ASSET PURCHASE AGREEMENT
BY AND AMONG
XPIT ACQUISITION LLC, A COLORADO LIMITED LIABILITY COMPANY,
CQG, INC., A COLORADO CORPORATION,
XPIT CORPORATION, A DELAWARE CORPORATION
RATEXCHANGE CORPORATION, A DELAWARE CORPORATION
AND
CERTAIN RELATED PARTIES (AS DEFINED HEREIN)
TABLE OF CONTENTS
ARTICLE I PURPOSE
ARTICLE II PURCHASE AND SALE OF ASSETS
2.1 Acquired Assets
2.2 Excluded Assets
ARTICLE III PURCHASE PRICE
3.1 Payment of the Base Price
3.2 Contingent Payments
3.3 Assumed Obligations
ARTICLE IV ASSUMPTION OF LIABILITIES
4.1 Assumed Obligations
4.2 Excluded Liabilities
ARTICLE V EMPLOYMENT AND NONCOMPETITION AGREEMENTS
5.1 Noncompetition Agreements
5.2 Employees
5.3 Other Agreements
5.4 Benefits
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER AND XPIT
6.1 Organization and Good Standing
6.2 Corporate authority
6.3 No Violation of Obligations
6.4 Financial Statements of XPIT
6.5 Acquired Assets
6.6 Liabilities
6.7 Operations Since the Financial Statements
6.8 Legal Proceedings
6.9 Material Agreements
6.10 Employees
6.11 Compliance with Law
6.12 Environmental Compliance
6.13 Taxes
6.14 Insurance
6.15 Trademarks and Intellectual Property
6.16 Software
6.17 Regulatory Approvals
6.18 Customers and Suppliers
6.19 Leased Premises
6.20 Obligation to Brokers
6.21 Complete Disclosure
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ARTICLE VII REPRESENTATIONS AND WARRANTIES OF ACQUISITION CO.
7.1 Organization and Qualification
7.2 Authority
7.3 No Violation of Obligations
7.4 No Brokers
7.5 Complete Disclosure
ARTICLE VIII COVENANTS OF THE RELATED PARTIES
8.1 Termination of Consulting Agreement
8.2 Acknowledgement of Prior Owners
8.3 Consent to Transactions
8.4 Release of Claims and Disclaimer of Rights
8.5 Representation and Warranty of the Related Parties
8.6 Representation and Warranty of Xxxxxx
8.7 Noncompetition
ARTICLE IX INFORMATION AND CONFIDENTIALITY
9.1 Provision of Information Relating to XPIT
9.2 Continued Due Diligence
ARTICLE X CONDITIONS TO CLOSING
10.1 Stockholder and XPIT Conditions
10.2 Acquisition Co.'s Conditions
ARTICLE XI CLOSING
11.1 Certificates
11.2 XPIT's Legal Opinion
11.3 Assignment and Xxxx of Sale
11.4 Assignment of Intangibles
11.5 Third-Party Consents
11.6 Assignment and Assumption of Assumed Obligation
11.7 Sublease
11.8 Acquisition Co.'s Legal Opinion
11.9 Purchase Price
11.10 Excluded Liabilities
11.11 Corporate Authorization of Acquisition Co.
11.12 Corporate Authorization of XPIT and Stockholder
11.13 Tax Allocations
11.14 Employment Agreements and Confidentiality Agreements
11.15 Noncompetition Agreements
11.16 Name Change
11.17 Domain Names
11.18 Consent of Noteholders
11.19 Termination of Consulting Agreement
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11.20 Other Acts
ARTICLE XII TERMINATION
12.1 Termination
12.2 Failure of Condition
12.3 Termination by Agreement
ARTICLE XIII COSTS AND EXPENSES
ARTICLE XIV MUTUAL INDEMNIFICATION
14.1 XPIT's and Stockholder's Indemnity
14.2 Acquisition Co.'s and CQG's Indemnity
14.3 General
14.4 Third Party Claims
14.5 Remedies
ARTICLE XV XPIT'S AND STOCKHOLDER'S POST-CLOSING COVENANTS
15.1 Payment of Liabilities
15.2 Sales Taxes
15.3 XPIT Liquidation
ARTICLE XVI GENERAL PROVISIONS
16.1 Survival of Agreement
16.2 Notices
16.3 Successors and Assigns
16.4 Merger
16.5 Attorney's Fees
16.6 Governing Law
16.7 Modification or Severance
16.8 Captions
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made and entered into as of
October __, 2001, by and among Xpit Acquisition LLC, a Colorado limited
liability company, ("Acquisition Co."); CQG, Inc., a Colorado corporation
("CQG"); XPIT Corporation, a Delaware corporation ("XPIT"); and RateXchange
Corporation, a Delaware corporation, (the "Stockholder"). Xxxxxx Financial,
Inc., a Kentucky corporation ("Xxxxxx"); Sockeye Trading, LLC, an Idaho limited
liability company ("Sockeye"); Sawtooth Investment Management, LLC, an Idaho
limited liability company ("Sawtooth"); and Xxxx Xxxxx, Xxxx Xxxxx, and Xxxx
Xxxxx (the "Members") are also parties to this Agreement with respect to Article
VIII and XIV below.
ARTICLE I
PURPOSE
The Stockholder owns all of the issued and outstanding capital stock of
XPIT. Acquisition Co. wishes to purchase certain specified assets of XPIT, as
set forth in Section 2.1, and to assume certain specified obligations of XPIT
and Stockholder, as set forth in Section 4.1, all on the terms more fully set
forth below. XPIT is engaged in the business of electronic order routing
services for financial instruments and commodity futures (the "XPIT Business").
Xxxxxx, Sockeye, Sawtooth, and the Members (the "Related Parties") have owned
interests in or are or have been otherwise affiliated with XPIT, as set forth in
Article VIII. Acquisition Co. has determined that a material condition to the
completion of the purchase provided for herein includes the agreement of XPIT,
the Stockholder, Sockeye, Sawtooth, and the Members to enter into noncompetition
agreements satisfactory to Acquisition Co. Acquisition Co. further requires, and
the Stockholder has agreed, that any of the assets to be acquired by Acquisition
Co. hereunder, including any proprietary information or other intangible assets,
which are owned by the Stockholder or the Related Parties or in which the
Stockholder or the Related Parties has any proprietary rights will be
transferred by the Stockholder to Acquisition Co. as part of the transaction
provided for herein.
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Acquired Assets. XPIT and the Stockholder hereby agree to sell, and
Acquisition Co. agrees to purchase, the Acquired Assets, as defined below, and
to assume certain specified liabilities as identified in Section 4.1 below. The
"Acquired Assets" consist of all of the assets of XPIT shown on the financial
statements of XPIT attached hereto as Schedule 6.4, all assets arising in the
ordinary course of business of XPIT from and after the date of such financial
statements, and any and all other assets owned by XPIT (or owned by Stockholder
or the Related Parties and utilized in the business of XPIT). Without limiting
the generality of the foregoing, the Acquired Assets shall specifically include
the following (whether owned by XPIT, the Stockholder, or the Related Parties):
(i) all right, title and interest in and to the XPIT order routing software and
all related components and modules, as described in Section 6.16, (the
"Software"), including all software code, trade secrets, copyrights, know-how,
show-how, and any other intellectual property rights related thereto,
incorporated therein, or otherwise required
for the Software to function in accordance with Section 6.16; (ii) all server
equipment and other hardware and software used by XPIT or which are otherwise
necessary to run the Software; (iii) all equipment, supplies, and other personal
property located at XPIT's offices, or used in connection with the XPIT Business
or the Software; (iv) the name "Xpit" and any rights thereto whether resulting
from state or federal registration or under common law, and all goodwill
associated therewith; (v) all rights to the domain names "xxx.xxxx.xxx" and
"xxx.xxxx.xxx;" and (vi) any other personal property (including the files and
records, insurance policies, deposits, intangible information, goodwill,
trademarks and trade names, trade secrets, telephone numbers, yellow page ads,
and previously expensed tools and supplies) or intellectual property (including
all "Intellectual Property," as defined in Section 6.15) and any interests in or
rights to any personal or intellectual property that is used or usable by XPIT
in the conduct or operation of the XPIT Business as presently conducted or
necessary to cause the Software to function in conformance with Schedule 6.16.
Notwithstanding the above, the Acquired Assets shall not include the Excluded
Assets listed in Section 2.2, below.
2.2 Excluded Assets. The Excluded Assets consist of all agreements,
liabilities, and obligations of XPIT not expressly assumed by Acquisition Co.
pursuant to Article IV below, all cash held in the name of XPIT, and all
accounts receivable of XPIT, provided, however that Acquisition Co. is
authorized to collect and retain such accounts receivable in accordance with
Section 3.1(b) below.
ARTICLE III
PURCHASE PRICE
The total consideration for the Acquired Assets and the noncompetition
agreements of XPIT, the Stockholder, and Sockeye, Sawtooth, and the Members is
the sum of (i) One Million Five Hundred Thousand Dollars ($1,500,000) (the "Base
Price"), payable to the Stockholder and to certain third parties in satisfaction
of Stockholders' debts as provided in Section 3.1; (ii) the Contingent Payments
set forth in Section 3.2, and (iii) assumption of certain of XPIT's obligations
as provided in Section 4.1 below.
3.1 Payment of the Base Price. Acquisition Co. shall pay, or shall cause
CQG to pay, the Base Price at the Closing, as follows:
(a) Acquisition Co. shall pay, or shall cause CQG to pay, the
principal and interest balance due under the promissory notes issued by
Stockholder to Sockeye, Xxxxxx Xxxxxxxxxx Xxxxx, and Xxxxxxx Xxxxxx
(collectively, the "Noteholders") in connection with the Agreement and Plan of
Merger dated as of March 12, 2001 by and among Stockholder, XPIT, Xxxx.Xxx,
Inc., an Idaho corporation ("Xxxx.Xxx"), Sockeye, and Xxxxxx ("Merger
Agreement"). The payment set forth in the previous sentence shall be made in the
amounts and in the manner set forth on Schedule 3.1(a), which schedule shall be
updated to reflect interest accrued under the promissory notes up to the date of
the Closing. The agreement of the Related Parties to the Provisions of Article
VIII and XIV hereof are a material condition to such payment.
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(b) Fifty Thousand Dollars ($50,000) of the Base Price (the "Holdback
Amount") shall be held by Acquisition Co. in a segregated account (the "Holdback
Account"). In addition, all accounts receivable of XPIT collected after the
Closing Date shall be deposited in the Holdback Account and added to the
Holdback Amount. Subject to Sections 4.1, 14.5, 15.1 and 15.2, the Holdback
Amount shall be paid to XPIT 3 months following the closing. XPIT hereby
authorizes Acquisition Co. to collect the outstanding accounts receivable of
XPIT from and after the Closing Date and until 3 months thereafter (the
"Holdback Period") for this purpose. XPIT and the Stockholder agree not to make
any attempt to collect the accounts receivable during the Holdback Period.
(c) Acquisition Co. shall pay, or shall cause CQG to pay the balance
of the Base Price after deduction of: (i) the aggregate amount paid to the
Noteholders under Section 3.1(a) and (ii) the $50,000 retained pursuant to
Section 3.1(b) to XPIT at the Closing in certified funds by wire transfer to an
account designated by XPIT.
3.2 Contingent Payments. Subject to Section 4.1, 14.5,15.1 and 15.2,
Acquisition Co. shall make, or shall cause CQG to make, payments (the
"Contingent Payments") to XPIT, as set forth below, upon the achievement of
certain amounts of "Order-Routing Revenue" as defined on Schedule 3.2 which
schedule is attached hereto and incorporated herein by this reference.
(a) If Acquisition Co. earns Order-Routing Revenue of $50,000 or more
in any single calendar month during the four-year period immediately following
the Closing, Acquisition Co. shall pay, or shall cause CQG to pay, $50,000 to
XPIT. The payment specified in this Section 3.2(a) shall be a one time payment
and in no event shall the aggregate amounts payable under this Section 3.2(a)
exceed $50,000.
(b) If Acquisition Co. earns Order-Routing Revenue of $2,500,000
during any of the first four twelve-month periods beginning on the first day of
the calendar month immediately following the Closing Date or on the Closing Date
if the Closing Date is the first day of a calendar month (each, an "Applicable
Twelve-Month Period"), Acquisition Co. shall pay, or shall cause CQG to pay, 5%
of the amount of the Order-Routing Revenue earned during such Applicable
Twelve-Month Period to XPIT; provided, however, that the aggregate amounts
payable under this Section 3.2(b) during the four Applicable Twelve-Month
Periods collectively shall not exceed $200,000.
(c) If Acquisition Co. earns Order-Routing Revenue of $10,000,000 in
any Applicable Twelve-Month Period Acquisition Co. shall pay, or shall cause CQG
to pay, 1% of the Order-Routing Revenue earned during such Applicable
Twelve-Month Period to XPIT, in addition to the payments under Sections 3.2(a)
and (b), if any.
(d) Acquisition Co. shall provide to XPIT a monthly accounting of the
calculation of the Order-Routing Revenue and the Contingent Payments, if any,
including supporting documentation indicating account activity (subject to such
restrictions on disclosure of customer information as may be imposed under
applicable law, regulations, or agreements with third parties). Such information
shall be confidential, shall be disclosed only to persons
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approved by Acquisition Co., shall be used by XPIT only for confirming
calculation of the Order-Routing Revenue and Contingent Payments, and shall not
be disclosed to any third parties (except pursuant to a valid court order for
such information and after Acquisition Co. has been provided with an opportunity
to take measures to protect the confidentiality of such information in any
proceeding).
3.3 Assumed Obligations. At the Closing, Acquisition Co. shall assume
certain obligations of XPIT as specified in Article IV below.
ARTICLE IV
ASSUMPTION OF OBLIGATIONS
Subject to the terms and conditions of this Agreement and as consideration
for the Acquired Assets and the noncompetition agreement provided for in Section
5.1, Acquisition Co. agrees as follows with respect to the liabilities of XPIT
and/or the Stockholder.
4.1 Assumed Obligations. Acquisition Co. or an affiliate shall assume the
obligations of XPIT and/or the Stockholder which accrue or become payable after
the date of the Closing under each of the agreements listed on Schedule 4.1
(collectively, the "Assumed Obligations"). XPIT and the Stockholder shall be
responsible for their liabilities and obligations incurred under each of the
agreements listed on Schedule 4.1 which accrue or become payable prior to the
Closing Date. Acquisition Co. shall not assume any other obligation or liability
of XPIT or the Stockholder. In the event that XPIT or the Stockholder does not
pay or otherwise satisfy its obligations under any of the agreements listed
above which accrue or become payable prior to the Closing Date, Acquisition Co.
or its affiliate may, in its sole discretion, elect to pay or otherwise satisfy
such obligations and to offset such payments or expenses against the Holdback
Amount or any Contingent Payments or to collect such payments or other expenses
directly from XPIT or Stockholder, in Acquisition Co.'s discretion.
4.2 Excluded Liabilities. XPIT and the Stockholder shall retain and be
jointly and severally liable for all Excluded Liabilities. Excluded Liabilities
consist of all liabilities and obligations to employees of XPIT or the
Stockholder and all other liabilities of XPIT or the Stockholder other than the
Assumed Obligations. XPIT and the Stockholder shall pay all Excluded Liabilities
in the ordinary course of business without liability to Acquisition Co. or its
affiliates or adverse effect to the XPIT Business or the Software.
ARTICLE V
EMPLOYMENT AND NONCOMPETITION AGREEMENTS
5.1 Noncompetition Agreements. As a material condition to the transactions
set forth herein, XPIT and the Stockholder and Sockeye, Sawtooth, and the
Members shall execute and deliver Noncompetition Agreements substantially in the
form attached hereto as Exhibit A and B, respectively.
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5.2 Employees. As a material condition to the transactions set forth
herein, each of the employees of XPIT or Stockholder, as listed on Schedule
6.10, (the "Employees") shall resign or be terminated by XPIT or Stockholder
immediately prior to the Closing, as applicable, and will be given the
opportunity to become employees of Acquisition Co. or CQG immediately after the
Closing. As a condition to their employment, such individuals will enter into an
Employment, Confidential Information and Invention Assignment Agreement
substantially in the form attached hereto as Exhibit C ("Employment Agreement")
or a Confidential Information and Invention Assignment Agreements substantially
in the form attached hereto as Exhibits D (the "Confidentiality Agreement"). The
Employment Agreement will provide that the Employee shall receive a salary equal
to their salary received from XPIT or the Stockholder prior to the Closing Date,
as set forth on Schedule 6.10, and standard benefits available to
similarly-situated Acquisition Co. employees.
5.3 Other Agreements. Based on its due diligence review, Acquisition Co.
reserves the right to require employment agreements, noncompetition covenants,
or other personnel agreements with any other individuals identified as key to
the continued operations of XPIT.
5.4 Benefits. Stockholder and XPIT shall each cooperate with Acquisition
Co. to assist in providing health benefits to the Employees following the
Closing, at Acquisition Co's expense. XPIT and Stockholder shall allow the
Employees to elect to extend their coverage under the Consolidated Omnibus
Budget Reconciliation Act (COBRA) or equivalent state law and shall allow
Acquisition Co. to pay the aggregate premiums for such coverage directly to
Stockholder or XPIT.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER AND XPIT
The Stockholder and XPIT jointly and severally represent and warrant to
Acquisition Co., CQG, and their successors and assigns as follows, as of the
date hereof and as of the Closing:
6.1 Organization and Good Standing. XPIT is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware.
XPIT is qualified to conduct business as a foreign corporation in the state of
Idaho. XPIT is not required by the nature of its assets or business to qualify
as a foreign corporation in any other jurisdiction. XPIT has full power to own
all of its properties and to carry on the XPIT Business as it is now being
conducted. XPIT has no subsidiaries and no direct or indirect ownership interest
in any corporation, partnership, joint venture, limited liability company,
limited liability partnership, association or other entity. The Stockholder is
the sole stockholder of XPIT, and the Stockholder holds good and marketable
title to all of its shares free and clear of any pledge, right to purchase, or
other limitation. There are no securities of XPIT outstanding, including any
outstanding subscriptions, options, warrants, convertible securities, or other
agreements or commitments obligating XPIT to issue or to transfer from treasury
any additional shares of XPIT other than the shares owned by the Stockholder.
XPIT has delivered to Acquisition Co. true, accurate, and complete copies of
XPIT's certificate of incorporation, bylaws, stock records, and minute books,
showing all amendments and changes thereto.
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6.2 Corporate Authority. XPIT has the authority, pursuant to its
certificate of incorporation and bylaws, and pursuant to such additional action
as is necessary by its officers, directors, and the Stockholder and by the
Stockholder's officers, directors and stockholders to execute this Agreement and
to consummate the transactions provided for herein. Without limiting the
generality of the foregoing, The Stockholder agrees that it will fully authorize
all of the transactions provided for herein prior to Closing. Any assets that
are included in the Acquired Assets and that are legally, directly and wholly
owned by Stockholder do not constitute substantially all of the property and
assets of the Stockholder. After consultation with legal counsel, Stockholder
and XPIT represent and warrant that the Acquired Assets were not transferred
from Stockholder to XPIT without authorization by the stockholders of the
Stockholder and that there is no basis (e.g. fraud, XPIT as mere alter ego or
instrumentality of the Stockholder, failure to observe corporate formalities)
for disregarding the legal separateness of Stockholder and XPIT.
6.3 No Violation of Obligations. The execution and delivery of this
Agreement, and the consummation of the transactions provided for herein, will
not violate any agreement or commitment made by XPIT or the Stockholder, or any
requirement binding on XPIT or the Stockholder respectively, including, without
limitation, any lease, contract, loan agreement, promissory note, franchise
agreement, court order, judgment, regulatory ruling, or arbitration award.
6.4 Financial Statements of XPIT. Attached hereto as Schedule 6.4 are the
unaudited financial statements of XPIT or its predecessor, Xxxx.Xxx, Inc. for
each of its two most recently completed fiscal years and XPIT's most recent
unaudited interim balance sheet for the period from January 1, 2001 to September
30, 2001 (collectively, the "Financial Statements"). The Financial Statements
fairly present the financial position of XPIT as of the respective dates thereof
and the results of the operations of XPIT for the periods indicated. All of the
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with that of preceding years
or other applicable periods. None of the Financial Statements is misleading in
any material respect.
6.5 Acquired Assets. XPIT has good and marketable title to all of the
Acquired Assets. Except as disclosed on Schedule 6.5, the Acquired Assets are
not subject to any deed of trust, mortgage, security interest, or other lien or
claim of any nature whatsoever. All the Acquired Assets are in satisfactory and
operational condition, except as otherwise shown on Schedule 6.5, and are
satisfactory for the conduct and operation of the XPIT Business as presently
conducted and the functionality of the Software in conformance with Schedule
6.16. No equipment is in need of material repairs or replacement. The Acquired
Assets transferred hereunder, including intangible assets and works in progress,
are all of the assets that are necessary for the continued operation of the XPIT
Business as presently conducted and for the Software to function in conformance
with Schedule 6.16.
6.6 Liabilities. XPIT has no liabilities, liquidated, actual or contingent,
except as shown on the Financial Statements or on Schedule 6.6. Any liabilities
arising after the date of the most recent Financial Statement have arisen in the
ordinary course of business of XPIT and
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are substantially similar in kind and amount to those amounts shown on the
Financial Statements. Schedule 6.6 specifically includes all accrued benefits
due to employees of XPIT and any of the Employees employed by Stockholder or any
other party, including sick leave, vacation rights, and other employee benefits,
whether or not such liabilities are fully reflected in the Financial Statements.
6.7 Operations Since the Financial Statements. Since the date of the most
recent Financial Statement, there has not been and there will not be through the
date of Closing:
(a) Any change in the business, results of operations, assets,
financial condition, or manner of conducting the XPIT Business or in the
functionality of the Software;
(b) Any decrease in the net book value of XPIT or the net XPIT asset
value shown on the most recent balance sheet included within the Financial
Statements;
(c) Any damage, destruction, or loss (whether or not covered by
insurance);
(d) Any declaration, setting aside, or payment of any dividend or
other distribution with respect to the stock of XPIT or any other distribution
to or for the benefit of the Stockholder except for payment of salaries in the
ordinary course of business;
(e) Any increase in the compensation payable or to become payable by
XPIT to any of its officers, directors, employees, or agents;
(f) Any other distributions by XPIT of any nature whatsover to or for
the benefit of the Stockholder or any affiliate thereof;
(g) Any issuance of shares of stock of XPIT, or any grant of any
option, warrant, or other right to acquire any of such stock;
(h) Any employment, bonus, or deferred compensation agreement entered
into between XPIT and any of its directors, officers, or other employees or
consultants;
(i) Any loss by XPIT of any customers, clients, or suppliers, or any
event or circumstance that is likely to lead to such loss which has a materially
adverse affect on the Acquired Assets or the Xpit Business or any entering into,
amendment, or termination by XPIT of any material contract, franchise, permit,
license, or other agreement;
(j) Any transaction or other action by XPIT outside of the ordinary
course of its business or any other action that could materially adversely
affect the Acquired Assets, the XPIT Business, or the functionality of the
Software;
(k) Any amendment to the certificate of incorporation, bylaws or other
governing documents of XPIT; or
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(l) Any indebtedness incurred by XPIT to borrow money or any
commitment to borrow money, any guarantee by XPIT of any third party
obligations, the imposition of any lien on the Acquired Assets, or the grant of
any encumbrance by XPIT.
6.8 Legal Proceedings. Except as set forth on Schedule 6.8, there are no
private or governmental proceedings pending, or to the best knowledge of the
Stockholder or XPIT threatened, against XPIT or the Stockholder, including
without limitation any investigation, audit, lawsuit, threatened lawsuit,
arbitration, workers' compensation claim, civil rights claim, or other legal
proceeding of any nature whatsoever.
6.9 Material Agreements. XPIT is not a party to any employment agreement,
equipment lease, real property lease, agreement for purchase or sale, franchise
agreement, joint venture agreement, or any other contract, agreement, or other
obligation, whether or not in writing (other than agreements that individually
represent obligations on the part of XPIT of less than $10,000 and in the
aggregate obligations of not more than $75,000), except for agreements which are
terminable within 30 days by XPIT and any assignee of XPIT without acceleration,
penalty, or any other adverse effect, except those agreements which are listed
on Schedule 6.9. Schedule 6.9 also includes all contracts or agreements for
goods or services that are used by XPIT in conduct of the XPIT Business,
required to cause the Software to function in conformance with Schedule 6.16, or
which are otherwise material to the conduct of the XPIT Business or the
Software. True, accurate, and complete copies of all agreements listed on
Schedule 6.9 have been provided to Acquisition Co. None of such agreements is in
default nor is XPIT or the Stockholder aware of any claim or penalty that has
accrued or that will accrue as a result of the Closing hereunder or for any
other reason under any of such agreements. Except as set forth on Schedule 6.9,
all of the Assigned Obligations may be assigned to Acquisition Co. without
consent from any third party and without any acceleration, penalty, or any other
adverse effect.
6.10 Employees. Schedule 6.10 is a list of all of the XPIT employees,
including the date of first hire, social security number, rate of compensation,
and any accrued rights (including vacation rights) to which such employee is
entitled from XPIT or Stockholder. Except as set forth on Schedule 6.10, none of
such employees is a party to any employment agreement or other contract with
XPIT or Stockholder. Except as set forth on Schedule 6.10, none of such
employees are entitled to any fringe benefits or other compensation from XPIT or
Stockholder as of the Closing Date. None of the XPIT employees is subject to any
collective bargaining agreement or other union agreement, nor is XPIT or the
Stockholder aware of any effort to organize any of the workforce of XPIT. No
disputes or claims against XPIT exist on behalf of any of its present or former
employees, including, but not limited to, claims of unemployment compensation,
violation of wage and hour laws, claims relating to past compensation, or claims
relating to unjust termination. Except as set forth on Schedule 6.10, XPIT does
not maintain any pension, profit sharing, 401(k), or similar plan or any other
plan or benefit that is subject to regulation under the Employment Retirement
Income Security Act of 1974 or any successor law, or any comparable law of any
state or any regulations or rules issued by the United States government or any
state government respectively in connection therewith. XPIT is current in all of
its obligations to employees with respect to the benefit plans that it does
maintain.
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6.11 Compliance with Law. XPIT is not in violation of any material law,
regulation, rule, ordinance, or other governmental requirement relating to or
which may have a material adverse effect on its properties or its business. As
of the Closing Date, neither XPIT nor the Stockholder has knowledge of any
development, occurrence, or condition that would adversely affect any of the
Acquired Assets or Assumed Obligations or that might curtail or interfere with
the present or future use of the Acquired Assets for the purposes for which they
are now used. All of the products and services sold or licensed by XPIT,
including their labeling and packaging, are in full compliance with all
applicable local, state, and federal laws, statutes, regulations, and
ordinances.
6.12 Environmental Compliance. XPIT is in full compliance with all
applicable federal, state, and local laws, rules, and regulations relating to
environmental regulations and to the disposal of waste products (including but
not limited to those products defined as hazardous waste under applicable laws).
XPIT does not lease, own, or operate a facility on, and has not leased, owned,
or operated a facility on, any land or real property subject to any
environmental contamination, violation, requirement for cleanup, or any other
environmental remediation.
6.13 Taxes. To the extent required, XPIT has timely and correctly prepared
and filed all tax returns, including federal and state income tax returns and
sales tax returns, and XPIT has paid all taxes due pursuant to such tax returns
as well as all other taxes, including real and personal property taxes,
franchise taxes, and sales and use taxes, for which XPIT is liable, except for
certain property taxes that are accrued but not yet due, as shown on Schedule
6.13. XPIT has not filed for and is not now, nor will it become, subject to any
extension of time with respect to the filing of any tax return. XPIT has
provided to Acquisition Co. true and correct copies of all federal and state
income tax returns filed for the past three years by XPIT or its predecessor,
Xxxx.xxx, Inc. XPIT and the Stockholder are not aware of any actual or
threatened tax audit against XPIT. XPIT has paid all payroll taxes as and when
due, maintains all required payroll trust accounts, and has timely paid all
employee and employer withholding taxes into such trust accounts.
6.14 Insurance. XPIT maintains adequate insurance with qualified insurance
carriers with respect to liability, workers' compensation, and property loss and
damage. A list of insurance policies showing coverage amounts, deductibles,
insurance carrier, and type of coverage is set forth on Schedule 6.14.
Declaration pages have been provided to Acquisition Co. with respect to each
such policy.
6.15 Trademarks and Intellectual Property. XPIT is the exclusive owner of
all intellectual property and technology necessary for the conduct of the XPIT
Business or to cause the Software to function in accordance with Schedule 6.16,
including, without limitation, any and all United States, state and foreign
patents, trademarks, service marks, trade names, service names, copyrights,
recordings or other use of marks, registrations, and applications pertaining
thereto, inventions, discoveries, improvements, processes, formulae, computer
programs or software (including the Software), e-mail domain names or addresses,
websites, drawings, designs, and all other know-how, not generally available
(collectively the "Intellectual Property"). XPIT has not granted to any person
or entity, other than its customers, any license or other right to use any
Intellectual Property, and the Intellectual Property does not require the use
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of third-party software or consents. As of the Closing Date, there are no
claims, actions, proceedings or facts that could lead to any claims, actions, or
proceedings with respect to: (i) any infringement or claimed infringement by
XPIT of any intellectual property of any person or entity, (ii) any threatened
or contemplated cancellation or revocation of any agreement granting to XPIT the
right to any Intellectual Property; or (iii) XPIT's ownership or use of the
Intellectual Property. Set forth on Schedule 6.15 is a list of: (i) all patents,
trademarks, service marks, trade names, copyrights, or applications for any of
the foregoing and all know-how, show-how, and any other intellectual property
rights that are owned or used in whole or in part by XPIT or the Stockholder in
connection with the XPIT Business or the Software; (ii) the geographic scope of
any limitations on any items listed on Schedule 6.15; and (iii) all agreements
to which XPIT is a party that are in force and relate in whole or in part to any
item listed on Schedule 6.15 or to any other intellectual property used by XPIT
in conjunction with the XPIT Business or the Software.
6.16 Software. The Software will perform the functions set forth on
Schedule 6.16 in accordance with the specifications, descriptions and technical,
functional, interface, performance and capacity specifications set forth
therein. The Software is fully operational on the configuration of hardware,
operating system and software currently utilized by XPIT ("Designated
Environment"), which will be transferred to Acquisition Co. hereunder as part of
the Acquired Assets. When used in the Designated Environment and properly
maintained, the Software will not become unstable or cause instability or system
failures in the Designated Environment or any component thereof. The Software is
fit for its intended uses and purposes and for the operation of the XPIT
Business as currently conducted, and no licenses to or rights in any software or
other intellectual property is required from any party to this agreement or
third party for the conduct of the XPIT Business or to cause the Software to
function in accordance with Schedule 6.16. The Software, when used in the
Designated Environment, shall receive, process and respond in the time frames
set forth on Schedule 6.16 and will be able to process the number of
transactions set forth therein without adversely affecting its response time or
functionality. The Software has been developed and functions in accordance with
all applicable laws and regulatory standards. The Software and each component
thereof does not, and will not when delivered, contain any pre-programmed
devices, such as "viruses" or other such devices that will cause the Software or
any component thereof to be erased or become inoperable or incapable of
processing or affect operations of other systems.
6.17 Regulatory Approvals. Schedule 6.17 is a list of all licenses,
permits, qualifications, and other regulatory approvals and authorities
applicable to the XPIT Business or the Software. XPIT holds all of such
approvals and other authorities necessary for the conduct of its business as now
conducted, all of such authorities may be transferred to Acquisition Co., at
Closing, without penalty or other adverse effect, and Acquisition Co. may
thereafter conduct the business as previously conducted by XPIT in full
compliance with all legal requirements.
6.18 Customers and Suppliers. As of the Closing Date, neither XPIT nor the
Stockholder has any information or reason to believe that any of its customers
or suppliers will cease to do business with Acquisition Co. after the Closing.
There are no disagreements or controversies pending, or to the best knowledge of
XPIT and the Stockholder, threatened with any customer or supplier of XPIT, nor
has any such customer or supplier made any claims or complaints regarding the
services or products provided by XPIT. All suppliers have been timely
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paid by XPIT. There are no special relationships (personal or otherwise, such as
payment in kind, rebates, or other incentives) between XPIT and any XPIT
customer or supplier. Neither XPIT nor any officer, director, stockholder, or
other affiliate of XPIT has any ownership or other pecuniary interest in any
competitor, customer, or supplier of XPIT. There are no sole source suppliers of
XPIT. For purposes of this agreement, "sole supplier" shall mean any individual
or entity that provides products or services used in connection with the XPIT
Business or the Software, but do not include FutureSource/Bridge, LLC or the
commodities and financial exchanges which provide information to XPIT. Except as
set forth on Schedule 6.18, XPIT does not use any manufacturers, sales, or
independent representatives agreements except for agreements that can be
terminated without cause or damages upon thirty (30) or fewer days notice. As
used herein, customers shall include all clients of XPIT, including all dealers,
distributors, and other users of XPIT services.
6.19 Leased Premises. XPIT leases certain real property (the "Premises")
from Sawtooth pursuant to an Office Sub-Lease dated October 24, 2000 (the
"Lease"), a true, correct, and complete copy of which has been previously
provided to Acquisition Co. As now configured, the Premises are suitable and
adequate for the conduct of the XPIT Business. The Premises are not subject to
any other lease rights, liens, encumbrances, or other third party rights that
would interfere with the rights of Acquisition Co. pursuant to the Lease,
including its right of quiet enjoyment, other than the primary lease for the
Premises by and between Sawtooth as lessee and the XX Xxxxx Plaza, LLC as
lessor. XPIT does not own, use or occupy any real property other than the
Premises.
6.20 Obligation to Brokers. Neither XPIT nor the Stockholder has incurred
any obligation for the payment of any brokerage commission, finder's fee, or any
other obligation relating to this Agreement or the consummation of the
transactions provided for herein, other than the finder's fee to Xxxxxx Xxxxxxx
which shall be paid in full by XPIT or Stockholder.
6.21 Complete Disclosure. This Agreement and the agreements and instruments
attached hereto and to be delivered at the time of Closing do not contain any
untrue statement of a material fact by the Stockholder or XPIT. This Agreement
and such other related agreements and instruments do not omit to state any
material fact necessary in order to make the statements made herein or therein
by XPIT or the Stockholder, in light of the circumstances under which they are
made, not misleading.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF ACQUISITION CO.
Acquisition Co. and CQG represent and warrant to XPIT and the Stockholder
as follows, as of the date hereof and as of the Closing:
7.1 Organization and Qualification. Acquisition Co. is a limited liability
company duly organized, validly existing, and in good standing under the laws of
the State of Colorado. CQG is a corporation duly organized, validly existing,
and in good standing under the laws of the
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State of Colorado. Acquisition Co. and CQG each have full power to own all of
their properties and to carry on their business as now conducted.
7.2 Authority. Acquisition Co., pursuant to its articles of organization
and operating agreement, and CQG, pursuant to its articles of incorporation and
bylaws, each have the authority to execute this Agreement and to consummate the
transactions provided for herein, subject to final approval by the board of
directors of each.
7.3 No Violation of Obligations. The execution and delivery of this
Agreement, and the consummation of the transactions provided for herein, will
not violate any agreement or commitment made by Acquisition Co. or CQG, or any
requirement binding on Acquisition Co. or CQG, including, without limitation,
any lease, contract, loan agreement, promissory note, franchise agreement, court
order, judgment, regulatory ruling, or any arbitration award.
7.4 No Brokers. Neither Acquisition Co. nor CQG have incurred any
obligation for the payment of any brokerage commission, finder's fee, or any
other similar obligation relating to this Agreement or the consummation of the
transactions provided for herein, all of which obligations will be satisfied by
Acquisition Co. or CQG without obligation to the Stockholder or XPIT.
7.5 Complete Disclosure. This Agreement and the agreements and instruments
related hereto do not contain any untrue statement of a material fact by
Acquisition Co. or CQG. This Agreement and such related agreements and
instruments do not omit to state any material fact necessary in order to make
the statements made herein or therein, in light of the circumstances under which
they are made, not misleading.
ARTICLE VIII
COVENANTS OF THE RELATED PARTIES
8.1 Termination of Consulting Agreement. Sawtooth is a party to an
Independent Consulting Agreement dated March 12, 2001 and as amended on
September 27, 2001, by and between Sawtooth and the Stockholder ("Consulting
Agreement"). The Stockholder and Sawtooth hereby mutually agree to terminate the
Consulting Agreement and each acknowledge and agree that the other has satisfied
all of its obligations under the Consulting Agreement. As consideration for
termination of the Consulting Agreement by Sawtooth and as payment and
satisfaction in full of all amounts due or become due under the Consulting
Agreement, Acquisition Co. agrees to pay $10,000 to Sawtooth in certified funds
by wire transfer to an account designated by Sawtooth.
8.2 Acknowledgement of Prior Owners. The Members are holders of
substantially all of the ownership interests in Sockeye and Sawtooth. The
Members, Sockeye, and Xxxxxx (collectively, the "Prior Owners") acknowledge and
agree that the payment set forth in Section 3.1(a) represents payment in full of
the amounts due under the promissory notes issued to Sockeye and Xxxxxx by
Stockholder as consideration for the transfer and sale of their direct and
indirect ownership interests in XPIT pursuant to the Merger Agreement. The Prior
Owners
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further acknowledge and agree that the payment set forth in Section 3.1(a) is
payment in advance of the maturity of the indebtedness represented by the
promissory notes and therefore is a payment to which they would not otherwise be
entitled at this time.
8.3 Consent to Transactions. The Prior Owners consent to the transactions
set forth herein for all purposes, including the restrictions set forth in
Section 7.4 of the Merger Agreement.
8.4 Release of Claims and Disclaimer of Rights. The Related Parties hereby
disclaim all right, title, and interest in the Acquired Assets (including the
Software and the Intellectual Property) and the Assumed Obligations and agree to
execute any document and to take such other actions as may be required by
Acquisition Co. to vest ownership of the Acquired Assets (including the Software
and the Intellectual Property) and Assumed Obligations in Acquisition Co. The
Prior Owners hereby release all claims to or against the Acquired Assets
(including the Software and the Intellectual Property) and Assumed Obligations
or against Acquisition Co. and its affiliates.
8.5 Representations and Warranties of the Related Parties. The Related
Parties hereby represent and warrant, jointly and severally, to Acquisition Co.
and CQG, as follows:
(a) Xxxxxx, Sawtooth, Sockeye each represent and warrant that it has
the authority, pursuant to its certificate of incorporation and bylaws or
articles of organization and operating agreement, as applicable, and pursuant to
such additional action as is necessary by its officers, directors, stockholders,
members or managers, to execute this Agreement (and the Noncompetition
Agreement, as applicable) and to consummate the transactions provided for
herein. Without limiting the generality of the foregoing, each agrees that it
will fully authorize all of the transactions provided for herein prior to
Closing.
(b) As of March 12, 2001 (the "Merger Date"), the representations and
warranties set forth in Sections 4.1 through 4.22 of the Merger Agreement were
true, accurate, and complete in all respects.
(c) As of the Merger Date, XPIT's predecessor, Xxxx.Xxx was the
exclusive owner of or had a valid right to use all intellectual property and
technology necessary for the conduct of its business or the functionality of the
Software. As of the Merger Date, Xxxx.Xxx did not own or use, in whole or in
part, any United States, state and foreign patents, trademarks, service marks,
trade names, service names, copyrights, recordings or other marks,
registrations, and applications pertaining thereto ("Registrations") except
Registrations for which it had a valid license or right to use. As of the Merger
Date, no third parties had any Registrations covering intellectual property used
by Xxxx.Xxx, except Registrations for which it had a valid license or right to
use. As of the Merger Date, Xxxx.Xxx had not granted to any person or entity,
other than its customers, any license or other right to use any inventions,
discoveries, improvements, processes, formulae, computer programs or software
(including the Software), e-mail domain names or addresses, websites, drawings,
designs, and all other know-how, not generally available (collectively the
"Intellectual Property"). As of the Merger Date, the Intellectual Property did
not require the use of third-party software or consents except for software for
which Xxxx.Xxx
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had consents or a valid license or right to use. As of the Merger Date, there
were no claims, actions, proceedings or facts that could lead to any claims,
actions, or proceedings with respect to: (i) any infringement or claimed
infringement by Xxxx.Xxx of any intellectual property of any person or entity,
(ii) any threatened or contemplated cancellation or revocation of any agreement
granting to Xxxx.Xxx the right to any Intellectual Property; or (iii) Xxxx.Xxx's
ownership or use of the Intellectual Property.
8.6 Representation and Warranty of Xxxxxx. Xxxxxx represents and warrants
that it is not in possession of any confidential or proprietary information of
XPIT and that it has not used and will not use any such confidential or
proprietary information in the conduct of its business.
8.7 Noncompetition. The Merger Agreement and this Agreement provide for the
transfer of valuable confidential and proprietary information utilized in the
XPIT Business, some of which constitutes trade secrets and all of which Sockeye,
Sawtooth, and the Members have had access to or knowledge of. In order to
protect the confidentiality of such proprietary information and to prevent the
use of such proprietary information by Sockeye, Sawtooth, and the Members in a
manner adverse to Acquisition Co. and in consideration for the accelerated
payment of the promissory notes as set forth in Section 3.1(a), Sockeye,
Sawtooth, and the Members each agree to execute and deliver to Acquisition Co.
at the Closing, a Noncompetition Agreement in substantially the form attached
hereto as Exhibit B.
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ARITCLE IX
INFORMATION AND CONFIDENTIALITY
9.1 Provision of Information Relating to XPIT. Prior to the execution of
this Agreement, XPIT and the Stockholder have made available to Acquisition Co.
information relating to the business and operations of XPIT, including the
Acquired Assets, the Assumed Obligations, and the Excluded Liabilities. XPIT and
the Stockholder believe that all of such information is substantially true and
complete. Any due diligence or investigation by Acquisition Co. shall not affect
the representations and warranties of XPIT contained in this Agreement, which
shall continue in effect and shall survive the Closing.
9.2 Continued Due Diligence. XPIT and the Stockholder will cooperate with
and will provide to Acquisition Co. all of the information requested by
Acquisition Co. in connection with its due diligence investigation of XPIT, the
Acquired Assets, the Assumed Obligations, the Excluded Liabilities, and related
matters, including, without limitation, all contracts, leases, and agreements
related to the XPIT Business (including prior purchase agreements and leases for
property and equipment), financial statements, the condition of property and
equipment, and confirmation of revenues, expenses, inventories, accounts
receivable, accounts payable, contracts receivable, and liabilities. Acquisition
Co. shall further have the right, prior to the Closing, to inspect the premises
of XPIT and to interview or meet with employees to assist in transition and to
determine the nature and status of projects currently in development. Any due
diligence or investigation by Acquisition Co. shall not affect the
representations and warranties of XPIT contained in this Agreement, which shall
continue in effect and shall survive the Closing.
ARTICLE X
CONDITIONS TO CLOSING
The obligations of the parties to close the transactions provided for
herein are subject to the following conditions as well as to any other
conditions express or implied in this Agreement.
10.1 Stockholder and XPIT Conditions. The obligations of the Stockholder
and XPIT are subject to the following conditions:
(a) All representations, warranties, covenants, and other agreements
contained herein on the part of Acquisition Co. will be true and correct at the
time of Closing.
(b) No lawsuit, governmental action, or other legal proceeding shall
have been commenced that shall materially interfere with the ability of the
parties to consummate the transactions provided for herein.
10.2 Acquisition Co.'s Conditions. The obligations of Acquisition Co. to
complete the transactions provided for herein are subject to the following
conditions:
(a) All representations, warranties, covenants, and other agreements
contained herein on the part of the Stockholder and XPIT will be true and
correct at the time of Closing.
15
(b) No lawsuit, governmental action, or other legal proceeding shall
have been commenced that shall materially interfere with the ability of the
parties to consummate the transactions provided for herein.
(c) Acquisition Co.'s Board of Directors shall have approved this
transaction, this Agreement, and the exhibits and schedules referenced herein.
(d) Acquisition Co. will be reasonably satisfied as to the willingness
of the key employees of XPIT identified by Acquisition Co. to continue working
for Acquisition Co after the Closing hereunder.
(e) XPIT and the Stockholders shall provide a certificate or other
evidence satisfactory to Acquisition Co. from XPIT's state and local governments
showing that XPIT is not delinquent on its sales and use tax obligations;
provided, however, that Acquisition Co. and CQG acknowledge that the amount of
franchise tax owed by Stockholder to the State of Delaware is currently in
dispute.
(f) Acquisition Co. shall be satisfied that the Assumed Obligations
may be assigned to Acquisition Co. without penalty or any other adverse effect,
and when necessary, that the consent of third parties has been obtained.
(g) Sawtooth shall execute and deliver a Sublease for the Premises
substantially in the form attached hereto as Exhibit G.
(h) Sawtooth shall have transferred the domain name "xxx.xxxx.xxx" to
Acquisition Co.
(i) XPIT shall have obtained (i) the consent of the stockholders of
the Stockholder to the transactions set forth herein, or (ii) an opinion of
Delaware counsel (the "Delaware Opinion Letter"), in form and substance
reasonably acceptable to counsel to Acquisition Co., opining that such
stockholder approval is not necessary to consummate the transactions set forth
herein and an appraisal ("Appraisal") by a reputable, disinterested appraiser
with experience in valuing companies in substantially the same business sector
as Stockholder, which appraiser shall be approved by Acquisition Co. prior to
commencing the Appraisal. The Appraisal shall establish the fair market value of
Stockholder and its subsidiaries (excluding XPIT) on a consolidated basis and
shall demonstrate to the satisfaction of Acquisition Co., in its sole
discretion, that the Acquired Assets do not constitute substantially all of the
assets of Stockholder on a consolidated basis. Acquisition Co. hereby agrees to
pay one-half of the cost of the Appraisal on the following conditions: (i) the
total cost paid by Acquisition Co. for such Appraisal shall not exceed Ten
Thousand Dollars ($10,000); (ii) Acquisition Co. shall not incur any liability
to pay costs or fees to any appraiser selected by XPIT or Stockholder unless
such appraiser has been approved by Buyers in writing; and (iii) the Appraisal
shall be completed within seven (7) days of the date hereof.
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(j) XPIT and Stockholder shall have continued to conduct the XPIT
Business in substantially the same manner as it has historically been conducted,
including providing substantially similar financial and other resources to XPIT.
ARTICLE XI
CLOSING
The closing of all transactions provided for herein (the "Closing") shall
occur by delivery of documents by facsimile (with originals to be delivered by
overnight courier the following day) as soon as practicably after each of the
conditions set forth in Article X have been satisfied or waived, or at such
other time as the parties may mutually agree (the "Closing Date"). The
transactions at Closing, when effective, will be deemed to be effective as of
the opening of business on the day of Closing, except as otherwise specifically
provided at the time of Closing. All actions to be taken at Closing will be
considered to be taken simultaneously, and no document, agreement, or instrument
will be considered to be delivered until all items that are to be delivered at
the Closing have been executed and delivered. At the Closing, the following
actions will occur:
11.1 Certificates. Officers of CQG, Acquisition Co., the Stockholder, XPIT,
Sockeye, Sawtooth, and Xxxxxx will each respectively execute a certificate
stating that all representations and warranties made by them respectively in
this Agreement continue to be true as of the time of Closing.
11.2 XPIT's Legal Opinion. The Stockholder will deliver to Acquisition Co.
an opinion of legal counsel for the Stockholder and XPIT, in form reasonably
satisfactory to Acquisition Co., opining favorably as to the matters set forth
in Sections 6.1 and 6.2 and, to the best of such counsel's knowledge, to the
matters in Section 6.3 of this Agreement.
11.3 Assignment and Xxxx of Sale. XPIT, Stockholder, and the Related
Parties will execute and deliver to Acquisition Co. an assignment and xxxx of
sale, substantially in the form of Exhibit E, transferring good and marketable
title to all of the Acquired Assets to Acquisition Co. free and clear of any
liens or other adverse interests.
11.4 Assignment of Intangibles. XPIT will execute such further assignments
or other transfer documents as may be necessary to transfer all intangible
Acquired Assets to Acquisition Co., including consents from third parties, to
the extent required to provide valid assignments of contracts and other
agreements. The Stockholder and the Related Parties will confirm its prior
transfer to XPIT of all information or other Intellectual Property relating to
the XPIT business or the Software.
11.5 Third-Party Consents. Stockholder and XPIT shall deliver to
Acquisition Co. any consents or agreements necessary to assign the Assumed
Obligations to Acquisition Co.
17
11.6 Assignment and Assumption of Assumed Obligation. The Stockholder and
Acquisition Co. will execute an assumption of liabilities, substantially in the
form of Exhibit F, assuming and agreeing to pay all of the liabilities assumed
in accordance with Section 4.1.
11.7 Sublease. Sawtooth and Acquisition Co. shall execute a Sublease for
the Premises substantially in the form of Exhibit G.
11.8 Acquisition Co.'s Legal Opinion. Acquisition Co. will deliver to the
Stockholder and XPIT an opinion of legal counsel for Acquisition Co., in form
reasonably satisfactory to XPIT and the Stockholder, opining favorably as the
matters set forth in Sections 7.1 and 7.2.
11.9 Purchase Price. Acquisition Co. will pay the Base Price for the
Acquired Assets in accordance with Section 3.1 hereof.
11.10 Excluded Liabilities. The Stockholder and XPIT shall satisfy or
provide evidence satisfactory to Acquisition Co. that they have satisfied or
will satisfy all of the Excluded Liabilities.
11.11 Corporate Authorization of Acquisition Co. Acquisition Co. shall
provide such corporate authorization as XPIT and the Stockholder may reasonably
request for the purpose of verifying the validity of all instruments and
documents delivered at the time of Closing by Acquisition Co.
11.12 Corporate Authorization of XPIT and Stockholder. XPIT and the
Stockholder shall provide such corporate authorization as Acquisition Co. may
reasonably request for the purpose of verifying the validity of all instruments
and documents delivered at the time of Closing by XPIT or the Stockholder,
including the Appraisal and the Delaware Opinion Letter or a vote of the
stockholders of the Stockholder.
11.13 Tax Allocations. The parties shall execute a schedule showing
allocations of the purchase price to the various Acquired Assets as reasonably
determined by Acquisition Co., which allocations shall be consistent with
Section 1060 of the Internal Revenue Code and the Regulations thereunder. The
parties will agree to report all transactions hereunder consistent with such
schedule for all tax purposes.
11.14 Employment Agreements and Confidentiality Agreements. XPIT shall
deliver an employment termination letter to each of the Employees and an
assignment and waiver of its rights under each of the Employee's nondisclosure
agreements with XPIT. Each of the Employees shall execute the Employment
Agreement or the Confidentiality Agreement.
11.15 Noncompetition Agreements. XPIT and the Stockholder and Sockeye,
Sawtooth, and the Members shall execute the Noncompetition Agreement,
substantially in the forms attached hereto as Exhibits A and B, respectively.
11.16 Name Change. XPIT shall deliver to Acquisition Co. such documentation
as it may deem reasonably necessary to change its name to a name that does not
include "XPIT" or
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any variant thereof or assurances that such documentation will be delivered as
soon as reasonably possible following the Closing.
11.17 Domain Names. Stockholder, XPIT and/or Sawtooth shall execute and
deliver to Acquisition Co. any documents reasonably requested by Acquisition Co.
in order to assign and transfer the domain names "XXXX.xxx" and "XXXX.xxx."
11.18 Consent of Noteholders. The Noteholders shall execute an agreement
consenting to the transactions herein, confirming payment of the notes and
terminating the promissory note and related pledge agreements.
11.19 Termination of Consulting Agreement. Stockholder and Sawtooth shall
execute an agreement terminating the Consulting Agreement in accordance with
Section 8.1 hereof.
11.20 Other Acts. The parties will execute any other documents reasonably
required to carry out the intent of this Agreement.
ARTICLE XII
TERMINATION
This Agreement will terminate in accordance with the following provisions.
12.1 Termination. If Xpit or Stockholder, on the one hand, or CQG or
Acquisition Co., on the other hand have not satisfied such parties' conditions
to Closing, as set forth in Article X, within forty-five (45) days of the date
hereof, this Agreement may be terminated by the others upon written notice, as
provided herein without liability to any party. If the purchase and sale
provided for herein fails to close within six months of the date hereof, then
this Agreement shall automatically terminate unless the parties have, by mutual
agreement, extended the time for Closing in writing without liability to any
party.
12.2 Failure of Condition. If this Agreement terminates by reason of the
failure of any condition provided for herein to be satisfied within six months
of the date hereof, and if the failure to satisfy such condition occurs without
material fault on the part of either party hereto, then this Agreement shall
terminate without liability on the part of either party hereto, except that the
confidentiality provisions set forth in Article IX shall remain in effect.
12.3 Termination by Agreement. If the parties hereto mutually agree to
terminate this Agreement, such termination shall be effective without liability
to either party hereto.
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ARTICLE XIII
COSTS AND EXPENSES.
Except as otherwise expressly provided for herein, whether or not the
transactions contemplated by this Agreement are consummated, each of the parties
hereto will be solely responsible for its own costs and expenses incurred in
connection herewith including without limitation any legal, accounting,
appraisal or other professional fees.
ARTICLE XIV
MUTUAL INDEMNIFICATION
14.1 XPIT's and the Stockholder's Indemnity. XPIT and the Stockholder,
jointly and severally, (and the Related Parties, jointly and severally, with
respect to the obligations, covenants, representations and warranties set forth
in Article VIII) agree that they shall indemnify and hold harmless Acquisition
Co., CQG, and the representatives, shareholders, officers, directors, employees,
agents, affiliates, predecessors, successors, and assigns of each (collectively,
the "Acquisition Co. Indemnitees") from and against any and all costs, losses,
liabilities, damages, litigation, claims, costs, and expenses, including
reasonable attorneys' fees and other expenses of investigation and defense
(collectively, the "Damages") to which the Acquisition Co. Indemnitees may
become subject or which are incurred in connection with, arise out of, result
from, or are attributable to any material breach of the terms of this Agreement
or any certificate or other document delivered hereunder or pursuant hereto by
XPIT, the Stockholder, or the Related Parties, including any material breach of
any representation or warranty made by XPIT, the Stockholder, or the Related
Parties the failure by XPIT or the Stockholder to perform materially any of the
covenants or obligations contained herein or in any certificate or other
document delivered hereunder or pursuant hereto.
14.2 Acquisition Co.'s and CQG's Indemnity. Acquisition Co. and CQG agree
that they, jointly and severally, shall indemnify and hold harmless the
Stockholder, XPIT and the representatives, officers, directors, stockholders,
employees, agents, affiliates, predecessors, successors, and assigns of each
(collectively, the "XPIT Indemnitees") from and against any and all Damages to
which the XPIT Indemnitees may become subject or which are incurred in
connection with, arise out of, result from, or are attributable to any material
breach of the terms of this Agreement or any certificate or other document
delivered hereunder by Acquisition Co., including any material breach of any
representation or warranty made by Acquisition Co., or the failure by
Acquisition Co. to perform materially any of the covenants or obligations
contained herein or in any certificate or other document delivered hereunder or
pursuant hereto or any use of the Acquired Assets after Closing.
14.3 General. The party entitled to indemnification shall be referred to as
the "Indemnified Party," and the party obligated to provide such indemnification
shall be referred to as the "Indemnifying Party" provided that XPIT and the
Stockholder shall be treated as one party for purposes of such definitions in
this Article XIV. The Indemnified Party shall advise the Indemnifying Party in
writing of any claim for indemnification (whether or not such claim involves a
person or entity that is not a party to this Agreement (a "Third Party")),
although the
20
failure to provide such written notice shall not discharge the obligations of
the Indemnifying Party hereunder.
14.4 Third Party Claims.
(a) The Indemnified Party shall immediately notify the Indemnifying
Party in writing of any claim by a Third Party for which the Indemnifying Party
has indemnification obligations hereunder and shall acknowledge its
indemnification obligation for such claim in writing. After the Indemnified
Party has received such notice of a claim by a Third Party from the Indemnifying
Party, the Indemnified Party shall allow the Indemnifying Party an opportunity
to undertake the prompt and diligent defense, settlement, or other resolution of
the claim. In the event the Indemnifying Party assumes the defense as provided
above, the Indemnified Party shall have the right to participate in the defense
at its own expense, shall cooperate with the Indemnifying Party in such defense,
and will attempt to make available to the Indemnified Party on a reasonable
basis all such witnesses, records, materials, and information in its possession
or under its control relating thereto as is reasonably requested by the
Indemnifying Party. Without the written consent of the Indemnified Party, the
Indemnifying Party shall not, in the defense of such Third Party claim or any
litigation resulting therefrom, consent to the entry of any judgment or enter
into any settlement. Any settlement of a Third Party claim shall include, as to
the Indemnified Party as an unconditional term thereof, a release by the Third
Party of the Indemnified Party from any and all liability in respect of such
claim or litigation, unless the Indemnified Party agrees otherwise in writing.
(b) In the event that the Indemnifying Party elects not to assume the
defense, is unwilling to acknowledge its indemnification obligations to the
Indemnified Party in writing as required by Section 14.3 does not perform, or
reasonably appears to be incapable of performing such obligations, then the
Indemnified Party may defend, settle, or otherwise resolve the claim as the
Indemnified Party determines to be appropriate. In such case, the Indemnifying
Party shall be responsible for all costs incurred, including settlement or other
amounts paid to third parties, by the Indemnified Party in connection therewith
and shall cooperate with the Indemnified Party in such defense and attempt to
make available to it all such witnesses, records, materials, and information in
its possession or under its control relating thereto as is requested by the
Indemnified Party.
14.5 Remedies. The Indemnifying Party shall promptly reimburse the
Indemnified Party for the amount of any judgment rendered against the
Indemnified Party with respect to any Third Party claim in litigation or upon
request by the Indemnified Party for any other Damages arising out of any claim
not involving a Third Party. To the extent that the Indemnifying Party refuses
to pay in full the Damages owed to the Indemnified Party, the Indemnified Party
may: (i) offset the Damages against any payments the Indemnified Party may owe
the Indemnifying Party, including without limitation the Holdback Amount and the
Contingent Payments; and (ii) utilize any legal or equitable remedy to collect
from the Indemnifying Party the amount of such Damages. Nothing contained herein
is intended to limit or constrain the Indemnified Party's rights against the
Indemnifying Party for indemnity, the remedies herein being cumulative and in
addition to all other rights and remedies of the Indemnified Party at law or in
equity.
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ARTICLE XV
XPIT'S AND STOCKHOLDER'S POST-CLOSING COVENANTS
From and after the time of Closing, XPIT and the Stockholder agree as
follows:
15.1 Payment of Liabilities. Except for the Assumed Obligations, XPIT
and/or the Stockholder shall pay all of XPIT's liabilities as and when due,
including without limitation any liabilities to trade creditors not assumed by
Acquisition Co. In the event that Acquisition Co. must pay any such trade
creditor in order for such trade creditor to continue to do business with
Acquisition Co. on the same terms as such party did business with XPIT, then
Acquisition Co. may pay such trade creditor and offset such payment against any
payments Acquisition Co. thereafter may owe XPIT or the Stockholder, including
without limitation the Holdback Amount and the Contingent Payments, or take such
other actions as may be reasonable to collect such payment from XPIT or the
Stockholder.
15.2 Sales Taxes. XPIT and/or the Stockholder shall pay all sales and use
taxes owed to any state taxing authority or any political subdivision or taxing
authority in any state that accrue prior to or as a result of consummating the
transactions set forth in this Agreement, if any, as and when due. XPIT shall
not permit any lien in favor of the of any state or any political subdivision or
taxing authority in the State of Idaho to attach to the Acquired Assets, and
shall satisfy or otherwise discharge any such lien that does attach to the
Acquired Assets, as a result of consummating the transaction set forth in this
Agreement. In the event XPIT and the Stockholder fail to pay such taxes,
Acquisition Co. may pay such taxes and offset such payment against any payments
Acquisition Co. thereafter may owe XPIT or the Stockholder, including without
limitation the Holdback Amount and the Contingent Payments, or take such other
actions as may be reasonable to collect such payment from XPIT or the
Stockholder
15.3 XPIT Liquidation. After Closing, XPIT may liquidate and distribute all
of its net assets, including any future payments hereunder, to the Stockholder,
provided that the Stockholder acknowledges in writing its agreement to be
responsible for all of the obligations of XPIT to Acquisition Co. Upon receipt
of notice of such liquidation and assumption of obligations, all payments and
other obligations due from Acquisition Co. to XPIT shall thereafter be made
exclusively to the Stockholder.
ARTICLE XVI
GENERAL PROVISIONS
The following general provisions shall apply to this Agreement.
16.1 Survival of Agreement. This Agreement, and all terms, warranties and
provisions hereof will be true and correct as of the time of Closing and will
survive the Closing for a period of three (3) years, except as otherwise
expressly provided herein and except for claims for any breach of Sections 6.1,
6.2, 6.3, 6.5, 6.13 and 6.15, which shall survive for five (5) years after the
Closing.
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16.2 Notices. All notices required or permitted hereunder or under any
related agreement or instrument (unless such related agreement or instrument
otherwise provides) will be deemed delivered when delivered personally, mailed,
by certified mail, return receipt requested, or registered mail, or sent by a
nationally recognized overnight courier to the respective party at the following
addresses or to such other address as each respective party may in writing
hereafter designate:
(a) To XPIT or the Stockholder:
RateXchange Corporation
000 Xxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Attention: D. Xxxxxxxx Xxxxxxxx, Chairman and CEO
With a copy sent at the same time in the same manner to their legal
counsel at:
RateXchange Corporation
000 Xxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxxxxxxx Xxxxxxx, General Counsel
(b) To CQG or Acquisition Co.:
CQG, Inc.
0000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
With a copy sent at the same time in the same manner to its legal
counsel at:
Krendl, Krendl, Sachnoff & Way, Professional Corporation
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
16.3 Successors and Assigns. This Agreement will be binding upon the
parties hereto and their respective successors, personal representatives, heirs,
and assigns. However, no party hereto will have any right to assign any of its
obligations pursuant to this Agreement except with the prior written consent of
all of the other parties, except that Acquisition Co. may assign its rights
hereunder to a corporation, limited liability company, or other entity that
Acquisition Co. wholly-owns or that Acquisition Co. is wholly-owned by.
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16.4 Merger. This Agreement and the exhibits and other documents,
agreements, and instruments related hereto set forth the entire agreement of the
parties with respect to the subject matter hereof and may not be amended or
modified except in writing subscribed to by all such parties.
16.5 Attorney's Fees. If any party shall commence any action or proceeding
against the other that arises out of the provisions hereof or to recover damages
as the result of the alleged breach of any of the provisions hereof, the
prevailing party therein shall be entitled to recover from the nonprevailing
party all reasonable costs incurred in connection therewith, including
reasonable attorneys' fees.
16.6 Governing Law. This Agreement is entered into in the City and County
of Denver, State of Colorado, it will be performed within such state, and all
issues arising hereunder shall be governed in all respects by the laws of such
state.
16.7 Modification or Severance. In the event that any provision of this
Agreement is found by any court or other authority of competent jurisdiction to
be illegal or unenforceable, such provision shall be severed or modified to the
extent necessary to render the remainder of the Agreement enforceable and as so
severed or modified, this Agreement will remain in full force and effect.
16.8 Captions. The captions in this Agreement are included for convenience
only and shall not in any way affect the interpretation of any of the provisions
hereof.
16.9 Counterparts. This agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have read and entered into this Agreement
as of the date above written.
XPIT ACQUISITION LLC,
a Colorado limited liability company,
By: CQG, INC.,
a Colorado corporation
Its: Member
By: ____________________________________
Name: __________________________________
Title: _________________________________
CQG, INC.,
a Colorado corporation
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
XPIT CORPORATION,
a Delaware corporation
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
RATEXCHANGE CORPORATION,
a Delaware corporation
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
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SAWTOOTH INVESTMENT MANAGEMENT, LLC,
an Idaho limited liability company
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
SOCKEYE TRADING, LLC,
an Idaho limited liability company
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
XXXXXX FINANCIAL, INC.,
a Kentucky corporation
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
_____________________________________________
Xxxx Xxxxx
_____________________________________________
Xxxx Xxxxx
_____________________________________________
Xxxx Xxxxx
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LIST OF EXHIBITS
Exhibit A Form of Noncompetition Agreement of XPIT and Stockholder
Exhibit B Form of Noncompetition Agreement of Sawtooth, Sockeye and the
Members
Exhibit C Form of Employment, Confidential Information and Invention
Assignment Agreement
Exhibit D Form of Confidential Information and Invention Assignment Agreement
Exhibit E Form of Assignment and Xxxx of Sale
Exhibit F Form of Assignment and Assumption Agreement
Exhibit G Form of Sublease
LIST OF SCHEDULES
Schedule Description
-------- -----------
3.1(a) Payment of Base Price
3.2 Order-Routing Revenue
4.1 Assumed Obligations
6.4 Financial Statements of XPIT
6.5 Acquired Assets
6.6 Liabilities
6.8 Legal Proceedings
6.9 Material Agreements
6.10 XPIT Employees
6.13 Taxes
6.14 Insurance Policies
6.15 Trademarks and Intellectual Property
6.16 Software
6.17 Regulatory Approvals
6.18 Customers and Suppliers
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