EXHIBIT 4.1
Execution Version
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of July 22, 2003 by and between Zix Corporation, a Texas
corporation ("Purchaser"), on the one hand, and Pocket Script LLC, an Ohio
corporation ("Seller"), on the other hand.
RECITALS:
WHEREAS, Seller presently conducts the business (the "Software
Business") of designing, creating, developing, licensing, distributing, testing
and marketing, and selling e-prescription Software and services; and
WHEREAS, Seller desires to sell and Purchaser desires to
purchase and acquire the right to design, create, develop, license, distribute,
test, market and sell the Software Products and certain assets, rights and
properties of Seller necessary to operate, or primarily used in, the Software
Business, all on the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements herein contained, the parties hereto
agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, unless the context
otherwise requires, capitalized terms used in this Agreement shall have the
meanings set forth below:
"Actions" shall have the meaning ascribed to such term Section
8.4(a).
"Action Expenses" shall mean all court costs and fees and
expenses incurred for outside counsel, experts, advisors and other fees and
expenses (except for internal costs) related to an Action.
"Affiliate" shall mean with respect to any Person, any other
person who, directly or indirectly, controls, is controlled by, or is under
common control with that Person.
"Confidential Information" shall mean any confidential
information, methods of operation, customers, and customer lists, products,
proposed products, former products, prices, fees, costs, plans, designs,
technology, inventions, trade secrets, know-how, software, marketing methods,
policies, plans, or other specialized information or proprietary matters.
"Consent" shall mean any consent, approval or authorization
of, notice to, or designation, registration, declaration or filing with, any
Person.
"Contract" shall mean any agreement, contract, lease,
commitment, license, undertaking or other legally binding contractual right or
obligation to which a Person is a party or by which a Person or its assets or
properties are bound.
"Documentation" shall mean the instructions and written
documents, including user documentation, installation, operation and maintenance
instructions used in connection with the Software Products.
"Employee Documents" shall mean the employee related forms
(including employment offer letters and assignment of invention, non-competition
and confidentiality agreements) submitted to each Transferred Employee prior to
the Closing for delivery at the Closing.
"ERISA" means the Employee Retirement Income and Security Act
of 1974, as amended.
"Governmental Authority" shall mean any federal, state, local
or foreign government or any subdivision, agency, instrumentality, authority,
department, commission, board or bureau thereof or any federal, state, local or
foreign court, tribunal or arbitrator.
"Knowledge," "known to" or "to the Knowledge" shall mean, with
respect to Seller, information that is actually known, after commercially
reasonable inquiry, by any of the following: Steve Burns.
"Laws" shall mean all federal, state, local or foreign laws,
ordinances, rules and regulations.
"Liens" shall mean all title defects, title encumbrances,
title objections, mortgages, liens, claims, charges, pledges, of any nature
whatsoever, including without limitation leases, chattel or other mortgages,
collateral security arrangements, title imperfections, defect or objection
liens, security interests, conditional and installment sales agreements and
other title or interest retention arrangements.
"Material Adverse Effect" shall mean any event, circumstance,
change or effect that has a material adverse effect on the Transferred Assets or
the operation of the Software Business, taken as a whole.
"Order" shall mean any judgment, award, order, writ,
injunction or decree issued by any Governmental Authority.
"Permits" shall mean all permits, certifications, licenses,
approvals, franchises, notices and authorizations issued by any Governmental
Authority.
"Permitted Liens" shall mean (a) Liens for taxes, assessments
and other governmental charges that are not due and payable or that may
thereafter be paid without penalty or (b) Liens imposed by law, such as material
men's, mechanics', workers', repairmen's, employees', carriers', vendors',
warehousemen's and other like Liens arising in the ordinary course of business
in respect of obligations that are not yet due and payable.
"Person" shall mean any individual, partnership, joint
venture, limited liability company, corporation, trust, unincorporated
organization, Governmental Authority or other entity.
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"Software" means the expression of an organized set of
instructions in a natural or coded language that is contained on a physical
media of any nature (whether electronic, written, magnetic or optical) and that
may be used with a computer or other data processing device of any nature which
is based on digital technology, to make such computer or other device operate in
a particular manner and for a certain purpose, and shall include computer
programs in source and object code, test or other significant data libraries,
and any of the following that is contained on a physical media of any nature and
that is used in the design, development, modification, enhancement, testing,
installation, maintenance, diagnosis or assurance of the same: flow diagrams,
masks, templates, input and output formats, file layouts, development tools,
database formats, interfaces, test programs and other similar materials.
"Software Business" shall have the meaning ascribed to such
term in the recitals to this Agreement.
Software Products" shall mean Seller's e-prescription Software
products and services.
"Transferred Employee" shall mean those employees of Seller
that are to become employees of Purchaser or its designee as set forth in
Schedule 6.10.
ARTICLE 2
PURCHASE OF ASSETS
2.1 PURCHASE AND SALE OF TRANSFERRED ASSETS. On the terms and
subject to the conditions hereof, at the Closing, Seller will sell, transfer,
convey, assign and deliver to Purchaser or its designee (hereinafter referred to
as "Acquisition Sub"), and Purchaser or Acquisition Sub will purchase and
accept, all of Seller's right, title and interest in and to the rights,
properties and assets described in this Section 2.1, (collectively, the
"Transferred Assets"), free and clear of all Liens, except Permitted Liens:
(a) Equipment and Fixed Assets. All machinery, equipment,
tools, work stations, and all other tangible personal property of Seller that is
necessary to operate, or primarily used in, the Software Business, including
without limitation, such tangible personal property listed on Schedule 2.1(a)
hereto;
(b) Assigned Contracts. All rights and incidents of interest
of Seller as of the Closing in and to contracts, including those with the
"Prescripton Benefit Managers" listed on Schedule 2.1(b) (collectively, the
"Assigned Contracts");
(c) Software. All Software and Documentation that is necessary
to operate, or primarily used in, the Software Business, including, but not
limited to, the Software Products listed on Schedule 2.1(c);
(d) Technical Data. All technical information (whether written
or in electronic format) necessary to operate, or primarily used in, the
Software Business or relating to the design, creation and development of the
Software Products, including the Documentation identified on Schedule 2.1(d)
hereto;
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(e) Books and Records. All books and records necessary to
operate, or relating primarily to, the Software Business, including, without
limitation, lab books, software documentation, software road maps,
presentations, customer lists and supplier lists;
(f) Intellectual Property. All right, title and interest in
and to all Intellectual Property necessary for the conduct of, or which arose
out of, the Software Business or relating to the Software Products or to the
design, creation or development, thereof;
(g) Trademarks. All right, title and interest of Seller in and
to the name "PocketScript" and all other trademarks and service marks, and
associated goodwill therewith, identified on Schedule 2.1(g) hereto (the
"Trademarks"); and
(h) Other Assets. All assets of Seller that are either
necessary for the operation of the Software Business or primarily used in the
Software Business, including the "pocketscript.com" Internet domain name and
other Internet domain names.
2.2 EXCLUDED ASSETS. Nothwithstanding anything to the contrary
contained in this Agreement, there shall be excluded from the Transferred Assets
and Seller shall retain all right, title and interest in and to the following
rights, properties and assets (the "Excluded Assets"):
(a) all of Seller's cash and cash equivalents, securities,
bonds and other investments;
(b) all of Seller's Contracts other than the Assigned
Contracts;
(c) all of the assets set forth on Schedule 2.2; and
(d) all of Seller's assets that are neither necessary for the
operation of, nor primarily used in, the Software Business.
2.3 FURTHER CONVEYANCES AND ASSUMPTIONS; CONSENT OF THIRD PARTIES
(a) From time to time following the Closing, Seller and
Purchaser shall, and shall cause their respective Affiliates to, execute,
acknowledge and deliver all such further conveyances, notices, assumptions,
releases and acquaintances and such other instruments, and shall take such
further actions, as may be necessary or appropriate to assure fully to Purchaser
and its respective successors or assigns, all of the properties, rights, titles,
interests, estates, remedies, powers and privileges intended to be conveyed to
Acquisition Sub under this Agreement and the Collateral Agreement and to assure
fully to Seller and its Affiliates and their successors and assigns, the
assumption of the liabilities and obligations intended to be assumed by
Acquisition Sub under this Agreement and the Collateral Agreements, and to
otherwise make effective the transactions contemplated hereby and thereby.
(b) Nothing in this Agreement nor the consummation of the
transactions contemplated hereby shall be construed as an attempt or agreement
to assign any Transferred Asset, including any Contract, Permit, certificate,
approval, authorization or other right, which by its terms or by Law is
nonassignable without the consent of a third party or a Governmental Body or is
cancelable by a third party in the event of an assignment ("Nonassignable
Assets")
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unless and until such consent shall have been obtained. Seller shall, and shall
cause its Affiliates to, use its best efforts to cooperate with Purchaser at its
request in endeavoring to obtain such consents promptly. To the extent permitted
by applicable Law, in the event consents to the assignment thereof cannot be
obtained, such Nonassignable Assets shall be held, as of and from the Closing
Date, by Seller or the applicable Affiliate of Seller in trust for Purchaser and
Acquisition Sub and the covenants and obligations thereunder shall be performed
by Purchaser or Acquisition Sub in Seller's or such Affiliate's name and all
benefits and obligations existing thereunder shall be for Purchaser's and
Acquisition Sub's account. Seller shall take or cause to be taken at Purchaser's
expense such actions in its name or otherwise as Purchaser may reasonably
request so as to provide Purchaser and Acquisition Sub with the benefits of the
Nonassignable Assets and to effect collection of money or other consideration
that becomes due and payable under the Nonassignable Assets, and Seller or the
applicable Affiliate of Seller shall promptly pay over to Purchaser or
Acquisition Sub all money or other consideration received by it in respect of
all Nonassignable Assets. As of and from the Closing Date, Seller on behalf of
itself and its Affiliates authorizes Purchaser and Acquisition Sub, to the
extent permitted by applicable Law and the terms of the Nonassignable Assets, at
Purchaser's expense, to perform all the obligations and receive all the benefits
of Seller or its Affiliates under the Nonassignable Assets and appoints
Purchaser and Acquisition Sub its attorney-in-fact to act in its name on its
behalf or in the name of the applicable Affiliate of Seller and on such
Affiliate's behalf with respect thereto.
ARTICLE 3
ASSUMPTION OF LIABILITIES
3.1 ASSUMED LIABILITIES. As of the Closing, Purchaser will cause
Acquisition Sub to assume and thereafter, in due course, fully satisfy the
following liabilities and obligations of Seller (the "Assumed Liabilities") and
no other liabilities or obligations of Seller:
(a) all liabilities and obligations of Seller under each
Assigned Contract that has been assigned to Acquisition Sub, other than any
liability that may arise under the Assigned Contract relating to events prior to
the Closing (except Warranties covered under 3.1(c) below will be assumed) or
arising as a result of the execution, delivery, or performance of this Agreement
by Seller; and
(b) the trade payables of Seller as set forth in Schedule 3.1;
and
(c) any and all product warranties and/or obligations to
repair or replace any Software and/or Software Products under any Assigned
Contracts as a result of any problem or defect, regardless of the date such
problem or defect actually arose (the "Warranties").
Purchaser understands that under certain of the Assigned Contracts
Seller has been paid for work that has not yet been performed. Purchaser agrees
that work under the Assigned Contracts for which Seller has already been paid is
an "Assumed Liability."
3.2 RETAINED LIABILITIES. Except as provided under Section 3.1,
neither Purchaser nor Acquisition Sub assumes or agrees to pay, satisfy,
discharge or perform, and will not be
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deemed by virtue of the execution and delivery of this Agreement or any document
delivered at the Closing pursuant to this Agreement, or as a result of the
consummation of the transactions contemplated by this Agreement, to have
assumed, or to have agreed to pay, satisfy, discharge or perform, any liability,
obligation or indebtedness of Seller, including, without limitation, any
liabilities and obligations of Seller (a) for any indebtedness for borrowed
money (whether or not relating to the Software Business), (b) for any accounts
payable (whether or not relating to the Software Business), (c) arising from or
relating to the employment or services (or termination of employment or
services) of any individual or under any benefit plan of Seller (such
liabilities and obligations retained by Seller being referred to herein as the
"Retained Liabilities"). As between the parties, Seller shall remain liable for
all the Retained Liabilities.
ARTICLE 4
PURCHASE PRICE
4.1 PURCHASE PRICE. In consideration of the conveyance to
Acquisition Sub of the Transferred Assets and the other rights granted to
Purchaser pursuant hereto and subject to the conditions and in accordance with
terms hereof, Purchaser shall pay the following purchase price at Closing (a)
issue to Seller a number of shares (the "Shares") of the Purchaser's common
stock, par value $.01 per share ("Purchaser Stock") valued at One Million Four
Hundred Thousand Dollars ($1,400,000.00), and (b) assume the Assumed
Liabilities. The Shares of Purchaser Stock shall be of the same class currently
publicly listed on NASDAQ under the symbol "ZIXI." The purchase price consisting
of the Shares of Purchaser Stock shall be reduced by Fifty Thousand Dollars
($50,000.00) at closing and Purchaser shall thereby credit Seller for repaying
in full all of its obligations to Purchaser under a Fifty Thousand Dollars
($50,000.00) promissory note dated July 3, 2003 evidencing a loan in such amount
made by Purchaser to Seller and Purchaser shall return such note to Seller
marked "Paid in Full." The number of Shares to be delivered at Closing shall be
362,903, determined by dividing $1,400,000.00 less the $50,000.00 offset by
$3.72, which is the average of the closing prices of the Purchaser Stock for the
five days preceding July 21, 2003.
4.2 SPECIAL ARRANGEMENTS RELATING TO THE SHARES.. The Shares, at
the time of issuance will not be registered under the Securities Act of 1933, as
amended, and are being issued to the Seller in reliance upon an exemption from
registration. The Shares will have the registration rights set forth in the
Registration Rights Agreement (herein so called) to be entered into and
delivered at the Closing, in the form of Exhibit A attached hereto.
ARTICLE 5
CLOSING
5.1 CLOSING. The consummation of the transactions contemplated
hereby (the "Closing") shall take place by mail or fax or at such place as the
parties may designate, on the date hereof. The date on which the Closing is
effected is referred to in this Agreement as the "Closing Date."
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5.2 DELIVERIES AT CLOSING. At the Closing:
(a) Seller hereby delivers, or causes to be delivered, to
Acquisition Sub the items described below:
(i) a Bill of Sale, in the form attached hereto
as Exhibit B (the "Bill of Sale"), executed by Seller;
(ii) an Assignment and Assumption Agreement, in
the form attached hereto as Exhibit C (the "Assignment and Assumption
Agreement"), executed by Seller;
(iii) articles of amendment to the articles of
incorporation of Seller, duly authorized by all required votes of the
directors and shareholders of Seller, changing the name of Seller to a
name that does not include "PocketScript" or a derivation;
(iv) evidence that the parties signing this
Agreement and the Collateral Agreements on behalf of Seller are
authorized to do so;
(v) consents to assignment relating to the
Assigned Contracts in form and substance acceptable to the Purchaser,
including a waiver by Express Scripts, Inc. of its right of first
refusal;
(vi) all electronic representations of source
code, object code and associated documentation that relate to the
Software Products;
(vii) a document in form and substance acceptable
to the Purchaser executed by Larry Waldman and Steve Burns and Seller
to the effect that they are either an "accredited investor" or a
"sophisticated investor" as those terms are generally understood under
the Securities Act of 1933, as amended, and the regulations thereunder;
(viii) an opinion of Seller's counsel in the form
mutually agreeable to Seller and Purchaser and Seller's counsel; and
(ix) all other documents, certificates, instruments
or writings reasonably requested by Purchaser in connection herewith.
(b) Purchaser or Acquisition Sub hereby delivers to Seller (or
its designee) the items described below:
(i) the Assignment and Assumption Agreement,
executed by Acquisition Sub;
(ii) the Shares of Purchaser Stock as provided in
Section 4.1 and return of the promissory note;
(iii) the Registration Rights Agreement, fully
executed by Purchaser;
(iv) evidence that the party signing this
Agreement and the Collateral Agreements on behalf of Purchaser and
Acquisition Sub is authorized to do so; and
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(v) all other documents, certificates,
instruments or writings reasonably requested by Seller in connection
herewith.
(c) Each Transferred Employee concurrently with the execution
and delivery of this Agreement has delivered to Purchaser the Employee
Documents, executed by each Transferred Employee;
(d) The Bill of Sale, Assignment and Assumption Agreement,
Employee Documents, and the Registration Rights Agreement shall constitute,
collectively, the "Collateral Agreements."
5.3 DELIVERY OF TRANSFERRED ASSETS. Title to the Transferred
Assets passes to Acquisition Sub as of the Closing at the applicable places of
business of Seller. Promptly following the Closing, Seller will place
Acquisition Sub in full possession and control of the Transferred Assets. All
other assets and information to be delivered to Acquisition Sub will be
delivered by Seller to such locations and in such manner as Purchaser shall
designate by means of delivery reasonably designated by Purchaser, at
Purchaser's cost and risk of loss.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby makes the following representations and
warranties to Purchaser and Acquisition Sub, each of which shall be unaffected
by any investigation heretofore or hereafter made by Purchaser or Acquisition
Sub.
6.1 ORGANIZATION AND GOOD STANDING. Seller is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Ohio and has all requisite corporate power and authority to own,
lease or otherwise hold its properties and assets (including the Transferred
Assets) and to carry on its business (including the Software Business) as
presently conducted.
6.2 AUTHORIZATION AND EFFECT OF AGREEMENT. Seller has all
requisite corporate power and authority to execute and to deliver this Agreement
and the Collateral Agreements to which it is a party (the "Seller Collateral
Documents") and to perform the transactions contemplated hereby and thereby. The
execution and delivery by Seller of this Agreement and the Seller Collateral
Documents and the performance by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of Seller. This Agreement and the Seller Collateral Documents have been duly
executed and delivered by Seller and each such agreement constitutes a valid and
binding agreement of Seller, enforceable against Seller in accordance with its
terms, subject to applicable bankruptcy, reorganization, moratorium, and similar
laws affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity.
6.3 NO CONFLICTS. Except as set forth on Schedule 6.3 attached
hereto, the execution and delivery of this Agreement and the Seller Collateral
Documents by Seller does not, and the
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performance by Seller of the transactions contemplated by this Agreement and the
Seller Collateral Documents, including the transfer of the Transferred Assets,
will not, conflict with, or result in any violation of, or constitute a default
under, or, as applicable, give rise to the creation of a Lien, other than a
Permitted Lien, upon any of the Transferred Assets or to a right of termination,
cancellation or acceleration of any obligation or to a loss of a benefit under,
(a) any provision of the Certificate of Incorporation or Bylaws or other
applicable constituent documents of Seller, (b) any of the terms, conditions or
provisions of any Assigned Contract, or (c) any Law or Order applicable to or
binding on Seller or the Transferred Assets. Except for any required Consents
set forth on Schedule 6.3 attached hereto, no Consent is required to be
obtained, made or given (whether pursuant to applicable Law, Contract or
otherwise) in connection with the execution and delivery of this Agreement or
the Seller Collateral Documents by Seller or the performance by Seller of the
transactions contemplated hereby or thereby. The execution and delivery of this
Agreement and the Seller Collateral Documents by Seller does not, and the
performance by Seller of the transactions contemplated by this Agreement and the
Seller Collateral Documents, including the transfer of the Transferred Assets,
will not, conflict with, or result in any violation of, or constitute a default
under, any applicable "bulk sales" or similar laws.
6.4 SUFFICIENCY OF THE ASSETS; TITLE TO TRANSFERRED ASSETS; NO
THIRD PARTY OPTIONS.
(a) Except as set forth on Schedule 6.4(a) attached hereto,
the Transferred Assets constitute all of the rights, properties and assets of
every kind, character and description, wherever located and whether tangible or
intangible, real or personal, or fixed or contingent, that are necessary to
operate, or primarily used in, the Software Business as currently conducted by
Seller. All of the tangible Transferred Assets referred to in Section 2.1(a) are
in good operating condition and repair, subject to ordinary wear and
maintenance, and are usable in the regular and ordinary course of the Software
Business.
(b) Except as set forth on Schedule 6.4(b) attached hereto,
Seller has sole, good, valid and indefeasible title to the Transferred Assets,
and, at the Closing, Seller will convey to Acquisition Sub, sole, good, valid
and indefeasible title to the Transferred Assets, free and clear of all Liens,
except Permitted Liens. Except as set forth on Schedule 6.4(b) attached hereto,
as of immediately prior to the Closing, no third party has any exclusive rights
to use or an exclusive license to any of the Transferred Assets or any portion
thereof.
(c) There are no existing agreements, options or commitments
granting to any Person the right to acquire any of the Transferred Assets or any
interest therein, other than Permitted Liens or as described in the Assigned
Contracts.
6.5 FINANCIAL DATA. Seller has provided to Purchaser, on Schedule
6.5, (1) a compilation of PocketScript, LLC's statement of assets, liabilities,
and equity-modified cash basis as of April 30, 2003 and the related statement of
revenues, expenses-modified cash basis for the period beginning December 17,
2002 and ending April 30, 2003 (2) a compilation of PocketScript, LLC's
statement of assets, liabilities, and equity-modified cash basis as of December
16, 2002 and the related statement of revenues, expenses-modified cash basis for
the nine months ending December 16, 2002 and (3) a compilation of Way Over the
Line, LLC's
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balance sheet as of December 16, 2002 and the related statement of income for
the twelve months ended December 16, 2002 (Way Over the Line, LLC was merged
with PocketScript, LLC effective December 16, 2002) (the "Financial
Statements"). Each of the Financial Statements is complete and correct in all
material respects, has been prepared in a manner consistently applied without
modification of the accounting principles used in the preparation thereof
throughout the periods presented and presents fairly the consolidated financial
position and results of operations of Seller as at the dates and for the periods
indicated.
6.6 LITIGATION. Except as set forth on Schedule 6.6 attached
hereto:
(a) There are neither any judicial or administrative actions,
proceedings or, to the Knowledge of Seller, investigations pending nor, to the
Knowledge of Seller, threatened that question the validity of this Agreement or
any action taken or to be taken by Seller in connection with this Agreement;
(b) There are no lawsuits, claims, administrative or other
proceedings or, to the Knowledge of Seller, investigations relating to the
conduct of the Software Business or otherwise affecting the Transferred Assets
pending, or, to the Knowledge of Seller, threatened against Seller; and
(c) There are no Orders binding on Seller that relate to the
Software Business or otherwise affect the Transferred Assets.
6.7 SOFTWARE PRODUCTS. Schedule 6.7 attached hereto sets forth a
complete list of the Software Products by release name and, where reasonable and
appropriate, description.
6.8 ASSIGNED CONTRACTS.
(a) Each Assigned Contract is in full force and effect and is
valid and, to the Knowledge of Seller, enforceable in accordance with its terms,
subject to applicable bankruptcy, reorganization, moratorium, and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity. Except as disclosed on Schedule
6.8(a) attached hereto, Seller is not, and to the Knowledge of Seller, no other
party thereto is, in material default in the performance, observance or
fulfillment of any obligation under any Assigned Contract. Except as disclosed
on Schedule 6.8(a) attached hereto, to the Knowledge of Seller, no event has
occurred which with or without the giving of notice or lapse of time, or both,
would constitute a default under any Assigned Contract. Seller has provided
Purchaser with true, complete and correct copies of each Assigned Contract, and
any amendment or modification thereto, or a written description of any Assigned
Contract that is not in writing.
(b) Except as disclosed on Schedule 6.8(b) attached hereto,
there are no licenses of Seller that are currently in effect of Seller, whether
written or oral, of the Software Products or the Intellectual Property in the
Software Products, other than any Software licenses to Seller's resellers,
distributors, channel partners or customers entered into in the ordinary course
of conducting the Software Business. None of such licenses authorize any
licensee to have access to source code with respect to the Software. No Software
has been transferred to any escrow agents, except as disclosed on Schedule
6.8(b) attached hereto. No source code to the Software has been transferred to
any Person except as disclosed on Schedule 6.8(b).
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6.9 COMPLIANCE WITH LAWS. Except as set forth on Schedule 6.9
attached hereto, to the best of Seller's knowledge, Seller has conducted and is
conducting the Software Business in compliance with all applicable Laws, except
where such failure to comply, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
6.10 PERSONNEL; LABOR MATTERS.
(a) Personnel. Schedule 6.10 attached hereto sets forth a
complete and correct list, as of the Closing Date, of all Transferred Employees,
including as applicable, (i) salary, hourly wage rate or retention rate; (ii)
position; and (vii) status (i.e., active, short term disability, long term
disability or leave of absence).
(b) Labor. No Transferred Employees are represented by any
labor organization, and there are no labor or collective bargaining agreements,
which pertain to the Transferred Employees. To the Knowledge of Seller, no labor
organization or group of employees of Seller has made a pending demand for
recognition or certification affecting the Transferred Employees, and, within
the preceding three years, there have been no representation, certification or
other related proceedings, or petitions seeking a representation proceeding or
other related proceeding, pending or, to the Knowledge of Seller, threatened to
be brought or filed with the National Labor Relations Board or any other labor
relations tribunal or authority. Within the preceding three years, there have
been no organizing activities involving Seller pending or, to the Knowledge of
Seller, threatened by any labor organization or group of employees of Seller
affecting the Transferred Employees.
(c) Employee Relations. There are no strikes, work stoppages,
slowdowns, lockouts, arbitrations, grievances, unfair labor practice charges or
complaints pending or, to the Knowledge of Seller, threatened involving the
Transferred Employees, which, if individually or collectively resolved against
Seller, could result in a material liability, and, to the Knowledge of Seller,
there are no facts or circumstances which could form the basis for any of the
foregoing. None of the Transferred Employees have resigned or have given notice
to Seller of their intention to resign or otherwise voluntarily terminate their
employment with Seller.
(d) Employee Litigation. There are no complaints, charges or
claims against Seller pending or, to the Knowledge of Seller, threatened to be
brought or filed with any public or governmental authority, arbitrator or court
based on, arising out of, in connection with, or otherwise relating to the
employment of any of the Transferred Employees, including but not limited to
ERISA, the Civil Rights laws, Americans with Disabilities Act, Age
Discrimination in Employment Act (as amended by the Older Workers Benefit
Protection Act), Pregnancy Discrimination Act, Equal Pay Act, Fair Labor
Standards Act, Worker Adjustment and Retraining Notification Act, and Family and
Medical Leave Act, and, to the Knowledge of Seller, there are no facts or
circumstances which could form the basis for any of the foregoing.
6.11 INTELLECTUAL PROPERTY.
(a) As used herein, the term "Scheduled Intellectual Property"
means, whether solely or jointly owned, Seller's domestic and foreign patents
(including design registrations and other government grants of rights to
inventions), patent applications, patent
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licenses from third parties, software licenses from third parties (other than
routine, non-negotiated, shrink wrap or similar everyday licenses of the type
commonly available at reasonable cost to the industry in general and which are
not a part of the Software Products), know-how licenses from third parties,
trade names, trademarks, trademark registrations and applications, service
marks, service mark registrations and applications, copyrights, copyright
registrations and applications and data sheets with copyright marks, in the
Software Products. Schedule 6.11(a)(i) attached hereto sets forth all of the
Scheduled Intellectual Property. Except as otherwise indicated on Schedule
6.11(a)(ii) attached hereto, Seller is the sole and exclusive owner of all
Scheduled Intellectual Property; and, to Seller's knowledge, there are no third
party rights that will impede Seller's sole and exclusive ownership of the
Scheduled Intellectual Property.
(b) The term "Intellectual Property" means, whether
solely or jointly owned, domestic and foreign patents (including design
registrations and other government grants of rights to inventions), patent
applications, patent licenses from third parties, software licenses from third
parties, know-how licenses from third parties, trade names, trademarks,
trademark registrations and applications, service marks, service mark
registrations and applications (and the goodwill associated therewith) and
copyright registrations and applications, including but not limited to that
listed under the Scheduled Intellectual Property; together with all unregistered
copyrights, trade secrets, know-how and other Confidential Information, other
non-public proprietary technical and business information, proprietary processes
and formulae, and all ownership, use and other rights thereto (including rights
of renewal and rights to sue for past, present and future infringements or
misappropriations thereof).
(i) The term "know-how" includes but is not
limited to Software concepts and invention disclosures related to the
Software Products of Seller but that are not incorporated into the
Software Products or filed as patent applications, if any, and trade
secrets that are related to the Software Products; and, except as set
forth on Schedule 6.11(b)(i) attached hereto, Seller is the sole and
exclusive owner of any such concepts, disclosures and trade secrets.
(ii) Except as set forth on Schedule 6.11(b)(ii)
attached hereto, each officer, employee, consultant and independent
contractor of Seller (each a "Seller Employee") who has originated or
invented any of the Software Products either (a) has executed a valid
written assignment needed to show sole ownership by Seller of the
Intellectual Property in the Software Products originated or invented
by such Seller Employee and, to the extent applicable to such Seller
Employee, any of Seller's Intellectual Property contained in any of the
Transferred Assets, (b) has executed an agreement which includes an
obligation to assign to Seller all rights to the Intellectual Property
in the Software Products originated or invented by such Person during
the course of such Person's relationship with Seller, or (c) is by law
or otherwise under an enforceable and binding obligation to assign such
rights to Seller. To the Knowledge of Seller, no such officer,
employee, consultant or independent contractor has notified Seller, or
otherwise made the claim, that such Person is, or believes himself or
herself to be, the owner of any of the Intellectual Property in the
Software Products.
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(iii) Except as set forth on Schedule 6.11(b)(iii)
attached hereto, Seller has taken all commercially reasonable actions
to protect and preserve the confidentiality of all Intellectual
Property in, or primarily related to, the Software Products covering
trade secrets, know-how, Confidential Information, other non-public
proprietary technical and business information, proprietary processes,
and formulae not otherwise protected by patents, patent applications or
copyrights ("Software Business Confidential Information").
(iv) Except as set forth on Schedule 6.11(b)(iv)
attached hereto, each officer, employee, consultant and independent
contractor of Seller who has worked in the Software Business has either
executed a non-disclosure agreement or is by law or otherwise under an
enforceable and binding obligation to protect and preserve the
confidentiality of the Software Business Confidential Information in
the Software Products.
(v) Except as disclosed on Schedule 6.11(b)(v)
attached hereto, the Knowledge of Seller or to the knowledge of any
Software Business Employee, no Software Business Confidential
Information primarily related to the Software Products has been
disclosed or is authorized to be disclosed to any third party, other
than pursuant to a non-disclosure agreement that protects Seller's
proprietary interests in and to such Software Business Confidential
Information or under circumstances in which the third party is under a
legal duty not to disclose such Software Business Confidential
Information.
(vi) Except as set forth on Schedule 6.12(b)(vi)
attached hereto, neither any source code relating to the Software
Products has been disclosed or transferred to any Person, nor, except
as set forth on Schedule 6.12(b)(vii) attached hereto, will the
execution and delivery of this Agreement by Seller result in any such
transfer, to a Person other than Purchaser, either directly, or
indirectly, or pursuant to the terms of an escrow arrangement.
(c) To the Knowledge of Seller, the Software Products do
not interfere with, infringe, misappropriate or otherwise come into conflict
with any Intellectual Property rights of third parties, and Seller has not
received any charge, complaint, claim or notice alleging any such interference,
infringement, misappropriation or conflict. Seller does not have any Knowledge
that the manufacturing, marketing, licensing, use or sale of the Software
Products infringes any Intellectual Property right of any third party.
(i) Except as set forth in Schedule 6.11(c)(i)
attached hereto, no third party has, to the Knowledge of Seller,
interfered with, infringed upon, misappropriated or otherwise come into
conflict with any Intellectual Property rights of Seller in the
Software Products.
(ii) Except as set forth on Schedule 6.11(c)(ii)
attached hereto, Seller is not, nor will be, as a result of the
execution and delivery of this Agreement or the performance of its
obligations under this Agreement or as a result of the transactions
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contemplated hereby, in breach of any license, sublicense or other
agreement primarily relating to the Intellectual Property in the
Software Products.
(d) Except as set forth on Schedule 6.11(d) attached
hereto, Seller does not use in the Software Products pursuant to license,
sublicense, agreement or permission, any Intellectual Property owned by a third
party.
6.12 SOFTWARE.
(a) Except as set forth on Schedule 6.12(a) attached
hereto, the past and current versions released since January 1, 2003, of all
Software Products perform substantially in accordance with the version-specific
user Documentation.
(b) No Transferred Employee is, or is now expected to be,
in default under any employment contract with Seller or, to the Knowledge of
Seller, any other restrictive covenant for the benefit of Seller relating to the
Software Products.
(c) Except as set forth on Schedule 6.12(c) attached
hereto, to the Knowledge of Seller, the Software Products were developed
entirely by the employees of, and consultants to, Seller which were bound by
agreements to assign all rights to the Software Products to Seller, or, if not,
Seller has purchased such Software from the party in whom, to the Knowledge of
Seller, title to such Software was vested.
(d) Except as set forth on Schedule 6.12(d) attached
hereto, Seller has no obligation to compensate any other Person for the
development, use, license, sale or exploitation of the Software Products.
(e) Except as set forth on Schedule 6.12(e) attached
hereto, there have been no patents applied for and no copyrights registered for
the Software Products.
(f) Seller shall not retain any copies of the code
relating to the Software Products.
6.13 MAJOR CUSTOMERS. Schedule 6.13 attached hereto sets forth the
names of the ten largest customers of the Software Products for the current
fiscal year other than resellers, distributors, or channel partners (based on
the aggregate value of the Software Products purchased from Seller by such
customers during such period) and the amount of revenue attributed to each such
customer during such period.
6.14 INVESTMENT REPRESENTATIONS. Seller represents that:
(a) Seller is acquiring the Shares for its own account and not
with a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered or exempted under the
1933 Act; provided, however, that by making the representations herein, Seller
does not agree to hold any of the Shares for any minimum or other
14
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the 1933 Act.
(b) Sophisticated Investor Status. Seller is a "sophisticated
investor" as such term is defined in the 1933 Act or applicable regulations.
There are 49 individuals who own 100% of Seller, and at least half of those are
"accredited investors" as such term is defined in the 1933 Act or applicable
regulations .
(c) Reliance on Exemptions. Seller understands that the Shares are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of the United States federal and state securities laws
and that the Purchaser is relying in part upon the truth and accuracy of, and
Seller's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Seller set forth herein in order to
determine the availability of such exemptions and the eligibility of Seller to
acquire the Shares.
(d) Information. Seller and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Purchaser and materials relating to the offer and sale of the Shares that
have been requested by Seller. Seller and its advisors, if any, have been
afforded the opportunity to ask questions of the Purchaser. Seller understands
that its investment in the Shares involves a high degree of risk. Seller has
sought such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition of the
Shares.
(e) No Governmental Review. Seller understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Shares or the
fairness or suitability of the investment in the Shares nor have such
authorities passed upon or endorsed the merits of the offering of the Shares.
(f) Transfer or Resale. Seller understands that except as provided
in the Registration Rights Agreement: (i) the Shares have not been and are not
being registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) Seller shall have delivered to the Purchaser an
opinion of counsel, in a generally acceptable form, to the effect that such
Shares to be sold, assigned or transferred may be sold, assigned or transferred
pursuant to an exemption from such registration, or (C) Seller provides the
Purchaser with reasonable assurance that such Shares can be sold, assigned or
transferred pursuant to Rule 144 promulgated under the 1933 Act, as amended (or
a successor rule thereto) ("RULE 144"); (ii) any sale of the Shares made in
reliance on Rule 144 may be made only in accordance with the terms of Rule 144
and further, if Rule 144 is not applicable, any resale of the Shares under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the 1933 Act) may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Purchaser nor any other
person is under any obligation to register the Shares under the 1933 Act or any
state securities laws or to comply with the terms and conditions of any
exemption thereunder. Notwithstanding the foregoing, the Shares may be pledged
in connection with a bona fide margin account or other loan or financing
arrangement secured by the Shares.
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(g) Legends. Seller understands that until such time as the sale
of the Shares has been registered under the 1933 Act as contemplated by the
Registration Rights Agreement, the stock certificates representing the Shares,
except as set forth below, shall bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of such
stock certificates):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SHARES UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF
COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II)
UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SHARES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SHARES.
The legend set forth above shall be removed and the Purchaser shall
issue a certificate without such legend to the holder of the Shares upon which
it is stamped, if, unless otherwise required by state securities laws, (i) such
Shares are registered for resale under the 1933 Act, (ii) in connection with a
sale transaction, such holder provides the Purchaser with an opinion of counsel,
in a generally acceptable form, to the effect that a public sale, assignment or
transfer of the Shares may be made without registration under the 1933 Act, or
(iii) such holder provides the Purchaser with reasonable assurances that the
Shares can be sold pursuant to Rule 144(k), or (iv) such holder provides the
Purchaser reasonable assurances that the Shares have been or are being sold
pursuant to Rule 144.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby makes the following representations and
warranties to Seller, each of which shall be unaffected by any investigation
heretofore or hereafter made by Seller.
7.1 CORPORATE ORGANIZATION. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and has all requisite corporate power and authority to own, lease or
otherwise hold its properties and assets and to carry on its business as
presently conducted. Acquisition Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio and has all
requisite corporate power and authority to own, lease or otherwise hold its
properties and assets and to carry on its business as presently conducted.
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7.2 AUTHORIZATION AND EFFECT OF AGREEMENT. Each of Purchaser and
Acquisition Sub has all requisite corporate power and authority to execute and
deliver this Agreement and the Collateral Agreements to which it is a party (the
"Purchaser Collateral Documents") and to perform the transactions contemplated
hereby and thereby. The execution and delivery by each of Purchaser and
Acquisition Sub of this Agreement and the Purchaser Collateral Documents and the
performance by each of them of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on the part of
Purchaser and Acquisition Sub, as applicable. This Agreement and the Purchaser
Collateral Documents have been duly executed and delivered by each of Purchaser
and Acquisition Sub, as applicable, and each of such agreements constitutes a
valid and binding agreement of Purchaser and Acquisition Sub, as applicable,
enforceable against Purchaser and Acquisition Sub, as applicable, in accordance
with its terms, subject to applicable bankruptcy, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and subject, as
to enforceability, to general principles of equity.
7.3 NO CONFLICTS. The execution and delivery of this Agreement and
the Purchaser Collateral Documents by Purchaser and Acquisition Sub does not,
and the performance by Purchaser and Acquisition Sub of the transactions
contemplated by this Agreement and the Purchaser Collateral Documents will not,
conflict with, or result in any violation of, or constitute a default under (a)
any provision of the Certificate of Incorporation or Bylaws of Purchaser or (b)
any Law or Order applicable to or binding on Purchaser or Acquisition Sub. No
Consent is required to be obtained, made or given (whether pursuant to
applicable Law, Contract or otherwise) in connection with the execution and
delivery of this Agreement by Purchaser or Acquisition Sub or the performance by
Purchaser and Acquisition Sub of the transactions contemplated hereby, other
than applicable securities laws filing.
7.4 LITIGATION. There are no judicial or administrative actions,
proceedings or investigations pending or, to Purchaser's or Acquisition Sub's
knowledge, threatened that question the validity of this Agreement or any action
taken or to be taken by Purchaser or Acquisition Sub in connection with this
Agreement.
7.5 PURCHASER STOCK. The Shares of Purchaser Stock to be issued
to Seller under this Agreement shall be the same class and series as those
shares of Seller publicly traded and listed on NASDAQ under the symbol "ZIXI"
and Purchaser has sufficient authorized and unissued shares to issue the Shares
to Purchaser in accordance with this Agreement. The Shares, when issued, will be
free and clear of any liens and encumbrances and will not be subject to any
restriction on transfer (other than those imposed by applicable securities
laws), options to purchase, or other repurchase rights under any of Purchaser's
organizational documents or agreements.
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ARTICLE 8
POST-CLOSING COVENANTS
8.1 COVENANT NOT TO COMPETE; NON SOLICITATION.
(a) Seller agrees that prior to the fourth anniversary of the
Closing Date, other than Seller's ownership interest in Purchaser, Seller will
not, directly or indirectly, own, manage, operate, control or participate in the
ownership, management, operation or control of any business, whether in
corporate, proprietorship or partnership form or otherwise, engaged in the
development, design, manufacturing, marketing or sale of e-prescription software
having substantially the same performance characteristics and functionality as
the Software Products; provided, however, that nothing herein shall preclude
Seller from owning an equity interest of five percent or less of any publicly
traded company listed on a national stock exchange or on the Nasdaq National
Market.
(b) Until the fourth anniversary of the Closing Date, Seller
will not directly or indirectly solicit, offer employment to or hire any
Transferred Employee (i) who is still an employee of Purchaser or Acquisition
Sub, or (ii) who has, without the consent of Purchaser or Acquisition Sub, as
applicable, terminated his or her employment with Purchaser or Acquisition Sub,
as applicable, within 180 days of such solicitation, offer or hire; provided,
however, that the foregoing provision will not prevent Seller from soliciting
the employment of any person pursuant to a general advertisement or similar
notice.
8.2 CONFIDENTIALITY. Except as required by Contracts to which
Seller is bound involving a license of the Software Products to a third party,
each party agrees that from and after the Closing, it will not, directly or
indirectly, disclose, reveal, divulge or communicate to any person or entity
other than its authorized officers, directors and employees, or use or otherwise
exploit for its own benefit or for the benefit of anyone other than the other
party, any Non-Public Information (as defined below) of the other party. Neither
party shall have any obligation to keep confidential any Non-Public Information
if and to the extent disclosure thereof is specifically required by Law or in
the enforcement of its rights hereunder; provided, however, that in the event
disclosure is required by applicable Law, the disclosing party shall, to the
extent reasonably possible, provide the other party with prompt notice of such
requirement prior to making any disclosure so that the other party may seek an
appropriate protective order. For purposes of this Section 8.2 only, "Non-Public
Information" shall mean any Confidential Information that, with respect to
Seller, relates to Seller's business other than the Software Business, and, with
respect to Purchaser, relates to Purchaser's (or Acquisition Sub's) business
(including, without limitation, the Software Business). The term Non-Public
Information does not include, and there shall be no obligation hereunder with
respect to, information that (i) is generally available to the public on the
date of this Agreement, (ii) becomes generally available to the public other
than as a result of a disclosure by a party not otherwise permissible hereunder,
or (iii) a party learns from other sources and such sources have not violated
their confidentiality obligation to the other party.
8.3 SPECIFIC PERFORMANCE; REFORMATION. The parties hereto
specifically acknowledge and agree that the remedy at law for any breach of
Section 8.1 or 8.2 will be inadequate and that a party, in addition to any other
relief available to it, shall be entitled to temporary and permanent injunctive
relief without the necessity of proving actual damage or posting any bond
whatsoever. In the event that the provisions of Section 8.1 or 8.2 should ever
be deemed to exceed the limitations provided by applicable Law, then the parties
hereto agree that such provisions shall be reformed to set forth the maximum
limitations permitted.
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8.4 FURTHER COOPERATION. Seller will cooperate with Purchaser,
upon Purchaser's reasonable request and at Purchaser's expense, in any Actions
necessary for the protection, enforcement or transfer of Purchaser's (or
Acquisition Sub's) exclusive ownership rights in any the Transferred Assets.
8.5 MAINTENANCE OF BOOKS AND RECORDS. Each of Seller and Purchaser
shall preserve until the fourth anniversary of the Closing Date all records
possessed by such party relating primarily to the Transferred Assets or the
operation of the Software Business prior to the Closing Date. After the Closing
Date, where there is a legitimate purpose, such party shall provide the other
party with reasonable access, upon prior reasonable written request specifying
the need therefor, during regular business hours, to (i) the relevant officers
and employees of such party and (ii) the books of account and records of such
party, but, in each case, only to the extent primarily relating to the
Transferred Assets or the operation of the Software Business prior to the
Closing Date, and the other party and its representatives shall have the right
to make copies of such books and records; provided, however, that the foregoing
right of access shall not be exercisable in such a manner as to interfere
unreasonably with the normal operations and business of such party; and further
provided that, to the extent such information constitutes trade secrets or
confidential information of such party, the requesting party will not, and shall
ensure that its representatives are bound not to disclose such information
except (i) as required by Law, (ii) with the prior written consent of such
party, which consent shall not be unreasonably withheld, or (iii) where such
information becomes available to the public generally, or becomes generally
known to competitors of such party, through sources other than the requesting
party and its representatives. Such records may nevertheless be destroyed by a
party if such party sends the other party written notice of its intent to
destroy records, specifying with particularity the contents of the records to be
destroyed. Such records may then be destroyed after the 30th day following
delivery of such notice unless the other party objects to the destruction, in
which case the party seeking to destroy the records shall either agree to retain
such records or to deliver such records to the objecting party.
8.6 TRANSFERRED EMPLOYEES. Either purchaser or Acquisition Sub
will offer employment to each Software Business employee set forth in Schedule
6.10 attached hereto on an "at will" basis on or prior to the date hereof, and
the individuals who accept such offer shall be referred to as the "Transferred
Employees." Each such offer of employment shall be no lower than the salary or
hourly wage rate as set forth on Schedule 6.10 attached hereto. Subject to
applicable Laws, Purchaser or Acquisition Sub, as applicable, shall have the
right to dismiss any or all Transferred Employees at any time, with or without
cause, and to change the terms and conditions of their employment (including
compensation and employee benefits provided to them).
8.7 FURTHER COOPERATION. In the event that an asset of Seller that
the parties did not intend to be transferred to Acquisition Sub was transferred
to Acquisition Sub in error, Purchaser agrees to execute and deliver, or cause
to be executed and delivered, all such documents and instruments and take such
other actions as may be reasonably necessary to transfer all right, title and
interest in such asset back to Seller. In the event that an asset of Seller
should have been included as a part of the Transferred Assets transferred to
Acquisition Sub, Seller agrees to execute and deliver, or cause to be executed
and delivered, all such documents and instruments and take such other actions as
may be reasonably necessary to transfer all right, title and interest
19
in such asset to Acquisition Sub. In the event that a dispute arises between
Seller and Purchaser with respect to whether a particular asset should or should
not have been transferred to Purchaser, the parties agree to use reasonable
efforts to resolve such dispute in a timely and mutually acceptable manner.
ARTICLE 9
SURVIVAL AND INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Except for the representations and warranties of Seller
contained in Section 6.4(b) and Section 6.8(b), which shall survive the Closing
and remain in effect until the fourth anniversary of the Closing Date (the
"Title Warranty Termination Date"), the representations and warranties of Seller
and Purchaser contained in this Agreement shall survive the Closing and remain
in effect until the second anniversary of the Closing Date. Any Claim Notice
given to the Indemnifying Party within such period of survival as herein
provided will be timely made for purposes hereof. No claims for an Indemnifiable
Loss may be asserted following the expiration of such applicable period.
(b) Unless a specified period is set forth in this Agreement
(in which event such specified period will control), the covenants in this
Agreement will survive the Closing and remain in effect indefinitely.
9.2 DEFINITIONS; LIMITATIONS ON LIABILITY.
(a) For purposes of this Agreement, (i) "Indemnity Payment"
means any amount of Indemnifiable Losses required to be paid pursuant to this
Agreement, (ii) "Indemnitee" means any person or entity entitled to
indemnification under this Agreement, (iii) "Indemnifying Party" means any
person or entity required to provide indemnification under this Agreement, (iv)
"Indemnifiable Losses" means any and all damages, losses, liabilities,
obligations, costs and expenses suffered or incurred by an Indemnitee, and any
and all claims, demands or suits brought against an Indemnitee (by any person or
entity, including, without limitation, any Governmental Authority), including,
without limitation, the costs and expenses of any and all actions, suits,
proceedings, demands, assessments, judgments, settlements and compromises
relating thereto and including reasonable attorneys' fees and expenses incurred
by the Indemnitee in connection therewith and (v) "Third Party Claim" means any
claim, action or proceeding made or brought by any Person other than a party to
this Agreement (or an Affiliate thereof).
(b) Notwithstanding any other provision hereof or of any
applicable law, (i) the maximum aggregate indemnification obligations of an
Indemnifying Party arising from breaches of representations or warranties (other
than those contained in Sections 6.4(b), and 6.8(c) and asserted pursuant to
Section 9.3(a)(i) or Section 9.3(b)(i), as applicable, shall be limited to, and
shall in no event exceed, U.S. One Million Five Hundred Thousand Dollars
($1,500,000) ("Indemnification Cap"). In the event that an Indemnitee assumes
the defense of a Third Party Claim, each applicable Indemnification Cap shall be
deemed to be automatically reduced by the
20
amount of any Action Expenses incurred by an Indemnifying Party on its own
behalf in connection with its participation in the defense of such Third Party
Claim.
(c) Notwithstanding anything to the contrary contained in this
Agreement, an Indemnifying Party shall not be required to make any
Indemnification Payment pursuant to Section 9.3 pursuant to any indemnification
obligation under this Agreement until such time as the total amount of all
Indemnifiable Losses that have been suffered or incurred by the Indemnitee
exceeds $50,000 in the aggregate; provided, however, that if the total amount of
such Indemnifiable Losses exceeds $50,000 in the aggregate, the Indemnitee shall
be entitled to be indemnified against only the amount of such Indemnifiable
Losses exceeding $50,000 (the "Indemnification Minimum"); provided that,
Purchaser's obligation to deliver the Shares and its indemnification obligation
set forth in Section 9.3(b)(iii) shall not be limited by the Indemnification Cap
or subject to the Indemnification Minimum; and provided further, that Seller's
indemnification obligation set forth in Section 9.3(a)(iii) shall not be limited
by the Indemnification Cap or subject to the Indemnification Minimum.
9.3 INDEMNIFICATION.
(a) Subject to Sections 9.1, 9.2, and 9.5, from and after
the Closing Date, Seller agrees to indemnify, defend and hold harmless Purchaser
from and against any and all Indemnifiable Losses relating to, resulting from or
arising out of:
(i) any breach of the representations and
warranties of Seller contained in Article 6 of this Agreement;
(ii) any nonfulfillment of any covenant on the
part of Seller under the terms of this Agreement;
(iii) any Retained Liabilities;
(iv) any failure to comply with any "bulk sales"
laws applicable to the transactions contemplated hereby; and
(v) the use or ownership of any of the
Transferred Assets prior to or on the Closing Date (other than the
Assumed Liabilities).
(b) Subject to Sections 9.1, 9.2 and 9.5, from and after
the Closing Date, Purchaser agrees to indemnify, defend and hold harmless Seller
from and against any and all Indemnifiable Losses relating to, resulting from or
arising out of:
(i) any breach of the representations and
warranties of Purchaser contained in Article 7 of this Agreement;
(ii) any non-fulfillment of any covenant on the
part of Purchaser under the terms of this Agreement;
(iii) any Assumed Liabilities; and
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(iv) the use or ownership of any of the
Transferred Assets after the Closing Date.
9.4 DEFENSE OF THIRD PARTY CLAIMS.
(a) If any Indemnitee receives notice of assertion or
commencement of any Third Party Claim against such Indemnitee with respect to
which an Indemnifying Party is obligated to provide indemnification under this
Agreement, the Indemnitee will give such Indemnifying Party reasonably prompt
written notice thereof, but in any event not later than ten (10) calendar days
after receipt of such notice of such Third Party Claim. Such notice will
describe the Third Party Claim in reasonable detail, will include copies of all
material written evidence thereof available after diligent search and attempt to
locate the same and will indicate the estimated amount, if reasonably
practicable, of the Indemnifiable Loss that has been or may be sustained by the
Indemnitee. The Indemnifying Party will have the right to participate in, or, by
giving written notice to the Indemnitee, to assume, the defense of any Third
Party Claim at such Indemnifying Party's own expense and by such Indemnifying
Party's own counsel (reasonably satisfactory to the Indemnitee), and the
Indemnitee will cooperate in good faith in such defense. If the Indemnifying
Party has assumed the defense of the Third Party Claim, the Indemnitee shall not
enter into any settlement of such claims, or admit any liability with respect to
such claim without the prior written consent of the Indemnifying Party.
(b) If, within 10 calendar days after giving notice of a
Third Party Claim to an Indemnifying Party pursuant to Section 9.3(a), an
Indemnitee receives written notice from the Indemnifying Party that the
Indemnifying Party has elected to assume the defense of such Third Party Claim
as provided in the last sentence of Section 9.3(a), the Indemnifying Party will
not be liable for any legal expenses subsequently incurred by the Indemnitee in
connection with the defense thereof; provided, however, that if the Indemnifying
Party fails to take reasonable steps necessary to defend diligently such Third
Party Claim within 10 calendar days after receiving written notice from the
Indemnitee that the Indemnitee reasonably believes the Indemnifying Party has
failed to take such steps or if the Indemnifying Party has not undertaken fully
to indemnify the Indemnitee in respect of all Indemnifiable Losses (without
regard to any applicable Indemnification Cap) relating to the matter, the
Indemnitee may assume its own defense, and the Indemnifying Party will be liable
for all reasonable costs and expenses paid or incurred in connection therewith.
If the Indemnitee assumes the defense of the Third Party Claim, the Indemnitee
shall not enter into any settlement of such claim, or admit any liability with
respect to such claim, without the prior written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld or delayed; provided,
however, if the Indemnitee provides written notice to the Indemnifying Party
that it relinquishes any and all claims for indemnification pursuant to Article
9 in respect of such Third Party Claim, Indemnitee may freely enter into any
settlement agreement without the prior written consent of the Indemnifying
Party. Without the prior written consent of the Indemnitee, the Indemnifying
Party will not enter into any settlement of any Third Party Claim that would
lead to liability or create any financial or other obligation on the part of the
Indemnitee for which the Indemnitee is not entitled to indemnification
hereunder.
(c) A failure to give timely notice or to include any
specified information in any notice as provided in Sections 9.3(a) or 9.3(b)
will not affect the rights or obligations of any
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party hereunder except and only to the extent that, as a result of such failure,
any party that was entitled to receive such notice was deprived of its right to
recover any payment under its applicable insurance coverage or was otherwise
materially damaged as a result of such failure.
9.5 CLAIMS. If any Indemnitee has, or claims to have, incurred or
suffered Indemnifiable Losses for which it is, or may be, entitled to
indemnification under this Section 9, such Indemnitee, acting in good faith, may
deliver a claim notice (a "Claim Notice") to the Indemnifying Party. Each Claim
Notice shall (i) state that such Indemnitee believes that there is or has been a
breach of a representation, warranty or covenant contained in this Agreement or
that such Indemnitee is otherwise entitled to indemnification under this Section
9, (ii) contain a brief description of the circumstances supporting such
Indemnitee's belief that there is or has been such a breach or that such
Indemnitee is so entitled to indemnification, and (iii) to the extent possible,
contain a good faith, non-binding, preliminary estimate of the amount of
Indemnifiable Losses such Indemnitee claims to have so incurred or suffered or
will incur or suffer, or a statement that such Indemnifiable Losses are not
capable of being estimated or quantified at such time and that the Claim Notice
will be amended to include a claimed amount at a later date.
9.6 EXCLUSIVE REMEDY; ADJUSTMENT TO PURCHASE PRICE.
(a) To the extent permitted by Law, the indemnity provisions of this
Article 9 shall be the sole and exclusive remedy of the parties with respect to
any breach of the representations, warranties and covenants contained in this
Agreement and the other indemnification obligations set forth in Section 9.3
that are asserted subsequent to Closing, provided, however, that the foregoing
shall not prohibit any party from seeking an injunction or other equitable
remedy in respect thereof, and provided further that the foregoing shall not
prohibit Seller from seeking and obtaining specific performance of the
Registration Rights Agreement and/or any remedy provided under the Registration
Rights Agreement.
(b) Any payments by Seller to Purchaser pursuant to Article 9 shall be
treated as an adjustment to the purchase price of the Transferred Assets.
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 NOTICES. All notices and other communications required or
permitted hereunder will be in writing and, unless otherwise provided in this
Agreement, will be deemed to have been duly given when delivered in person or
when dispatched by electronic facsimile transfer (confirmed in writing by mail
simultaneously dispatched) or one business day after having been dispatched by a
nationally recognized overnight courier service to the appropriate party at the
address specified below:
(a) If to Seller, to:
Pocket Script LLP
4770 Duke Drive, 2nd Floor
23
Mason, Ohio 45040
Attention: Stephen S. Burns
Facsimile No.: (___) _______
with a copy to:
Katz, Teller, Brant & Hild
255 East Fifth Street, Suite 2400
Cincinnati, Ohio 45202
Attention: Robert E. Brant
Facsimile No.: (513) 721-7120
If to Purchaser, to:
Zix Corporation
2711 N. Haskell Avenue, Suite 2300
Dallas, Texas 75204-2960
Attention: Legal Department
Facsimile No.: (214) 515-7385
or to such other address or addresses as any such party may from time to time
designate as to itself by like notice.
10.2 EXPENSES. Except as otherwise expressly provided herein, each
party hereto will pay any expenses incurred by it incident to this Agreement and
in preparing to consummate and consummating the transactions provided for
herein.
10.3 SUCCESSORS AND ASSIGNS. This Agreement will be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns, but will not be assignable or delegable by any party
without the prior written consent of the other party; provided, however, that
upon notice to the other party delivered in accordance with Section 10.1, either
party may assign or delegate any or all of their rights or obligations under
this Agreement to any Affiliate thereof or to any Person that directly or
indirectly acquires, after the Closing, all or substantially all of the assets
or voting stock of such party, but such assignment or delegation shall not
relieve the assigning party of any obligation hereunder.
10.4 WAIVER. No failure on the part of any Person to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of any Person in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. No Person shall be deemed to have waived any claim
arising out of this Agreement, or any power, right, privilege or remedy under
this Agreement, unless the
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waiver of such claim, power, right, privilege or remedy is expressly set forth
in a written instrument duly executed and delivered on behalf of such Person;
and any such waiver shall not be applicable or have any effect except in the
specific instance in which it is given.
10.5 ENTIRE AGREEMENT.. This Agreement, which includes the
schedules, annexes and exhibits hereto, supersedes any other agreement, whether
written or oral, that may have been made or entered into by any party relating
to the matters contemplated hereby and constitutes the entire agreement by and
among the parties hereto.
10.6 AMENDMENTS, SUPPLEMENTS, ETC. This Agreement may be amended or
supplemented at any time by additional written agreements executed and delivered
by each of the parties hereto.
10.7 RIGHTS OF THE PARTIES. Nothing expressed or implied in this
Agreement is intended or will be construed to confer upon or give any Person
other than the parties hereto any rights or remedies under or by reason of this
Agreement or any transaction contemplated hereby.
10.8 FURTHER ASSURANCES. From time to time, as and when reasonably
requested by any party hereto, the other party will execute and deliver, or
cause to be executed and delivered, all such documents and instruments, make
such other deliveries and take such other actions as may be reasonably necessary
to consummate the transactions contemplated by this Agreement.
10.9 APPLICABLE LAW. This Agreement and the legal relations among
the parties hereto will be governed by and construed in accordance with the
rules and substantive Laws of the State of Texas, United States of America,
without regard to conflicts of law provisions thereof.
10.10 EXECUTION IN 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 agreement.
10.11 TITLES AND HEADINGS. Titles and headings to Sections herein
are inserted for convenience of reference only, and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
10.12 INVALID PROVISIONS. If any provision of this Agreement is held
to be illegal, invalid, or unenforceable under any present or future Law, and if
the rights or obligations under this Agreement of Seller on the one hand and
Purchaser on the other hand will not be materially and adversely affected
thereby, (a) such provision will be fully severable; (b) this Agreement will be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part hereof; (c) the remaining provisions of this
Agreement will remain in full force and effect and will not be affected by the
illegal, invalid, or unenforceable provision or by its severance from this
Agreement; and (d) in lieu of such illegal, invalid, or unenforceable provision,
there will be added automatically as a part of this Agreement a legal, valid,
and enforceable provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible.
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10.13 BULK SALES; PAYMENT OF LIABILITIES.. Purchaser waives
compliance by Seller with the provisions of the so-called bulk sales Law of any
applicable jurisdiction; provided however, that Seller will pay the obligations
owing to its creditors (other than those included in the Assumed Liabilities)
promptly following the sale of the shares of Purchaser Stock; and further
provided, however, that Seller will indemnify, defend and hold harmless
Purchaser in respect of any Indemnifiable Loss relating to, resulting from or
arising out of Seller's failure so to comply with any such bulk sales Law under
the Laws of the State of Ohio or failure to pay the liabilities of Seller in
connection with the transactions contemplated by this Agreement and such
indemnification obligation shall not be limited by the Indemnification Cap or
subject to the Indemnification Minimum, but Seller's indemnification shall not
cover any Indemnifiable Loss relating to, resulting from, or arising out of
Seller's failure to comply with any such bulk sales Laws of any jurisdiction
other than Ohio.
10.14 SPECIFIC PERFORMANCE. The parties recognize that if Seller
refuses to perform under the provisions of this Agreement, monetary damages
alone will not be adequate to compensate Purchaser for its injury. Purchaser
shall therefore be entitled, in addition to any other remedies that may be
available, to obtain specific performance of the terms of this Agreement. If any
action is brought by Purchaser to enforce this Agreement, Seller shall waive the
defense that there is an adequate remedy at law.
10.15 TRANSFERS. Purchaser and Seller will cooperate and take such
action as may be reasonably requested by the other in order to effect an orderly
transfer of the Transferred Assets with a minimum of disruption to the
operations and employees of the businesses of Purchaser and Seller.
10.16 TRANSFER TAXES. All sales, use, transfer, stamp, conveyance,
value added or other similar taxes, duties, excises or governmental charges
(collectively "Transaction Taxes") imposed by the State of Ohio with respect to
the transfer of the Transferred Assets or otherwise on account of this Agreement
or the transactions contemplated hereby will be borne by Seller and all such
Transaction Taxes imposed by any other jurisdiction with respect to the transfer
of the Transferred Assets or otherwise on account of this Agreement or the
transactions contemplated hereby will be borne by Purchaser.
10.17 ATTORNEYS' FEES. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to recover in such action its reasonable attorneys'
fees, costs and necessary disbursements in addition to any other relief to which
it may be entitled.
10.18 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
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(b) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(c) Except as otherwise indicated, all references in this
Agreement to "Sections", "Schedules", "Annexes" are intended to refer to
Sections of this Agreement and Schedules and Annexes to this Agreement.
[This Space Deliberately Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
Zix Corporation
By:___________________________
Name: ________________________
Title: _______________________
Pocket Script LLP
By:___________________________
Name: ________________________
Title: _______________________