STOCK PURCHASE AGREEMENT
Exhibit
10.17
THIS
STOCK PURCHASE AGREEMENT
(this
“Agreement”) is made as of May 7, 2007, by and between DIGITAL ANGEL CORPORATION
(“Stockholder”) and XXXXXXX COMMUNICATIONS, INC., a Delaware corporation
(“Buyer”).
W
I T N E S S E T H:
WHEREAS,
OuterLink Corporation, a Delaware corporation (the “Company”), provides
satellite-based
mobile asset tracking and data messaging systems used to manage the deployment
of aircraft and land vehicles;
WHEREAS,
the
Stockholder owns of record all of the issued and outstanding Shares (as defined
in Section 4.6(a)) of the Company, which Shares represent all of the issued
and
outstanding capital stock of the Company; and
WHEREAS,
the
Stockholder desires to sell to Buyer, and Buyer desires to purchase from the
Stockholder, the Shares, upon the terms and conditions hereinafter set
forth.
NOW,
THEREFORE,
in
consideration of the mutual agreements and covenants contained herein, and
for
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the parties hereby agree as follows:
1. Purchase
and Sale of the Shares.
Subject
to the terms and conditions of this Agreement and in reliance upon the
representations and warranties of the parties set forth herein, the Stockholder
hereby agrees to sell to Buyer, and Buyer hereby agrees to purchase from the
Stockholder, the Shares on the Closing Date (as defined in Section 3) for the
consideration set forth in Section 2.
2. Consideration.
(a) Purchase
Price.
The
purchase price shall be One Million Dollars ($1,000,000) (the “Purchase Price”).
Upon execution and delivery of this Agreement, Buyer shall execute and deliver
to the Stockholder, as a good faith deposit and initial payment (the “Initial
Payment”) of the Purchase Price, an amount equal to One Hundred Thousand Dollars
($100,000.00) in the form of a promissory note substantially in the form of
Exhibit
A,
attached hereto (the “Deposit Note”), which Initial Payment shall be refundable
(by return and cancellation of the Deposit Note) only in the event of the
failure of any condition set forth in Sections 6(a)-(i). At the Closing, Buyer
shall pay to the Stockholder the balance of the Purchase Price by wire transfer
(the “Closing Payment”). The Closing Payment shall be adjusted pursuant to
Sections 2(b), (c) and (d).
(b) Adjustments
to the Closing Payment.
The
Closing Payment shall be adjusted as of the Closing as follows:
(i) The
Closing Payment shall be increased dollar for dollar for the amount of the
cash
balances and cash equivalents (including bank accounts and certificates of
deposit), if any, of the Company as of the Closing Date, as reflected on the
Closing Balance Sheet, provided, however, cash and cash equivalents shall
exclude cash held by the Company as deposits (which are reflected on the Closing
Balance Sheet as liabilities) from other third parties and any cash held by
the
Company relating to an overpayment to the Company by a Governmental Entity
under
that certain Contract with USPFO for South Carolina.
(ii) The
Closing Payment shall be decreased dollar for dollar for the amount of any
liabilities other than Permitted Liabilities (as defined herein) as reflected
on
the Closing Balance Sheet. The term “Permitted Liabilities” means the
following:
(A) trade
payables and accrued expenses incurred in the ordinary course of business,
including, but not limited to, payroll, payroll taxes, and real estate taxes,
if
any; and
(B) employee
withholding taxes, if any.
(iii) The
preliminary adjustment to the Closing Payment shall be made on an estimated
basis at the Closing in accordance with the Pro Forma Closing Balance Sheet
(as
defined in Section 2(c)(i)) and with any final adjustment and any resulting
payment to be made from the Stockholder on the one hand and the Buyer on the
other hand, or vice versa, shall be made within 15 days after completion of
the
Closing Balance Sheet (as defined and prepared in accordance with the provisions
of Section 2(c)(ii)).
(iv) There
shall be no adjustment to the Closing Payment for any change in the value of
any
of the Company’s fixed assets between December 31, 2006 and the Closing
Date.
(c) Closing
Balance Sheets.
(i) On
or
prior to the Closing Date, the Stockholder
and
Buyer shall jointly prepare a pro forma balance sheet of the Company as of
the
Closing Date (the “Pro Forma Closing Balance Sheet”), determined on an accrual
basis in accordance with generally accepted accounting principles in
effect
in the United States (“GAAP”)
consistently applied and compiled in accordance with Statements on Standards
for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants, (the “Standards”), which Pro Forma Closing Balance Sheet
shall be utilized by the parties to assist in the calculation of the preliminary
adjustments to the Purchase Price and the preparation of the Closing Balance
Sheet as hereinafter provided.
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(ii) Within
60
days after the Closing Date, Buyer, with the assistance of the Stockholder,
shall
prepare a balance sheet of the Company as of the Closing Date (the “Closing
Balance Sheet”), in accordance with GAAP and compiled in accordance with the
Standards. If the parties are unable to agree upon the Closing Balance Sheet,
or
any portion thereof, within 15 days after the parties have commenced resolution
of the dispute, then the matter shall be submitted for resolution to a mutually
agreeable certified public accounting firm (the “Independent Accountants”),
whose determination shall be final and binding upon the parties, and whose
fees
shall be borne equally by the Stockholder and Buyer except, however, that if
the
Independent Accountants determine that the Closing Balance Sheet proposed by
Buyer was correct in its entirety, then the Stockholder shall be solely
responsible for the fees of the Independent Accountants; if the Independent
Accountants determine that the dispute should be resolved in favor of the
objections raised in the Closing Balance Sheet by the Stockholder
in its
entirety, then Buyer shall be solely responsible for the fees of the Independent
Accountants.
(d) Final
Adjustments.
To the
extent that there are assets or liabilities other than Permitted Liabilities,
which were not (i) included in the Pro Forma Closing Balance Sheet, or (ii)
reflected in any adjustment made at the Closing to the Purchase Price, but
which
are included in the Closing Balance Sheet or discovered subsequent thereto,
and
which would, if they had been included in the Pro Forma Closing Balance Sheet,
have resulted in an adjustment to the Purchase Price, the amount thereof shall
be deemed an adjustment to the Purchase Price and the net amount due, whether
from Buyer or the Stockholder, shall be remitted to the other party within
five
(5) days of request therefor from the party to whom such payment is
due.
(e) Fiduciary
Out and Termination Fee.
Notwithstanding anything in this Agreement to the contrary, if
in the
course of discharging its fiduciary duties respecting superior offers,
Stockholder’s Board of Directors determines on or before June 29, 2007 (the
“Drop Dead Date”) that the transactions contemplated by this Agreement are
inferior to any other bona fide offer made to it
and
that, based on advice of legal
counsel, the Stockholder is duty-bound to accept such offer (a “Fiduciary Out”),
then the Stockholder may terminate this Agreement upon return to Buyer and
cancellation of the Deposit Note and payment to Buyer of an amount equal to
the
sum of $100,000.00 and the aggregate out-of-pocket costs and reasonable expenses
of Buyer in connection with this Agreement and the transactions contemplated
hereby, including, without limitation, reasonable fees and disbursements of
accountants, attorneys, investment bankers, and consultants (collectively,
“Termination
Expenses”).
Notwithstanding anything to the contrary set forth in this Agreement, in the
event Buyer is required to file suit to seek all or a portion of the Termination
Amount, Buyer shall be entitled, in addition to payment of the Termination
Expenses, to payment by Stockholder of all additional expenses, including
reasonable attorneys’ fees and expenses, which it incurs in enforcing its rights
hereunder. The return and cancellation of the Deposit Note and the payment
of
the Termination Expenses shall be in lieu of any other damage, remedy or claim
by Buyer against the
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Stockholder
on account of the termination of this Agreement by Stockholder for a Fiduciary
Out.
3. Closing.
The
closing of the purchase and sale of the Shares (the “Closing”) shall take place
at
the
offices of Buyer’s counsel in Boston, Massachusetts at 10:00 a.m. local time, on
the second business day after the date on which all of the conditions to the
Closing set forth in Sections 6 and 7 (other than those that by their terms
are
to be satisfied at or before Closing) have been satisfied or waived, or on
such
other date (any such date, the “Closing Date”) or at such other time and place
as Stockholder and Buyer may mutually agree. If the Closing shall not have
taken
place prior to July 3, 2007, this Agreement shall be deemed terminated without
further action of the parties and the parties shall have no further obligation
to each other hereunder other than such obligations as may be then owed or
owed
as a result thereof, all as provided herein, which obligations shall survive
termination.
4. Representations
and Warranties of the Stockholder.
The
Stockholder,
for
itself and the Company, represents
and warrants to and agrees with Buyer on and as of the date hereof and as of
the
Closing Date, as follows:
4.1 Authority,
Validity of Agreement.
The
Stockholder has all requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder and consummate the
transactions contemplated by this Agreement. The execution and delivery of
this
Agreement, and the consummation of the transactions contemplated hereby are
duly
authorized and, subject to the continuing obligation of the Stockholder’s Board
of Directors to discharge its fiduciary duties respecting superior offers,
no
other approval is required for the performance by the Stockholder of its
obligations hereunder. This Agreement has been duly executed and delivered
by
the Stockholder. This Agreement constitutes a valid and binding obligation
of
the Stockholder, enforceable in accordance with its terms (subject, as to the
enforcement of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium and similar laws affecting creditors’ rights, and with respect to the
remedy of specific performance, equitable doctrines applicable
thereto).
4.2 No
Violations.
Except
as set forth on Schedule
4.2,
neither
the execution and delivery of this Agreement by the Stockholder nor the
consummation of the transactions contemplated hereby will (a) violate any
provisions of the certificate of incorporation or bylaws of the Stockholder
or
the Company, or (b) violate, or be in conflict with, or constitute a default
(or
an event which, with or without due notice or lapse of time, or both, would
constitute a default) under, or cause or permit the acceleration of the maturity
of or give rise to any right of termination, cancellation, imposition of fees
or
penalties under, any note, debt, debt instrument, indenture, security agreement,
option to purchase, lease, deed of trust or license, or any other material
contract to which the Stockholder or the Company is a party or by which the
Stockholder or the Company or any of the assets of either is or may be bound,
or
(c) result in the creation of imposition of any lien or other encumbrance upon
any assets of the Stockholder or the Company under any debt, obligation,
contract or commitment to which Company or the Stockholder is a party or by
which any of the Company’s or the Stockholder’s assets is or may be bound, or
(d) violate any laws to which the Shareholder or the Company may be subject,
which
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would
have a Material Adverse Effect. For purposes of this Agreement, “Material
Adverse Effect” means an event, circumstance, fact, or condition which would:
individually or in the aggregate (i) have a material adverse effect on the
business, financial condition, operations, assets and liability of the entity
to
which reference is being made, taken as a whole, or (ii) would prevent a party
hereto from performing its obligations under this Agreement.
4.3 Consents
and Approvals of Governmental Authorities.
Except
as set forth on Schedule 4.3,
no
consent, approval, order or authorization of, or registration, declaration
or
filing with, any local, state, provincial, federal, foreign or international
governmental authority, agency or other entity, including, but not limited
to,
any court, tribunal or panel (each a “Governmental Entity”), is required to be
obtained or made by the Stockholder or the Company in connection with the
execution, delivery and performance of this Agreement or the consummation of
the
transactions contemplated hereby.
4.4 Other
Consents.
No
consent, waiver or approval of, or notice to, any third party is required to
be
or necessary to be obtained by the Stockholder or the Company in connection
with
the execution and delivery of this Agreement and the performance of the
Stockholder or the Company’s obligations hereunder.
4.5 Organization
and Good Standing of Stockholder and Company.
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(a)
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Each
of the Stockholder and the Company is a corporation duly organized,
validly existing and in good standing under the laws of the State
of
Delaware.
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(b)
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Each
of the Stockholder and the Company has all requisite corporate power
and
authority to own, lease and operate its assets and to carry on its
business as now being conducted.
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(c)
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Company
is qualified to do business and in good standing in each state set
forth
in Schedule
4.5(c),
which is each jurisdiction where the failure to be so qualified would
have
a Material Adverse Effect on Company. Neither the Stockholder nor
the
Company has received notification from any jurisdiction that Company
is
required to qualify or obtain a license to do business in such
jurisdiction or that it is otherwise not in good standing in such
jurisdiction.
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(d)
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Complete
and correct copies of the certificate of incorporation, as amended
(with
such certificate and all amendments thereto certified by the Secretary
of
State of Delaware) and bylaws, as amended to the date hereof, of
the
Company have been provided to
Buyer.
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4.6 Capital
Stock of Company.
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(a)
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Schedule
4.6(a)
sets forth a true and complete list for Company as of Closing of
the
number of all shares of Stock authorized and issued and outstanding
(“Shares”) (including a description of the class or series of all such
outstanding
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shares
and all stock issued as a result of the exercise of all stock options and
warrants), the record owners thereof and the amount and percentage of ownership
of such Shares or equity interests.
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(b)
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Except
as disclosed on Schedule
4.6(b):
(i) all outstanding Shares of the Company are duly authorized, validly
issued, fully paid and non-assessable and are owned of record as
set forth
in Schedule
4.6(a);
(ii) none of such Shares is subject to any preemptive rights; (iii)
neither Company nor Stockholder has any commitment or obligation,
either
firm or conditional, to issue, deliver or sell, or cause to be issued,
delivered or sold, under offers, stock option agreements, stock bonus
agreements, stock purchase plans, incentive compensation plans, warrants,
calls, conversion rights or otherwise, any Shares or other securities
including securities or obligations outstanding which are convertible
into
or exchangeable for any Shares, other equity securities, or ownership
interests, upon payment of any consideration or otherwise; and (iv)
there
are no voting trusts, voting agreements, stockholder agreements,
proxies
or other agreements or understandings with respect to the Shares
to which
Stockholder or Company is a party.
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(c)
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Except
as disclosed on Schedule
4.6(a),
Company does not own, directly or indirectly, any equity, capital
(whether
equity or debt) or profit interest in any corporation, partnership,
association, business trust, joint venture or other business entity.
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4.7 Ownership
and Transfer of Shares to be Transferred.
Except
as disclosed in Schedule
4.6(b),
the
Stockholder has the absolute and unrestricted right, power and authority to
exchange, transfer and assign the Shares pursuant to this Agreement, and such
Shares constitute all of the issued and outstanding securities of Company
entitled to receive consideration in the event of a sale of the Company; as
of
Closing, each circumstance disclosed in Schedule
4.6(b)
will be
waived or modified such that the Stockholder has as of Closing such absolute
and
unrestricted right, power and authority. All Shares are owned by the Stockholder
free and clear of all liens and encumbrances of any nature whatsoever. The
transactions contemplated by this Agreement will not give rise to any preemptive
rights, rights of first refusal, warrants, dividends, or conversion rights,
and
will not violate any law applicable to Company or Stockholder.
4.8 Minute
Books; Books, Records and Accounts; Officers and Directors.
The
minute books of Company contain legally sufficient records of all corporate
actions taken by the directors and Stockholder of Company (except where the
absence of such records would not adversely affect either Company or Buyer),
and
true and complete copies of such minute books have been furnished to Buyer.
All
accounts, books, ledgers and official and other records of whatsoever kind
material to the business of the Company have been fully, properly and accurately
kept and completed in all material respects, there are no material inaccuracies
or material discrepancies of any kind contained or reflected therein, and
collectively they fairly present the financial position of the Company.
Schedule
4.8
sets
forth a true and complete list of each of the current officers and directors
of
Company.
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4.9 Financial
Statements.
Schedule
4.9
contains
true, correct and complete copies of the following financial statements
(“Financial Statements”) of Company: audited balance sheet as of December 31,
2005 and unaudited balance sheets as of December 31, 2006 and March 31, 2007
(the latter being the “March 31, 2007 Balance Sheet”); audited income statement
for the 12-month period ended December 31, 2005; and unaudited income statements
for the periods ending December 31, 2006 and March 31, 2007.
(a) All
of
such Financial Statements are in accordance with the books and records of
Company.
(b) Each
balance sheet (including any related notes) included in the Financial Statements
fairly presents the assets, liabilities and financial condition of the business
of the Company as of the respective dates thereof, and each of the statements
of
operations contained in the Financial Statements are complete and correct and
fairly present the results of operations for the periods referred to therein,
all in accordance with GAAP consistently applied throughout the periods involved
(except for the absence of footnotes and year-end adjustments not material
in
amount).
4.10 Absence
of Undisclosed Liabilities.
Company
has no Liabilities, including Taxes, except:
(a) Liabilities
that are fully accrued or reserved against in the March 31, 2007 Balance Sheet,
or reflected in the notes thereto;
(b) Liabilities
(including those arising from the creation of Contracts (as defined herein)
incurred since the date of the March 31, 2007 Balance Sheet in the ordinary
course of business; and
(c) Liabilities
disclosed in Schedule
4.10(c).
For
purposes of this Agreement, “Liabilities” means any and all claims, assessments,
charges, indebtedness or obligations of any nature whatsoever, whether absolute,
accrued, contingent or otherwise, and whether due or to become due, and “Tax” or
“Taxes” means any tax or other similar liability imposed or collected by any
Governmental Entity, including, without limitation, all federal, state, county,
local, and foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, occupation, property, excise, value added, withholding and
other taxes, duties or assessments (including the recapture of any tax items
such as investment tax credits), together with any related interest, penalties
and additions and shall include any transferee or secondary liability for a
Tax
and any liability arising as a result of being (or ceasing to be) a member
of
any affiliated, consolidated, combined, or unitary group or being included
(or
required to be included) in any Tax return relating thereto.
4.11 Absence
of Certain Changes.
Except
as set forth on Schedule
4.11
or as
shown on the March 31, 2007 Balance Sheet, since January 1, 2007, Company has
not:
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(a)
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Suffered
any change or changes which, individually or in the aggregate, have
had or
would
have, a Material Adverse Effect on the
Company;
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(b)
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Paid,
discharged, or satisfied any Liabilities other than the payment,
discharge
or satisfaction in the ordinary course of
business;
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(c)
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Become
subject to any newly-enacted or adopted law which would reasonably
be
expected to have a Material Adverse Effect on the
Company;
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(d)
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Permitted
or allowed any of its assets to be subjected to any lien or
encumbrance;
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(e)
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Written
up the value of any inventory, any notes or accounts receivable or
any
other assets;
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(f)
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Canceled
or amended any debts or waived any claims or rights of substantial
value,
or sold, transferred or otherwise disposed of any of its assets except
in
the ordinary course of business;
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(g)
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Licensed,
sold, transferred, pledged, modified, disclosed, disposed of or permitted
to lapse any right to the use of any intellectual property right
except in
the ordinary course of business;
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(h)
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Granted
any increase in the compensation of officers or employees (other
than
normal increases to non-officer employees in the ordinary course
of
business);
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(i)
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Declared,
paid or set aside for payment any dividend or other distribution
in
respect of its Shares or other equity securities or, directly or
indirectly, redeemed, purchased or otherwise acquired any Shares
or other
equity securities;
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(j)
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Made
any change in any method of accounting or accounting practice or
any
change in depreciation or amortization policies or rates previously
adopted;
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(k)
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Paid,
lent or advanced any amount to, or sold, transferred or leased any
assets
to, or entered into any agreement or arrangement with, any of its
affiliates, except for directors’ fees, and employment compensation to
officers in the ordinary course of
business;
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(l)
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Sold,
leased or otherwise disposed of any of its assets, except in the
ordinary
course of business;
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(m)
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Made
capital expenditures or commitments therefor exceeding, in the aggregate,
Ten Thousand Dollars ($10,000); or
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(n)
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Agreed,
whether in writing or otherwise, to take any action described in
this
Section 4.11.
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4.12 Title
to, and Sufficiency of, Assets.
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(a)
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The
March 31, 2007 Balance Sheet includes all material tangible assets
owned
or leased by Company, or otherwise used in or pertaining to the business
of the Company as presently conducted, with an indication of which
such
assets are owned and which are
leased.
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(b)
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Company
has good and valid title to or a valid leasehold interest in all
of the
assets included on the March 31, 2007 Balance Sheet. None of such
assets
is subject to any lien or encumbrance of any nature whatsoever. The
assets
included on the March 31, 2007 Balance Sheet constitute all of the
material tangible assets held for use or used in connection with
the
business of the Company and are sufficient for the operation of the
Company’s business as presently conducted or planned to be
conducted.
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4.13 Plant,
Property, and Equipment.
The
leased real property, and other plant, property, equipment, leasehold
improvements, and other tangible assets of the Company are adequate in all
respects for the purposes for which they are being used and conform in all
material respects with applicable laws, are structurally sound with no material
defects, and are in good operating condition and repair (ordinary wear and
tear
excepted).
4.14 Accounts
and Notes Receivable.
Except
to the extent of applicable reserves for doubtful accounts shown on the March
31, 2007 Balance Sheet, all of the accounts, notes and other receivables owed
to
Company as of the date hereof or thereafter acquired or arising prior to the
Closing Date, constitute, and as of the Closing Date will constitute, valid
and
enforceable claims arising from bona fide transactions in the ordinary course
of
business, and Company has not received notice of any claims, refusals to pay
or
other rights of set-off against any of the accounts receivable. Schedule
4.14
contains
an accurate aging of the accounts, notes and other receivables of Company at
March 31, 2007.
4.15 Accounts
and Notes Payable; Interest-Bearing Debt.
(a)
There
are
no back Taxes owed by the Company.
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(b)
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Schedule
4.15(b)
reflects all interest-bearing debt of Company, including the person
or
institution to whom the debt is owed, the current amount of the debt,
and
any instruments reflecting such
debt.
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(c)
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The
Company has no long term debt, notes payable or other long term
obligations, other than capital lease obligations which are disclosed
on
the March 31, 2007 Balance Sheet:
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4.16 Orders,
Commitments, Warranty Claims and Returns.
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(a)
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All
accepted and unfulfilled orders for the sale of Company products
and
services entered into by Company and all outstanding Contracts
for the
purchase of supplies and materials entered into by Company were
made in
the ordinary course of
business.
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(b)
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Except
as disclosed on Schedule
4.17,
there are no claims against Company to return, or claims for refunds
due
to delivery of defective or unsatisfactory Company products, in excess
of
an aggregate Five Thousand Dollars ($5,000), or understanding that
Company
products in the hands of certain customers, retailers or distributors
would be returnable.
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4.17 Defects
in Products; Warranties.
There
are no defects in Company products heretofore or currently being distributed
or
sold by Company which would have a Material Adverse Effect on the Company.
Except as disclosed on Schedule
4.17,
there
are no express or implied warranties outstanding with respect to Company
products, except as imposed by law.
4.18 Real
Property.
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(a)
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No
Owned Real Property.
Company does not have and has not had any fee or other direct or
indirect
ownership interest in any real
property.
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(b)
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Leased
Real Property Agreements.
Schedule
4.18(b)
sets forth a true and complete list of all leased real property and
a copy
of all of the agreements (as amended) relating thereto (the “Lease
Agreements”). To the Stockholder’s knowledge, all the Lease Agreements are
in full force and effect and are valid and enforceable against the
other
parties thereto in accordance with their terms. None of the Lease
Agreements is in default by Company or, to the Stockholder’s knowledge, by
other third parties thereto, and, to the Stockholder’s knowledge, no
circumstance exists with respect to Company or to the other parties
thereto which, with notice, the passage of time or both would (i)
constitute a material default under the Lease Agreements, (ii) provide
a
basis for termination under such agreements prior to their normal
expiration dates, (iii) have a Material Adverse Effect on the Company,
or
(iv) grant a third party the right to occupy the premises. The Closing
will not affect the rights to the continued use and possession of
the
leased real property on the terms and conditions specified in the
Lease
Agreements to the extent and for the purposes for which such property
is
now used.
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(c)
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Leases
of Real Property to Others.
No real property leased by the Company or the Stockholder in connection
with the Company’s business is subject to any lease or other right of use
or possession by any person other than
Company.
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(d)
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Utilities.
To Stockholder’s knowledge, all utilities necessary for the normal use and
operation of the real property leased by the Company or the Stockholder
in
connection with the Company’s business are available at such
property.
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(e)
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Former
Facilities.
No former Company real property was ever used by Company for anything
other than commercial office
space.
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(f)
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Disputes.
No third party has raised any claim, dispute or controversy with
respect
to any of the Lease Agreements, nor has Stockholder or Company
received
notice of alleged nonperformance, delay in delivery or other noncompliance
by it with respect to its obligations under any such Lease
Agreements.
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4.19 Contracts.
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(a)
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Schedule
4.19(a)(i)
contains a complete list of all Current Customers. For purposes of
this
Agreement, “Current Customer” means any person from whom Company has
recognized revenue in the past twelve months or to whom Company has
any
obligation to complete work or honor any contractual warranty.
Schedule
4.19(a)(ii)
contains (i) a list of all currently outstanding but unaccepted written
proposals relating to proposed contracts with customers, and (ii) a
description of all oral proposals relating to proposed contracts
with
customers. True and correct copies of all standard form customer
contracts
used by Company have been made available to Buyer. No contract for
any
Current Customer, whether written or oral, differs in any material
respect
from the attached standard forms of customer contracts. True and
correct
copies of all written Contracts with Current Customers have been
provided
or made available to Buyer. Except as disclosed on Schedule
4.19(a)(iii),
since January 1, 2007, no Current Customer has canceled or terminated
its
contract, or notified Company or Stockholder of an intent to cancel
or
terminate its contract.
|
|
(b)
|
Schedule
4.19(b)
contains a complete list of all suppliers of Company who since March
31,
2007 have invoiced Company for Thirty Thousand Dollars ($30,000)
or more,
including the types of products and/or services provided by each
such
supplier.
|
|
(c)
|
Schedule
4.19(c)
sets forth a true and complete list of all of the currently effective
written contracts or written or binding oral agreements (the “Contracts”)
to which Company is a party, of the following
types:
|
|
(i)
|
Employment
agreements and any outstanding offers of
employment.
|
|
(ii)
|
Royalty
agreements.
|
|
(iii)
|
Consulting
agreements.
|
11
|
(iv)
|
Agreements
or commitments for capital expenditures or the acquisition by purchase
or
lease of fixed assets providing for payments in excess of Thirty
Thousand
Dollars ($30,000) individually or in the
aggregate.
|
|
(v)
|
Agreements
for the purchase, sale, lease or other transfer of any services,
products,
materials or supplies in excess of Five Thousand Dollars ($5,000)
individually or in the aggregate from a single
person.
|
|
(vi)
|
Joint
venture or partnership agreements with any other
entity.
|
|
(vii)
|
Non-competition
or similar agreements which prevent Company or any of its employees
from
competing with any person (other than
Company).
|
|
(viii)
|
Confidentiality
or employee non-solicitation agreements with any other person (other
than
as are contained in the customer
Contracts).
|
|
(ix)
|
Agreements
relating to the research or development by Company for others or
by others
for Company.
|
|
(x)
|
Agreements
for the long-term borrowing or long-term lending of money (including
capitalized leases).
|
|
(xi)
|
Agreements
for the short-term borrowing or short-term lending of
money.
|
|
(xii)
|
Any
Contract, not listed in other Schedules to this Agreement, requiring
the
performance by Company of any obligation for a period of time extending
more than one year from the date of this Agreement or calling for
Company
to pay a consideration or incur costs of more than Thirty Thousand
Dollars
($30,000).
|
Schedule
4.19(c)
is
organized by type of Contract and briefly summarizes, with respect to each
Contract, the names of the parties thereto, the products and/or services
covered, the date of the Contract, and all amendments or modifications
thereto.
|
(d)
|
Except
as set forth in Schedule
4.19(d),
Company has in all material respects performed, and is now performing,
the
obligations of, and Company is not in default (nor would by the lapse
of
time or the giving of notice or both be in default) in respect of
any
Contract referred to in the Schedules to this Article IV. Each of
the
Contracts or other instruments shown on the Schedules referred to
in this
Agreement is in full force and effect and is a valid and enforceable
obligation against Company and, to Stockholder’s knowledge, against the
other parties thereto in accordance with its terms (subject, as to
the
enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting creditors’ rights, and,
with respect to the remedy of specific
|
12
performance,
equitable doctrines applicable thereto). To Stockholder’s knowledge, no other
parties to such Contracts or other instruments is in default in any material
respect (or would by the lapse of time or the giving of notice or both be
in
default in any material respect) thereunder or has breached in any material
respect any terms or provisions thereof.
|
(e)
|
There
are no Contracts to which Company is a party to or bound by which
either
separately or in the aggregate has or is likely to result in a
loss to
Company.
|
|
(f)
|
No
third party has raised any claim with respect to any of the Contracts,
nor
has Company received notice of alleged default by Company with respect
to
its obligations under any such
Contracts.
|
|
(g)
|
No
material part of the Customer Contracts or sales has been won through
small business or other set-aside
programs.
|
|
(h)
|
Other
than as provided in Section 4.19(a), true and complete copies of
all of
the Contracts and instruments referred to in the Schedules delivered
under
this Article IV have been delivered to Buyer.
|
4.20 Litigation.
Except
as set forth in Schedule
4.20,
there
are no suits, claims, actions, arbitrations, litigation, legal, administrative
or other proceedings (including without limitation permit revocations, permit
amendments, or administrative complaints of discrimination) or governmental
investigations of which it has notice, pending, or, to Stockholder’s knowledge,
threatened against Company or its assets. Schedule
4.20
sets
forth, with respect to each such suit, claim, action, arbitration, litigation,
proceeding or investigation, the forum, the parties thereto, the subject matter
thereof, the amount of damages claimed or relief sought and the status as of
a
recent date.
4.21 Compliance
with Laws.
|
(a)
|
To
the Stockholder’s knowledge, the operations and business of Company have
been conducted, and are being conducted, in compliance with all applicable
laws. Company has not received any notification that it is in violation
of
any laws.
|
|
(b)
|
Schedule
4.21(b)
hereto sets forth a list of all governmental approvals, permits,
licenses,
certifications or other authorizations of which the failure to obtain
or
maintain would have a Material Adverse Effect on the Company. All
approvals, permits, licenses, certifications or other authorizations
have
been obtained and are in full force and effect and are being complied
with
by the Company in all material
respects.
|
|
(c)
|
Except
as set forth in Schedule
4.21(c),
there are no outstanding judgments, orders, injunctions, decrees,
stipulations, awards (whether rendered by a Governmental Entity or
by
arbitration) or private settlement agreements to which
|
13
Company
is a party. All of the foregoing set forth in Schedule
4.21(c)
are
being complied with by Company in all material respects.
|
(d)
|
Neither
Company nor any director, officer, employee or agent thereof has,
directly
or indirectly, given or agreed to give any gift or similar benefit
to any
customer, supplier, competitor or governmental employee or official
which
would subject Company or any of its assets, to any damage or penalty
under
any law in any civil, criminal or governmental litigation or proceeding.
|
4.22 Computer
Software and Intellectual Property.
|
(a)
|
Company
Software Products.
Schedule
4.22(a)
contains a list of all Company Software Products. For the purposes
hereof,
“Company Software Products” means all of Company’s proprietary software
(i.e., computer programs in any form (including source code and binary
code), and in any stage of development, test and release, together
with
all related technical documentation, user manuals, data files, databases
and other works of authorship, and all information and materials
necessary
or required for the effective installation, maintenance, use and
support
of such computer programs) that is included in Company products or
has
been offered or provided by Company under license for use by Company’s
customers. Company Software Products does not include third party
software, which for purposes of this Agreement means all software
licensed, leased or loaned by third party vendors or contractors
for use
by Company in connection with its internal business operations, or
for
distribution by Company under sublicense for use by customers, either
on a
stand-alone basis or in combination with Company Software Products.
|
|
(b)
|
Third
Party Software.
Schedule
4.22(b)
contains a list of all material third party software under which
any
rights to use or distribute software have been granted to Company.
Company
has delivered to Buyer copies of all such license agreements.
|
|
(c)
|
Source
Code Escrow.
Schedule
4.22(c)
contains a list of all agreements under which Company has delivered
source
code for any Company Software Product to be held in escrow and released
upon the occurrence of certain events or conditions. Company has
made
available to Buyer copies of all such source code escrow agreements.
|
|
(d)
|
Certain
Intellectual Property Rights.
Schedule
4.22(d)
contains a complete list of the following items included in the Company’s
intellectual property rights: (i) United States and foreign patents
and
patent applications, and, in the case of patent applications, a
description of the current status of each of the applications; (ii)
copyrights in computer programs and other works of authorship which
are
registered with any governmental entity; or for which registration
applications have been filed; (iii) United States and foreign trademarks,
service marks and
|
14
|
|
trade
names, for which registrations have been received or applications
for
registration have been filed; and (iv) a list of unregistered
trade names
used by Company.
|
|
(e)
|
Miscellaneous.
|
|
(i)
|
Company
owns good and marketable title to, and has the right to possess,
use,
modify, and prepare derivative works based on, manufacture, reproduce,
license, and distribute, all Company Software Products and intellectual
property rights in the United States and throughout the world in
Company’s
business as currently conducted and Company has done nothing to
cause such
rights to be owned or possessed by any third party other than the
license
of object code pursuant to any of the Contracts. Company has received
no
claim that any Company Software Product or any intellectual property
right
is in whole or in part invalid, unenforceable, ineffective or in
violation
of the rights of others. All Company Software Products and all
intellectual property rights developed by Company employees and/or
independent contractors are owned exclusively by the
Company.
|
|
(ii)
|
There
is no pending claim or litigation and, to Stockholder’s knowledge, there
is no threatened claim or litigation contesting the right to use,
sell,
license or dispose of any Company Software Product or intellectual
property rights, nor, to Stockholder’s knowledge, is there any fact or
alleged fact which would reasonably serve as a basis for any such
claim
that could materially limit the protection afforded by the Company’s
intellectual property rights to the use, sale, license, or disposition
of
Company Software Products.
|
|
(iii)
|
Except
as disclosed on Schedule
4.22(e)(iii),
each person who participated in the creation of Company’s Software
Products and/or its intellectual property rights either has executed
a
valid, binding and enforceable assignment of rights of ownership
to
Company or was an employee of Company acting within the scope of
his or
her employment at the time of such creation, and in all cases all
incidents of ownership thereto are held exclusively by the
Company.
|
|
(iv)
|
Except
as disclosed on Schedule
4.10(c)
and Schedule
4.22(e)(iv),
Company is in material compliance with the terms and conditions of
all
license agreements governing the use of third party software.
|
|
(v)
|
All
third party software used by Company for its internal business operations
(including product development and testing) is licensed for use only
on
computer equipment located at Company’s sites or on computers under
control of Company’s employees or independent contractors.
|
15
|
(vi)
|
Except
as disclosed on Schedule
4.22(e)(vi),
Company has taken reasonable steps to safeguard and maintain the
secrecy
and confidentiality of all trade secrets and proprietary or confidential
business and technical information included in its intellectual
property
rights, including, without limitation, entering to appropriate
confidentiality or disclosure agreements with employees, officers,
consultants, independent contractors and licensees that serve Company,
the
forms of which have been made available to
Buyer.
|
|
(vii)
|
All
documents and materials containing trade secrets or proprietary or
confidential business or technical information of Company (including
without limitation all source code for Company Software Products)
are
presently located at one of the premises identified as leased real
property in Schedule
4.18(b)
and, as applicable, at escrow agents’ sites listed on Schedule
4.22(c),
and, to Stockholder’s knowledge, have not been used, divulged, or
appropriated for the benefit of any person other than Company, or
to the
detriment of Company.
|
|
(viii)
|
To
Stockholder’s knowledge, no third party is infringing on any intellectual
property right of the Company in a manner that could materially limit
the
protection afforded by the Company’s intellectual property rights to the
use, sale, license or disposition of Company Software Products.
|
|
(ix)
|
The
execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby will not breach, violate
or
conflict with any material instrument or material agreement to which
the
Company or Stockholder is a party governing any intellectual property
right, will not cause the forfeiture or termination or give rise
to a
right of forfeiture or termination of any intellectual property right
or
in any way materially impair the right of Company to use, sell, license
or
dispose of or bring any action for the infringement of any intellectual
property right or any Company Software Product. As used herein,
intellectual property rights means all of Company’s rights, title and
interest in and to all: (a) United States and foreign patents and
patent
applications; (b) copyrights in computer programs and other works
of
authorship; (c) trade secrets and proprietary or confidential business
and
technical information; (d) proprietary “know-how,” whether or not
protectable by patent, copyright or trade secret right; and (e) United
States and foreign trademarks, service marks, trade names and associated
goodwill, and registrations or applications for registration of any
such
marks or names; Company Software Products; and third-party
software.
|
16
4.23 No
Subsidiaries.
Except
as set forth on Schedule
4.23,
the
Company does not have any subsidiaries.
4.24 Environmental
Matters.
|
(a)
|
To
Stockholder’s knowledge, there are no underground storage tanks present on
any Company real property.
|
|
(b)
|
Schedule
4.24(b)
accurately describes all of the environmental permits currently
held by
Company, and the environmental permits listed on Schedule
4.24(b)
are all of the environmental permits necessary for the continued
conduct
of any Hazardous
Material Activity of Company as such activities are currently being
conducted. For the purposes hereof, “Hazardous Materials Activity” means
the possession, transportation, transfer, recycling, storage, use,
treatment, manufacture, investigation, removal, remediation, release,
sale, or distribution of, any hazardous material, hazardous or
toxic
substance, or hazardous waste that is defined as such or regulated
by law
(“Hazardous
Materials”).
|
|
(c)
|
Company
has not transferred or released Hazardous Materials (except for standard
office supplies used in the ordinary course that may be considered
to be
Hazardous Materials) to any disposal sites, and no action or proceeding
exists or, to Stockholder’s knowledge, is threatened against Company with
respect to any transfer or release of Hazardous Materials to a disposal
site.
|
|
(d)
|
Company
has delivered to Buyer or made available for inspection by Buyer
any
records concerning the Hazardous Materials Activities of Company
and all
environmental audits and environmental assessments of any Company
real
property conducted at the request of, or otherwise available to,
the
Stockholder or Company.
|
|
(e)
|
Company
has never conducted any Hazardous Material Activity in violation
of any
applicable environmental law.
|
|
(f)
|
No
action, proceeding, revocation proceeding, amendment procedure, writ,
injunction or claim is pending or, to Stockholder’s knowledge, threatened
concerning or relating to any environmental law or any Hazardous
Materials
Activity of Company.
|
4.25 Employee
Plans and Arrangements.
|
(a)
|
Neither
Company nor any Related Party (i.e., any entity which is considered
a
single employer with Company under applicable law) sponsors, maintains,
administers, contributes to or has or could reasonably be expected
to have
any Liability with respect to any ERISA benefit plan other than an
ERISA
benefit plan specifically listed on Schedule
4.25(a)
(a
“Company ERISA Benefit Plan”).
|
17
|
|
No
Company ERISA Benefit Plan is subject to Code Section 412 or Part
3 of
Subtitle B of Title I of ERISA or Title IV of ERISA. Neither Company
nor
any Related Party has or could reasonably be expected to have any
liability to any person
in connection with any “voluntary employees’ beneficiary association”
within the meaning of Code Section 501(c)(9), “welfare benefit fund”
within the meaning of Code Section 419, “qualified asset account” within
the meaning of Code Section 419A or “multiple employer welfare
arrangement” within the meaning of ERISA Section 3(40). As used herein,
“Code” means the Internal Revenue Code of 1986, as amended, and “ERISA”
means the Employee Retirement Income Security Act of 1974, as
amended.
|
|
(b)
|
Except
as disclosed on Schedule
4.25(b),
neither Company nor any Related Party sponsors, maintains, administers,
contributes to, is a party to or has or could reasonably be expected
to
have any liability with respect to (i) any non-ERISA benefit arrangement
other than a non-ERISA benefit arrangement specifically listed on
Schedule
4.25(b)
(a
“Company Non-ERISA Benefit Arrangement”), or (ii) employment agreement,
collective bargaining agreement, consulting agreement, confidentiality
agreement, agreement not to compete or other labor agreement between
either Company or a Related Party and any individual who provides
or
provided personal services to either Company or a Related Party as
an
employee or otherwise or such individual’s employer or agent.
|
|
(c)
|
True
and complete copies of each of the following documents have been
made
available to Buyer: (i) each Company Non-ERISA Benefit Arrangement
or a
complete description of any non-ERISA benefit arrangement that is
not in
writing and a complete and accurate description of the individuals
covered
by each such arrangement; (ii) all written documents of any nature
reflecting contractual terms and conditions of any person’s employment
with the Company (an “Employee Agreement”) or a complete description of
any Employee Agreement that is not in writing; (iii) all written
documents
of any nature establishing the terms and conditions of each Company
ERISA
Benefit Plan and related trust or insurance agreements or contracts
evidencing any funding vehicle with respect thereto; (iv) the three
most
recent annual reports on Treasury Form 5500, including all schedules
and
attachments, with respect to any plan for which such a report is
required;
(v) the form of summary plan description, including any summary of
material modifications thereto or other modifications communicated
to
participants; and (vi) the most recent determination letter with
respect
to each Company ERISA Benefit Plan intended to qualify under Section
401(a) of the Code and the full and complete application therefor
submitted to the Internal Revenue Service.
|
|
(d)
|
Each
Company ERISA Benefit Plan and Company Non-ERISA Benefit Arrangement
and
Employee Agreement is and has been maintained and administered in
accordance in all material respects with the documents or instruments
governing the plan, arrangement or agreement (or in accordance with
|
18
|
|
the written descriptions thereof provided
in Schedule
4.25(d)
in
the case of an unwritten Company Non-ERISA Benefit Arrangement
or Employee
Agreement), except in the case of any change in applicable governing
laws
that are not yet required to be incorporated
into the instruments or documents governing the plan, arrangement
or
agreement, in which case the plan, arrangement or agreement has
in
operation been maintained and administered in accordance with
applicable
laws at all times on and after the effective date of such change.
Each
Company ERISA Benefit Plan that is intended to be qualified under
Code
Section 401(a) is and has at all times been so qualified in form
and, in
all material respects, in operation.
|
|
(e)
|
There
are no facts or circumstances relating to any Company ERISA Benefit
Plan
or Company Non-ERISA Benefit Arrangement that could, directly or
indirectly, subject Company or any Related Party to (i) any excise
tax or
other liability under Chapters 43 or 47 of Subtitle D of the Code,
(ii)
any penalty, tax or other liability under Code Sections 6651, 6652
and
6690 or (iii) any civil penalty or other liability under Section
502(c) of
ERISA.
|
|
(f)
|
No
payment made or benefit provided pursuant to any Company ERISA Benefit
Plan, Company Non-ERISA Benefit Arrangement or Employee Agreement
will be
nondeductible to Company or any Related Party because of the applicability
of Code Section 280G, nor will either Company or any Related Party
be
required to gross up or otherwise compensate any recipient in connection
with the imposition of any excise tax (including any interest or
penalties
related thereto) pursuant to Code Section 4999. Neither Company nor
any
Related Party will incur any Liability in connection with severance
benefits which become payable solely by reason of the transactions
contemplated by this Agreement. Other than as expressly provided
herein,
such transactions will not result in the acceleration of accruals,
funding, vesting or payment of any contribution or benefit under
any
Company ERISA Benefit Plan, Company Non-ERISA Benefit Arrangement
or
Employee Agreement.
|
|
(g)
|
Other
than as required by COBRA, Company does not provide or maintain,
or
provide nor is it obligated to maintain or provide, post-retirement
or
post-termination health, medical, life or other welfare benefits
for
employees or former employees of Company. No promise or other commitment
exists that would prevent either Buyer or Company or Stockholder
from
amending or terminating any arrangement providing health, medical,
life,
or other welfare benefits in respect of any current or former employee
of
Company without liability therefor. Except as set forth in the applicable
government instruments or as required by law, neither Company nor
any
other person has created any impediment to the amendment, termination,
merger of or transfer of assets and liabilities with respect to any
Company ERISA Benefit Plan, Company Non-ERISA Benefit Arrangement
or
Employee Agreement.
|
19
|
(h)
|
All
contributions or benefit obligations in connection with any Company
ERISA
Benefit Plan, Company Non-ERISA Benefit Arrangement or Employee
Agreement
have been fully paid or properly accrued in accordance with GAAP
in the
Financial Statements of Company. All obligations to provide medical,
dental, vision, life, accidental death and dismembership or long-term
disability benefits pursuant to any Company ERISA Benefit Plan,
Company
Non-ERISA Benefit Arrangement or Employee Agreement are either
fully
insured (except for amounts not covered by reason of co-payments,
deductibles, participant contributions or similar allowances) or
will be
provided by an HMO with respect to which Company’s sole liability is to
pay premiums.
|
|
(i)
|
There
are no pending or, to Stockholder’s knowledge, threatened audits or
investigations by any governmental entity, claims (other than undisputed
claims for benefits arising in the ordinary course), suits, grievances
or
other proceedings, and Company is unaware of any facts or circumstances
that could give rise thereto, involving, directly or indirectly,
any
Company ERISA Benefit Plan, Company Non-ERISA Benefit Arrangement,
or
Employment Agreement.
|
4.26 Employees.
|
(a)
|
Except
as set forth on Schedule
4.26(a),
Company (i) is not a member of any multi-employer bargaining group;
(ii)
has not withdrawn from any multi-employer bargaining group within
the past
five years, and (iii) within the past three years not defeated any
collective bargaining representation petition, removed any existing
collective bargaining authority, or defeated any multi-employer bargaining
group or other third party with respect to employees.
|
|
(b)
|
Company
has complied in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment,
wages and hours.
|
|
(c)
|
There
is no strike, labor dispute, work slowdown or work stoppage actually
pending or threatened against Company. No collective bargaining
representation petition or collective bargaining agreement grievance
is
pending or threatened against Company.
|
|
(d)
|
Except
as set forth on Schedule
4.26(d),
as of the Closing Date, Company will have paid or reserved on its
books
any and all obligations for vacation pay, severance pay, layoff or
termination, or other amounts that may be due any person including,
but
not limited to, by reason of any action taken under this Agreement;
excluded from this representation shall be any sick days or vacation
days
accrued by employees during 2007 and disclosed on Schedule
4.26(h).
|
|
(e)
|
Company
is not a joint employer with any other legal entity and does not
control
labor relations or operations of any other legal entity.
|
20
|
(f)
|
Company
does not employ or otherwise obtain the services of any “leased employee”
(as such term is defined in the Code).
|
|
(g)
|
Except
as disclosed on Schedule
4.26(g),
all workers associated with the business of the Company are employees
of
Company.
|
|
(h)
|
Schedule
4.26(h)
lists the names, titles, date of employment, current base compensation
rates, and estimated vacation and sick time accrued for each employee
of
Company as of a recent date, and the amount of bonuses paid (or
due)
during the most recent full fiscal year to each employee.
|
|
(i)
|
Except
as set forth on attached Schedule
4.26(i),
no Key Employee of the Company has resigned since January 1, 2007
and to
the Stockholder’s knowledge, no Key Employee plans to retire or resign
during the twelve-month period following the Closing Date or otherwise
be
unavailable as an employee of the Company at compensation substantially
similar to such employee’s present rate of compensation. For purposes
hereof, “Key Employee” shall mean any Company employee whose total
compensation during the prior year exceeds
$50,000.
|
4.27 Compensation
Plans.
Except
as disclosed on Schedule
4.27,
Company
is not a party, nor is it subject, to any plan, contract or understanding
providing for any bonuses, commissions, stock options, stock warrants, deferred
compensation, profit sharing, annuity, or similar obligations of any kind,
including any incentive compensation bonus, retention bonus, sale bonus, or
similar obligations specifically relating to the consummation of the
transactions contemplated by this Agreement.
4.28
Insurance.
Schedule
4.28
contains
a description of the policies of general liability, theft, fire, flood,
windstorm, earthquake, workers’ compensation, life, health, dental, disability,
business travel accident, directors and officers, and other forms of insurance
owned or held by Company.
4.29 Taxes.
|
(a)
|
For
purposes of this Section 4.29, references to Company include all
predecessors thereof or any transferee with respect thereto.
|
|
(b)
|
Except
as set forth in Schedule
4.29(b):
|
|
(i)
|
All
Company Tax returns have been properly and timely filed, and Taxes
shown
thereon as due have been timely paid. There exists no factual basis
or
event which would make Buyer or Company liable for Company Taxes
other
than those which have been paid or accrued. As of the time of each
filing,
the foregoing Tax returns correctly reflected the facts regarding
the
|
21
|
|
income,
business, assets, operations, activities, status, or other matters
of the
Company and any other information required to be shown thereon.
|
|
(ii)
|
All
Company Taxes arising in, or attributable to, the pre-Closing period
have
been (or will be) paid or fully accrued or established as a deferred
liability on the books, records and financial statements of Company
(whether or not such Taxes are due and payable). The March 31,
2007
Balance Sheet fully accrues or establishes all liability for Company
Taxes
as of the date thereof.
|
|
(iii)
|
There
is no (nor has there been any requirement for an) agreement, waiver
or
consent providing for an extension of time with respect to the
assessment
or collection of, or statute of limitations regarding, any Taxes
or the
filing of any Tax returns and no power of attorney granted by or
with
respect to Company with respect to any Tax matter is currently
in force.
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|
(iv)
|
There
is no pending or, to Stockholder’s knowledge, threatened audit,
examination or investigation with respect to any Company Tax returns
or
Company Taxes or any Company Tax matters, nor has any written or,
to
Stockholder’s knowledge, other notice of the initiation thereof been
received by Company; there is (and there has been) no action, suit,
proceeding, claim, demand, deficiency or additional assessment pending,
or
threatened with respect to any Company Tax returns or any Company
Taxes.
|
|
(v)
|
There
are no lien or encumbrances, on any asset of Company arising out
of,
connected with, or related to Taxes (other than for Taxes that are
not
delinquent).
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|
(vi)
|
Other
than elections made on the face of Tax returns provided to Buyer,
no
agreement, consent, or election for foreign, federal, state or local
Tax
purposes which would affect or be binding on Company after the Closing
has
been filed or entered into with respect to Company or any of its
assets or
operations.
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|
(vii)
|
Company
is not a party to, bound by, or under any obligation (or potential
obligation) under any Tax Agreement. For purposes of this Agreement,
“Tax
Agreement” means any sharing, allocation, indemnity or other agreement or
arrangement (written or unwritten) relating to Taxes (other than
this
Agreement).
|
|
(viii)
|
Company
is not a party to any agreement relating to a foreign sales corporation
within the meaning of Section 922 of the Code, or a domestic
|
22
|
|
international
sales corporation within the meaning of Section 991 of the Code.
|
|
(ix)
|
Company
is not and has never been subject to Section 999 of the Code. Company
is
not (and has not been) a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code;
|
|
(x)
|
Company
is not nor has it been a partner in any partnership or any entity
treated
as a partnership for Federal income tax purposes.
|
|
(xi)
|
No
Tax years (or periods) with respect to the Federal income Tax liabilities
of Company and its assets and operations have been
extended.
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|
(xii)
|
Company
has filed all necessary clearance certificates or similar documents
which
may be required by any governmental entity upon withdrawal from
doing
business in such governmental
jurisdiction.
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|
(xiii)
|
Company
has withheld and paid all Taxes required to have been withheld and
paid in
connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or third party.
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|
(xiv)
|
Company
is unaware of any facts or circumstances which would make it likely
that
any tax authority will assess any additional Taxes for any period
for
which Tax returns have been filed.
|
|
(c)
|
There
have been delivered to Buyer copies of all Company Tax returns for
the
last three years and all open years and all revenue agent (or other)
reports, findings, proposed assessments, deficiency (or other) notices,
agreements (including any Tax Agreement), elections, claims or demands
and
all other items relating to Taxes.
|
4.30 Bank
Accounts.
Schedule
4.30
sets
forth a true and complete list of all of the (a) names and locations of all
banks, trust companies, savings and loan associations, brokerage firms, and
other financial institutions at which Company maintains accounts of any nature,
lock boxes, or safety deposit boxes, and the names of all persons authorized
to
draw thereon or make withdrawals therefrom and (b) the account number for each
account identified in clause (a).
4.31 Affiliate
Transactions.
Except
as set forth in Schedule
4.31,
to
Stockholder’s knowledge, no director or officer of Company and no person related
to any of them has any interest in (a) any asset used in connection with or
pertaining to the Company, or (b) any creditor, supplier, customer,
manufacturer, distributor or reseller of products of Company; provided, however,
that (i) no such director or officer or other person shall be deemed to have
such an interest solely by virtue of the ownership of less than 1% of the
outstanding voting stock or debt securities of any publicly held company, the
stock or debt securities of which are traded on a recognized stock exchange
or
quoted on the National Association of Securities Dealers
Automated Quotation System, and (ii) no such director or officer or other person shall be deemed to have such an interest solely by virtue of the ownership by a partnership in which he is a partner of less than 5% of the outstanding voting stock or debt securities of any privately-held company.
23
Automated Quotation System, and (ii) no such director or officer or other person shall be deemed to have such an interest solely by virtue of the ownership by a partnership in which he is a partner of less than 5% of the outstanding voting stock or debt securities of any privately-held company.
4.32 Powers
of Attorney; Guarantees, Suretyships.
(a) Except
as
disclosed on Schedule
4.32(a),
neither
Stockholder nor Company has granted, and there are not outstanding, any general
or special powers of attorney or comparable delegations of authority, which
would be binding upon Buyer or Company, or any of Company’s assets, after the
Closing.
(b) Except
(i) as set forth in Schedule
4.32(b),
(ii) as
may be contained in instruments associated with Company bank debt, Lease
Agreements, equipment leases and customer Contracts, and (iii) for endorsements
for collections of deposits in the ordinary course of business, Company has
no
liability as guarantor, surety, co-signer, endorser, co-maker, indemnitor,
or obligor in respect of the obligation, indebtedness or potential liability
of
any person.
4.33 No
Brokerage or Other Fees.
Except
as set forth on Schedule
4.33,
no
broker or finder has acted for Company in connection with this Agreement or
the
transactions contemplated hereby, and no person is entitled to any brokerage
or
finder fee or commission from Buyer or Company in respect to this Agreement
by
virtue of any action by Company. The fees and expenses of any broker or finder
acting for the Company in this transaction shall be paid in full by the
Stockholder at or prior to the Closing.
4.34 Disclosure.
No
representation or warranty by Stockholder or Company in this Agreement and
no
statement or information contained in the Financial Statements, the Exhibits
and
the Schedules attached hereto, when read together and taken as a whole, contains
any untrue statement of material fact or omits to state any material fact
necessary in order to make the statements herein or therein, in light of the
circumstances under which they were made, not false or misleading.
5. Buyer’s
Representations and Warranties.
Buyer
represents and warrants and agrees with the Stockholder as follows:
(a) Organization
and Authority.
Buyer
is a corporation duly organized, validly existing and in good standing under
the
laws of the State of Delaware. Buyer has all requisite power to own its property
and to carry on its business as presently conducted, and Buyer has complete
and
unrestricted power and authority to perform this Agreement and the transactions
contemplated hereby.
(b) Binding
Effect.
This
Agreement and all other agreements, documents and instruments executed by Buyer
in connection herewith are and will be the valid and binding obligations of
Buyer, enforceable against Buyer in accordance with their respective terms,
24
and
the
execution, delivery and performance of this Agreement, and such other
agreements, documents and instruments executed by Buyer, and the transactions
contemplated hereby and thereby, have been duly and validly authorized and
approved by Buyer’s Board of Directors.
(c) Non-Contravention.
The
execution and delivery of this Agreement and all other agreements, documents
and
instruments to be executed in connection herewith, and the performance of the
transactions contemplated hereby and thereby, do not, and will not, constitute
a
violation of, be a default under, give rise to any right of termination,
cancellation or acceleration under, or conflict with the terms of, the
Certificate of Incorporation or By-laws of Buyer, each as amended to date,
or
any contract, lease, indenture, agreement, order, judgment or decree to which
Buyer is a party or by which it is bound, and does not, and will not, violate
or
constitute a default under any statute, rule, regulation, order or ordinance
of
any governmental, judicial or arbitrary body.
(d) Litigation.
There
is no suit, action or legal, administrative, arbitration or other proceedings
of
any nature pending, or to the knowledge of Buyer, threatened, against
Buyer which materially adversely affects Buyer, or which might materially
and adversely affect the legality or validity of this Agreement, or the
consummation of the transactions contemplated hereby.
(e) Disclosure.
No
representation or warranty made by Buyer in this Agreement or in any statement
or certificate furnished or to be furnished to the Company or the Stockholder
pursuant hereto or in connection herewith, contains or shall contain any untrue
statement of material fact or omits or shall omit to state a material fact
necessary to make the statements contained therein not misleading.
(f) Brokerage.
Buyer
has not engaged the services of any broker, investment banker, financial
advisor, finder, or other person or entity entitled to be paid a commission,
fee
or other compensation in connection with the transactions provided for in this
Agreement.
6. Conditions
to Buyer’s Obligations.
The
obligations of Buyer to consummate the transactions contemplated by this
Agreement are subject to the satisfaction (unless waived by Buyer) on or prior
to the date hereof of each of the following conditions:
(a) Representations
and Warranties.
All
representations and warranties of the Stockholder set forth in this Agreement
and in any statement, certificate or other instrument delivered to Buyer
pursuant hereto or in connection herewith, shall have been true and correct
in
all material respects on and as of the date of this Agreement, and shall be
true
and correct in all material respects on and as of the Closing Date.
(b) No
Adverse Change.
Except
as set forth on Schedule
4.11,
since
December 31, 2006, there shall not have been any material damage to or loss
or destruction of any of the Company’s fixed assets, or any Material Adverse
Effect on the Company, or
25
the
imposition of any laws, rules or regulations which could have a Material Adverse
Effect on the Company, or any suit or action brought against the Company the
outcome of which could have a Material Adverse Effect on the Company, its
condition (financial or otherwise) or operations of the Company’s
assets.
(c) Compliance
with Agreement.
The
Stockholder shall have performed and complied with all of its obligations under
this Agreement which are to be performed or complied with by it on or prior
to
the date hereof.
(d) Proceedings
and Instruments Satisfactory.
All
proceedings, corporate or other, to be taken by the Stockholder, or by the
Company or on its behalf, in connection with the transactions contemplated
by
this Agreement, and all documents incident thereto, shall be satisfactory in
all
respects to Buyer.
(e) No
Litigation.
No
investigation, suit, action or other proceeding shall be threatened or pending
against the Company or the Stockholder before any court or Governmental Entity
which seeks to restrain or prohibit or obtain damages or other relief
in connection with the performance of this Agreement or the
consummation of the transactions contemplated hereby.
(f) FCC
Compliance and Approval.
Stockholder and Company shall be in compliance in all respects with the
Communications Act of 1934, as amended (the “Communications Act”) and with all
applicable Federal Communications Commission (“FCC”) rules, regulations and
policies, and shall have complied with all FCC eligibility and basic
qualifications requirements to effectuate the transactions contemplated
hereunder, including, but not limited to, the non-U.S. ownership limits of
Section 310(b) of the Communications Act and Section 5301 of the Anti-Drug
Abuse
Act of 1988, 21 U.S.C. Section 862. No later than June 29, 2007, the FCC shall
have consented to the transfer of control over Company to Buyer as evidenced
by
the FCC’s or the FCC International Bureau’s Grant of the Transfer Application
(as defined and described in Section 13 hereof) (“FCC Approval”).
(g) Non-Competition
Agreement.
The
Stockholder shall have entered into a non-competition agreement with Company,
to
be effective from and after Closing, in the form of Exhibit
B
(the
“Non-Competition Agreement”).
(h) Deliveries.
The
Stockholder shall have delivered (or cause to be delivered) on or prior to
the
Closing Date, the following:
(i) stock
certificates representing the Shares, duly endorsed for transfer by the
Stockholder to Buyer;
(ii) the
Non-Competition Agreement duly executed by the Stockholder;
26
(iii) a
certificate of the Secretary of the Company as to the Company’s charter
documents, by-laws and incumbency and signatures of the Company’s
officers;
(iv) [INTENTIONALLY
OMITTED.]
(v) a
copy of
the charter documents of the Company, with all amendments thereto, as certified
as of a recent date by the Secretary of State of the State of
Delaware;
(vi) a
certificate of the legal existence and corporate good standing of the Company
issued as of a recent date by the Secretary of State of the State of
Delaware;
(vii) certificate(s)
of good standing to do business in all foreign jurisdictions set forth on
Schedule
4.5(c),
issued
as of a recent dated by the Secretary of State of such foreign
jurisdiction;
(viii) a
certificate of the tax good standing of the Company issued as of a recent date
by the applicable tax authority in the State of Delaware and any other foreign
jurisdiction where the Company files any Tax return;
(ix) the
written resignations of the directors and officers of the Company from their
respective positions with the Company;
(x) the
stock
books, stock ledgers, minute books and corporate seal of the Company (all other
records of the Company being located in the corporate premises, or otherwise,
of
the Company);
(xi) documents
evidencing the discharge or release of any security interests, liens or
encumbrances on the assets and properties of the Company, including, without
limitation, UCC termination statements; and
(xii) such
other documents, instruments and certificates not inconsistent with the
provisions of this Agreement, executed by the Company and/or the Stockholder,
as
Buyer shall reasonably require to effectuate the purposes and intent of this
Agreement.
(i) Financing.
By 5:00
p.m. EDT, May 21, 2007, the
Buyer
shall have obtained all of the financing it needs in order to consummate the
transactions contemplated hereby and fund its working capital requirements,
in
each case on terms and conditions satisfactory in all reasonable respects to
the
Buyer. (Buyer hereby agrees to notify the Stockholder promptly of the
satisfaction of this condition.)
27
7. Conditions
to the Stockholder’s Obligations.
The
obligations of the Stockholder to consummate the transactions contemplated
by
this Agreement are subject to the satisfaction (unless waived by the
Stockholder)
on or
prior to the date hereof of each of the following conditions:
(a) Representations
and Warranties.
All
representations and warranties of Buyer set forth in this Agreement and in
any
statement, certificate or other instrument delivered to the Stockholder pursuant
hereto or in connection herewith, shall have been true and correct in
all
material respects on and as of the date of this Agreement, and shall be true
and
correct in all material respects on and as of the Closing Date.
(b) Compliance
with Agreement.
Buyer
shall have performed and complied with all of the obligations under this
Agreement which are to be performed or complied with by it on or prior to the
date hereof.
(c) Proceedings
and Instruments Satisfactory.
All
proceedings, corporate or other, to be taken by Buyer or on behalf of Buyer
in
connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be satisfactory in all material respects
to
the Company and the Stockholder.
(d) No
Litigation.
No
investigation, suit, action or other proceeding shall be threatened or pending
against Buyer before any court or governmental agency which seeks to restrain
or
prohibit or obtain damages or other relief in connection with the performance
of
this Agreement or the consummation of the transactions contemplated
hereby.
(e) Deliveries.
Buyer
shall have delivered (or cause to be delivered) to the Stockholder on or prior
to the Closing Date the following:
(i) the
Closing Payment due under Section 2(a);
(ii) a
certificate of the Secretary of Buyer as to (A) the votes of Buyer’s Board of
Directors authorizing and approving the execution, delivery and performance
of
this Agreement and the consummation of the transactions contemplated hereby,
and
(B) the incumbency and signatures of Buyer’s officers;
(iii) a
certificate of the legal existence and corporate good standing of Buyer issued
as of a recent date by the Secretary of State of the State of Delaware;
and
(iv) such
other documents, instruments and certificates not inconsistent with the
provisions of this Agreement, executed by Buyer, as the Company and the
Stockholder shall reasonably require to effectuate the purposes and intent
of
this Agreement.
(f) Release
of Imperium Encumbrances.
The
Stockholder shall have obtained from Imperium (as defined in the Schedules)
the
discharge or release of any security interests, liens
28
or
encumbrances, including any pledge obligations, respecting the Shares on terms
and conditions that would not, in the reasonable good faith judgment of legal
counsel to the Stockholder, have a material adverse effect on the business,
financial condition, operations, assets and liability of the Stockholder, taken
as a whole. The Stockholder hereby agrees to use best efforts to obtain such
discharge or release as promptly as practicable, and shall deliver evidence
of
such efforts to Buyer as Buyer may request.
8. Survival
of Representations.
(a) Survival
of Representations.
All
representations, warranties and agreements made by any party in this Agreement
or pursuant hereto shall survive the date hereof for a period of three years,
excluding representations and warranties relating to
Sections
4.7, 4.24, 4.25, and 4.29, which shall survive until
the
expiration of the applicable statutes of limitations with respect to such
representation or warranty, notwithstanding any investigation by any party
made
either before or after the date hereof.
(b) Statements
as Representations.
All
statements contained in any certificate, schedule, list, document or other
writing delivered pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed representations and warranties within
the
meaning of Section 8(a).
9. Indemnification
by the Stockholder.
(a) Indemnity.
The
Stockholder shall indemnify, defend and hold Buyer and the Company harmless
from
and against any and all claims, liabilities, obligations, losses, damages,
costs
or expenses (including reasonable legal fees, costs and expenses arising from
or
in connection with any action, suit, proceeding or claim incident to any of
the
foregoing) (collectively, “Losses”) suffered by Buyer or the Company resulting
from or which arise out of (i) any acts or omissions of the Company or the
Stockholder arising or occurring prior to the Closing Date with respect to
the
Company’s business, including, without limitation, any Losses related to the
Company’s breach of warranty with respect to the Company’s products or services
produced or performed prior to the Closing, or any product liability claim
or
other liability arising out of defective products or services produced or
performed by the Company prior to Closing; (ii) any breach of any representation
or warranty, covenant, agreement or obligation on the part of the Stockholder
under this Agreement, any Schedule or Exhibit to this Agreement or under any
agreement executed in connection therewith, or from any misrepresentation in
or
omission from any certificate or other instrument furnished to Buyer pursuant
hereto or in connection herewith; (iii) any facts or circumstances relating
to
the Company existing or arising on or prior to the Closing Date known to the
Stockholder, including, without limitation, tax claims, environmental claims,
assessments or liabilities relating to tax periods ending on or prior to the
Closing, liabilities under or in respect of any litigation described on
Schedule
4.20
and
liabilities arising from the elimination from the Company’s balance sheet of any
notes or other payables to the Stockholder or former stockholders of the
Company; (iv) any failure of the Company to comply as of the Closing Date with
any employee benefit plan laws, rules, regulations or
29
orders,
including, without limitation, the so called GUST amendments; (v) any failure
of
the Company to comply with any applicable bulk sales transfer laws; and (vi)
any
brokers’ or finders’ fees or compensation in connection with the transactions
provided for by this Agreement by any person or entity claiming a right to
same
because of having been engaged by or having served the Stockholder or the
Company. Notwithstanding the foregoing, the Stockholder
shall not be liable for Permitted Liabilities included on the Closing Balance
Sheet in accordance with the provisions of Section 2.
(b) Payment
of Losses.
Subject
to the provisions of Section 9(c), Buyer shall be reimbursed by the Stockholder
on demand by Buyer to the Stockholder for any Losses suffered by Buyer or the
Company with respect to any liability or claim to which the indemnity set forth
in Section 9(a) relates. In addition, provided any liability or claim to which
the indemnity set forth in Section 9(a) relates is acknowledged by the
Stockholder or is adjudicated or arbitrated as a liability or claim to which
the
indemnity set forth in Section 9(a) relates through the mediation and
arbitration provisions set forth in Section 14(h), Buyer shall have the right
to
set off and deduct the amount of any payment made by it or Loss suffered by
it
with respect to such liability or claim to which the indemnity set forth in
Section 9(a) relates against the amount of any payment obligation of Buyer
to
the Stockholder
under this Agreement. In
addition, amount payable under this Section 9 shall be reduced by and to the
extent that the Company or Buyer receives proceeds under insurance policies
specifically as a result of, and in compensation for, the subject of an
indemnification liability or claim.
(c) Third-Party
Claims.
Should
any claim be made against Buyer or the Company by a person not a party to this
Agreement with respect to any matter to which the indemnity set forth in Section
9(a) relates (a “Third-Party Claim”), then Buyer shall promptly give the
Stockholder written notice of any such Third-Party Claim (including all
available information regarding the details of the Third-Party Claim). If the
Stockholder acknowledges to Buyer in writing that such Third-Party Claim is
subject to the indemnity set forth in Section 9(a), the Stockholder shall have
the right to defend or settle any such Third-Party Claim, at its sole expense,
on its own behalf and with counsel of its own choosing, which counsel shall
be
reasonably satisfactory to Buyer. In such defense or settlement of any
Third-Party Claim, Buyer shall cooperate with and assist the Stockholder as
is
reasonable and may participate therein with its own counsel at its sole expense,
and Buyer’s written consent shall be a requirement to any settlement and
disposition thereof, which consent shall not be unreasonably withheld or
delayed, provided that in any such settlement or disposition, Buyer shall not
be
liable for any amounts under such settlement or disposition and such settlement
or disposition shall contain a complete release of Buyer from any liability.
Failure by Buyer to give notice within a reasonable period of time shall not
constitute a defense, in whole or in part, to any claim for indemnification
by
Buyer, except only to the extent that such failure by Buyer shall result in
a
material prejudice to the Company and the Stockholder. If the Stockholder does
not notify Buyer within 10 days after receipt of Buyer’s written notice of a
Third-Party Claim that the Stockholder intends to undertake the defense thereof,
and that such claim is subject to the indemnity set forth in Section 9(a),
or if
after undertaking such defense the Stockholder fails to pursue such
30
defense
in a prudent manner, then Buyer shall have the right to contest, settle or
compromise such Third-Party Claim, and the Stockholder shall indemnify Buyer
for
the full amount of all Losses paid or suffered by Buyer in respect thereof.
So
long as the Stockholder has given Buyer timely notice that the Stockholder
will
undertake the defense of the Third-Party Claim,
and is defending such Third-Party Claim in good faith, Buyer shall not pay
or
settle any such Third-Party Claim without the written consent of the
Stockholder.
(d) Cumulative
Remedies.
Except
as expressly provided herein, the remedies provided to Buyer and the Company
in
this Section 9 shall be cumulative and shall not preclude the assertion by
Buyer
of any other rights or the seeking of any other remedies against the
Stockholder.
(e) Limitations
on Indemnification.
(i) The
Stockholder
shall
not be required to indemnify Buyer or the Company with respect to any Losses
resulting from or arising out of matters described in Section 9(a), unless
and
until the aggregate amount of all Losses exceeds $25,000 (the
“Threshold Amount”), in which case the Stockholder shall be required to
indemnify Buyer or the Company for the entire amount of which such Losses from
the first dollar. Losses thereafter may be asserted regardless of
amount.
(ii) The
Stockholder’s maximum liability to Buyer or the Company under this Section 9
shall not exceed $1,000,000.
10. Indemnification
by Buyer.
(a) Indemnity.
Buyer
shall indemnify, defend and hold the Stockholder harmless from and against
any
and all Losses suffered by the Stockholder resulting from (i) any breach of
any
representation or warranty, covenant, agreement or obligation on the part of
Buyer under this Agreement, any schedule to this Agreement or under any
agreement executed in connection herewith; (ii) any misrepresentation in or
omission from any certificate or other instrument furnished to the Stockholder
pursuant hereto or in connection herewith; and (iii) any claims for brokers’ or
finders’ fees or compensation in connection with the transactions provided for
by this Agreement by any person, firm, corporation or other entity claiming
a
right to same because of having been engaged by or having served
Buyer.
(b) Payment
of Losses.
Subject
to the provisions of Section 10(c), the Stockholder shall be reimbursed by
Buyer
on demand for any Loss suffered by the Stockholder with respect to any liability
or claim to which the indemnity set forth in Section 10(a) relates.
(c) Third-Party
Claims.
Should
any Third-Party Claim be made against the Stockholder with respect to any matter
to which the indemnity set forth in Section 10(a)
31
relates,
then the Stockholder
shall
promptly give Buyer written notice of any such Third-Party Claim and Buyer
shall
have the right to defend or settle any such Third-Party Claim, at its sole
expense, on its own behalf and with counsel of its own choosing, which counsel
shall be reasonably satisfactory to the Stockholder.
The
Stockholder agrees that Xxxxxxxxx Xxxxxxxxxx
& Xxxx LLP is satisfactory. In such defense or settlement of any claim, the
Stockholder shall cooperate with and assist Buyer to the maximum extent
reasonably possible and may participate therein with its own counsel at its
own
expense, and the Stockholder’s
written
consent shall be a requirement to any settlement and disposition thereof, which
consent shall not be unreasonably withheld or delayed. Failure by the
Stockholder
to give
notice within a reasonable period of time shall not constitute a defense, in
whole or in part, to any claim for indemnification by the Stockholder, except
only to the extent that such failure by the Stockholder
shall
result in a material prejudice to Buyer. If Buyer does not notify the
Stockholder
within
10 days after receipt of the Stockholder’s
written
notice of a Third-Party Claim that Buyer intends to undertake the defense
thereof, and that such claim is subject to the indemnity set forth in Section
10(a), or if after undertaking such defense Buyer fails to pursue such defense
in a prudent manner, then the Stockholder
shall
have the right to contest, settle or compromise the claim and Buyer shall
indemnify the Stockholder for the full amount of all Losses paid or suffered
by
the Stockholder
in respect thereof. Notwithstanding the foregoing, so long as Buyer is
contesting any such Third Party Claim in good faith, the Stockholder shall
not
have the right to pay or settle any such claim without the prior written consent
of Buyer.
(d) Cumulative
Remedies.
Except
as expressly provided herein, the remedies provided to the Stockholder in this
Section 10 shall be cumulative and shall not preclude the assertion by the
Stockholder of any other rights or the seeking of any other remedies against
Buyer.
11. Press
Releases.
The
Stockholder agrees that it will not release, and shall not permit any person
or
entity to release, any press releases or other similar announcements without
Buyer’s prior approval thereof, it being acknowledged by Buyer that the
Stockholder is a publicly-traded company.
12. Conduct
of the Business for Buyer’s Account After June 15, 2007.
Notwithstanding
anything in this Agreement to the contrary, if for any reason whatsoever (other
than the Buyer’s failure to comply with its obligations hereunder), the Closing
shall not have taken place by June 15, 2007, the Buyer agrees that upon any
subsequent Closing in accordance with the terms hereof, the Purchase Price,
in
addition to any adjustments made in accordance with Section 2, shall be adjusted
upward by an amount equal to the 60% of the aggregate actual operating expenses
of the Company (included such operating expenses as may be paid or otherwise
covered directly by Stockholder) for the period between June 16, 2007 and
Closing, as mutually determined in good faith by the parties and assuming
operations in the ordinary course of business. Buyer and Stockholder hereby
agree that Xxxx X. Xxxxxxx and Xxxxx XxXxxxx, as promptly as practicable after
execution and delivery hereof, shall confer regarding an interim budget and
operating plan for the period commencing May 7, 2007 and ending July 3,
2007.
32
|
13.
|
Covenants
and Agreements of the Stockholder and Buyer Regarding Taxation, FCC,
Xxxxxxx’x Knowledge.
|
|
(a)
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Buyer
and the Stockholder agree that the Company’s 2007 tax year shall be
treated as two (2) tax years, the first of which ends on the Closing
Date
and the second of which begins on the day after the Closing Date
and ends
on December 31, 2007. The Stockholder agrees that it will cause
the Tax
return for the period from January 1, 2007 to the Closing Date
to be
prepared and provided to Buyer, at the Stockholder’s sole expense, for
review and filing by Buyer in a timely manner consistent with the
filing
requirements under the Internal Revenue Code. Buyer agrees to provide
to
the Stockholder and its agents all information available from the
books of
the Company, as reasonably requested by the Stockholder, for the
preparation of said return.
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(b)
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Within
five (5) business days following the date of execution hereof, the
Stockholder and Buyer shall jointly submit to the FCC completed FCC
Form
312 Application (the “Transfer Application”) seeking FCC consent to the
transfer of control over Company to Buyer, and for the FCC or the
FCC
International Bureau to Grant the Transfer Application. For purposes
of
this Agreement, “Grant” means an action or decision of the FCC or the FCC
International Bureau pursuant to delegated authority that is made
public
by the FCC either pursuant to a written decision or public notice.
As
provided in Section 6 above, the Closing shall be conditioned on
the
parties’ having obtained FCC Approval by the Drop Dead
Date.
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(c)
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The
Buyer acknowledges that Xxxx X. Xxxxxxx has acted as an officer of
the
Company, and in such capacity has overseen certain operations and affairs
of the Company. Accordingly, the Buyer warrants, represents and agrees
that Xxxx X. Xxxxxxx has no knowledge of any fact or circumstance
which
presently, or solely with the passage of time, could reasonably be
expected to (a) result in a default by the Stockholder of any of
the
warranties and representations contained in this Agreement (a “Warranty
Default”), or (b) cause a failure of a condition precedent of Buyer’s
obligations under this Agreement or give rise to any other circumstance
entitling Buyer to terminate or avoid this Agreement (either, a “Failure
of Buyer’s Condition Precedent”), or (c) give rise to an indemnity claim
by Buyer against the Stockholder pursuant to the provisons of Section
9 of
this Agreement or otherwise (a “Buyer Indemnity Claim”). To the extent
that Xxxx X. Xxxxxxx is, as of the date hereof, aware of a fact or
circumstance which could reasonably be expected to lead to a Warranty
Default, a Failure of Buyer’s Condition Precedent, or a Buyer Indemnity
Claim, then such shall not be grounds for the Buyer to terminate
or avoid
this Agreement, and the Buyer shall have no rights against the Stockholder
on account of such Warranty Default, Failure of Buyer’s Condition
Precedent or Buyer Indemnity Claim. Further, to the extent that Xxxx
X.
Xxxxxxx, prior to the Closing, acquires knowledge of any state of
facts
which could reasonably be expected give rise to a Warranty Default,
a
Failure of Buyer’s Condition Precedent, or a Buyer Indemnity Claim, the
Buyer
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33
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shall
give immediate written notice of the same to the Stockholder, and
if
thereafter the Buyer elects to waive, as applicable, any Failure
of
Buyer’s Condition Precedent relating thereto and close and consummate
the
transactions contemplated by this Agreement, the Buyer shall have
no
rights against the Stockholder on account of such particular Warranty
Default or Buyer Indemnity
Claim.
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14. Miscellaneous
Provisions.
(a) Expenses.
Each
party shall be responsible for all of its fees and expenses incurred by it
in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. The Stockholder shall
be
responsible for all fees and expenses of the Company incurred prior to the
Closing in connection with the execution and delivery of this Agreement and
the
consummation of the transactions contemplated hereby, subject to Section
12.
(b) Assignability;
Binding Effect.
This
Agreement may not be assigned by any of the parties hereto without the prior
written consent of the others. Subject to the foregoing, this Agreement shall
be
binding upon, and inure to the benefit of, the parties hereto and their
respective heirs, executors, administrators, successors and assigns.
(c) Notice.
All
notices, payments, demands and requests required or permitted hereunder shall
be
in writing and shall be deemed duly given if personally delivered or sent by
registered or certified mail, postage prepaid, return receipt requested, or
by
Federal Express or other recognized overnight express couriers, or by fax and
followed by hard copy, to the parties hereto at the following addresses:
IF
TO THE
STOCKHOLDER:
Digital
Angel Corporation
000
Xxxxxxxx Xxx.
Xxxxx
Xx.
Xxxx, XX
WITH
A
COPY
TO:
Xxxxxxxx
Xxxxxxxx, Esq.
Digital
Angel Corporation
0000
X.
Xxxxxxxx Xxx., Xxxxx 000
Xxxxxx
Xxxxx, XX 00000
Fax:
000-000-0000
IF
TO
BUYER:
Xxxxxxx
Communications, Inc.
0000
Xxxxxxxx Xxxx, Xxxx 000
Xxxxxxxx,
XX 00000
Attn:
Xxxx Xxxxxxx,
President
34
Fax:
___________________________
WITH
A
COPY
TO:
Xxxxx
X.
X’Xxxxxxx, Esq.
Xxxxxxxxx
Xxxxxxxxxx & Xxxx LLP
The
Prudential Tower
000
Xxxxxxxx Xxxxxx
Xxxxxx,
XX 00000-0000
Fax:
(000) 000-0000
Any
party
hereto may change its address for notice by giving notice of any such change
of
address in the manner set forth above.
(d) Governing
Law.
This
Agreement and all issues related to the subject matter hereof shall be governed
by and construed in accordance with the laws of the State of
Delaware.
(e) Consent
to Jurisdiction.
The
parties hereto consent to the jurisdiction of the courts of the Superior Court,
Suffolk County, Boston, Massachusetts or the United States District Court for
the District of Massachusetts, sitting in Boston, Massachusetts, as well as
the
jurisdiction of all courts from which an appeal may be taken from such courts,
for the purposes of any suit, action or other proceeding relating to this
Agreement or with respect to any transactions contemplated hereby, and expressly
waive any and all objections the parties hereto may have as to the venue of
such
courts to settle or adjudicate any claim or controversy arising
hereunder.
(f) Entire Agreement;
Severability.
This
Agreement, together with the Schedules and Exhibits and the Non-Competition
Agreement, sets forth the entire agreement and understanding among the parties
as to the subject matter hereof and merges and supersedes all prior discussions,
agreements and understandings with respect hereto. This Agreement and said
Schedules and Exhibits may not be amended, changed or modified except by a
written instrument duly executed by the parties hereto. The
provisions of this Agreement will be deemed severable, and if any provision
of
this Agreement is held illegal, void or invalid under applicable law, such
provision may be changed to the extent reasonably necessary to make the
provision legal, valid and binding. If any provision of this Agreement is held
illegal, void or invalid in its entirety, the remaining provisions of this
Agreement will not be affected but will remain binding in accordance with their
terms. Buyer may, nevertheless, declare this Agreement to be null and void
if
it, in its sole discretion, deems the avoidance or invalidity of any provision
hereunder to adversely affect its interests.
(g) No
Waiver.
No
waiver of any breach or default hereunder shall be considered valid unless
in
writing, and no such waiver shall be deemed a waiver of any subsequent breach
or
default and of the same or similar nature.
35
(h) Mediation
and Arbitration.
Except
as otherwise provided in the Non-Competition Agreement, or as otherwise agreed
by the parties, any controversy, dispute or claim between the parties arising
out of, related to or in connection with this Agreement or the performance
or
breach hereof shall be submitted to and settled as follows:
(i) All
controversies or claims arising out of or relating to this Agreement shall
be
settled in the first instance by non-binding mediation under the Commercial
Mediation Rules of the American Arbitration Association (“AAA”) in Boston,
Massachusetts as such rules are in effect on the date of delivery of demand
for
mediation. The parties agree to use mutually acceptable professional mediation
services. Each party shall pay its own expenses, including legal fees, and
agree
to share equally any other fees associated with the mediation, including the
cost of the mediator. Unless a settlement is mutually agreed to in writing,
the
participants shall not be bound by the discussions or outcome of the mediation.
(ii) If
the
dispute cannot be settled through mediation within 30 days of the demand for
same, the dispute shall be submitted to arbitration conducted by the AAA in
Boston, Massachusetts, in accordance with the Commercial Arbitration Rules
of
the AAA as then in effect; provided
that the
arbitration shall be by a single arbitrator mutually selected by Buyer on the
one hand, and the Stockholder on the other hand, and if the parties do not
agree
within 20 days after the date of notification
of a request for such arbitration made by either party, the selection of the
single arbitrator shall be made by the AAA in accordance with said rules. All
discovery will be completed, and the arbitration will commence, within 30 days
after appointment of the arbitrator. Unless the arbitrator finds that
exceptional circumstances justify delay, the hearing will be completed, and
an
award will be rendered in writing, within 15 days after commencement of the
hearing. In addition to, and not in substitution for any and all other relief
in
law or equity that may be granted by the arbitrator, the arbitrator may grant
equitable relief and specific performance to compel compliance hereunder. The
determination of the arbitrator shall be accompanied by a written opinion of
the
arbitrator and shall be final, binding and conclusive on the parties, and
judgment on the arbitrator’s award, including without limitation equitable
relief and specific performance, may be entered in and enforced by any court
having jurisdiction thereof.
(iii) The
fees
and expenses of the AAA and of the arbitrator shall be shared equally by Buyer
on the one hand, and the Stockholder on the other hand.
(iv) The
provisions of this Section 14(h) shall not prohibit the parties from pursuing
any injunctive relief, temporary restraining orders or other remedies in equity,
available to the parties for a breach or threatened breach of this
Agreement.
(i) Further Assurances.
The
parties hereto agree that they will, without further consideration, from time
to
time hereafter, and at their own expense, execute and deliver
36
such
other documents, and take such other action, as may reasonably be requested
in
order to more effectively consummate the transactions contemplated hereby.
The
provisions hereof shall survive the date hereof.
(j) Counterparts.
This
Agreement may be signed in any number of counterparts, including by facsimile,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE
PAGE TO FOLLOW]
37
[Signature
page to Stock Purchase Agreement]
IN
WITNESS WHEREOF,
the
parties have caused this Agreement to be executed under seal as of the date
first above written.
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STOCKHOLDER:
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DIGITAL
ANGEL CORPORATION
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By:
/s/ Xxxxx XxXxxxx
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Name: Xxxxx XxXxxxx
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Title: President
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BUYER:
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XXXXXXX
COMMUNICATIONS, INC.
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By:
/s/Xxxx X. Xxxxxxx
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Name: Xxxx X. Xxxxxxx
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Title: President
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