ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") dated February __,
2000 (the "Effective Date") is made between Network-1 Security Solutions, Inc.
("Seller"), a Delaware corporation doing business at 0000 Xxxxxxx Xxxx, Xxxxxxx,
XX 00000, Exodus Communications, Inc. ("Buyer"), a Delaware corporation doing
business at 0000 Xxxxxxx Xxxxxxx Xxxx., Xxxxx Xxxxx, XX 00000 and, as to Section
10 only, the Key Employees of Seller listed on the signature page hereof. Seller
is engaged in various lines of business, including a professional services
operation engaged in the business of rendering professional design and
consulting services relating to network security (the "Purchased Business") and
owns various assets used in connection with or relating to the Purchased
Business defined below as the Purchased Assets. Buyer is engaged, among other
things, in the business of providing professional consulting services relating
to Web hosting and wants to acquire the Purchased Assets from Seller and hire
certain Seller employees, defined below as the Employees, used to render
services in connection with the Purchased Business.
The parties, therefore, agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
have the following meanings:
1.1 "Assignment and Assumption Agreement" means the Assignment
and Assumption Agreement attached hereto as Exhibit 1 pursuant to which the
Contracts are assigned and certain obligations thereunder are assumed.
1.2 "Xxxx of Sale" means means the Xxxx of Sale attached
hereto as Exhibit 2 pursuant to which the Purchased Assets are transferred and
assigned to Buyer.
1.3 "Cause" means:
(i) Employee's failure to appear for work at Buyer
for more than 30 consecutive days (other than due to medical reasons, disability
or death);
(ii) Employee engaging in knowing and intentional
illegal conduct which is injurious to Buyer or its affiliates;
(iii) Employee being convicted of a felony or
committing an act of dishonesty or fraud against, or the misappropriation of
property belonging to, Buyer or its affiliates;
(iv) Employee breaching, in any material respect, the
terms of any invention assignment or confidentiality agreement with Buyer;
(v) Employee's commencement of employment with
another employer while an employee of Buyer; or
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(vi) Employee's willful refusal to perform express
duties reasonably assigned by Employee's supervisor after being provided with
written notice from Buyer of the wrongful nature of such refusal and a
reasonable subsequent opportunity to cure such breach in a manner reasonably
satisfactory to Buyer.
1.4 "Closing" means the day upon which the conditions to
concluding this Agreement are met and the parties exchange the deliveries
specified in Section 2 below.
1.5 "Consulting Materials" means all training, network design
and consulting materials used in connection with the Purchased Business and
listed on Exhibit A, Exhibit E, Exhibit F, and Exhibit H.
1.6 "Contracts" means those agreements, if any, between Seller
and third parties which are assigned to Buyer either (a) at Closing, in
accordance with the terms of such agreements without the necessity of the third
party's consent and without breach thereof; or (b) either at Closing or within
ninety (90) days following the Closing, with the consent in writing of the
applicable third parties as required by the terms thereof, in each case as
evidenced by the inclusion of such contract on Exhibit B hereto and on Schedule
1 to the Assignment and Assumption Agreement at Closing or by an amendment to
each thereto signed by both parties at the time of such assignment, which
currently includes only the CyberCop software license relating to the license of
Third Party Software.
1.7 "Disclosure Schedule" means Exhibit C to this Agreement.
1.8 "Employees" means those Seller employees used to render
services in connection with the Purchased Business listed on Exhibit D who
accept employment with Buyer.
1.9 "Good Reason" means failure by Buyer to pay an Employee
the agreed upon compensation or benefits pursuant to such Employee's offer
letter with Buyer, breach by Buyer of the offer letter with an Employee, or any
other circumstance constituting "constructive termination" of the Employee under
California law.
1.10 "Intangible Assets" means all right, title and interest
in and to the Software, the Publications and the Consulting Materials, the other
intangible assets identified on Exhibit E to this Agreement and all Intellectual
Property Rights therein.
1.11 "Intellectual Property Rights" has the meaning specified
in Section 4.13.
1.12 "Moral Rights" means any right to claim authorship of a
work, any right to object to any distortion or other modification of a work, and
any similar
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right, existing under the law of any country in the world, or under any treaty.
1.13 "Ordinary Course" means in the ordinary course of
business consistent with past practices.
1.14 "Publications" means those publications of Seller or any
of the Employees relating to the Purchased Business and listed on Exhibit F.
1.15 "Purchase Price" means the purchase price payable to
Seller for the Purchased Assets as specified in Section 3.1 below
1.16 "Purchased Assets" means the various assets, new or used,
tangible or intangible, that are required or useful, or are otherwise used by
Seller, in connection with the ownership, development or operation of the
Purchased Business, consisting of the Tangible Assets, the Intangible Assets,
the Third Party Software, Seller's rights in the Contracts, along with copies of
all relevant books and records of Seller pertaining to the Tangible Assets, the
Intangible Assets, the Contracts and the Purchased Business, certain prepaid
customer contracts and deposits that are assignable with such customers'
consents (Seller will cooperate with Buyer and Employees in efforts to obtain
customer consents to such assignments), and the other assets, if any, listed on
Exhibit G hereto. For the avoidance of doubt, the Purchased Assets will not
include cash, accounts receivable or marketable securities held by Seller or any
assets used by Seller in connection with its network security software business.
1.17 "Software" means the computer program in object and
source code owned and developed by Seller and used in connection with the
Purchased Business as described on Exhibit E, H and I, including all predecessor
versions, and all related user and developer documentation.
1.18 "Tangible Assets" means the computer and network
equipment and other personal property and tangible assets used in connection
with the Purchased Business and listed on Exhibit I hereto.
1.19 "Third Party Software" means the third party software
used in connection with the Tangible Assets and listed on Exhibit I hereto.
1.20 "Year 2000 Compliant" means to be able to accurately
process, provide, and/or receive date/time data between the twentieth and
twenty-first centuries, including years 1999 and 2000 and leap year calculations
without malfunction, incorrect results or the degradation in performance as a
result of such data; unless caused by, other third party technology.
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2. Purchase and Sale.
2.1 Purchase and Sale. On the Closing, Seller shall grant,
sell, convey, assign, transfer and deliver to Buyer, and Buyer shall purchase
and accept from Seller the Purchased Assets, free and clear of all liens,
claims, encumbrances, security interests, restrictions and rights of any third
parties.
2.2 Transfer of Purchased Assets. On or before the Closing,
Seller shall, at its expense, deliver the Purchased Assets to Buyer at Buyer's
principal place of business (with the Software, Consulting Materials, and
Publications to be delivered in a mutually acceptable electronic format if
either party so requests) or at such other locations as identified on Exhibit I
and times and by such other means as are agreed by the parties. The transfer of
title to the Purchased Assets shall be evidenced by the executed and delivered
Xxxx of Sale attached as Exhibit 1 and, as to any assigned Contracts, the
inclusion of such Contracts on Schedule 1 of the executed and delivered
Assignment and Assumption Agreement attached as Exhibit 2. Purchased Assets in
the physical possession of Employees will be deemed delivered by the transfer by
such Employees to become Buyer employees with such Purchased Assets in their
possession. Certain Consulting Materials will be deemed delivered when posted
via Common Courier or as otherwise agreed by the parties.
2.3 Further Action. On and after the Closing, Seller will
execute and deliver to Buyer such documents and instruments of transfer and take
such further action as may be reasonably requested by Buyer to transfer to Buyer
the Purchased Assets and vest or perfect in Buyer good and marketable title in
and to the Purchased Assets subject to the terms of this Agreement. Seller
hereby waives any Moral Rights with respect to the Software and Intangible
Assets.
2.4 No Assumption of Liability. Except to the extent Buyer
expressly assumes any prospective liability under the Contracts (other than for
breach thereof prior to Closing) pursuant to the Assignment and Assumption
Agreement, the parties agree that Buyer is not assuming, has not assumed, and
will not by the execution, delivery or performance of this Agreement, or
otherwise, assume or otherwise become responsible for any liability or
obligation of any nature of Seller, including without limitation: (i) any
liability or obligation, absolute, contingent, accrued or otherwise, relating to
the Purchased Assets or the Purchased Business or any other obligation or
liability of Seller; (ii) any and all liabilities, whether now existing or
hereafter arising, with respect to the sale, lease, license or other provision
of any products, software or services relating to the Purchased Assets or the
Purchased Business; (iii) any accounts or notes payable, or liabilities for
breach of warranty whenever arising; (iv) any tax liabilities related to the
Purchased Assets, the Employees, or the Purchased Business, including sales or
use taxes associated with transfer of same to Buyer hereunder; (v) any taxes,
wage claims or liabilities for employment-related contributions or liabilities
or any other employee-related claims and liabilities; (vi) any liabilities
arising from a failure to properly withhold from employees or a failure to file
required tax returns or reports with
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respect to employees or consultants; (vii) any compensation or benefits to which
the Seller's employees are entitled from Seller, including without limitation,
any liability to any Employee for the payment of any and all accrued and unused
vacation time, sick pay or severance pay; and (viii) any liability, obligation
or claim to or by NextVISION (including without limitation any claim under the
Alliance Partner Agreement with NextVISION claiming that Buyer may only do
business in certain Latin American countries through NextVISION); (ix) any
liability, obligation or claim to or by City of Hope (including without
limitation those described in the complaint filed by City of Hope against Seller
in July 1999 in the Los Angeles Superior Court) (items (i) through (viii) above
are collectively referred to herein as "Pre-Closing Risks"). Seller hereby
agrees to indemnify, defend and hold Buyer harmless from and against all loss,
liability, claims and expenses (including reasonable attorneys' fees) related to
such Pre-Closing Risks; provided that Buyer gives Seller reasonable notice of
such claim and reasonably cooperates in the defense and settlement of such
claim.
3. Purchase Price and Manner of Payment.
3.1 Purchase Price. The total Purchase Price for the Purchased
Assets will be $4,000,000 in cash, payable as follows: (a) $2,700,000 in the
form of a wire transfer of immediately available funds at the Closing; and (b)
$1,300,000 to be deposited (the "Aggregate Escrow Amount") with an Escrow Agent
pursuant to the Escrow Agreement attached hereto as Exhibit 3. The Purchase
Price shall be subject to adjustment and offset as specified in Sections 2.4,
3.2, 9.1 and in the Escrow Agreement.
3.2 Release of Contract Holdback Amount Upon Contract
Assignments. The parties agree that an aggregate of $300,000 of the Aggregate
Escrow Amount (the "Contract Holdback Amount") will be released from Escrow to
Seller only if within ninety (90) days of the Closing (the "Holdback Period")
Buyer receives purchase orders or enters into other binding contractual
commitments in Buyer's name, from any of the ten former customers of the
Purchased Business listed on Schedule 3.2 ("LISTED CUSTOMERS"), for or relating
to consulting services generated by the Employees or Seller ("QUALIFYING
ORDERS"); and in that case, the amount of the Contract Holdback Amount so
released will equal the aggregate "unconditionally committed dollar amount" of
the Qualifying Orders from the Listed Customers, up to the Contract Holdback
Amount. Buyer shall make reasonable good faith efforts to solicit Qualifying
Orders from the Listed Customers and will afford the Employees reasonable
opportunity to solicit Qualifying Orders from the Listed Customers. The term
"unconditionally committed dollar amount" shall mean and refer to the amount
unconditionally payable under the Qualifying Order upon or prior to delivery of
the requested service, irrespective of whether such amount has actually been
paid or revenue thereon has been recognized. An assignment of a purchase order
by Seller to Buyer from one of the Listed Customers for consulting services from
the Employees, in accordance with the assignment provisions of such purchase
order or with the customer's consent, will qualify as a Qualifying Order, but
only the
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dollar amount of such assigned purchase order that Buyer can xxxx after Closing
will qualify as an "unconditionally committed dollar amount" entitling release
of an equivalent dollar amount under the preceding sentence. The portion of the
Contract Holdback Amount to which Seller is entitled under the foregoing
provisions shall be released to Seller, and the balance, if any, of the Contract
Holdback Amount (to which Seller is not entitled) will be returned to Buyer,
when and as provided in Section 1(b) of the Escrow Agreement (or if the matter
involves a "Contested Claim" as defined in the Escrow Agreement, when and as
provided in Section 4(b) of the Escrow Agreement).
3.3 EXPENSES AND TAXES; PURCHASE PRICE ALLOCATION. Each party
will bear its own attorneys, accountants, financial advisor and other fees and
costs related to preparation of this Agreement. Seller will pay all sales and
use tax associated with the transaction hereby contemplated and the transfer of
the Purchased Assets and will indemnify Buyer from all loss, liability, claim,
risk and expense (including reasonable attorneys' fees) occasioned by Buyer's
failure to pay such taxes. Buyer will cooperate with Seller in minimizing any
such liability by allowing deliveries of Software and other intangibles to be
made electronically. In accordance with Section 6012(c)(10) of the California
Revenue and Taxation Code, Buyer and Seller agree that $51,940 of the Purchase
Price shall be allocated as a reasonable price for the tangible personal
property (including without limitation books and records of Seller pertaining to
the Intangible Assets) which is used to transfer the Software and other
Intangible Property included in the Purchased Assets. Buyer and Seller further
agree that this sum represents a reasonable price based upon their mutual good
faith estimate of the retail fair market value of the tangible personal property
based upon the cost of materials and labor used to produce such tangible
personal property. Seller agrees that the balance of the Purchase Price shall be
allocated as determined by Buyer and Seller in consultation with their auditors
and financial advisors and that Seller and Buyer shall adopt that allocation on
any relevant tax returns.
4. Representations and Warranties of Seller. Seller hereby represents
and warrants to Buyer that, except as set forth in the Disclosure Schedule
attached hereto as Exhibit C, the matters set forth in the following subsections
of this Section 4 are true and correct as of the Effective Date and the Closing.
4.1 Organization and Good Standing. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, has the corporate power and authority to own, operate and
lease its properties and to carry on the Purchased Business as now conducted and
as presently proposed to be conducted, and is duly qualified and in good
standing as a foreign corporation in each jurisdiction where the nature of its
business or location of its properties (including the Purchased Assets) requires
such qualification and where the failure to be so qualified would have a
Material Adverse Effect. "Material Adverse Effect" and "Material Adverse
Change," when used in reference to the Seller, the Purchased Assets, or the
Purchased Business mean or refer to any event,
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circumstance, change, or effect that is (or with the passage of time will be),
individually or in the aggregate with all other adverse events, circumstances,
changes, and effects, materially adverse to the condition (financial or
otherwise), properties, assets, liabilities, Intellectual Property rights,
business, prospects or operating results of the Seller, Purchased Assets, or
Purchased Business, as applicable.
4.2 Subsidiaries and Guaranties. Except as set forth in Item
4.2 of the Disclosure Schedule, Seller has no subsidiaries or any interest,
direct or indirect, in any corporation, partnership, limited partnership,
limited liability company, association, joint venture or other business entity.
None of the Purchased Assets are owned or held by any of Seller's subsidiaries
or by any affiliate of Seller. Seller is not a guarantor of any obligation of a
third party, whether or not such third party is related to or affiliated with
Seller.
4.3 Power, Authorization and Validity.
(a) Seller has all necessary right, corporate power,
legal capacity and authority to enter into, execute and deliver this Agreement,
to consummate the sale to Buyer of the Purchased Assets contemplated hereby and
the other transactions contemplated by this Agreement and the Xxxx of Sale,
Assignment and Assumption Agreement, Escrow Agreement and any other ancillary
agreements entered into pursuant to this Agreement ("Ancillary Agreements").
This Agreement has been, and at the Closing the Ancillary Agreements will be,
duly executed and delivered by Seller, and (assuming due authorization,
execution and delivery by Buyer) this Agreement constitutes, and, upon Seller's
execution of each of the Ancillary Agreements, each of the Ancillary Agreements
will constitute, a legal, valid and binding obligation of Seller enforceable
against Seller and against the funds deposited in escrow pursuant to the Escrow
Agreement in accordance with its respective terms, except as to the effect, if
any, of (a) applicable bankruptcy and other similar laws affecting the rights of
creditors generally and (b) rules of law governing specific performance,
injunctive relief and other equitable remedies. The execution, delivery and
performance by Seller of this Agreement and each of the Ancillary Agreements
have been duly and validly approved and authorized by all necessary corporate
action on the part of Seller's Board of Directors. No shareholder approval of
this Agreement or the sale of the Purchased Assets is required under applicable
law.
(b) No filing, authorization or approval with or of
any governmental entity is necessary or required to be made or obtained prior to
the Closing to enable Seller to enter into, and to perform its obligations
under, this Agreement and the Ancillary Agreements.
4.4 No Violation of Existing Agreements or Laws. Neither the
execution and delivery of this Agreement or any Ancillary Agreement, nor the
consummation of the transactions provided for herein or therein, will conflict
with, or (with or without notice or lapse of time, or both) result in a
termination, breach or
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violation of (a) any provision of the Articles of Incorporation or Bylaws of
Seller, as currently in effect, (b) any instrument or contract to which Seller
or is a party or by which Seller is bound or (c) any federal, state, local or
foreign judgment, writ, decree, order, statute, rule or regulation applicable to
Seller or any subsidiary or their respective assets or properties. Seller is not
a party to, or otherwise subject to any provision contained in, any instrument
evidencing indebtedness, any agreement relating thereto or any other contract or
agreement (including its Articles of Incorporation) which materially restricts
or otherwise limits Seller's power or authority to transfer the Purchased
Assets.
4.5 Consents. The execution and delivery of this Agreement and
the Ancillary Agreements do not and the performance of this Agreement and the
Ancillary Agreements by Seller will not require any consent, approval,
authorization or other action by or filing with or notification to, any court or
governmental or regulatory authority except as to filings by Seller with the
Securities and Exchange Commission.
4.6 Litigation. Except as disclosed in Item 4.6, there is no
action, proceeding or claim or investigation pending against Seller, the
Purchased Assets or the Employees or any properties or rights of Seller, which
relate to or arose out of or are based upon the ownership or use of the
Purchased Assets or the operation of the Purchased Business or the actions of
any Employees in connection with the Purchased Assets or the Purchased Business,
before any court, arbitrator or administrator or governmental body before any
court or administrative agency nor is there any basis therefore, nor has any
party threatened same. There is no action, suit, proceeding, claim, arbitration
or investigation pending or as to which Seller has received any notice of
assertion against Seller or with respect to any of the Purchased Assets or any
Employee, which in any manner challenges or seeks to prevent, enjoin, materially
alter or materially delay any of the transactions contemplated by this Agreement
or the Ancillary Agreements. There is no judgment, order, writ or decree of any
governmental authority applicable to Seller which might result in any Material
Adverse Change in the value of the Purchased Assets or the financial condition
or results of operations of the Purchased Business or Buyer's ability to offer,
support and market the Seller Services.
4.7 Solvency; No Fraudulent Conveyance. Seller is solvent and
able to pay its debts as they come due. Seller is not the subject of any
bankruptcy proceeding and there has not been any election or resolution to
dissolve or liquidate Seller. Sale of the Purchased Assets to Buyer does not
constitute a fraudulent conveyance and is for fair and adequate value.
4.8 Financial Information and Records. Seller has provided to
Buyer a true and correct copy of Seller's unaudited revenues and cost of goods
sold for the Purchased Business dated as of December 31, 1999 ("Latest Financial
Information") and has made available to Buyer access to all records of Seller
pertaining to the Purchased Assets (the "Financial Records").
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4.9 Taxes.
(a) Definitions. For purposes of this Agreement, the
following terms have the following meanings: "TAX" (and, with correlative
meaning, "TAXES" and "TAXABLE") means any and all taxes, including without
limitation (i) any income, profits, alternative or add-on minimum tax, gross
receipts, sales, use, value-added, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp, occupation,
net worth, premium, property, environmental or windfall profit tax, custom, duty
or other tax governmental fee or assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any governmental entity responsible for the imposition of any such
tax (domestic or foreign) (a "TAXING AUTHORITY"), (ii) any liability for the
payment of any amounts of the type described in clause (i) above as a result of
being a member of an affiliated, consolidated, combined or unitary group for any
Taxable period or as the result of being a transferee or successor thereof and
(iii) any liability for the payment of any amounts of the type described in
clause (i) or (ii) above as a result of any express or implied obligation to
indemnify any other person.
(b) No Tax Liability. Since January 1, 1999, no Tax
liability in connection with the Purchased Assets or Purchased Business has been
incurred other than in the Ordinary Course, and adequate provision has been made
for all Taxes since that date in accordance with past practices on a timely
basis. Seller has timely withheld and paid to the applicable financial
institution or Taxing Authority all amounts required to be withheld in
connection with amounts paid or owing to any Employee.
(c) Tax Returns. All Tax returns, statements, reports
and forms (including estimated Tax returns and reports and information returns
and reports) required to be filed with any Taxing Authority with respect to any
Taxable period ending on or before the Effective Time or Closing, by or on
behalf of Seller that relate to the Purchased Assets, or the Purchased Business
(collectively, the "SELLER RETURNS"), have been or will be filed when due
(including any extensions of such due date), and all amounts shown to be due
thereon on or before the Closing have been or will be paid on or before such
date.
(d) There is no claim, audit, action, suit,
proceeding, or investigation now pending or, to the best knowledge of Seller,
threatened against or with respect to Seller in respect of any Tax that relate
to the Purchased Assets or the Purchased Business, nor to the best knowledge of
Seller is there any basis therefor. There are no liabilities for Taxes that
relate to the Purchased Assets or the Purchased Business with respect to any
notice of deficiency or similar document of any Tax Authority received by Seller
which have not been satisfied in full (including liabilities for interest,
additions to tax and penalties thereon and related expenses). There are no liens
for Taxes upon any of the Purchased Assets.
(e) There is no contract, agreement, plan or
arrangement, including without limitation the provisions of this Agreement and
the Ancillary Agreements, covering any Employee that, individually or
collectively, could give rise to
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the payment of any amount that would not be deductible pursuant to Section 280G
or Section 162 of the Code (as determined without regard to Section 280G(b)(4)).
Other than pursuant to this Agreement, Seller is not a party to or bound by (or
will prior to the Effective Date or Closing become a party to or bound by) any
tax indemnity, tax sharing or tax allocation agreement relating to the Purchased
Assets, the Employees or the Purchased Business.
4.10 Title to and Condition of Purchased Assets. Seller owns
all the Purchased Assets and has good and marketable title in and to all of the
Purchased Assets, free and clear of any pledge, lien, collateral assignment,
security interest, mortgage, deed of trust, title retention, conditional sale or
other security arrangement, or any charge, adverse claim of title, ownership or
use, or any other encumbrance of any kind whatsoever ("ENCUMBRANCES"). Title to
all the Purchased Assets is freely transferable from Seller to Buyer, free and
clear of all Encumbrances without obtaining the consent or approval of any
person and the transfer of the Purchased Assets to Buyer and Buyer's use thereof
does not and will not infringe upon any Intellectual Property Rights of any
third party. No third party is using any element of the Purchased Assets nor
infringing on the Intellectual Property Rights therein. None of the material
intangible Purchased Assets that were used in the Purchased Business have been
removed from use in such business since August 1, 1999, other than to upgrade
outdated or inoperative equipment, except with respect to proceeds of accounts
receivable and except as necessary in the Ordinary Course. The current location
of all tangible Purchased Assets is set forth on Item 4.10 , and Seller will not
re-locate any material Purchased Assets from the location(s) shown for such
Purchased Assets on Item 4.10 without Buyer's prior written consent. Seller has
paid in full all royalties, fees and any other payments, if any, that have ever
become due and payable under all license agreements included among the Contracts
or related to any of the Purchased Assets and no further royalties, license
fees, maintenance and support fees or any other payments whatsoever are due and
payable, nor will any further royalties, license fees, maintenance and support
fees or any other payments whatsoever in the future become due and payable,
under any license agreements included among the Contracts or with respect to any
Purchased Assets under any circumstances. Except as may be set forth in the
Disclosure Schedule or any schedule to this Agreement, none of the Purchased
Assets is licensed from any third party and no royalties, license fees or
similar payments are due or payable (or may become due or payable) to any third
party under any license or other agreement. None of the Purchased Assets is
licensed to any third party.
4.11 Absence of Certain Changes. Since the date of Latest
Financial Information (the "Latest Financial Information Date"), Seller has
carried on the Purchased Business in the Ordinary Course substantially in
accordance with the procedures and practices in effect on the date of the Latest
Financial Information Date. Except as disclosed in Item 4.11 or in connection
with the transactions contemplated by this Agreement and the Ancillary
Agreements, since the Latest Financial Information Date there has not been with
respect to the Purchased Business or any of the Purchased Assets:
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(a) any change in the Purchased Business or any of
the Purchased Assets which change by itself or in conjunction with all other
such changes, whether or not arising in the Ordinary Course, have had or is
reasonably likely to have a Material Adverse Effect on the Purchased Assets or
the Purchased Business;
(b) any contingent liability incurred in connection
with the Purchased Business as guarantor or surety with respect to the
obligations of others;
(c) any Encumbrance placed on any of the Purchased
Assets, other assets or properties thereof;
(d) any obligation or liability incurred thereby
other than in the Ordinary Course;
(e) any purchase, license, sale, transfer or other
disposition, or any agreement or other arrangement for the purchase, license,
sale, transfer or other disposition, of any of the Purchased Assets or any other
properties or assets or goodwill or Intellectual Property of Seller used in or
related to the Purchased Business;
(f) any damage, destruction or loss, whether or not
covered by insurance, relating to the Purchased Assets or the Purchased
Business;
(g) any loss of key executive, management,
development personnel or service personnel involved in the Purchased Business;
(h) any obligation or liability incurred by Seller to
any of the Employees except normal compensation and expense allowances payable
to Employees in the Ordinary Course;
(i) any loss on or prior to the date of this
Agreement of one or more customers of the Purchased Business or any indication
that such a loss is, or losses are, reasonably likely;
(j) any grant of a security interest in any of the
Purchased Assets;
(k) any termination, or any extension, amendment,
relinquishment, expiration or non-renewal that resulted from third party
dissatisfaction with Seller's services or contract performance relating to the
Purchased Business, of any contract to which Seller is a party, or any written
request received by Seller for or to effect any of the foregoing; or
(l) any changes to wages, salary or employment terms
of any of the Employees.
4.12 Agreements and Commitments. As of the date hereof, except
as disclosed in Item 4.12 delivered by Seller to Buyer herewith, on the date of
this Agreement Seller is not a party or subject to any oral or written executory
contract or, to the extent expressly enumerated in paragraphs below, commitment,
that is related to the Purchased
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Business or the Purchased Assets or any of the Employees, including but not
limited to the following:
(a) Any contract, commitment, letter agreement or
purchase order providing for payments by or to Seller in an aggregate amount of
(i) $20,000 or more in the Ordinary Course or (ii) $10,000 or more not in the
Ordinary Course;
(b) Any license agreement under which Seller is
licensor (except for any nonexclusive software license granted by Seller to
customers in the Ordinary Course); or under which Seller is licensee (except for
standard "shrink wrap" licenses for off-the-shelf software products with a
license fee or purchase price of under $5,000 per copy or seat);
(c) Any material agreement by Seller to encumber,
transfer or sell rights in or with respect to any material item of Seller
Intellectual Property (as defined in Section 4.12 hereof), excluding
non-exclusive software licenses;
(d) Any agreement for the sale or lease of real or
tangible personal property involving more than $10,000 per year;
(e) Any sales representative, value-added remarketer,
OEM or other agreement for the marketing or sale of professional consulting
services or otherwise relating to the Purchased Business or the Purchased
Assets;
(f) Any joint venture contract or arrangement or any
other agreement that involves a sharing of profits with other persons or the
payment of royalties to any other person;
(g) Any instrument evidencing indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee or otherwise, except for trade
indebtedness incurred or made in the Ordinary Course;
(h) Any contract containing covenants purporting to
limit Seller's freedom to compete in any line of business, market or industry
and/or in any geographic area; or
(i) Any contract for the employment of any officer,
employee or consultant of Seller or any other type of contract or commitment
with any officer, employee or consultant of Seller that is not immediately
terminable by Seller without cost or other liability.
Except as noted in Item 4.12, all agreements,
obligations and commitments disclosed in Item 4.12, are valid and in full force
and effect, except where the failure to be such would not have a Material
Adverse Effect on Seller. Except as noted on Item 4.12, neither Seller nor any
other party is in breach of or default under any
12
material term of any such agreement, obligation or commitment nor has such other
party threatened such a breach or default. Seller is not a party to any contract
or arrangement that it believes will have a Material Adverse Effect on Seller.
Seller does not have liability for renegotiation of government contracts or
subcontracts.
4.13 Intellectual Property.
(a) For purposes of this Agreement, "Intellectual
Property" means:
(i) all issued patents, reissued or reexamined
patents, revivals of patents, utility models, certificates of invention,
registrations of patents and extensions thereof, regardless of country or formal
name (collectively, "Issued Patents");
(ii) all published or unpublished
nonprovisional and provisional patent applications, reexamination proceedings,
invention disclosures and records of invention (collectively "Patent
Applications" and, with the Issued Patents, the "Patents");
(iii) all copyrights, copyrightable works,
semiconductor topography and mask work rights, including all rights of
authorship, use, publication, reproduction, distribution, performance,
transformation, Moral Rights and rights of ownership of copyrightable works,
semiconductor topography works and mask works, and all rights to register and
obtain renewals and extensions of registrations, together with all other
interests accruing by reason of international copyright, semiconductor
topography and mask work conventions (collectively, "Copyrights");
(iv) trademarks, registered trademarks,
applications for registration of trademarks, service marks, registered service
marks, applications for registration of service marks, trade names, registered
trade names and applications for registrations of trade names (collectively,
"Trademarks");
(v) all technology, ideas, inventions,
designs, proprietary information, manufacturing and operating specifications,
know-how, formulae, trade secrets, technical data and proprietary processes;
(vi) all databases and all collected data and
all rights therein throughout the world;
(vii) all computer software, including all
source code, object code firmware, development tools, files, records and data
and all media on which any of the foregoing is recorded; and
(viii) all Web addresses, rights and domain
names and all rights under all Web cross-linking agreements; and the term
"Intellectual Property Rights" means any rights in any Intellectual Property.
13
(b) With respect to each item of Intellectual
Property incorporated into the Intangible Assets or used or offered by Seller or
any of the Employees in connection with the Purchased Business, and in each case
owned by Seller or licensed to Seller (except "off the shelf" or other software
widely available through regular commercial distribution channels at a cost not
exceeding $5,000 per copy or seat or CPU on standard, non-negotiated terms and
conditions) ("Seller Intellectual Property"), the Seller Disclosure Schedule
lists as of the date of this Agreement at Item 4.13:
(i) all Patents, all registered Trademarks,
and all registered Copyrights, including the jurisdictions in which each such
Intellectual Property has been issued or registered or in which any such
application for such issuance and registration has been filed.
(ii) the following agreements relating to the
products or service offerings or capabilities of Seller relating to the
Purchased Assets or the Purchased Business, including products or service
offerings or capabilities currently under development (collectively the "Seller
Services") or other Seller Intellectual Property: all (A) agreements granting
any right to distribute or sublicense any of the Seller Services on any
exclusive basis, (B) any exclusive licenses of Intellectual Property to or from
Seller, (C) agreements pursuant to which the amounts actually paid or payable
under firm commitments to or by Seller are $10,000 or more, (D) joint
development or support agreements, (E) any agreement by which Seller grants any
ownership right to any Intellectual Property owned by Seller other than
nonexclusive software licenses entered into with customers in the Ordinary
Course, (F) any option relating to any Seller Intellectual Property, and (G)
agreements pursuant to which any party is granted any rights to access source
code or to use source code to create derivative works of Seller Intellectual
Property.
(c) The Seller Disclosure Schedule contains an
accurate list as of the date of this Agreement of all licenses, sublicenses and
other agreements to which Seller is a party and pursuant to which Seller is
authorized to use any Intellectual Property owned by any third party (except
"off the shelf" or other software widely available through regular commercial
distribution channels at a cost not exceeding $5,000 per copy or seat on
standard non-negotiated terms and conditions and any rights implied by law)
("Third Party Intellectual Property").
(d) There is no unauthorized use, disclosure,
infringement or misappropriation of any Seller Intellectual Property, including
any Third Party Intellectual Property, by any employee or former employee of
Seller or by any other third party. Seller has not entered into any agreement to
indemnify any other person against any charge of infringement of any
Intellectual Property, other than indemnification provisions contained in
standard sales or agreements to end users arising in the ordinary course of
business, the forms of which have been delivered to Buyer or its counsel. There
are no royalties, fees or other payments payable by Seller (or by Buyer as
Seller's successor with respect to the Purchased Assets) to any Person,
14
under any written or oral contract or understanding or otherwise, by reason of
the ownership, use, sale or disposition of any Intellectual Property.
(e) Seller is not in breach of any license,
sublicense or other agreement relating to the Seller Intellectual Property or
Third Party Intellectual Property Rights. Neither the execution, delivery or
performance of this Agreement or any Ancillary Agreement, or any of the
transactions contemplated hereby or thereby will contravene, conflict with or
result in an infringement on the Buyer's right to own or use any Seller
Intellectual Property, including any Third Party Intellectual Property.
(f) All Patents, registered Trademarks, registered
service marks and registered copyrights held by Seller and related to the
Purchased Business are valid and subsisting. Except for such as are not past
due, all maintenance and annual fees with respect thereto have been fully paid
and all fees paid during prosecution and after issuance of any patent comprising
or relating to such item have been paid in the correct entity status amounts.
Seller has not infringed, misappropriated or made unlawful use of, is not
currently infringing, misappropriating or making unlawful use of, and has not
received any written notice or written communication alleging or relating to any
actual, alleged, possible or potential infringement, misappropriation or
unlawful use of, any Intellectual Property or other proprietary right or asset
owned or used by any third party, except where the matter is unrelated to the
Purchased Business and the Purchased Assets. Without limiting the foregoing, the
offering and sale of the Seller Services by Seller does not, and the offering
and sale of the Seller Services by Buyer immediately after the Closing will not,
and the Purchased Business as conducted as of the date hereof does not, and
Seller's use of Intellectual Property included in the Purchased Assets as of the
date hereof does not, infringe or violate any Intellectual Property of any other
person. There is no proceeding pending or threatened, nor has any written claim
or demand been made, which challenges the legality, validity, enforceability or
ownership of any item of Seller Intellectual Property or Third Party
Intellectual Property. Seller has not brought a proceeding alleging infringement
of Seller Intellectual Property or breach of any license or agreement involving
Intellectual Property against any third party.
(g) All Employees have executed and delivered to
Seller an agreement (containing no exceptions or exclusions from the scope of
its coverage other than as set forth in the standard form) regarding the
protection of proprietary information and the assignment to Seller of any
Intellectual Property arising from services performed for Seller by such persons
in connection with the Purchased Business, the form of which has been supplied
to Buyer. All current and former consultants and independent contractors to
Seller involved in the Purchased Business or the development of any of the
Purchased Assets or any of the service offerings of the Purchased Business have
executed and delivered to Seller an agreement (containing no exceptions or
exclusions from the scope of its coverage other than as set forth in the
standard form) regarding the protection of proprietary information and the
assignment to Seller of any Intellectual Property arising from services
performed for Seller by such persons, except to the extent that the failure to
execute and deliver
15
such agreement would not have a Material Adverse Effect on the Purchased Assets
or Purchased Business. To the knowledge of Seller, no current or former employee
or independent contractor of Seller involved in the Purchased Business is in
violation of any term relating to Intellectual Property of any patent disclosure
agreement or employment contract or any other contract or agreement relating to
the relationship of any such employee or independent contractor with Seller or
of any other term of any such agreements or contracts. No current or former
officer, director, stockholder, employee, consultant or independent contractor
has any right, claim or interest in or with respect to any Seller Intellectual
Property. To the best knowledge of Seller, Seller is not using any trade
secrets, and to the knowledge of Seller, Seller is not using any other
confidential information, of any former employer of any past or present
employees, in connection with the Purchased Business or by using any of the
Purchased Assets.
(h) Seller has taken all commercially reasonable and
customary measures and precautions necessary to protect and maintain the
confidentiality of all Seller Intellectual Property (except such Seller
Intellectual Property whose value would be unimpaired by public disclosure) and
otherwise to maintain and protect the full value of all Intellectual Property it
owns relating to the Purchased Business or the Purchased Assets. All use,
disclosure or appropriation of confidential and proprietary information of any
third party ("CONFIDENTIAL INFORMATION") in connection with the Purchased
Business has, to Seller's knowledge, been pursuant to the terms of a written
agreement between Seller and the owner of such Confidential Information, or is
otherwise lawful.
(i) The Seller Services, including the performance
and results thereof, conform in all material respects with any published
specification, published documentation or written performance standard provided
with respect thereto by Seller.
(j) Seller is not subject to any proceeding or
outstanding decree, order, judgment, or stipulation which may affect the
validity, use or enforceability of any Seller Intellectual Property or
restricting in any manner the use, transfer, or licensing thereof by Seller.
Seller is not subject to any agreement which restricts in any material respect
the use, transfer, or licensing by Seller of the Seller Intellectual Property or
Seller Services, excluding agreements relating to Third Party Intellectual
Property.
(k) Seller owns all right, title and interest in, or
has the right to use, all Intellectual Property that is material to or
reasonably necessary to the conduct of the Purchased Business as presently
conducted ("MATERIAL SELLER INTELLECTUAL PROPERTY"). Seller is not aware of any
loss, cancellation, termination or expiration of any Patent or Patent
Application, registered Trademark, or registered Copyright relating to any
Material Seller Intellectual Property. Except as set out in Item 4.13, Seller
has not granted any reseller, distributor, sales representative, original
equipment manufacturer, value added reseller or other third party any right to
16
reproduce, manufacture, sell, license, furnish or distribute any Seller Services
in any market segment or geographic location.
4.14 Compliance with Laws. Seller has complied, or prior to
the Closing will have complied, and is or will be at the date of Closing in full
compliance, in all material respects, with all applicable laws, ordinances,
regulations and rules, and all orders, writs, injunctions, awards, judgments and
decrees, applicable to the Purchased Business or the Purchased Assets or the
Employees, including, without limitation: (a) all applicable federal, state and
local laws, ordinances and regulations, and all orders, writs, injunctions,
awards, judgments and decrees, pertaining to employment or employment practices,
terms and conditions of employment, or wages and hours; (b) the Export
Administration Act and regulations promulgated thereunder and other laws,
regulations, rules, orders, writs, injunctions, judgments or decrees applicable
to the export or re-export of controlled commodities or technical data, (c) the
Immigration Reform and Control Act and (d) all governmental and nongovernmental
regulations related to the operation and use of the Internet. Seller has
received all permits and approvals from, and has made all filings with, third
parties, including government agencies and authorities, that are necessary to
the conduct of the Purchased Business as presently conducted.
4.15 Certain Transactions and Agreements. No person who is an
officer of Seller nor any member of their immediate families nor any of the
Employees, has any direct or indirect ownership interest in or any employment or
consulting agreement with any firm or corporation that competes with the
Purchased Business or Buyer (except with respect to any interest in less than 2%
of the outstanding voting shares of any corporation whose stock is publicly
traded) or has, except for the normal rights of a stockholder or an option
holder, any interest in any of the Purchased Assets or any other assets used in
connection with the Purchased Business.
4.16 Employees.
(a) Except as disclosed in Item 4.16, Seller does not
have any employment contract or consulting agreement with any of the Employees
currently in effect that is not terminable at will without penalty or payment of
compensation by Seller (other than agreements with the purpose of providing for
the confidentiality of proprietary information or assignment of inventions).
(b) Seller has good labor relations, and has no
knowledge of any facts indicating that any of its Purchased Business employees
intends to leave its employ.
(c) Neither Seller nor any Subsidiary has ever been a
participant in any "prohibited transaction," within the meaning of Section 406
of ERISA with respect to any employee pension benefit plan (as defined in
Section 3(2) of ERISA) which Seller sponsors as employer or in which Seller
participates as an employer, which would impose any penalty on Seller or which
was not otherwise exempt pursuant to Section 408 of ERISA (including, but not
limited to, any individual exemption granted
17
under Section 408(a) of ERISA), or which could result in an excise tax under the
Code. The group health plans, as defined in Section 4980B(g) of the Code, that
benefit employees of Seller are in compliance in all material respects with the
continuation coverage requirements of subsection 4980B of the Code. There are no
outstanding violations of Section 4980B of the Code with respect to any employee
plan, covered employees or qualified beneficiaries. No Employee Plans will be
subject to any surrender fees or service fees upon termination other than the
normal and reasonable administrative fees associated with the termination of
benefit plans.
(d) To the best of the knowledge of Seller, no
Employee or other employee or former employee of the Purchased Business is in
violation of any term of any employment contract, patent or trade secret
disclosure agreement or noncompetition agreement or any other contract or
agreement, or any restrictive covenant, relating to the right of any such
employee to be employed by Seller or to use trade secrets or proprietary
information of others, and the employment of any employee of Seller does not
subject Seller to any material liability to any third party.
(e) Except as disclosed in Item 4.16, Seller is not a
party to any (i) agreement with any Employee (1) the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving Seller in the nature of any of the transactions
contemplated by this Agreement; (2) providing any term of employment or
compensation guarantee or (3) providing severance benefits or other benefits
after the termination of employment of any Employee regardless of the reason for
such termination of employment other than as required by law, or (4) imposing
liability on any successor to Seller by acquisition or asset purchase, or (ii)
agreement or plan, including, without limitation, any stock option plan, stock
appreciation rights plan or stock purchase plan, as to which any Employee
participates any of the benefits of which will be materially increased, or the
vesting of benefits of which will be materially accelerated, by the occurrence
of any of the transactions contemplated by this Agreement.
(f) A list of all Employees and their current base
compensation as of the date of this Agreement is disclosed on Item 4.16(f).
Copies of all offer letters and other documents reflecting bonus arrangements of
any Seller officer, director or employee have been delivered to Buyer.
4.17 Corporate Documents. Seller has made available to Buyer
for examination all documents and information disclosed in the Items of the
Disclosure Schedule or other exhibits called for by this Agreement which have
been reasonably requested by Buyer or its legal counsel.
4.18 No Brokers. Except as disclosed in Item 4.18, Seller is
not obligated for the payment of fees or expenses of any investment banker,
broker or finder in connection with the origin, negotiation or execution of this
Agreement or in connection with any transaction provided for herein or therein.
18
4.19 Books and Records. The books, records and accounts of
Seller relating to the Purchased Business and the Purchased Assets (a) are in
all material respects true and complete, and (b) have been maintained in
accordance with reasonable business practices.
4.20 Warranties, Guarantees and Indemnities. Except as
disclosed in Item 4.20 or in the agreements or contract listed herein, Seller
has not provided to its customers or any third parties (i) any warranties or
guarantees regarding the Seller Services; (ii) any rights to obtain refunds with
respect to Seller Services or (iii) any indemnities with respect to intellectual
property infringement or Year 2000 compliance.
4.21 Customer Relationships. Seller has good commercial
working relationships with its Purchased Business customers. Except as disclosed
in Item 4.21, no customer accounting for more than 5% of the Seller's Purchased
Business revenues in any month during 1999 ("MATERIAL CUSTOMER") has canceled or
otherwise terminated its relationship with Seller, decreased or limited
materially the amount of product or services ordered from Seller or threatened
in writing (or to Seller's knowledge orally) to take any such action. There are
no liabilities under the contracts with customers other than those described in
detail and quantified on Item 4.21.
4.22. Product and Service Quality. All Seller Services
provided to customers on or prior to the Closing conform to applicable
contractual commitments, implied warranties not disclaimed, express warranties,
product specifications and quality standards published by Seller in all material
respects, and Seller does not have any material liability (and Seller is not
aware of any basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against Seller giving rise to
any liability) for replacement or repair thereof, or for the taking of any
remedial action with respect thereto or other damages in connection therewith.
All material complaints received since January 1, 1999 from customers regarding
the Seller Services are set out in Item 4.22 in detail reasonably sufficient to
understand the nature of the complaint and the resolution or lack of resolution
thereof.
5. Representations and Warranties of Buyer. Buyer hereby represents and
warrants to Seller that the matters set forth in the following subsections of
this Section 5 are true and correct as of the Effective Date and the Closing.
5.1 Corporate Organization and Good Standing. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California and is qualified to do business in any other state
where the failure to so qualify would have a material adverse effect on Buyer's
business. Buyer has all corporate power and authority to own, lease and operate
its properties and to conduct its business as such is presently conducted.
5.2 Binding Agreement. This Agreement, when executed and
delivered by Buyer, will constitute the valid and binding obligation of Buyer,
enforceable against Buyer according to its terms.
19
5.3 Employee Offer Letters. Buyer shall have entered into
Offer Letters (effective on the Closing) with each Employee with respect to
their employment by Buyer which shall commence upon the Closing.
6. Conditions Precedent to Buyer's Obligations. As of the Closing, the
following conditions have been satisfied, unless waived by Buyer in accordance
with Section 8:
6.1 Representations and Warranties True at Closing. The
representations and warranties made by Seller in Section 4 above shall be true
and correct in all material respects as of the Closing.
6.2 Corporate Approvals. On or prior to the Closing, this
Agreement and all transactions contemplated hereby shall have been duly and
validly authorized and adopted by the Board of Directors of Seller, and Seller
shall have delivered to Buyer copies of the resolutions of its Board of
Directors authorizing the execution, delivery and performance of this Agreement
and the transactions contemplated hereby.
6.3 Consents. Seller will have obtained all consents, permits
and waivers and made all filings necessary or appropriate for the consummation
of the transactions contemplated hereby, any required governmental approvals
except for the assignment of the Contracts as provided in Section 3.2 hereof.
6.4 Closing Certificate. At the Closing, Seller shall have
delivered to Buyer a certificate signed by the Chief Financial Officer of
Seller, dated on the Closing date and certifying to the fulfillment of the
conditions set forth in Sections 6.1, 6.2, and 6.3 above and that there have
been no Material Adverse Change to the Purchased Assets or to the Purchased
Business since January 1, 2000, except as set forth in Item 4.11 of the
Disclosure Schedule.
6.5 Deliveries Obtained. All deliveries to Buyer required to
be made by Seller under Section 2 hereof shall have been made, and Seller shall
have signed and delivered each of the Ancillary Agreements.
6.6 Diligence. Buyer shall be satisfied with the results of
its investigation of the Purchased Assets and the Purchased Business prior to
the Closing and the terms under which any Contracts are to be assigned.
6.7 Employees. Xx. Xxxx Xxxxxxx, Xxx Xxxxx, Xxxx Xxxxxxx, Xxxx
Xxxxxxx, Xxx Xxxxxxxx, Xxxx Xxxxxx and Xxxx Xxxxxx (the "Employees") shall have
accepted Buyer's offer of full time employment with Buyer and shall have
terminated their full-time employment relationship with Seller on or prior to
the Closing.
20
6.8 Non-Compete/Non-Solicit. Each of the Employees shall have
signed this Agreement agreeing to be bound along with Seller by the
Non-Compete/Non-Solicit provisions of Section 10 hereof.
6.9 Confidentiality Agreements. Each of the Employees shall
have signed Seller's standard form of confidentiality agreement (including
invention assignment provisions) or shall have executed employment agreements
with similar provisions, and a copy of same along with those signed by all other
Employees shall have been provided to Buyer.
6.10 Good Title. The Purchased Assets shall be free and clear
of all liens and encumbrances.
6.11 Opinion. Buyer shall have received an opinion of Seller's
counsel as to due authorization and other customary matters.
6.12 No Litigation. There shall not be pending or threatened
any litigation with respect to the Purchased Assets or the transfer thereof or
Seller.
6.13 Waiver of Moral Rights. Each Employee and each other
author of any of the Software and Intangible Assets shall have waived any Moral
Rights with respect thereto.
7. Conditions Precedent to the Obligations of Seller. As of the
Closing, all of the following conditions shall have been satisfied, unless
waived by Seller in accordance with Section 8:
7.1 Representations and Warranties True at Closing. The
representations and warranties made by Buyer in Section 5 above shall be true
and correct in all material respects on the Closing.
7.2 Closing Certificate. On the Closing Date, Buyer shall have
delivered to Seller a certificate signed by an officer of Buyer, dated the
Closing Date and certifying to the fulfillment of the conditions set forth in
Sections 7.1.
7.3 Deliveries. Buyer shall deliver the Purchase Price as
provided in Section 3.1 and shall have signed each of the Ancillary Agreements.
7.4 Employees. The Employees shall have accepted Buyer's offer
of full time employment with Buyer.
8. Waivers of Conditions; Termination; Certain Covenants.
8.1 Waivers of Conditions. Either party can elect to waive any
condition for its benefit on prior written notice to the other party and upon
such
21
waiver will not thereafter be able to seek any legal recourse against the other
party for the failure to satisfy such condition.
8.2 Certain Seller Covenants.
Until the earlier of (a) termination of this
Agreement or (b) the Closing:
(a) Seller shall conduct the Purchased Business only
in the ordinary course;
(b) Seller shall reasonably cooperate with Buyer in
the orderly transition of the Purchased Business to Buyer's control by the
Closing;
(c) Seller shall reasonably cooperate with Buyer in
establishing email aliases for the Employees' existing email accounts on
Seller's computer systems, to redirect email addressed to such accounts to the
appropriate corresponding Employees' email accounts on Buyer's computer systems;
(d) Following the Closing, Seller shall use
commercially reasonably efforts to remove references to the Purchased Business
or Purchased Assets from its web site. Seller shall use commercially reasonable
efforts to establish reference textual links, in a form reasonably consented to
by Buyer, from the existing "Professional Services" web page, and all other web
pages related to the Purchased Business or Purchased Assets on Seller's web
site, to a web site and URL provided by Buyer;
(e) Seller shall use commercially reasonable efforts
to preserve for Buyer the good will of Seller's Purchased Business customers and
others having business relations with the Seller related to the Purchased
Business;
(f) Seller shall reasonably assist Buyer in retaining
the Employees;
(g) Seller will provide Buyer with full and complete
access to all of its facilities, books, and records and will cause Seller's
representatives to cooperate fully with the Buyer and Buyer's representatives in
connection with the Buyer's due diligence review of Seller and its assets,
contracts, liabilities, operations, records, and other aspects of the Business.
The foregoing shall allow without limitation, Buyer and its representatives to
conduct, at Buyer's expense, an audit of the accounting books and records
related to the Purchased Business.
8.3 Employment Covenant. Prior to Closing, Buyer shall offer
employment effective at Closing to the Employees. The offers of employment will
include compensation and non-compete covenants consistent with Buyer's policies
and past practices for key employees. At Closing, Seller will terminate the
22
Employees and make such employees available for employment by Buyer, using its
commercially reasonable best efforts to assist Buyer in employing the Employees,
including permitting interviews prior to closing. The Employees employed by
Buyer will execute Buyer's standard agreement regarding assignment of
inventions, which all Buyer employees are required to sign.
9. Survival, Indemnification and Exculpation.
9.1 Indemnification of Buyer. Seller will defend, indemnify
and hold Buyer (including Buyer's officers, directors, shareholders, employees,
distributors and agents) harmless from all Stipulated Losses and from all loss,
liability, claims and expenses (including reasonable attorneys' and experts'
charges) (collectively, the "Losses") occasioned by, relating to or resulting
from: (a) Seller's breach of any of its representations and warranties herein,
(b) any Pre-Closing Risks (as provided in Section 2.4); or (c) Seller's failure
to pay, pursuant to Section 3.3 hereof, all sales and use tax associated with
the transaction hereby contemplated and the transfer of the Purchased Assets
("Transaction Tax"). Indemnity claims may be made at any time prior to the first
anniversary of the Closing (although indemnity claims for Pre-Closing Risks or
for any unpaid Transaction Tax may be made at any time), and Buyer shall have
the right to satisfy indemnity claims from the escrow held under the Escrow
Agreement, provided that access to the escrow shall be a non-exclusive remedy
for indemnity claims other than for Stipulated Losses. For purposes of this
Section, the Stipulated Losses shall be and mean an amount equal to the
aggregate of the following specified dollar amounts in the event that the
indicated event occurs: $1,000,000 in the event that Xx. Xxxx Xxxxxxx resigns
from Buyer other than for Good Reason, or is terminated by Buyer for Cause, in
either case prior to the first anniversary of Closing; (b) $500,000 in the event
that Xxx Xxxxx resigns from Buyer other than for Good Reason or is terminated by
Buyer for Cause, in either case prior to the first anniversary of Closing; (c)
$250,000 in the event that Xxxx Xxxxxxx resigns from Buyer other than for Good
Reason, or is terminated by Buyer for Cause, in either case prior to the first
anniversary of Closing; (d) $250,000 in the event that Xxxx Xxxxxxxx resigns
from Buyer other than for Good Reason or is terminated by Buyer for Cause, in
either case prior to the first anniversary of Closing; (e) $250,000 in the event
that Xxx Xxxxxxxx resigns from Buyer other than for Good Reason, or is
terminated by Buyer for Cause, in either case prior to the first anniversary of
Closing; (f) $250,000 in the event that Xxxx Xxxxxx resigns from Buyer other
than for Good Reason, or is terminated by Buyer for Cause, in either case prior
to the first anniversary of Closing; or (g) $250,000 in the event that Xxxx
Xxxxxx resigns from Buyer other than for Good or is terminated by Buyer for
Cause, in either case prior to the first anniversary of Closing; provided,
however, that in no event shall Stipulated Losses exceed $1,000,000 in the
aggregate and in no event shall Buyer be entitled to recover Stipulated Losses
from Seller other than by offset against the Escrow Amount. Seller acknowledges
that that it is difficult to estimate the damages that would result from one of
the Stipulated Loss events failure to obtain Qualifying Orders from Listed
Customers within 90 days of Closing in accordance with Section 3.2 hereof but
that the Stipulated Loss amounts and the Contract Holdback
23
Amount respectively represent a reasonable estimate of the damages that would be
occasioned by the Stipulated Loss, and by the failure to obtain Qualifying
Orders from Listed Customers within 90 days of Closing, respectively.
9.2 Survival. The representations and warranties of Seller in
this Agreement will survive until the first anniversary of Closing, as to any
claims made prior to expiration (even if resolved thereafter); the covenants of
Seller and Employees shall survive after Closing in accordance with their terms.
The representations and warranties of Buyer in this Agreement shall expire at
Closing or expiration of this Agreement. The provisions of Section 11.4
(Confidentiality) shall survive for a period of five years after Closing.
10. Noncompetition and Nonsolicitation. As an inducement to enter into
this Agreement and consummate the transactions contemplated hereby, during the
period from the Closing until the second anniversary of the Closing (the
"Noncompete Period"), Seller agrees not to (i) offer, or assist any other
person, entity or venture to offer, services competitive to those consulting
services offered by the Purchased Business or by Buyer, nor (ii) solicit or
otherwise induce any employee of Buyer or any subsidiary of Buyer to leave the
employ of Buyer or its subsidiary without Buyer's written approval. Furthermore,
Seller agrees to refer any requests for services it receives in connection with
the Purchased Assets or Purchased Business to Buyer; provided however, that
Seller shall have no obligation to refer requests for consulting services
relating to or in connection with sales of Seller's network security software
products. The parties acknowledge and agree that money damages may not be an
adequate remedy for any breach or threatened breach of these provisions and
that, in such event, the aggrieved party or its successors or assigns may, in
addition to any other rights and remedies existing in its favor, apply to any
court of competent jurisdiction for specific performance, injunctive and other
relief in order to enforce or prevent any violations of the provisions of this
Section 10. Any injunction shall be available without the posting of any bond or
other security. In the event of an alleged breach or violation of any of the
provisions of this Section 10, the Noncompete Period will be tolled until such
alleged breach or violation is resolved; provided, however, that if it is found
that the provisions of this Section 10 have not been violated, then the
Noncompete Period will not be deemed to have been tolled. The parties agree that
the restrictions contained in this Section 10 are reasonable in all respects in
light of all circumstances and are independent of any obligations of Buyer. The
foregoing notwithstanding, it is understood and agreed that Xx. Xxxx Xxxxxxx
shall have the right to continue to serve as a director of Seller, and such
service shall not be deemed a breach of this Section by him.
11. Miscellaneous
11.1 No Assignment; Successors and Assigns. This Agreement may
not be assigned by Seller or Buyer and any attempt to do so will be void; except
24
that either party may assign this Agreement in connection with a merger or sale
of substantially all of its assets or similar reorganization. This Agreement and
the terms and conditions contained herein are binding upon, and will inure to
the benefit of, the parties hereto and their respective representatives,
executors, administrators, heirs, successors and assigns. There are no intended
third party beneficiaries of this Agreement.
11.2 Severability. If any provision of this Agreement is found
to be invalid, illegal or unenforceable, then it will be enforced to the maximum
extent possible and the remaining provisions of this Agreement will continue
unaffected to the extent equitable.
11.3 Waivers. No waiver by any party hereto of any term or
condition of this Agreement will be effective unless set forth in writing signed
by such party. No waiver of any provision of this Agreement will be deemed a
waiver of any other provision, or constitute a continuing waiver unless
otherwise expressly provided in writing by the waiving party. No failure or
delay on the part of any party in exercising any right, power or privilege under
this Agreement will operate as a waiver thereof, nor will a single or partial
exercise thereof preclude any other or further exercise of any other rights,
powers or privileges.
11.4 Confidentiality. Each party acknowledges that it will
receive information which is confidential and proprietary to the other party
(the "Confidential Information") in connection with this Agreement. Each party
agrees not to use the Confidential Information except in performance of this
Agreement and not to disclose the Confidential Information to third parties.
Each party shall take all reasonable steps to protect the Confidential
Information from unauthorized or inadvertent disclosure or use, including
without limitation, all steps that it takes to protect its own proprietary
information. Neither party will issue a press release in connection with the
entry into or Closing of this Agreement without the prior approval of the other
party, except as may be required by law.
11.5 Notices. All notices which are required to be given
hereunder shall be in writing and shall be addressed (i) if to Seller, at
Seller's address set forth on the signature page of this Agreement (with a copy
to Seller's counsel, Xxxxxxx Xxxxx & Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 Attn: Xxx Xxxxxxxx, Esq.) or (ii) if to Buyer, at the address set
forth set forth on the signature page of this Agreement, or at such other
address as the relevant party furnishes to the other party hereto in writing
pursuant to this Section. Any such notice may be delivered personally, by
commercial overnight courier or facsimile transmission which shall be followed
by a hard copy (U.S. mail prepaid, first class or better) and shall be deemed to
have been served if by hand when delivered, if by commercial overnight courier
48 hours after deposit with such courier, and if by facsimile transmission when
transmission has been confirmed.
25
11.6 Counterparts. This Agreement may be executed in any
number of counterparts (original or facsimile), each of which shall be deemed an
original and all of which together shall constitute but one instrument.
11.7 Broker's Fees/Expenses. Each party represents that it has
not engaged the services of any broker or finder in connection with the
transactions contemplated by this Agreement and jointly and severally agree to
indemnify the other and hold it harmless from and against any claims for
broker's or finder's fees or other compensation in connection with such
transactions. Otherwise, each party will bear its own expenses in connection
with this Agreement.
11.8 Governing Law; Disputes; Arbitration.
(a) The internal laws of the State of California
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto. Any dispute arising hereunder
("DISPUTE") shall be settled by means of binding arbitration. The arbitration
shall take place in Santa Clara, California and shall be conducted in accordance
with the commercial arbitration rules of the American Arbitration Association
then in effect. The arbitrator shall have the authority to grant any equitable
and legal remedies that would be available in any judicial proceeding instituted
to resolve a Dispute. The parties shall use their best efforts to select an
arbitrator within 30 days.
(b) There shall be three (3) arbitrators, one (1) to
be chosen directly by each party at will, and the third arbitrator to be
selected by the two (2) arbitrators so chosen. Each party shall pay the fees of
the arbitrator it selects and of its own attorneys, the expenses of its
witnesses and all other expenses connected with presenting its case. Other costs
of the arbitration, including the cost of any record or transcripts of the
arbitration, administrative fees, the fee of the third arbitrator, and all other
fees and costs, shall be borne equally by the parties. For any Dispute submitted
to arbitration, the burden of proof will be as it would be if the claim were
litigated in a judicial proceeding.
(c) Upon the conclusion of any arbitration
proceedings hereunder, the arbitrators will render findings of fact and
conclusions of law and a written opinion setting forth the basis and reasons for
any decision reached and will deliver such documents to each party to this
Agreement along with a signed copy of the award.
(d) Any arbitrator chosen in accordance with these
provisions will not have the power to alter, amend or otherwise affect the terms
of these arbitration provisions or the provisions of this Agreement.
(e) Except as specifically otherwise provided in this
Agreement, arbitration will be the sole and exclusive remedy of the parties for
any
26
Dispute arising out of this Agreement or the Escrow Agreement, except as
otherwise permitted in the Escrow Agreement.
11.9 Attorneys' Fees. If any action at law or in equity or
arbitration or mediation proceeding is necessary to enforce or interpret the
provisions of this Agreement, then the prevailing party shall be entitled to
reasonable attorneys' and experts' charges in addition to any other relief to
which such prevailing party may be entitled.
11.10 Interest. Except as otherwise provided in Exhibit 3, any
obligation under the Agreement which can be reduced to a monetary sum and which
is not satisfied when due under this Agreement will bear interest at the rate of
one percent per month or any lower legal maximum until satisfied.
11.11 Entire Agreement; Modifications. This Agreement,
together with the exhibits attached hereto, each of which is incorporated herein
by this reference, constitutes the entire agreement among the parties hereto
pertaining to the subject matter hereof and supersedes in its entirety all prior
agreements, understandings, negotiations and discussions between the parties,
whether oral or written, with respect to the subject matter hereof. No
supplement, modification or amendment to this Agreement will be binding unless
executed in writing by all parties hereto. There are no intended third party
beneficiaries of this Agreement. An ambiguity or inconsistency in this Agreement
shall not be construed against its drafter. "Including" and "for example" are
used inclusively, without limitation. As of the Closing, the parties agree that
they have no claims against the other under any prior agreements between them.
The adequacy and fairness of consideration is acknowledged by each party.
[BALANCE OF PAGE LEFT BLANK; SIGNATURE BLOCK FOLLOWS.]
27
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written:
Network-1 Security Solutions, Inc. Exodus Communications, Inc.
By: /s/ Avi X. Xxxxx By: /s/ X. Xxxxxxxx Case
------------------------------ --------------------------
Name: Avi X. Xxxxx Name: X. Xxxxxxxx Case
---------------------------- ------------------------
Title: President and Title: Executive Vice President,
Chief Executive Officer Finance and Chief
--------------------------- Financial Officer
------------------------
Address: Address:
Network-1 Security Solutions, Inc. Exodus Communications, Inc.
0000 Xxxxxxx Xxxx 0000 Xxxxxxx Xxxxxxx Xxxx.
Xxxxxxx, XX 00000 Xxxxx Xxxxx, XX 00000
Attn: Mr. Xxx Xxxxx Attention: Xxxx X. Xxxxxx
President and CEO General Counsel
KEY EMPLOYEES
-------------
/s/ Xx. Xxxx Xxxxxxx
---------------------------
Xx. Xxxx Xxxxxxx
/s/ Xxx Xxxxx
---------------------------
Xxx Xxxxx
/s/ Dr. Xxxx Xxxxxxx
---------------------------
Dr. Xxxx Xxxxxxx
/s/ Xxxx Xxxxxxx
---------------------------
Xxxx Xxxxxxx
/s/ Xxx Xxxxxxxx
---------------------------
Xxx Xxxxxxxx
/s/ Xxxx Xxxxxx
---------------------------
Xxxx Xxxxxx
/s/ Xxxx Xxxxxx
---------------------------
Xxxx Xxxxxx
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
EXHIBITS & SCHEDULES
--------------------
Exhibit 1 Xxxx of Sale
Exhibit 2 Assumption and Assignment Agreement
Exhibit 3 Escrow Agreement
Exhibit 4 CyberCop License
Exhibit A The Consulting Materials
Exhibit B Contracts
Exhibit C Disclosure Schedule
Exhibit D Employees
Exhibit E Other Intangible Assets
Exhibit F Publications
Exhibit G Other Purchased Assets
Exhibit H Software
Exhibit I Tangible Assets and Third Party Software
Schedule 3.2 Listed Customers
EXHIBIT 1
XXXX OF SALE
XXXX OF SALE
------------
This XXXX OF SALE is executed and delivered effective as of February
__, 2000 between Network-1 Security Solutions, Inc., a Delaware corporation
("Seller"), and Exodus Communications, Inc., a Delaware corporation ("Buyer").
RECITALS
--------
Buyer, Seller and certain key employees of Seller (only with respect to
paragraph 10) have executed and delivered an Asset Purchase Agreement dated as
of February ___, 2000 (the "Purchase Agreement"), which provides for the sale by
Seller to Buyer of the Purchased Assets. Capitalized terms used but not defined
in this Xxxx of Sale have the meanings given them in the Purchase Agreement.
AGREEMENT
---------
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, Seller hereby sells, assigns,
transfers and conveys to Buyer the Purchased Assets and all of Seller's right,
title and interest therein, free and clear of any encumbrances and, in
connection therewith, Seller makes to Buyer such representations, warranties and
indemnities with respect to the Purchased Assets as are set forth in the
Purchase Agreement.
This Xxxx of Sale shall be governed by and construed in accordance with
the laws of the State of California without giving effect to any provisions
thereof relating to conflicts of laws. This Xxxx of Sale shall be binding upon
the parties hereto and inure to the benefit of Buyer and its successors and
assigns.
All of the covenants, representations, warranties and indemnities in
this Xxxx of Sale shall survive the Closing and the execution and delivery of
this Xxxx of Sale.
IN WITNESS WHEREOF, the parties have caused this Xxxx of Sale to be
duly executed on their behalf as of the date first written above.
Network-1 Security Solutions, Inc.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Accepted: Exodus Communications, Inc
By:
----------------------------
Name: X. Xxxxxxxx Case
--------------------------
Title: Executive Vice President of
Finance and Chief Financial
Officer
-------------------------
[SIGNATURE PAGE TO XXXX OF SALE]
EXHIBIT 2
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement (the "Assignment"), effective
as of February ___, 2000 between Network-1 Security Solutions, Inc., a Delaware
corporation ("Assignor"), and Exodus Communications, Inc., a Delaware
corporation ("Assignee").
R E C I T A L S
- - - - - - - -
Assignor, Assignee and certain key employees of Assignor (only with
respect to paragraph 10) have executed and delivered an Asset Purchase Agreement
dated as of February ___, 2000 (the "Purchase Agreement"), pursuant to which
Assignor agreed to assign to Assignee, and Assignee agreed to assume, certain
contract rights and other obligations under the Contracts. Capitalized terms
used but not defined in this Assignment have the meanings given them in the
Purchase Agreement.
COVENANTS
---------
In consideration of the mutual promises and agreements hereinafter
contained and for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the parties agree as follows:
1. Assignor hereby grants, transfers and assigns to Assignee all of
Assignor's right, title and interest in and under the contracts listed on
Schedule 1 attached hereto, as amended from time to time by a mutually initialed
and dated copy of Schedule 1 (the "Contracts").
2. Subject to the terms of the Purchase Agreement and subject to the
exceptions and exclusions therein specified, Assignee hereby assumes Assignor's
obligations arising after the Closing Date (as defined in the Purchase
Agreement) under the Contracts with respect to the period from and after the
Closing Date (provided, however, that Buyer does not assume any liability for
breach of any of the Contracts occurring prior to the Closing Date).
3. All of Assignee's rights and remedies under this Assignment shall
inure to the benefit of Assignee's successors and assigns forever.
4. This Assignment shall be governed by and construed in accordance
with the laws of the State of California without giving effect to any provisions
thereof relating to conflicts of laws.
5. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one
original instrument.
IN WITNESS WHEREOF, the parties have executed this Assignment effective
as of the time and day first above written.
ASSIGNOR:
Network-1 Security Solutions, Inc.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
ASSIGNEE:
Exodus Communications, Inc.
By:
---------------------------
Name: X. Xxxxxxxx Case
--------------------------
Title: Executive Vice President of
Finance and Chief Financial
Officer
--------------------------
[SIGNATURE PAGE TO ASSIGNMENT AND ASSUMPTION AGREEMENT]
SCHEDULE 1
CONTRACTS & LICENSES
ALL CONTRACTS BETWEEN SELLER AND THE BELOW LISTED CUSTOMERS OF SELLER:
1. CyberCop License
EXHIBIT 3
ESCROW AGREEMENT
ESCROW AGREEMENT
----------------
This Escrow Agreement (this "AGREEMENT") is made and entered into as of
February __, 2000 (the "EFFECTIVE DATE"), by and among Exodus Communications,
Inc., a Delaware corporation ("BUYER"), Network-1 Security Solutions, Inc., a
Delaware corporation ("SELLER"), and State Street Bank and Trust Company of
California, N.A., as Escrow Agent (the "ESCROW AGENT"). Capitalized terms used
in this Agreement and not otherwise defined herein will have the meanings given
them in the Asset Purchase Agreement entered into by and among the Parties of
even date herewith (the "PURCHASE AGREEMENT"), a copy of which is attached
hereto as Exhibit A.
RECITALS
--------
A. Pursuant to the terms of the Purchase Agreement, Buyer has agreed to
buy and the Seller has agreed to sell the Purchased Assets, in exchange for the
Purchase Price.
B. Sections 3.1, 3.2 and 9.1 of the Purchase Agreement provide for an
aggregate of $1,300,000 in cash (the "Aggregate Escrow Amount") to be deducted
and withheld from the Purchase Price and placed in an escrow account (the
"Escrow Account"), with $300,000 of such amount (the "Contract Holdback Amount")
to be released pursuant to Section 3.2 of the Agreement and Section 1(b) hereof
and with $1,000,000 of such amount ("Escrow Cash") to secure certain
indemnification obligations of Seller to Buyer under Sections 2.4, 3.3 and 9.1
of the Purchase Agreement on the terms and conditions set forth in this
Agreement.
C. As a condition precedent to consummate the transactions contemplated
in the Purchase Agreement, the parties desire to set forth in this Agreement the
terms and conditions pursuant to which the Aggregate Escrow Amount shall be
deposited, held in, and disbursed from the Escrow Account.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. ESCROW AND INDEMNIFICATION
(a) Escrow Cash. On the Effective Date, notification
of which shall have been given to the Escrow Agent in writing, Buyer will
deposit the Aggregate Escrow Amount with the Escrow Agent, who will hold such
consideration in escrow until the Contract Holdback Amount is released pursuant
to Section 3.2 of the Purchase Agreement and Section 1(b) of this Agreement and
who will hold the Escrow Cash to serve as collateral for the indemnification
obligations of Seller under Sections 2.4, 3.3 and 9.1 of the Purchase Agreement
until Buyer is required to release the balance of the Escrow Cash pursuant to
the terms of this Agreement. The Escrow Agent agrees to accept delivery of the
Aggregate Escrow Amount and to hold such Aggregate Escrow Amount in escrow
subject to the terms and conditions of this Agreement.
(b) Release of Contract Holdback Amount. Within ten
(10) business days after the ninety (90) day period following the Closing of the
Purchase Agreement, or at an earlier time in which Buyer receives Qualifying
Orders (as such term is defined in Section 3.2 of the Purchase Agreement) with
unconditionally committed dollar amounts in aggregate of at least $300,000,
Buyer will send to Seller and the Escrow Agent a written notice ("Release
Notice") specifying the aggregate "unconditionally
committed dollar amount" of the Qualifying Orders from Listed Customers, as
calculated by Buyer pursuant to Section 3.2 of the Purchase Agreement, and
directing the Escrow Agent to release to Seller a corresponding dollar amount of
the Contract Holdback Amount. Unless Buyer and the Escrow Agent receive a
written objection to the Release Notice from Seller within ten (10) business
days of the Seller's and Escrow Agent's receipt of the Release Notice, the
Escrow Agent shall release to Seller that portion of the Contract Holdback
Amount specified in the Release Notice and release to Buyer the balance, if any,
of the Contract Holdback Amount. If Seller does send to Buyer and the Escrow
Agent a written objection to the Release Notice within ten (10) business days of
the date of the Release Notice, then the Escrow Agent shall only release such
portions of the Contract Holdback Amount to such parties as Buyer and Seller
mutually instruct in writing and the matter shall be settled as a Contested
Claim pursuant to Section 4(b) below.
(c) Indemnification. Each of the parties to this
Agreement other than the Escrow Agent (collectively, the "INTERESTED PARTIES")
agree that, (i) Buyer is indemnified pursuant to the terms of Sections 2.4, 3.3
and 9.1 of the Purchase Agreement (which terms and the terms defined therein are
incorporated herein by reference) from and against any Stipulated Losses and
from any Losses relating to or arising out of any breach of Seller's
representations and warranties in the Agreement, Pre-Closing Risks or
Transaction Tax (each a "CLAIM"), subject to the limitations set forth in
Sections 2.4, 3.3 and 9.1 of the Purchase Agreement and in this Agreement, and
(ii) the Escrow Cash will be security for this indemnity obligation, subject to
the limitations, and in the manner provided, in Sections 2.4, 3.3 and 9.1 of the
Purchase Agreement and this Agreement. The foregoing incorporation by reference
of Sections 2.4, 3.3 and 9.1 of the Purchase Agreement (and the terms defined
therein) by the Interested Parties shall not in any way be deemed to cause the
Escrow Agent to be charged with knowledge thereof, or under any duty to
determine or interpret, or to determine or compel compliance with, such terms.
Promptly upon becoming aware of any Claim giving rise to indemnification rights
under the Purchase Agreement, Buyer will give Seller notice of such Claim as
provided for in Section 3 hereof (the "NOTICE OF CLAIM") and will also provide
the Escrow Agent with a copy of the Notice of Claim. The Escrow Agent will not
transfer any of the Escrow Cash held in the Escrow Account pursuant to a Notice
of Claim received by it until such Notice of Claim has been finally resolved in
accordance with Section 4 below.
(d) Third Party Claims. In the case of a Third Party
Claim (as defined in Section 3 herein), within ten days of receipt of a Notice
of Claim, Seller may, by written notice to Buyer, elect to, at Seller's expense,
participate in or assume control of the negotiation, settlement or defense of
the Claim and, in such event, Seller shall reimburse Buyer for all of Buyer's
out-of-pocket expenses as a result of such participation or assumption. If
Seller elects to assume such control, Buyer shall have the right to participate
in the negotiation, settlement or defense of such Third Party Claim and to
retain counsel to act on its behalf, provided that the fees and disbursements of
such counsel shall be paid by Buyer unless Seller consents in writing to the
retention of such counsel at Seller's expense. If Seller, having elected to
assume such control, thereafter fails to defend the Third Party Claim within a
reasonable time, Buyer shall be entitled to assume such control and Seller shall
be bound by the results obtained by Buyer with respect to such Third Party
Claim.
(e) Settlement of Third Party Claims. If Seller fails
to assume control of the defense of any Third Party Claim, Buyer shall have the
exclusive right to contest, settle or pay the amount claimed. Whether or not
Seller assumes control of the negotiation, settlement or defense of any Third
Party Claim, neither Party shall settle any Third Party Claim without the
written consent of the other
-2-
Party, which consent shall not be unreasonably withheld or delayed; provided,
however, that the liability of such Party shall be limited to the proposed
settlement amount if any such consent is not obtained for any reason within a
reasonable time after the request therefor.
(f) Direct Claims. In the case of a Direct Claim (as
defined in Section 3 herein), Seller shall have 60 days from receipt of the
Notice of Claim within which to make such investigation of the Claim as Seller
considers necessary or desirable. For the purpose of such investigation, Buyer
shall make available to Seller or its agents the information relied upon by
Buyer to substantiate the Claim, together with all such other information as
Seller or its agents may reasonably request. If both Parties agree at or before
the expiration of such 60 day period (or any mutually agreed upon extension
thereof) to the validity and amount of such Claim, Seller shall instruct the
Escrow Agent to immediately pay to Buyer the full agreed upon amount of the
Claim from (and to the extent of) the Escrow Cash or it will be settled pursuant
to Section 4(a) below. Failing such agreement, the matter shall be referred to
binding arbitration as provided for in Section 5 herein.
(g) The Escrow Agent shall have no responsibility for
or with respect to compliance by the Interested Parties with the terms or
requirements of this Section 1.
2. DEPOSIT OF AGGREGATE ESCROW AMOUNT; RELEASE FROM
ESCROW.
(a) Delivery of Aggregate Escrow Amount; Investment.
Upon the Effective Date, the Aggregate Escrow Amount will be delivered by Buyer
to the Escrow Agent and the Escrow Agent shall deposit the Aggregate Escrow
Amount in an account at the Escrow Agent (or an affiliate or custodian acting on
its behalf). The Escrow Agent shall invest Aggregate Escrow Amount in accordance
with Section 16. The Aggregate Escrow Amount shall be maintained in the Escrow
Agent's account until the release of the Contract Holdback Amount in accordance
with Section 1(b) hereof and until release of the Escrow Cash in accordance with
Section 2(b) and 2(c) hereto.
(b) Distribution to Seller. On the one-year
anniversary of the Effective Date (the "RELEASE DATE"), the Escrow Agent will
release the Escrow Cash to Seller less (A) any Escrow Cash delivered to Buyer in
accordance with Section 4 hereof, and (B) any Escrow Cash subject to delivery to
Buyer in accordance with Section 4 hereof with respect to any then pending but
unresolved Claims of Buyer, subject to the Escrow Agent's receipt of written
instructions from Buyer and Seller as provided in Section 2(c) below.
(c) Release of Escrow Cash. The Escrow Cash will be
held by Escrow Agent until released pursuant to Section 2(b) above or Section 4,
below. On the Release Date (in the case of Section 2 (b)) or after the
applicable release condition is met (in the case of Section 4), as the case may
be, Escrow Agent will deliver to Seller the requisite amount of Escrow Cash to
be released on such date as identified by Buyer and Seller to the Escrow Agent
in writing (in the case of Section 2(b)) or as identified in the applicable
Notice of Claim (in the case of Section 4(a)) or in the final decision of
litigation or arbitration, as applicable (in the case of Section 4(b)) received
by the Escrow Agent, as the case may be. Such delivery will be in the form of a
check or wire transfer issued in the name of Seller. Buyer and Seller shall
undertake to deliver a timely written notice to Escrow Agent identifying the
amount of Escrow Cash to be released at such time and, if applicable, setting
forth wire-transfer instructions.
-3-
(d) No Encumbrance. No Escrow Cash or any beneficial
interest therein may be pledged, sold, assigned or transferred, including by
operation of law, by Seller or be taken or reached by any legal or equitable
process in satisfaction of any debt or other liability of Seller (other than
Seller's obligations under Section 9.1 of the Purchase Agreement), prior to the
delivery to Seller of the Escrow Cash by the Escrow Agent.
(e) Power to Transfer Escrow Cash. The Escrow Agent
is hereby granted the power to effect any transfer of the Aggregate Escrow
Amount contemplated by this Agreement. Buyer will cooperate with the Escrow
Agent in promptly effecting such transfers.
3. NOTICE OF CLAIM. Each Notice of Claim by Buyer will be in
writing delivered to Seller with a copy to the Escrow Agent, will specify
whether the Claim arises as a result of a claim by a person against Buyer (a
"THIRD PARTY CLAIM") or whether the Claim does not so arise (a "DIRECT CLAIM"),
and shall also specify with reasonable particularity (to the extent that the
information is available):
(a) the factual basis for the Claim; and
(b) the amount of the Claim, if known, or if not
known, Buyer' good faith estimate of the reasonably foreseeable maximum amount
of the alleged damages arising from such Claim (which amount may be the amount
of damages claimed by a third party plaintiff in an action brought against Buyer
based on alleged facts, which if true, would constitute a breach of Seller's
representations and warranties but only to the portion attributable to such
breach) (the "ESTIMATED DAMAGES"), the basis thereof and documentation
supporting same.
4. RESOLUTION OF NOTICE OF CLAIM AND TRANSFER OF ESCROW
CASH. Any Notice of Claim received by Seller and the Escrow Agent, will be
resolved as follows:
(a) Uncontested Claims. In the event that Seller does
not either (i) contest a Notice of Claim in writing to the Escrow Agent and
Buyer or (ii) pay the amount demanded (as certified by Seller to the Escrow
Agent in writing), all within 60 days after Notice of Claim was received by the
Escrow Agent (an "UNCONTESTED CLAIM"), then the Escrow Agent will promptly pay
to Buyer an amount of the Escrow Cash equal to the amount of the Claim and/or
Estimated Damages specified in the Notice of Claim, and will notify Seller of
such transfer. The parties hereby agree that the Stipulated Losses specified in
Section 9.1 of the Purchase Agreement shall be deemed Uncontested Claims and the
Escrow Agent shall immediately release to Buyer the amount of any Stipulated
Loss payable under Section 9.1 of the Purchase Agreement upon receipt of notice
from Buyer of any such Stipulated Loss which notice is copied to Seller and not
objected to by Seller within the sixty (60) day period described above;
provided, however, that in no event shall Stipulated Losses exceed $1,000,000 in
the aggregate and in no event shall Buyer be entitled to recover Stipulated
Losses from Seller other than by offset against the Escrow Cash. In the event
Seller does so object, the matter shall be settled as a Contested Claim pursuant
to Section 4(b) below.
(b) Contested Claims. In the event that Seller
delivers written notice contesting all, or a portion of, a Notice of Claim to
Buyer and the Escrow Agent within the 60-day period provided above, matters that
are subject to Third Party Claims brought against Buyer in a litigation or
arbitration will await the final decision, award or settlement of such
litigation or arbitration and shall be subject to the
-4-
provisions and procedures set forth in this Agreement. Matters that are subject
to Direct Claims and that are not resolved by Seller and Buyer as provided for
in Section 1(f) herein will be settled by binding arbitration which will be
conducted as provided in Section 5 herein. Any portion of the Notice of Claim
that is not contested will be resolved as set forth above in Section 4(a). The
final decision of the arbitrator will be furnished to the Escrow Agent, Seller
and Buyer in writing and will constitute a conclusive determination of the issue
in question, binding upon the Seller and Buyer. After notice that the Notice of
Claim is contested by Seller, the Escrow Agent will continue to hold, in the
Escrow Account, Escrow Cash having a value sufficient to cover such Claim (and
Estimated Damages, if any) (notwithstanding the expiration of the Release Date)
until (i) execution, and delivery to the Escrow Agent, of a settlement agreement
by Buyer and Seller setting forth a resolution of the Notice of Claim, or (ii)
receipt by the Escrow Agent of a copy of the final award of the arbitrator or
court, as the case may be, together with a written certificate from Buyer or
Seller certifying that the same is a true, accurate and complete copy of a final
decision, award or settlement of such Notice of Claim pursuant to this Section
4(b).
(c) Determination of Amount of Claims. Any amount
owed to Buyer hereunder, as finally determined pursuant to Section 4(a) or (b)
above, will constitute an Uncontested Claim under Section 4(a) hereof.
(d) No Exhaustion of Remedies. Buyer need not exhaust
any other remedies that may be available to it but shall proceed directly in
accordance with the provisions of this Agreement. Buyer may institute claims
against the Escrow Cash and in satisfaction thereof may recover all or a portion
of the Escrow Cash, in accordance with the terms of this Agreement, without
making any other claims directly against the Seller and without rescinding or
attempting to rescind the transactions consummated pursuant to the Purchase
Agreement. The assertion of any single Claim for indemnification hereunder will
not bar Buyer from asserting other Claims hereunder.
(e) Deliveries to Seller. Deliveries to Seller shall
be made to the applicable address set forth in Section 7 hereof, or such other
address as to which the Escrow Agent shall have received prior written notice
from Seller pursuant to Section 7, on which the Escrow Agent may rely
conclusively. All risks of shipment shall be borne by the intended recipient.
5. ARBITRATION. Buyer and Seller agree that they shall use
best reasonable efforts to settle amicably disagreements arising from or in
connection with this Agreement. To this effect, following notice of either to
the other (with copy to the Escrow Agent) of a disagreement, which shall include
any failure to agree upon a matter to be agreed upon (a "DISPUTE") the parties
hereto shall consult and negotiate with one another in good faith an
understanding to reach a just and equitable solution. If those attempts fail
after a period of ten (10) Business Days from the time the parties have been
notified of the Dispute, then every such Dispute shall be settled by arbitration
in Santa Xxxxx County, California, in accordance with the commercial arbitration
rules of American Arbitration Association then in effect. Any judgment upon the
award rendered by the arbitrator may be entered in any court having jurisdiction
over the subject matter thereof. The arbitrator shall have the authority to
grant any equitable and legal remedies that would be available in a judicial
proceeding instituted to resolve the Dispute.
(a) Selection of Arbitrator. The American Arbitration
Association will have the authority to select an arbitrator from a list of
arbitrators who are lawyers familiar with California contract law; provided,
however, that such lawyers cannot work for a firm then performing services for
either
-5-
party, that each party will have the opportunity to make such reasonable
objection to any of the arbitrators listed as such party may wish and that the
American Arbitration Association will select the arbitrator from the list of
arbitrators as to whom neither party makes any such objection. In the event that
the foregoing procedure is not followed, each party will choose one person from
the list of arbitrators provided by the American Arbitration Association
(provided that such person does not have a conflict of interest), and the two
persons so selected will select from the list provided by the American
Arbitration Association the person who will act as arbitrator.
(b) Payment of Costs. Buyer and Seller will bear the
expense of deposits and advances required by the arbitrator in equal
proportions, but either party may advance such amounts, subject to recovery as
an addition or offset to any award. The arbitrator will award to the prevailing
party, as determined by the arbitrator, all costs, fees and expenses related to
the arbitration, including reasonable fees and expenses of attorneys,
accountants and other professionals incurred by the prevailing party. Buyer and
Seller shall pay in equal proportions all costs and expenses of the Escrow Agent
in connection with any arbitration.
(c) Award. Upon the conclusion of the arbitration
proceedings hereunder, the arbitrator will render findings of fact and
conclusions of law and a written opinion setting forth the basis and reasons for
any decision reached and will deliver such documents to each party to this
Agreement along with a signed copy of the award.
(d) Terms of Arbitration. The arbitrator chosen in
accordance with these provisions will not have the power to alter, amend or
otherwise affect the terms of these arbitration provisions or the provisions of
this Agreement.
(e) Exclusive Remedy. Except as specifically
otherwise provided in this Agreement, arbitration will be the sole and exclusive
remedy to Buyer or Seller for any Dispute arising out of this Agreement.
6. LIMITATION OF ESCROW AGENT'S LIABILITY.
(a) The Escrow Agent shall only have those duties as
are expressly set forth in this Agreement, and no implied duties shall be read
into this Agreement. The Escrow Agent will incur no liability with respect to
any action taken or suffered by it in reliance upon any notice, direction,
instruction, consent, statement or other document believed by it to be genuine
and duly authorized, nor for any other action or inaction, except its own
willful misconduct or gross negligence. The Escrow Agent will not be responsible
for the validity or sufficiency of this Agreement. In all questions arising
under this Agreement, the Escrow Agent may rely on the advice or opinion of
counsel, including in-house counsel, and for anything done, omitted or suffered
in good faith by the Escrow Agent based on such advice or opinion, the Escrow
Agent will not be liable to anyone. The Escrow Agent will not be required to
take any action hereunder involving any expense unless the payment of such
expense is made or provided for in a manner satisfactory to it. The Escrow Agent
shall not be obligated to take any legal action or other action hereunder which
might, in its judgment, involve any expense or liability unless it shall have
been furnished with acceptable indemnification.
-6-
(b) In the event conflicting demands are made or
conflicting notices are served upon the Escrow Agent with respect to the Escrow
Account, the Escrow Agent will have the absolute right, at the Escrow Agent's
election, to do either or both of the following: (i) resign so a successor can
be appointed pursuant to Section 10 hereof or (ii) file a suit in interpleader
and obtain an order from a court of competent jurisdiction requiring the parties
to interplead and litigate in such court their several claims and rights among
themselves. In the event such interpleader suit is brought, the Escrow Agent
will thereby be fully released and discharged from all further obligations
imposed upon it under this Agreement, and Buyer will pay the Escrow Agent
(subject to reimbursement from the Seller pursuant to Section 9 hereof) all
costs, expenses and reasonable attorney's fees expended or incurred by the
Escrow Agent pursuant to the exercise of Escrow Agent's rights under this
Section 6 (such costs, fees and expenses will be treated as extraordinary fees
and expenses for the purposes of Section 9 hereof).
(c) In no event shall the Escrow Agent be liable for
any indirect, punitive, special or consequential damages, or any amount in
excess of the value of the pledged collateral (as of the date of the action or
omission giving rise to liability).
(d) The Escrow Agent shall in no instance be under
any duty to give any property held by it hereunder any greater degree of care
than it gives its own similar property. In no event shall the Escrow Agent have
any obligation to advance or risk funds.
(e) The Escrow Agent shall not be deemed to have
notice of any fact, claim or demand with respect hereto unless actually known by
an officer charged with responsibility for administering this Agreement or
unless in writing received by the Escrow Agent and making specific reference to
this Agreement. If any notice, certificate or other document is required to be
delivered to the Escrow Agent and any other person, the Escrow Agent may assume
without inquiry that any such document which the Escrow Agent has received has
also been received by such other person.
(f) All indemnifications contained in this Agreement
shall survive the resignation or removal of the Escrow Agent, and shall survive
the termination of this Agreement.
(g) The Escrow Agent is not responsible for the
recitals appearing in this Agreement. The recitals shall be deemed to be
statements of the other parties to this Agreement.
(h) The Escrow Agent has no responsibility for the
sufficiency of this Agreement for any purpose. Without limiting the foregoing,
if any security interest is referred to herein, the Escrow Agent shall have no
responsibility for, and makes no representation or warranty as to, the creation,
attachment or perfection of any such security interest or the sufficiency of
this Agreement therefor.
(i) Nothing in this Agreement shall obligate the
Escrow Agent to qualify to do business or act in any jurisdiction in which it is
not presently qualified to do business, or be deemed to impose upon the Escrow
Agent the duties of a trustee. The duties of the Escrow Agent under this
Agreement are strictly ministerial in nature.
(j) In no event shall the Escrow Agent have any
liability for any failure or inability of any of the other parties to perform or
observe its duties under the Agreement, or by reason of a
-7-
breach of this Agreement by either of the other parties hereto. In no event
shall the Escrow Agent be obligated to take any action against any of the other
parties to compel performance hereunder.
(k) The Escrow Agent shall in no instance be
obligated to commence, prosecute or defend any legal proceedings in connection
herewith. The Escrow Agent shall be authorized and entitled, however, in any
instance to commence, prosecute or defend any legal proceedings in connection
herewith, including without limitation any proceeding it may deem necessary to
resolve any matter or dispute, to obtain a necessary declaration of rights, or
to appoint a successor upon resignation (and after failure by Buyer to appoint a
successor, as provided hereinafter).
(l) In the event of any ambiguity or uncertainty
under this Agreement, or in any notice, instruction, or other communication
received by the Escrow Agent hereunder, the Escrow Agent may, in its discretion,
refrain from taking action, and may retain the pledged collateral until and
unless it receives written instruction signed by Buyer and Seller which
eliminates such uncertainty or ambiguity.
(m) The Escrow Agent shall have no liability for the
actions or omissions of any book-entry depository, transfer agent, nominee,
correspondent, subagent or subcustodian. The Escrow Agent shall be permitted to
use the services of any recognized securities depository or clearing agent, such
as (without limitation) The Depository Trust Company and the Federal Reserve
Bank book-entry securities system, as applicable, in connection with any
securities or investments held hereunder.
(n) The Escrow Agent shall not be responsible or
liable for delays or failures in performance resulting from acts beyond its
control. Such acts shall include but not be limited to acts of God, strikes,
lockouts, riots, acts of war, epidemics, laws or governmental regulations
changes or superimposed after the fact, fire, communication line failures, power
failures, computer viruses, earthquakes or other disasters, or to unavailability
of Federal Reserve Bank wire or telex facilities.
7. NOTICES. Any notice, certificate, consent, determination or
other communication required or permitted to be given or made under this
Agreement shall be in writing and shall be effectively given and made if (i)
delivered personally, (ii) sent by prepaid courier service or mail, or (iii)
sent prepaid by fax and receipt thereof is confirmed, in each case to the
applicable address set out below:
(i) if to Seller, to:
Network-1 Security Solution, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxx, XX 00000
Attention: Avi X. Xxxxx. President and
Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxx & Xxxxxxx, P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxx Xxxxxxxx, Esq.
-8-
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(ii) if to Buyer, to:
Exodus Communications, Inc.
0000 Xxxxxxx Xxxxxxx Xxxx.
Xxxxx Xxxxx, XX 00000
Attention: Xxxx X. Xxxxxx, General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Fenwick & West LLP
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(iii) If to the Escrow Agent, to:
State Street Bank and Trust Company of
California, N.A.
000 X. 0xx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Corporate Trust Administration
(Exodus/Network-1 2000 Escrow)
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or to such other address as a party may have furnished to the other parties by
written notice given in accordance with this Section 7.
Any such communication so given or made shall be deemed to
have been given or made and to have been received on the day of delivery if
delivered, or on the day of faxing or sending by other means of recorded
electronic communication, provided that such day in either event is a Business
Day and the communication is so delivered, faxed or sent before 4:30 p.m. on
such day. As used herein, a "BUSINESS DAY" shall be any day which is not a
Saturday, Sunday or federal holiday. Otherwise, such communication shall be
deemed to have been given and made and to have been received on the next
following Business Day. Any such communication sent by mail shall be deemed to
have been given and made and to have been received on the fifth Business Day
following the mailing thereof; provided however that no such communication shall
be mailed during any actual or apprehended disruption of postal services. Any
such communication given or made in any other manner shall be deemed to have
been given or made and to have been received only upon actual receipt; provided
that for any notice or other writing required to be delivered to the Escrow
Agent, such notice or other writing shall only be
-9-
deemed delivered when actually received. If any Notice of Claim, objection
thereto, notice or other document is required to be delivered to the Escrow
Agent and any other person, the Escrow Agent may assume without inquiry that
such Notice of Claim, objection, notice or other document was received by such
other person on the date on which it was received by the Escrow Agent.
8. GENERAL.
(a) Governing Law, Assigns. This Agreement will be
governed by and construed in accordance with the internal laws of the State of
California without regard to conflict-of-law principles and will be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and permitted assigns.
(b) Counterparts. This Agreement may be executed in
two or more counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
(c) Entire Agreement. Except as otherwise set forth
in the Purchase Agreement, this Agreement constitutes the entire understanding
and agreement of the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements or understandings, written or
oral, between the parties with respect to the subject matter hereof.
(d) Waivers. No waiver by any party hereto of any
condition or of any breach of any provision of this Agreement will be effective
unless in writing. No waiver by any party of any such condition or breach, in
any one instance, will be deemed to be a further or continuing waiver of any
such condition or breach or a waiver of any other condition or breach of any
other provision contained herein.
9. FEES AND EXPENSES AND INDEMNITY.
(a) All fees and expenses of the Escrow Agent
incurred in the acceptance of, and legal fees and expenses incurred in the
preparation of this Agreement, and in the ordinary course of performing its
responsibilities hereunder will be paid by Buyer in accordance with Exhibit A,
upon receipt of a written invoice by Escrow Agent. Any extraordinary fees and
expenses, including without limitation any fees or expenses incurred by the
Escrow Agent in connection with a dispute over the distribution of Escrow Cash
or the validity of a Notice of Claim, will be paid 50% by Buyer and 50% by
Seller. Seller's liability for such extraordinary fees and expenses of the
Escrow Agent shall be paid by Buyer and recovered as a Claim hereunder out of
the Escrow Cash. To the extent that insufficient Escrow Cash remain to cover
Seller's liability for the fees and expenses of the Escrow Agent, Buyer shall
indemnify the Escrow Agent for such fees and expenses.
(b) Each of Buyer and Seller, jointly and severally,
hereby covenants and agrees to indemnify the Escrow Agent, its directors,
officers, agents and employees, for, and to defend and hold them harmless from
and against, any and every loss, liability, damage, claim, cost and expense of
any nature incurred or suffered by the Escrow Agent and arising out of or in
connection with this Agreement or the administration of this Agreement or the
performance or observance by the Escrow Agent of its responsibilities or
services under this Agreement (including but not limited to attorneys fees and
other costs and expenses of defending or preparing to defend against any claim
or liability), unless and except to
-10-
the extent such loss, liability, damage, cost or expense shall be caused by the
Escrow Agent's own willful misconduct or gross negligence. The Escrow Agent
shall be entitled to reimbursement on demand for all expenses incurred in
connection with the administration of this Agreement or the escrow created
hereby which are in excess of its compensation for normal services hereunder,
including, without limitation, payment of any legal fees and expenses incurred
by the Escrow Agent in connection with the resolution of any claim by any party
hereunder.
(c) Each of Buyer and Seller, jointly and severally,
agree to assume any and all obligations imposed now or hereafter by any
applicable tax law with respect to the payment under this Agreement, and,
without limiting the generality of Section 9(b) above, hereby agree to indemnify
and hold the Escrow Agent harmless from and against any taxes, additions for
late payment, interest, penalties and other expenses, that may be assessed
against the Escrow Agent on any such payment or other activities under this
Agreement.
10. SUCCESSOR ESCROW AGENT. In the event the Escrow Agent
becomes unavailable or unwilling to continue in its capacity herewith, the
Escrow Agent may resign and be discharged from its duties or obligations
hereunder by giving notice of its resignation to the parties to this Agreement,
specifying a date not less than ten days' following such notice date of when
such resignation will take effect. Buyer will designate a successor Escrow Agent
prior to the expiration of such ten-day period by giving written notice to the
Escrow Agent and Seller. Buyer may appoint a successor Escrow Agent without the
consent of Seller so long as such successor is a bank (or in the case of a
subsidiary of a bank holding company, its parent is a holding company) with
assets of at least $50,000,000, and may appoint any other successor Escrow Agent
with the consent of Seller, which will not be unreasonably withheld. The Escrow
Agent will promptly deliver the Escrow Cash to such designated successor. If no
successor Escrow Agent is named by Buyer and Seller, the Escrow Agent may apply
to a court of competent jurisdiction for appointment of a successor Escrow
Agent.
11. LIMITATION OF RESPONSIBILITY. The Escrow Agent's duties
are limited to those set forth in this Agreement and applicable laws, and Escrow
Agent is not charged with knowledge of or any duties or responsibilities in
connection with any other document or agreement including without limitation the
Purchase Agreement.
12. AMENDMENT. This Agreement may be amended by the written
agreement of Buyer, the Escrow Agent and Seller, provided that, if the Escrow
Agent does not agree to an amendment agreed upon by Buyer and Seller (except an
amendment adversely affecting the rights or protections of the Escrow Agent),
the Escrow Agent will resign and Buyer will appoint a successor Escrow Agent in
accordance with Section 10 above.
13. DISPUTE RESOLUTION RELATING TO DISPUTES INVOLVING THE
ESCROW AGENT. It is understood and agreed that should any dispute arise with
respect to the delivery, ownership, right of possession, and/or disposition of
the Escrow Cash or the Contract Holdback Amount, or should any claim be made
upon such Escrow Cash or the Contract Holdback Amount by a third party, the
Escrow Agent upon receipt of written notice of such dispute or claim by the
parties hereto or by a third party, is authorized and directed to retain in its
possession without liability to anyone, all or any of said Escrow Cash until
such dispute shall have been settled either by the mutual written agreement of
the parties involved or by a final order, decree or judgment of court in the
United States of America, the time for
-11-
perfection of an appeal of such order, decree or judgment having expired. The
Escrow Agent may, but shall be under no duty whatsoever to, institute or defend
any legal proceedings which relate to the Escrow Cash or the Contract Holdback
Amount.
14. CONSENT TO JURISDICTION AND SERVICE RELATING TO DISPUTES
INVOLVING THE ESCROW AGENT. Buyer and Seller hereby absolutely and irrevocably
consent and submit to the jurisdiction of the courts in the State of California
(and of any federal court located in said state) in connection with any actions
or proceedings brought against Buyer and Seller by the Escrow Agent arising out
of or relating to this Escrow Agreement. In any such action or proceeding, Buyer
and Seller hereby absolutely and irrevocably waive personal service of any
summons, complaint, declaration or other process and hereby absolutely and
irrevocably agree that the service thereof may be made by certified or
registered first-class mail directed to Buyer and Seller, as the case may be, as
their respective addresses in accordance with Section 7 hereof.
15. REPRODUCTION OF DOCUMENTS. This Agreement and all
documents relating hereto, including, without limitation, (a) consents, waivers
and modifications which may hereafter be executed and (b) certificates and other
information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. The parties agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible as evidence.
16. INVESTMENT OF ESCROW CASH. The Escrow Agent shall invest
Escrow Cash in the SSgA U.S. Treasury Money Market Fund or, with the prior
written consent of Buyer, in another money market mutual fund registered under
the Investment Company Act of 1940, the principal of which is invested solely in
obligations issued or guaranteed by the United States Government. All interest
or any other income earned with respect to such investment shall be retained by
the Escrow Agent until distributed in accordance with the other provisions of
this Agreement, at which time it will be distributed to Seller and Buyer in the
same proportions as the Contract Holdback Amount is released pursuant to Section
1(b) or the Escrow Cash is released in accordance with Section 2(b) and 2(c)
hereof, as applicable.
17. TAX REPORTING MATTERS. The Interested Parties agree to
provide the Escrow Agent with certified tax identification numbers for each of
them by furnishing appropriate Forms W-9 (or Forms W-8, in the case of non-U.S.
persons) and other forms and documents that the Escrow Agent may reasonably
request (collectively, "TAX REPORTING DOCUMENTATION") to the Escrow Agent within
30 days after the date hereof. The parties hereto understand that, if such Tax
Reporting Documentation is not so certified to the Escrow Agent, the Escrow
Agent may be required by the Internal Revenue Code, as it may be amended from
time to time, to withhold a portion of any interest or other income earned on
the investment of monies or other property held by the Escrow Agent pursuant to
this Agreement.
-12-
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the day and year first above written.
EXODUS COMMUNICATIONS, INC. NETWORK-1 SECURITY SOLUTIONS, INC.
By: By:
--------------------------------- ---------------------------------
X. Xxxxxxxx Case Avi X. Xxxxx
Executive Vice President, Finance President and Chief Executive
and Chief Financial Officer Officer
STATE STREET BANK AND TRUST COMPANY
OF CALIFORNIA, N.A., AS ESCROW AGENT
By:
---------------------------------
Authorized Signatory
[SIGNATURE PAGE TO ESCROW AGREEMENT]
-00-
XXXXX XXXXXX XXXX AND TRUST COMPANY
OF CALIFORNIA, N.A.
Schedule of Fees for Escrow Services
EXODUS COMMUNICATIONS, INC./NETWORK-1 SECURITY SOLUTIONS, INC.
ACCEPTANCE FEE: $ 500.00
This one-time charge, payable at closing, includes acceptance and
assumption of responsibility and duties as Escrow Agent; review and comment
on the form of agreement; and establishment of account(s) in accordance
with governing document.
LEGAL COUNSEL: AT COST
State Street will engage the firm of Xxxxxxx & Xxxxxxx, Xxxxxx X. Xxxxx,
Esq. to review and comment on the form of agreement.
ESCROW AGENT FEE: $3,500.00
Payable at funding and annually thereafter, if applicable. Compensates
State Street for administrative services in accordance with the Escrow
Agreement.
PRO-RATA CALCULATIONS: Should the Escrow Agreement require pro-rata
distribution of investment income to the beneficiaries, the annual fee
noted above includes calculations and tax report for up to ten (10)
beneficiaries. STATE STREET WILL ASSESS an additional $250 for each
beneficiary pro-rata calculation beyond the first ten.
CLAIMS (if applicable):
Uncontested $250.00
Contested BILLED AT COST
PREPARATION OF 1099'S (if applicable, each 1099): $15.00
WIRE TRANSFER FEE (This fee will be deducted from wire amount, if applicable)
International $40.00
Domestic $15.00
INVESTMENT FEE: $65.00
Per security purchased (i.e. Treasuries, Agencies, etc.)
INVESTMENT IN STATE STREET INVESTMENT VEHICLES: 40 BASIS POINTS (.0040)
(Calculated on the Average Daily Net Assets)
INVESTMENT VEHICLES:
SSgA Prime Money Market Fund
SSgA US Treasury Money Market Fund
SSgA Tax Free Money Market Fund
STATE STREET INSURED MONEY MARKET (IMMA): NO TRANSACTION FEE
-14-
OUT-OF-POCKET EXPENSE: AT COST
The transaction underlying this proposal, and all related documentation, is
subject to review and acceptance by State Street in accordance with its policies
and procedures. Should the actual transaction materially differ from the
assumptions used herein, State Street reserves the right to modify this
proposal. In the event that the subject transaction fails to close for reasons
beyond the control of State Street, the party requesting these services agrees
to pay State Street's acceptance fees, legal fees and out-of-pocket expenses.
This proposal is a confidential document and should not be duplicated and/or
distributed.
DATED: FEBRUARY 7, 2000
-15-
EXHIBIT 4
CYBERCOP LICENSE
EXHIBIT A
CONSULTING MATERIALS
All training, network design and consulting materials used in
connection with the Purchased Business (some of which are listed in this Exhibit
A and some of which are listed in Exhibits E, F and H), including, without
limitation, (a) any courseware/seminars for commercial use and all materials
related thereto, (b) any reports for customer consulting and all materials
related thereto, (d) all work product delivered to or under development for
delivery to or use in providing Purchased Business services to customers, (e)
Powerpoint technical presentations, if any, related to the Purchased Business,
(f) consulting templates, if any, for network standards, and (g) the reports
listed below:
REPORTS CONSOLIDATED ON CD 1
----------------------------
o Abbott Labs
o Aerojet
o Akzo Nobel Organon
o Alcan
o Alcoa
o Allied Fibers
o Amadeus
o American Airlines
x Xxxxxxxx Consulting
o Anthem (Associates)
o Appleton Papers, Inc-
o Applicon
o Architect of the Capitol
o ARCO
o ARCO Chemical Company
o ARINC
o ARMCO
o Associates Ins-
o Xxxxx Xxxxxxxx
o Banco do Brasil
x Xxxxxxx
o Bergen Xxxxxxxx Corp
o Berlex Biosciences
o Bonneville Power
o Boots Pharmaceutical
x Xxxxx Info Sys
x Xxxxxxxxxxx
o Buck Knives
o Burson Xxxxxxxxxx
o Capital One
o Caremark
x Xxxxxx & Xxxxxxx
o Caterpillar
o Centerior Energy
o Central & Southwest
o CFE - Mexican Power Grid
o Checkpoint Systems
o Chemical Bank
o Chicago Stock Exchange
o City of Torrance
o CompuServe
o Corning CC
o Customer Reports
REPORTS CONSOLIDATED ON CD 2
----------------------------
o Delphi
o Dreamworks SKG
o Eastman Chemical
o EDS
o Emulex
o Entergy
o Eveready Battery
o FAA
o FCCS
o Firewall design info
o Fisons
o Florida Power
o Fluor-Xxxxxx
x Xxxxxxxx Quest
o Gainesville Regional Utilities
o Gallo Winery
o General Electric
o Georgia Pacific
o Glaxo
x Xxxxx-Ami
o GPO
o Group Health
o GTE
o GTELE
x Xxxxxxxx Police
o Health Net
o Hoechst Celanese
x Xxxxxx Defense Communications
x Xxxxxx EDSG
o Hybritech
o IAAI
o Indiana Toll Road
o InternetConnect
o ISMS
o ITT Aerospace
o Jayhawk
o Xxxx Deere
o Johnson and Xxxxxxx
o Johnson Controls
o Kodak
o XXXXX
x Xxxxx-General Foods
o LA Daily News
o LDS Church
o Lego Systems
o Lexis-Nexis
o Liberty Mutual
o Xxxxxxxx Xxxxxx
o Loral
o Xxxxx Xxxxxx
o Los Alamos Nat'l Labs
o LTU
o LTV_
o Marathon Oil
o Mayo Clinic
o MCI
o Med Colleg of Wisconsin
o Metro Seattle
o Midwest
o Milligan College
o Mobile One
o Motorola
o MRMLS
o MTC Telecommunications
o MTech
o MTM
o NASA
o National Health Labs
o National Telephone Services
o Navajo Nation
o Neles-Jamesbury
o NEPOOL
o Network Misc
o Network-1 Waltham Design
o NIPSCO
o North Shore Sanitary District
o Northeast Nuclear
o Northeast Utilities
o Northrop BAT Group
o NPCC
o Nutrasweet
o NUWES
o NW Alloys
o OK State Senate
o Otis Elevator R&D
o Pacific Xxxx
o Packard Electric
x Xxxxx Systems
o Xxxxxx Xxxxxx
o PPG Lexington
o PSInet
REPORTS CONSOLIDATED ON CD 3
----------------------------
o RCMP Xxxxxxxx Police
o Reemay, Inc
o Regional Information Systems
x Xxxxxxx Engineering
o Riksdagen (Sweden)
o XX Xxxxxxxxx
o Sandoz
x Xxxxxxx, Xxxx & Xxxxx
o Scripps Xxxxxx
x Xxxxxx
o SEMA
o Xxxxxxx Xxxxxxx
o Sikorsky Aircraft
o SmithKline #1
o Sony Pictures
o Southwestern Xxxx Telephone
o SUNY - Xxxxxx
o SWBT #1
o Tandy Corporation
o Techdata
o TelAlaska
o Teradyne
o The Associates
o The Citadel
o The Taunton Press
o Thrift
o TIAA-CREF
o Training Materials
o TRAPS Generic Items
o Travellers
o Treetops School
o TRW
o United Airlines Flight Center
o University of Portland
o Unos
o Vitalink
x Xxxxxxxx Net Design
o Waste Management
o Westpac Bank
o Wheeling Pittsburgh Steel
o Xilinx
o Yadkin
o Zenith
EXHIBIT B
CONTRACTS & LICENSES
ALL CONTRACTS BETWEEN SELLER AND THE BELOW LISTED CUSTOMERS OF SELLER:
1. CyberCop License
EXHIBIT C
DISCLOSURE SCHEDULE
The responses in this Disclosure Schedule are numbered in accordance
with the subsections of Section 4. The information provided in this Disclosure
shall be deemed to supplement and be a part of the indicated subsections of the
representations and warranties of Seller contained in the indicated subsections
of the Agreement, as applicable. All information provided in this Disclosure
Schedule shall be construed as exceptions to the representations and warranties
contained in the sections of Section 4 that are specifically referenced herein,
unless otherwise indicated by the context. Any disclosures made under the
heading of one section of this Exhibit C may apply to and/or qualify disclosures
made under one or more other sections. Section headings are provided for
convenience only. Unless otherwise defined, any capitalized terms in this
Disclosure Schedule shall have the same meanings assigned to such terms in the
Asset Purchase Agreement to which this schedule is an exhibit.
Item 4.2 Subsidiaries and Guaranties.
-------------------------------------
Network-1 Acquisition Corp. is a wholly owned subsidiary of the Seller
and does not own any of the Purchase Business or Purchased Assets.
Item 4.6 Litigation
-------------------
The Seller commenced an action against a former employee (Xxxxx
Xxxxxxxxxxx) for recovery of a loan in the principal amount of $10,584 (plus
interest) which Xx. Xxxxxxxxxxx had failed to repay the Seller. Xx. Xxxxxxxxxxx
has asserted a counterclaim against the Seller for $47,850 for alleged
commissions due him from the Seller.
Item 4.10 Title to and Condition of Purchased Assets.
----------------------------------------------------
The current location of all tangible Purchased Assets and Third Party
Software is set forth in Exhibit I to the Agreement. The CyberCop license
renewal is due April 18, 2000 ($5,000).
Item 4.11 Absence of Certain Changes.
------------------------------------
The transactions contemplated by the Agreement have caused Employees to
expend material hours related to such transactions which were not in the normal
course of business and adversely affected billable hours during the month of
January, 2000.
(e) Seller leases an IBM RS-6000 computer which is not included as part of the
Purchased Assets but was used for consulting training. This equipment will
be returned to IBM upon closing.
(h) In connection with the sale of the Purchased Assets and Purchased Business,
the Seller has agreed to provide additional benefits to the Employees
including (i) additional grants of non-qualified stock options; (ii)
accelerating vesting of stock options, (iii) changing the exercise period
(following the termination of employment by the Seller) to ninety (90) days
and (iv) a cash bonus payable from the $1.0 million of the Purchase Price
held in escrow (the Escrow Funds as defined in the Escrow Agreement)
provided each such employee is employed by Seller one year following the
Closing. See Exhibit D to Agreement for a summary of benefits to be
provided to Employees in connection with transactions contemplated by the
Agreement. Buyer has not assumed any of the foregoing additional benefits
promised to Employees by Seller.
(l) Xxxxxxx Xxxxxxxx was re-hired by the Seller on January 31, 2000 as part of
the Professional Services team. Mr. Conquest receives compensation at the
rate of $110,000 per annum. See also Item 4.11(h) and Exhibit D to
Agreement for a summary of benefits to be provided to Employees in
connection with transactions contemplated by the Agreement.
Item 4.12 Agreements and Commitments.
------------------------------------
(a) The Company currently has work-in-progress consulting arrangements (oral
agreements) with X.X. Xxxxxxx Pharmaceutical Research, Lexis/Nexus, and
eLoyalty. See Exhibit D for summary of employment agreements, offer letters
and parting summary letters with respect to the Employees. See Item 4.11(l)
related to the hiring of Xxxxxxx Xxxxxxxx.
The Seller pays Xxxxxx Xxxxx rent of $900 per month plus reimbursement of
additional expenses (including telephone, ISDN line, etc.) with respect to
is office location in Long Island City at Xx. Xxxxx'x residence.
(b) The Seller has an agreement dated September 10, 1999, with NextVISION with
respect to the resale of consulting services (the "NextVISION Agreement").
The Seller has a license for CyberCop software with Network Associates
which expires on April 18, 2000 (the "CyberCop License"). Buyer is not
assuming, has not assumed, and will not by the execution, delivery or
performance of this Agreement, or otherwise, assume or otherwise become
responsible for any liability or obligation of any nature of Seller under
the NextVISION Agreement.
(d) See Xxxxx lease arrangement referred in Item 4.12(a) above.
(e) See NextVISION agreement referred to in Item 4.12(b)
(g) Xxxxxxx Xxxxxxx has an outstanding loan from the Seller of $87,790 as of
January 31, 2000.
(h) The NextVISION Agreement provides NextVISION with an exclusive right to
resell Seller's consulting services in Argentina through March 31, 2000
subject to extension.
(i) Xxxxxx Xxxxx and Xxxxxxx Xxxxxxx have employment agreements which provide
for severance payments upon termination by the Seller without cause. Xx.
Xxxxx and Xx. Xxxxxxx have agreed to waive any such severance payments in
connection with the transactions contemplated by the Agreement. Also see
Exhibit D for all Employees.
Item 4.13 Intellectual Property.
-------------------------------
(b) (i) See CyberCop License as referenced in item 4.12(b) above.
(c) The CyberCop License - see 4.12(b) above.
(d) See CyberCop License referred to in Item 4.12(b).
(k) See NextVISION agreement referred to in Item 4.12(b).
Item 4.16 Employees
-------------------
(a) See reference to Xxxxx and Xxxxxxx xxxxxxxxx payments in Item 4.12(i).
(e) See Item 4.11(h) and Exhibit D for summary of benefits to be provided by
Seller to Employees in connection with the transactions contemplated by the
Agreement.
(f) A list of all Employees and their current base compensation as of the date
of this Agreement is as follows:
Xxxxxxx Xxxxxxx $ 160,000
Xxxxxx Xxxxx $ 120,000
Xxxxxxx Xxxxxxx $ 102,500
Xxxxxxx Xxxxxxxx $ 95,000
Xxxx Xxxxxx $ 70,000
Xxxx Xxxxxx $ 92,000
Xxxxxxx Xxxxxxxx $ 110,000
Item 4.21 Customer Relationships.
--------------------------------
There is deferred revenue with respect to X.X. Xxxxxxx Pharmaceutical
Research of $38,375 as of January 31, 2000, subject to adjustment through
Closing.
Item 4.22 Product and Service Quality.
-------------------------------------
In July 1999, the City of Hope filed a lawsuit against the Seller in Los Angeles
Superior Court alleging breach of contract with respect to certain network
security consulting services provided by the Seller to the City of Hope and
seeking return of $530,893 paid to the Seller for such services, plus
consequential damages and other unspecified damages. Prior to the City of Hope's
commencement of the action, the Seller had demanded from the City of Hope
payment in the amount of $218,766, representing outstanding invoices for
services rendered by the Seller to City of Hope. In October, 1999, the parties
settled the dispute by agreeing to forego their respective claims against each
other and exchanging general releases. The case was dismissed with prejudice.
The Seller had a dispute with AIRINC with respect to certain consulting
services preferred. The dispute was resolved and AIRINC has paid the Seller in
full for such services.
EXHIBIT D
EMPLOYEES
The term Employees in the Asset Purchase Agreement to which this
Exhibit D is attached refers to those Seller employees used to render services
in connection with the Purchased Business who are listed below and who accept
employment with Buyer:
EMPLOYEES
-------------------------
1. Xx. Xxxx Xxxxxxx
2. Xxx Xxxxx
3. Xxxx Xxxxxxx
4. Xxx Xxxxxxxx
5. Xxxx Xxxxxx
6. Dr. Xxxx Xxxxxxxx
7. Xxxx Xxxxxx
The Employees and the other Intangible Assets related to the Employees includes
the following:
o any contracts and/or information that may be required to retain all
current Employees of the Purchased Business
o the employment and personnel records for all employees of the Purchased
Business hired by Buyer, whether in electronic media or otherwise
EXHIBIT E
OTHER INTANGIBLE ASSETS
The Intangible Assets as defined in Section 1.10 of the Asset Purchase
Agreement to which this Exhibit is attached includes items (a) through (i) below
and the other items listed below: (a) all contract rights, customer lists,
prospective customer lists, any lead database, email addresses of customers
registered via the web and related information related to the Purchased Business
or the Contracts; (b) all Intellectual Property including, without limitation,
patents, copyrights, trademarks and service marks directly related to the
Purchased Business or customers of the Purchased Business, including
Intellectual Property listed on Exhibits A, E, F, H, and I; (c) all documents
and records relating to the Purchased Assets or the operations of the Purchased
Business, including all customer and vendor records, all data of any type
related to the Purchased Business on any computer used in the Purchased
Business, and all lists of leads; (d) all permits, licenses, consents, filings,
authorizations, approvals and indicia of authority (and pending applications for
any thereof) related to the Purchased Business; (e) any and all prepaid
expenses, advances, deposits and other assets related to the Purchased Business
subject to obtaining any required consent to transfer thereof; (f) all right,
title and interest of Seller in the trademarks and applications therefor of
related to the Purchased Assets or the Purchased Business and all goodwill
associated therewith; (g) all marketing and promotional literature used in
connection with the Purchased Business, including as provided on Exhibit F; (i)
the web site and URL used in connection with the Purchased Business and all
related source HTML files and documentation associated with the operation of
such site.
PROFESSIONAL SERVICES
---------------------
o Act Database of all customers and prospects in ACT format.
o Documentation
o All hardcopies and softcopies of Professional Services marketing materials
o The full consulting group web site on CD o Hyperlink from Network-1
Consulting's URL to a URL identified by Buyer
o All customer and vendor records and payment terms, including but not
limited to payment schedules and an aged receivables report (as of 12/31/99
and as of Closing) covering for periods current through 90 days past due.
o The following cellular phone numbers registered in the name of Seller and
used by the following Employees in connection with the operation of the
Purchased Business:
========================= =========================
Name Phone Number
========================= =========================
Xx. Xxxx Xxxxxxx 000-000-0000
------------------------- -------------------------
Xxx Xxxxx 000-000-0000
------------------------- -------------------------
Xxxx Xxxxxxx 000-000-0000
------------------------- -------------------------
Xxx Xxxxxxxx None
------------------------- -------------------------
Xxxx Xxxxxx 000-000-0000
------------------------- -------------------------
Dr. Xxxx Xxxxxxx 000-000-0000
------------------------- -------------------------
Xxxx Xxxxxx 000-000-0000
========================= =========================
o The following pager numbers registered in the name of Seller and used by
the following Employees in connection with the operation of the Purchased
Business:
========================= =========================
Name Pager Number
========================= =========================
Xx. Xxxx Xxxxxxx 000-000-0000
------------------------- -------------------------
Xxx Xxxxx 800-skypage
------------------------- -------------------------
Xxxx Xxxxxxx 000-000-0000
------------------------- -------------------------
Xxx Xxxxxxxx None
------------------------- -------------------------
Xxxx Xxxxxx None
------------------------- -------------------------
Dr. Xxxx Xxxxxxx 000-000-0000
------------------------- -------------------------
Xxxx Xxxxxx 000-000-0000
========================= =========================
COURSE SUMMARY'S
----------------
o (t)CMS Course Handout
o 1-day net statistics
o 1st Boston Special
o Advanced Ethernet course
o Advanced Network Design
o Aetna Audit handout
o aggroup 1-97
o Alpha Micro Enet,TCP & Novell
o AoC Security Audit Presentation
o Arch_PP
x XXXXX '91 handout
x XXXXX '93 seminar
x XXXXX networking seminar
o ASM '95 Dallas
o AT&T DECnet-LAT Course
o ATM
o ATM case studies
o ATM Course
o ATM primer
o ATM stuff
o BAYVAX Cl-Svr Net Performanc
x Xxxxxxx FWP 2-97
x Xxxxxxx FWP 2-9700
o bill's TCP password packets
x Xxxxx exec tech trends
o BPA Database course
o CL-svr net perf 1-hr session
o Client-Server
o CMS Course Handout
o CMS Course Handout (new)
o Compsec '94
o Compsec '94 dist sys security
o Compsec '94 Network Security
o Compsec '95
o CompSec '96 FW seminar
o CompSec'95 Future of Inet Sec-
o CompSec'95 Future of Inet Sec00
o Consulting presentation 2-97
o Coors Net Mgt 2-16-93
o Copy of Macro-32 Course
o Corning Glass Network Special
o Corp Org Chart 10-4-96
o Course Outlines
o CSI Dial-up Security
o CSI Expert Systems
o CSI Nov '95
o Data Comm for Mgrs
o DECnet Mgt (3-day)
o DECnet-TCP (2-day)
o DECnet-VAX Internals (IV)
o DECnet-VAX Mgt (2-day)
o DECnet-VAX Performance
o DECnet-VAX Programming
o DECUS 1-Day network security
o DECUS 1-hr cl-svr net perf
o DECUS BAYVAX Net Futures
o DECUS Client-Server
o DECUS F'94
o DECUS F'94 Anaheim
o DECUS File Servers
o DECUS LAN Troubleshooting
o DECUS Las Vegas F92 Sessions
o DECUS Las Vegas F93 Sessions
o DECUS Mac-to-VAX Connections
o DECUS Micro-Mainframe
o DECUS Multivendor Net Mgt
o DECUS Net Mgt Toolkit
o DECUS Network Security
o DECUS Ntwk w-twisted pair
o DECUS Ntwk w-twisted pair00
o DECUS Orlando Network Performan
o DECUS S'93 Atlanta Sessions
o DECUS S'94 New Orleans
o DECUS S'95
o DECUS Seminars
o DECWindows Appendix A code
o DECWindows short example
o Defeating Inter-Intra sec w-f00
o Defeating Inter-Intra sec w-fir
o Defending Servers against network attacks 7-98
o Design Sample
o Dial-Up Security
o Dial-up-remote LAN '95
o Distributed Applications
o DoE ISC-211 Conference
o E-commerce & Firewalls
o EDPAA CL-SVR Net Arch-Perf
o EDPAA Cl-Svr Security Issues
o EDPAA Dial-Up MODEM Protection
o EDPAA Dial-Up Security
o EDPAA Multiprotocol LAN Securit
o EDPAA Net O-S Intro
o EDPAA NY 1-94 Courses
o EDS Protocol Course
o EG&G Special 7-91
o EKDUG PC & Wrkstn Net 10-91
o Encryption Futures
o Entergy Special
o EP & Writing Books
o Ethernet Concepts & Planning
o Ethernet intro
o Ethernet Mgt & Troubleshooting
o Executive Seminar (networks)
o Expert system seminar
o Firewall charts-graphs
o Firewall charts-graphs00
o Firewall seminar
o Futures of Technology keynote
o General Logistics Handout (Enet
o Good Net Design_
o Good network design
o Good network design (new)
o Groupware and DTP
o Hancock_97
o High Speed fwls 2-8-96
o Hoechst Multivendor Net Mgt
o HOECHST PC & Workstns Nets
o IIA Abilene 1996
o Industrial Networks
o Intel design, perf, mgt & trend
o Interconnecting LANs
o Internet Futures for ASM '951
o Internet-What Future Holds
o Interop s96 Paper
o Intranets Some assy req 9-96
o Intranets Some assy req 9-9600
o Intro to ATM
o Intro to ATM - short version
o Intro to Net Security 2-97
o Intro to Net Security 2-9700
o IP subnet mask spreadsheet
o Ireland System Manager Seminar
o ISACA - Cl-svr Audit-Sec-Ctl 00
o ISACA - Cl-svr Audit-Sec-Ctl NJ
o ISACA abstracts CACS 97
o ISACA Auditing Networks 9-95
o ISACA Auditing Networks 9-9500
o ISACA DFW 1-95 Datacomm Basics
o ISACA Houston '96
o ISACA LA '95
o ISACA95 Sessions Atlanta
o Kodak Seminar CL-Svr
o Kodak SQL for Netprof
o Kodak-DEC-Telestar TCP-IP
o LAN Architectures
o LAN Capacity Planning
o LAN Protocols
o LAN Statistics
o LAN Theory
o LAN Theory 1996
o London Firewalls 5-96
o London product pres 5-96
o Macro-32 Course Overheads
o Mactivity '93 Net Trends
o Mactivity '94
o Mactivity '95
o Mactivity '96 Intro to ATM
o Mactivity '96 LANE (ATM)
o Managing multiple Ethernets
o Managing multivendor systems-
o Managing multivendor systems-00
o Managing Real-Time LANs
o Mapping Your Network
o Measuring Net Performance
o Metro Seattle Special purchasin
o Mgt Nets with NTPROF
o Micro & Workstn Networks
o Microcomputer Protocols
o Migrating to TCP-IP
o Migrating to TCP-IP00
o Mike's Conference Handouts
o Mike's Presentations
o MMS Handout (new)
o NAF95 Handouts
o Navajo Network Troubleshooting
o ncl slides
o Net Firewalls 5-96
o Net Firewalls 5-9600
o Net mon, mgt & perf
o Net Security - EDS - 3-95
o Net Security - EDS - 3-9500
o NET1-A+ pres 10-12-95
o NET1-A+ pres 10-12-9500
o NET1-ACC
o NET1-AccessPlus 1-28-95
o NET1-XXX
o NET1-Analyst 1-29-95
o NET1-Analyst 1-29-9500
o NET1-NetPanel 1-29-95
o NET1-NetPanel 1-29-9500
o NET1-SEC
o NET1-SecurePlus 1-29-95
o NET1-SecurePlus 1-29-9500
o NetExpo Firewalls 9-94
o Network Design - Intensive
o Network Event Management
o Network MGR & Phase V
o Network Performance
o Network Performance F'94
o Network Protocol Analysis
o Network Security
o Network Security (new 10-21-90
o Network Security Seminar
o Network statistics 35mm
o Network Troubleshooting
o Network-1 Eveready presentation
o Network-1 Oxford presentation
o Networks & Graphics
o New DECUS net security
o New DECUS net security-
o NovaQuest CEO Handout
o NT Firewall seminar 4-97
o ntprof relational manual
o Ntwk Des & Analy-
o NWTA Enterprise Net Mgt
o NWTA LAN-WAN Integration
o Oakridge
o Oakridge Presentations
o One Day Firewall Seminar
o OSI Design & Migration course
o OSI design and migration
o OSI Intro course
o Pascal folder
o Pathworks (2-day)
o PAVLUG Multi-vendor Net '91
o PAVLUG Network Security '91
o PC & Workstn Net Mgt & Trouble
o PC & WS Networks (new)
o Phase V DECnet Course 12-2-89
o Xxxxxx Xxxxxx exec special
o Pioneer firewalls 9-95
o Pioneer NET1-Firewall-Plus
o Pioneer presentations
o PM Net Security Special
o PM Yr2000 Special
o Portland LUG PC & Work Ntwks
o Portland LUG Phase V
o Portland LUG Phase V overview
o Product Roadmap RevII
o RDB-VMS Handout (1-15)
o Relational DB Concepts
o Remote Client-Svr Apps
o Rockhurst NY firewalls 9-95
o RSX DECnet Internals
o SANS NS99
o SB 1994 Perf results
o Scanned stuff for DuPont
o SCTE '97
o Sec Inter-Intra environment 97
o Securing an Internet Connection
o Selecting Switching Bridges
o SEMA II
o Short Corp-Product brief 8-96
o SUNY Handout
o Sweden multivendor handout
o Sweden Tech Update
o Switching Bridges
o System & Network Security
o TCA Network Security
o TCA Network Security 1994
o TCP Graphics
o TCP-IP
o TCP-IP & GOSIP
o TCP-IP & NetBIOS
o TCP-IP & NetBIOS00
o TCP-IP Supplement to Ethernet
o TCP-OSI
o Tech trends 1-day_
o Tech trends 1-day_00
o Tech trends a Perspective
o Tech trends affecting nets TCA
o Tech trends in networks (new)
o Technical overview of MODEMS
o Technical staff management
o Technical Trends slides
o Tel-Ed 97 Overheads
o Third Party Purchasing
o Traveling with Laptops
o Troubles with Ethernet
o Troubles with Technology
o TRW Network Firewalls session
o Twinkie Stuff
o UNDERSTANDING ETHERNET
o Using CMS & MMS for Product Dis
o Using Internet to Improve Biz_
o VAXCluster Performance
o VMS Courses
o VMS Examples
o WAN security for SCTE 1-97
o Why be On Internet-
o Wide Area Networks
o WinNT Programming In Practice
o Xxxxxxxxx 00 Xxxxx Xxxxxxxxxxx
o WWW Security
o XYZ net migration example
EXHIBIT F
PUBLICATIONS
Those publications of Seller or, to the extent of Seller's interest, of any
of the Employees relating to the Purchased Business or network security
including without limitation the following:
o Computers & Security files
o Network-1, Inc-
o Newsletter Files
o NewUI Screens
o Proposals
o Sales Manual Docs
o Speaking Engagement files
o White Papers
o Wiring documents
EXHIBIT G
OTHER PURCHASED ASSETS
o Several file cabinets of Xx. Xxxxxxx which are in storage and copies of
invoices will be shipped after the closing to location specified by
Buyer.
EXHIBIT H
SOFTWARE
The software described in items 1, 2, 3, 4, 5, and 6 a-k below, which
constitute all computer software programs developed in connection with the
Purchased Assets or the Purchased Business, in source and object code for all
platforms and in all languages and each of the following items related to such
software: (i) any and all documentation; (ii) any and all related databases;
(iii) all supplementary software programs related thereto; (iv) all derivative
works, modifications, alterations, amendments, corrections, updates,
enhancements, changes, upgrades, and additions to the foregoing; (v) all know
how, inventions, work in progress, algorithms, diagnostic routines, processes
related to or associated with the foregoing; (vi) any and all related manuals,
logic diagrams, flow charts, programmers' notes, and other documentation
relating to the foregoing; and (vii) bug data bases and tech support.
1. All penetration analysis and reporting software, including TRAPS
applications.
2. the archive file hacktools.tar.Z and all information contained therein
3. the archive file scanner.tar.Z and all information contained therein
4. the archive file httpd.tar and all information contained therein
5. the archive file misc.tar.Z and all information contained therein
6. Various analysis tools including:
a. Net1 Analyst
b. Network Mapping Utility
c. Network Statistics Reporter
d. Network Security Monitor
e. Network Event Manager
f. Check-4-Virus
g. Net1 Analyst for DOS
h. Data Collection Toll for DOS
i. Network Traffic Analyzer
j. Network Report Data Reduction Utility
k. Network Traffic Data Collector
EXHIBIT I
TANGIBLE ASSETS AND THIRD PARTY SOFTWARE
1. Computer and networking equipment, personal electronic
computer and other equipment, and third party software used
by the Employees, owned by Seller, and used in connection
with the Purchased Business including, without limitation,
the items listed on the two spreadsheets attached to this
Exhibit I and labeled, "Exhibit I - Tangible Assets and
Third Party Software."
2. All other existing tangible assets not listed above,
including without limitation, all properties and equipment
used by Seller or any affiliate of Seller in the Purchased
Business, all servers, routers, and personal computers
(including laptops) used by Seller or any affiliate of
Seller or any Employee in connection with the Purchased
Business, including without limitation, the items listed on
the two spreadsheets attached to this Exhibit I and
labeled, "Exhibit I - Tangible Assets and Third Party
Software."
EXHIBIT I
TANGIBLE ASSETS AND 3RD PARTY SOFTWARE
DELIVERY OF TEXAS, WASHINGTON AND NEW YORK COMPLETED AT CLOSING. MASSACHUSETTS TANGIBLE ASSETS AND 3RD PARTY SOFTWARE WILL BE
DELIVERED TO XXXX TAYLORS EXODUS LOCATION UNLESS SPECIFIED OTHERWISE. HARDWARE/SOFTWARE INVENTORY FOR NETWORK-1 CONSULTING TEAM
Estimated Total Net Book
Quantity Description Config Info Cost Cost Value Location
-------- ----------- ----------- ---- ---- ----- --------
1 Dell Inspiron 7000 300MHZ PII, DVD, 128MB, 8GB, 10/100, 56Kb + OS 3,200.00 3,200.00 2,133.33 Waltham
1 Dell Inspiron 7000 300MHZ PII, DVD, 128MB, 8GB, 10/100, 56Kb + OS 3,200.00 3,200.00 1,066.67 Xxxxxxx
0 Xxxx Xxxxxxxx 0000 300MHZ PII, DVD, 128MB, 8GB, 10/100, 56Kb + OS 3,200.00 9,600.00 6,400.00 Texas
1 Dell Inspiron 7000 300MHZ PII, DVD, 128MB, 8GB, 10/100, 56Kb + OS 3,200.00 3,200.00 2,133.33 NY
1 Dell Port Replicator Docking Station 250.00 250.00 166.67 Waltham
1 Dell Port Replicator Docking Station 250.00 250.00 83.33 Seattle
1 Dell Port Replicator Docking Station 250.00 250.00 166.67 Texas
1 Applications/SW MS Office 2000 700.00 700.00 466.67 Waltham
1 Applications/SW MS Office 2000 700.00 700.00 233.33 Seattle
3 Applications/SW MS Office 2000 700.00 2,100.00 1,400.00 Texas
1 Applications/SW MS Office 2000 700.00 700.00 466.67 NY
1 Applications/SW NAI CyberCop 5.x (renew every 2 years) 10,000.00 10,000.00 6,666.67 Waltham
1 Peripherals HP Laser 6L 200.00 200.00 133.33 Waltham
1 Peripherals 8GB disk 200.00 200.00 133.33 Waltham
2 Peripherals ZIP 100mb 100.00 200.00 133.33 TX
1 Peripherals CD burner 400.00 400.00 133.33 Seattle
1 Peripherals CD burner 400.00 400.00 266.67 Texas
1 Applications/XX Xxxxxx Systemworks 100.00 100.00 33.33 Seattle
2 Applications/XX Xxxxxx Systemworks 100.00 200.00 133.33 Texas
1 Applications/XX XxXxxx Office 2000 Pro 100.00 100.00 33.33 Seattle
1 Applications/XX XxXxxx Office 2000 Pro 100.00 100.00 66.67 Texas
1 Applications/SW Visio Professional 700.00 700.00 466.67 Waltham
1 Applications/SW Visio Professional 700.00 700.00 233.33 Seattle
1 Applications/SW Visio Professional 700.00 700.00 466.67 Texas
1 Applications/SW Visio Professional 700.00 700.00 466.67 NY
2 Applications/SW Visio Network Diagrams 295.00 590.00 393.33 Texas
1 IBM 000XX 000 XXX, 00 XX, 0.0 XX - XX 4.0 WS 1,200.00 1,200.00 800.00 Texas
2 IBM 300GL 300 MHZ, 64 MB, 8.4 GB - NT 4.0 WS 1,200.00 2,400.00 1,600.00 Seattle
2 Peripherals 10 GB disk 200.00 400.00 266.67 Waltham
1 AST 200G 200MHz, 64MB, 12GB, W95 1,000.00 1,000.00 666.67 Waltham
1 IBM 300GL 000 XXX, 000 XX, 8.4 GB - NT 4.0 WS, Linux 6.0 1,365.00 1,365.00 910.00 Waltham
1 Peripherals 10 GB disk 200.00 200.00 133.33 Waltham
1 Peripherals Epson 850 color inject printer 150.00 150.00 100.00 Waltham
1 Dell 400 400MHZ, 128MB, 12GB disk, 10/100 - NT 4.0 Server 3,000.00 3,000.00 2,000.00 Waltham
3 Dell 400 400MHZ, 128MB, 12GB disk, 10/100 - NT 4.0 Server 3,000.00 9,000.00 6,000.00 Texas
1 Peripherals 4 port keyboard/monitor/mouse switch 250.00 250.00 166.67 Waltham
1 Sun Ultra 5 270 MHz, 128MB, 4.3 GB, CD - Solaris 2.7 & 2.51 2,600.00 2,600.00 1,733.33 Waltham
Monitors
1 Princeton Graphics 17" Ultra 72 200.00 200.00 133.33 Waltham
1 iiyama 21" VisionMaster Pro 502 980.00 980.00 653.33 Waltham
1 Daewood 15" 150.00 150.00 100.00 Waltham
1 NEC 15" Multisync 3FGE 150.00 150.00 100.00 Waltham
1 Nokia 44X 21" monitors 1,200.00 1,200.00 400.00 Seattle
2 Nokia 44X 21" monitors 1,200.00 2,400.00 1,600.00 Texas
1 Misc 14" monitor 150.00 150.00 100.00 Waltham
Misc
1 Linksys Etherfast 10/100 8-port Autosensing 100.00 100.00 66.67 Waltham
1 Linksys Etherfast 10/100 8-port Autosensing 100.00 100.00 66.67 Texas
1 Linksys/Misc 5 port 10mbps minihubs 50.00 50.00 16.67 Seattle
4 Linksys/Misc 5 port 10mbps minihubs 50.00 200.00 133.33 Texas
1 Cell phones Nokia 6162 150.00 150.00 100.00 Texas
1 Cell phones Nokia 6162 150.00 150.00 50.00 Seattle
1 Cell phones Nokia 6162 150.00 150.00 100.00 Texas
1 Cell phones Nokia 6162 150.00 150.00 100.00 NY
1 Cell phones Nokia 6162 150.00 150.00 100.00 Texas
1 Palm Pilot 500.00 500.00 333.33 Texas
1 Intel PC Camera 450.00 450.00 300.00 Texas
1 Apple LaserWriter 2,200.00 2,200.00 1,466.67 Texas
1 Paper Shredder 150.00 150.00 100.00 Texas
1 Cisco 801 ISDN Router 599.00 599.00 199.67 Seattle
1 Triplite 700 UPS 200.00 200.00 133.33 Texas
1 Sun Ultra 10 2,000.00 2,000.00 1,333.33 Texas
1 HP Design Jet 450C 4,100.00 4,100.00 2,733.33 Waltham
Miscellaneous Hardware
and Software 8,000.00 8,000.00 2,666.67
---------------------------------------------
TOTAL 85,634.00 51,939.67 23,863.33
=============================================
EXHIBIT I (continued)
TANGIBLE ASSETS AND 3RD PARTY SOFTWARE
DELIVERY OF TEXAS, WASHINGTON AND NEW YORK COMPLETED AT CLOSING. MASSACHUSETTS TANGIBLE ASSETS AND 3RD PARTY SOFTWARE WILL BE
DELIVERED TO XXXX TAYLORS EXODUS LOCATION UNLESS SPECIFIED OTHERWISE. HARDWARE/SOFTWARE INVENTORY FOR NETWORK-1 CONSULTING TEAM
Quantity Description MA TX WA User(s)
-------- ----------- -- -- -- -------
1 Dell Inspiron 7000 2,133.33 Xxxx
1 Dell Inspiron 7000 1,066.67 Xxxxxxx
3 Dell Inspiron 7000 6,400.00 Harker, Mathews, Xxxxxxx
0 Xxxx Xxxxxxxx 0000 2,133.33 Xxxxx
1 Dell Port Replicator 166.67 Xxxx
1 Dell Port Replicator 83.33 Xxxxxxx
1 Dell Port Replicator 166.67 Xxxxxxx
1 Applications/SW 466.67 Xxxx
1 Applications/SW 233.33 Xxxxxxx
3 Applications/SW 1,400.00 Harker, Mathews, Xxxxxxx
1 Applications/SW 466.67 Xxxxx
1 Applications/SW 6,666.67 Xxxx
1 Peripherals 133.33 Xxxx
1 Peripherals 133.33
2 Peripherals 133.33
1 Peripherals 133.33 Xxxxxxx
1 Peripherals 266.67 Xxxxxx, Xxxxxxx
1 Applications/SW 33.33 Xxxxxxx
2 Applications/SW 133.33 Xxxxxx, Xxxxxxx
1 Applications/SW 33.33 Xxxxxxx
1 Applications/SW 66.67 Xxxxxx, Xxxxxxx
1 Applications/SW 466.67 Xxxx
1 Applications/SW 233.33 Xxxxxxx
1 Applications/SW 466.67 Harker, Mathews, Xxxxxxx
1 Applications/SW 466.67 Xxxxx
2 Applications/SW 393.33 Harker, Mathews, Xxxxxxx
1 IBM 300GL 800.00 Harker, Mathews, Xxxxxxx
2 IBM 300GL 1,600.00 Xxxxxxx
2 Peripherals 266.67 Xxxx
1 AST 200G 666.67 Xxxxxxx
1 IBM 300GL 910.00 Xxxx
1 Peripherals 133.33 Xxxx
1 Peripherals 100.00
1 Dell 400 2,000.00 Xxxx
3 Dell 400 6,000.00 Harker, Mathews, Xxxxxxx
1 Peripherals 166.67 Xxxxxxx
1 Sun Ultra 5 1,733.33 Xxxx
Monitors
1 Princeton Graphics 133.33 Xxxx
1 iiyama 653.33 Xxxx
1 Daewood 100.00 Xxxx
1 NEC 100.00 Xxxx
1 Nokia 44X 400.00 Xxxxxxx
2 Nokia 44X 1,600.00 Harker, Mathews, Xxxxxxx
1 Misc 100.00
Misc
1 Linksys 66.67 Xxxx
1 Linksys 66.67 Harker, Mathews, Xxxxxxx
1 Linksys/Misc 16.67 Xxxxxxx
4 Linksys/Misc 133.33 Harker, Mathews, Xxxxxxx
1 Cell phones 100.00 Xxxxxx
1 Cell phones 50.00 Xxxxxxx
1 Cell phones 100.00 Xxxxxxx
1 Cell phones 100.00 Xxxxx
1 Cell phones 100.00 Xxxxxxx
1 Palm Pilot 333.33
1 Intel PC Camera 300.00
1 Apple LaserWriter 1,466.67
1 Paper Shredder 100.00
1 Cisco 801 ISDN Router 199.67
1 Triplite 700 UPS 133.33
1 Sun Ultra 10 1,333.33
1 HP Design Jet 450C 2,733.33
Miscellaneous Hardware
and Software 666.67 1,666.67 333.33
-------------------------------------------------------------------
TOTAL 23,660.00 4,416.33 51,939.67
===================================================================
SCHEDULE 3.2
LISTED CUSTOMERS
1. Delphi/Packard Electric
2. J & J (PRI)
3. Oxford University Press
4. Entergy
5. Lexis Nexis
6. Eloyalty
7. 24/7 Media
8. HP
9. Pacific AeroSpace
10. Silver Cube/Multi Bear
