STOCKPURCHASEAGREEMENT
EX-10.25 2 ex1025.htm EXHIBIT 10.25 ex1025.htm
(b) Buyer and the owners of Buyer have consulted with their own corporate and securities attorneys and financial advisors in regard to Cogility and the Purchase;
Exhibit 10.25
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is dated as of January 12, 2013 (the "Agreement"), by and among Drumright Group, LLC, a Delaware limited liability company ("Buyer"), Acquired Sales Corp., a Nevada corporation ("Seller"), and Cogility Software Corporation, a Delaware corporation ("Cogility"). Buyer, Seller and Cogility are hereby referred to individually as a "Party" and collectively as the "Parties".
In consideration of the mutual benefits to be derived and the representations and warranties, conditions and promises herein contained, and intending to be legally bound hereby, the Parties hereby agree as follows:
ARTICLE 1
GENERAL
1.1 Sale and Purchase of Cogility Capital Stock and assets, including but not limited to, the Cogility IP (hereinafter "Assets"). On the date of the first payment, Seller shall sell, transfer, assign and deliver unto Buyer, and Buyer shall purchase (the "Purchase") from Seller, all (100%) of the outstanding capital stock of Cogility (the "Cogility Capital Stock"), free and clear of all encumbrances or liens, for the Purchase Price hereinafter set forth. The date (the "Closing Date") of the closing (the "Closing") of the Purchase shall be February 11, 2013. The "Date of the First Payment", "Closing" and "Closing Date" shall be synonymous for the purpose of this Agreement.
1.2 Purchase Price and Payment Dates.
(a) For the Cogility Capital Stock and Assets excluding Cogility's cash on hand and also excluding Cogility's accounts receivable in regard to completed work performed up to and through January 31, 2013 in accordance with Section 1.5, Buyer shall pay to Seller an aggregate amount ("the Purchase Price") equal to Seven Million Dollars ($7,000,000) minus the aggregate amount of the liabilities of Cogility that will be listed on an Attachment A hereto and incorporated herein as part of this Agreement (collectively the "Attachment A Liabilities"), to be prepared and delivered by Seller to Buyer prior to the Closing The Purchase Price will be paid as follows:
(l) First Payment: At the Closing, Buyer shall place into an escrow account, to be selected by Seller, an amount in cash equal to Four Million Dollars (U.S. $4,000,000) (sometimes referred to as the "First Payment"), payable via wire transfer. The escrow agent will be given irrevocable instructions to pay the Attachment A Liabilities (see Section l .2(b) below) in full at the Closing Date.
(2) Second Payment: Subject to Section 4.6 (c), on the first business day in Chicago, Illinois, that is on or after the six month anniversary of the Closing Date, Buyer shall pay to Seller an amount in cash equal to One Million Five Hundred Thousand Dollars ($1,500,000) (referred to as the "Second Payment", payable via wire transfer; and
(3) Third Payment: On the first business day in Chicago, Illinois, that is on or after the twelve month anniversary of the Closing Date, Buyer shal1 pay to Seller an amount in cash equal to One Million Five Hundred Thousand Dollars ($1 ,500,000) ( referred to as the "Third Payment"), payable via wire transfer.
(b) "Attachment A Liabilities" means the aggregate amount of any and all bona fide, legitimate liabilities of Cogility known to Seller through standard diligence. The Attachment A Liabilities will be prepared by Seller and delivered to Buyer no later than five days prior to the Closing Date.
1.3 Payment of the Attachment A Liabilities and Any Other Liabilities and contractual obligations Not Listed Therein: At the Closing, Seller, through its escrow agent, or, if necessary, from Seller's separate funds, will pay in full all of the Attachment A Liabilities and any and all other, legitimate, outstanding unlisted Liabilities of Cogility, provided, however, that:
| (a) Cogility will still have contractual performance obligations under certain outstanding contracts, which obligations will not be fulfilled by the Closing, and will continue following the Closing, and Cogility has on-going business operations that regularly generate liabilities including but not limited to typical trade payables that are not yet due and payable and accrued employee payroll obligations that are due and payable every two weeks. Such liabilities which are not yet due and payable will not be paid as of the Closing, and such on-going business operations will continue following the Closing (collectively the "Ongoing Cogility Obligations and Liabilities" or "OCOL"). |
| (b) Any and all liabilities incurred by or on behalf ofCogi1ity up to and through January 31, 2013 will be the sole responsibility of Seller. |
| (c) This provision, Section 1.3, does not constitute any agreement or acknowledgement by Buyer that the Attachment A Liabilities inc1udes all liabilities, debts or other obligations, past or current, payable by Seller. |
1.4 Security for the Second Payment and the Third Payment. The full and timely receipt by Seller of the Second Payment and the Third Payment from Buyer shall either be secured by a payment guaranty issued by a U.S. bank (the "Guaranty Bank"), the form and substance of which guaranty (the "Bank Guaranty") shall be reasonably acceptable to the Seller
and delivered by Buyer to Seller at the Closing, or shall be secured by unconditional joint and several personal guarantees (collectively the "Personal Guarantees") by each of James Drumright and Dale Shipley (individually a "Guarantor" and collectively the "Guarantors"), the form and substance of which guarantees (collectively the "Personal Guarantees") shall be reasonably acceptable to Seller, and delivered by Buyer to Seller at the Closing. The Bank Guaranty or the Personal Guarantees, as the case may be, shall among other things state that if any lawsuit is filed by Seller against the Guaranty Bank or any of the Guarantors in order to collect the Second Payment or the Third Payment, then Seller shall be entitled to collect reasonable attorneys' fees and expenses from the Guaranty Bank and the Guarantors irt addition to the Second Payment and the Third Payment.
1.5 Current Cogility Customers and Billings Prior to Closing:
(a) DCGS-A Billings Prior to the Closing. Cogility is currently performing work for the U.S. Army DCGS-A on the JIST project, under subcontract with Booz Allen & Hamilton ("BAH"). At the Closing, Seller shall deliver to Buyer a list of all Cogility invoices submitted by Cogility to BAH or to any other U.S. Army DCGS-A prime contractor on the JIST project for completed work performed up to and through January 31, 2013, which invoices have not been paid prior to the Closing Date (collectively the "Unpaid BAH Invoices"). Buyer and Cogility jointly agree and covenant that they shall cause all payments received by Cogility after the Closing in regard to the Unpaid BAH Invoices ("Payment Received on the Unpaid BAH Invoices") to be immediately allocated and paid over by Cogility to Seller. If any lawsuit is filed by Seller against Cogility and/or Buyer in order to collect the Payments Received on the Unpaid BAH Invoices, and Seller prevails on such lawsuit, then Seller shall be entitled to collect reasonable attorney's fees and expenses from Cogility and Buyer in addition to the Payments Received on the Unpaid BAH Invoices.
(b) All Other Current Clients: The provisions set forth in 1.5(a) above, shall apply to current Cogility Clients, including, but not limited to, Womble Carlyle, CashCall and any and all other customers to which Cogility is currently providing services, maintenance and/or support of any nature.
ARTICLE2
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer that the statements made in this Article 2 are true and correct as of the date hereof and as of the Closing Date.
2.1 Organization. Seller is duly organized, validly existing, and in good standing under the laws of the State of Nevada. Cogility is duly organized, validly existing, and in good standing under the laws of the State of Delaware. Seller has the full corporate power and authority to enter into this Agreement, to carry out its obligations hereunder, to consummate the transactions contemplated hereby, to conduct its business as it is presently being conducted and to own, operate and lease its properties and assets. Cogility's headquarters office is located in Providence, Rhode Island. Seller agrees that Buyer shall have no obligation whatsoever in connection with the Rhode Island Lease upon First Payment, and that the Rhode Island Lease shall be terminated.
2.2 Authorization.. Upon approval by the Boards of Directors of Seller and Cogility, which approvals will be voted upon by such Boards within two (2) days iollowing the receipt by such Boards of the forms of the Personal Guarantees and the legal opinions in regard to the validity and enforceability thereof, the execution and delivery by Seller of this. Agreement, the performance by Seller of its obligations hereunder and the consummation by Seller of the transactions contemplated herein shall be duly authorized by all requisite corporate action on the part of Seller, at which time this Agreement shall be duly execute(_ and delivered by Cogility and Seller, and shall be a valid and binding obligation of Cogility and Seller, enforceable against each of them in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or hereafter in effect, relating to or limiting creditors' rights generally; and (b) general principles of equity (whether considered in an action in equity or at law). Schedule 2.2 sets forth each jurisdiction in which Cogility is licensed or qualified to do business, and Cogility is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business as currently conducted makes such licensing or qualification necessary.
2.3 No Conflict. The execution, delivery and performance of this Agreement by Cogility and Seller and the consummation of the transactions contemplated herein or th· fulfillment by Cogility or Seller of any of its terms do not and will not:
(a) conflict with or result in a violation or breach by Cogility or Seller of, or constitute a default under, or create an event that, with the giving of notice or the lapse of time, or both, would be a default under or breach of, or give a right t·J terminate or cancel under, any of the terms, conditions or provisions of: (1) any indenture, mortgage, lease, deed of trust, pledge, loan or credit agreement, or any other contract, arrangement or agreement to which Cogility or Seller is a party or to which any portion of the assets of Cogility is subject; (2) the Certificate c.f Incorporation, Bylaws or other organizational documents of Seller or Cogility; or (3) any judgment, order, writ, injunction, decree or demand of any Governmental Entity which materially affects Seller or Cogility, or is likely to adversely affeet Cogility's ability to conduct its business or own or convey its assets;
(b) result in the creation or imposition of any encumbrances or lien of any nature whatsoever upon any assets of Cogility or materially affects Cogility 's ability to conduct its business as historically conducted prior to the date of this Agreement; or
(c) cause a loss or adverse modification of any authorization or contract granted by any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-gover:ental, or any arbitrator, court or tribunal of competent jurisdiction (collectively, "Governmental Entity") to or otherwise held by Cogility.
Except for this Agreement, neither Seller nor Cogility has any legal obligation, absolute or contingent, to any other Person to sell any capital stock or other ownership interest in Cogility, or the business or any assets ofCogility or to effect any merger, consolidation or other reorganization ofCogility or to enter into any agreement with respect thereto.
2.4 Capitalization; No Subsidiaries.
(a) Cogility's authorized Capital Stock consists of 10,000,000 shares of common stock, $0.0001 par value, ofwhich 100 shares are issued and outstanding. All outstanding shares ofCogility Capital Stock are duly authorized, validly issued, fully paid and non-assessable and are owned of record and beneficially by Seller, free and clear of all Liens, excepting those represented by the Attachment A Liabilities. The only equity or stock of Cogility is represented by the Cogility Capital Stock. At the Closing, Buyer shaH own all of the Cogility Capital Stock, free and clear of all Liens.
(b) The Cogility Capital Stock was issued in compliance with any applicable statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, other requirement or rule of law of any Governmental Entity ("Laws"). The Cogility Capital Stock was not issued in violation of any agreement, arrangement or commitment to which Seller or Cogility is a party and is not su ject to or in violation of any preemptive or similar rights of any individual, partnership, corporation, limited liability company, association, joint stock company, trust, joint venture, unincorporated organization or any other business entity, or Governmental Entity (or any department, agency, or political subdivision thereof) (collectively, "Person")
(c) There are no outstanding or authorized options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the capital stock of Cogility or obligating Seller or Cogility to issue or sell any shares of capital stock of, or any other interest in, Cogility. Cogility does not have outstanding or authorized any stock appreciation, phantom stock, profit participation or similar rights. There are no voting trusts, stockhold<::r agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of the Cogility Capital Stock.
(d) Seller is the record and beneficial owner of all shares of Capital Stock of Cogility, and at the Closing the Cogility Capital Stock will be free and clear of all liens and encumbrances. At the Closing, certificates evidencing the Cogility Capital Stock will be delivered to Buyer by Seller and will convey and transfer to Buyer good, complete and marketable title to all capital stock and equity of Cogility, free and cJear of restrictions or conditions to transfer or assignment (other than restrictions on transfer imposed by federal or state securities laws) and free and clear of all defects of title or encumbrances, including but not limited to any mortgage, lien, pledge, charge, claim, demand, community property interest. security interest, license, title retention agreement, option, right of first refusal,, voting agreement, lease, financing arrangement, taxes, equity or other adverse Claim (collectively, "Lien").
(e) Cogility does not own. directly or indirectly, any capital stock or other ownership interest in any corporation, partnership, business association, joint venture or other entity.
(f) Seller has provided to Buyer complete and correct copies of the! Certificate of Incorporation, Bylaws and other organizational documents of Cogility and Cogility is not in default or violation thereof.
2.5 Financial Statements.
(a) The audited and reviewed historical financial statements ofCogili r ("Financial Statements") are reflected in the annual and quarterly filings of Seller (the "SEC Filings") with the U.S. Securities and Exchange Commission (th "SEC"), and present fairly in all material respects the financial position and results of operations and cash flows of Cogility as of the dates and for the periods covered by such filings, and are in agreement with the books and records of Cogility in all material respects. The Financial Statements have been prepared in accordance with United States generally accepted accounting principles in effect from time to time ("GAAP") applied on a consistent basis. Cogility maintains a standard system of accounting established and administered in accordance with GAAP.
(b) Cogility has no liabilities, obligations or commitments of any nature whatsoever, assetted or not asserted, known or unknown, absolute or contingent, accrued or un-accrued, matured or m1-matured or otherwise ("Liabilities"), except for the Attachment A Liabilities and the On-going Business Liabilities and Obligations; Cogility has no known bona fide, legitimate liabilities which have not been reflected in the Financial Statements, or in the Attachment A Liabilities . Except as set forth in the Financial Statements, there are no facts known to Cogility or Seller which Cogility or Seller has recognized as reasonably likely to give rise to any bona fide, legitimate claims against or liabilities of Cogility.
(c) Attachment A Liabilities lists all of the bona fide, legitimate liabilities of Cogility known to Seller or reasonably should be known to Seller as of the Closing Date, except for the OCOL.
(d) The accounts receivable of Cogility reflected on the Financial Statements and the accounts receivable ofCogiJity arising after the date thereof (a) have arisen from transactions entered into by Cogility involving the sale of goods or the rendering of services in the ordinary course of business consistent with past practice; (b) constitute only valid, undisputed claims of Cogility not subject to claims of set-off or other defenses or unterclaims; and (c) subject to a reserve for bad debts shown on the Financial Statements. Accounts receivable of Cogility arising after the date of the Financial Statements, on the accounting records of Cogility, are collectible in due course.
2.6 Absence of Certain Facts or Events.
(a) Cogility currently has in effect outstanding at-will employment contracts, health care benefits, an optional 401K Plan with Securian Retirement, and provides two weeks paid vacation and designated paid time off. Cogility does not provide any other program, plan or benefit.Certain of Cogility employees currently hold common stock of Seller and/or options to purchase common stock of Seller.
(b) No person or entity has any options or rights to acquire any equity of any sort or kind in Cogi1ity. This includes, but is not limited to: (i) rights to redeem or repurchase outstanding equity; (ii)rights to any dividend or distribution; (iii) rights to merge Cogility with or into any entity; (iv) rights to any purchase or other acquisition; (v) rights to any purchase or any acquisition by Cogility of the business or assets of any other entity, or (vi)any transaction involving the sale, assignment, modification or transfer of any contractual rights or claims of Cogility to Seller or its affiliates or any agreement to take any such actions, except as described in this paragraph. As used herein, capital stock includes all classes of stock and other equity.
(c) At the Closing, to Seller's best knowledge and consistent with thorough diligence and disclosure practices Cogility will not have any obligation or liability as a result of borrowed money, any commitment to borrow money, any mortgage, pledge, security interest or other Lien on Cogility's assets. Further, there shall be no lien on Cogility assets, nor any loans made or agreed to be made by Cogility, nor any failure to pay or perform any other monetary obligation of Cogility when and to the extent due. other than in regard to the Attachment A Liabilities.
(d) Cogility has not received any notice, or, to the best knowledge of Seller and Cogility, any informal notice, from any customer of Cogility that Cogility is in default on any of its past or present contractual obligations.
(e) Seller has represented to Buyer that it has not and will not, prior 1o closing, enter into any agreement with any person or entity, whereby Cogility agrees to transfer, discount, or in any other way make special pricing accommodation for the delivery or use or other access to any Cogility License or personnel. Buyer considers this to be a material provision in this agreement.
(f) Except to the extent described on Schedule 2.6(e), Cogility has no Liabilities of any nature, whether accrued, absolute, contingent or otherwise (including without limitation as guarantor or otherwise with respect to obligations of others).
(g) There are no outstanding powers of attorney executed on behalf of Cogility.
2.7 Property, Leases and Liens. Schedule 2.7 attached hereto, accurately sets forth, as of the date of this Agreement, leased real properties and all items of equipment and other personal property of Cogility which are owned by Cogility or used in or necessary for the conduct of Cogility's business as currently conducted (the "Properties"). Schedule 2.7 also lists: all leases or other agreements creating or modifying or altering rights to such Property, and all indebtedness secured by any encumbrance or lien on any such Property, specifYing the nature thereof and the holder of such encumbrance or Lien. "The agreements, contracts and commitments 1isted in Schedule 2.7 ru·e in full force and effect without any default, waiver or infraction by Cogility or by any other party thereto. Except as noted on Schedule 2.7, Cogility has good and merchantable title to all Propet1ie·s and other assets of Cogility, in each case, free and clear of all encumbrances or Liens. Except as noted on Schedule 2.7, all Properties are generally in good condition (subject to ordinary wear and tear), have been generally maintained in accordance with good industry practice and are suitable for the uses for which they are presently being used in the business of Cogility. Regarding mobile phones, laptops or tablets or any other electronic devices or digital material used by or in the possession of Gerard M. Jacobs, Daniel F. Terry, Jr., Matthew Ghourdjian, or Minh N. Le, or any other electronics, digital devices or hard copy transfer or reproductions thereof, whether or not listed on Schedule 2.7, all information and/or data pet1aining to Cogility contained on or accessible on such devices shall be the sole proprietary property of Buyer and any transfer of such information or data to otht r than Buyer shall be prohibited and will constitute a material breach of this agreement, excluding, as to corporate officers or directors of Seller, any information necessary to comply with tax liabilities or obligations or in order to comply with any governmental rules, regulations, filings or reporting requirements. Such information includes but is not limited to all proprietary information listed in section 2.13 of this Agreement.
2.8 Contracts and Commitments.
(a) Schedule 2.8(a) sets forth a complete and accurate list of all contracts or agreements (oral and written) to which Cogility is a party or by or to which it or any of Cogility's assets or properties are bound or su ject (except contracts that are terminable by Cogility upon 30 days' notice or less without any Liability or the payment of any termination fee or penalty). Except as set forth on Schedule 2.8(a),Cogility has no (1) collective bargaining agreements; (2) employment, consulting or similar agreements, contracts or commitments which are not terminable without penalty or cost by Cogility on notice of thirty (30) days or less; (3) I ease of personal property having a term in excess of one year; (4) nofe or other evidence of indebtedness for borrowed money; (5) agreement of guaranty or indemnification; (6) agreement, contract or commitment limiting the freedom of Cogility to engage in any line of business or compete with any person or entity; agreement, contract or commitment lating to future capital expenditures; or agreement, contract or commitment relating to the acquisition of assets of:or any interest in, any business enterprise.
(b) Promptly following the execution ofthis Agreement, Seller shall deliver to Buyer a correct and complete copy of each written agreement (as amended to date) listed in Schedule 2.8(a) and a written summary setting forth the terms and conditions of each oral agreement referred to in Schedule 2.8(a). With respect to each of the contracts, agreements and instruments set forth on or required to be set forth on Schedule 2.8(a) ("Contracts"): (i) each is legal, valid, binding, enforceable, and in full force and effect, in accordance with its respective terms; (ii) each will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the Closing Date; (ii) no party is in breach or default nor is in receipt of any claim of default or breach, and no event has occurred which with notice or lapse of time would constitute a breach or default, or permit termination, modification, or acceleration under such agreement; (iii) each party thereto has performed all material obligations required to be performed by it; and (iv) no customer, contract or business was obtained by Cogility as a result of any illegal, unlawful or unethical transaction or, pursuant to any illegal price reduction, price abatement, price guarantee, discount, rebate or any remuneration or other payment arrangement which will or may be binding upon Buyer and, neither Cogility nor Seller has received, or has knowledge that it will receive a notice regarding a change in pricing, payment, volume of business or ofthe intention of any party to cancel, terminate or repudiate any Contract.
2.9 Cogility Intellectual Property ("JP''): Messrs. Jacobs, Dan Terry, Matt Ghourdjian and Minh Le, and all other current or past officers and/or directors of Cogility, assert that they have not at any time, filed, authorized, or otherwise knowingly permitted the filing (excluding patent filings), or transfer of any Cogility JP, nor, to their knowledge, has any third party had the right to reproduce, distribute, transfer, publicly display, resell, lease, sublicense, loan, pledge, or otherwise encumber the source code. Notwithstanding the above: Cogility has pledged and encumbered the source code as collateral for certain of the Attachment A Liabilities, but such pledge and encumbrance will be terminated on the Closing Date upon the payment of the Attachment A Liabilities, and following such payment the Cogility IP will be free and clear of all pledges, encumbrances or other liens.
2. 10 Permits and Authorizations.
(a) Cogility has obtained all security clearances, consents, licenses, permits, qualifications, grants and other authorizations of a Governmental Entity (herein collectively called "Authorizations") pursuant to which Cogility conducts its business or holds any of its assets. All Authorizations are in full force and effect and constitute all Authorizations required to permit Cogility to operate its assets and conduct its business following the Closing Date as such assets and business are presently operated and conducted, except that Cogility may need to obtain security clearances for certain new directors and officers ofCogility, and except that Cogility will need to properly notify the U.S. Department of Defense ofCogility's new headquarters office location. The consummation of the transactions contemplated by this Agreement will not require any transfer, renewal or notice with respect to anAuthorizations except as set forth in
immediately preceding sentence. Notwithstanding the foregoing, Buyer understands and acknowledges, that U.S. Department of Defense rules and regulations regarding security clearances, records, facilities and other matters must be complied with, such as (by way of example and not by way of limitation) the requirement that Cogility's Chairman or Chief Executive Officer have security clearances.
(b) Neither Cogility nor Seller has been notified or presently has reason to believe any of the Authorizations will not in the ordinary course be renewed upon its respective expiration.
(c) Cogility has not received in writing, or to the knowledge of Cogility or Seller, otherwise received or been notified of, any claim or assertion that it has breached any of the terms or conditions of any Authorization in such manner as would permit any other person or entity to cancel, terminate or materially amend any Authorization necessary to permit the continued operation of Cogility as presently conducted.
2. 11 No Violations.
(a) To the knowledge ofCogility and Seller, Cogility is not in violation of any applicable law, statute, order, rule or regulation promulgated or judgment entered (or, with respect to rules and regulations of administrative agencies, or known by Cogility or Seller to be proposed) by any Governmental Entity in a manner which is likely to have a material adverse effect on Cogility.
(b) To the knowledge ofCogility and Seller, no consent, approval or authorization of, or declaration, filing or registration with, any Governmental Entity is required to be made or obtained by Seller or Cogility in connection with the execution, delivery and performance by Seller and Cogility of this Agreement and the consummation of the transactions contemplated hereby, or the continued operation of Cogility's business, excepting only the timely filing by Seller of a Form 8-K with the SEC following the Closing Date.
2.9 Proceedings.
(a) There are no suits, actions, claims or other legal proceedings or, to Seller's or Cogility's knowledge, Governmental Entity or other investigations pending against SeHer or Cogility or as to which either Seller or Cogility has received any Claim or assertion.
(b) There is no pending or, to the knowledge of Seller or Cogility, threatened claim by any individual, business entity or Governmental Entity in which a product of Cogility is a11eged to have a defect and which is reasonably likely to result in a claim.
(c) There is no claim against or claim threatened that could or is likely to prevent or delay the ability of Cogility to consummate the transactions contemplated by this Agreement or to carry on its business as now conducted, nor is there any judgment, decree, injunction, rule or order of any Governmental Enties, court or arbitrator pending, threatened or outstanding against Cogility having, or which in the future could have, any such effect.
2.10 Insurance Policies. Schedule 2.13 lists all insurance policies under which Cogility and/or its directors, officers and employees are insured or are a beneficiary or fe-r which Cogility is currently obligated to pay premiums and further sets forth the name of the insurer, type of coverage, policy limits and deductibles and additional insureds, if any, and the annual premium for each such policy (collectively the "Cogility Insurance Policies").
2.11 Proprietary Information and Rights Schedule 2.14 sets forth a complete and accurate list of all of the following that are owned, used, licensed or proposed to be used by Cogility: (i) Cogility Source Code(s) and all customer specific engagement components , excluding those that belong to customers, that have been accumulated and kept under development control ; (ii) all registered, previously registered and pending applications for "Intellectual Property" (as defined in Section 2.14(g)); (iii) all technical documentation, user guides, manuals, training materials and any other related or supportive documents; (iv) material unregistered Intellectual Property (other than commercially available off-the-shelf software); (v) all licenses (as licensee or licensor) and other agreements relating thereto, identifying whether such Intellectual Property is owned or licensed, the filing office, filing date, registration number, registration date and dates of maintenance filings, if any. At Closing, Seller shaiJ provide (either in hard copy or via electronic copy contained in the computers owned by Cogility at the Closing) all diagrams, presentations, white papers and all related materials prepared for delivery, internal review or presentation to past, current or targeted customers or markets that are currently in the possession, custody or control of Cogility or its directors, officers or employees (collectively "Documentation"). Seller, its respective employees, agents or contractors, without further consideration, hereby transfers, grants, conveys, assigns, and relinquishes exclusively to Buyer any and all rights, title and interest it/they now have or may hereafter acquire in the Cogility Intellectual Property, as defined below, under the patent, copyright, trade secret and trademark laws of any country in perpetuity or for the longest period otherwise permitted by law necessary to give effect to the ownership terms specified herein pertaining to such Documentation.
(a) Seller represents that the Intellectual Prope1ty identified on Schedule 2.14 constitutes all Intellectual Property (other than commercially available off-the-shelf software or software owned and/or licensed by customers) used by or necessary for Cogility's business activity (collectively, the "Cogility Intellectual Property");
(b) Except as set forth on Schedule 2.14, with respect to each item of Intellectual Property identified on Schedule 2.14:
(1 ) Prior to or contemporaneous with first payment, Cogility will own and possess all right, title, and interest in and to all of the Intellectual Property (or to a license to the Intellectual Property, as noted), free and clear of Liens, encumbrnnces and thier restrictions or limitations;
(2) Cogility Intellectual Property is not su ject to any outstanding injunction, judgment, order, decree, ruling, claim or charge;
(3) No action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand is pending or, to Seller's knowledge, is threatened which challenges the legality, validity, enforceability, use, or ownership or license of any of any Cogility Intellectual Property, and there would be no basis for any such claim;
(4) Other than customers, Cogil ity has never a&1feed to indemnify any person or entity against any interference, infringement, misappropriation, or other conflict with respect to any of the Cogility Intellectual Property;
(5) No loss or expiration of any of the Cogility Intellectual Property is threatened or pending, except for patents and copyrights expiring at the end of their statutory or common law terms (and not as a result of any act or omission by Seller or Cogility, including without limitation, a failure by Seller or Cogility to pay any required renewal or maintenance fees, patent issue fees, trademark renewal fees and/or license renewal fees); and
(6) Cogility has secured U.S. trademark registrations for "Cogility," "Cogility Software," and "Servoss." All fees necessary to maintain the U.S. trademarks through the Closing date have been paid. Cogility has further filed U.S. patent applications listed on Schedule 2.14, and no filings or fees are due with respect to the filed U.S. patent application through the Closing date. At the Closing Date, Seller shall provide to Buyer a schedule of all known payments or fees due or payable within twelve months following the Closing Date.
(c) Cogility has not infringed, misappropriated, interfered or otherwise conflicted with, and the operation ofCogility's business has not nor will it infring1 , misappropriate, interfere or otherwise conflict with, any InteHectual Property (I[ any person or entity; Seller is not aware of any facts which indicate a likelihood of any of the foregoing and Cogility has not received any notices regarding any of the foregoing (including, without limitation, any demands to license any Intellectual Property from any person or entity).
(d) A11 software utilized by Cogility is legally licensed and Cogility' s use is in compliance with each such license. Cogility owns the number of licens ::s required by any such software vendor to utilize the number of copies in use or instaJled by Cogility.
(e) To Seller's knowledge, no person or entity has infringed, misappropriated, interfered or otherwise conflicted with any of the Cogility InteJlectual Property. Contemporaneous with the Closing, the Cogility Intellectual Property will be owned by and available for use by Cogility on terms and conditions no less than the manner in which Cogility owned or used the Cogilit Intellectual Property immediately prior to the Closing.
(f) Except as set forth on Schedule 3.14, no confidential or proprietary information has been disclosed to any person or entity, except as authorized by Cogility, including, but not limited to, information shared with Cogility's professional advisors, employees and agents.
(g) For purposes of this Agreement, "lnteUectual Property" means al1 of the following in any jurisdiction throughout the world: (i) Cogility Source Code(s) and all customer specific engagement components that have been accumulated and kept under development control; (ii) all registered, previously registered and pending applications f(>r "Intellectual Property" (as defined in Section 2.14(g)); (iii) aU technical documentation, user guides, manuals, training materials and any other related or supportive documents; (iv) material but unregistered Intellectual Property (other than commercially available off-the-shelf software); (v) aU licenses (as licensee or licensor) and other agreements relating thereto, identifying whether such Intellectual Property is owned or licensed, the filing office, filing date, registration number, registration date and dates of maintenance filings, if any; and (vi) all diagrams, presentations, white papers and all related materials prepared fi)f delivery, internal review or presentation to current or targeted customers or markets; (vii) all inventions (whether patentable or unpatentable and whether or not reduced to practice), (viii) all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations thereof; trademarks, service marks, trade dress, trade names, corporate names, (and all translations, adaptations, derivations and combinations of the foregoing) and Internet domain names, together with all goodwill associated with each of the foregoing and all applications, registrations, and renewals in connection therewith; (ix) all copyrights (whether statutory or common law) and all applications, registrations, and renewals in connection therewith; (x) trade secrets; (xi) industrial designs; (xii) computer software (including but not limited to source code, executable code, data, databases and documentation); (xiii) all copies and tangible embodiments thereof (in whatever form or medium); and (xiv) trade names and fictitious business names.
2.12 Employee Benefit Plans. Cogility does not have any Plans or employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended), except that Cogility has a 401 K plan with Securian Retirement (the "40 lK Plan"). The 401 K Plan complies with all applicable Laws.
2.13 Employment Laws.
(a) Schedule 2.16 contains a list of all persons who are employe. s, consultants, or contractors of Cogility as of the date hereof, and sets forth for each such individual the following: (i) name; (ii) title or position (including whether fu11 or part time); (iii) hire date; (iv) current annual base compensation rate; (v) commission, bonus or other incentive-based compensation; and (vi) a description of the fringe benefits provided to each such individual as ofthe date hereof. Seller agrees that the current compensation rates will remain fixed and in effect through Closing Date. As of the date hereof and the Closing Date, all commissions and bonuses payable to employees, consultants, or contractors of Cogility for servies performed on or prior to the date hereof have been paid in full and there are no outstanding agreements, understandings or commitments of Cogility with respect to any commissions, bonuses or increases in compensation except as listed on the Attachment A Liabilities.
(b) Cogility is in compliance in all material respects with all Laws respecting employment and employment practices, terms and conditions of employment, wages and hours, affirmative action and occupational safety, and has not received notice of, and is not engaged in, any unfair Jabor practice.
(c) No unfair labor practice complaint against Cogility is pending before the National Labor Relations Board or any other Governmental Entity.
(d) There is no labor strike, dispute, slowdown or stoppage threatened, pending or against or affecting Cogility.
(e) There are not, and in the past three years have not been, any claims, grievances or arbitration proceedings, workers compensation proceedings, labor disputes (including charges of violations of any Laws relating to current or former employees (including retirees) or current or former applicants for employment}, investigations, or administrative proceedings of any kind pending or, to the best knowledge of Cogility and Seller, threatened against or relating to Cogility, its employees or employment practices, or operations, as they pertain to conditions of employment; nor is Cogility or Seller subject to any order, judgment, deere(;:, award, or administrative ruling arising from any such matter.
(f) No collective bargaining agreement is currently in existence or is being negotiated by Cogility and as of the date of this Agreement no labeor organization has been certified or recognized as the representative of any employees of Cogility or is actively seeking such certification or recognition.
2.14 Environmental Laws. The assets, properties and the business of Cogility have been and are operated in compliance in all material respects with all applicable environmental Laws and the Seller has not received from any Person or entity any: (i) notice or claim relating to actual or alleged non-compliance with any environmental Law or any term or condition of any environmental Pennit; or (ii) written request for information pursuant to environmental Law, which, in each case, either remains pending or unresolved, or is the source of ongoing obligations or requirements as of the Closing Date. Neither Seller nor Cogility has retained or assumed, by contract or operation of Law, any Liabilities or obligations of third parties under any environmental Law.
2.15 Taxes. Except as reflected in the Attachment A Liabilities: (a) all federal, state, foreign and local tax returns and tax repm1s (including infonnation returns) requin:d to be filed by Cogility have been filed with the appropriate Governmental Entity in all jurisdictions in which such returns and reports are required to be filed, and all such returns and reports are, in all respects, complete, accurate and in accord mce with all legal requirements applicable thereto; (b) all federal, state, foreign and local income, profits, franchise, sales, use, occupation, property,,:xcise, withholding and other taxes, duties, charges and assessments (including interest and penalties) due from Cogility have been fully paid or adequately provided for on the books and financial statements of Cogility in accordance with GAAP, (c) Cogility has not received any written notice or inquiry from the Internal Revenue Service or any other taxing authority in connection with any of its returns and reports of any pending or threatened examination or audit; (d) no extensions or waivers of statutes of limitation have been given or requested with respect to Cogility, (e) any deficiencies asserted or assessments made as a result of examination by any taxing authorities have been fulJy paid or fully reflected on the books ofCogility, (f) no Claim has been made by any Governmental Entity in a jurisdiction where Cogility does not file tax returns that it is or may be subject to taxation by that jurisdiction. There are no Liens or encumbrances for taxes upon any of the assets of Cogility, and (g) Cogility ha..o;; withheld and paid all taxes required to have been withheld and paid in connection with any amounts paid or owing to or on behalf of any employee, independent contractor, creditor, stockholder or other Person.
2.16 No Unlawful Contributions. Neither Cogility nor any director, officer, agent, employee nor any other person or entity acting on behalf of Cogility, has made or used any corporate funds to make any unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, made any direct or indirect unlawful payments to officials or employees of any Governmental Entity from corporate funds; failed to file any reports required with respect to lawful contributions; established or maintained any unlawful or unrecorded fund of corporate monies or other assets; made any intentionally false or fictitious entries on the books or records of Cogility; or made or received any bribe, rebate, payoff, influence payment, kickback or other unlawful payment. Except as set forth on Schedule 2.1 9, neither Cogility nor the Seller acting on the behalf of Cogility, acting alone or together, directly or indirectly, has: (1) received any rebates, payments, commissions, promotional allowances or any other economic benefits, regardless of their nature or type, from any customer, governmental employee or other person or entity with whom Cogility will do business directly or indirectly; or (2) agreed to give any money, gift or similar benefit to any customer, supplier, employee or agent of a customer or supplier, or official or employee of any government agency, governmental employee or other person or entity who was, is or may be in a position to help or hinder Cogility's business (or assist Cogility in connection with any actual or proposed transaction) that, in the case of either clause (I) or clause (2), (i) might subject Cogility to any loss, damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) if not given in the past, would have been materially adverse to Cogility, or (iii) if not continued in the future, could reasonably be expected to materially and adversely affect Cogility.
2.17 No Insider Transactions. Following the payment of the Attachment A Liabilities, neither Seller nor any affiliate thereof will have any interest or cJaim against Cogility or any of its assets which could result in a claim against Cogility or could materially and adversely affect Cogility's assets, Cogility's title to or it'i right to use its assets, or Cogility's right to conduct its business following the Closing, with the exception of any accounts receivables that are due to Seller for services rendered, by Cogility, u to and including January 31, 2013 that have not been paid to Seller.
2.18 Officers and Directors/Bank Accounts. Schedule 2.21 lists all officers, executive officers and directors of Cogility, and all bank and other accounts, safe deposit boxes, lock boxes, money market funds, certificates of deposit, stocks, bonds, notes and other securities owned directly or indirectly, beneficially or of record, by Cogility and identifies all persons authorized to sign on such accounts.
2.22 Warranties. There are no outstanding warranty claims against Cogility, and no reasonable basis therefor. All products sold or licensed by Cogility have conformed in all material respects with all applicable Laws, contractual commitments and all express and implied warranties, and Cogility has no liability (whether known or discoverable through standard diligence, whether asset1ed or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due) for replacement, rework, refund or repair thereof or other damages in connection therewith. Cogility has no product liability (whether known or discoverable through standard diligence, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due) which is not covered by Cogility's policy of insurance. There is no basis for any present or future liability, arising out of any injury to individuals or property as a result of any product sold or licensed by Cogility.
2.23 Disclosure. The representations and warranties of Seller contained in this Agreement and all information delivered in any Schedule, Exhibit, or certificate hereto or in any other written statement, instrument or certificate delivered by Seller to Buyer, shall be true and correct on the Closing Date as though then made and as though the Closing Date was substituted for the date of this Agreement throughout such representations and warranties.
2.24 No Finders or Brokers. Neither Seller nor Cogility nor any of their respective affiliates has entered into any agreement, arrangement or understanding with any person or entity that could result in the obligation to pay any finder's fee, brokerage commission, advisory fee or similar payment in connection with the transactions contemplated hereby.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
3.1 Organization. Buyer is a duly organized limited liability company, validly existing and in good standing under the laws of the State of Delaware and has full power and authority to perform this Agreement.
3.2 Authorization. Upon approval by the Managers, which approval will be voted upon by such Managers within two (2) days following the execution of this Agreement, the execution and delivery by Buyer of this Agreement, the performance by Buyer of its obligations hereunder and the consummation by Buyer of the transactions contemplated herein shall be duly authorized by all requisite corporate action on the part of Buyer, at which time this Agreement shall be duly executed and delivered by Buyer, and shaH be a valid and binding obligation of Buyer, enforceable against it in accordance with its terms, except as such enforceability may be limited by (a) bankmptcy, insolvency, reorganization, moratorium or other similar laws, now or hereafter in effect, relating to or limiting creditors' rights generally, and (b) general principles of equity (whether considered in an action in equity or at law).
3.3 No Conflict. Neither the execution and delivery of this Agreement by Buyer nor the consummation of the transactions contemplated hereunder nor th(: fulfillment by Buyer of any of its terms will:
(a) conflict with or result in a breach by Buyer of, or constitute a default by it under, or create an event that, with the giving of notice or the lapse of time, o:r both, would be a default under or breach of, any of the terms, conditions or provisions of; (1) any indenture, mortgage, lease, deed of trust, pledge, loan or credit agreement or any other material contract, arrangement or agreement to which Buyer is a party or to which a material portion of its assets is subject; (2) the organizational documents of Buyer, or, (3) any judgment, order, writ, injunction, decree or demand of any Governmental Entity which materially affects Buyer or which materially affects the Buyer's ability to conduct its business;
(b) result in the creation or imposition of any encumbrance or lien of any nature whatsoever upon any material portion of the assets of Buyer or which materially affects Buyer's ability to conduct its business as conducted prior to the date of this Agreement; or
(c) Cause a loss or adverse modification of any Authorization or contract granted by any Governmental Entity to or otherwise necessary c·r materially useful to Buyer's business.
3.4 Investment Intent. Buyer is acquiring Cogility capital stock and equity for investment purposes and not with a view to the resale or distribution thereof; Buyer has the knowledge and sophistication to purchase the Cogility capital stock and equity Buyer has had access to all infonnation regarding Cogility that it has requested and has had the opportunity to ask questions regarding Cogility, its operations and such other matters that Buyer has deemed material to its investment decision Buyer will not dispose of Cogility capital stock and equity without compliance with all applicable federal and state securities laws. Without limiting the generality of the foregoing, Buyer represents, warrants and acknowledges that:
(a) Buyer and the owners of Buyer are sophisticated accredited investors with substantial experience in buying and selling stocks;
(b) Buyer and the owners of Buyer have consulted with their own corporate and securities attorneys and financial advisors in regard to Cogility and the Purchase;
(c) Buyer and the owners of Buyer have reai and understood Seller's annual report on F01m 10-K for 2011 filed with the SEC in March 2012 including but not limited to the description of Cogility and the Risk Factors described therein and financial statements contained therein, but the foregoing shall not abrogate Seller's representations and warranties;
(d) Buyer and the owners of Buyer have read and understood SeHer's quru1erly reports on Form 10-Q for the first three quru1ers of 2012 filed with the SEC in May, August and November, 2012 including but not limited to the financial statements contained therein; and
(e) Buyer and the owners of Buyer acknowledge that Seller and Cogility have offered to provide Buyer and the owners of Buyer with access to such "due diligence" investigation materials regarding Cogility as Buyer and the owners of Buyer may reasonably request pursuant to the terms and conditions of that certain Mutual Non-Disclosure Agreement dated as ofNovember 10, 2012, between CogiJity and DG (the "NDA''), and the terms and conditions of the NDA are hereby incorporated herein by reference thereto.
3.5 No Finders or Brokers. Buyer has not entered into any agreement, arrangement or understanding with any Person which could result in Seller's obligation to pay any finder's fee, brokerage commission, advisory fee or similar payment in connection with this Agreement or the transactions contemplated hereby.
ARTICLE4
AGREEMENTS AND COVENANTS
4.1 Confidentiality. Until the Closing, Buyer shall treat in confidence aU non-public documents, materials and other information which Buyer shall have obtained regarding Cogility during the course of the negotiations leading to the transactions contemplated hereby, the investigation ofCogility and the preparation of this Agreement, and in the event the sale and purchase hereunder shall not be consummated, Buyer shaH return all copies of non-public documents and materials which have been furnished in connection therewith, all pursuant to the terms and conditions of the NDA which shall remain in full force and legal effect fo11owing the execution and delivery of this Agreement.
4.2 Fulfillment of Conditions.
(a) Seller will use all reasonable efforts, and Seller will cause Cogility to use all reasonable efforts, to perform, comply with and fulfill all obligations, covenants and conditions required by this Agreement and a11 documents and instruments delivered herewith to be performed, complied with or fulfi11ed by Seller or Cogility prior to or as of the Closing Date. Buyer will use all reasonable efforts to perfonn, comply with and :filial! obligations, covenants and conditions required by this Agreement to be performed, complied with or fulfilled by Buyer prior to or as of the Closing Date.
(b) Seller will use aU reasonable efforts, and will cause Cogility to us,e all reasonable efforts, to secure all necessary consents, waivers, approvals, and authorizations , including but not limited to, permits and licenses, and will make, and will cause Cogility to make, all necessary filings in order to enable Seller or Cogility to consummate the transactions contemplated hereby. Buyer will use all reasonable efforts to secure all necessary consents, waivers, approvals, and Authorizations, including but not limited to permits and licenses, and will make all necessary filings in order to enable Buyer to consummate the transactions contemplated hereby.
4.3 Operation in Ordinary Course. From the execution of this Agreement until the Closing, Seller shall cause Cogility to, and Cogility shall, operate its business in a manner consistent with its past and present practices, except as contemplated by thi ; Agreement or as required by applicable laws and regulations. This provision includes, but is not limited to, Seller's agreement not to enter into any arrangement regarding Cogility licenses or services with any member, employee or affiliate of Cogility, or any other third party except as set forth in Section 4.6.
4.4 Post-Closing Access by Seller. After the Closing, Buyer shall cause: Cogility to cooperate with Seller and Seller's auditors to the extent reasonably requested by Seller and Seller's auditors, and to make available to Seller and Seller's auditors all financial, insurance, tax and other information (including reasonable access to all booh and records) of Cogility with respect to any fiscal period of Cogility ending on or prior to the Closing Date to the extent reasonably required by Seller and Seller's auditors in connection with (a) the preparation of financial statements, and the auditing or review thereof:as needed in connection with any required SEC Filing by Seller, (b) any audit or other investigation by any taxing authority, (c) the prosecution or defense of any tax Claims or related litigation that might give rise to indemnification payments hereunder, or the preparation by Seller of tax returns or any other reports or submissions to any Governmental Entity required to be made by Seller with respect to Cogility, or (d) the prosecution of any insurance Claim, or the defense of any lawsuit. Buyer shaH cause Cogility to preserve all such information, including without limitation, the books and records ofCogility, for at least six (6) years after the Closing Date.
4.5 Taxes. Seller agrees to close Cogility's books as of the Closing Date and file all required U.S. federal and state income tax returns for Cogility for the short period from January I, 2013 through the Closing Date. Buyer and Cogility shall be responsible for preparing and filing all required U.S. federal and state income tax returns for Cogility for all periods after the Closing Date. Seller shall be responsible for aU taxes accrued and owed by Cogility prior to and through the Closing Date. Buyer and Cogility shall be responsible for all taxes incurred by Cogility thereafter. In the event that the Closing Date is not contemporaneous with the end of any other tax period, such as the period for filing quarterly payroll taxes returns, such taxes shall be pro-rated and apportioned to Seller an Buyer. For tax purposes, Seller and Buyer agree that the Purchase shall be treated as
"asset sale" by Cogility under Section 338(h)(1 0) of the Internal Revenue Code of 1986, as amended, and the Parties agree and covenant to make all filings with the U.S. Internal Revenue Service as shall be necessary to effectuate this election.
4.6 Transition of Certain Contracts. This Section 4.6 is solely intended to provide for a smooth transition of certain existing contracts that prior to the Closing Date are being performed employing Cogility IP. Nothing in this Section 4.6 shall be deemed to grant any ownership rights, titles or interests in Cogility IP to any person or entity other than Cogility, and neither AQSP nor any of its affiliates shall use any Cogility IP following the Closing Date excepting only as contemplated by this Section 4.6. It is understood by AQSP and its affiliates that following the Closing Buyer and Cogility shall be free to compete for any governmental or commercial contract opportunities as they wish, in their sole discretion, and nothing in this Agreement shall commit Buyer or Cogility to provide any Cogility IP, or engineering or other resources, to AQSP or any of its affiliates.
(a) Womble Carlyle.
(1) Seller has a subsidiary called Defense & Security Technology Group, Inc. ("DSTG"). Minh Le and DSTG are quarterbacking Cogility's on-going performance under its partially-completed contract (the "Womble Carlyle Contract") with the law firm of Womble Carlyle Sandridge & Rice ("Womble Carlyle"). The Womble Carlyle Contract involves the creation by Cogility of so-called "legal analytics" software employing Cogility IP (the "Womble Software"), with the expectation that when the Womble Software is completed, Cogility will attempt to license the Womble Software to potential clients such as law firms and their clients, and to corporate legal departments, with Womble Carlyle receiving a to-be-negotiated share of such licensing fees.
(2) Prior to the Closing, Cogility will assign (the "Womble Assignment") all of its remaining rights and obligations under the Womble Carlyle Contract to DSTG and DSTG will assume all of such remaining rights and obligations, and Womble Carlyle shall acknowledge that Cogility shall not have any further obligations to Womble Carlyle (the "Womble Carlyle Transition").
(3) Fo1Iowing the Womble Carlyle Transition, DSTG shall perform all remaining obligations in regard to Womble Carlyle under the Womble Carlyle Contract, and DSTG shall be entitled to receive aJl amounts paid or payable by Womble Carlyle under the Womble Carlyle Contract.
(4) If Cogility for any reason receives any payment from Womble Carlyle under the Womble Carlyle Contract following the Closing, then Cogility shall immediately allocate and pay over such payment to DSTG or Seller.
(5) Following the Closing, Cogility shall not have any obligation to perform any software engineering services for DSTG, and DSTG shall contract for software engineering services from third parties. However, for a period of 60 days following the Closing Date, DSTG shall be permitted to ask Cogility's software reasonable number of questions, provided that answering such questions does not unreasonably interfere with Cogility's operations.
(6) DSTG shall transition so that as promptly as reasonably practicable following the Closing Date, but in any event within six months following the Closing Date, the Womble Software shall be rewritten so that it no longer employs Cogility IP.
(b) SDI.
(1) Seller has a subsidiary called Simplicity Digitized, Inc. ("SDI"). Matt Ghourdjian and SDI are creating so-called "lending/leasing" software employing Cogility IP (the "Lending/Leasing Software"), with the expect'ltion that when th(! Lending/Leasing Software is completed, SDI will attempt to license the Lending/Leasing Software to potential clients such as subprime lenders, with SDI's financial backers to receiv.;. a to-be-negotiated share of such licensing fees.
(2) Following the Closing, Cogility shall not have any obligation to perform any software engineering services for SDI, and SDI shall contract for software engineering services from third parties. However, for a period of 60 days following the Closing Date, SDI shall be permitted to ask Cogility's software engineers a reasonable number of questions, provided that answering such questions does not unreasonably interfere with Cogility's operations.
(3) SDI shall transition so that as promptly as rea'ionably practicable following the Closing Date, but in any event within six months following the Closing Date, the Lending/Leasing Software shall be rewritten so that it no longer employs Cogility IP.
(c) Certification of Transition. Seller shall deliver to Buyer a written notice "the "Completion of Transition Notice") certifying that:
longer employs Cogility IP; and
(1) the Womble Software has been rewritten so that it no longer employs Cogility IP; and
(2) the Lending/Leasing Software has been rewritten so that it no longer employs Cogility IP.
Pursuant to Section 1.2(a)(2), Buyer is obligated to make the Second Payment to Seller on the first business day in Chicago, Illinois, that is on or after the six month anniversary of the
Closing Date (the "Second Payment Date"). Notwithstanding Section 1.2(a)(2), Buyer shaE have the right to postpone the Second Payment Date until the date upon which Seller delivers to Buyer the Completion of Transition Notice, at which time the Second Payment shall lx: immediately due and payable by Buyer to Seller.
(d) Navy.
(1) DSTG is performing under its partially-completed U.S. $139,500 contract with the U.S. Navy (the "Existing Navy Contract"). The Existing Navy Contract involves the creation by DSTG of a proof-of-concept of so-called "project management" software employing Cogility IP (the "Navy Software").
(2) Following the Closing, Cogility shall not have any obligation to perform any software engineering services for DSTG, and DSTG shall contrru::t for software engineering services from third parties. However, for a period of 60 days following the Closing Date, DSTG shal1 be permitted to ask Cogility's software engineers a reasonable number of questions, provided that answering such questions does not unreasonably interfere with Cogility's operations.
(3) Following its completion of the Existing Navy Contract, DSTG shall not employ Cogility IP in regard to any future Navy contracts.
(e) City ofEI Monte. Seller's wholly-owned subsidiary called Cortez Systems and Cogility have been providing, as a service (SAAS), a municipal code enforcement application that is being used by the City ofEI Monte, Los Angeles County, California. Seller shall work with Cortez Systems and its legal counsel to resolve this situation, most likely (1) to terminate the providing of such application due to the City ofEI Monte's failure to pay Cortez Systems or Cogility for hosting and other work performed to date, or (2) to cause such application to be turned over to the City of El Monte for its in-house hosting and use. Any costs and expenses in regard to any such resolution shall he borne by Seller and Cortez Systems, and any future revenues in regard to any such resolution including but not limited to any fees directly or indirectly paid by the City ofEl Monte shall accrue to the benefit of, and shall be allocated and paid over to, Seller. If in the event that any litigation arises in connection with this matter, Seller and Cortez Systems shall pay all legal fees and shall indemnify Cogility in regard thereto; provided, however, that Cogility shall fully cooperate with Seller's and Cortez Systems' prosecution and/or defense of such litigation.
4. 7 Bank Accounts: Seller will, on or prior to the Closing Date, cause Cogility to cancel the authority of all persons except for Messrs. Gerard Jacobs and Daniel Terry
Seller's signators to this Agreement, to draw checks or otherwise conduct banking on any of the bank accounts maintained by Cogility. Seller will submit evidence satisfactory to Buyer of such timely cancellation and limited access. Buyer agrees and acknowledges that Buyer is not purchasing Cogility's cash on hand, so on the Closing Date Cogility's bank accounts will only have a nominal amount of cash in them.
4. 8 Indebtedness of Seller. On the date of the First Payment, Seller will repay in full all principal and accrued interest outstanding under any indebtedness of Seller which is collateralized by a pledge of the Cogility capital stock and equity or by any encumbrance or Lien on the assets of Seller or its subsidiaries.
4.9 Non-Solicitation or Interference. Following the Date of First Payment and until the third anniversary of the first payment, neither Seller, nor its affiliates, nor any of the past, current or then directors or officers of Seller or Cogility, nor their agents or representatives (collectively the "Seller Group"), shall directly or indirectly solicit any of the persons or entities listed on Schedule 4.9 (collectively the "Core Engineers") for employment by any affiliate or company wholly or pattly owned or controlled by all or any of the Selkr Group. Nor shall Seller's group in any way interfere with or act in any way to the detriment of Buyer's recruitment efforts.
4.10 Representation of Ownership. Following the Date of First Payment, any representation of any ownership, control, use of or rights to Cogility or the Cogility Intellectual property by any person or entity, including but not limited to, Seller's agent:>, employees, officers, directors, representative and affiliates, without Buyer's prior written consent shall be prohibited.
4.11 Forwarding of Emails. Buyer shall cause Cogility to forward to Gerard M. Jacobs, Daniel F. Terry, Jr., Matthew Ghourdjian, Minh N. Le, Roger Greene, Elizabeth Emrick, Ruthanne Ward and Atmette Pringle copies of any emails sent to their respective Cogility email addresses for a period of at least 60 days following the Closing Date.
ARTICLE 5
CONDITIONS OF CLOSING
5. I Conditions of Obligations of Buyer. The obligation of Buyer to consummate the purchase of Cogility Capital Stock and Assets pursuant to this Agreement is subject to the satisfaction of the following conditions, any of which may be waived by Buyer:
(a) Representations and Warranties; Performance of Obligations. The representations and warranties of Seller and Cogility set forth in Article 2 hereof and in all agreements, documents and instruments executed and delivered pursuant hereto or in cotmection with the Closing Date shall have been and are true and correct in all material respects as of the date hereof and as of the Closing Date as though made on and as of the Closing Date. Seller and Cogility shall have performed in all material respects the agreements and obligations necessary to be performed by them under this Agreement prior to the Closing Date.
(b) Certificate and Deliveries by Seller. Buyer shall have received a certificate, dated the Closing, signed by Seller and Cogility, certifying that the conditions specified in Section 5.l(a) have been fulfilled.
(c) No Injunction. No preliminary or permanent injunction or order that would prohibit or restrain the consummation of the transactions contemplated hereunder shall be in effect and no Governmental Entity or other person or entity shall have commenced or threatened to commence an action or proceeding seeking to enjoin the consummation of such transactions or to impose liability on the pai1ies hereto in connection therewith.
(d) Other Consents. Buyer, Cogility and Seller shall have received all other consents required to be obtained in connection with the consummation of the transactions contemplated hereunder, including but not limited to the approval of the Boards of Directors of Buyer, Seller and Cogility, and the shareholders of Seller if necessary.
(e) Certificates and Instruments of Transfer. Seller shall have delivered to Buyer a certificate representing the Cogility Capital Stock and Asset ., accompanied by duly executed stock powers.
(f) Engineer Recruitment. The Core Engineers shall have been successfully recruited by Buyer to work for Cogility and/or Buyer commencing on or after the Closing Date.
5.2 Conditions of Obligations of Seller. The obligations of Seller to consummate the sale and purchase under this Agreement are subject to the satisfaction of the following conditions, each of which may be waived by Seller:
(a) Representations and Warranties; Performance o:f Obligations. The representations and warranties of Buyer set forth in Article 3 hereof and in all agreements, documents and instruments executed and delivered pursuant hereto or in connection with the Closing Date shall have been and are true and correct in all material respects as of the date hereof and as of the Closing Date as though made on and as of the Closing Date. Buyer shall have performed in all material respects the agreements and obligations necessary to be performed by it under this Agreement prior to the date of first payment.
(b) Certification by Buyer. Seller shall have received a certificate, dated on the date of first payment, signed by an officer of Buyer, cet1ifying that the conditions specified in Section 5.2(a) have been fulfilled.
(c) No Injunction. No preliminary or permanent injunction or order that would prohibit or restrain the consummation of the transactions contemplated hereunder shall be in effect and no Governmental Entity or other person or entity shaJI have commenced or threatened to commence an action or proceeding seeking to enjoin the consummation of such transactions or to impose liability on the parties hereto in connection therewith.
(d) Other Consents. Buyer, Cogility and Seller sha11 have received all other consents required to be obtained in connection with the consummation of the transactions contemplated hereunder, including but not limited to the approval of the Boards of Directors of Buyer, Seller and Cogility, and the shareholders of Seller if necessary, and the signed Womble Assignment.
(e) The following shall be delivered at Closing Date:
(i) Purchase Price. Seller shall have received from Buyer the First
Payment payable on the Closing Date as provided in Section 1.2.
(ii) Guarantees. Either Seller shaJI have received from the Guaranty Bank the Bank Guaranty accompanied by an opinion of legal counsel that such Bank Guaranty is a validly issued and legally binding obligation of the Guaranty Bank enforceable against the Guaranty Bank in accordance with its terms or Seller shall have received from James Dmmright and Dale Shipley their respectiv(: Personal Guarantees for the second and third payments. Seller shall have received from the Guarantors their Personal Guaranties accompanied by an opinion of legal counsel that such Personal Guaranties are validly issued and legally binding joint and several obligations of the Personal Guarantors in accordance with their terms.
(iii) Securities Filings. Any SEC Filings necessary to be made shall have been made by Seller, and any approvals necessary to be obtained Jrom the SEC shalL have been obtained. Evidence of such filings and approvals, if any are necessary, shall be delivered to Buyer on the date of the first payment.
(iv) Subscription Agreements. Buyer, and the owners of Buyer, shall have· executed and delivered to Seller's securities attorney such subscription agreement and representation letters as Seller's securities attorney may reasonably request in order to ensure that the Purcha..c;;e complies with aJl applicable securities laws.
ARTICLE 6
CLOSING DATE AND TERMINATION OF AGREEMENT
6.1 Closing Date. Subject to the te1ms and conditions of this Agreement, the Date is February 11, 2011 at , or at such other time or on such other date or at such other place as Seller and Buyer may mutually agree upon in writing.
6.2 Termination of Agreement. This Agreement may be terminated and abandoned at any time prior to the Closing Date:
(a) By mutual consent of Buyer and Seller;
(b) By Buyer or Seller if, without fault of such tenninating party, the Closing shall not have been consummated on or before February 13, 2013; or
(c) By Buyer, or Seller, if the conditions set forth in A11icle 5 hereofhave not been timely satisfied
6.3 Effect of Termination. In the event of termination of this Agreement !:.S provided in Section 6.2, notice thereof shall be promptly given by the terminating Party to the other Parties and thereafter this Agreement shall forthwith become void, and there shall be no liability or obligation on the part of Buyer or Seller or any of their respective affiliates (a) except that the terms and conditions of Section 4.1 and the NDA, and the Binding Provisions as defined in the Letter of Intent, shall remain in full force and effeet following the termination ofthis Agreement, and (b) except that nothing herein will relieve any party from liability for any breach of any agreement or covenant herein.
ARTICLE 7
INDEMNIFICATION
7.1 Indemnification by Seller.
(a) Subject to the provisions of Sections 7.l(b), 7.3 and 7.4 below, Seller shall protect, defend, indemnify and hold harmless Buyer and Cogility (each a "Buyer Indemnitee") against any, claim, loss, damage, liability, payment, and obligation(s) (collectively "Losses"), incurred, suffered, sustained or paid by such Buyer Indemnitee after the Closing Date resulting from, related to or arising out of any inaccuracy in or breach of any of the representations, warrantit!S made by Seller or Cogility in this Agreement.
(b) No Buyer Indemnitee shall be entitled to indemnification pursuant to this Section 7.1 in respect to any inaccuracy in or breach of any representation or warranty until such time as the Losses of all Buyer Indemnitees exceed Seventy Thousand Dollars (U.S. $70,000) ("Seller's Basket") in the aggregate; provided that all claims by Buyer Indemnitee for indemnification shall accrue in the aggregate until the Losses of all Buyer Indemnitee exceeds the Seller's Basket and thereupon Seller shall become obligated to indemnify the Buyer Indemnitees only for the amount by :hich all such claims exceed Seller's Basket.
In no event, shall the Seller's indemnification Obligations in this Section 7.1 exceed an aggregate of One Mil1ion Four Htmdred Thousand Dollars (U.S. $1,400,000); provided that there shall be no limit on indemnification with respect to breaches of Section 2.18 in regard to taxes, or on the amount of indemnification for breaches of Section 2.4 (a) in regard to defects in Seller's title to the Cogility Capital Stock sold or Seller's ability to convey marketable title thereto, or regarding Section 2.9 in regard to Cogility's IP.
(c) Each Buyer Indemnitee shall promptly give written notice to Selle:r of the assertion by any person or entity of any claim, action, suit or proceeding with respect to which Seller is obligated to provide indemnification hereunder. Seller shall have the right, but not the obligation, to contest, defend or litigate, and to retain com1seJ of its choice in connection with any claim, action, suit or proceeding by any third party alleged or asserted against Buyer Indemnitee that is subject to indemnification by Seller hereunder, and the cost and expense thereof shall be subject to the indemnification obligations of Seller hereunder. Neither Seller, on the one hand, nor any Buyer lndenmitee, on the other hand, shall be entitled to settle or compromise any such claim, action suit or proceeding without the prior written consent of Buyer Indemnitee or Seller, as the case may be, which consent shall not be unreasonably withheld.
(d) Notwithstanding the provisions of Section 7.1 (a) and (b), Seller shall protect, defend, indemnify and hold harmless Buyer Indemnitee against any claim, loss, damage, liability, payment, and obligations(s) (collectively "Losses") incuned, suffered, sustained or paid by such Buyer Indemnitee related or pertaining to the contracts listed in Section 4.6 in this Agreement, and such indemnification shall be exempted from any of the limitations referenced in Section
7.1 (b) in this Agreement.
7.2 Indemnification by Buyer.
(a) Subject to the provisions of Section 7.2(b), 7.3 and 7.4 below, Buyer shall indemnify Seller against, and hold Seller harmless from any and all Losses incurred, suffered, sustained or required to be paid, directly or indirectly, by or sought to be imposed upon Seller, resulting from, related to or arising out of any inaccuracy in or breach of any of the representations, wan-antics or covenants made by Buyer in or pursuant to this Agreement
(b) Seller shall not be entitled to indemnification pursuant to this Section 7.2 in respect of an inaccuracy in or breach of any representation or wananty, until such time as the Losses of Seller exceed Seventy Thousand Dollars (U.S. $70,000) ("Buyer's Basket") in the aggregate; provided that all claims by Seller for indemnification shall accrue in the aggregate until the Losses of Seller exceed the Seller's Basket and thereupon Buyer shall become obligated to indemnify the Seller only for the amount by which all such claims exceed Seller's Basket. In no event shall B: er's indemnification obligations under Section 7.2 exceed in the aggregate One Million Four Hundred Thous md Dollars (U.S. $1 ,400,000).
( c) Seller shall promptly give written notice to Buyer of the assertion hy any person or entity of any claim, action, suit or proceeding with respect to whl<:h Buyer is obligated to provide indemnification hereunder. Buyer shall have the right, but not the obligation, to contest, defend or litigate, and to retain counsel of its choice in connection with, any claim, action, suite or proceeding by any third party alleged or asserted against Sel1er that is subject to indemnification by Buy.er hereunder, and the cost and expense thereof shall be su ject to the indemnification obligations of Buyer hereunder. Neither SeHer, on one hand, nor Buyer, on the other hand, shall be entitled to settle or compromise any such claim, action, suit or proceeding without the prior writ1en consent of Seller or Buyer, as the case may be, which consent shall not be unreasonably withheld.
7.3 Survival of Representations and Warranties.. All representations and warranties contained herein or made pursuant hereto shall survive the Closing hereunder until the twenty-tour month anniversary of the Closing, except that the representations and warranties in Section 2.18 in regard to taxes, in Section 2.4(a) in regard to defects in Seller's title to the Cogility Common Stock sold or Seller's ability to convey marketable title thereto, and in Section 2.9 in regard to Cogility's IP, shall survive the Closing until ninety days following the expiration ofthe applicable statute of limitations. The expiration of any representations and warranties shall not affect any claim for indemnification mad· prior to the date of such expiration.
7.4 Cogility Insurance Policies. Notwithstanding anything to the contrary contained in this Article 7 or elsewhere in this Agreement Cogility and Buyer expressly understand and acknowledge that one or more of the Insurance Policies of Cogility in effect at the Closing Date may cover some or all of any Losses which are otherwise intended to be indemnified pursuant to this Article 7. Cogility and Buyer agree and covenant that in regard to any Losses that are wholly or partly covered by the Insurance Policies of Cogility in effect at the Closing Date, such , Insurance Policies of Cogility in effect at the Closing Date shall be exhausted in regard to Losses before Buyer seeks indemnification from Seller in regard to Losses pursuant to this Article 7, and any amoums recovered by Cogility under the Insurance Policies ofCogility shall offset, doJJar for dollar, the an1ount of Losses for which Buyer may seek indemnification from Seller pursuant to this Article 7.
ARTICLE 8
MISCELLANEOUS
8.1 Further Actions. From time to time, as and when requested, each Party shall execute and deliver, or cause to be executed and delivered, such documents aud instruments and shall take, or cause to be taken, such further or other actions as another Party may reasonably request in order to carry out the intent and purposes of this Agreement, including effecting the purchase and carrying out the other covenants and agreements contemplated hereby.
8.2 Expenses. Except as otherwise specificalJy provided herein, Seller and Buyer shaH each bear their own fees and other costs and expenses with respect to the negotiation, execution and delivery of this Agreement and the consummation of the Purchase hereunder, including but not limited to any fees and expenses owed to any lawyers, accountants, financial advisers, investment bankers or brokers employed by such Party. Notwithstanding the foregoing, Buyer and Seller shall each pay one-half of any and all sales, transfer or documentary taxes incident to the purchase and transfer of the Cogility Capital Stock and Assets.
8.3 Entire Agreement. This Agreement, which includes the Attachment :, Schedules and Exhibits hereto, which are hereby made a part of this Agreement by reference hereto, contain the entire understanding and agreement between the Parties hereto and their affiliates with respect to the subject matter of this Agreement and supersede all prior or contemporaneous agreements, representations, warranties, arrangements or understandings of such Parties with respect thereto, whether oral or written, excepting, however, that (a) the terms and conditions of the Mutual Non-Disclosure Agreement entered into as of November I 0, 2012, by and between Cogility and Buyet ("NDA'') are hereby incorporated herein by reference thereto, and such terms and condition:; shall continue to be legally binding upon the Parties following the execution of this Agreement excepting only if and to the extent that any term or condition of the NDA is expressly contrmy to the terms and conditions of this Agreement; and.
(b) The terms and conditions of the Letter of Intent, entered into by and between Buyer and Seller, dated December 14, 2012, are hereby incorporated herein by reference thereto, and the Binding Provisions as defined in the Letter of Intent shall continue to be legally binding upon the parties following the execution of this Agreement, excepting only if and to the extent that any of such Binding Provisions is expressly contrary to the terms and conditions of this Agreement. No promise, inducement, representation or agreement, other than as expressly set forth in this Agreement, the ("NDA'') or the Binding Provisions of the Letter of Intent, has been made to or by the Parties hereto. Evidence shall be inadmissible to show agreement by and between such Parties to any tem1 or condition contrary to or in addition to the terms and conditions contained in this Agreement, the NDA or the Binding Provisions of the Letter of Intent. This Agreement, the NDA and the Binding Provisions of the Letter of Intent shall be construed according to their fair meaning and not strictly for or against any Party regardless of draftsmanship.
8.4 Notices. All notices or other communications which are required or permitted hereunder shall be in writing and sufficient if(a) delivered personally or (b) sent by certified or registered mail, return receipt requested, postage prepaid, or (c) sent by overnight courier with a national1y recognized courier, delivery signature required, as follows:
If to Seller or Cogility:
Mr. Gerard M. Jacobs
Chief Executive Officer
Acquired Sales Corp.
31 N. Suffolk Lane
Lake Forest, IL 60045
with a copy to:
RogerS. Greene, Esq.
6 Joliet Drive
Coto De Caza, CA 92679
If to Buyer:
Drumright Group, LLC Attn.: Mr. James Drumright
515 Westside Road
Healdsburg, CA 95448
with a copy to:
Joanne Rosendin, Esq.
One Kaiser Plaza Suite 340
Oaklan, CA 94612
If sent by certified or registered mail, notice shall be considered delivered five (5) business days after the date of mailing, and if sent by any other means set forth above, notice shall be considered delivered upon receipt thereof Any Party may by notice to the other partks change the address to which notice or other communications to it are to be delivered or mailed.
8.5 Descriptive Headings. The descriptive headings of this Agreement are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement.
8.6 Governing Law. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of California without regard to conflict of law principles.
8.7 Assignability. This Agreement shall not be assignable by any party without thtwritten consent of the other parties and any such purported assignment by any part without such consent shall be void.
8.8 Waivers and Amendments. Any waiver of any term or condition of this Agreement, or any amendment or supplementation of this Agreement, shall be effective only if in writing, signed by the Parties to be bound thereby. A waiver of any breach or failure to enforce any of the terms or conditions of this Agreement shall not in any way affect, limit or waive a Party's rights hereunder at any time to enforce strict compliance thereafter with every term or condition of this Agreement.
8.9 Third Party Rights. Notwithstanding any other provision of this Agreement, this Agreement shall not create benefits on behalf of any shareholder or employee of Buyer, Seller or Cogility, or any other person or entity (including without limitation any broker or finder), and this Agreement shall be effective only as between the: Parties hereto.
8.10 Publicity.
(a) Buyer acknowledges that Seller is a publicly traded company and that unauthorized disclosure of any material information regarding Buyer, Cogility, DSTG or the Purchase, or purchases or sales of Seller Capital Stock and Assets while in possession of material non-public information regarding Seller, Cogility, DSTG or the Purchase, could subject Buyer or the owners of Buyer to liability under applicable laws and regulations.
(b) Seller shall be permitted to make the attached press release regarding this Agreement per the advice of Seller's securities attorney, in order to comply with applicable securities laws and regulations. However, before issuing such press release Seller shall first consult with Buyer, and shall develop language for the press release that is both accurate and mutually acceptable to Buyer and Seller.
8.11 Resignations. At the Closing, all of the Seller's directors and officers of Cogility shall resign, provided that Seller shall not object if Buyer and Daniel F. Terry, Jr. mutually agree upon an arrangement pursuant to which he shall remain as a director and/or officer of Cogility for a temporary period of time in order to facilitate Cogility's continuing compliance applicable U.S. Department of Defense rules and regulations.
Schedule 2.2 - Cogility is duly licensed and qualified to transact business m;a foreign corporation in California.
Schedule 2.6(e) -
(1) Cogility has liabilities that will be listed on Attachment A Liabilities, and that will be paid off in full at the Closing.
(2) Cogility has the Ongoing Cogility Obligations and Liabilities as described in Section 1.3(a).
(3) In January 2011, the Watertower Group asserted a claim against Cogi1ity for less than $100,000 in fees that Watertower Group claimed it was owed for unsuccessfully trying to help Cogility raise capital during 2005. Cogility responded to Watertower Group's claim, by telling the Watertower Group that any such claim should have been a..<>serted years ago, and is barred by the statute oflimitations. 'The Watertower Group did not file any sort oflawsuit or other proceeding against Cogility. SeHer and Cogility do not believe that any sums are due to the Watertower Group.
Schedule 2.7 -- Real estate and property
(1) Leased real estate:
Providence, RI:
(1) Street address: 235 Promenade Street, Suite 141, Providence, RI 02908
(2) Identity of lessor and lessee: Lessor is Foundry Parcel Fifteen Associates, LLC. Lessee is Cogility.
(3) Term and rental payments: January 15, 2012 through January 14, 2013; $500 per month Cogility intends to terminate this lease on or prior to the Closing in accordance with Section 2.1.
Anaheim, CA:
(1) Street address: 1600 South Douglass Road, Suite 102, Anaheim, CA 92612
(2) Identity oflessor and lessee: Lessor is CashCall, Inc. Lessee is Cogility.
(3) Term and rental payments: No rental payment and no written agreement guaranteeing any term for Cogility.
San Jose, CA:
Cogility leases a small storage locker that is rented on a month-to-month basis, containing furniture and equipment that previously were in a rented office in San Jose, CA. Cogility will keep or terminate this storage locker, and dispose of its contents, as instructed by Buyer.
(2) Owned personal property: Computers, office equipment and furniture
(3) Leased personal property: None
(4) All ofCogility's assets, including but not limited to its IP and its personal property, are subject to an omnibus pledge, perfected security interest and other security arrangements in tavor of its corporate parent Acquired Sales Corp. and certain lenders to Acquired Sales Corp. When the Attachment A Liabilities are paid off at the Closing, such pledge, perfected security interest and other security arrangements will be terminated and all of Cogility's assets, including but not limited to its IP and its personal property, will be free and clear of all encumbrances and liens.
Schedule 2.8(a) - Contracts to which Cogility is a party or by or to which it or any of Cogility's asset<; or properties are bound or subject, except contracts that are terminable by Cogility upon 30 days' notice or less without any liability or the payment of any terminatio:n fee or penalty:
(1) Contract with U.S. Army DCGS-A regarding the JIST project, currently under a subcontract with Booz Allen Hamilton, copy already delivered to Buyer
(2) Contract with Womble Carlyle Sandridge & Rice, LLP regarding the so-called "legal analytics" software project that will be transitioned to Defense Security & Technology Group, Inc., pursuant to Section 4.6, copy already delivered to Buyer
(3) Contract arrangement involving the City of El Monte, California, and Seller's wholly-owned subsidiary Cortez Systems, that will be transitioned pursuant to Section 4.6. Cogility considers the City of EI Monte to be in default of this contractual arrangement.
(4) Liabilities that will be listed on Attachment A Liabilities
Schedule 2.10 (referred to in the Agreement as Schedule 2.I 3)-- Insurance policies- Cogility currently has the following insurance policies in place, and copies have been furnished to Buyer:
(1) Professional Liability (E&O) Policy, effective October 5, 2012 to October 5, 2013
(2) Worker's Compensation Policy, effective November 26, 2012 to November 26, 2013 (3) Businessowners Policy, effective November 26, 20 I 2 to November 26, 2013
These policies were recently reviewed at renewal and some changes and corrections were identified. Endorsements were issued to update the policies. Cogility wilJ receive updated policies which will include the endorsed changes.
Schedule 2.11 (referred to in the Agreement as Schedule 2.14)-Cogility Intellectual Property
Cogility owns the certain intellectual property including but not limited to software source code and machine readable code and planned development, all product documentation, customer lists, all training materials, all documentation used to support customers, and al l intellectual property protections associated with such intellectual property, including, but not limited to, patents, patent applications, copyrights, trademarks, service marks and trad•e secrets, including but not limited to software generally known as Cogility Studio, Cogility Meta-Modeler Framework, Cogility Modeling Repository, Cogility Data Visualization Framework, Cogility Intelligence Framework, and Cogility Event Matching Template (collectively the "Cogility Intellectual Property").
The Cogility Intellectual Property has been used by Cogility in performing Cogility's contracts with customers including but not limited to the U.S. Department of Defense and CashCall.
Cogility has secured U.S. trademark registration for "Cogility", Registration No. 3006210, registration date 11111/2005, and renewal date 7/26/2015.
Cogility has secured U.S. trademark registration for "Cogility Software", Registration No. 2977188, registration date 7/26/2005, and renewal date 10/11/2015.
Cogility has secured U.S. trademark registration for "Servoss" and the renewal date is 6/23/2014.
The Cogility Intellectual Property includes the two following patents and patents applications pending:
(1) SYSTEM AND METHOD FOR TEMPORAL CORRELATION OF OBSERVABLES Docket No.: 008889P002. Cogility has received a Notice of Allowance dated December 3, 2012, on this application. Patent issuance fees of approximately $2,000 must be paid no later than March 3, 2013. Cogility's patent counsel has advised that Cogility has the opportunity to file divisional patents that could extend the scope of the patent if the divisional application is filed prior to issuance ofthe parent patent. Cogility's patent counsel has estimated that if payment of the patent issuance fees is made on March 3, 2013, then the divisional filings should be made no later than Aprill5, 2013, but there is always the possibility that the patent will issue sooner than April 15, 2013.
(2) STATE MACHINE WITH OUT-OF-ORDER PROCESSING FUNCTIONALITY AND METHOD THEREOF Docket No.: 005255P003. Cogility understands that the initial response from the USPTO on this application is a disallowance on an issue relating to prior art. Cogility has not yet seen the letter, but a response is due by March 18, 2013. The response time can be extended by up to three months by paying additional monthly fees. Cogility's patent counsel has advised that in the vast m jority of instances, the first communication from the patent office is a rejection, which can then be addressed. (For example, there was a question about prior art in the application discussed in ( l) above, which was handled through a phone call with Cogility's patent counsel and one of Cogility's software programmers.)
Cogility's domain name and web site is as follows: www.cogility.com
All of Cogility's assets including the Cogility Intellectual Property and trade names are subject to an omnibus pledge, security interest, and other security arrangements in favor of Seller and certain lenders to Seller. When the Attachment A Liabilities are paid off at the Closing, such pledge, perfected security inatned:other security arrangements will terminated and all of Cogility's assets, including but not limited to its IP and its personal property, will be free and clear of all encumbrances and liens.
Schedule 2.13 (referred to in the Agreement as Schedule 2.16) - Employees
Buyer has told Cogility that Buyer is interested in having Cogi1ity retain the services of seven key employees following the Closing. Cogility has supplied the relevant employment information regarding these seven employees to Buyer in an email to James Drumright. Unless Buyer notifies Cogility otherwise prior to the Closing, Cogility plans 1:0 terminate all other full-time and part-time employees of Cogility at or prior to the Closing Date.
Schedule 2.16 (referred to in the Agreement as Schedule 2.19) - Contributions
No unlawful contributions have been made
Schedule 2.18 (referred to in the Agreement as Schedule 2.21) -- Bank Accounts
(1) The officers ofCogility are: Daniel F. Terry, Jr., CEO; Gerard M. Jacobs, President; Matthew Ghourdjian, CTO; and Minh N. Le, COO
(2)1be directors ofCogiity are: Vincent J. Mesolella, Chairman; Gerard M. Jacobs; Matthew Ghourdjian; James S. Jacobs; Joshua A. Bloom; Richard E. Morrissy; Roger S. Greene; and Michael D. McCaffrey.
(3) Cogility has checking and savings account at Wells Fargo Bank, Meadowlark Plaza, Huntington Beach, CA. The signers on these accounts currently are Elizabeth Emrick, Matthew Ghourdjian, and Ruthanne Ward, but will be switched to Gerard M. Jacobs and Daniel F. Terry, Jr. prior to the Closing as required by Section 4.7. The numbers ofthese accounts will be provided by SeHer to Buyer at the Closing.