EXECUTION VERSION
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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
VASCO DATA SECURITY INTERNATIONAL, INC.,
AS SELLER
AND
SECURED SERVICES, INC.
AS PURCHASER
DATED JULY 8, 2003
EFFECTIVE JULY 1, 2003
TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS.......................................................1
1.1. 3M Contract.....................................................1
1.2. 3M Revenue Share................................................1
1.3. Accounts Receivable.............................................1
1.4. Accredited Investor.............................................1
1.5. Affiliate.......................................................1
1.6. Assignment and Assumption Agreement.............................2
1.7. Assumed Liabilities.............................................2
1.8. Audit Right.....................................................2
1.9. Base Purchase Price.............................................2
1.10. Xxxx of Sale....................................................2
1.11. Binary Code.....................................................2
1.12. Books and Records...............................................2
1.13. Business Day....................................................2
1.14. Business........................................................2
1.15. Claim...........................................................2
1.16. Claim Notice....................................................2
1.17. Closing.........................................................2
1.18. Closing Date....................................................3
1.19. Code............................................................3
1.20. Collateral Documents............................................3
1.21. Computer Program................................................3
1.22. Consents........................................................3
1.23. Contemplated Transactions.......................................3
1.24. Contracts.......................................................3
1.25. Copyrights......................................................3
1.26. Default.........................................................3
1.27. Documentation...................................................3
1.28. DOD Integic Consulting Services.................................4
1.29. Dolfin..........................................................4
1.30. Dolfin Agreement................................................4
1.31. Employment Agreement............................................4
1.32. Encumbrances....................................................4
1.33. Escrow Agreement................................................4
1.34. Exchange Act....................................................4
1.35. Excluded Assets.................................................4
1.36. Excluded Obligations............................................4
1.37. GAAP............................................................4
1.38. Goodwill........................................................4
1.39. Governmental Consent............................................4
1.40. Governmental Entity.............................................4
1.41. Indebtedness....................................................5
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1.42. Indemnified Party...............................................5
1.43. Indemnifying Party..............................................5
1.44. Indemnity Notice................................................5
1.45. Intellectual Property...........................................5
1.46. IRS.............................................................5
1.47. Knowledge.......................................................5
1.48. Law.............................................................5
1.49. Lease...........................................................5
1.50. Legal Proceeding................................................6
1.51. Liabilities.....................................................6
1.52. Licenses........................................................6
1.53. Losses..........................................................6
1.54. Material Adverse Effect.........................................6
1.55. Material Contract...............................................6
1.56. Net Revenue.....................................................6
1.57. Object Code.....................................................6
1.58. Order...........................................................6
1.59. Organizational Documents........................................6
1.60. Patents.........................................................6
1.61. Permits.........................................................7
1.62. Person..........................................................7
1.63. Personnel.......................................................7
1.64. Post-Closing Integic Revenue Share..............................7
1.65. Pre-Closing Integic Revenue Share...............................7
1.66. Prepaid Expenses................................................7
1.67. Prepaid Expense Adjustment Amount...............................7
1.68. Prepaid Receivables Amount......................................7
1.69. Promissory Note.................................................7
1.70. Proposed Reorganization.........................................7
1.71. Proposed Reorganization Agreement...............................7
1.72. Proprietary Information.........................................7
1.73. Purchase Price..................................................8
1.74. Purchased Assets................................................8
1.75. Purchased Contracts.............................................8
1.76. Purchased Software..............................................8
1.77. Retained Liabilities............................................8
1.78. SEC.............................................................8
1.79. Securities Act..................................................8
1.80. Security Agreement..............................................8
1.81. Software........................................................8
1.82. Source Code.....................................................8
1.83. SSGI............................................................8
1.84. SSI Business Plan...............................................8
1.85. SSI Common Stock................................................8
1.86. SSI Preferred Stock.............................................9
1.87. SSI Preferred Stock Certificates................................9
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1.88. Subsidiary......................................................9
1.89. System Documentation............................................9
1.90. Tangible Personal Property......................................9
1.91. Tax Returns.....................................................9
1.92. Taxes...........................................................9
1.93. Third Party.....................................................9
1.94. Threshold Amount................................................9
1.95. Trademarks......................................................9
1.96. Underpayment Amount.............................................9
1.97. User Documentation..............................................9
1.98. VACMAN Enterprise Trademark....................................10
1.99. VACMAN Intellectual Property...................................10
ARTICLE 2 SALE AND PURCHASE OF ASSETS;
CONSIDERATION; ASSUMPTION OF LIABILITIES.......................10
2.1. Agreement to Sell and Purchase Assets..........................10
2.2. Excluded Assets................................................10
2.3. Consideration and Payment......................................11
2.4. Base Purchase Price............................................11
2.5. Post-Closing 3M Revenue Share..................................11
2.6. Post-Closing Integic Revenue Share.............................11
2.7. Allocation of Purchase Price...................................11
2.8. Assumption of Liabilities......................................12
2.9. Security Agreement.............................................12
2.10. Trademark License..............................................12
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF VASCO..........................13
3.1. Organization...................................................13
3.2. Authorization..................................................13
3.3. Conflict with other Instruments; Absence of Restrictions.......13
3.4. Title to Properties; Adequacy of Properties....................14
3.5. Compliance with Law............................................14
3.6. Government and Third-Party Approvals...........................14
3.7. Legal Proceedings..............................................14
3.8. Contracts and Commitments......................................14
3.9. Absence of Certain Developments................................14
3.10. Intellectual Property..........................................15
3.11. Corporate Records..............................................15
3.12. Statements and Other Documents Not Misleading..................15
3.13. Effective Date of Warranties, Representations and Covenants....16
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SSI............................16
4.1. Organization...................................................16
4.2. Authorization for Agreement....................................16
4.3. Conflict with other Instruments; Absence of Restrictions.......16
4.4. Government and Third-Party Approvals...........................17
4.5. Legal Proceedings..............................................17
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4.6. SSI Stock......................................................17
4.7. Capitalization.................................................17
4.8. Tax Returns....................................................17
4.9. Undisclosed Liabilities........................................17
4.10. Books and Records..............................................17
4.11. Access to Information Regarding VASCO..........................17
4.12. Statements and Other Documents Not Misleading..................18
4.13. SSI Business Plan..............................................18
4.14. Additional Investment..........................................18
4.15. Effective Date of Warranties, Representations and Covenants....18
ARTICLE 5 CLOSING 18
5.1. Closing........................................................18
5.2. Deliveries at Closing..........................................19
5.3. Additional Conditions Precedent................................21
5.4. Financial Statements...........................................21
5.5. Expenses.......................................................22
5.6. Subsequent Documentation.......................................22
5.7. Third Party Consents...........................................22
5.8. Employment, Compensation and Employee Benefits From
and After Closing...........................................22
5.9. Severance......................................................23
5.10. Unemployment Compensation......................................23
5.11. Escrow Agreement...............................................23
5.12. Prepaid Receivables Amount and Prepaid Expense Amount;
Offset Against Promissory Note................................23
ARTICLE 6 CONFIDENTIALITY AND COVENANT NOT TO COMPETE......................24
6.1. Confidentiality................................................24
6.2. Return of Proprietary Information..............................24
6.3. Covenant Not To Compete........................................24
ARTICLE 7 INDEMNIFICATION..................................................25
7.1. Survival.......................................................25
7.2. VASCO's Indemnification........................................25
7.3. SSI's Indemnification..........................................26
7.4. Payment; Procedure for Indemnification.........................26
7.5. Limitations of Indemnity.......................................28
7.6. Characterization of Indemnity Payments.........................29
ARTICLE 8 POST-CLOSING COVENANTS...........................................29
8.1. Further Cooperation............................................29
8.2. Post-Closing Receivables.......................................29
8.3. Post-Closing Excluded Assets...................................29
8.4. Post-Closing Expenses and Liabilities..........................29
8.5. Public Announcements...........................................30
8.6. Audit Right....................................................30
8.7. SSI Stock......................................................30
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ARTICLE 9 TAXES RELATED TO PURCHASED ASSETS................................30
ARTICLE 10 SECURITIES LAWS REPRESENTATIONS.................................31
10.1. Compliance with Law............................................31
10.2. Economic Risk; Sophistication..................................31
10.3. Accreditation..................................................31
10.4. SSI Common Stock; Rule 144(k)..................................31
ARTICLE 11 MISCELLANEOUS...................................................32
11.1. Notices........................................................32
11.2. No Third Party Beneficiaries...................................33
11.3. Schedules and Exhibits.........................................33
11.4. Expenses.......................................................33
11.5. Further Assurances.............................................33
11.6. Entire Agreement; Amendment....................................33
11.7. Section and Paragraph Titles...................................33
11.8. Binding Effect.................................................33
11.9. Counterparts...................................................34
11.10. Severability...................................................34
11.11. Governing Law..................................................34
11.12. WAIVER OF JURY TRIAL...........................................34
11.13. No Tax Representations.........................................34
11.14. Waiver.........................................................34
11.15. Default........................................................34
11.16. Relationship of the Parties....................................34
11.17. Interpretation.................................................35
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "AGREEMENT") is made this
8th day of July, 2003 (the "CLOSING DATE"), and effective as of July 1, 2003
(the "EFFECTIVE DATE"), among SECURED SERVICES, INC., a Delaware corporation
("SSI"); and VASCO Data Security International, Inc., a Delaware corporation
("VASCO"). Each of SSI and VASCO are sometimes hereinafter referred to
individually, as a "PARTY" or collective as "PARTIES."
RECITALS
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WHEREAS, VASCO owns the Purchased Assets and employs the
Personnel (as such terms are defined herein);
WHEREAS, VASCO desires to sell to SSI and SSI desires to
purchase from VASCO the Purchased Assets in accordance with the provisions set
forth in this Agreement;
WHEREAS, VASCO desires that the responsibility of employing
the Personnel be transferred to SSI and SSI desires to assume the employment
responsibilities with respect to such Personnel in accordance with the
provisions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants, promises and agreements contained herein, the parties,
intending to be legally bound, hereby agree as follows:
ARTICLE 1
DEFINITIONS
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As used in this Agreement, the following terms shall have the
meanings herein specified, unless the context otherwise requires:
1.1. 3M Contract shall mean that certain Contract existing as
of the date of this Agreement by and between 3M and VASCO and which is among the
Purchased Contracts.
1.2. 3M Revenue Share shall have the meaning assigned to it in
Section 2.5.
1.3. Accounts Receivable shall mean, with respect to the
Business, all trade accounts receivable, and all notes receivable or evidences
of Indebtedness payable to the operator of the Business.
1.4. Accredited Investor shall have the meaning given to that
term in Regulation D as promulgated by the SEC under the Securities Act.
1.5. Affiliate shall mean: (i) any Person that directly or
indirectly through one or more intermediaries controls, is controlled by or
under common control with the Person specified; (ii) any director, officer or
Subsidiary of the Person specified; and (iii) any spouse, parent, child,
sibling, mother-in-law, father-in law, son-in-law, daughter-in-law,
brother-in-law or sister-in-law of the Person specified. The term "control"
(including, with correlative meaning, the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to elect a majority of the
board of directors (or other governing body) or to direct or cause the direction
of the management and policies of such Person, whether through the ownership of
voting securities, by contract or otherwise. In any event and without limiting
the generality of the foregoing, any Person owning 10% or more of the voting
securities of another Person shall be deemed to control that Person.
1.6. Assignment and Assumption Agreement shall have the
meaning assigned to it in Section 5.2.1(b).
1.7. Assumed Liabilities shall have the meaning assigned to it
in Section 2.8.
1.8. Audit Right shall have the meaning assigned to it in
Section 8.5.
1.9. Base Purchase Price shall have the meaning assigned to it
in Section 2.3.
1.10. Xxxx of Sale shall have the meaning assigned to it in
Section 5.2.1(c).
1.11. Binary Code shall mean Computer Program code that loads
and executes without further processing by a software compiler or linker, or
that results when Source Code is processed by a software compiler.
1.12. Books and Records shall mean all records, documents,
lists and files, relating to the Purchased Assets, the Business and the
Personnel, including, without limitation, executed originals (or copies of
executed originals when executed originals are not available) of all Tax
Returns, Contracts, purchase orders, sales orders, price lists, lists of
accounts, customers, suppliers, employees, contractors, consultants and other
personnel, shipping records, all product, business and marketing plans, sales
and product brochures and catalogs and other sales literature and materials,
historical sales and commissions data and all books, ledgers, files and business
records relating to the Purchased Assets, the Business and the Personnel,
whether in hard copy, electronic form or otherwise.
1.13. Business Day shall mean any calendar day which is not a
Saturday, Sunday or public holiday under the laws of the State of Delaware.
1.14. Business shall mean the discrete business unit of VASCO
known as VACMAN Enterprise (f/k/a SnareWorks) charged with the support and
maintenance of the Purchased Software.
1.15. Claim shall mean any written or oral demand, claim,
complaint, suit, action, cause of action, investigation, proceeding or notice by
any Person alleging actual or potential Liability for any Loss, or for any
Default under any Law, Contract, License or Permit.
1.16. Claim Notice shall have the meaning assigned to it in
Section 7.4.2(a).
1.17. Closing shall mean the consummation of the Contemplated
Transactions on the Closing Date, effective as of the Effective Date, pursuant
to Article 5.
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1.18. Closing Date shall have the meaning set forth in the
introductory paragraph hereof.
1.19. Code shall mean the Internal Revenue Code of 1986 and
the rules and regulations promulgated thereunder, as amended and supplemented
from time to time, or any successors thereto.
1.20. Collateral Documents shall mean any documents or
Contracts, other than this Agreement, that relate to the Contemplated
Transactions.
1.21. Computer Program shall mean a list of steps or list of
statements and/or instructions which are capable when incorporated in a
machine-readable medium of causing a computer to indicate, perform or achieve
particular functions, tasks or results.
1.22. Consents shall mean any consent, waiver, approval,
authorization, certification or exemption required from any Person or under any
Contract or Law, as applicable.
1.23. Contemplated Transactions shall mean the sale and
purchase of the Purchased Assets hereunder and all of the transactions ancillary
thereto which are referred to in this Agreement or any of the Collateral
Documents.
1.24. Contracts shall mean, with respect to any Person, all
contracts, Leases, agreements, loan documents, instruments, Licenses,
undertakings and other commitments, whether written or oral, to which such
Person is, or such Person's properties, operations, business or assets are,
bound.
1.25. Copyrights shall mean registered copyrights, copyright
applications and unregistered copyrights.
1.26. Default shall mean, with respect to a Contract, Permit,
License, Law, Organizational Document or other instrument or agreement, (a) a
violation, breach or default, (b) the occurrence of an event which with the
passage of time or the giving of notice or both would constitute a violation,
breach or default, or (c) the occurrence of an event that (with or without the
passage of time or the giving of notice or both) would give rise to a right of
damages, specific performance, termination, renegotiation or acceleration
(including the acceleration of payment).
1.27. Documentation shall mean all documentation, whether in
written or electronic format, in VASCO's possession, custody or control
pertaining to the Software, including, the System Documentation and User
Documentation for the Software, any marketing materials, product specifications,
flow charts, diagrams, algorithms, other design documentation, training manuals,
bug lists, and any electronic machine-readable and Source Code versions of the
same, any and all Software-related answer books or other records of customer
service issues and/or responses, and any and all written notes, plans and other
documentation describing problems with respect to the Software and proposed and
implemented solutions therefor, written proposals with respect to future
development of the Software, or other matters related to the use, operation,
development, or enhancement of the Software, if any.
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1.28. DOD Integic Consulting Services shall mean any and all
services, employing the Purchased Assets, provided to the U.S. Department of
Defense with respect to the CHCS II Healthcare Application.
1.29. Dolfin shall have the meaning assigned to it in Section
5.3.2.
1.30. Dolfin Agreement shall have the meaning assigned to it
in Section 5.3.2.
1.31. Employment Agreement shall have the meaning assigned to
it in Section 5.2.2(e).
1.32. Encumbrances shall mean, with respect to any asset, any
security interests, liens, encumbrances, pledges, mortgages, charges, claims,
conditional or installment sales Contracts, title retention Contracts,
transferability restrictions and other claims or burdens of any nature
whatsoever attached to or adversely affecting such asset.
1.33. Escrow Agreement shall have the meaning assigned to it
in Section 5.11.
1.34. Exchange Act shall mean the Securities Exchange Act of
1934, as amended.
1.35. Excluded Assets shall have the meaning assigned to it in
Section 2.2
1.36. Excluded Obligations shall have the meaning assigned to
it in Section 8.4.
1.37. GAAP shall mean generally accepted accounting principles
in the United States, applied on a basis consistent with past practices and
preceding years and throughout the periods involved.
1.38. Goodwill shall mean (i) the expectation of continued
patronage from customers and new patronage from prospective clients of VASCO,
(ii) the Business as a going concern and all of the goodwill incident to the
Business, and (iii) all Trademarks, trade names, trade dress and similar
intangible indicators of origin related exclusively to the Business.
1.39. Governmental Consent shall mean any and all licenses,
franchises, permits, easements, rights, consents, Orders, approvals, variances,
waivers, filings and other authorizations with, of or from any Governmental
Entity, (a) necessary to consummate the Contemplated Transactions in the manner
contemplated hereby, or (b) otherwise relating to (i) any Contract or other
instrument with any Governmental Entity and to which the subject Person, its
subsidiaries or any of its stockholders is a party (or by which any of their
respective properties or assets is bound or affected), or (ii) any Permit,
including the transfer of any such Contract, Permit or other instrument in
accordance with the terms.
1.40. Governmental Entity shall mean any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the government of the United States or of any foreign country, any state or any
political subdivision of any such government (whether state, provincial, county,
city, municipal or otherwise).
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1.41. Indebtedness of any Person shall mean all obligations of
such Person (a) for borrowed money, including related fees and expenses, (b)
evidenced by notes, bonds, debentures or similar instruments, (c) for the
deferred purchase price of goods or services (other than trade payables or
accruals incurred in the ordinary course of business), (d) under capital leases
or (e) in the nature of guarantees of the obligations described in clauses (a)
through (d) above of any other Person and, as it relates to the Company, shall
include all indebtedness and other amounts owed or to be distributed to either
Individual or their respective Affiliates.
1.42. Indemnified Party shall have the meaning assigned to it
in Section 7.4.1.
1.43. Indemnifying Party shall have the meaning assigned to it
in Section 7.4.1.
1.44. Indemnity Notice shall have the meaning assigned to it
in Section 7.4.1.
1.45. Intellectual Property shall mean, collectively, (a) all
inventions (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all Patents, (b) all Trademarks, trade
dress, logos, trade names, fictitious names, brand names, brand marks, domain
names and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all Copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all Software, (g) all other proprietary
rights, and (h) all copies and tangible embodiments thereof (in whatever form or
medium).
1.46. IRS shall mean the United States Internal Revenue
Service.
1.47. Knowledge, and all variations thereof, shall mean with
respect to any representation, warranty or statement of any party in this
Agreement that is qualified by such party's "knowledge," the actual knowledge of
such party or, in the case of an entity, the actual knowledge of any officer or
director of such entity.
1.48. Law shall mean, with respect to any Person, any
applicable law, statute, treaty, ordinance, rule, regulation, Order,
pronouncement having the effect of law, or other requirement of any Governmental
Entity, including, without limitation, the Foreign Corrupt Practices Act of
1977, and those covering safety, health, transportation, bribery, record
keeping, zoning, employment, tax, anti-discrimination, antitrust, wage and hour
and price and wage control matters, to which, in each of the foregoing cases,
such Person is, or any of such Person's properties, operations, business or
assets are, bound or subject.
1.49. Lease shall mean any lease, agreement (whether verbal or
written) or tenancy for property or assets, together with all subleases,
amendments, extensions, addenda, assignments, waivers and all other rights of
use and/or occupancy, and Contracts and documents relating to any of the
foregoing.
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1.50. Legal Proceeding shall mean any Claim or any legal,
administrative or other similar proceeding by or before any Governmental Entity
or arbitration or alternative dispute resolution panel.
1.51. Liabilities and words of similar import include, without
limitation, any direct or indirect indebtedness, guaranty, endorsement, claim,
loss, damage, deficiency, cost, expense, obligation or responsibility, fixed or
unfixed, known or unknown, asserted or unasserted, xxxxxx or inchoate,
liquidated or unliquidated, secured or unsecured.
1.52. Licenses shall mean, with respect to any Person, all
licenses, permits, authorizations, approvals, registrations, franchises, rights,
variances (including zoning variances), easements, rights of way, and similar
consents or certificates granted or issued by any other Person, other than a
Governmental Entity, relating to the business of the subject Person.
1.53. Losses shall mean, with respect to any event or
circumstance, any and all Liabilities, Encumbrances, penalties, fines,
settlements, and causes of action, including, without limitation, any diminution
in value of any real or personal property and reasonable attorneys', experts'
and accountants' fees, expenses and disbursements and court costs in connection
with any of the foregoing incurred by a Person in connection with such event or
circumstance.
1.54. Material Adverse Effect shall mean, with respect to any
event or circumstance, an effect caused thereby or resulting therefrom that is
or would be materially adverse as to, or in respect of, the condition (financial
or otherwise), business, results of operation or prospects of a specified Person
or Persons when taken as a whole.
1.55. Material Contract shall have the meaning assigned to it
in Section 3.8.
1.56. Net Revenue shall mean gross collections less applicable
sales Tax.
1.57. Object Code shall mean the fully compiled or assembled
series of Computer Programs in machine language in either printed form or as
stored software media.
1.58. Order shall mean any judgment, order, writ, decree,
injunction, award, ruling or other determination whatsoever of any Governmental
Entity or any other entity or body (including, without limitation, any
arbitration or similar panel) whose finding, ruling or holding is legally
binding or is enforceable as a matter of right (in any case, whether preliminary
or final).
1.59. Organizational Documents shall mean the articles or
certificate of incorporation, bylaws, operating agreement, certificate of
partnership or other governing or constituent documents of a Person.
1.60. Patents shall mean all letters patent and pending
applications for patents of the United States and all countries foreign thereto,
including regional patents, certificates of invention and utility models, rights
of license or otherwise to or under letters patent, certificates of intention
and utility models which have been opened for public inspection and all
reissues, divisions, continuations and extensions thereof.
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1.61. Permits shall mean all licenses, permits, certificates
of authority, authorizations, approvals, registrations, franchises, rights,
Orders, qualifications and similar rights or approvals granted or issued by any
Governmental Entity relating to either the Purchased Assets or the Business or
both.
1.62. Person shall mean any natural person, corporation,
general partnership, limited partnership, limited liability company,
proprietorship, joint venture, trust, association, union, entity, or other form
of business organization or any Governmental Entity whatsoever.
1.63. Personnel shall mean the individuals listed on Exhibit A
attached hereto.
1.64. Post-Closing Integic Revenue Share shall have the
meaning assigned to it in Section 2.6.
1.65. Pre-Closing Integic Revenue Share shall have the meaning
assigned to it in Section 2.6.
1.66. Prepaid Expenses shall mean, as of any date of
determination, payments made by VASCO with respect to the Business, that
constitute prepaid expenses of the Business in accordance with GAAP.
1.67. Prepaid Expense Adjustment Amount shall mean the
aggregate amount of the specified Prepaid Expenses set forth on Schedule 2.1.4.
1.68. Prepaid Receivables Amount shall mean the aggregate
amount of those Accounts Receivable attributable to the Purchased Assets for the
period after the Effective Date but received by VASCO prior to the Closing Date
as full or partial prepayment for services to be provided with respect to the
Purchased Assets.
1.69. Promissory Note shall have the meaning assigned to it in
Section 2.4.2.
1.70. Proposed Reorganization shall have the meaning assigned
to it in Section 5.3.3.
1.71. Proposed Reorganization Agreement shall have the meaning
assigned to it in Section 5.3.3.
1.72. Proprietary Information shall mean (i) with respect to
any party to this Agreement or any Affiliate of such party, all financial,
technical, commercial or other information, including but not limited to
information, materials, documents, customer lists, financial reports, business
plans and marketing data that relate to the business, strategies or operations
of the parties hereto, disclosed or otherwise made available by such party or
such Affiliate to another party or affiliate (the "RECIPIENT") in connection
with the transactions contemplated by this Agreement and (ii) each of the terms,
conditions and other provisions contained in this Agreement and in the
agreements or documents to be delivered pursuant to this Agreement.
Notwithstanding the preceding sentence, the definition of Proprietary
Information shall not include any information that (i) is in the public domain
at the time of disclosure to the Recipient or becomes part of the public domain
after such disclosure through no fault of the
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Recipient, (ii) is lawfully possessed in writing by the Recipient at the time of
disclosure to such Recipient, or (iii) is disclosed to a party by any Person
other than a party to this Agreement; provided, that the party to whom such
disclosure has been made does not have actual knowledge that such Person is
prohibited from disclosing such information (either by reason of contractual, or
legal or fiduciary duty or obligation). For the purposes hereof, public domain
shall not include disclosure of information, except as otherwise provided
herein, to any other person in connection with the transactions contemplated
hereby.
1.73. Purchase Price shall have the meaning assigned to it in
Section 2.3.
1.74. Purchased Assets shall have the meaning assigned to it
in Section 2.1.
1.75. Purchased Contracts shall mean those Contracts listed on
Schedule 2.1.2 as part of the Purchased Assets.
1.76. Purchased Software shall mean that Software listed on
Schedule 2.1.1 as part of the Purchased Assets.
1.77. Retained Liabilities shall mean all Liabilities of VASCO
of any nature whatsoever, whether now existing or hereafter arising or incurred,
except for the Assumed Liabilities.
1.78. SEC shall mean the Securities and Exchange Commission.
1.79. Securities Act shall mean the Securities Act of 1933, or
any successors thereto, and the rules and regulations promulgated thereunder, as
amended and supplemented from time to time.
1.80. Security Agreement shall have the meaning assigned to it
in Section 2.9.
1.81. Software shall mean all Computer Programs (including
related Documentation) related to the Business and set forth on the Schedule of
VACMAN Intellectual Property, attached hereto as Schedule 2.1.1, and all
modifications, customizations, enhancements and updates thereof (including
foreign language versions) contained in subsequent "versions" or "releases,"
including, without limitation, the protocols, all data bases, compilations, tool
sets, work benches, compilers, decompilers or other intangible property that are
expressed in Object Code, and shall consist of the Source Code, Binary Code and
Object Code therefor; provided, however, that "Software" shall not include
non-copyrightable ideas or principles expressed therein.
1.82. Source Code shall mean the Computer Programs in human
readable form.
1.83. SSGI shall mean Southern Software Group, Inc., a
Delaware corporation.
1.84. SSI Business Plan shall have the meaning assigned to it
in Section 4.12.
1.85. SSI Common Stock shall mean the common stock, par value
$0.001 per share, of SSI.
8
1.86. SSI Preferred Stock shall mean the Series A Preferred
Stock, par value $0.001 per share, of SSI.
1.87. SSI Preferred Stock Certificates shall have the meaning
assigned to it in Section 2.4.1.
1.88. Subsidiary means any entity with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the voting stock
or otherwise has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
1.89. System Documentation shall mean documentation, however
recorded, other than Source Code, which documents collectively the design and
details of a particular software program and provides information to enable a
reasonably knowledgeable computer programmer to make enhancements, revisions and
modifications.
1.90. Tangible Personal Property shall mean, when used with
respect to any Person, any and all of the following: equipment, machinery,
furniture, leasehold improvements, office supplies, trade fixtures, and other
tangible personal property, used or intended for use by such Person in the
conduct of such Person's business.
1.91. Tax Returns shall mean all returns, reports, claims for
refunds or other information required or permitted to be supplied to or filed
with any Governmental Entity in connection with Taxes (including, without
limitation, information returns and declarations of estimated tax).
1.92. Taxes shall mean (i) all taxes, charges, fees, levies or
other assessments including, without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, transfer, franchise, profits, payroll,
employment, social security, unemployment, excise, estimated, stamp, occupancy,
occupation, property or other similar taxes, including any interest or penalties
thereon, and additions to tax or additional amounts imposed by any federal,
state, local or foreign Governmental Entity, domestic or foreign (a "TAXING
AUTHORITY") or (ii) all liability for the payment of any taxes, interest,
penalty, addition to tax or like additional amount resulting from the
application of Treasury Regulation ss. 1.1502-6 or comparable Law.
1.93. Third Party shall mean any Person other than VASCO, SSI
or an Affiliate of either of the foregoing.
1.94. Threshold Amount shall have the meaning assigned to it
in Section 7.5.1.
1.95. Trademarks shall mean registered trademarks, registered
service marks, trademark and service xxxx applications, and unregistered
trademarks and service marks.
1.96. Underpayment Amount shall have the meaning assigned to
it in Section 8.5.
1.97. User Documentation shall mean any documentation, however
recorded, intended for instruction or reference in use of any Software.
9
1.98. VACMAN Enterprise Trademark shall mean the "VACMAN
Enterprise" trademark of VASCO, including all proprietary rights therein and
goodwill associated therewith.
1.99. VACMAN Intellectual Property shall have the meaning
assigned to it in Section 2.1.1.
ARTICLE 2
SALE AND PURCHASE OF ASSETS;
CONSIDERATION; ASSUMPTION OF LIABILITIES
----------------------------------------
2.1. Agreement to Sell and Purchase Assets. Subject to the
terms and conditions set forth in this Agreement, SSI hereby agrees to purchase
and/or assume and VASCO hereby agrees to sell and/or assign, as applicable, on
the Closing Date and effective as of the Effective Date, all of VASCO's right,
title and interest in and to the following assets (collectively, the "PURCHASED
ASSETS"):
2.1.1. The Intellectual Property of VASCO listed in the
Schedule of VACMAN Intellectual Property, attached hereto as Schedule 2.1.1
(collectively, the "VACMAN INTELLECTUAL PROPERTY"), including, without
limitation, all Software described thereon (the "PURCHASED SOFTWARE"), all as
existing immediately prior to the Effective Date, to the extent assignable by
VASCO.
2.1.2. VASCO's rights under Contracts which are described in
the Schedule of Purchased Contracts, attached hereto as Schedule 2.1.2 (the
"PURCHASED CONTRACTS"), including, without limitation, the right to provide the
Business to Persons who are parties to such Purchased Contracts.
2.1.3. The physical assets used by VASCO exclusively to
conduct the Business and listed in the Schedule of Physical Assets, attached
hereto as Schedule 2.1.3.
2.1.4. All Prepaid Expenses associated with the Business and
in existence at the Effective Date and listed and fully described in the
Schedule of Prepaid Expenses attached hereto as Schedule 2.1.4.
2.1.5. All of VASCO's interest in all Permits and Licenses
relating to the Business or the Purchased Assets and listed in the Schedule of
Permits and Licenses, attached hereto as Schedule 2.1.5, to the extent
assignable and transferable.
2.2. Excluded Assets. The Purchased Assets shall not include
(i) any asset owned by VASCO which is not used by VASCO exclusively in the
provision of the Business, (ii) any of VASCO's rights or consideration under
this Agreement, (iii) VASCO's physical assets which are not listed on Schedule
2.1.3, (iv) all cash, cash equivalents and marketable securities of VASCO and
(v) all Accounts Receivable or other amounts earned prior to the Closing by
VASCO from any Person in connection with the provision of the Business,
regardless of whether such Accounts Receivable or other amounts are received
prior to the Closing (collectively, the "EXCLUDED ASSETS").
10
2.3. Consideration and Payment. As full consideration for the
Purchased Assets being purchased pursuant to this Agreement, SSI shall pay,
deliver or cause to be paid and delivered to VASCO (in addition to the
assumption of the Assumed Liabilities) the sum of $3,073,093.83 plus the Prepaid
Expense Adjustment Amount (the "BASE PURCHASE PRICE"), in the manner set forth
in Section 2.4, plus the aggregate amount of 3M Revenue Share, Pre-Closing
Integic Revenue Share and Post-Closing Integic Revenue Share payable pursuant to
Sections 2.5 and 2.6 (collectively, the "PURCHASE PRICE").
2.4. Base Purchase Price. The Base Purchase Price shall be
paid as follows:
2.4.1. SSI Preferred Stock. SSI shall issue and deliver to
VASCO at the Closing, effective as of the Effective Date, Two Million
(2,000,000) certificated shares of SSI Preferred Stock, which the parties hereto
agree is valued at $2,000,000 (the "SSI PREFERRED STOCK CERTIFICATES").
2.4.2. Delivery of Promissory Note. SSI shall deliver at the
Closing, effective as of the Effective Date, a senior secured promissory note of
SSI for a principal amount of $1,073,093.83 to and in favor of VASCO in the form
of Exhibit B (the "PROMISSORY NOTE"). The parties hereto agree that the
Promissory Note shall be payable in thirty-six (36) equal and consecutive
monthly payments of $32,645.59, such amount representing the aggregate principal
amount of the Promissory Note plus interest thereon accrued at a rate of six
percent (6%) per annum, compounded monthly.
2.5. Post-Closing 3M Revenue Share. For each month during the
thirty-six (36) months following the Effective Date, SSI shall pay VASCO an
amount equal to forty percent (40%) of the Net Revenue attributable to the 3M
Contract during such month (the "3M REVENUE SHARE"). SSI shall deliver the 3M
Revenue Share to VASCO monthly in arrears within ten (10) days of receipt
thereof.
2.6. Post-Closing Integic Revenue Share. For each month during
the thirty-six (36) months following the Effective Date, SSI shall pay VASCO:
(a) an amount equal to sixty percent (60%) of the Net Revenue attributable to
all DOD Integic Consulting Services provided by SSI during such month, where
such services were first provided by SSI following the Effective Date (the
"POST-CLOSING INTEGIC REVENUE SHARE"); provided, however, that the amount of
Post-Closing Integic Revenue Share payable by SSI to VASCO shall not exceed
$90,000.00 for each successive twelve month period during the thirty-six (36)
months following the Effective Date; and (b) an amount equal to one hundred
percent (100%) of the Net Revenue attributable to all DOD Integic Consulting
Services provided by SSI during such month, where such services are related to a
project initiated by VASCO prior to the Effective Date (the "PRE-CLOSING INTEGIC
REVENUE SHARE"). SSI shall deliver the Pre-Closing and Post-Closing Integic
Revenue Share to VASCO monthly in arrears within ten (10) days of receipt
thereof.
2.7. Allocation of Purchase Price. SSI shall on or before
sixty (60) days after the Effective Date initially determine and send to VASCO a
schedule containing the allocation of the purchase price, as defined in the
Code, among the Purchased Assets as is required by Section 1060 of the Code (the
"ALLOCATION SCHEDULE"), such schedule which will include the allocation set
forth on Schedule 2.7 attached hereto. The Allocation Schedule will be deemed to
11
be accepted by VASCO unless VASCO provides a written notice of disagreement to
SSI within ten (10) Business Days after receipt of the Allocation Schedule. If
VASCO provides such written notice, VASCO and SSI shall proceed to negotiate in
good faith to agree on a mutually acceptable Allocation Schedule. If no mutually
acceptable Allocation Schedule is created within ten (10) business days of SSI's
receipt of the written notice of disagreement, then an independent accountant
mutually satisfactory to VASCO and SSI (the "INDEPENDENT ACCOUNTANT") shall be
engaged to determine the Allocation Schedule taking into account the fair market
value of each of the Purchased Assets. The fees for such determination shall be
split evenly by VASCO and SSI. Such determination by the Independent Accountant,
or the original Allocation Schedule if not objected to by VASCO, or the mutually
acceptable Allocation Schedule shall be binding and conclusive to all parties to
the Agreement and all parties shall file all relevant tax returns consistent
with such final determination, unless otherwise required by applicable law;
provided, however, that if the Purchase Price is adjusted in accordance with
Section 2.5 or 2.6, the Allocation Schedule otherwise determined shall be
adjusted in accordance with the requirements of Section 1060 of the Code.
2.8. Assumption of Liabilities. At the Closing, and effective
as of the Effective Date, SSI will assume only those Liabilities of VASCO
expressly listed on Schedule 2.8, if any (collectively, the "ASSUMED
LIABILITIES"). All other Liabilities of VASCO shall be Retained Liabilities and
shall not be assumed by SSI.
2.9. Security Agreement. SSI's obligations under the
Promissory Note and its obligations under Sections 2.5 and 2.6 shall be secured
by (a) the Purchased Assets and (b) all Accounts Receivables related to the
Purchased Assets and earned after the Effective Date, pursuant to the terms of a
Security Agreement in the form attached hereto as Exhibit C (the "SECURITY
AGREEMENT").
2.10. Trademark License. VASCO hereby grants to SSI, effective
as of the Effective Date and subject to the terms and conditions of this
Agreement, a non-exclusive, non-transferable, fully paid-up license to use,
reproduce and display the VACMAN Enterprise Trademark in connection with the
promotion and marketing of the Business by SSI; provided, however, that VASCO
shall have the right to reasonably monitor SSI's use of the VACMAN Enterprise
Trademark to ensure compliance by SSI with VASCO's standards of quality and
presentation of the VACMAN Enterprise Trademark, and SSI agrees to cooperate
with VASCO in connection therewith. The license granted under this Section 2.10
shall terminate upon the earlier of (a) the one-year anniversary of the
Effective Date or (b) the date on which SSI has completed its anticipated
re-branding of the Purchased Software. SSI covenants and agrees that the VACMAN
Enterprise Trademark is and shall remain the sole and exclusive property of
VASCO, and SSI shall not hold itself out as having any ownership rights with
respect thereto or, except as specifically granted hereunder, any other rights
therein. Any and all goodwill associated with the VACMAN Enterprise Trademark
shall inure directly and exclusively to the benefit of VASCO.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF VASCO
---------------------------------------
As a material inducement for SSI to enter into and perform its
obligations under this Agreement, VASCO hereby represents and warrants to SSI as
follows:
3.1. Organization. VASCO (i) is a corporation duly
incorporated, validly existing and in good standing under the laws of the state
of Delaware, (ii) has the power and authority to own and operate its properties
and assets and to transact its business as currently conducted and (iii) is duly
qualified and authorized to do business and is in good standing in all
jurisdictions where the failure to be duly qualified, authorized and in good
standing would have a Material Adverse Effect upon its business, operations,
results of operations, assets, liabilities or condition (financial or
otherwise).
3.2. Authorization. VASCO has the corporate power and
authority to enter into and perform this Agreement, each of the Collateral
Documents to which it is a party, and to consummate the Contemplated
Transactions. The execution, delivery and performance by VASCO of this Agreement
and each of the Collateral Documents to which it is a party, and the
consummation by VASCO of the Contemplated Transactions, have been duly
authorized by all necessary corporate action on the part of VASCO. This
Agreement and each of the Collateral Documents to which VASCO is a party have
been duly executed and delivered by VASCO and constitute a legal, valid and
binding obligation of VASCO, enforceable against VASCO in accordance with their
respective terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, moratorium or similar Laws affecting the rights of
creditors' generally and general equity principles (regardless of whether
enforceability is considered a proceeding at law or in equity).
3.3. Conflict with other Instruments; Absence of Restrictions.
The execution, delivery and performance of this Agreement and each of the
Collateral Documents, and the consummation of the Contemplated Transactions, by
VASCO, do not and will not: (i) result in a Default, of or under (A) any of the
terms of the Organizational Documents of VASCO, (B) assuming the receipt of all
Governmental Consents listed on Schedule 3.6, any Law, Permit or Order
applicable to or binding upon VASCO, or (C) assuming the receipt of all Consents
from Persons other than Governmental Entities listed on Schedule 3.6, any
Contracts or Licenses to which VASCO is a party or by which it is bound; (ii)
result in the creation or imposition of any Encumbrance upon any of the equity
interests of VASCO or upon any of the assets or properties of VASCO; or (iii)
assuming the receipt of all Consents listed on Schedule 3.6, (A) result in the
termination, amendment or modification of, or give any party the right to
terminate, amend, modify, abandon, or refuse to perform any material Contract,
License or Permit to which VASCO is a party or by which it, or any of its
properties or assets, is bound, or (B) result in the acceleration or
modification, or give any party the right to accelerate or modify, the time
within which, or the terms under which, any duties or obligations are to be
performed, or any rights or benefits are to be received under any material
Contract, License or Permit to which VASCO is a party or by which it, or any of
its properties or assets, is bound.
13
3.4. Title to Properties; Adequacy of Properties. VASCO has
good and valid title to all of the Purchased Assets, free and clear of any and
all Encumbrances. The Purchased Assets are in good working order and fit for
their intended use, other than the Tangible Personal Property comprising a part
of the Purchased Assets, which are being conveyed to SSI in an "as is, where is"
condition, with respect to physical attributes only.
3.5. Compliance with Law. (a) VASCO has complied with every,
and are not in violation of any, Law or Order to which the Business is subject
and (b) VASCO has not failed to obtain, or to adhere to the requirements of, any
License or Permit necessary to the ownership of the Purchased Assets or the
operation of the Business, to the extent, in each of the foregoing cases, the
failure to obtain or the violation of which would have a Material Adverse Effect
upon the Business, its results of operations, financial condition, business or
prospects.
3.6. Government and Third-Party Approvals. Except as set forth
on Schedule 3.6, no Governmental Consent or Consent of any Person (including any
party to any material Contract with VASCO) is required (i) for the execution,
delivery and performance by VASCO of this Agreement or any of the Collateral
Documents to which it is a party or (ii) in connection with VASCO's consummation
of the Contemplated Transactions.
3.7. Legal Proceedings. There is no Legal Proceeding or Claim
pending or, to the Knowledge of VASCO, threatened, against or affecting VASCO
that relates to or affects the Business, the Purchased Assets or the Personnel.
3.8. Contracts and Commitments. Schedule 3.8 sets forth a
correct and complete list of all Contracts to which VASCO is a party that fall
into one or more of the following categories (each a "MATERIAL CONTRACT"):
3.8.1. All bonds, debentures, notes, mortgages, indentures or
guarantees by which any of the Purchased Assets are bound, and any oral or
written direct or indirect guarantee of any such obligation; and
3.8.2. All Leases by which any of the Purchased Assets (real,
personal or mixed, tangible or intangible) are bound.
3.9. Absence of Certain Developments. Except as required by or
pursuant to the Contemplated Transactions, VASCO has not, from the Effective
Date through the Closing Date:
3.9.1. mortgaged, pledged or been subjected to any Encumbrance
on any of the Purchased Assets;
3.9.2. sold, assigned, transferred or otherwise disposed of or
committed to sell, assign, transfer or otherwise dispose of any of the Purchased
Assets, except in the ordinary course of business, or canceled any material
debts or claims;
3.9.3. suffered any unusual or extraordinary losses related to
the Purchased Assets or waived any rights of material value, whether or not in
the ordinary course of business or consistent with past practice;
14
3.9.4. paid or committed to pay any bonuses or similar
payments, except in the ordinary course of business consistent with past
practice;
3.9.5. suffered any material damage, destruction or casualty
loss related to the Purchased Assets, whether or not covered by insurance;
3.9.6. increased the compensation payable or to become payable
to any of the Personnel, or increased benefits for any such Personnel under any
employee benefit plan or other employee or consultant compensation arrangement;
3.9.7. had any payment default or event of default under any
debt, Lease or other Material Contract related to the Purchased Assets except
for overdue payables arising in the ordinary course of business;
3.9.8. taken any other action related to the Purchased Assets
outside of the ordinary course of business; or
3.9.9. taken or agreed to take any action contemplated by this
Section 3.9 or that would otherwise cause any representation or warranty made by
VASCO in this Agreement to be untrue or inaccurate as of the Closing or result
in the breach of any covenant or agreement in this Agreement required to be
performed by VASCO on or prior to the Closing.
3.10. Intellectual Property. Set forth on Schedule 2.1.1 is a
true and complete list, with a brief description of each, including, where
relevant, the owner, the applicable jurisdiction, the registration number,
application number or issuance number, the date of application, issuance and/or
filing, of all VACMAN Intellectual Property. Where applicable, each of the
federal and state registrations pertaining to the VACMAN Intellectual Property
is valid and in full force and effect, and all required filings in association
with such registrations have been properly made and all required fees have been
paid. VASCO owns or otherwise has the right to use all VACMAN Intellectual
Property and the consummation of the Contemplated Transactions will not alter or
impair any such rights. No claims are pending against VASCO by any person with
respect to the use of any VACMAN Intellectual Property or challenging or
questioning the validity or effectiveness of any license or agreement relating
to the same.
3.11. Corporate Records. From the date of this Agreement to
the Closing, VASCO will (i) give to SSI and its authorized representatives full
access during normal business hours to all VASCO Books and Records so that SSI
may inspect them; and (ii) furnish such additional information related to the
Contemplated Transactions including all related properties and affairs of VASCO
as SSI may reasonably request.
3.12. Statements and Other Documents Not Misleading. Neither
this Agreement, including all Schedules and Exhibits, nor any Collateral
Document or other instrument heretofore or hereafter furnished by VASCO to SSI
in connection with the Contemplated Transactions contains or will contain any
untrue statement of any material fact or omits or will omit to state any
material fact required to be stated in order to make such statement, document or
other instrument not misleading.
15
3.13. Effective Date of Warranties, Representations and
Covenants. Each warranty, representation and covenant set forth in this Article
3 shall be deemed to be made on and as of the date of Closing. The
representations and warranties contained in this Article 3 shall not be affected
or deemed waived by reason of the fact that SSI and/or its representatives knew
or should have known that any such representations or warranty is or might be
inaccurate in any material respect.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SSI
-------------------------------------
As a material inducement for VASCO to enter into and perform
its obligations under this Agreement, SSI hereby represents and warrants to
VASCO as follows:
4.1. Organization. SSI (i) is a corporation duly incorporated,
validly existing and in good standing under the laws of the state of Delaware,
(ii) has the power and authority to own and operate its properties and assets
and to transact its business as currently conducted and (iii) is duly qualified
and authorized to do business and is in good standing in all jurisdictions where
the failure to be duly qualified, authorized and in good standing would have a
Material Adverse Effect upon its business, operations, results of operations,
assets, liabilities or condition (financial or otherwise).
4.2. Authorization for Agreement. SSI has the corporate power
and authority to enter into and perform this Agreement, each of the Collateral
Documents to which it is a party, and to consummate the Contemplated
Transactions. The execution, delivery and performance by SSI of this Agreement
and each of the Collateral Documents to which it is a party, and the
consummation by SSI of the Contemplated Transactions, have been duly authorized
by all necessary corporate action on the part of SSI. This Agreement and each of
the Collateral Documents to which SSI is a party have been duly executed and
delivered by SSI and constitute the legal, valid and binding obligations of SSI,
enforceable against SSI in accordance with their respective terms, except as
such enforcement may be limited by applicable bankruptcy, insolvency, moratorium
or similar Laws affecting the rights of creditors' generally and general equity
principles (regardless of whether enforceability is considered a proceeding at
law or in equity).
4.3. Conflict with other Instruments; Absence of Restrictions.
The execution, delivery and performance of this Agreement and each of the
Collateral Documents, and the consummation of the Contemplated Transactions, by
SSI do not and will not: (i) result in a Default of or under (A) any of the
terms of the Organizational Documents of SSI, (B) assuming the receipt of all
Governmental Consents listed on Schedule 4.4, any Law, Permit or Order
applicable to or binding upon SSI, or (C) assuming the receipt of all Consents
from Persons other than Governmental Entities listed on Schedule 4.4, any
Contracts or Licenses to which SSI is a party or by which it is bound, or (ii)
assuming the receipt of all Consents listed on Schedule 4.4, (A) result in the
termination, amendment or modification of, or give any party the right to
terminate, amend, modify, abandon, or refuse to perform any material Contract,
License or Permit to which SSI is a party or by which it, or any of its
properties or assets, is bound, or (B) result in the acceleration or
modification, or give any party the right to accelerate or modify, the time
16
within which, or the terms under which, any duties or obligations are to be
performed, or any rights or benefits are to be received under any material
Contract, License or Permit to which SSI is a party or by which it, or any of
its properties or assets, is bound.
4.4. Government and Third-Party Approvals. Except as set forth
on Schedule 4.4, no Governmental Consent or Consent of any Person (including any
party to any material Contract with SSI) is required (i) for the execution,
delivery and performance by SSI of this Agreement or any of the Collateral
Documents to which it is a party or (ii) in connection with SSI's consummation
of the Contemplated Transactions.
4.5. Legal Proceedings. There is no Legal Proceeding or Claim
pending or, to the Knowledge of SSI, threatened, against or affecting SSI that
relates to or affects the business, operations, properties, assets, income or
employees of SSI.
4.6. SSI Stock. (a) The SSI Preferred Stock, when issued, sold
and delivered in accordance with the terms of this Agreement, will be duly and
validly issued, fully paid, non-assessable and free and clear of all
Encumbrances (other than transfer restrictions imposed solely by virtue of
applicable securities Laws); and (b) the SSI Common Stock issuable upon
conversion or redemption of, or as dividends upon, the SSI Preferred Stock have
been duly and validly reserved and, upon issuance in accordance with the
conversion, redemption or dividend provisions of the SSI Preferred Stock, will
be duly and validly issued, fully paid, non-assessable and free and clear of all
Encumbrances.
4.7. Capitalization. Immediately prior to the date of
execution of this Agreement, the authorized capital stock of SSI consists of
50,000,000 shares of SSI Common Stock, of which 3,900,000 shares are issued and
outstanding, all fully paid and non-assessable; and 5,000,000 shares of SSI
Preferred Stock, of which no shares are issued and outstanding. Except as
otherwise provided in Schedule 4.7, there are no outstanding options, warrants
or calls pursuant to which any Person has the right to purchase any authorized
and unissued SSI Common Stock or other securities of SSI. SSI has no
Subsidiaries.
4.8. Tax Returns. SSI has filed all Tax Returns that have been
required to be filed by it or has received currently effective extensions of the
required filing dates.
4.9. Undisclosed Liabilities. Except as set forth in Schedule
4.9, SSI has no material assets or Liabilities of any nature whatsoever, whether
accrued, absolute, contingent or otherwise, including, without limitation, Tax
Liabilities and interest due or to become due.
4.10. Books and Records. From the date of this Agreement to
the Closing, SSI will (i) give to VASCO or its representatives full access
during normal business hours to all of SSI's offices, books, records, Contracts,
Organizational Documents and other corporate documents and properties so that
VASCO or its representative may inspect them; and (ii) furnish such information
concerning the property, business and affairs of SSI related to the Contemplated
Transactions as VASCO or its representatives may reasonably request.
4.11. Access to Information Regarding VASCO. SSI acknowledges
that: (a) it has had access during the twelve (12) months prior to the execution
of this Agreement to all reports and registration statements and other filings
made by VASCO with the SEC by personal
17
delivery to SSI and/or by notification of access to the reports and registration
statements of VASCO that contain such information in the XXXXX Archives of the
SEC at xxx.xxx.xxx; (b) it has had a reasonable opportunity to review such
documentation and discuss it, to the extent desired, with its legal counsel,
directors and executive officers; (c) it has had, to the extent desired, the
opportunity to ask questions of and receive responses from the directors and
executive officers of VASCO, and with the legal and accounting firms of VASCO,
with respect to such documentation; and (d) to the extent requested, all
questions raised have been answered to SSI's complete satisfaction.
4.12. Statements and Other Documents Not Misleading. Neither
this Agreement, including all Schedules and Exhibits, nor any Collateral
Document or other instrument heretofore or hereafter furnished by SSI to VASCO
in connection with the Contemplated Transactions contains or will contain any
untrue statement of any material fact or omits or will omit to state any
material fact required to be stated in order to make such statement, document or
other instrument not misleading.
4.13. SSI Business Plan. Attached hereto as Exhibit D is a
true and correct copy of the business plan of SSI (the "SSI BUSINESS PLAN"). SSI
represents and warrants that (a) the SSI Business Plan does not contain an
untrue statement of any material fact or omit to state any material fact
required to be stated in order to make such statement, document or other
instrument not misleading, (b) the forward looking statements contained in the
SSI Business Plan are reasonable estimates based upon current knowledge and
reasonable assumptions and (c) the SSI Business Plan, including with preparation
and dissemination thereof, complies with all applicable federal and state
securities Laws.
4.14. Additional Investment. SSI shall, following the date of
this Agreement and without interruption, continue to use its best efforts to
raise funds, in addition to and not in duplication of those funds required to be
raised pursuant to Section 5.3.1, in an amount no less than $2,000,000 from the
sale of shares of SSI Common Stock to Accredited Investors at a price of $0.75
per share or an aggregate of 2,666,667 shares, which offering may include one
warrant to acquire an additional share of SSI Common Stock at an exercise price
of $1.50 per share for every two shares of SSI Common Stock purchased at $0.75
per share.
4.15. Effective Date of Warranties, Representations and
Covenants. Each warranty, representation and covenant set forth in this Article
4 shall be deemed to be made on and as of the date of Closing. The
representations and warranties contained in this Article 4 shall not be affected
or deemed waived by reason of the fact that VASCO and/or its representatives
knew or should have known that any such representations or warranty is or might
be inaccurate in any material respect.
ARTICLE 5
CLOSING
-------
5.1. Closing. On the Closing Date, all Contemplated
Transactions to be consummated at the Closing shall be consummated. All actions
taken at Closing shall be deemed to have occurred simultaneously, and shall be
effective as of the Effective Date. Closing
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shall take place at the offices of SSI's legal counsel, Morse, Zelnick, Rose &
Lander, at 000 Xxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000-0000, or such
other place as is mutually acceptable to the parties.
5.2. Deliveries at Closing. At the Closing and as a condition
to Closing:
5.2.1. VASCO will deliver to SSI:
(a) a certificate or certificates dated as of the
Closing Date and signed on VASCO's behalf by its Secretary, in customary form
and substance, to the effect that: (i) the resolutions of the Board of Directors
of VASCO authorizing the actions taken in connection with the Contemplated
Transactions were duly adopted at a duly convened meeting thereof, at which a
quorum was present and acting throughout, or by unanimous written consent,
remain in full force and effect, and have not been amended, rescinded or
modified; (ii) the officers or other individuals executing this Agreement and
each of the Collateral Documents to which VASCO is a party are incumbent
officers or otherwise duly authorized to execute such agreements and documents
on behalf of VASCO and the specimen signatures on such certificate are their
genuine signatures; (iii) each of the representations and warranties of VASCO
contained in Article 3 hereof is true and correct as of the Closing Date; (iv)
VASCO has performed or complied with all covenants and agreements contained
herein and in each of the Collateral Documents, to which VASCO is a party, that
are required to be performed or complied with by it on or prior to the Closing
Date; and (v) VASCO has fulfilled all conditions set forth in Article 5 hereof
that are required to be fulfilled by it on or prior to the Closing Date;
(b) An Assignment and Assumption Agreement, duly
executed by VASCO, with respect to each Purchased Contract and all other
Purchased Assets, in the form of Exhibit E attached hereto (the "ASSIGNMENT AND
ASSUMPTION AGREEMENT");
(c) A Xxxx of Sale, duly executed by VASCO, in
the form of Exhibit F attached hereto (the "XXXX OF SALE"); and
(d) The Escrow Agreement, duly executed by VASCO,
in the form of Exhibit G attached hereto.
5.2.2. SSI shall deliver to VASCO:
(a) The SSI Preferred Stock Certificates;
(b) The Promissory Note, duly executed by SSI, in
the form of Exhibit B;
(c) The Assignment and Assumption Agreement, duly
executed by SSI, in the form of Exhibit E;
(d) An Employment Agreement with respect to each
of the Personnel, each duly executed by SSI, in the form of Exhibit H (each, an
"EMPLOYMENT AGREEMENT");
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(e) The Escrow Agreement, duly executed by SSI,
in the form of Exhibit G;
(f) The Security Agreement, duly executed by SSI,
in the form of Exhibit C;
(g) A fully executed copy of the Dolfin Agreement
(as defined in Section 5.3.2);
(h) A fully executed copy of the Proposed
Reorganization Agreement (as defined in Section 5.3.3);
(i) Evidence that SSI's Certificate of
Incorporation has been amended to reflect the revised terms of the SSI Preferred
Stock, such amendment to be in the form of Exhibit I attached hereto, and such
evidence to be in the form of a copy of SSI's Certificate of Incorporation, as
amended, and certified by the Secretary of State of the State of Delaware;
(j) A certificate or certificates dated as of the
Closing Date and signed on behalf of SSI by its Secretary to the effect that:
(i) (A) its Organizational Documents attached to the certificate are true and
complete, (B) its Organizational Documents have been in full force and effect in
the form attached to the certificate since the date of the adoption of the
resolutions referred to in clause (C) below and no amendment to such
Organizational Documents has occurred since the date of the last amendment
annexed thereto, (C) the resolutions of the Board of Directors of SSI
authorizing the actions taken in connection with the Contemplated Transactions
were duly adopted at a duly convened meeting thereof, at which a quorum was
present and acting throughout, or by unanimous written consent, remain in full
force and effect, and have not been amended, rescinded or modified; (ii) the
officers or other individuals executing this Agreement and each of the
Collateral Documents to which SSI is a party are incumbent officers or otherwise
duly authorized to execute such agreements and documents on behalf of such party
and the specimen signatures on such certificate are their genuine signatures;
(iii) SSI is in good standing in all jurisdictions in which it is organized or
registered to do business; (iv) each of the representations and warranties of
SSI contained in Article 4 hereof is true and correct as of the Closing Date;
(v) SSI has performed or complied with all covenants and agreements contained
herein and in each of the Collateral Documents, to which it is a party, that are
required to be performed or complied with by it on or prior to the Closing Date;
(vi) SSI has fulfilled all conditions set forth in Article 5 hereof that are
required to be fulfilled by it on or prior to the Closing Date; and (vii) SSI
has on deposit subscription funds in an amount at least equal to that referenced
in Section 5.3.1. The certificates referred to above in clause (iii) shall (1)
attach a subsistence certificate with respect to SSI certified by the Secretary
of State of the State of Delaware, or other appropriate Delaware state
officials, dated as of a date not more than five (5) days prior to the Closing
Date, and a certificate of no tax liens in Delaware with respect to SSI; and (2)
shall include a declaration of the Secretary of SSI that, as of the Closing
Date, SSI is not registered to do business in any jurisdiction other than
Delaware. Such certificate or certificates shall be in customary form and
substance. The certificates referred to above in clause (vii) shall attach proof
reasonably acceptably to VASCO (e.g., SSI bank account statement), that,
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as of the Closing Date, the requisite funds remain in the possession of SSI and
have not been withdrawn by the parties to the SSI Common Stock subscription
agreements; and
(k) An opinion from Morse, Zelnick, Rose &
Lander, LLP, in the form set forth on Exhibit L.
5.3. Additional Conditions Precedent. In addition to the
deliveries required by Section 5.2, the Closing of this Agreement is subject to
the satisfaction of the following conditions precedent:
5.3.1. SSI shall have raised not less than the sum of
$750,000 from the sale of shares of SSI Common Stock to Accredited Investors, at
a price of $0.75 per share or an aggregate of 1,000,000 shares, which offering
may include one warrant to acquire an additional share of SSI Common Stock at an
exercise price of $1.50 per share for every two shares of SSI Common Stock
purchased at $0.75 per share; and SSI shall have provided VASCO, prior to
Closing, with copies of the subscription agreements contemplated by this Section
5.3.1;
5.3.2. SSI shall have executed the Asset Purchase
Agreement with Xxxxxx.xxx, Inc., a Delaware corporation ("DOLFIN"), in the form
of Exhibit J (the "DOLFIN AGREEMENT"), which agreement shall be effective as of
the Effective Date, and each of SSI and Dolfin shall have satisfied all
conditions required by the Dolfin Agreement such that all transactions
contemplated thereunder shall have closed, all on a basis consistent with the
SSI Business Plan; and SSI shall have provided VASCO, prior to Closing, with a
copy of the Dolfin Agreement;
5.3.3. SSI and SSGI shall have consummated, or shall
simultaneous with Closing, consummate, the proposed reorganization contemplated
by such parties, pursuant to which SSI would be acquired by or merged into SSGI
(the "PROPOSED REORGANIZATION"). SSI represents, covenants and agrees that, upon
consummation of the Proposed Reorganization, which shall be documented by an
agreement between SSI and SSGI in the form attached hereto as Exhibit K (the
"PROPOSED REORGANIZATION AGREEMENT"), which agreement shall be effective as of
the Effective Date, SSI shall ensure that (a) the terms and conditions of the
Proposed Reorganization do not and, with the passage of time will not, adversely
effect any right or privilege possessed by VASCO pursuant to this Agreement or
any of the Collateral Documents and (b) either (i) SSI's rights and obligations
under this Agreement and the Collateral Documents are assigned in full to SSGI,
pursuant to an instrument of assignment in form and substance satisfactory to
VASCO or (ii) SSGI shall enter into a new set of documents with VASCO,
substantially identical to the Collateral Documents, for the express purpose of
SSGI assuming without variation SSI's obligations under the Contemplated
Transactions; and SSI shall have provided VASCO, prior to Closing, with a copy
of the Proposed Reorganization Agreement; and
5.3.4. VASCO and SSI shall have obtained all Consents
and Governmental Consents set forth on Schedules 3.6 and 4.4.
5.4. Financial Statements. No later than seventy-five (75)
days after the Closing Date, at no cost to SSI, VASCO shall deliver or cause to
be delivered to SSI copies of (a) the audited financial statements with respect
to the Business for the fiscal years ended
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December 31, 2001 and 2002 and (b) VASCO management-reviewed financial
statements with respect to the Business for the fiscal quarter ended March 31,
2003.
5.5. Expenses. VASCO shall be responsible for the payment of
costs it has incurred and will incur in connection with the negotiation,
execution and delivery of this Agreement and the Collateral Documents and the
consummation of the Contemplated Transactions. SSI shall be responsible for the
payment of costs it has incurred and will incur in connection with the
negotiation, execution and delivery of this Agreement and the Collateral
Documents and the consummation of the Contemplated Transactions.
5.6. Subsequent Documentation. VASCO shall at any time and
from time to time upon the request of SSI execute, acknowledge and deliver, or
cause to be executed, acknowledged and delivered, all such further assignments,
instruments of sale and transfer and other documents as may be reasonably
required for the better assigning, transferring and confirming to SSI or its
successors and assigns, the Purchased Assets for the purpose of carrying out the
intent of this Agreement.
5.7. Third Party Consents. Unless otherwise agreed to by SSI,
to the extent that any Purchased Contract is not assignable without Consent,
this Agreement shall not constitute an assignment or an attempted assignment
thereof, or an assumption or attempted assumption of Liabilities arising
thereunder, if such assignments or attempted assignment would constitute a
breach thereof unless the necessary Consents are obtained. VASCO shall use best
efforts to obtain the Consents required for the assignment of the Purchased
Contracts and SSI shall provide full cooperation in such effort. If any such
Consent shall not be obtained with respect to a Contract, then either, at SSI's
option, (i) such Contract shall be an Excluded Asset and SSI shall not assume
any Liabilities related thereto or arising thereunder, or (ii) VASCO and SSI
shall cooperate in a reasonable arrangement (a) providing SSI with the benefits
intended to be assigned to SSI hereunder with respect to any such Contract and
(b) to relieve VASCO of its obligations to the other contracting party under any
such Contract. If and to the extent that such arrangement cannot be made on
terms and conditions acceptable to SSI, then SSI shall have no obligation to
Close under this Agreement.
5.8. Employment, Compensation and Employee Benefits From and
After Closing. The respective undertakings and covenants of SSI from and after
the Closing with respect to the employment by SSI of the Personnel, and the
compensation and employee benefits to be provided such Personnel by SSI, shall
be as set forth below:
5.8.1. Employment. SSI shall offer employment to each of
the Personnel. The offer of employment to any such Personnel shall be (i) for
the same or a comparable position as held by such Personnel in the Business
immediately prior to the Closing, (ii) at the same or a greater rate of
compensation as paid by VASCO immediately prior to the Closing, (iii)
non-cancelable by SSI, other than for cause, for a term of one (1) year from and
after the Effective Date and (iv) made pursuant to and memorialized by an
Employment Agreement with respect to such Personnel in the form attached hereto
as Exhibit H. All such Personnel shall be treated as employees of SSI from the
date of commencement of their employment with VASCO, such that the Personnel
shall receive credit from SSI for the amount
22
of time they previously served VASCO, as such timing of employment may affect,
inter alia, such Personnel's eligibility for vacation time and other benefits.
5.8.2. Benefits. Upon hiring by SSI, each Personnel
member shall be entitled to enroll in and be covered by health care, disability
and other benefit plans of SSI, all of which plans shall be reasonably
comparable to those plans provided by VASCO to the Personnel prior to the Close,
and the Personnel's coverage under such SSI plans shall commence as soon as
practicable upon hiring, and shall not be subject to any waiting or other
probationary period requirement.
5.9. Severance. VASCO represents that no Personnel member is
entitled to severance pay for a voluntary or an involuntary termination of
employment with VASCO. VASCO has not made any representations or promises or
otherwise created any expectation among such employees respecting any severance
benefits or payments from SSI.
5.10. Unemployment Compensation. VASCO shall cooperate with
SSI with respect to establishing SSI's obligations for unemployment taxes and
similar obligations in a manner satisfactory to SSI, and shall take such steps
as reasonably directed by SSI in anticipation of SSI's potential employment of
any of the Personnel.
5.11. Escrow Agreement. On the Closing Date, SSI and VASCO
shall enter into the Escrow Agreement, in the form attached hereto as Exhibit G,
which agreement shall be effective as of the Effective Date, with DSI Technology
Escrow Services, Inc. serving as escrow agent thereunder (the "ESCROW AGENT").
Pursuant to the Escrow Agreement, SSI shall deposit with Escrow Agent within
fourteen (14) days after the Closing Date two (2) full and complete copies of
the then-current and immediately preceding releases of the Source Code and
Object Code for all Software and copies of all Documentation related to the
Software. After the Closing Date, within sixty (60) days of the release of any
new version of the Software incorporating any enhancements, improvements or
modifications to a previous version or release, SSI shall deposit with Escrow
Agent two (2) full and complete copies of the Source Code and Object Code for
such new version or release of the Software, the name and address of the Manager
of Software Engineering responsible for development of the new version or
release, and copies of all Documentation related to the new version or release.
The Escrow Agreement shall provide, inter alia, for the immediate release by
Escrow Agent of the Software and Documentation to VASCO upon the occurrence of
either of the following events: (a) the material uncured breach by SSI of this
Agreement or of any of the Collateral Documents to which it is a party, or (b)
the dissolution, liquidation, bankruptcy or insolvency of SSI.
5.12. Prepaid Receivables Amount and Prepaid Expense Amount;
Offset Against Promissory Note. The parties hereto agree that the amount
designated as "Total Prepaid Receivables" on Schedule 5.12 represents the
Prepaid Receivables Amount and the amount designated as "Total" on Schedule
2.1.4 represents the Prepaid Expense Amount. SSI acknowledges and agrees that
VASCO shall retain the Prepaid Receivables Amount. VASCO acknowledges and agrees
that SSI shall not remit the Prepaid Expense Amount to VASCO at the Closing.
VASCO and SSI agree that the Prepaid Expense Amount shall be subtracted from the
Prepaid Receivables Amount and the remainder shall be the "Offset Amount" and
such amount shall be offset against the monthly payments otherwise due to VASCO
from SSI under the
23
Promissory Note, until the balance of the Offset Amount has been offset. Nothing
in this Section 5.12 shall relieve SSI of any obligations under the Promissory
Note other than the obligation to make the first consecutive monthly payments
thereunder equaling the Offset Amount. For the avoidance of doubt, and
notwithstanding anything to the contrary herein or in the Promissory Note, (a)
each of SSI's monthly payments of $32,645.59 due August 1, 2003and September 1,
2003 shall be offset against the Offset Amount retained by VASCO and (b)
$28,498.04 of the monthly payment due October 1, 2003 under the Promissory Note
shall be offset against the remaining balance of the Offset Amount, and SSI
shall be required to pay VASCO the balance of the October 1, 2003 payment
($4,147.55) in accordance with the terms of the Promissory Note.
ARTICLE 6
CONFIDENTIALITY AND COVENANT NOT TO COMPETE
-------------------------------------------
6.1. Confidentiality. Each party hereto shall and shall cause
its counsel, accountant, financial advisors and lenders to: (a) keep all
Proprietary Information confidential and not to disclose or reveal any
Proprietary Information to any Person other than its officers, directors,
Affiliates, employees, attorneys, accountants, other agents and representatives,
including engineers, financial advisors, current and prospective lenders and
debt securities underwriters who are participating in the evaluation of the
Contemplated Transactions or who otherwise need to know the Proprietary
Information for the purpose of evaluating the Contemplated Transactions; and (b)
not to use the Proprietary Information for any purpose other than (i) in
connection with the evaluation and/or consummation of the Contemplated
Transactions; (ii) to the extent necessary to obtain any of the Consents listed
on Schedule 3.6 or 4.4 or (iii) to enforce such party's rights and remedies
under this Agreement. Notwithstanding anything to the contrary in this Section
6.1, to the extent either party to this Agreement is required by Law or Order to
disclose the Proprietary Information of the other party to another Person, the
disclosing party will provide the minimum Proprietary Information required to be
disclosed, and will make such disclosure only after providing the non-disclosing
party with a reasonable opportunity to revise or enjoin its disclosure and will
use reasonable efforts to ensure that the Proprietary Information receives
confidential treatment by those to whom it is disclosed. The obligations of each
party hereto under this Section 6.1 shall terminate three (3) years from the
date of this Agreement.
6.2. Return of Proprietary Information. If Closing does not
occur by July 15,
2003 (as such date may be extended by mutual agreement of the parties hereto),
each party shall promptly thereafter return all written and electronic copies of
Proprietary Information of the other party.
6.3. Covenant Not To Compete. As a material inducement to
SSI's consummation of the Contemplated Transactions, neither VASCO nor any of
its Subsidiaries shall, during the five (5) years following the date of this
Agreement, do any of the following, directly or indirectly, without the prior
written consent of SSI in its sole discretion:
24
6.3.1. Compete, directly or indirectly, in the Business
as conducted on the Closing Date with SSI or any of its Affiliates or
Subsidiaries, or any of their respective successors or assigns, within any
geographic area located within the United States of America; provided, that SSI
acknowledges and agrees that none of the business activities conducted by VASCO
as of the date of this Agreement, other than the Business, currently, or, if
conducted in the future, would, breach the covenant contained in this Section
6.3.1;
6.3.2. invest in, undertake, carry on or be engaged in
or concerned with or have a financial interest in or advise, lend money to,
guarantee the debts or obligations of or permit its name or a part thereof or
that of any Subsidiary to be employed by or associated with any individual,
partnership, sole proprietorship, association, organization, or corporation that
competes with SSI through the provision of products or services similar to the
Business; provided, that VASCO or any or its Subsidiaries may own, as a passive
investor, not more than one percent (1%) of the outstanding securities of any
class of any publicly traded securities of such Person; or
6.3.3. solicit, hire or engage the services of any of
the Personnel whose employment is transferred to SSI, or persuade or attempt to
persuade any such individual to terminate his or her employment with SSI. For
the avoidance of doubt, neither VASCO nor any of its Subsidiaries shall be bound
by the restrictions of this Section 6.3.3 with respect to any Personnel member
(a) to whom SSI elects not to offer employment (notwithstanding SSI's obligation
to do so pursuant to Section 5.8.1 herein), (b) whose employment with SSI has
been terminated by SSI for reasons other than cause.
ARTICLE 7
INDEMNIFICATION
---------------
7.1. Survival. All covenants and other agreements shall
survive the Closing in accordance with the applicable statute of limitations.
7.2. VASCO's Indemnification. Regardless of any investigation
undertaken or made by SSI, or any of its stockholders, employees, agents or
representatives prior to the Effective Date, VASCO hereby agrees to indemnify,
defend and hold harmless SSI and its directors, officers, employees, Affiliates,
agents, stockholders, successors and assigns and legal representatives, and each
Person who controls (within the meaning of the Securities Act) any of them, from
and against any and all Claims (including, without limitation, Claims arising
out of facts or circumstances that have occurred on or prior to the Effective
Date, even though such Claims may not be filed or come to light until after the
Effective Date) or Losses that may be imposed upon, incurred by or asserted
against any of them arising out of, based upon or resulting from: (a) any
misrepresentation, breach of any warranty or non-fulfillment of any covenant to
be performed by VASCO under this Agreement or any Collateral Document; (b) any
Retained Liabilities; and (c) any Legal Proceeding or Order arising out of any
of the foregoing, even though such Legal Proceeding or Order may not be filed,
become final, or come to light until after the Effective Date.
25
7.3. SSI's Indemnification. Regardless of any investigation
undertaken or made by VASCO or any of its stockholders, employees, agents or
representatives prior to the Effective Date, SSI hereby agrees to indemnify,
defend and hold harmless VASCO and its directors, officers, employees,
Affiliates, agents, stockholders, successors and assigns and legal
representatives, and each Person who controls (within the meaning of the
Securities Act) any of them, from and against any and all Claims (including,
without limitation, Claims arising out of facts or circumstances that have
occurred on or prior to the Effective Date, even though such Claim may not be
filed or come to light until after the Effective Date) or Losses that may be
imposed upon, incurred by or asserted against any of them arising out of, based
upon or resulting from: (a) any misrepresentation, breach of any warranty or
non-fulfillment of any covenant to be performed by SSI under this Agreement or
any Collateral Document; (b) any Assumed Liabilities; (c) the SSI Business Plan;
and (d) any Legal Proceeding or Order arising out of any of the foregoing, even
though such Legal Proceeding or Order may not be filed, become final, or come to
light until after the Effective Date.
7.4. Payment; Procedure for Indemnification.
--------------------------------------
7.4.1. Claim or Loss. In the event that the party
seeking indemnification under this Article 7 (the "INDEMNIFIED PARTY") shall
suffer a Claim or Loss, it shall promptly, after obtaining knowledge of the
incurrence of any such indemnifiable Claim or Loss, give a notice of intent to
seek indemnity, describing the Claim or Loss in reasonable detail (an "INDEMNITY
NOTICE") to the party from whom indemnification under this Article 7 is sought
(the "INDEMNIFYING PARTY"). The failure of any Indemnified Party to give the
Indemnifying Party the Indemnity Notice shall not release the Indemnifying Party
of liability under this Article 7, except (a) to the extent that the
Indemnifying Party's ability to defend such Claim is materially prejudiced by
the failure to give such notice, (b) that the Indemnifying Party shall not be
liable for Claims or Losses incurred by the Indemnified Party that would not
have been incurred but for the delay in the delivery of, or failure to deliver,
the Indemnity Notice and (c) the Indemnified Party shall be responsible for any
legal fees and expenses incurred in connection with opening a default judgment
in connection with the Claim or Loss that was incurred as a direct result of the
failure to so notify. For the purposes of the foregoing sentence, if a default
judgment in connection with a Claim or Loss is not opened by the court, then the
Indemnifying Party shall have been deemed to be materially prejudiced. Within
fifteen (15) days after the receipt by the Indemnifying Party of the Indemnity
Notice, the Indemnifying Party shall either (i) pay to the Indemnified Party an
amount equal to the indemnifiable Claim or Loss or (ii) object to such claim, in
which case the Indemnifying Party shall give written notice to the Indemnified
Party of such objection together with the reasons therefor, it being understood
that the failure of the Indemnifying Party to so object shall preclude the
Indemnifying Party from asserting any claim, defense or counterclaim relating to
the Indemnifying Party's failure to pay any indemnifiable Claim or Loss. The
Indemnifying Party's objection shall not, in and of itself, relieve the
Indemnifying Party from its obligations under this Article 7. In the event that
the parties are unable to resolve the subject of the Indemnity Notice, the issue
shall be submitted to a court of competent jurisdiction for resolution as set
forth in this Agreement.
7.4.2. Third Party Claim or Loss.
-------------------------
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(a) Notwithstanding anything set forth in Section
7.4.1, in the event the facts giving rise to the claim for indemnification under
this Article 7 shall involve any action, or threatened Claim or demand by any
Third Party, the Indemnified Party shall, promptly after obtaining knowledge of
such Third Party Claim or demand giving rise to the claim for indemnification,
send written notice of intent to seek indemnity, describing such action or Claim
in reasonable detail (a "CLAIM NOTICE") to the Indemnifying Party. The failure
of the Indemnified Party to give the Indemnifying Party the Claim Notice shall
not release the Indemnifying Party of Liability under this Article 7, except (a)
to the extent that the Indemnifying Party's ability to defend such Claim or Loss
is materially prejudiced by the failure to give such notice, (b) that the
Indemnifying Party shall not be liable for Claims or Losses incurred by the
Indemnified Party that would not have been incurred but for the delay in the
delivery of, or failure to deliver, the Claim Notice and (c) the Indemnified
Party shall be responsible for any legal fees and expenses incurred in
connection with opening a default judgment in connection with the Claim or Loss
that was incurred as a direct result of the failure to so notify. For the
purposes of the foregoing sentence, if a default judgment in connection with a
Claim or Loss is not opened by the court, then the Indemnifying Party shall have
been deemed to be materially prejudiced. The Indemnifying Party shall be
entitled to defend such action or Claim in the name of the Indemnified Party at
its own expense and through counsel of its own choosing; provided, that if the
applicable action or Claim is against, or if the defendants in any such Legal
Proceeding shall include, both the Indemnified Party and the Indemnifying Party
and the Indemnified Party reasonably concludes that there are defenses available
to it that are different or additional to those available to the Indemnifying
Party or if the interests of the Indemnified Party may be reasonably deemed to
conflict with those of the Indemnifying Party, then the Indemnified Party shall
have the right to select separate counsel and to assume the Indemnified Party's
defense of such Claim or Legal Proceeding, with the reasonable fees, expenses
and disbursements of such counsel to be reimbursed by the Indemnifying Party as
incurred. The Indemnifying Party shall give the Indemnified Party notice in
writing within five (5) days after receiving the Claim Notice from the
Indemnified Party in the event of Legal Proceeding or otherwise of its intent to
exercise its right to assume the defense of such action or Claim. If the
Indemnified Party has received no such notice within such time period, the
Indemnified Party may take control of the defense of such action or Claim but
the Indemnifying Party shall pay the reasonable costs of such defense incurred
by the Indemnified Party (and all such costs shall be deemed to be Losses for
purposes of this Article 7).
(b) Whenever the Indemnifying Party is entitled
to defend any Claim hereunder, the Indemnified Party may elect, by notice in
writing to the Indemnifying Party, to continue to participate through its own
counsel, at its expense, but the Indemnifying Party shall have the right to
control the defense of the Claim or the Legal Proceeding; provided, that the
Indemnifying Party retains counsel reasonably satisfactory to the Indemnified
Party and pursuant to an arrangement reasonably satisfactory to the Indemnified
Party; otherwise, the Indemnified Party shall have the right to control the
defense of the Claim or the Legal Proceeding.
(c) Notwithstanding any other provision contained
in this Agreement, the party controlling the defense of the Claim or the Legal
Proceeding shall not settle any such Claim or Legal Proceeding without the
written consent of the other party; provided, that if the Indemnified Party is
controlling the defense of the Claim or the Legal Proceeding and shall
27
have, in good faith, negotiated a settlement thereof, which proposed settlement
contains terms that are reasonable under the circumstances, then the
Indemnifying Party shall not withhold or delay the giving of such consent (and
in the event the Indemnifying Party and Indemnified Party are unable to agree as
to whether the proposed settlement terms are reasonable, the Indemnifying Party
and Indemnified Party will submit the disagreement to a court of competent
jurisdiction for resolution as set forth in this Agreement). In the event that
the Indemnifying Party is controlling the defense of the Claim or the Legal
Proceeding and shall have negotiated a settlement thereof, which proposed
settlement is substantively final and unconditional as to the parties thereto
(other than the consent of the Indemnified Party required under this Section
7.4) and contains an unconditional release of the Indemnified Party and does not
include the taking of any actions by, or the imposition of any restrictions on
the part of, the Indemnified Party and the Indemnified Party shall refuse to
consent to such settlement, the liability of the Indemnifying Party under this
Article 7, upon the ultimate disposition of such Legal Proceeding or Claim,
shall be limited to the amount of the proposed settlement with any amounts over
and above the amount of the proposed settlement being the liability of the
Indemnified Party; provided, however, that in the event the proposed settlement
shall require that the Indemnified Party make an admission of liability, a
confession of judgment, or shall contain any other non-financial obligation
which, in the reasonable judgment of the Indemnified Party, renders such
settlement unacceptable, then the Indemnified Party's failure to consent shall
not give rise to the limitation of Indemnifying Party's liability as provided
for in this Section 7.4, and the Indemnifying Party shall continue to be liable
to the full extent of such Legal Proceeding or Claim; and provided further, that
notwithstanding any provision to the contrary, no indemnifiable Claims or Losses
with respect to Taxes shall be settled without the prior written consent of the
SSI.
7.5. Limitations of Indemnity.
------------------------
7.5.1. Neither VASCO nor SSI shall make a Claim for
indemnifiable Losses pursuant to Section 7.2(a) or Section 7.3(a), as the case
may be, unless the aggregate amount of such indemnifiable Losses for either
VASCO or SSI, as the case may be, exceeds Ten Thousand Dollars ($10,000) (the
"THRESHOLD AMOUNT") at which point such recovery shall include the full amount
of any such indemnifiable Losses, including the Threshold Amount and such claim
is made within three (3) years from the Effective Date. Except for Third Party
Claims or Losses set forth in Section 7.4.2 above, each of VASCO's and SSI's
respective indemnifiable Losses, at any time within the indemnity period (as
provided in the preceding sentence), shall be limited to an amount (such amount
being the "CAP") equal to (a) $3,073,093.83 minus (b) the sum of: (i) the then
fair market value of the SSI Preferred Stock Certificates held by VASCO plus the
value of any consideration received by VASCO for the sale of any shares of such
SSI Preferred Stock Certificates; and (ii) the then fair market value of the
Promissory Note plus all payments previously made on such Promissory Note,
provided however, that if SSI is not then in default on such Promissory Note,
the fair market value of the Promissory Note shall be deemed to be its then
current balance including interest. For purposes of calculating the amount of an
Indemnified Party's Losses incurred by such Indemnified Party arising out of or
resulting from any breach of a representation, covenant or agreement, the
references to a "Material Adverse Effect" or materiality (or other correlative
terms) shall be disregarded. Neither the Cap nor the Threshold Amount shall
apply to, nor shall either in any way limit the right of any party to pursue,
any rights, remedies or Claims based on fraud.
28
7.5.2. SSI shall not be entitled to indemnification
under this Article 7, and VASCO shall have no liability whatsoever, for any
Claim or Loss arising out of, related to or based on the assistance provided to
SSI by employees of VASCO, including without limitation Xxxxx Xxxx, in the
preparation of the SSI Business Plan.
7.5.3. No party shall be entitled to indemnification
under this Article 7 if and to the extent that such party's claim for
indemnification is directly or indirectly related to a breach by such Person of
any representation, warranty, covenant or other agreement set forth in this
Agreement.
7.5.4. No claim under this Article 7 shall be made
unless an Indemnity Notice, or a Claim Notice (as applicable) has been given
prior to the applicable survival period.
7.6. Characterization of Indemnity Payments. Except as
otherwise required by applicable Law, any payment made pursuant to this Article
7 shall be treated, for Tax purposes, as an adjustment to the Purchase Price and
will be allocated in a manner consistent with the allocation set forth on
Schedule 2.7.
ARTICLE 8
POST-CLOSING COVENANTS
----------------------
8.1. Further Cooperation. From and after the Closing Date,
VASCO shall (i) assist and cooperate with SSI in effecting the orderly transfer
of the Purchased Assets to SSI and/or its Affiliate and (ii) execute and deliver
such documents and take such other actions as SSI reasonably requests to fully
consummate the Contemplated Transactions.
8.2. Post-Closing Receivables. If, at any time after the
Effective Date, VASCO shall receive any payments on account of any Accounts
Receivables related to the Purchased Assets, where such Accounts Receivable were
earned by SSI after the Effective Date, then VASCO shall hold such funds in
trust for, and shall promptly remit such funds to SSI immediately upon receipt
thereof.
8.3. Post-Closing Excluded Assets. If, at any time after the
Effective Date, SSI shall receive any payments on account of any of the Excluded
Assets (including, without limitation, any Accounts Receivable related to the
Purchased Assets, where such Accounts Receivable were earned by VASCO prior to
the Effective Date), then SSI shall hold such funds in trust for, and shall
promptly remit such funds to VASCO immediately upon receipt thereof.
8.4. Post-Closing Expenses and Liabilities. Except as
otherwise provided in this Agreement, it is understood and agreed that VASCO
shall retain all liability for, and SSI shall not assume or have any obligation
with respect to, any expenses, obligations or liabilities of VASCO which arise,
accrue or occur prior to the Effective Date and are attributable to the
Purchased Assets, the Business, or the Personnel (all such obligations and
liabilities being herein referred to as the "EXCLUDED OBLIGATIONS"), including,
without limitation, all obligations and liabilities attributable to any and all
obligations arising under Law or Contract with respect to any employee benefit
plan, program, or arrangement and/or any of the Personnel in connection with his
or her employment by VASCO. If, at any time after the Effective Date, SSI shall
29
receive any demand for payments on account of any expenses, obligations or
liabilities related to the Excluded Obligations, then SSI shall promptly notify
VASCO of such demand. If VASCO does not dispute such underlying third-party
demand for payment, VASCO shall promptly remit sufficient funds to SSI for
payment thereon. If, however, VASCO disputes the underlying third-party demand
for payment, VASCO shall (a) notify SSI of the dispute, (b) work directly with
such third party to resolve such dispute and (c) have no obligation to tender
any payment to SSI on account of such disputed third-party demand.
8.5. Public Announcements.Neither party shall issue any public
report, statement, press release or similar item or make any other public
disclosure with respect to the substance of this Agreement prior to the approval
of the non-disclosing party and any such approval shall be provided on a timely
basis and shall not be unreasonably withheld; provided, however, that, to the
extent that either party is required by applicable Law to issue such a public
statement or disclosure within a certain amount of time, such party shall be
permitted to do so without the approval of the other party, so long as the
disclosing party has made commercially reasonable efforts to obtain such
approval prior to the issuance of the public statement or disclosure.
8.6. Audit Right. For so long as amounts are due and owing to
VASCO pursuant to Section 2.5 or 2.6, and for an additional six (6) months
thereafter, VASCO or its representative shall be provided, at VASCO's sole
expense, full access to all books and records of SSI with respect to the
Purchased Assets for the purpose of auditing and confirming SSI's compliance
with its payment obligations under Sections 2.5 and 2.6 (the "AUDIT RIGHT");
provided, however, that, subject to clause (b) of the immediately succeeding
sentence, VASCO's Audit Right may be exercised no more frequently than once
every six (6) months. If, upon exercise of its Audit Right, VASCO or its
representative determines that SSI has underpaid its obligation pursuant to
either Section 2.5 or 2.6, calculated on a monthly basis, by five percent (5%)
or more (the "UNDERPAYMENT AMOUNT"), (a) interest at the rate of one and
one-half percent (1.5%) per month shall be assessed on the Underpayment Amount
and shall be immediately due and payable to VASCO and (b) until the Underpayment
Amount plus accrued interest thereon is paid to VASCO, VASCO shall be entitled
to exercise its Audit Right, at SSI's sole expense, once every three (3) months
thereafter.
8.7. SSI Stock. For so long as VASCO owns a majority of the
SSI Preferred Stock, SSI shall not (a) amend its Organizational Documents in
such a manner as to adversely affect the rights, privileges or preferences of
VASCO in such capital stock or (b) take any other action which would effect the
same result.
ARTICLE 9
TAXES RELATED TO PURCHASED ASSETS
---------------------------------
SSI shall pay and shall indemnify and hold harmless VASCO from
and against all Taxes related to the transfer of the Purchased Assets, if any.
All Taxes on the ownership or use of the Purchased Assets (specifically
excluding Taxes measured by the net income of any party) that accrue on or prior
to the Effective Date shall be paid by VASCO, and all such Taxes that accrue
after the Effective Date shall be paid by SSI; provided, that all such Taxes
shall be
30
prorated to the Effective Date. Should SSI pay any such Taxes, VASCO shall,
within thirty (30) days of SSI's request, pay to SSI that portion of such Taxes
that accrued prior to the Effective Date.
ARTICLE 10
SECURITIES LAWS REPRESENTATIONS
-------------------------------
VASCO acknowledges that the shares of SSI Preferred Stock to
be delivered to VASCO pursuant to this Agreement have not been registered under
the Securities Act or any other state securities laws, and therefore may not be
resold without compliance with the Securities Act. VASCO further acknowledges
that the SSI Preferred Stock to be acquired by VASCO pursuant to this Agreement
is being acquired solely for the account of VASCO, with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution.
10.1. Compliance with Law. VASCO covenants, warrants and
represents that none of the shares of SSI Preferred Stock issued to VASCO will
be offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the Securities Act and all of the applicable provisions of the rules and
regulations of the SEC and applicable state securities Laws. All the SSI
Preferred Stock shall bear a legend restricting the sale, assignment,
hypothecation or other disposition of the SSI Preferred Stock unless such
disposition can be made in accordance with applicable securities Laws.
10.2. Economic Risk; Sophistication. VASCO is able to bear the
economic risk of an investment in the SSI Preferred Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the proposed investment in the SSI
Preferred Stock. VASCO or its representative has had an adequate opportunity to
ask questions and receive answers from the officers of SSI concerning any and
all matters relating to the Contemplated Transactions including, without
limitation, the background and experience of the current and proposed officers
and directors of SSI, the plans for the operations of the business of SSI, the
business, operations and financial condition of SSI, the SSI Business Plan and
any plans for additional acquisitions and the like.
10.3. Accreditation. VASCO covenants, warrants and represents
that it is an Accredited Investor with respect to the purchase of the SSI
Preferred Stock pursuant to this Agreement.
10.4. SSI Common Stock; Rule 144(k). SSI covenants, warrants
and represents that all SSI Common Stock issued to VASCO upon conversion or
redemption of, or as dividend shares upon, the SSI Preferred Stock purchased by
VASCO pursuant to this Agreement shall be validly issued, fully paid and
nonassessable, free and clear of all Encumbrances and, if publicly traded, all
such SSI Common Stock shall be registered in accordance with the terms and
provisions of SSI's Certificate of Incorporation attached hereto as Exhibit I
and as may thereafter be amended; provided, however, and without limiting the
foregoing, SSI and VASCO
31
acknowledge and agree that, to the extent that any such SSI Common Stock is
issued to VASCO on a date on or after the second anniversary of the Effective
Date, such SSI Common Stock shall be exempt from the registration requirements
of the Securities Act pursuant to Rule 144(k) thereof.
ARTICLE 11
MISCELLANEOUS
-------------
11.1. Notices. All notices, documents or other deliverables
required to be given, sent or delivered to any of the parties to this Agreement
shall be in writing and shall be deemed to have been sufficiently given, sent or
delivered, subject to the further provisions of this Section 11.1, for all
purposes when presented personally to such party or sent by certified or
registered mail, return receipt requested, with proper postage prepaid, or any
United States national overnight delivery service, with proper charges prepaid,
or by facsimile transmission with receipt confirmed by such party, to the
sender, at its address set forth below:
If to SSI:
----------
0000 Xxxxx Xxxxxxx Xxxx Xxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxx X0X 0X0
XXXXXX
Fax:
Attention: King Xxxxx, Chief Executive Officer
with a copy to:
Morse, Zelnick, Rose & Lander, LLP
000 Xxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx Xxxxxxx, Esquire
If to VASCO:
-----------
0000 Xxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Fax:
Attention: T. Xxxxxxx Xxxx, Chief Executive Officer
with a copy to:
00
Xxxxxx Xxxxxxxx LLP
000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Fax: 000-000-0000
Attention: Xxxxxx Xxxxxx, Esquire
Such notice shall be deemed to be received when delivered if
delivered personally, or the next Business Day after the date sent if sent by a
United States national overnight delivery service, or three (3) Business Days
after the date mailed if mailed by certified or registered mail. Any notice of
any change in such address shall also be given in the manner set forth above.
Whenever the giving of notice is required, the giving of such notice may be
waived in writing by the party entitled to receive such notice.
11.2. No Third Party Beneficiaries. Except as is otherwise
expressly provided in this Agreement, this Agreement is not intended to, and
does not, create any rights in or confer any benefits upon anyone other than the
parties hereto.
11.3. Schedules and Exhibits. All schedules and exhibits
attached to this Agreement are incorporated by reference into this Agreement for
all purposes. Unless the context otherwise requires, all references herein to
"Schedule" or "Exhibit" are references to the schedules and exhibits attached to
this Agreement.
11.4. Expenses. The parties to this Agreement shall pay their
own expenses incident to the preparation, negotiation and execution of this
Agreement including, without limitation, all fees and costs and expenses of
their respective accountants and legal counsel.
11.5. Further Assurances. Each of the parties hereto shall, at
their own respective expense, from time to time upon the request of the other
party, execute and deliver, or cause to be executed and delivered, at such times
as may reasonably be requested by such other party, such other documents,
certificates and instruments and take such actions as such other party deem
reasonably necessary to consummate more fully the Contemplated Transactions.
11.6. Entire Agreement; Amendment. This Agreement, the
Collateral Documents and any other documents, instruments or other writings
delivered or to be delivered pursuant to this Agreement constitute the entire
agreement among the parties with respect to the subject matter of this Agreement
and supersede all prior agreements, understandings, and negotiations, whether
written or oral, with respect to the subject matter of this Agreement. None of
the terms and provisions contained in this Agreement can be changed without a
writing signed by all parties hereto.
11.7. Section and Paragraph Titles. The section and paragraph
titles used in this Agreement are for convenience only and are not intended to
define or limit the contents or substance of any such section or paragraph.
Unless the context otherwise requires, all references herein to "Section" or
"Article" are references to the sections and articles of this Agreement.
11.8. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of each of the parties to this Agreement and their
respective heirs, personal representatives, and successors and permitted
assigns. Neither SSI nor VASCO shall have the
33
right to assign this Agreement without the prior written consent of the other
and such consent shall not be unreasonably withheld.
11.9. Counterparts. This Agreement may be executed in any
number of counterparts, including by means of facsimile, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute one and the same instrument.
11.10. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or such provision, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
11.11. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF DELAWARE WITHOUT
GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE
STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY OTHER JURISDICTION OTHER THAN THE STATE OF DELAWARE.
11.12. WAIVER OF JURY TRIAL. EACH OF SSI AND VASCO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
CONTEMPLATED TRANSACTIONS.
11.13. No Tax Representations. Without affecting the parties'
obligations herein, SSI and VASCO agree that no representation or warranty has
been made by them as to the Tax consequences of the Contemplated Transactions,
that each is engaging separate counsel with respect to such Tax consequences,
and that each is assuming its own respective Tax liability, if any, arising out
of this Agreement or the consummation of the Contemplated Transactions.
11.14. Waiver. No failure or delay by any party hereto in
exercising any right, power or privilege hereunder or under any of the
Collateral Documents (and no course of dealing between the parties) shall
operate as a waiver of any such right, power or privilege. No waiver of any
default on any one occasion shall constitute a waiver of any subsequent or other
default. No single or partial exercise of any such right, power or privilege
shall preclude the further or full exercise of such right, power or privilege.
11.15. Default In the event of default hereunder, the
non-defaulting party shall be entitled to recover reasonable attorney's fees and
costs in enforcing the terms and provisions hereof.
11.16. Relationship of the Parties. The relationship between
SSI and VASCO established by this Agreement is solely that of vendor and vendee
and nothing contained herein shall be deemed to create a joint venture or other
fiduciary relationship between SSI and
34
VASCO. Neither SSI nor VASCO, nor their respective officers, directors,
managers, employees, representatives or agents, shall be deemed to be agent or
servant of the other party nor have the right or authority to enter into any
contract, agreement, commitment or other obligation in the name of or on behalf
of the other party or otherwise purport to bind the other party in any manner.
11.17. Interpretation. This Agreement shall not be construed
more strictly against either party hereto regardless of which party is
responsible for its preparation, it being agreed that this Agreement was fully
negotiated by both parties.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURES FOLLOW]
35
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first written above.
SECURED SERVICES, INC.
By: /s/King X. Xxxxx
--------------------
Name: King X. Xxxxx
Title: President and Chief Executive Officer
VASCO DATA SECURITY INTERNATIONAL, INC.
By: /s/Xxxxxxxx X. Xxxx
--------------------
Name: Xxxxxxxx X. Xxxx
Title: Executive Vice President & Chief
Financial Officer
36
