ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT is made as of the 7th day of December, 1999, by
and between LEAD MACHINE, INC., a Washington corporation with its principal
offices located at Gig Harbor, Washington ("Seller"), XXXX XXXXXXXX, an
individual and sole shareholder of Seller (the "Shareholder") and XXXX.XXX,
Inc., a California corporation with its principal offices located in Laguna
Hills California ("Buyer").
Subject to the terms and conditions set forth in this Agreement, Buyer
desires to purchase from Seller, and Seller desires to sell to Buyer all of the
assets more fully described in Section 1.2 below.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and in consideration of the mutual
promises contained in this Agreement, the parties hereto agree as follows:
ARTICLE 1
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DEFINITIONS
For the purpose of this Agreement, the following terms have the
meanings set forth below:
1.1 Assets. "Assets" shall mean any and all "Millionaire Island"
related Subscriber or other Customer accounts of Seller, telephone numbers
(listed on the "Telephone Numbers Schedule" attached hereto as Schedule "C" and
incorporated herein as if fully set forth), Customer lists, files, contracts and
contract rights arising therefrom, the Products, Trademarks, and Tradenames, and
goodwill identified in Schedule "A" attached hereto and incorporated herein as
if fully set forth.
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1.2 Customer or Subscriber. "Customer" or "Subscriber" shall mean
any person, organization, business, or other entity which subscribes to,
purchases, licenses or uses in any way the Products or Assets of Seller.
1.3 Customer Contracts. "Customer Contracts" shall mean any and
all contracts or agreements, whether oral or written, committing a Subscriber or
Customer to subscribe to, purchase, license, or use in any way any of the
Products or Assets of Seller, and any renewal, modification, or extension
thereof.
1.4 Purchase Price. "Purchase Price" shall mean the greater of
$50.00 or ten percent (10%) of (a) any new Customer Contract executed after
November 1, 1999 or (b) the amount charged by Buyer to a Subscriber or Customer
for the renewal, extension or modification of a Customer Contract, which amount
may be adjusted as set forth in Section 2.2.
1.5 Products. "Products" shall mean those products, services,
licenses, or rights set forth in Schedule "D" attached hereto and incorporated
herein by this reference as if fully set forth, including all modifications,
upgrades, revisions, amendments, and restatements thereof.
1.6 Sales. "Sales" shall mean the sale of Products and the
renewal, modification, or extension of a Customer Contract which generates
revenues of any kind to or for Buyer.
1.7 Shareholder. "Shareholder" shall mean and refer to Xxxx
Xxxxxxxx.
ARTICLE 2
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PURCHASE OF ASSETS
2.1 Purchase. Subject to the terms and conditions established in
this Agreement, Buyer agrees to purchase from Seller and Seller agrees to sell,
convey, assign, transfer, and deliver to Buyer at the Closing, as set forth in
Section 2.5, the Assets.
2.2 Purchase Price. The Purchase Price for the Assets shall be the
continual obligation of Buyer to pay the Purchase Price for so long as Buyer
shall derive revenues from Customers or Subscribers from the Products, subject
to subsequent adjustment as set forth herein. The Purchase Price shall be
payable on the 20th day of each calendar month subsequent for Sales made by
Buyer in the preceding calendar month.
2.3 Purchase Price Adjustments. In the event any Customer Contract
executed after the date of this Agreement is canceled, which cancellation
requires Buyer to refund monies to the Customer or Subscriber, Buyer may reduce
the amount to be paid out of the Purchase Price on the canceled Customer
Contract by a percentage equal to the percentage refunded on said canceled
Customer Contract. Said adjustment shall be made in the month following the
month of cancellation of the Customer Contract.
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2.4 Set-Off. Buyer shall have the right to set-off against any
amounts due Seller any sale which cancels or fails to pay within ninety (90)
days of billing. Buyer agrees to notify Seller when an account cancels or
becomes forty-five (45) days delinquent and will give Seller every opportunity
to bring the account current. Buyer will not set-off any account that cancels
due to rate increases imposed by Buyer on products purchased.
2.5 Non-Assumption of Liabilities. Buyer assumes no liability or
obligation of Seller except for Seller's obligations to provide services after
the Closing date for Customer Contracts preceding the Closing, but only in
accordance with the terms and conditions of the Customer Contracts which were
provided by Seller to Buyer prior to the Closing and are listed on the Assets
Schedule (attached hereto and incorporated herein as Schedule "A"). In the event
Buyer pays any charges associated with said liability or obligation of Seller,
including any liability described herein, Seller hereby authorizes Buyer to make
a corresponding adjustment in the Purchase Price to reflect any such payment for
liabilities or obligations of the Seller.
2.6 Closing. The Closing of the transaction
contemplated by this Agreement will take place at the offices of Buyer at 2:30
P.M. on December 7, 1999, or at such place or such time and date as is mutually
agreeable to Seller and Buyer. The following transfer shall occur at the
Closing: '
(a) Buyer shall deliver to Seller the consideration described in
Section 2.2, if any.
(b) Seller shall deliver to Buyer (i) a xxxx of sale with
covenants of title, and such other instruments of sale, transfer, assignment,
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and conveyance in form and substance satisfactory to Buyer as are requested by
Buyer to transfer good and marketable title to Buyer, free and clear of any and
all liens, security interests charges and encumbrances to the Assets; and (ii)
all consents by third parties that are required for the transfer of all of
Seller's rights, title and interests in the Assets.
2.7 Incentive Participation by Shareholder. Buyer desires to have
Shareholder provide continuing services to Buyer in the future with respect to
the promotion and sales of Products. The parties acknowledge that Buyer is
currently developing an incentive program, which will provide to qualified
persons options to acquire shares of stock in Buyer based upon the attainment of
certain specified and detailed financial goals. Buyer agrees that Shareholder
shall be provided with the same opportunity, based on performance as described
in the designated incentive program, and shall be granted the same treatment and
rights under any incentive plan developed by Buyer as Buyer grants to Mr. Xxxxx
Xxxxxxxx, President of Marketing for Xxxx.xxx. Furthermore, in the event Buyer
grants to any of it officers, directors, or shareholders the right to register
the "restricted" shares of Buyer held by them, Buyer shall also grant such
rights and shall register such "restricted" shares of stock as may be held by
Shareholder.
2.8 Position of Shareholder. Upon the closing of the transaction
herein, Shareholder shall be appointed and shall serve as President of
Millionaire Island, a division of Xxxx.xxx.
2.9 Sales Standards. Buyer shall diligently and actively promote
and market the Products and Sales of Customer Contracts and that the performance
standard for Sales of Customer Contracts shall be 500 new Customer Contracts per
month or more (the "Minimum Sales Standard"). Buyer shall have until the last
day of March, 2000 to reach said Minimum Sales Standard. If Buyer fails to meet
said Minimum Sales Standard by that date, Seller shall have the option, in its
sole discretion, to terminate this Agreement and demand and receive the
immediate return of all Assets and Products, including Customer Contracts sold
between November 1, 1999 and March 31, 2000. The exercise of said option to
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terminate this Agreement shall be in writing and shall be delivered to Buyer no
later than April 20, 2000. Furthermore, if after April 1, 2000, Sales of
Customer Contracts drops below the Minimum Sales Standard in any three (3)
consecutive months, Seller shall have the option, in its sole discretion, to
terminate this Agreement and demand and receive the immediate return of all
Assets and Products, including all Customer Contracts sold to the date of
termination of this Agreement for which Seller shall pay to Buyer the sum of One
Thousand Dollars (US$1,000) as a termination fee and in satisfaction and release
of all claims Buyer may have in or to the Assets and Products or against Seller
or Shareholder. Upon termination of this Agreement and payment of the
termination fee as set forth in this Section 2.9, all rights of Buyer in and to
the Assets and Products shall automatically terminate and all obligations of
Shareholder and Seller to Buyer shall terminate.
ARTICLE 3
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COVENANTS OF SELLER
Continuing Access. Seller hereby grants to Buyer open and continuing
access to all records and documents in Seller's possession which are related to
the Assets.
ARTICLE 4
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REPRESENTATIONS AND WARRANTIES OF SELLER
As a material inducement to Buyer to enter into this Agreement and
purchase the Assets, Seller represents and warrants as follows:
4.1 Organization and Corporate Power. Seller is a corporation duly
organized, validly existing and in good standing under the laws of its State,
and is qualified to do business and is in good standing under the laws of each
jurisdiction in which its ownership of property or conduct of business requires
it to qualify.
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4.2 Authorization; No Breach. The execution, delivery and
performance of this Agreement and the consummation of all the transactions
contemplated herein have been duly authorized by Seller and no breach exists of
any covenant of Seller set forth in this Agreement. This Agreement constitutes a
valid and binding obligation of Seller, enforceable in accordance with its
terms. The execution, delivery and performance of this Agreement by Seller and
the consummation of the transactions contemplated hereby do not and will not (i)
conflict with or result in any breach of any of the provisions of, (ii)
constitute a default under, (iii) result in a violation of, (iv) result in the
creation of any lien, security interest, charge or encumbrance upon any Customer
Contract, (v) give any third party the right to accelerate any obligation, or
(vi) require any authorization, consent, approval, exemption or other action by
or notice to any court, other governmental body, or other third party under the
provisions of Seller's Articles of Incorporation or Bylaws or any indenture,
mortgage, lease, loan agreement or other agreement or instrument to which Seller
is bound or affected or to which any of Seller's respective properties are
subject, or any law, statute, rule, regulation, judgment or decree to which
Seller is subject.
4.3 Absence of Undisclosed Liabilities. Except for Seller's
obligations to provide services, all of which are set forth in the Customer
Contracts which have been provided to Buyer, Seller has no obligation or
liability (whether accrued, absolute, contingent, unliquidated or otherwise,
whether or not known to Seller, whether due or to become due) related or in any
way connected with any Customer Contract rising out of transactions entered into
at or prior to the Closing date, or any action or inaction at or prior to the
Closing date, or any occurrence or state of facts existing at or prior to the
Closing date.
In addition, Seller represents and warrants that it is
rightfully and lawfully in possession of the trade names and trademarks which
Buyer is purchasing and that all registration requirements, if any, have been
fulfilled. Schedule "C" reflects true and correct copies of all trade name and
trademark held or asserted by Seller.
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4.4 Assets.
(a) The Assets described in and attached hereto and incorporated
herein as Schedule "A" is in full force and effect and Seller holds a valid and
existing interest under each of the Assets. Seller has delivered to Buyer
originals of each of the Customer Contracts identified in Schedule "A" to this
Agreement. The Customer Contracts have not been modified, except to the extent
that such modifications are disclosed by the originals delivered or made
available to Buyer. Seller has performed all obligations required to be
performed by it and is not in default under, or in breach of, nor in receipt of
any claim of default or breach under any Customer Contract to which Seller is a
party. No event has occurred which with the passage of time or giving of notice
or both would cause a breach of or default under any Customer Contract; Seller
has no present expectation or intention of not fully performing all such
obligations; and Seller has no knowledge of any breach or anticipated breach by
the other parties to any Customer Contract to which Seller is a party. Seller is
not a party to any contract or commitment, oral or written, regarding or related
to any Customer Contract which contract or commitment may be adverse to Buyer's
rights or interests pursuant to this Agreement. Seller has not been notified of
any cancellation of any Customer Contract, and Seller does not know of any event
which would entitle a party to any Customer Contract to cancellation.
(b) Seller owns good and marketable title to each of the Assets,
free and clear of any and all liens, security interests, charges and
encumbrances.
(c) Seller is not a party to any Customer Contract except for
those Customer Contracts which have been provided to Buyer prior to the Closing.
(d) Except for this Agreement, Seller is not a party and shall not
at any time become a party to any contract or agreement, oral or written,
pursuant to which Seller agrees to pledge, sell, exchange, transfer or dispose
of in any manner, any of Seller's right, title or interest in any of the Assets.
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(e) Seller agrees to disclose to Buyer the nature and extent of
all existing liens, including but not limited to Federal and State withholding
taxes and any liens anticipated. Seller agrees to execute all corresponding
releases in connection with such liens. Seller agrees to indemnify and hold
Buyer harmless from and against all loss, liability, damage, deficiency or
expense, including but not limited to, legal expenses and costs, which Buyer may
suffer, sustain or become subject to as a result of or in connection with such
liens.
4.5 Brokerage. There are no sums due to any Broker or Finder.
4.6 Compliance with Laws. Seller is not in violation of any law,
rule or regulation related to any Assets; there are no pending or threatened
claims or any such violations; and Seller has received no notice of any such
violation. Seller has complied with all laws, rules or regulations related to
the Assets.
4.7 Taxes. All federal, state and local property, sales and use
taxes and all other public taxes or charges incurred during any period prior to
and including the Closing Date which may relate to or affect the Assets in any
way or which may affect or relate to their transfer pursuant to this Agreement,
are the obligation and liability of Seller and have been paid or provided for in
full by Seller prior to the date of Closing.
4.8 Disclosure. Neither this Agreement, nor any schedules or
exhibits hereto, nor any other document delivered pursuant hereto, contain any
untrue statement of a material fact or omit a material fact necessary to make
the statements contained herein or therein, in light of the circumstances in
which they were made, misleading. There is no fact which has not been disclosed
to Buyer of which Seller is aware and which materially, adversely affects the
Assets.
ARTICLE 5
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REPRESENTATIONS AND WARRANTIES OF BUYER
As a material inducement to Seller to enter into this Agreement and to
sell the Assets, Buyer hereby represents and warrants as follows:
5.1 Organization and Power. Buyer is a corporation duly organized
and validly existing under the laws of the State of California with full power
and authority to enter into this Agreement and perform its obligations
hereunder.
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5.2 Authorization; No Breach. The execution, delivery and
performance of this Agreement and the consummation of all the transactions
contemplated hereby have been duly authorized by Buyer and no breach exists of
any covenant of Buyer set forth in this Agreement. This Agreement constitutes a
valid and binding obligation of the Buyer, enforceable in accordance with its
terms. The execution, delivery and performance of this Agreement by Buyer and
the consummation of the transactions contemplated hereby do not and will not (i)
conflict with or result in any breach of any of the provisions of, (ii)
constitute a default under, (iii) result in a violation of, or (iv) require any
authorization, consent, approval, exemption or other action by or notice to any
court, other governmental body, or other third party under the provisions of
Buyer or any indenture, mortgage, lease, loan agreement or other agreement or
instrument to which Buyer is bound or affected or to which any of Buyer's
respective properties are subject, or any law statue, rule regulation, judgment
or decree to which Buyer is subject.
ARTICLE 6
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ADDITIONAL AGREEMENTS
6.1 Survival. The representations, warranties, covenants and
agreements set forth in this Agreement, or in any writing delivered in
connection with this Agreement, will survive the Closing and the consummation of
the transactions contemplated hereby, notwithstanding any examination made for
or on behalf of Buyer, the knowledge of any of its partners, employees or
agents, or the acceptance of any certificate or opinion.
6.2 Indemnification.
(a) Seller agrees to indemnify and hold Buyer harmless from and
against any and all loss, liability, damage, deficiency or expense including
without limitation, legal expenses and costs, which Buyer may suffer, sustain,
or become subject and result of or in connection with (i) the breach by Seller
of any representation, warranty, covenant or agreement of it contained in this
Agreement, or (ii) any federal, state, local or other tax of any nature arising
out of any event or state of facts occurring or existing prior to the Closing,
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or (iii) any efforts of Buyer to seek to enforce the indemnification obligation
of Seller to Buyer pursuant to this Agreement. Any liability of Seller to Buyer
pursuant to this Section 6.2 may be satisfied, at Buyer's discretion, out of and
offset from the Purchase Price.
(b) After Seller has acknowledged in writing that it is
indemnifying Buyer pursuant to the terms of this Agreement with respect to
litigation involving any claim pursuant to this Agreement, Seller will be
entitled to assume the defense of any such litigation, provided that Buyer may,
at its election, participate in any such defense to the extent that it, in its
sole discretion, believes that such litigation will materially affect its
ongoing business. At Seller's reasonable request, Buyer will cooperate with
Seller in the preparation of any such defense, and Seller will reimburse Buyer
for any expenses incurred by Buyer in connection with such request.
6.3 Risk of Loss. All Assets will be transferred from Seller to
Buyer effective at 2:30 p.m., December 1, 1999, Pacific Standard Time.
6.4 Litigation Costs. In the event any litigation is instituted by
any party to this Agreement against the other party regarding the construction
of any term or to recover any damages resulting from a breach of any term of
this Agreement, the prevailing party in any such action shall be entitled to
recover from the losing party for any and all of such prevailing party's
attorney's fees and costs associated with such action.
6.5 Expenses. Except as otherwise expressly provided in this
Agreement, each party will pay all of its expenses, including attorneys, and
accountants' fees, in connection with the negotiation of this Agreement, the
performance of its obligations hereunder and thereunder, and the consummation of
the transactions contemplated by this Agreement.
6.6 Further Transfers. Seller will execute and deliver such
further instruments of conveyance and transfer and take such additional action
as Buyer may request to effect, consummate, confirm or evidence the transfer to
Buyer of the Assets. Seller will execute such documents as may be necessary to
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assist Buyer in preserving or perfecting its rights in the Assets and will also
do such acts as are necessary to perform its representations, warranties and
agreements herein.
6.7 Other Documents. Seller and Buyer each agree to execute such
further agreements and/or instruments as may reasonably be required to carry out
the transaction set forth in this Agreement.
6.8 Confidentiality. If the transactions contemplated hereby are
not consummated, neither Buyer nor Seller will use or disclose to any third
parties confidential information obtained by it regarding the other party.
ARTICLE 7
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MISCELLANEOUS
7.1 Entire Agreement. This Agreement embodies the entire
understanding and agreement between the parties and supersedes any and all prior
negotiations, understandings or agreements in regard thereto.
7.2 Amendment to Waiver. (a) This Agreement may not be amended nor
any rights hereunder be waived except by an instrument in writing signed by the
party sought to be charged with such amendment or waiver. (b) No course of
dealing between or among any persons having any interest in this Agreement will
be deemed effective to modify, amend or discharge any part of this Agreement or
any rights or obligations of any person under or by reason of this Agreement.
7.3 Bulk Transfer Laws. Buyer hereby waives compliance by Seller
with the provisions of any so-called bulk transfer laws of any jurisdiction in
connection with the sale of the Assets to Buyer. Seller agrees to indemnify
Buyer, as set forth in Section against all liability, damage or expense which
Buyer may suffer due to the failure to so comply.
7.4 Notices. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when personally delivered or
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mailed by first class mail, return receipt requested. Notices, demands and
communications to Buyer and Seller will, unless another address is specified in
writing, be sent to the address indicated below:
If to Seller: Lead Machine, Inc.
c/o Xxxx Xxxxxxxx
0000 Xxxxx Xxxx Xx.
Xxx Xxxxxx, XX 00000
and if to Buyer: Xxxx.xxx, Inc.
00000 Xxxxx Xxxxx Xxxxx, 0xx Xxxxx
Xxxxxx Xxxxx, XX. 00000
7.5 Assignment. This Agreement and all of the provisions hereof
will be binding upon and inure to the benefit of the parties hereto and their
respective successors and the rights, interests or obligations hereunder may be
assigned by either party without the prior written consent of the other party.
7.6 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provisions will be ineffective only to
the extent of such prohibition of invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
7.7 No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against any
person or entity.
7.8 Captions. The captions in this Agreement are for convenience
of reference only and do not constitute a part of this Agreement and will not be
deemed to limit, characterize or in any way affect any provision of this
Agreement, and all provisions of this Agreement will be enforced and construed
as if no caption had been used in this Agreement.
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7.9 Counterparts. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
instrument.
7.10 Applicable Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
SELLER BUYER
By:/s/Xxxx Xxxxxxxx By:/s/Xxxxx X. Xxxxxxx
---------------- -------------------
Xxxx Xxxxxxxx, President Xxxxx X. Xxxxxxx, Chairman/CEO
SHAREHOLDER:
-------------------------------
Xxxx Xxxxxxxx
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SCHEDULE A
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SCHEDULE OF ASSETS OF SELLER
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MillionaireIsland Customer Contracts and contract rights thereunder including
but not limited to rights to future amounts payable thereunder.
MillionaireIsland Trade name and trademarks related thereto, whether or not
existing or registered or unregistered by arising under State or Federal laws or
international conventions or treaties. XxxxxxxxxxxXxxxxx.xxx domain name.
MillionaireIsland client and subscribers, data, telephone numbers, e-mail
addresses and lists related thereto.
MillionaireIsland virtual recruiting system including the MillionaireIsland Web
site, its designs, and content as currently exists, and any modifications,
additions, changes or revisions thereto, or improvements and upgrades thereof.
Goodwill arising from the MillionaireIsland virtual recruiting system.
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SCHEDULE B
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SELLER'S REGISTERED TRADEMARKS AND TRADENAMES
---------------------------------------------
Seller has not registered any trademarks or tradenames with any federal
governmental agency. However, Seller claims rights to and in the
MillionaireIsland tradename and any trademarks currently used in conjunction
therewith under applicable State and Federal laws, and international conventions
and treaties.
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SCHEDULE C
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SELLER'S TELEPHONE NUMBER SCHEDULE
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The parties acknowledge that Seller has previously been provided with the
telephone numbers and e-mail addresses of MillionaireIsland Customers and
Subscribers.
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SCHEDULE D
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SELLER'S PRODUCTS
-----------------
MillionaireIsland virtual recruiting system including the MillionaireIsland Web
site, its designs, and content as currently exists, and any modifications,
additions, changes or revisions thereto, or improvements and upgrades thereof.
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