprise aware of any facts that would give rise to such a claim; (d) no
employee is subject to any secrecy or noncompetition agreement or any other
agreement or restriction of any kind that would impede in any way the
ability of such employee to carry out fully all activities of such employee
in furtherance of the business associated with the Transferred Assets; and
(e) no employee or former employee of Enterprise has any claim with respect
to any Intellectual Property Rights contained in the Transferred Assets.
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3.12 THIRD PARTY WARRANTIES. Except as disclosed on SCHEDULE 3.12,
with respect to the Transferred Assets, Enterprise has not given any
warranty to any third party.
3.13 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed on
SCHEDULE 3.13, with respect to the Transferred Assets, Enterprise has no
liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise, whether due or to become due, whether known or unknown, and
regardless of when asserted) arising out of transactions or events
heretofore entered into, or any action or inaction, or any state of facts
existing, with respect to or based upon transactions or events heretofore
occurring, except liabilities which have arisen after the date of the
Latest Balance Sheet (as defined below) in the ordinary course of business
(none of which is a material uninsured liability for breach of contract,
breach of warranty, tort, infringement, claim or lawsuit).
3.14 CONTRACTS AND COMMITMENTS.
(a) SCHEDULE 3.14 lists the following agreements, whether oral or
written, to which Enterprise is a party, which are currently in
effect, and which relate to Transferred Assets: (i) collective
bargaining agreement or contract with any labor union; (ii) bonus,
pension, profit sharing, retirement or other form of deferred
compensation plan; (iii) hospitalization insurance or other welfare
benefit plan or practice, whether formal or informal; (iv) contract
for the employment of any officer, individual employee or other person
on a full-time or consulting basis or relating to severance pay for
any such person; (v) confidentiality agreement; (vi) agreement or
indenture relating to the borrowing of money or to mortgaging,
pledging or otherwise placing a lien on any of the Transferred Assets;
(vii) guaranty of any obligation for borrowed money or otherwise;
(viii) contract or group of related contracts with the same party for
the purchase of products or services under which the undelivered
balance of such products or services is in excess of $10,000; (ix)
contract or group of related contracts with the same party for the
sale of products or services under which the undelivered balance of
such products or services has a sales price in excess of $10,000; (x)
contract which prohibits Enterprise from freely engaging in business
anywhere in the world; (xi) contract for the distribution of any of
the products that comprise Transferred Assets; (xii) franchise
agreement; (xiii) license agreement or agreement providing for the
payment or receipt of royalties or other compensation by Enterprise in
connection with the Intellectual Property Rights related to the
Transferred Assets; (xiv) other agreement which is either material to
the Transferred Assets or was not entered into in the ordinary course
of business.
(b) Enterprise has performed all obligations required to be
performed by it in connection with the contracts or commitments
required to be disclosed in SCHEDULE 3.14 and is not in receipt of any
claim of default under any contract or commitment required to be
disclosed under such schedule; Enterprise has no present expectation
or intention of not fully performing any material obligation pursuant
to any contract or commitment required to be disclosed under such
caption; and Enterprise has no knowledge of any breach or anticipated
breach by any other party to any contract or commitment required to be
disclosed under such caption.
(c) Prior to the date of this Agreement, SSI has been supplied
with a correct and complete copy of each written contract or
commitment, and a written description of each oral contract or
commitment, set forth on SCHEDULE 3.14 together with all amendments,
waivers or other changes thereto.
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3.15 DISCLOSURE. Neither this Agreement nor any of the Exhibits
hereto nor any of the documents delivered by or on behalf of
Enterprise pursuant to Section 6 hereof nor any of the Schedules
delivered herewith, taken as a whole, contain any untrue statement of
a material fact regarding Enterprise or the Transferred Assets or any
of the other matters dealt with in this Section 3 relating to
Enterprise or the transactions contemplated by this Agreement. This
Agreement, the Exhibits hereto, the documents delivered to SSI by or
on behalf of Enterprise pursuant to Section 6 hereof, and the
Schedules delivered herewith, taken as a whole, do not omit any
material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they were made, not
misleading, and there is no fact which has not been disclosed to SSI
of which any officer or director of Enterprise is aware which
materially affects adversely or could reasonably be anticipated to
materially affect adversely the Transferred Assets.
3.16 NO MATERIAL ADVERSE CHANGES. Enterprise has delivered to SSI
copies of the unaudited balance sheet, as of August 31, 1998, of the
Business (the "Latest Balance Sheet") and the unaudited statements of
earnings, shareholders' equity and cash flows of the Business for the
period ended August 31, 1998 (such statements and the Latest Balance
Sheet being herein referred to as the "Latest Financial Statements").
The Latest Financial Statements are based upon the information
contained in the books and records of Enterprise and fairly present
the financial condition of the Business as of the dates thereof and
results of operations for the periods referred to therein. Since the
date of the Latest Balance Sheet, there has been no material adverse
change in the assets, financial condition, operating results,
customer, employee or supplier relations, business condition or
prospects of Enterprise.
Section 4. ADDITIONAL AGREEMENTS.
4.1 CONFIDENTIALITY. Each of the parties hereto hereby agrees to
keep any information or knowledge obtained pursuant to any provision
of this Agreement, or the negotiation and execution hereof or the
effectuation of the transactions contemplated hereby, confidential;
provided, however, that (a) after the Closing Date, neither SSI nor
GMI shall have any obligation to keep confidential any information or
knowledge relating to the Transferred Assets, (b) after the Closing
Date, Enterprise shall have an obligation to keep confidential all
information and knowledge relating to the Transferred Assets and (c)
the foregoing shall not apply to information or knowledge which (i) a
party can demonstrate was already lawfully in its possession prior to
the disclosure thereof by the other party and not subject to a
confidentiality obligation, (ii) is generally known to the public and
did not become so known through any violation of law or this
Agreement, (iii) became known to the public through no fault of such
party, (iv) is later lawfully acquired by such party from other
sources, (v) is required to be disclosed by order of court or
government agency with subpoena or similar powers or pursuant to
public disclosure requirements of the Securities and Exchange
Commission or (vi) is disclosed in the course of any litigation
between any of the parties hereto. The parties shall take reasonably
steps to ensure that their respective employees and consultants are
aware of and abide by the confidentiality obligation of this Section
4.1.
4.2 TRANSACTION COSTS. Each party shall be responsible for its
own costs, expenses and claims (including attorneys' and broker's
fees) arising out of its negotiation, execution and performance of
this Agreement and all transactions contemplated hereby.
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4.3 TRANSFER OF EMPLOYEES.
(a) GMI agrees to offer employment to the individuals who
are employees of Enterprise on the Closing Date, and upon
acceptance of such offer of employment by such individuals
(referred to herein as the "Transferred Employees"), the
Transferred Employees shall be deemed employees of the
Singlepoint Division. Beginning on the Closing Date, the
Transferred Employees who have accepted employment shall be
employed in the Singlepoint Division and may not transfer to
another division or department of GMI, except with the consent of
the management of the Singlepoint Division. Beginning on the
Closing Date, the Transferred Employees shall receive the same
salary and benefits, including medical benefits, and shall
maintain the same position as in effect with respect to each such
employee on October 31, 1998. The Transferred Employees shall
also be eligible to participate in GMI's 401(k) plan beginning on
the Closing Date. In addition, the Transferred Employees shall be
eligible to participate in GMI's bonus plan, pursuant to which
they may be eligible to receive a bonus from a pool consisting of
10% of GMI's pre-tax earnings, which bonus shall be payable, at
the election of the employee, 50% in cash and 50% in options to
purchase GMC common stock, or 100% in options to purchase GMC
common stock. For purposes of calculating the options which may
be granted to a Transferred Employee so electing, each $1.00 of
bonus shall be multiplied by two and then divided by the fair
market value of a share of GMC common stock as of the date of
grant. The benefits and compensation provisions of this Section
4.3 are qualified in their entirety by the provisions of the
applicable plan or policy of GMI and applicable law.
(b) The Option Value, as set forth in Section 1.4(d), of any
individual who is a shareholder of Enterprise and also a
Transferred Employee shall be reduced by (i) 35% if such
individual terminates his or her employment with GMI within one
year from the Closing Date, or (ii) 50% if such individual
terminates his or her employment with GMI within six months from
the Closing Date.
4.4 EMPLOYMENT AGREEMENTS.
(a) Xxxxx Xxxx and Desi Dos Xxxxxx shall enter into employment
agreements with SSI substantially in the form attached hereto as
EXHIBIT F.
(b) In the event the earnings of the Singlepoint Division are
equal to or in excess of $800,000 for the first 12 months of
operations after the Closing Date, GMI may, in its sole discretion so
long as Xxxxx XxXxxxxxx is the Chief Executive Officer of GMC, hire
one person to serve as sales manager and/or director of consulting for
the Singlepoint Division with an annual salary of up to $150,000,
excluding any bonus or incentive compensation.
4.5 CUSTOMER TRANSITION. Each of SSI, GMI and Enterprise will use
commercially reasonable efforts to implement a smooth transition of
operations to SSI, with the intent that any customers who acquire any
Software (including any subsequent derivations thereof) either before or
after the Closing Date will experience as little disruption or delay in
supply, support or service as is reasonably practicable. Enterprise shall
not notify its dealers and distributors that Enterprise will no longer
offer the Software, and that the Singlepoint Division will now offer the
Software, except at the direction of GMI, in GMI's sole discretion, or with
the prior written consent of GMI.
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4.6 EMPLOYEE CONFIDENTIALITY AGREEMENTS. Each of the Transferred
Employees will execute a confidentiality agreement with GMI, in a form and
substance that is mutually acceptable to GMI and Enterprise, on or prior to
the Closing Date. Notwithstanding the foregoing, Enterprise shall make
available to GMI prior to the Closing Date a copy of each confidentiality
agreement in effect with Enterprise employees prior to the Closing Date,
and GMI reserves the right to maintain any such confidentiality agreements
in effect, rather than executing a new confidentiality agreement with any
Transferred Employee.
4.7 SUBSEQUENT ACTIONS; FURTHER ASSURANCES. Each party agrees to (a)
cooperate fully with the other party, (b) execute such further instruments,
documents and agreements, (c) give such further written assurances to
evidence the transaction contemplated hereby and (d) make physical delivery
of any tangible Transferred Assets not already delivered or made reasonably
available to SSI or Enterprise as may be reasonably requested to evidence
and reflect the transactions described herein and contemplated hereunder;
PROVIDED, HOWEVER, that any such request shall be at the expense of the
party making such request and shall be accomplished by the party making
such request taking all necessary action to minimize the effort required by
the party receiving such request.
4.8 BULK SALES. SSI hereby agrees to waive the requirement, if any,
that Enterprise comply with any bulk transfer law which may be applicable
to the transactions contemplated by this Agreement; PROVIDED, HOWEVER, that
Enterprise agrees to indemnify and hold harmless each of SSI and GMI with
respect to any noncompliance with such laws and SSI's waiver with respect
thereto.
4.9 BUY-BACK BY ENTERPRISE. Enterprise shall have the right to
purchase from SSI, and SSI shall have the obligation to sell to Enterprise,
the Singlepoint Division, upon the terms and conditions set forth in
Section 1.4(e), in the event that, during the Earn Out Period, any of the
following events occur: (a) a petition is filed by or against GMC for
relief under any applicable bankruptcy, insolvency or similar law, or a
decree or order for relief is entered in respect of GMC, voluntarily or
involuntarily, under any such law, or a receiver, liquidator, sequestrator,
trustee, custodian or other officer is appointed with respect to GMC or its
assets and liabilities pursuant to any such law; (b) the reported price of
GMC common stock, as reported on the OTC Bulletin Board, or such other
stock exchange on which the stock of GMC is listed, is below $0.50,
adjusted for any stock splits or stock dividends, for 30 consecutive days
on which the OTC Bulletin Board, or such other stock exchange on which the
stock of GMC is listed, is open for trading; (c) the reported price of GMC
common stock, as reported on the OTC Bulletin Board, or such other stock
exchange on which the stock of GMC is listed, is below $1.00, adjusted for
stock splits or stock dividends, and the average trading volume per day is
less than 25,000 shares for 30 consecutive days on which the OTC Bulletin
Board, or such other stock exchange on which the stock of GMC is listed, is
open for trading; (d) the net worth of GMC is below $4 million at the end
of any fiscal quarter, as reported on GMC's Form 10-Q for the applicable
quarter; (e) GMC does not raise at least $1.5 million from the sale of
equity securities of GMC during the last four months of the 1998 calendar
year; (f) GMI has more than 60% of the dollar value of accounts payable
over 90 days old at the end of any month; (g) GMC has not, after using good
faith efforts, filed an application and paid the appropriate filing fee on
or before June 30, 1999 to list GMC's common stock on a national stock
exchange; (h) (1) during the period from the Closing Date until June 30,
1999, GMC has not achieved a net worth equal to 12 times Enterprise's eight
month earnings, or a tangible net worth of eight times
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Enterprise's eight month earnings, and (2) during the period from the
Closing Date until June 30, 1999, GMC has not commenced a firm underwritten
offering which will create a dollar value of ten times Enterprise's nine
month earnings, and (3) GMC's earnings for the first half of the 1999
calendar year are less than four times Enterprise's earnings for the same
period; (i) the Singlepoint Division has not maintained separate books and
records of financial information during the 18 month period after the
Closing Date or has not granted access to Xxxxx Xxxx or Desi Dos Xxxxxx, or
their designated agents or representatives, to inspect such books and
records upon reasonable notice to SSI; (j) GMC has not maintained
sufficient cash reserves to pay back to Enterprise the earnings the
Singlepoint Division has accrued during the 18 month period after the
Closing Date, in which case SSI shall cause GMC to pay to Enterprise any
such deficiency in the form of common stock of GMC, or SSI shall cause GMC
to issue to Enterprise shares of common stock of GMC such that the fair
market value of such shares is equal to any such deficiency; or (k) SSI
does not maintain at least 40% of the earnings of the Singlepoint Division
as working capital at any time during the Earn Out Period. Notwithstanding
the foregoing, Enterprise shall not have the right to buy back from SSI,
and SSI shall not have the obligation to transfer to Enterprise, the
Singlepoint Division if Singlepoint Division's Adjusted Earnings are less
than an average of $14,000 per month during the Earn Out Period.
4.10 SALE OF SINGLEPOINT DIVISION. Each of SSI and GMI agree not to
sell, transfer, assign, pledge, or dispose of the Singlepoint Division or
license the source code for the Software to any third party during the 18
month period after the Closing Date without the prior written consent of
Xxxxx Xxxx and Desi Dos Xxxxxx, which consent shall not be unreasonably
withheld. In the event GMI, through SSI, obtains the consent of Xx. Xxxx
and Mr. Dos Xxxxxx and sells all or substantially all the assets of the
Singlepoint Division within 18 months from the Closing Date, any profit
from such sale, after deduction of the Initial Payment and other cash
advances, plus the Option Value, shall be divided equally between the
shareholders of Enterprise who were holders of common stock of Enterprise
immediately prior to the Closing Date and the shareholders of GMC.
4.11 SECONDARY PUBLIC OFFERING. In the event the adjusted earnings of
the Singlepoint Division are equal to or in excess of $400,000 in the first
six months after the Closing Date, GMI shall use its best efforts to cause
GMC to commence a secondary public offering and file a Registration
Statement with the Securities and Exchange Commission as soon as
practicable after April 30, 1999. Upon the written request of a shareholder
of Enterprise (an "Enterprise Shareholder") given within 30 days after
receipt of a notice from GMC relating to such a proposed offering, GMI
shall use its best efforts to cause GMC, except as herein provided, to
cause all shares of GMC common stock that the Enterprise Shareholder has
acquired pursuant to this Agreement and with respect to which the
Enterprise Shareholder has requested registration to be included in such
registration statement, all to the extent requisite to permit the sale or
other disposition by the Enterprise Shareholder of the shares to be so
registered; PROVIDED, HOWEVER, that nothing herein shall prevent GMC from,
at any time, abandoning or delaying any such registration if it is in its
best interests to do so. If any such registration pertains to an
underwritten offering in whole or in part, GMC may require that the shares
requested for inclusion by the Enterprise Shareholder pursuant to this
section be included in the underwritten offering on the same terms and
conditions as the securities otherwise being sold through the underwriters,
PROVIDED, HOWEVER, that GMI shall use its best efforts to cause GMC to
raise an amount of capital in such offering such that the Enterprise
Shareholders receive proceeds therefrom equal to 12 times the adjusted
earnings of the Singlepoint
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Division accumulated from the Closing Date until the month prior to the
signing by GMC of an underwriting agreement (the "Accumulation Period"),
PROVIDED, HOWEVER, that if the Accumulation Period exceeds 12 months, the
adjusted earnings of the Singlepoint Division shall be calculated, for
purposes of this Section 4.11, for the 12 month period immediately
preceding the signing by GMC of an underwriting agreement relating to the
offering. Any proceeds received by the Enterprise Shareholders pursuant to
this Section 4.11 shall be applied towards the aggregate Purchase Price
paid by SSI to Enterprise in accordance with Section 1.4 and shall not be
deemed to constitute an early payout of the Earn Out Payment.
4.12 TAX TREATMENT OF SHAREHOLDER OPTIONS. GMC shall use its best
efforts to assure that the Shareholder Options are eligible for the
favorable tax treatment afforded incentive stock options by Section 422 of
the International Revenue Code of 1986, as amended, upon exercise of the
Shareholder Options in whole or in part and any subsequent resale of shares
obtained by exercise of the Shareholder Options.
4.13 ACCESS TO BOOKS AND RECORDS. For a reasonable period of time
after the Closing Date, SSI shall afford to Enterprise and its authorized
representatives (the "Enterprise Repreentatives") access at reasonable
times and upon reasonable notice to the books and records of SSI in order
for the Enterprise Representatives to prepare any necessary tax or other
filings.
Section 5. INDEMNIFICATION.
5.1 AGREEMENT TO INDEMNIFY. Enterprise agrees to, and hereby does,
indemnify and hold SSI and GMI harmless against and in respect of any loss,
cost, expense, claim, liability, deficiency, judgment or damage, including
reasonable legal fees and expenses (individually, a "GMI Loss"; and
collectively, "GMI Losses") incurred by SSI or GMI as a result of any
inaccuracy in or breach of a representation or warranty of Enterprise
contained in this Agreement. Similarly, each of SSI and GMI agree to, and
hereby do, indemnify and hold Enterprise harmless against and in respect of
any loss, cost, expense, claim, liability, deficiency, judgment or damage,
including reasonable legal fees and expenses (individually, a "Enterprise
Loss"; and collectively, "Enterprise Losses") incurred by Enterprise as a
result of any inaccuracy in or breach of a representation or warranty of
SSI or GMI contained in this Agreement.
5.2 PROCEDURE FOR INDEMNIFICATION.
(a) In the event that SSI, GMI or Enterprise shall incur or
suffer a GMI Loss or a Enterprise Loss, respectively, in respect of
which indemnification may be sought by such party pursuant to the
provisions of this Article 5, such party shall assert a claim for
indemnification by written notice (a "Notice") to the other party
briefly stating the nature and basis of such claim. In the case of
Losses arising by reason of any third-party claim, the Notice shall be
given within 30 days of the filing or other written assertion of any
such claim against the first party.
(b) In the case of third-party claims for which indemnification
is sought, the indemnifying party shall have the option (i) to conduct
any proceedings or negotiations in connection therewith, (ii) to take
all other steps to settle or defend any such claim and (iii)
- 16 -
to employ counsel to contest any such claim or liability in the name
of the indemnified party or otherwise; provided, however, that the
indemnifying party shall notify the indemnified party of its
intentions with respect to any of the foregoing within 30 days after
receipt of notice of any such claims. In any event, the indemnified
party shall be entitled to participate at its own expense with its own
counsel in any proceedings relating to any third-party claim,
including without limitation settlement negotiations. The parties
agree to cooperate reasonably with each other in connection with the
defense of any claim. Enterprise will have no liability to SSI or GMI
for any breach of representations and warranties based on (i)
modification of the Software or (ii) the combination or use of the
Software with software or any equipment or process not furnished by
Enterprise if such infringement would have been avoided by the use of
the Software alone.
5.3 SOLE REMEDY. The provisions of this Article 5 and Section 8.2
constitute the sole remedy of a party for any breach of a representation or
warranty by the other party.
5.4 GUARANTY OF GMC AND GMI. Each of GMC and GMI shall guarantee the
performance by SSI of the representations, warranties, covenants and
obligations set forth in Sections 1.4(b), 1.4(c), 1.4(d), 1.4(e), 2, 4.3,
4.9, 4.10, 4.11 and 5.1.
Section 6. CONDITIONS TO CLOSING. The obligations of SSI and GMI under
Section 1 are subject to the fulfillment, on or before the Closing Date, of each
of the following conditions, unless SSI and GMI agree in writing to waive such
conditions:
6.1 ASSIGNMENT OF ASSUMED CONTRACTS. Enterprise shall have caused the
Assumed Contracts to be assigned to SSI and shall deliver to SSI evidence
of such assignments, in form and substance satisfactory to SSI.
6.2 LIST OF TRANSFERRED ASSETS /ASSUMED LIABILITIES AND EMPLOYEE
NAMES. At the closing, Enterprise shall deliver to SSI a true and complete
list of the Transferred Assets and Assumed Liabilities and an
organizational chart describing the names and titles of all employees of
the Business as of the Closing Date.
6.3 SOURCE CODES. At the closing, Enterprise shall deliver to SSI on
electronic media a complete copy of the source codes for each of the
current versions of the Software.
6.4 OPINION OF ENTERPRISE'S COUNSEL. SSI shall have received from
Enterprise's legal counsel a written opinion, dated as of the Closing Date,
addressed to SSI and satisfactory to SSI's legal counsel.
6.5 BOARD APPROVAL. The Boards of Directors of SSI, GMI and Enterprise
shall have approved this Agreement and the transactions contemplated
hereby. Such approvals shall not have been modified or rescinded.
6.6 POST-CLOSING DELIVERIES. Enterprise shall use its best efforts to
obtain and deliver to SSI, as soon as practicable after the Closing Date,
evidence of consents to assignment of each of the Assumed Contracts
requiring such consent, including, but not limited to the State Farm
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Master Consulting Services Agreement (the "State Farm Agreement"). Until
Enterprise obtains such consents, Enterprise shall promptly remit to SSI
any cash received by Enterprise under each of the Assumed Contracts
requiring consent.
Section 7. NONCOMPETE COVENANT. For a period of five years after the
Closing Date, Enterprise shall not, directly or indirectly, distribute, market,
promote or otherwise provide to any third parties any business that is
competitive with the Business, as such business exists immediately after the
Earn Out Period, except with the prior written consent of SSI. In the event SSI
elects to return the Transferred Assets to Enterprise pursuant to Section
1.4(e), this noncompete covenant will terminate as of the date such return is
complete.
Section 8. GENERAL PROVISIONS.
8.1 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Minnesota, without regard to
its conflicts of law rules.
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8.2 MEDIATION AND ARBITRATION.
(a) If a dispute among the parties relating to this Agreement has
not been resolved by negotiation among the parties, the parties shall
make a good faith attempt to settle such dispute by mediation pursuant
to the provisions of this Section 8.2 before resorting to arbitration,
litigation or any other dispute resolution procedure.
(b) Unless the parties agree otherwise, the mediation shall be
conducted in accordance with the Commercial Mediation Rules of the
American Arbitration Association (the "AAA") then in effect by a
mediator who (i) has the qualifications and experience set forth in
8.2(c) below and, (ii) is selected as provided in Section 8.2(d).
(c) Unless the parties agree otherwise, the mediator shall be a
person with excellent academic and professional credentials who has
had both training and experience as a mediator as a member of the AAA
Mediation Panel or who is a lawyer or retired judge who has mediated
cases for the federal or state courts or a reputable commercial ADR
firm or not-for-profit ADR organization.
(d) Either party (the "Initiating Party") may initiate mediation
of the dispute by giving the other party (the "Recipient Party")
written notice (a "Mediation Notice") setting forth a list of the
names and resumes of qualifications and experience of three impartial
persons who the Initiating Party believes would be qualified as a
mediator pursuant to the provisions of Section 8.2(c) hereof. Within
15 days after the delivery of the Mediation Notice, the Recipient
Party may designate a person to serve as the mediator from among the
three persons listed by the Initiating Party in the Mediation Notice
(in which event such designated person shall be the mediator). If none
of the persons listed in the Mediation Notice is designated by the
Recipient Party to serve as the mediator, the Counter-Notice should
set forth a list of the names and resumes of three impartial persons
who the Recipient Party believes would be qualified as a mediator
pursuant to the provisions hereof. Within 10 days after the delivery
of the Counter-Notice, the Initiating Party may designate a person to
serve as the Mediator from among the three persons listed by the
Recipient Party in the Counter-Notice (in which event such designated
person shall be the mediator). If the parties cannot agree on a
mediator from the three impartial nominees submitted by each party,
each party shall strike two names from the other party's list, and the
two remaining persons on both lists will jointly select as the
mediator any person who has the qualifications and experience set
forth in Section 8.2(c) hereof. If they are unable to agree, then the
mediator will be selected by the President of the AAA or his regional
designee.
(e) Within 30 days after the Mediator has been selected as
provided above, both parties and their respective attorneys shall meet
with the Mediator for one mediation session of at least four hours, it
being agreed that each party representative attending such mediation
session shall be a Senior Party Representative with authority to
settle the Dispute. If the dispute cannot be settled at such mediation
session or at any mutually agreed continuation thereof, either party
may give the other and the Mediator a written
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notice declaring the mediation process at an end, in which event
either party shall be free to pursue such remedies as it may elect.
(f) All conferences and discussions which occur in connection
with mediation conducted pursuant to this Agreement shall be deemed
settlement discussions, and nothing said or disclosed, nor any
document produced, which is not otherwise independently discoverable
shall be offered or for any other purpose in any current or future
arbitration or litigation.
(g) The parties will endeavor to amicably resolve any dispute
controversy or claim arising out of or related to this Agreement, or
breach thereof. In the event, however, that any dispute, controversy
or claim cannot be amicably resolved, it shall be finally settled by
binding arbitration. Such arbitration shall be conducted by the
American Arbitration Association in Minneapolis, Minnesota, under that
organization's commercial arbitration rules. The expense of
arbitration will be borne by the losing party. The parties further
agree that the award of the arbitrator shall be the final, sole, and
exclusive remedy between them regarding any claims, counterclaims,
issues, or accounting presented or pled to the arbitrator; that is
shall be nonappealable; that any monetary award shall be promptly
paid, free of any tax, deduction or offsets; and that any costs, fees,
or taxes incident to enforcing the award shall be charged against the
party resisting such enforcement. Judgment upon the award of the
arbitrator may be entered and enforced in any court having
jurisdiction thereof.
(h) All reasonable attorney's fees and costs incurred by the
prevailing party in any mediation or arbitration pursuant to this
Agreement, and the cost of such arbitration, shall be paid by the
other party to the arbitration within five days after receipt of
written demand therefor from the prevailing party following the
rendition of the written decision of the mediator or arbitrator, or as
otherwise ordered by the mediator or arbitrator. On the application of
such prevailing party before or after the initial decision of the
mediator or arbitrator, and proof of its attorneys' fees and costs,
the mediator or arbitrator shall order the other party to the
mediation or arbitration to make the payments provided for in the
preceding sentence; provided, however, that if neither party prevails
entirely, the mediator or arbitrator may, in his or her sole
discretion, assess any part of such attorneys' fees and costs against
a specified party.
(i) Neither party, nor the mediator or arbitrator shall disclose
the existence, content or results of any mediation or arbitration
hereunder without the prior written consent of both parties.
(j) Except as provided in Section 8.2(k), mediation or
arbitration shall be the exclusive methods available for resolution of
controversies and claims described in this Section 8.2, and the
parties stipulate that the provisions hereof shall be a complete
defense to any suit, action or proceeding in any court or before any
administrator or arbitrator with respect to any such controversy or
claim. The provisions of this Section 8.2 shall survive the
termination or expiration of this Agreement.
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(k) Notwithstanding the terms of this Section 8.2 or any
provision to the contrary in the Arbitration Rules, at any time before
and after arbitration is initiated pursuant to the Arbitration Rules,
the parties shall be free to apply to any court of competent
jurisdiction for interim or conservatory measures (including temporary
conservatory injunctions). The parties acknowledge and agree that any
such action by a party shall not be deemed to be a breach of such
party's obligation to arbitrate all disputes under this Section 8.2 or
infringe upon the powers of any arbitrator. The parties hereby consent
to the non-exclusive jurisdiction of the U.S. District Court for the
District of Minnesota.
8.3 SUCCESSORS AND ASSIGNS. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors
and administrators of the parties hereto.
8.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement, including the
Exhibits hereto which are hereby incorporated by reference, constitutes the
full and entire understanding and agreement between the parties with regard
to the subjects hereof and thereof, and no party shall be liable or bound
to any other party in any manner by any representations, warranties or
covenants except as specifically set forth herein or therein. Except as
expressly provided herein, neither this Agreement nor any term hereof may
be amended, waived, discharged or terminated other than by a written
instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
8.5 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally (including by
commercial delivery service) or mailed by registered or certified mail
(return receipt requested) or sent via facsimile transmission (with
acknowledgment of complete transmission) to the parties at the following
addresses (or at such other address for a party as shall be specified by
like notice):
IF TO ENTERPRISE, TO: WITH A COPY TO:
Enterprise Solutions, Inc. Xxxxxxxx & Shohl, P.L.L.
0000 Xxxxxxxxx Xxxxxx, Xxxxx 000 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000-0000 Xxxxxxxx, XX 00000
Attention: Xxxxx Xxxx Attention: Xxxxx X. XxXxxxx
Facsimile No.: 408/557-6510 Facsimile No.: 614/628-6890
IF TO SSI OR GMI, TO: WITH A COPY TO:
Global MAINTECH, Inc. Xxxxxx & Whitney LLP
0000 Xxxx Xxxx Xxxxxxx 000 Xxxxx Xxxxx Xxxxxx
Xxxx Xxxxxxx, Xxxxxxxxx 00000 Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx X. XxXxxxxxx Attention: Xxxxxxx X. Xxxxxx
Facsimile No.: 612/944-3311 Facsimile No.: 612/340-8738
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Notice shall be deemed given upon personal delivery thereof or, if sent
other than by personal delivery, at the earlier of its receipt or 72 hours
after deposit postage prepaid in the U.S. mail or 72 hours after the
complete transmission thereof by facsimile transmission, as applicable.
8.6 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any party hereunder upon any breach or default
of SSI, GMI or Enterprise under this Agreement shall impair any such right,
power or remedy of such party, nor shall it be construed to be a waiver of
any such breach or default, or an acquiescence therein, or of or in any
similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any party of any breach or
default under this Agreement, or any waiver on the part of any party of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to
any such holder, shall be cumulative and not alternative.
8.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties
actually executing such counterparts and all of which together shall
constitute one instrument.
8.8 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and
effect without said provision, provided, however, that no such severability
shall be effective if it materially changes the economic benefit of this
Agreement to any party.
8.9 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and shall not be considered in
construing or interpreting this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first set forth above.
SINGLEPOINT SYSTEMS, INC.
By /s/ XXXXX XXXXXX
--------------------------------
Its Chief Financial Officer
GLOBAL MAINTECH, INC.
By /s/ XXXXX XXXXXX
--------------------------------
Its Chief Financial Officer
GLOBAL MAINTECH CORPORATION
By /s/ XXXXX XXXXXX
--------------------------------
Its Chief Financial Officer
ENTERPRISE SOLUTIONS, INC.
By /s/ XXXXXXX XXXXX XXXX
--------------------------------
Its President
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