SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the "Agreement") is entered into
as of October 1, 2002, by and among CBL Acquisition Corp., a Utah
corporation ("Acquirer") and the individuals listed on Annex A hereto
("Shareholders").
RECITALS:
A. Shareholders are the record and/or beneficial owners of all of
the issued and outstanding capital stock of ACN 000 000 000 Pty. Ltd., a
registered company under the Corporations Xxx 0000 (Cwth.) (the "Company").
B. Shareholders wish to sell to Acquirer, and Acquirer wishes to
purchase from Shareholders, all of the issued and outstanding capital stock
of the Company set forth opposite each such Shareholder's name on Annex A
(the "Shares") upon the terms and subject to the conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions
hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
1. PURCHASE AND SALE OF SECURITIES
1.1 Sale and Delivery. Shareholders agree to sell and
deliver to Acquirer, and Acquirer agrees to purchase and
accept from Shareholders, free and clear of all Liens, on
the terms and subject to the conditions set forth in this
Agreement, and for the purchase price described in Section
1.2, good and marketable title to the Shares. The Shares to
be sold and purchased pursuant to this Agreement will, as of
the Closing Date, constitute in the aggregate all of the
outstanding capital stock of the Company.
1.2 Purchase Price. The aggregate purchase price (the
"Purchase Price") for all of the Shares shall be Ten U.S.
Dollars ($10.00) and other good and valuable consideration
to be delivered at Closing.
2. REPRESENTATIONS AND WARRANTIES CONCERNING SHAREHOLDERS
For purposes of the representations and warranties of Shareholders
contained herein, disclosure in any section of the Shareholders Disclosure
Letter (defined below) shall be deemed to be adequate response and
disclosure of such facts or circumstances with respect to all
representations or warranties by Shareholders which would reasonably call
for disclosure of such information, whether or not such disclosure is
specifically associated with or purports to respond to one or more or all
of such representations or warranties; provided such disclosure is fair and
accurate. The inclusion of any information in any section of the
Shareholders Disclosure Letter or other document delivered by Shareholders
pursuant to this Agreement shall not be deemed to be an admission or
evidence of the materiality of such item, nor shall it establish a standard
of materiality for any purpose whatsoever. Shareholders hereby represent
and warrant that, except as disclosed in the Shareholders disclosure letter
(the "Shareholders Disclosure Letter") delivered by Shareholders to
Acquirer herewith as amended from time to time prior to Closing:
Each Shareholder jointly and severally hereby represents and warrants
to, and covenants and agrees with, Acquirer that:
2.1 Ownership of Shares. Shareholder owns, or as of the Closing Date
will own, of record and beneficially the Shares, and has, and at all times
prior to and as of the Closing Shareholder will have, good and marketable
title to such Shares free and clear of all liens.
2.2 Delivery of Good Title. Upon delivery of the Shares to be sold
by Shareholder hereunder, Acquirer will have good and marketable title to
the Shares, free and clear of all liens.
2.3 Execution and Delivery. All consents, approvals, authorizations
and orders necessary for the execution, delivery and performance by
Shareholder of this Agreement (including, without limitation, the transfer
and sale of the Shares to be sold by Shareholders to Acquirer) have been
duly and lawfully obtained, and Shareholder has, and at the Closing will
have, full right, power, authority and capacity to execute, deliver and
perform this Agreement. This Agreement has been duly executed and
delivered by Shareholder and constitutes a legal, valid and binding
agreement of Shareholder enforceable against Shareholder in accordance with
its terms, except as limited by (i) applicable bankruptcy, insolvency, and
other laws of general application affecting enforcement of creditors'
rights generally, and (ii) general principles of equity, including
limitations on the availability of specific performance, injunctive relief
or other equitable remedies.
2.4 No Conflicts. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will
not conflict with or result in a breach or violation of any term or
provision of, or (with or without notice or passage of time, or both)
constitute a default under, any indenture, mortgage, deed of trust, trust
(constructive and other), loan agreement or other agreement or instrument
to which Shareholder is a party or by which Shareholder or the Shares are
bound, or violate any Legal Requirement applicable to or binding upon such
Shareholder.
2.5 No Brokers. No broker, finder or similar agent has been employed
by or on behalf of Shareholder in connection with this Agreement or the
transactions contemplated hereby, and Shareholder has not entered into any
agreement or understanding of any kind with any person or entity for the
payment of any brokerage commission, finder's fee or any similar
compensation in connection with this Agreement or the transactions
contemplated hereby.
3. REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
Each Shareholder jointly and severally hereby represents and warrants
that, except as disclosed in the relevant item of the Shareholders
Disclosure Letter):
3.1 Organization and Good Standing. Except as disclosed in Item
3.1, the Company is a corporation duly organized, validly existing and in
good standing under the Corporations Law of South Australia, has the
corporate power and authority to own, operate and lease its properties and
to carry on its business as now conducted and is qualified as a foreign
corporation in each jurisdiction where the nature of its business or
location of its properties requires such qualification except where the
failure to so qualify would not result in a Material Adverse Effect (as
defined in Section 12.13.4 below) on the Company.
-2-
3.2 Capitalization.
(a) Authorized/Outstanding Capital Stock. As of the date
hereof, the authorized capital stock of the Company consists of 1,000,000
shares of Capital Stock of which 200 shares are issued and outstanding.
All issued and outstanding shares of the Company capital stock have been
duly authorized and validly issued, are fully paid and nonassessable, are
not subject to any right of rescission and have been offered, issued, sold
and delivered by the Company in compliance with all registration or
qualification requirements (or applicable exemptions therefrom) of
applicable federal and state securities laws, except where the failure to
so qualify would not result in a Material Adverse Effect on the Company.
A list of all holders of the Company's capital stock, and the number of
shares and options held by each, in each case as of the date hereof, has
been delivered by Shareholders to Acquirer herewith as Item 3.2. As of the
date hereof, Shareholders are the sole shareholders of the Company.
(b) Options/Rights. Except as disclosed in Section 3.2(a)
or on Item 3.2, there are no options, warrants, calls, commitments,
conversion privileges or preemptive or other rights or agreements
outstanding to purchase any of the Company's authorized but unissued
capital stock or any securities convertible into or exchangeable for shares
of the Company's capital stock or obligating the Company to grant, extend,
or enter into any such option, warrant, call, right, commitment, conversion
privilege or other right or agreement, and there is no liability for
dividends accrued but unpaid. Except as described in Item 3.2, there are
no voting agreements, rights of first refusal or other restrictions (other
than normal restrictions on transfer under applicable federal and state
securities laws) applicable to any of the Company's outstanding securities.
Except as described in Item 3.2, the Company is not under any obligation to
register under the Securities Act any of its presently outstanding
securities or any securities that may be subsequently issued.
3.3 Subsidiaries and Guaranties. Except as disclosed in Item
3.3 of the Disclosure Letter, the Company does not have any subsidiaries or
any interest, direct or indirect, in any corporation, partnership, joint
venture or other business entity. The Company is not a guarantor of any
obligation of a third party, whether or not such third party is related to
or affiliated with the Company.
3.4 No Violation of Existing Agreements or Laws. Except as
disclosed in Item 3.4, neither the execution and delivery of this Agreement
or any of the Ancillary Agreements, nor the consummation of the
transactions provided for herein or therein, will conflict with, or (with
or without notice or lapse of time, or both) result in a termination,
breach or violation of (a) any provision of the Articles of Incorporation
or Bylaws of the Company, as currently in effect, (b) any instrument or
contract to which the Company or Shareholders are a party or by which the
Company or Shareholders are bound or (c) any federal, state, local or
foreign judgment, writ, decree, order, statute, rule or regulation
applicable to Shareholders, the Company or any Subsidiary or their
respective assets or properties, other than, with respect to (a), (b) and
(c), any such conflict, termination, breach or violation that would not
have a Material Adverse Effect on the Company. The consummation of the
transactions contemplated herein and succession by Acquirer as the sole
shareholder of the Company will not require the consent of any third party,
except as disclosed in Item 3.4.
-3-
3.5 Litigation. Except as disclosed in Item 3.5, there is no
action, proceeding or claim or investigation pending against the Company
before any court or administrative agency nor is there any basis therefor,
nor has any party threatened the same. Except as disclosed in Item 3.5,
there is no basis for any shareholder or former shareholder of the Company,
or any other person, firm, corporation or entity to assert a claim against
Shareholders, the Company, or Acquirer based upon: (a) ownership or rights
to ownership of any shares of the Company Stock or other securities, (b)
any rights as a the Company securities holder, including, without
limitation, any option or other right to acquire any the Company
securities, any preemptive rights or any rights to notice or to vote or (c)
any rights under any agreement between the Company and any the Company
securities holder or former the Company securities holder in such holder's
capacity as such. There is no action, suit, proceeding, claim, arbitration
or investigation pending or as to which Shareholders have received any
notice of assertion against Shareholders or the Company, which in any
manner challenges or seeks to prevent, enjoin, materially alter or
materially delay any of the transactions contemplated by this Agreement.
3.6 The Company Finances. The Company has not prepared any
financial statements, however, all of the assets and liabilities of the
Company are listed in Item 3.6. Except as disclosed in Item 3.6, the
Company has no debt, liability or obligation of any nature, whether
accrued, absolute or contingent, and whether due or to become due, that
would be required under generally accepted accounting principles ("GAAP")
to be reflected on the liabilities column of a balance sheet, prepared as
of the date hereof in accordance with GAAP.
3.7 Taxes.
(a) For purposes of this Agreement, the following terms
have the following meanings: "Tax" (and, with correlative meaning, "Taxes"
and "Taxable") means any and all taxes, including without limitation
(i) any income, profits, alternative or add-on minimum tax, gross receipts,
sales, use, value-added, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation, net
worth, premium, property, environmental or windfall profit tax, custom,
duty or other tax governmental fee or assessment or charge of any kind
whatsoever, together with any interest or any penalty, addition to tax or
additional amount imposed by any governmental entity responsible for the
imposition of any such tax (domestic or foreign) (a "Taxing Authority"),
(ii) any liability for the payment of any amounts of the type described in
clause (i) above as a result of being a member of an affiliated,
consolidated, combined or unitary group for any Taxable period or as the
result of being a transferee or successor thereof and (iii) any liability
for the payment of any amounts of the type described in clause (i) or (ii)
above as a result of any express or implied obligation to indemnify any
other person.
(b) Except as disclosed in Item 3.7(b), all Tax returns,
statements, reports and forms (including estimated Tax returns and reports
and information returns and reports) required to be filed with any Taxing
Authority on or before the Effective Time, by or on behalf of the Company
and each of its Subsidiaries (collectively, the "Company Returns"), have
been or will be filed when due (including any extensions of such due date),
and all amounts shown to be due thereon on or before the Effective Time
have been or will be paid on or before such date.
(c) Since its inception, the Company has not incurred any
Tax liability.
-4-
(d) There is no claim, audit, action, suit, proceeding, or
investigation now pending or, to the knowledge of Shareholders, threatened
against or with respect to the Shares, the Company or any Subsidiary in
respect of any Tax, nor to the knowledge of Shareholders is there any basis
therefor. There are no liabilities for Taxes with respect to any notice of
deficiency or similar document of any Tax Authority received by the Company
or any Subsidiary which have not been satisfied in full (including
liabilities for interest, additions to tax and penalties thereon and
related expenses). There are no liens for taxes upon the assets of the
Company or any Subsidiary.
3.8 Title to Properties. Except as disclosed in Item 3.8, the
Company has good and marketable title to all of its material assets and
properties (including but not limited to those shown on Item 3.6), free and
clear of all liens, charges or encumbrances (other than ( i ) liens for
taxes not yet due and payable; (ii) liens which are not material in
character, amount or extent, and which do not materially detract from the
value or materially interfere with the use of the property subject thereto
or affected thereby; and (iii) contractor's liens and liens with respect to
taxes that are not yet due and payable (the foregoing (i), (ii), and (iii),
"Permitted Liens"). The machinery and equipment included in such assets
are in good condition and repair, normal wear and tear excepted, and all
leases of real or personal property to which the Company or any Subsidiary
is a party are fully effective and afford the Company or the Subsidiary
peaceful and undisturbed possession of the subject matter of the lease.
Neither the Company nor any Subsidiary is in violation of any zoning,
building, safety or environmental ordinance, regulation or requirement or
other law or regulation applicable to the operation of owned or leased real
property which would have a Material Adverse Effect on the Company, and
neither the Company nor any Subsidiary has received any notice of such
violation with which it has not complied or had waived.
3.9 [Intentionally Omitted].
3.10 Agreements and Commitments. As of the date hereof, except
as disclosed in Item 3.10 delivered by Shareholders to Acquirer herewith,
or as disclosed in Item 3.11, Item 3.14.3 or Item 3.14.6 as required by
Section 3.11, Section 3.14.3 or Section 3.14.6, as the case may be, on the
date of this Agreement the Company is not a party or subject to any oral or
written executory contract or, to the extent expressly enumerated in
paragraphs below, commitment, that is material to the Company, its
financial condition, business or prospects, including but not limited to
the following:
(a) Any contract, commitment, letter agreement or purchase
order providing for payments by or to the Company in an aggregate amount of
(i) $10,000 or more in the ordinary course of business consistent with past
practice ("Ordinary Course") or (ii) $5,000 or more not in the Ordinary
Course;
(b) Any license agreement under which the Company is
licensor (except for any nonexclusive software license granted by the
Company to customers in the Ordinary Course); or under which the Company is
licensee (except for standard "shrink wrap" licenses for off-the-shelf
software products with a license fee or purchase price of under $5,000 per
copy or seat);
(c) Any material agreement by the Company to encumber,
transfer or sell rights in or with respect to any material item of the
Company Intellectual Property (as defined in Section 3.11 hereof),
excluding non-exclusive software licenses;
-5-
(d) Any agreement for the sale or lease of real or tangible
personal property involving more than $10,000 per year;
(e) Any dealer, distributor, sales representative, original
equipment manufacturer, value-added remarketer or other agreement for the
distribution of the Company's products;
(f) Any franchise agreement;
(g) Any stock redemption or agreement obligating the
Company to purchase its capital stock;
(h) Any joint venture contract or arrangement or any other
agreement that involves a sharing of profits with other persons or the
payment of royalties to any other person, excluding non-exclusive software
licenses;
(i) Any instrument evidencing indebtedness for borrowed
money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee or otherwise, except for trade
indebtedness or any advance to any employee of the Company incurred or made
in the Ordinary Course;
(j) Any contract containing covenants purporting to limit
the Company's freedom to compete in any line of business, market or
industry and/or in any geographic area; or
(k) Any contract for the employment of any officer,
employee or consultant of the Company or any other type of contract or
commitment with any officer, employee or consultant of the Company that is
not immediately terminable by the Company without cost or other liability.
Except as noted in Item 3.4, all agreements, obligations and commitments
disclosed in Item 3.10, Item 3.11, Item 3.14.3 or Item 3.14.6 as required
by Section 3.10, Section 3.11, Section 3.14.3 or Section 3.14.6, as the
case may be, are valid and in full force and effect, except where the
failure to be such would not have a Material Adverse Effect on the Company.
Except as noted on Item 3.10, neither the Company nor to Shareholders'
knowledge any other party is in breach of or default under any material
term of any such agreement, obligation or commitment nor has such other
party threatened such a breach or default. The Company is not a party to
any contract or arrangement that Shareholders believe will have a Material
Adverse Effect on the Company. The Company does not have liability for
renegotiation of government contracts or subcontracts that can reasonably
be expected to have a Material Adverse Effect on the Company.
3.11 Intellectual Property.
(a) For purposes of this Agreement, "Intellectual Property"
means:
(i) all issued patents, reissued or reexamined
patents, revivals of patents, utility models, certificates of invention,
registrations of patents and extensions thereof, regardless of country or
formal name (collectively, "Issued Patents");
(ii) all published or unpublished nonprovisional and
provisional patent applications, reexamination proceedings, invention
disclosures and records of invention (collectively "Patent Applications"
and, with the Issued Patents, the "Patents");
-6-
(iii) all copyrights, copyrightable works,
semiconductor topography and mask work rights, including all rights of
authorship, use, publication, reproduction, distribution, performance,
transformation, moral rights and rights of ownership of copyrightable
works, semiconductor topography works and mask works, and all rights to
register and obtain renewals and extensions of registrations, together with
all other interests accruing by reason of international copyright,
semiconductor topography and mask work conventions (collectively,
"Copyrights");
(iv) trademarks, registered trademarks, applications
for registration of trademarks, service marks, registered service marks,
applications for registration of service marks, trade names, registered
trade names and applications for registrations of trade names
(collectively, "Trademarks");
(v) all technology, ideas, inventions, designs,
proprietary information, manufacturing and operating specifications, know-
how, formulae, trade secrets, technical data and proprietary processes;
(vi) all databases and all collected data and all
rights therein throughout the world;
(vii) all computer software, including all source
code, object code firmware, development tools, files, records and data and
all media on which any of the foregoing is recorded; and
(viii) all Web addresses, rights and domain names
and all rights under all Web cross-linking agreements.
(b) With respect to each item of Intellectual Property
incorporated into any product of the Company or used in connection with any
service offered or provided by the Company or otherwise used in the
business of the Company and in each case owned by the Company or licensed
to the Company (except "off the shelf" or other software widely available
through regular commercial distribution channels at a cost not exceeding
$5,000 per copy or seat or CPU on standard, non-negotiated terms and
conditions) ("Company Intellectual Property"), the Shareholders Disclosure
Letter lists as of the date of this Agreement at Item 3.11:
(i) all Patents, all registered Trademarks, and all
registered Copyrights, including the jurisdictions in which each such
Intellectual Property has been issued or registered or in which any such
application for such issuance and registration has been filed.
(ii) the following agreements relating to the products or
service offerings or capabilities of the Company, including products or
service offerings or capabilities currently under development (collectively
the "Company Services") or other Company Intellectual Property: all
(A) agreements granting any right to distribute or sublicense any of the
Company Services on any exclusive basis, (B) any exclusive licenses of
Intellectual Property to or from the Company, (C) projects under agreements
pursuant to which the amounts actually paid or payable individually under
firm commitments to or by the Company are $10,000 or more, (D) joint
development agreements, (E) any agreement by which the Company grants any
ownership right to any Intellectual Property owned by the Company other
than nonexclusive software licenses entered into with customers in the
Ordinary Course, (F) any option relating to any Company Intellectual
Property, and (G) agreements pursuant to which any party is granted any
rights to access source code or to use source code to create derivative
works of Company Intellectual Property.
-7-
(c) the Shareholders Disclosure Letter contains an accurate list
as of the date of this Agreement of all licenses, sublicenses and other
agreements to which the Company is a party and pursuant to which the
Company is authorized to use any Intellectual Property owned by any third
party (except "off the shelf" or other software widely available through
regular commercial distribution channels at a cost not exceeding $5,000 per
copy or seat or CPU on standard non-negotiated terms and conditions and any
rights implied by law) ("Third Party Intellectual Property").
(d) To the best of Shareholders' knowledge, there is no
unauthorized use, disclosure, infringement or misappropriation of any
Company Intellectual Property, including any Third Party Intellectual
Property, by any employee of the Company and the Company has not received
actual notice that any former employee or any other third party has made
any unauthorized use, disclosure, infringement or misappropriation of any
Company Intellectual Property, including any Third Party Intellectual
Property. The Company has not entered into any agreement to indemnify any
other person against any charge of infringement of any Intellectual
Property, other than indemnification provisions contained in sales or
services agreements arising in the ordinary course of business, copies of
which have been delivered to Acquirer or its counsel. There are no
royalties, fees or other payments payable by the Company to any Person,
under any written or oral contract or understanding or otherwise, by reason
of the ownership, use, sale or disposition of any Intellectual Property.
(e) The Company is not in breach of any license, sublicense or
other agreement relating to Company Intellectual Property or Third Party
Intellectual Property Rights. Except as disclosed in Item 3.11(e), neither
the execution, delivery or performance of this Agreement or any ancillary
agreement contemplated hereby nor the consummation of any of the
transactions contemplated by this Agreement will contravene, conflict with
or result in any violation of Acquirer's right to own or use any Company
Intellectual Property, including any Third Party Intellectual Property.
(f) All registered Trademarks and registered service marks held
by the Company are valid and subsisting. Except for such as are not past
due, all maintenance and annual fees have been fully paid and all fees paid
during prosecution and after issuance of any patent comprising or relating
to such item have been paid in the correct entity status amounts. The
Company has not infringed, misappropriated or made unlawful use of, is not
currently infringing, misappropriating or making unlawful use of, and has
not received any written notice or written communication alleging or
relating to any actual, alleged, possible or potential infringement,
misappropriation or unlawful use of, any Intellectual Property or other
proprietary right or asset owned or used by any third party. Without
limiting the foregoing, the offering and sale of the Company Services by
the Company does not, and the offering and sale of the Company Services
immediately after the Effective Time will not, and the business of the
Company as conducted as of the date hereof does not, and the Company's use
of Intellectual Property as of the date hereof does not, to Shareholders'
knowledge, infringe or violate any Intellectual Property of any other
person. There is no proceeding pending or threatened, nor has any written
claim or demand been made, which challenges the legality, validity,
enforceability or ownership of any item of Company Intellectual Property or
Third Party Intellectual Property. The Company has not brought a
proceeding alleging infringement of Company Intellectual Property or breach
of any license or agreement involving Intellectual Property against any
third party.
-8-
(g) Except as disclosed in Item 3.11(g), all current and former
officers and managerial and technical employees and employees engaged in
development of the Company have executed and delivered to the Company an
agreement (containing no exceptions or exclusions from the scope of its
coverage other than as set forth in the standard form supplied to Acquirer)
regarding the protection of proprietary information and the assignment to
the Company of any Intellectual Property arising from services performed
for the Company by such persons, the form of which has been supplied to
Acquirer. Except as disclosed in Item 3.11(g), all current and former
consultants and independent contractors to the Company involved in the
development, modification, marketing and servicing of the Company's
products, and/or Company Intellectual Property have executed and delivered
to the Company an agreement (containing no exceptions or exclusions from
the scope of its coverage other than as set forth in the standard form)
regarding the protection of proprietary information and the assignment to
the Company of any Intellectual Property arising from services performed
for the Company by such persons except where the failure to obtain such
agreements from former employees and independent contractors would not have
a Material Adverse Effect on the Company. To the knowledge of Shareholders,
no employee or independent contractor of the Company is in violation of any
term relating to Intellectual Property of any patent disclosure agreement
or employment contract or any other contract or agreement relating to the
relationship of any such employee or independent contractor with the
Company or of any other term of any such agreements or contracts. Other
than with respect to Third Party Intellectual Property that is not used in
connection with the Company Services, no current or former officer,
director, shareholder, employee, consultant or independent contractor has
any right, claim or interest in or with respect to any Company Intellectual
Property. To the best knowledge of Shareholders, the Company is not using
any trade secrets, and to the knowledge of Shareholders, the Company is not
using any other confidential information, of any former employer of any
past or present employees.
(h) Shareholders have disclosed in Item 3.11(h) all measures and
precautions taken to protect and maintain the confidentiality of all
Company Intellectual Property. Except as disclosed in Item 3.11(h), the
Company has taken all commercially reasonable and customary measures and
precautions necessary to maintain and protect the full value of all
Intellectual Property it owns except where such failure to protect and
maintain would not have a Material Adverse Effect on the Company. All use,
disclosure or appropriation of confidential and proprietary information of
any third party ("Confidential Information") has, to Shareholders'
knowledge, been pursuant to the terms of a written agreement between the
Company and the owner of such Confidential Information, or is otherwise
lawful.
(i) No product liability claims have been communicated in
writing to or, to Shareholders' knowledge, threatened against the Company.
(j) A complete list of each of the principal the Company
Services, together with a brief description of each, is set forth in
Item 3.11(j). The Company Services, including the performance and results
thereof, conform in all material respects with any published specification,
published documentation or written performance standard provided with
respect thereto by the Company.
(k) The Company is not subject to any proceeding or outstanding
decree, order, judgment, or stipulation which may affect the validity, use
or enforceability of any Company Intellectual Property or restricting in
any manner the use, transfer, or licensing thereof by the Company. The
Company is not subject to any agreement which restricts in any material
respect the use, transfer, or licensing by the Company of Company
Intellectual Property or the Company Services, excluding agreements
relating to Third Party Intellectual Property.
-9-
(l) The Company owns all right, title and interest in, or has
the right to use, all Intellectual Property that is material to or
reasonably necessary to the conduct of its business as presently conducted
("Material Company Intellectual Property"). Shareholders are not aware of
any loss, cancellation, termination or expiration of any Patent or Patent
Application, registered Trademark, or registered Copyright relating to any
Company Intellectual Property. Copies of all forms of nondisclosure or
confidentiality agreements currently utilized by the Company to protect
Company Intellectual Property have been provided to Acquirer. Except as set
out in Item 3.11, the Company has not granted any reseller, distributor,
sales representative, original equipment manufacturer, value added reseller
or other third party any right to reproduce, manufacture, sell, license,
furnish or distribute any the Company Services in any market segment or
geographic location.
3.12 Compliance with Laws. Except for noncompliance that would
not result in a Material Adverse Effect on the Company, the Company has
complied, or prior to the Closing Date (as defined in Section 7.1 hereof)
will have complied, and is or will be at the Closing Date in full
compliance, in all material respects, with all applicable laws, ordinances,
regulations and rules, and all orders, writs, injunctions, awards,
judgments and decrees, applicable to the Company or to the assets,
properties and business thereof, including, without limitation: (a) all
applicable federal and state securities laws and regulations except as
disclosed in Item 3.2, (b) all applicable federal, state and local laws,
ordinances and regulations, and all orders, writs, injunctions, awards,
judgments and decrees, pertaining to (i) the sale, licensing, leasing,
ownership or management of owned, leased or licensed real or personal
property, products or technical data, (ii) employment or employment
practices, terms and conditions of employment, or wages and hours and (iii)
safety, health, fire prevention, environmental protection (including toxic
waste disposal and related matters described in Section 3.20 hereof),
building standards, zoning or other similar matters, (c) the Export
Administration Act and regulations promulgated thereunder and other laws,
regulations, rules, orders, writs, injunctions, judgments or decrees
applicable to the export or re-export of controlled commodities or
technical data, (d) the Immigration Reform and Control Act and (e) all
governmental and nongovernmental regulations related to the operation and
use of the Internet. Except as disclosed in Item 3.4, the Company has
received all permits and approvals from, and has made all filings with,
third parties, including government agencies and authorities, that are
necessary to the conduct of its business as presently conducted except
where the failure to receive such permit or approval or make such filing
would not have a Material Adverse Effect on the Company.
3.13 Certain Transactions and Agreements. No person who is an
officer of the Company nor any member of their immediate families, has any
direct or indirect ownership interest in or any employment or consulting
agreement with any firm or corporation that competes with the Company
(except with respect to any interest in less than 1% of the outstanding
voting shares of any corporation whose stock is publicly traded). Except
as disclosed in Item 3.13, none of said officers or any directors of the
Company or any member of their immediate families, is directly or
indirectly interested in any contract with the Company, including, but not
limited to, any loan agreements (excluding travel advances), except for
normal compensation for services as an officer (disclosed in Item 3.14.3),
director or employee of the Company and except for the normal rights of a
shareholder, warrantholder or optionholder. Except as disclosed in Item
3.13, none of such officers or directors or family members has, except for
the normal rights of a shareholder or an option holder, any interest in any
(a) Company Intellectual Property or (b) any interest in any property
(other than Company Intellectual Property) used in the business of the
Company, whether such property is real or personal, tangible or intangible.
-10-
3.14 Employees.
3.14.1 Except as disclosed in Item 3.14.1, the Company does
not have any employment contract or consulting agreement currently in
effect that is not terminable at will without penalty or payment of
compensation by the Company (other than agreements with the purpose of
providing for the confidentiality of proprietary information or assignment
of inventions).
3.14.2 The Company (a) has not ever been or is now subject
to a union organizing effort, (b) is not subject to any collective
bargaining agreement with respect to any of its employees, (c) is not
subject to any other material contract, written or oral, with any trade or
labor union, employees' association or similar organization or (d) does not
have has any current labor dispute. The Company has good labor relations,
and Shareholders have no knowledge of any facts indicating that the
consummation of the transactions provided for herein (other than any
contemplated reductions in force associated therewith) will have a Material
Adverse Effect on the Company and have no knowledge that any of the
Company's key development or other employees intends to leave its employ
where such departure would reasonably be expected to have a Material
Adverse Effect on the Company.
3.14.3 Item 3.14.3 delivered by Shareholders to Acquirer
herewith contains a list of all severance agreements, pension,
superanuation, retirement, disability, medical, dental or other health
plans, life insurance or other death benefit plans, profit sharing,
deferred compensation agreements, stock, option, bonus or other incentive
plans, vacation, long service, sick, holiday or other paid leave plans,
severance plans or other similar employee benefit plans maintained by the
Company or any trade or business which is treated as a single employer with
the Company or in which any employees of the Company participate (the
"Employee Plans"), as well as all employment and consulting agreements to
which the Company is a party. Except as disclosed in Item 3.14.3, each of
the Employee Plans, and its operation and administration, is in compliance
in all material respects with each of the respective Employee Plans' terms
and with all applicable, federal, state, local and other governmental laws
and ordinances, orders, rules and regulations. Shareholders have delivered
to Acquirer a true and complete copy of, to the extent applicable, (a) all
Employee Plans as well as all employment and consulting agreements to which
the Company is a party as amended, (b) the Company's three most recent
annual reports (Form 5500s), (c) each trust agreement related to such
Employee Plans, (d) most recent summary plan description for each Employee
Plan for which a description is required, (e) any material contract
regarding the funding arrangement for any Employee Plan. Except as set
forth in Item 3.14.3, no Employee Plans will be subject to any surrender
fees or service fees upon termination other than the normal and reasonable
administrative fees associated with the termination of benefit plans.
Except as disclosed in Item 3.14.3, no employee of the Company or any
Subsidiary and no person subject to any Company or any Subsidiary health
plan has made medical claims through such health plan during the twelve
months preceding the date hereof for more than $5,000 in the aggregate.
3.14.4 To the knowledge of Shareholders, no employee of the
Company is in violation of any term of any employment contract, patent or
trade secret disclosure agreement or noncompetition agreement or any other
contract or agreement, or any restrictive covenant, relating to the right
of any such employee to be employed by the Company or to use trade secrets
or proprietary information of others, and the employment of any employee of
the Company does not subject the Company to any material liability to any
third party.
-11-
3.14.5 Except as disclosed in Item 3.14.3, the Company is
not a party to any (a) agreement with any employee of the Company (i) the
benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction involving the Company in the
nature of any of the transactions contemplated by this Agreement (ii)
providing any term of employment or compensation guarantee or
(iii) providing severance benefits or other benefits after the termination
of employment of such employee regardless of the reason for such
termination of employment other than as required by law, or (b) agreement
or plan, including, without limitation, any stock option plan, stock
appreciation rights plan or stock purchase plan, any of the benefits of
which will be materially increased, or the vesting of benefits of which
will be materially accelerated, by the occurrence of any of the
transactions contemplated by this Agreement.
3.14.6 A list of all employees of the Company and their current base
compensation as of the date of this Agreement is disclosed on Item 3.14.6.
Copies of all offer letters and other documents reflecting bonus
arrangements of any Company officer, director or employee have been
delivered to Acquirer.
3.15 Corporate Documents. Shareholders have made available to
Acquirer for examination all documents and information disclosed in Items
3.1 through 3.25 or other exhibits called for by this Agreement which have
been reasonably requested by Acquirer' legal counsel, including, without
limitation, the following: (a) copies of the Company's Certificate of
Registration and Constitution as currently in effect; (b) the Company's
minute book containing all records of all proceedings, consents, actions
and meetings of the Company's directors and shareholders; (c) the Company's
stock ledger, journal and other records reflecting all stock issuances and
transfers; and (d) all permits, orders and consents issued by any
regulatory agency with respect to the Company, or any securities of the
Company, and all applications for such permits, orders and consents.
3.16 No Brokers. Except as disclosed in Item 3.16, neither
Shareholders nor the Company is obligated for the payment of fees or
expenses of any investment banker, broker or finder in connection with the
origin, negotiation or execution of this Agreement or in connection with
any transaction provided for herein or therein.
3.17 Books and Records. The books, records and accounts of the
Company (a) are in all material respects true and complete, and (b) have
been maintained in accordance with reasonable business practices except
where failure to maintain such books, records and accounts in accordance
with reasonable business practices will not have a Material Adverse Effect
on anyone relying on such books, record and accounts.
3.18 Environmental Matters.
3.18.1 To Shareholders' knowledge, during the period that
the Company has leased or owned its properties or leased, owned or operated
any facilities, there have been no disposals, releases or threatened
releases of Hazardous Materials (as defined below) on, from or under any
such properties or facilities that would have a Material Adverse Effect on
the Company. Shareholders have no knowledge of any presence, disposals,
releases or threatened releases of Hazardous Materials on, from or under
any of such properties or facilities, which may have occurred prior to the
Company or any Subsidiary having taken possession of any of such properties
or facilities which might reasonably be expected to have a Material Adverse
Effect on the Company. For purposes of this Agreement, the terms
"disposal," "release," and "threatened release" have the definitions
assigned thereto by the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as amended
("CERCLA"). For the purposes of this Section 3.18, "Hazardous Materials"
mean any hazardous or toxic substance, material or waste which is or becomes
-12-
prior to the Closing Date, regulated under, or defined as a "hazardous
substance," "pollutant," "contaminant," "toxic chemical," "hazardous
material," "toxic substance" or "hazardous chemical"; under any applicable
federal, state or local statute, ordinance, rule or regulation that has a
scope or purpose similar to (i) CERCLA; (ii) the Emergency Planning and
Community Right-to-Know Act, 42 U.S.C. Section 11001 et seq.; (iii) the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.;
(iv) the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; (v)
the Occupational Safety and Health Act of 1970, 29 U.S.C. Section 651 et
seq.; or (vi) regulations promulgated under any of the above statutes.
3.18.2 To Shareholders' knowledge, none of the properties
or facilities currently leased or owned by the Company or any properties or
facilities previously leased or owned by the Company is in violation of any
federal, state or local law, ordinance, regulation or order relating to
industrial hygiene or to the environmental conditions on, under or about
such properties or facilities, including, but not limited to, soil and
ground water condition which violation would have a Material Adverse Effect
on the Company.
3.18.3 During the Company's occupancy of any properties or
facilities owned or leased at any time by the Company, neither the Company,
nor to Shareholders' knowledge, any third party, has used, generated,
manufactured, released or stored on, under or about such properties and
facilities or transported to or from such properties and facilities any
Hazardous Materials that would have or is reasonably likely to have a
Material Adverse Effect on the Company.
3.18.4 During the time that the Company has owned or leased
the properties and facilities currently occupied by it or any properties
and facilities previously occupied by the Company, there has been no
material litigation, proceeding or administrative action brought or
threatened against the Company, or any material settlement reached by the
Company with, any party or parties alleging the presence, disposal, release
or threatened release of any Hazardous Materials on, from or under any of
such properties or facilities.
3.19 Government Contracts. All representations, certifications
and disclosures made by the Company to any Government Contract Party (as
defined below) have been in all material respects current, complete and
accurate at the times they were made. There have been no acts, omissions
or noncompliance with regard to any applicable public contracting statute,
regulation or contract requirement (whether express or incorporated by
reference) relating to any of the Company's contracts with any Government
Contract Party in either case that have led to or is reasonably likely to
lead to, either before or after the Closing Date, (a) any material claim or
dispute involving the Company, and/or Acquirer as successor in interest to
Shareholders and any Government Contract Party or (b) any suspension,
debarment or contract termination, or proceeding related thereto. There
has been no act or omission that relates to the marketing, licensing or
selling to any Government Contract Party of any of the Company's technical
data, computer software, products and services and that has led to or is
reasonably likely to lead to, either before or after the Closing Date, any
cloud on any of the Company's rights in and to its technical data, computer
software, products and services. There is currently no dispute between the
Company and any Government Contract Party. For purposes of this Section
3.19, the term "Government Contract Party" means any independent or
executive agency, division, subdivision, audit group or procuring office of
the federal, state, territorial, provincial, county, local or municipal
government, including any prime contractor of the federal government and
any higher level subcontractor of a prime contractor of the federal
government, and including any employees or agents thereof, in each case
acting in such capacity.
-15-
3.20 Warranties, Guarantees and Indemnities. Except as disclosed
in Item 3.20 or in the agreements or contract listed herein, the Company
has not provided to its customers or any third parties (i) any warranties
or guarantees regarding the Company Services; (ii) any rights to obtain
refunds with respect to the Company Services or (iii) any indemnities with
respect to intellectual property infringement.
3.21 No Shareholder Claims. No shareholder of the Company has
claimed in writing any interest in any additional shares of the Company's
capital stock, or any options, warrants or other securities of the Company,
except for the number of shares of the Company Stock which such person is
shown to be the owner of on Item 3.2, and no third party who is not
disclosed on Item 3.2 has made in writing, any claim of entitlement to
receive any shares of the capital stock of the Company, any warrants or
other rights to acquire any capital stock of the Company or any other
securities of the Company, and to Shareholders' knowledge no such claim has
been made orally.
3.22 Customer Relationships. The Company has good commercial
working relationships with its customers. Except as disclosed in Item
3.22, no customer accounting for more than 5% of the Company's revenues in
any month during the last twelve (12) calendar months (a "Material
Customer") has canceled or otherwise terminated its relationship with the
Company, decreased or limited materially the amount of product or services
ordered from the Company or threatened in writing (or to Shareholders'
knowledge orally) to take any such action.
3.23. Product and Service Quality. All services provided by the
Company to customers on or prior to the Closing Date conform to applicable
contractual commitments, implied warranties not disclaimed, express
warranties, product specifications and quality standards published by the
Company in all material respects, and the Company does not have any
material liability (and the Company is not aware of any basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand against the Company giving rise to any
liability) for replacement or repair thereof, or for the taking of any
remedial action with respect thereto or other damages in connection
therewith. All material complaints received since January, 2001 from
customers regarding the Company's services are set out in Item 3.23 in
detail reasonably sufficient to understand the nature of the complaint and
the resolution or lack of resolution thereof.
3.24 Insurance. The Company maintains the insurance coverage
disclosed on Item 3.24. Item 3.24 sets forth all claims made under such
insurance policies since the Company's inception and the premiums that
apply with respect to such insurance policies as of the date of this
Agreement.
3.25 Disclosure. The Company has not failed to disclose any
information known to it that is material to a decision to consummate the
transactions contemplated herein. This Agreement (including Schedules and
Exhibits) and the certificates and instruments delivered pursuant to this
Agreement at the Closing by or on behalf of Shareholders, to Shareholders'
knowledge, do not contain any untrue statement of material fact or omit to
state a material fact necessary to make the statements contained herein and
therein not misleading in light of the circumstances under which they were
made.
-16-
4. REPRESENTATIONS AND WARRANTIES OF ACQUIRER
Acquirer hereby represents and warrants, that, except as
disclosed on the Acquirer disclosure letter delivered to Shareholders
herewith as amended from time to time in non-material respects prior to
Closing:
4.1 Organization and Good Standing. Acquirer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Utah. Acquirer has the corporate power and authority to own,
operate and lease its properties and to carry on its business as now
conducted and as proposed to be conducted.
4.2 Power, Authorization and Validity; Adverse Changes.
4.2.1 Acquirer has the corporate right, power, legal
capacity and authority to enter into and perform its obligations under this
Agreement, and each other agreement to be entered by Acquirer in connection
herewith (the "Acquirer Ancillary Agreements"). This Agreement has been
duly executed and delivered by Acquirer and the Acquirer Ancillary
Agreements have been or will be duly executed and delivered by Acquirer (as
applicable). The execution, delivery and performance of this Agreement and
the Acquirer Ancillary Agreements have been duly and validly approved and
authorized by Acquirer's Board of Directors and shareholders, as
applicable, and no other corporate approvals or proceedings on the part of
Acquirer are necessary to authorize this Agreement and the transactions
contemplated hereby.
4.2.2 No filing, authorization or approval, governmental or
otherwise, is necessary or required to be made or obtained to enable
Acquirer to enter into, and to perform its obligations under, this
Agreement and the Acquirer Ancillary Agreements.
4.2.3 This Agreement is and the Acquirer Ancillary
Agreements are, or when executed and delivered by Acquirer and the other
parties thereto will be, valid and binding obligations of Acquirer,
enforceable against Acquirer in accordance with their respective terms,
except as to the effect, if any, of (a) applicable bankruptcy and other
similar laws affecting the rights of creditors generally, (b) rules of law
governing specific performance, injunctive relief and other equitable
remedies; and (c) the enforceability of provision requiring indemnification
in connection with the offering, issuance or sale of securities.
4.2.4 Since June 30, 2002, there has not been with respect
to Acquirer or Trinity Companies, Inc., a Utah corporation and parent
company of Acquirer ("Parent") any Material Adverse Change.
4.3 No Violations. Neither the execution nor delivery of this
Agreement or any Acquirer Ancillary Agreement, nor the consummation of the
transactions contemplated hereby or thereby, will conflict with, or (with
or without notice or lapse of time, or both) result in a termination,
breach or violation of (a) any provision of the Articles of Incorporation
or Bylaws of Acquirer or Parent, as currently in effect or (b) any
instrument or contract to which Acquirer or Parent is a party or by which
Acquirer or Parent is bound, or (c) any federal, state, local or foreign
judgment, writ, decree, order, statute, rule or regulation applicable to
Acquirer or Parent or their respective assets or properties, other than,
with respect to (a), (b) and (c), any such, conflict, termination, breach
or violation that would not have a Material Adverse Effect on Acquirer or
Parent.
-17-
4.4 Acquirer. Acquirer has been formed for the sole purpose of
effecting the transactions contemplated herein and, except as contemplated
by this Agreement, Acquirer has not conducted any business activities and
does not have any material liabilities or obligations.
4.5 Litigation. There is no litigation, suit, action, or
proceeding pending, or to the knowledge of Acquirer, threatened against
Parent or Acquirer, nor is there, to the knowledge of Acquirer, any basis
therefore.
5. TARGET PRECLOSING COVENANTS
During the period from the date of this Agreement until the Effective
Time, the Company covenants to and agrees with Acquirer as follows:
5.1 Advice of Changes. Shareholders will promptly advise
Acquirer in writing (a) of any event occurring subsequent to the date of
this Agreement that would render any representation or warranty of the
Company contained in this Agreement, if made on or as of the date of such
event or the Closing Date, untrue or inaccurate in any material respect
(however, no advisory need be provided regarding any event or action
contemplated or permitted under this Agreement and (b) of the occurrence of
any Material Adverse Change with respect to the Company.
5.2 Maintenance of Business. The parties hereto understand and
acknowledge that it is their intent to work closely together during the
period from the date hereof until the Closing Date. Shareholders will use
commercially reasonable efforts to carry on and preserve its business and
its relationships with customers, suppliers, employees and others in
substantially the same manner as it has prior to the date hereof. If
Shareholders become aware of a material deterioration in the Company's
relationship with any material customer, supplier or key employee, it will
promptly bring such information to the attention of Acquirer in writing
and, if requested by Acquirer, will use commercially reasonable efforts to
restore the relationship.
5.3 Conduct of Business. Shareholders will cause the Company to
continue to conduct its business and maintain its business relationships in
the Ordinary Course and will not, without the prior written consent of the
Chief Executive Officer or Chief Financial Officer of Acquirer, not to be
unreasonably withheld, conditioned or delayed:
(a) borrow any money other than pursuant to existing lines
of credit;
(b) enter into any capital expenditure by the Company in
excess of $10,000 (in the case of transactions or commitments which are
neither made in the Ordinary Course nor contemplated by the Company's
current capital expenditure budget) or $10,000 (in the case of transactions
or commitments made in the Ordinary Course);
(c) encumber or permit to be encumbered any of its assets
except in the Ordinary Course;
(d) dispose of any of its assets except in the Ordinary
Course;
(e) enter into any lease or contract for the purchase or
sale of any property, real or personal, tangible or intangible, except in
the Ordinary Course or enter into any agreement of the types described in
Section 3.10 to the extent involving amounts in excess of $10,000;
-18-
(f) fail to maintain its equipment and other assets in good
working condition and repair according to the standards it has maintained
to the date of this Agreement, subject only to ordinary wear and tear;
(g) pay any bonus, royalty, increased salary (except for
annual increases in the Ordinary Course and disclosed to Acquirer in
writing and approved by Acquirer, such approval not to unreasonably be
withheld) or special remuneration to any officer, employee or consultant
(except pursuant to existing arrangements heretofore disclosed in writing
to Acquirer) or enter into any new employment or consulting or severance
agreement with any such person, or enter into any new agreement or plan of
the type described in Section 3.14.3;
(h) change accounting methods;
(i) declare, set aside or pay any cash or stock dividend or
other distribution in respect of capital stock, or, except as contemplated
in this Agreement, redeem or otherwise acquire any of its capital stock
excluding repurchases of unvested shares upon employee termination;
(j) amend or terminate or settle any disputes under any
contract, agreement or license to which it is a party of a nature required
to be disclosed in Section 3.11;
(k) lend any amount to any person or entity, other than
advances for travel and expenses which are incurred in the Ordinary Course
and which are not material in amount, which travel and expenses shall be
reasonably documented by receipts for the claimed amounts;
(l) guarantee or act as a surety for any obligation except
for the endorsement of checks and other negotiable instruments in the
Ordinary Course and which are not material in amount;
(m) waive or release any material right or claim except in
the Ordinary Course;
(n) issue or sell any shares of its capital stock of any
class or any other of its securities, or issue, grant, modify or create any
warrants, obligations, subscriptions, options, convertible securities,
stock appreciation rights or other commitments to issue shares of capital
stock or accelerate the vesting of any outstanding option or other
security;
(o) split or combine the outstanding shares of its capital
stock of any class or enter into any recapitalization affecting the number
of outstanding shares of its capital stock of any class or affecting any
other of its securities;
(p) except for the Merger, merge, consolidate or reorganize
with, or acquire any entity;
(q) amend its Articles of Incorporation or Bylaws;
(r) agree to any audit assessment by any tax authority or
file any federal or state income or franchise tax return unless copies of
such returns have been delivered to Acquirer;
(s) license any of its technology or any Company
Intellectual Property, except in the Ordinary Course;
(t) change or terminate any insurance coverage;
-19-
(u) terminate the employment of any key employee disclosed
in Item 3.9; or
(v) agree to do any of the things described in the
preceding clauses 5.3(a) through 5.3(u).
5.4 Certain Agreements. Shareholders will cause all present employees
and consultants of the Company engaged in development activity who have not
previously executed the Company's forms of assignments of copyright and
other intellectual property rights to the Company to execute such forms.
5.5 Regulatory Approvals. Shareholders will execute and file, or
join in the execution and filing, of any application or other document that
may be necessary in order to obtain the authorization, approval or consent
of any governmental body, federal, state, local or foreign, which may be
reasonably required, or which Acquirer may reasonably request, in
connection with the consummation of the transactions provided for in this
Agreement. Shareholders will use commercially reasonable efforts to obtain
or assist Acquirer in obtaining all such authorizations, approvals and
consents.
5.6 Necessary Consents. Shareholders will use commercially
reasonable efforts to obtain such written consents and waivers (including
waivers of any applicable refusal or co-sale rights that may apply to the
transactions hereby contemplated) and take such other actions as may be
necessary or appropriate for Shareholders to facilitate and allow the
consummation of the transactions provided for herein and to facilitate and
allow Acquirer to carry on the Company's business after the Closing Date.
5.7 Litigation. Shareholders will notify Acquirer in writing
promptly after learning of any material action, suit, proceeding or
investigation by or before any court, board or governmental agency,
initiated by or against the Company or any Subsidiary or threatened against
it or any Subsidiary.
5.8 No Other Negotiations. In consideration of the time and effort
to be devoted to the transactions contemplated by this Agreement,
Shareholders agree that it will not engage in discussions concerning a
potential financing or an acquisition of the Company with any third party
for a 45-day period beginning on the date of this Agreement.
5.9 Access to Information. Until the Closing Date, Shareholders will
provide Acquirer and its agents with reasonable access to the files, books,
records and offices of the Company, including, without limitation, any and
all information relating to the Company taxes, commitments, contracts,
leases, licenses, real, personal and intangible property and financial
condition. Shareholders will cause the Company's accountants to cooperate
with Acquirer and its agents in making available all financial information
reasonably requested, including without limitation the right to examine all
working papers pertaining to all financial statements prepared or audited
by such accountants.
5.10 Satisfaction of Conditions Precedent. Shareholders will use
commercially reasonable efforts to satisfy or cause to be satisfied all the
conditions precedent which are set forth in Section 9, and Shareholders
will use commercially reasonable efforts to cause the transactions provided
for in this Agreement to be consummated, and, without limiting the
generality of the foregoing, to obtain all consents and authorizations of
third parties and to make all filings with, and give all notices to, third
parties that may be necessary or reasonably required on its part in order
to effect the transactions provided for herein.
-20-
5.11 Blue Sky Laws. Shareholders shall use commercially reasonable
efforts to assist Acquirer to the extent necessary to comply with the
securities and Blue Sky laws of all jurisdictions applicable in connection
with the transactions contemplated herein.
5.12 Notification of Employee Problems. Shareholders will promptly
notify Acquirer if any of the Company's officers becomes aware that any of
its key employees intends to leave its employ.
5.13 Benefit Plans; Cash Compensation. As soon as practicable after
the execution of this Agreement, Acquirer and Shareholders shall confer and
work together in good faith to agree upon mutually acceptable employee
benefit, superanuation, and compensation arrangements for the Company's
employees following the Effective Date. Shareholders shall take such
actions as are necessary to terminate its participation in such Employee
Plans as is requested by Acquirer, provided that Acquirer shall take such
steps as are commercially and administratively reasonable to ensure that
(i) those of the Company's employees who are eligible to participate in
each such Employee Plan shall be entitled to participate, on terms
comparable to those of their current participation, in comparable employee
benefit plans maintained by Acquirer effective immediately following the
Effective Date and (ii) such employees shall be credited with prior periods
of employment with the Company for purposes of participation in and vesting
under Acquirer's employee benefit plans, vacation, long service and sick
leave entitlement where service is a factor. Base compensation and, if
applicable, eligibility for bonus compensation (with appropriate adjustment
to milestones to track the combined business) will remain unchanged for the
Company's officers and employees, or if Acquirer so elects will be adjusted
as mutually agreed.
6. ACQUIRER PRECLOSING COVENANTS
During the period from the date of this Agreement until the
Effective Time, or such later time as provided herein, Acquirer covenants
to and agrees with Shareholders as follows:
6.1 Satisfaction of Conditions Precedent. Acquirer will use all
commercially reasonable efforts to satisfy or cause to be satisfied all the
conditions precedent which are set forth in Section 8, and Acquirer will
use all commercially reasonable efforts to cause the transactions provided
for in this Agreement to be consummated, and, without limiting the
generality of the foregoing, to obtain all consents and authorizations of
third parties and to make all filings with, and give all notices to, third
parties that may be necessary or reasonably required on its part in order
to effect the transactions provided for herein.
6.2 Regulatory Approvals. Acquirer will execute and file, or
join in the execution and filing, of any application or other document that
may be necessary in order to obtain the authorization, approval or consent
of any governmental body, federal, state, local or foreign, which may be
reasonably required, or which Shareholders may reasonably request, in
connection with the consummation of the transactions provided for in this
Agreement. Acquirer will use all reasonable efforts to obtain all such
authorizations, approvals and consents.
6.3 Indemnification. From and after the Effective Time,
Acquirer agrees to indemnify and hold harmless each current and former
director and officer of the Company against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or prior to
-21-
the Effective Time, asserted or claimed after the Effective Time, to the
fullest extent that the Company would have been permitted under its
organizational documents and applicable law in effect on the date hereof to
indemnify such person (and in connection therewith Acquirer shall advance
expenses as incurred to the fullest extent provided for under Acquirer's
organizational documents and applicable law as from time to time in effect,
provided the person to whom expenses are advanced provides an undertaking
to repay such advances if it is ultimately determined that such person is
not entitled to indemnification). Shareholders represent that there is no
current basis for any indemnity claim under this Section 6.4, except as set
out in Item 6.4.
6.4 Cooperation in Obtaining Necessary Consents. Acquirer will
cooperate with Shareholders as reasonably requested by Shareholders in
order to assist Shareholders to obtain such written consents as are
contemplated by Section 5.6 hereof.
7. CLOSING MATTERS
7.1 The Closing. Subject to termination of this Agreement as
provided in Section 10 below, the closing of the transactions provided for
herein (the "Closing") will take place at the offices of Xxxxxxx, Xxxxx &
Xxxxxxx, 000 Xxxxx 000 Xxxx, Xxxxx 000, Xxxxxx, Xxxx 00000 at 10:00 a.m.,
Mountain Time on the first business day following the last to be satisfied
of the conditions to closing or such other date as the parties agree (the
"Closing Date"). At the Closing:
(a) Shareholders shall deliver or cause to be delivered to
Acquirer, against payment by Acquirer to Shareholders of the consideration
set forth in Section 1.2:
(i) an irrevocable general proxy in favor of Acquirer
with respect to the Shares being sold by Shareholders hereunder;
(ii) all of the documents, certificates and instruments
required to be delivered, or caused to be delivered, by such Shareholders
pursuant to Section 9 hereof; and
(iii) all records, documents and files of the
Company, or copies thereof including without limitation, all minute books,
stock records and internal accounting records. Shareholders may retain
copies of and shall be provided reasonable access after the Closing to all
such records, documents and files.
(b) Against delivery of the irrevocable general proxy in
favor of Acquirer with respect to the Shares being sold by Shareholders
hereunder, Acquirer shall deliver all of the documents, certificates and
instruments required to be delivered, or caused to be delivered, by such
Shareholders pursuant to Section 8 hereof.
7.2 Shares Certificates. As soon as practicable, but in any event
within seven (7) business days after the transfer of the Shares has been
stamped pursuant to applicable federal law, Shareholders shall deliver or
cause to be delivered to Acquirer a certificate or certificates
representing the Shares being sold by Shareholders hereunder duly endorsed
for transfer, or accompanied by duly executed assignments separate from
certificate, transferring to Acquirer good and marketable title to such
Shares, free and clear of all liens.
-22-
8. CONDITIONS TO OBLIGATIONS OF SHAREHOLDERS
Obligations hereunder are subject to the fulfillment or
satisfaction, on and as of the Closing, of each of the following conditions
(any one or more of which may be waived by Shareholders):
8.1 Accuracy of Representations and Warranties. The
representations and warranties of Acquirer set forth in Section 4 shall be
accurate in all material respects and Shareholders shall have received a
certificate to such effect executed on behalf of Acquirer by its Chief
Executive Officer and its Chief Financial Officer.
8.2 Covenants. Acquirer shall have performed and complied in
all material respects with all of its covenants contained in Section 6 on
or before the Closing Date, and Shareholders shall have received a
certificate to such effect executed on behalf of Acquirer by its Chief
Executive Officer or Chief Financial Officer.
9. CONDITIONS TO OBLIGATIONS OF ACQUIRER
The obligations of Acquirer hereunder are subject to the
fulfillment or satisfaction on, and as of the Closing, of each of the
following conditions (any one or more of which may be waived by Acquirer):
9.1 Accuracy of Representations and Warranties. The
representations and warranties of Shareholders set forth in Sections 2 and
3 shall be accurate in all material respects and Acquirer shall have
received a certificate to such effect executed on behalf of Shareholders.
9.2 Covenants. Shareholders shall have performed and complied
in all material respects with all of its covenants contained in Section 5
on or before the Closing and Acquirer shall have received a certificate to
such effect signed by Shareholders.
10. TERMINATION OF AGREEMENT
10.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by the mutual written consent of Acquirer and
Shareholders;
(b) Upon notice by either party, if the Merger shall not
have been consummated by October 15, 2002 (the "Final Date") other than as
the result of a breach of this Agreement by the terminating party;
(c) by Acquirer, if Shareholders breach their obligations
under Section 5.8; or
(d) by either party, if a permanent injunction or other
order by any federal or state court which would make illegal or otherwise
restrain or prohibit the consummation of the transactions contemplated by
this Agreement will have been issued and will have become final and
nonappealable.
Any termination of this Agreement under this Section 10.1 will be
effective by the delivery of written notice of the terminating party to the
other party hereto.
-23-
10.2 Certain Continuing Obligations. Following any termination of
this Agreement pursuant to this Section 10, the parties hereto will
continue to perform their respective obligations under Sections 12.11 but
will not be required to continue to perform their other covenants under
this Agreement.
BREACH AND INDEMNIFICATION
Any breach under this Agreement shall constitute a breach under both
(i) that certain Securities Purchase Agreement by and between Acquirer and
Xxxxx Xxxxxxx with respect to his shares of Competency Based Learning, Inc.
Pty. Ltd. ACN 084 763 780, a registered company under the Corporations Law
of South Australia; and (ii) an Agreement and Plan of Reorganization by and
among Acquirer, Competency Based Learning, Inc., a California corporation,
Parent and Xxxxxx Xxxxxxx Xxxxxxxx. The non-breaching party shall be
entitled to the rights and remedies afforded to the non-breaching party for
corresponding breaches thereunder.
12. MISCELLANEOUS
12.1 Governing Law. Except to the extent for corporate matters
governed by the internal laws of South Australia and Utah, the internal
laws of the State of Utah (irrespective of its choice of law principles)
will govern the validity of this Agreement, the construction of its terms,
and the interpretation and enforcement of the rights and duties of the
parties hereto.
12.2 Assignment; Binding Upon Successors and Assigns. No party
hereto may assign any of its rights or obligations hereunder without the
prior written consent of the other party hereto. This Agreement will be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
12.3 Severability. If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible,
the economic, business and other purposes of the void or unenforceable
provision.
12.4 Counterparts. This Agreement may be executed in
counterparts, each of which will be an original as regards any party whose
name appears thereon and all of which together will constitute one and the
same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, bear the signatures of
all parties reflected hereon as signatories.
12.5 Amendment and Waivers. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only by a writing signed by the party to
be bound thereby. The waiver by a party of any breach hereof or default in
the performance hereof will not be deemed to constitute a waiver of any
other default or any succeeding breach or default.
-24-
12.6 No Waiver. The failure of any party to enforce any of the
provisions hereof will not be construed to be a waiver of the right of such
party thereafter to enforce such provisions. The waiver by any party of
the right to enforce any of the provisions hereof on any occasion will not
be construed to be a waiver of the right of such party to enforce such
provision on any other occasion.
12.7 Notices. Any notice or other communication required or
permitted to be given under this Agreement will be in writing, will be
delivered personally or by mail or express delivery, postage prepaid, and
will be deemed given upon actual delivery or, if mailed by registered or
certified mail, on the third business day following deposit in the mails,
addressed as follows:
(i) If to Acquirer:
Trinity Companies, Inc.
0000 Xxxxx Xxxxxxxx Xxxx #000
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxx Xxxx, President
with a copy to:
Xxxxxxx, Xxxxx & Xxxxxxx
000 Xxxxx 000 Xxxx, Xxxxx 000
Xxxxxx, Xxxx 00000
Attention: Xxxxx Xxxxxxxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
(ii) If to the Shareholders:
Xxxxx Xxxxxxx
X.X. Xxx 000
XXXXXXXXXX 0000
Xxxxxxxxx
Phone: ______________
Fax: _______________
And
Xxxxxx Xxxxxxx Xxxxxxxx
000 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Phone: ________________
Fax: __________________
with a copy to:
Xxxxxx Xxxxxxxx Xxxxxxx & Share LLP
Xxxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
or to such other address as the party in question may have furnished to the
other party by written notice given in accordance with this Section 12.7.
12.8 Construction of Agreement. The language hereof will not be construed
for or against any party based solely on that party being the drafting
party. A reference to an article, section or exhibit will mean an article
or section in, or an exhibit to, this Agreement, unless otherwise
explicitly set forth. The titles and headings in this Agreement are for
reference purposes only and will not in any manner limit the construction
of this Agreement. For the purposes of such construction, this Agreement
will be considered as a whole.
-25-
12.9 No Joint Venture. Nothing contained in this Agreement will
be deemed or construed as creating a joint venture or partnership between
the parties hereto. No party is by virtue of this Agreement authorized as
an agent, employee or legal representative of any other party. No party
will have the power to control the activities and operations of any other,
and the parties' status is, and at all times, will continue to be, that of
independent contractors with respect to each other. No party will have any
power or authority to bind or commit any other. No party will hold itself
out as having any authority or relationship in contravention of this
Section.
12.10 Further Assurances. Each party agrees to cooperate
fully with the other party and to execute such further instruments,
documents and agreements and to give such further written assurances as may
be reasonably requested by the other party to evidence and reflect the
transactions provided for herein and to carry into effect the intent of
this Agreement.
12.11 Public Announcement. Acquirer and Shareholders will
issue a press release approved by both parties announcing this Agreement as
soon as practicable following the execution of this Agreement. Parent may
issue such press releases, and make such other disclosures regarding the
transactions contemplated by this Agreement, as it determines to be
required or appropriate under applicable securities laws. Shareholders
will not make any other public announcement or disclosure of the
transactions contemplated by this Agreement until such time as Acquirer has
issued such press releases, and made such other disclosures regarding this
Agreement required under applicable securities laws or the time period
designated by federal securities laws for making such disclosures has
lapsed. Shareholders will take all reasonable precautions to prevent any
trading in the securities of Parent by officers, directors, employees and
agents of Shareholders having knowledge of any material information
regarding Parent provided hereunder, including, without limitation, the
existence of the transactions contemplated by this Agreement (the "Parent
Material Information"), until the information in question has been publicly
disclosed. Shareholders agree not to trade in the securities of Parent
until the Parent Material Information has been disclosed.
12.12 Time is of the Essence. The parties hereto acknowledge
and agree that time is of the essence in connection with the execution,
delivery and performance of this Agreement, and that they will each utilize
reasonable best efforts to satisfy all the conditions to Closing.
12.13 Certain Definitions.
"Entity" shall mean any corporation (including any non-
profit corporation), general partnership, limited partnership, limited
liability partnership, joint venture, estate, trust company (including any
limited liability company or joint stock company), firm or other
enterprise, association, organization or entity.
"Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign
or other government; or (c) governmental or quasi-governmental authority of
any nature (including any governmental division, department, agency,
commission, instrumentality, official, organization, unit, body or Entity
and any court or other tribunal).
"Legal Requirement" shall mean any statute, law,
ordinance, rule, regulation, permit, order, writ, judgment, injunction,
decree or award issued, enacted or promulgated by any local, state, federal
or foreign court, government, governmental department, commission, agency
board or instrumentality.
-26-
"Material Adverse Effect" and "Material Adverse Change"
For purposes of this Agreement, the terms "Material Adverse Effect" and
"Material Adverse Change" mean or refer to, with respect to any entity, any
adverse change, circumstance or effect that, individually or in the
aggregate with all other adverse changes, circumstances and effects, is or
is reasonably likely to be materially adverse to the financial condition,
properties, assets, liabilities, material Intellectual Property rights,
business, or operating results of such entity, and its subsidiaries if any,
taken as a whole, except for those changes, circumstances or events that
are caused by (i) general business or economic conditions, (ii) conditions
affecting the market in which such entity competes, (iii) conditions
resulting from the announcement of this Agreement or the pendency of the
consummation of the transactions contemplated herein and (iv) conditions
resulting from or relating to the taking of any action contemplated by this
Agreement or otherwise agreed to by Acquirer.
"Person" shall mean any individual, Entity or
Governmental Body.
12.14 Expenses. All expenses incurred in connection with
this Agreement on behalf of Shareholders, including, but not limited to,
all accounting, legal and investment banking and other related fees, shall
be paid by Shareholders, and not by the Company or Acquirer.
12.15 Absence of Third Party Beneficiary Rights. No
provisions of this Agreement are intended, nor will be interpreted, to
provide or create any third party beneficiary rights or any other rights of
any kind in any client, customer, affiliate, partner or employee of any
party hereto or any other person or entity, except as specifically
otherwise provided to be for the benefit of officers, directors, employees
or shareholders of the Company in Sections 5.13 and 6.3 (as to officers and
directors), and, except as so provided, all provisions hereof will be
personal solely between the parties to this Agreement.
12.16 Entire Agreement. This Agreement and the exhibits
hereto constitute the entire understanding and agreement of the parties
hereto with respect to the subject matter hereof and supersede all prior
and contemporaneous agreements or understandings, inducements or
conditions, express or implied, written or oral, between the parties with
respect to the subject matter hereof. The express terms hereof control and
supersede any course of performance or usage of trade inconsistent with any
of the terms hereof.
12.17 Sole Remedy. The parties' sole and exclusive remedy
for breach of any representation, warranty or covenant herein shall be the
indemnification provision of Article 11.
12.18 Arbitration. Any dispute arising out of this Agreement
under the Commercial Arbitration Rules (the "AAA Rules") of the American
Arbitration Association (the "AAA"). This arbitration provision is
expressly made pursuant to and shall be governed by the Federal Arbitration
Act, 9 U.S.C. Section 1-14. The Parties agree that pursuant to Section 8
of the Federal Arbitration Act, a judgment of a United States District
Court of competent jurisdiction shall be entered upon the award made
pursuant to the arbitration. A single arbitrator, who shall have the
authority to allocate the costs of any arbitration initiated under this
paragraph, shall be selected according to the AAA Rules within ten (10)
days of the submission to the AAA of the response to the statement of claim
or the date on which any such response is due, whichever is earlier. The
arbitrator shall be required to furnish to the parties to the arbitration a
preliminary statement of the arbitrator's decision that includes the legal
-27-
rationale for the arbitrator's conclusion and the calculations pertinent to
any damage award being made by the arbitrator. The arbitrator shall then
furnish each of the parties to the arbitration the opportunity to comment
upon and/or contest the arbitrator's preliminary statement of decision
either, in the discretion of the arbitrator, through briefs or at a
hearing. The arbitrator shall render a final decision following any such
briefing or hearing. The arbitrator shall conduct the arbitration in
accordance with the Federal Rules of Evidence. The arbitrator shall decide
the amount and extent of pre-hearing discovery which is appropriate. The
arbitrator shall have the power to enter any award of monetary and/or
injunctive relief (including the power to issue permanent injunctive relief
and also the power to reconsider any prior request for immediate injunctive
relief by any party and any order as to immediate injunctive relief
previously granted or denied by a court in response to a request therefor
by any party), including the power to render an award as provided in Rule
43 of the AAA Rules. The arbitrator shall have the power to award the
prevailing party its costs and reasonable attorneys' fees; provided,
however, that the arbitrator shall not award attorneys' fees to a
prevailing party if the prevailing party received a settlement offer unless
the arbitrator's award to the prevailing party is greater than such
settlement offer without taking into account attorneys' fees in the case of
the settlement offer or the arbitrator's award. In addition to the above
courts, the arbitration award may be enforced in any court having
jurisdiction over the parties and the subject matter of the arbitration.
12.19 Interpretation. All references to currency under this
Agreement are United States dollars and all references to "federal" shall
include both the United States and Australia in the context of such
references and all references to "state" shall include both the states of
the United States and the Australian equivalents.
12.20. Governmental Charges. Acquirer shall pay all sales
tax, stamp duty taxes or other governmental charges resulting from the
transactions contemplated by this Agreement excluding any income taxes
assessed against Shareholders or the Company as a result of this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-28-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ACQUIRER SHAREHOLDERS
CBL Acquisition Corp.
By: By:
Name: ________________________ Xxxxx Xxxxxxx
Title: _________________________
By:___________________________
Xxxxxx Xxxxxxx Xxxxxxxx
SIGNATURE PAGE TO
ACN PURCHASE AGREEMENT
-29-
-29-
ANNEX A
Shareholders No. of Shares
Xxxxx Xxxxxxx 100
Xxxxxx Xxxxxxx Xxxxxxxx 100
-30-
