1
EXHIBIT 10.50
AUTO-GRAPHICS, INC.
3201 Temple Avenue
Pomona, California 91768
1-800-776-6939
January 2, 2001
Mr. Jerry Sherman, President
MAXCESS LIBRARY SYSTEMS, INC.
6305 Ivy Lane, Suite 720
Greenbelt, MD 20770
RE: Asset Purchase Agreement Letter
Dear Jerry:
This Asset Purchase Agreement letter, when signed and timely
returned to us, will constitute a legally binding agreement dated and effective
as first set forth above (the "Agreement") by and between Auto-Graphics, Inc., a
California corporation ("the "Company"), and Maxcess Library Systems, Inc., a
Maryland corporation (the "Seller"), whereby the Company will purchase certain
assets and property from the Seller constituting and comprising the Seller's
Verso and Enterprise 2000 software and product lines and business as more fully
described herein (individually and collectively the "Software Business") free
and clear of any and all liens, claims and encumbrances of whatsoever nature or
kind. The parties have memorialized their agreement and understanding regarding
the subject Software Business purchase and sale transaction in this Agreement
the terms and conditions of which are set forth in this paragraph and as
follows:
1. Software Business Purchase Transaction. At the Closing as
defined herein, the Company will purchase and acquire from the Seller and the
Seller will sell, transfer and assign to the Company, for the Purchase Price as
defined herein, all of the Seller's right, title and interest in and to the
assets and property constituting and comprising the Software Business. As used
in this Agreement, the "Software Business" is understood to include (1) the
software including without limitation source code for the Seller's Verso, Verso
2
Mr. Jerry Sherman
January 2, 2000
Page 2
Solo, Verso Enterprise, Verso ASP and Enterprise 2000 software products
(individually and collectively the "Verso Software"), (2) the Seller's Verso
Software customer contracts and accounts receivable, (3) third party vendor
licenses and other rights for and covering software and other proprietary
rights, title and interest entitling the Seller to use such third party property
embedded in and otherwise used in connection with the Seller's Verso Software
and Software Business, (4) manuals, protocols, product literature and other
written materials, whether or not copyrighted, covering or otherwise used/owned
by the Seller in connection with the Verso Software and the Software Business,
(5) tradenames, trade marks, trade dress, copyrights and other intellectual
property used and/or proposed to be used in and associated with the ownership,
sale and marketing of the Verso Software and Software Business, (6) all other
software and hardware owned and used by the Seller as part of the Seller's
Software Business, and such other assets and property as specified and described
on the Schedule attached hereto and incorporated herein as Exhibit 1. For
convenience purposes only, the Seller has scheduled any and all assets or other
property owned and/or used by the Seller in its business which assets/property
are not the subject of this Agreement (the "Excluded Assets/Property") which
schedule is attached hereto and incorporated herein as Exhibit 1-1 [if "None" so
state in the Exhibit]. Except as expressly otherwise provided for in this
Agreement, no debt or other obligations and/or liability of the Seller is
intended or shall be deemed for any purpose to be assumed by the Company under
or otherwise in respect of this Agreement and the subject Software Business
purchase transaction provided for herein, all of which shall remain the sole and
exclusive obligation of, and shall be paid and satisfied during the normal
course by, the Seller.
2. Purchase Price. In consideration of the purchase by the
Company from the Seller of the Software Business, including without limitation
the Verso Software, the Company shall pay the Seller, as the total consideration
for the purchase of the Software Business, the following (the "Purchase Price"):
(1). Cash. At the Closing, Two Hundred Thousand Dollars
($200,000) in the form of the Company's check made payable to the Seller; and
(2). Performance of Customer Contracts. As part of the
Purchase Price, the Company will perform any and all executory promises
expressly provided for in any of the customer contracts to be sold, assigned and
transferred by the Seller to and purchased and acquired by the Company as
provided for under paragraph 1 of this Agreement and as expressly set forth on
Exhibit 1 of this Agreement (but such agreement to perform such executory
services including ongoing maintenance shall not obligate the Company, directly
3
Mr. Jerry Sherman
January 2, 2000
Page 3
or indirectly, to any such customers under, in connection with or otherwise in
respect of any such assigned customer contracts).
(3). Closed Business. Fifty percent (50%) of the
software (only) purchase price of purchase contracts with the Company signed by
and/or installed at Riveria Beach Public Library and/or US Catholic Conference
within ninety (90) days of the date of this Agreement to be paid by the Company
to the Seller within fifteen (15) days of the receipt by the Company of
payment(s) by such prospective customers (which payment(s) by the Company under
this subparagraph shall be in lieu of any royalty payments by the Company
attributable to such customer contracts and associated revenue in 2001 as
otherwise provided for below); and
(4) Royalty Payments. The Company will pay the Seller,
or its designee, royalty payments on revenues collected (herein "revenues") by
the Company from the sale or license (including ASP service fee and
training/support fees) of the Verso Software, as follows (the "Royalty
Payments"):
A. 2001: 5% of 2001 revenues;
B. 2002: 4% of 2002 revenues; and
C. 2003: 3% of 2003 revenues.
Royalty Payments as provided for above, together with a written report setting
forth the applicable revenues for the period, shall be made annually by the
Company to the Seller covering the preceding calendar year within forty-five
(45) days of the conclusion of such calendar year period. Royalty Payments to be
made by the Company as part of the Purchase Price shall be computed based on
revenues attributable to Verso Software products determined in accordance with
generally accepted accounting principles (GAAP) consistently applied. Where the
Verso Software is embedded in any of the Company's products/services, the
portion of the revenues attributable to the Verso Software derived by the
Company from any such customer contracts/payments shall be in accordance with
the purchase contracts between the Company and its customers as to the Verso
Software portion of such contracts (or, if not so designated in any such
purchase contract, then by the mutual agreement of the parties or as may
otherwise be determined to be reasonable under the circumstances). At the
Seller's election, and at the Seller's expense, upon reasonable advance written
notice but no more frequently that once each in each calendar year, Seller
and/or its authorized representative shall be entitled to audit the Company's
books and records as may be necessary to verify the Royalty
4
Mr. Jerry Sherman
January 2, 2000
Page 4
Payments made by the Company to the Seller for the immediately preceding
calendar year. Seller acknowledges that, in determining to enter into and
perform this Agreement, the Seller was not relying upon any representation,
warranty, guaranty and/or other assurances by the Company (including any
employee, officer, director, or other representative thereof) as to the amount
of the Royalty Payments likely to be received by the Seller and/or the
underlying annual revenues upon which such Royalty Payments are based.
The Purchase Price to be paid by the Company to the Seller for
the Software Business including the Verso Software as provided for in this
paragraph of the Agreement is understood and agreed to be "net" of any and all
charges, obligations and liabilities including sales, corporate and other taxes
and charges resulting from or otherwise arising as a result of the subject
Software Business purchase transaction which is the subject of this Agreement
(which the Company has not expressly agreed to assume and pay as part of the
consideration to be paid by the Company to the Seller under this Agreement); and
the Seller agrees to promptly pay any and all applicable such taxes and charges
of whatsoever nature or kind.
Except as may otherwise be expressly provided for or contemplated by this
Agreement, if any, the Company is not obligated to pay any debts, obligations
and/or liabilities of the Seller (including the Seller's sole shareholder as may
be the case), including as may exist or subsequently exist by operation of law;
and all such debts, obligations and liabilities of the Seller (including the
Seller's sole shareholder as may be the case) shall be and remain the sole and
exclusive responsibility, obligation and liability of the Seller (including the
Seller's sole shareholder as may be the case).
3. Closing. The consummation of the Software Business purchase
transaction as provided for and contemplated herein shall take place at the
time, date and place as mutually determined and subsequently confirmed in
writing by the parties but, in no event, shall the Closing take place later than
thirty (30) days following the effective date of this Agreement (the "Closing"
and the "Closing Date"). If, for any reason, the parties fail to designate and
confirm the Closing date, time and place for the Closing, then such Closing
shall take place at the Seller's offices at the above referenced address in
Maryland at 3:00 P.M. on Friday, January 19, 2001.
4. Seller's Representations and Warranties to the Company. As an
inducement to and as consideration for the Company entering into and performing
this Agreement, the Seller and its sole shareholder in such corporate and
individual capacities as indicated below (in the Seller's signature block)
5
Mr. Jerry Sherman
January 2, 2000
Page 5
hereby represent and warrant to the Company, and acknowledge that the Company is
authorized and directed to rely thereon for purposes of this Agreement, as
follows:
(1) Software Business/Verso Software. The assets and
property constituting and comprising the Software Business including the Verso
Software as defined herein, which are being purchased and acquired by the
Company under this Agreement, are sufficient and adequate to allow and provide
the Company with the legal right to use, sell, license and otherwise deal in
such Software Business for its own account without obligation of any kind to any
third person or entity (except only for the Closed Business and Royalty Payments
obligation to the Seller as provided for in paragraphs 2(3) and (4) hereof and
as otherwise set forth on the Schedule attached hereto and incorporated herein
as Exhibit 4(1) [if "None" so state in the Exhibit]. Nothing in this
subparagraph is intended or should be construed for any purpose, except as
expressly provided elsewhere in this Agreement, to obligate the Company in
respect of any obligation or other matter set forth by the Seller on Exhibit
4(1) which obligations and/or other matters shall remain the sole and exclusive
obligations and responsibilities of the Seller which will be paid or otherwise
satisfied by the Seller prior to or at the Closing in accordance with the
provisions of this Agreement. The Software Business including the Verso Software
is suitable for its intended purpose as described in the Seller's published
product literature and advertising describing such software product(s).
(2) Free and Clear. At the Closing, the Software
Business including without limitation the Verso Software being sold by the
Seller to and being purchased by the Company from the Seller pursuant to and in
accordance with this Agreement will be free and clear of any and all liens,
claims and encumbrances of whatsoever nature or kind. The undersigned is not
aware of any claim of ownership, or assertion of any lien and/or encumbrance
against or in respect of the Software Business including the Verso Software, by
any third person or entity except as set forth on the schedule attached hereto
and incorporated herein as Exhibit 4(2) [if "None" so state in the Exhibit].
Nothing in this subparagraph is intended or should be construed for any purpose
to obligate the Company to pay any lien, claim or other obligation listed on
Exhibit 4(2) which liens, claims and/or encumbrances (if any) shall remain the
sole and exclusive obligation and responsibility of the Seller.
(3) Corporate Authority. The undersigned Jerry Sherman
is the President and the sole shareholder of the Seller; and this Agreement has
been reviewed and unanimously approved by the Seller's Board of Directors and
such shareholder; and the undersigned is duly authorized and empowered to enter
6
Mr. Jerry Sherman
January 2, 2000
Page 6
into and timely and completely perform this Agreement in accordance with its
terms/conditions.
(4) Development Project. Except for the reasons, if any,
set forth on the schedule attached hereto and incorporated herein as Exhibit
4(4) [if "None" so state in the Exhibit], the Seller and its sole shareholder
are not aware of any reason why the Development Effort described in paragraph 7
of this Agreement cannot reasonably be accomplished by the Company with their
cooperation and assistance within a reasonable period of time following the
effective date of this Agreement.
5. The Company's Representations and Warranties to the Seller.
As an inducement to and as consideration for the Seller entering into and
performing this Agreement, the Company hereby represents and warrants to the
Seller and its sole shareholder, and acknowledges that the Company and its sole
shareholder are authorized and directed to rely thereon for purposes of this
Agreement, that all necessary corporate action has been taken by, for and on
behalf of the Company including the undersigned representative thereof to enter
into and timely and fully perform this Agreement in accordance with its
terms/conditions.
6. Conditions to the Company's Obligation to Close.
Notwithstanding anything to the contrary contained in this Agreement, the
Company's obligation to consummate the Software Business purchase transaction at
the Closing pursuant to and in accordance with the provisions of this Agreement
is expressly made subject to and conditioned upon the following:
(1). Due Diligence. Completion, to satisfaction of the Company
and its legal counsel in their sole election and discretion, of the Company's
"due diligence" investigation in respect of (A) the Software Business including
without limitation the Verso Software and (B) otherwise relating to the matters
set forth on the Exhibits and each of them completed by the Seller and made part
of this Agreement, all within twenty-five (25) days following the date effective
date of this Agreement;
(2) Truth/Accuracy of Seller's Representations and Warranties.
The truth and accuracy of the Seller's representations and warranties to the
Company as set forth in paragraph 4 of the Agreement at such date and as of the
Closing Date;
(3) Employment Agreement. The entering into employment
agreements with Jerry Sherman and Charles Hichak in form and substance
satisfactory to the Company. The employment agreement with Jerry Sherman shall
7
Mr. Jerry Sherman
January 2, 2000
Page 7
provide, among other things that the term of such agreement shall be for a
period of two years (2) years commencing January 1, 2001 and provide for annual
compensation of Ninety Thousand Dollars ($90,000) per year; and
(4) Third Party Assignments/Transfers. The completion to the
Company's satisfaction, in its sole discretion and election, of the assignment
and/or transfer of (A) Seller customer contracts and accounts and (B) third
party (vendor) agreements including rights, title and interests of and by any
and all such third parties (vendors/licensees) as may be necessary and/or deemed
reasonably advisable by the Company and its legal counsel to provide the Company
with the right to use, sell, license and otherwise deal in the Verso Software
products and otherwise own and operate the Software Business which is the
subject of this Software Business purchase transaction and Agreement, all as
provided for in this Agreement.
The Company shall have the right in its sole discretion and election, but shall
not be obligated, to waive any or all of the foregoing conditions to Closing.
7. Seller's Cooperation and Assistance. As part of the
consideration to be provided by the Seller and its sole shareholder and received
by the Company under this Agreement, the Seller and its sole shareholder hereby
agree and promise, without the payment of any additional consideration therefor
(except for the employment agreement to be entered into between the Company and
Jerry Sherman) that, to provide such cooperation and assistance as may be
required and reasonably requested by the Company from time to time to integrate
the Verso Software product into and with the Company's IOL2 software so as to
provide a common interface "look and feel" to customers/users of the Company's
IOL2 product/service which integration, together with the re-design of screen
formats, will allow the Company to offer to customer/users of the Company's IOL2
product/service circulation, acquisitions and serial services without requiring
any additional software deployed at such customer/user location(s) (herein
generally referred to as the "Development Project"). Seller and its sole
shareholder further agree and promise to cooperate and assist the Company to (1)
enter into an employment agreement with Charles Hichak prior to the Closing on
such terms and conditions as the parties deem reasonable and appropriate and (2)
obtain as assignment (or sublease) of the Company's current lease for its
offices/facilities located at the address for the Seller first set forth above
for the current lease term and, further, obtain an extension of such lease, or a
new lease, for such facilities on terms and conditions as the Company deems
reasonable and appropriate under the circumstances.
8. Company's Payment to Third Party Claimants/Lien Creditors.
Notwithstanding any contrary provision in this Agreement, if the Company
8
Mr. Jerry Sherman
January 2, 2000
Page 8
discovers any third party creditor who has asserted a third party claim and/or
claims to have and/or appears to have any lien or encumbrance in, to or
otherwise affecting the Software Business including the Verso Software, and
which was not listed by the Company on Exhibits 4(1) and/or 4(2) hereto, then
the Company shall have the right in its sole election and discretion (but shall
not be obligated) to pay-off or otherwise compromise or satisfy any such third
party claim(s) and/or underlying debt obligation(s), so as to ensure that the
Software Business and Verso Software are in fact sold and transferred by the
Seller, and are purchased and acquired by the Company, free and clear of any and
all claims, liens and encumbrances as provided for elsewhere in this Agreement,
and to deduct any and all such amounts/payments up to a maximum of One Hundred
Thousand Dollars ($100,000) from the amount to be paid by the Company to the
Seller at the Closing under paragraph 1(1) of this Agreement. Nothing in this
paragraph is intended or shall be deemed to limit or restrict the Company's
rights under paragraph 6 (Conditions to the Company's Obligation to Close) of
this Agreement.
9. Complete Agreement/Amendment and Miscellaneous Provisions.
This Agreement sets forth all of the terms and conditions of the parties'
agreements regarding or otherwise in respect of the subject matter of such
Agreement, and can only be amended, changed or modified by a further writing
signed by the party against which any such amendment, change or modification is
sought to be enforced. This Agreement contains all of the parties' statements,
representations, understandings, agreements, promises, covenants, assurances,
warranties, guarantees and other matters regarding the subject matter of the
Agreement. This Agreement has and shall be deemed for all purposes to have been
drafted and otherwise prepared by all of the parties hereto. Should any
ambiguity subsequently be determined to exist in or in respect of this Agreement
including the language used herein, then no party hereto shall suffer any
prejudice or disability as a result of any such ambiguity. The parties hereby
acknowledge to one and other that they have had the opportunity to have this
Agreement and matters relating thereto reviewed by their own respective
individual professional advisors including attorneys. This Agreement is made and
shall be governed and interpreted for all purposes under the laws of the State
of California (without regard to its conflict of law provisions). For purpose of
this Agreement, and the performance of the parties' responsibilities and
obligations hereunder and/or the satisfaction of conditions as provided for
herein, time shall be deemed to be of the essence. The representations,
agreements, covenants and warranties contained in this Agreement shall survive
the Closing. A waiver of any of the covenants and/or conditions set forth in
this Agreement by the party for whose benefit such covenants and conditions are
intended shall not be deemed to be or constitute a waiver of any other covenant
or condition of the Agreement. This Agreement, including all rights and
obligations provided for herein, is binding upon the
9
Mr. Jerry Sherman
January 2, 2000
Page 9
parties including their heirs, executors, administrators, trustees and successor
trustees, designees, assigns, and other successors in interest. As used herein
"Agreement" shall be understood to include all Exhibits attached and
incorporated herein by references in the Agreement.
If the foregoing is acceptable to the Seller, and this letter
accurately and completely memorializes all of the terms and conditions
constituting and comprising the parties' Agreement in respect of the subject
matter of such Agreement, please finalize all Exhibits referred to in this
Agreement then sign and return for receipt in hand by the undersigned by no
later than the close of business Los Angeles Time on Thursday, January 4, 2001,
following which the offer represented by this letter shall automatically expire
and terminate and be of no further force or effect.
AUTO-GRAPHICS, INC.
(the "Company")
By
Michael Skiles, President
(signatures continued on following page)
ACCEPTED AND AGREED
MAXCESS LIBRARY SERVICES, INC.
(the "Seller")
By
Jerry Sherman, President and
sole shareholder of Maxcess
Library Services, Inc. in
such corporate and individual
10
capacity
January ___, 2001
11
EXHIBIT 1
SCHEDULE OF ASSETS BEING PURCHASED
(to be provided)
12
EXHIBIT 1-1
EXCLUDED ASSETS/PROPERTY
(to be provided)
13
EXHIBIT 4(1)
THIRD PARTY OBLIGATIONS
(to be provided)
14
EXHIBIT 4(2)
LIENS, CLAIMS AND ENCUMBRANCES
(to be provided)
15
EXHIBIT 4(4)
DEVELOPMENT PROJECT OBSTACLES
(to be provided)