MEMBERSHIP INTEREST PURCHASE AGREEMENT
MEMBERSHIP
INTEREST PURCHASE AGREEMENT, dated as of January 15, 2008 (the “Agreement”), by
and among XxxXxxxxxxxxxXxxxxxxx.xxx, Inc., a corporation existing under the
laws
of Nevada (the “Buyer”), Investment Tools and Training, LLC, a limited liability
company existing under the laws of Utah (the “Company”), Boya Systems, LLC, a
limited liability company existing under the laws of Utah (“Boya”), Xxxx Creek
Capital Management, LLC, a limited liability company existing under the laws
of
Utah (“Kays”) and LUCASA, LLC, a limited liability company existing under the
laws of Utah (“Lucasa” and collectively with Boya and Kays, the
“Owners”).
W
I T N E S S E T H:
WHEREAS,
the Owners own 100% of the issued and outstanding membership interests in the
Company. Such membership interests shall be referred to herein as
“Units.
WHEREAS,
subject to the terms and conditions hereof, the Owners desire to sell, transfer
and assign to Buyer, and Buyer desires to purchase from the Owners, the
Units.
WHEREAS,
the Company desires to facilitate the transactions set forth.
NOW,
THEREFORE, in consideration of the premises and the mutual covenants and
agreements hereinafter contained, the parties hereby agree as
follows:
ARTICLE
I.
PURCHASE
AND SALE OF ASSETS.
1.1. Sale
of Units.
The
Owners agree to sell, assign, transfer and deliver to Buyer, and Buyer agrees
to
purchase from the Owners, all of Owners’ right, title and interest in and to the
Units.
1.2. Purchase
Price; Payment.
(a) Purchase
Price.
The
purchase price for the Units shall be (i) an aggregate of Two Million Dollars
($2,000,000.00) evidenced by convertible debentures, substantially in the form
of Exhibit A hereto (the “Debentures”), and (ii) an aggregate of Sixty-Six
Million Six Hundred Thousand (66,600,000) shares of common stock, par value
$0.001 per share, of Buyer (the “Common Stock” and collectively with the
Debentures, the “Purchase Price”), which shall be payable to the Owners, in
accordance with Section 1.2(b).
(b) Payment
of Purchase Price.
The
Buyer shall deliver the Purchase Price to the individuals and/or entities
designated by the Owners, as set forth on Schedule 1.2(b) annexed
hereto:
(i) on
the
Closing Date hereof (as hereafter defined), (a) the Debentures, and (b) an
aggregate of Fifty-Four Million Six Hundred Thousand (54,600,000) shares of
Common Stock;
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(ii) on
the
one year anniversary of the Closing Date, an aggregate of Four Million
(4,000,000) shares of Common Stock;
(iii) on
the
two year anniversary of the Closing Date, an aggregate of Four Million
(4,000,000) shares of Common Stock;
(iv) on
the
three year anniversary of the Closing Date, an aggregate of Two Million
(2,000,000) shares of Common Stock; and
(v) on
the
four year anniversary of the Closing Date, an aggregate of Two Million
(2,000,000) shares of Common Stock.
ARTICLE
II.
CLOSING
AND TERMINATION
2.1. Closing
Date.
Subject
to the satisfaction of the conditions set forth in Sections 6.1 and 6.2 hereof
(or the waiver thereof by the party entitled to waive that condition), the
closing of the sale and purchase of the Units provided for in Section 1.1 hereof
(the “Closing”) shall take place at the offices of Sichenzia Xxxx Xxxxxxxx
Xxxxxxx LLP located at 00 Xxxxxxxx, 00xx
Xxxxx,
Xxx Xxxx, XX 00000 (or at such other place as the parties may mutually agree
upon) on or before January 15, 2008. The date on which the Closing shall be
held
is referred to in this Agreement as the “Closing Date”
2.2. Termination
of Agreement. This
Agreement may be terminated prior to the Closing as follows:
(a) at
the
election of the Owners or the Buyer on or after January 15, 2008, if the Closing
shall not have occurred by the close of business on such date, provided that
the
terminating party is not in default of any of its obligations hereunder;
(b) by
mutual
written consent of the Owners and the Buyer; or
(c) by
the
Owners or the Buyer if there shall be in effect a final nonappealable order
of a
court, government or governmental agency or body of competent jurisdiction
(“Governmental Body”) of competent jurisdiction restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated hereby;
it being agreed that the parties hereto shall promptly appeal any adverse
determination which is not nonappealable (and pursue such appeal with reasonable
diligence).
2.3. Procedure
Upon Termination.
In the
event of termination and abandonment by the Buyer or the Owners, or both,
pursuant to Section 2.2 hereof, written notice thereof shall forthwith be given
to the other party or parties, and this Agreement shall terminate, and the
purchase of the Units hereunder shall be abandoned, without further action
by
the Buyer or the Owners. If this Agreement is terminated as provided herein
each
party shall redeliver all documents, work papers and other material of any
other
party relating to the transactions contemplated hereby, whether so obtained
before or after the execution hereof, to the party furnishing the
same.
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2.4. Effect
of Termination.
In the
event that this Agreement is validly terminated as provided herein, then each
of
the parties shall be relieved of their duties and obligations arising under
this
Agreement after the date of such termination and such termination shall be
without liability to the Buyer or the Owners; provided, however, that nothing
in
this Section 2.4 shall relieve the Buyer or the Owners of any liability for
a
breach of this Agreement.
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES OF THE SELLER AND THE OWNERS
The
Company and the Owners, jointly and severally hereby represent and warrant
to
the Buyer that:
3.1. Organization
and Good Standing.
The
Company is a limited liability company duly formed, validly existing and in
good
standing under the laws of the jurisdiction of its formation as set forth above
and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now conducted. The Company is duly
qualified or authorized to do business and is in good standing under the laws
of
each jurisdiction in which it owns or leases real property and each other
jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification or authorization, except where failure
to
be so qualified would not have a material adverse effect on the business, assets
or financial condition of the Company taken as a whole (“Material Adverse
Effect”).
3.2. Authorization
of Agreement.
The
Company and the Owners have all requisite power, authority and legal capacity
to
execute and deliver this Agreement, and each other agreement, document, or
instrument or certificate contemplated by this Agreement or to be executed
by
the Company or the Owners in connection with the consummation of the
transactions contemplated by this Agreement (together with this Agreement,
the
“Company Documents”), and to consummate the transactions contemplated hereby and
thereby. This Agreement has been, and each of the Company Documents will be
at
or prior to the Closing, duly and validly executed and delivered by the Company
or the Owners and (assuming the due authorization, execution and delivery by
the
other parties hereto and thereto) this Agreement constitutes, and each of the
Company Documents when so executed and delivered will constitute, legal, valid
and binding obligations of the Company, enforceable against the Company or
the
Owners, as applicable, in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors’ rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
3.3. Formation.
The
Company is a limited liability company duly formed and validly subsisting under
the laws of the State of Utah, and is in good standing with the office of the
Secretary of State for the State of Utah.
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3.4. Capitalization.
The
authorized capital of the Company consists of membership interests, which are
referred to herein as “Units.” The Owners collectively own 100% of the Units,
free and clear of any and all liens, charges or encumbrances or any kind or
nature
and no
person, firm or corporation has any agreement, warrant or option or any right
capable of becoming an agreement or option for the acquisition of Units or
for
the purchase, subscription or issuance of any of the unissued units in the
capital of Company. When delivered to the Buyer the Units shall be validly
issued and outstanding as fully paid and non-assessable and the Units shall
be
transferable upon the books and records of the Company, in all cases subject
to
the provisions and restrictions of all applicable securities laws.
3.5. Conflicts;
Consents of Third Parties.
(a) Except
as
set forth in Schedule 3.5(a), none of the execution and delivery by the Company
or Owners of this Agreement and the Company Documents, the consummation of
the
transactions contemplated hereby or thereby, or compliance by the Company with
any of the provisions hereof or thereof will (i) conflict with, or result in
the
breach of, any provision of the limited liability company agreement of the
Company; (ii) conflict with, violate, result in the breach or termination of,
or
constitute a default under any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the Company or any Owner
is
a party or by which any of them or any of their respective properties or assets
is bound; (iii) violate any statute, rule, regulation, order or decree of any
governmental body or authority by which the Company is bound; or (iv) result
in
the creation of any Lien upon the properties or assets of the Company except,
in
case of clauses (ii), (iii) and (iv), for such violations, breaches or defaults
as would not, individually or in the aggregate, have a Material Adverse
Effect.
(b) No
consent, waiver, approval, order, permit or authorization of, or declaration
or
filing with, or notification to, any person or Governmental Body is required
on
the part of the Company, the Company in connection with the execution and
delivery of this Agreement or the Company Documents, or the compliance by the
Company as the case may be, with any of the provisions hereof or
thereof.
3.6. Ownership
of Assets.
Company
has good and marketable title to all of its assets free and clear of all
mortgages, pledges, security interests, charges, liens, restrictions and
encumbrances of any kind (collectively, “Liens”) whatsoever. The assets include
all of the assets and properties held for use by Company to conduct its business
as presently conducted and. All of the tangible assets are in good repair,
have
been well maintained and are in good operating condition, do not require any
material modifications or repairs, and comply in all material respects with
applicable laws, ordinances and regulations, ordinary wear and tear
excepted.
3.7. Financial
Statements.
The
Company has delivered or caused to be delivered to the Buyer copies of (i)
the
audited consolidated balance sheets of the Company as of August 31, 2007 and
the
related audited consolidated statements of income and of cash flows of the
Company for the period from November 9, 2006 through August 31, 2007 and (ii)
the unaudited but reviewed consolidated balance sheet of the Company as of
September 30, 2007 and the related consolidated statements of income and cash
flows of the Company for the nine-month period then ended (such audited and
unaudited statements, including the related notes and schedules thereto, are
referred to herein as the “Company Financial Statements”). Each of the Company
Financial Statements is complete and correct in all material respects, has
been
and will be prepared in accordance with GAAP (subject to normal year-end
adjustments in the case of the unaudited statements) and in conformity with
the
practices consistently applied by the Company without modification of the
accounting principles used in the preparation thereof and will present fairly
the financial position, results of operations and cash flows of the Company
as
at the dates and for the periods indicated. For the purposes hereof, the
unaudited but reviewed consolidated balance sheet of the Company as of September
30, 2007 is referred to as the “Company Balance Sheet” and September 30, 2007 is
referred to as the “Company Balance Sheet Date”.
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3.8. No
Undisclosed Liabilities.
The
Company has no indebtedness, obligations or liabilities of any kind (whether
accrued, absolute, contingent or otherwise, and whether due or to become due)
that would have been required to be reflected in, reserved against or otherwise
described on the Company Balance Sheet or in the notes thereto in accordance
with GAAP which was not fully reflected in, reserved against or otherwise
described in the Company Balance Sheet or the notes thereto or was not incurred
in the ordinary course of business consistent with past practice since the
Company Balance Sheet Date.
3.9. Absence
of Certain Developments.
Except
as expressly contemplated by this Agreement or as set forth on Schedule 3.9,
since the Company Balance Sheet Date:
(i) there
has
not been an event which had a Material Adverse Effect nor has there occurred
any
event which is reasonably likely to result in a Material Adverse
Effect;
(ii) there
has
not been any damage, destruction or loss, whether or not covered by insurance,
with respect to the property and assets of the Company having a replacement
cost
of more than $10,000 for any single loss or $25,000 for all such
losses;
(iii) there
has
not been any declaration, setting aside or payment of any distribution in
respect of any membership interest of the Company or any repurchase, redemption
or other acquisition by the Company of any outstanding membership, or other
ownership interest in, the Company;
(iv) the
Company has not awarded or paid any bonuses to employees of the Company with
respect to the fiscal year ended 2006, except to the extent accrued on the
Company Balance Sheet or entered into any employment, deferred compensation,
severance or similar agreement (nor amended any such agreement) or agreed to
increase the compensation payable or to become payable by it to any of the
Company’s directors, officers, employees, agents or representatives or agreed to
increase the coverage or benefits available under any severance pay, termination
pay, vacation pay, company awards, salary continuation for disability, sick
leave, deferred compensation, bonus or other incentive compensation, insurance,
pension or other employee benefit plan, payment or arrangement made to, for
or
with such directors, officers, employees, agents or representatives (other
than
normal increases in the ordinary course of business consistent with past
practice and that in the aggregate have not resulted in a material increase
in
the benefits or compensation expense of the Company);
(v) there
has
not been any change by the Company in accounting or Tax reporting principles,
methods or policies;
(vi) the
Company has not entered into any transaction or Contract or conducted its
business other than in the ordinary course consistent with past
practice;
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(vii) the
Company has not failed to promptly pay and discharge current liabilities except
where disputed in good faith by appropriate proceedings;
(viii) the
Company has not made any loans, advances or capital contributions to, or
investments in, any person or paid any fees or expenses to the Company or any
Affiliate of the Company;
(ix) the
Company has not mortgaged, pledged or subjected to any Lien any of its assets,
or acquired any assets or sold, assigned, transferred, conveyed, leased or
otherwise disposed of any assets of the Company, except for assets acquired
or
sold, assigned, transferred, conveyed, leased or otherwise disposed of in the
ordinary course of business consistent with past practice;
(x) the
Company has not discharged or satisfied any Lien, or paid any obligation or
liability (fixed or contingent), except in the ordinary course of business
consistent with past practice and which, in the aggregate, would not be material
to the Company;
(xi) the
Company has not canceled or compromised any debt or claim or amended, canceled,
terminated, relinquished, waived or released any Contract or right except in
the
ordinary course of business consistent with past practice and which, in the
aggregate, would not be material to the Company;
(xii) the
Company has not made or committed to make any capital expenditures or capital
additions or betterments in excess of $10,000 individually or $25,000 in the
aggregate;
(xiii) the
Company has not instituted or settled any material legal proceeding;
and
(xiv) the
Company has not agreed to do anything set forth in this Section
3.9.
3.10. Taxes.
(a) Except
as
set forth on Schedule 3.10 (A) all Tax returns required to be filed by or on
behalf of the Company have been properly prepared and duly and timely filed
with
the appropriate taxing authorities in all jurisdictions in which such Tax
returns are required to be filed (after giving effect to any valid extensions
of
time in which to make such filings), and all such Tax returns were true,
complete and correct in all material respects; (B) all Taxes payable by or
on
behalf of the Company or in respect of its income, assets or operations have
been fully and timely paid, and adequate reserves or accruals for Taxes have
been provided in the Company Balance Sheet with respect to any period for which
Tax Returns have not yet been filed or for which Taxes are not yet due and
owing; and (C) the Company has not executed or filed with the Internal Revenue
Service (the “IRS”) or any other taxing authority any agreement, waiver or other
document or arrangement extending or having the effect of extending the period
for assessment or collection of Taxes (including, but not limited to, any
applicable statute of limitation), and no power of attorney with respect to
any
Tax matter is currently in force. “Tax or Taxes” means all federal, state, local
or other taxes or similar governmental charges, fees, levies or
assessments.
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(b) The
Company has complied in all material respects with all applicable Laws (as
defined in Section 3.18), rules and regulations relating to the payment and
withholding of Taxes and has duly and timely withheld from employee salaries,
wages and other compensation and has paid over to the appropriate taxing
authorities all amounts required to be so withheld and paid over for all periods
under all Laws.
(c) Buyer
has
received complete copies of (A) all federal, state, local and foreign income
or
franchise Tax Returns of the Company and (B) any audit report issued within
the
last three (3) years relating to any material Taxes due from or with respect
to
the its income, assets or operations. All income and franchise Tax returns
filed
by or on behalf of the Company for the taxable years ended on the respective
dates set forth on Schedule 3.10 have been examined by the relevant taxing
authority or the statute of limitations with respect to such Tax Returns has
expired.
(d) Schedule
3.10 lists all material types of Taxes paid and material types of Tax Returns
filed by or on behalf of the Company. Except as set forth on Schedule 3.10,
no
claim has been made by a taxing authority in a jurisdiction where the Company
does not file Tax Returns such that it is or may be subject to taxation by
that
jurisdiction.
(e) Except
as
set forth on Schedule 3.10, all deficiencies asserted or assessments made as
a
result of any examinations by the IRS or any other taxing authority of the
Tax
Returns of or covering or including the Company that are owed by the Company
have been fully paid, and there are no other audits or investigations by any
taxing authority in progress, nor has the Company received any written notice
from any taxing authority that it intends to conduct such an audit or
investigation. No issue has been raised in writing by a federal, state, local
or
foreign taxing authority in any current or prior examination which, by
application of the same or similar principles, could reasonably be expected
to
result in a proposed deficiency for any subsequent taxable period.
(f) Except
as
set forth on Schedule 3.10, the Company has not (A) agreed to or is not required
to make any adjustments pursuant to Section 481(a) of the Code or any similar
provision of state, local or foreign law by reason of a change in accounting
method initiated by the Company or has any knowledge that the IRS has proposed
any such adjustment or change in accounting method, or has any application
pending with any taxing authority requesting permission for any changes in
accounting methods that relate to the business or operations of the Company,
(B)
executed or entered into a closing agreement pursuant to Section 7121 of the
Code or any predecessor provision thereof or any similar provision of state,
local or foreign law with respect to the Company, or (C) requested any extension
of time within which to file any Tax Return, which Tax Return has since not
been
filed within the period of limitations.
(g) No
property owned by the Company is (i) property required to be treated as being
owned by another person pursuant to the provisions of Section 168(f)(8) of
the
Internal Revenue Code of 1954, as amended and in effect immediately prior to
the
enactment of the Tax Reform Act of 1986, (ii) constitutes “tax-exempt use
property” within the meaning of Section 168(h)(1) of the Code or (iii) is
“tax-exempt bond financed property” within the meaning of Section 168(g) of the
Code.
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(h) The
Company is not a foreign person within the meaning of Section 1445 of the
Code.
(i) The
Company is not a party to any tax sharing or similar agreement or arrangement
(whether or not written) pursuant to which it will have any obligation to make
any payments after the Closing.
(j) There
is
no contract, agreement, plan or arrangement covering any person that,
individually or collectively, could give rise to the payment of any amount
that
would not be deductible by the Buyer, the Affiliates or their respective
affiliates by reason of Section 280G of the Code, or would constitute
compensation in excess of the limitation set forth in Section 162(m) of the
Code.
(k) The
Company is not subject to any private letter ruling of the IRS or comparable
rulings of other taxing authorities.
(l) There
are
no liens as a result of any unpaid Taxes upon any of the assets of the
Company.
(m) Except
as
set forth on Schedule 3.10, the Company has no elections in effect for federal
income tax purposes under Sections 108, 168, 441, 463, 472, 1017, 1033 or 4977
of the Code.
(n) The
Company has never owned any subsidiaries and has never been a member of any
consolidated, combined or affiliated group of corporations for any Tax
purposes.
3.11. Real
Property.
(a) Company
does not own any interest in any real property. Schedule 3.11(a) sets forth
a
complete list of all real property and interests in real property leased by
the
Company (individually, a “Real Property Lease” and the real properties specified
in such leases being referred to herein individually as a “Company Property” and
collectively as the “Company Properties”) as lessee or lessor. The Company
Property constitutes all interests in real property currently used or currently
held for use in connection with the business of the Company and which are
necessary for the continued operation of the business of the Company as such
business is currently conducted. The Company has a valid and enforceable
leasehold interest under each of the Real Property Leases, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors’ rights and remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in
a
proceeding at law or in equity), and Company has not received any written notice
of any default or event that with notice or lapse of time, or both, would
constitute a default by the Company under any of the Real Property Leases.
All
of the Company Property, buildings, fixtures and improvements thereon owned
or
leased by the Company are in good operating condition and repair (subject to
normal wear and tear). The Company has delivered or otherwise made available
to
the Buyer true, correct and complete copies of the Real Property Leases,
together with all amendments, modifications or supplements, if any,
thereto.
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(b) The
Company has all material certificates of occupancy and permits of any
Governmental Body necessary or useful for the current use and operation of
each
Company Property, and the Company has fully complied with all material
conditions of the permits applicable to it. No default or violation, or event
that with the lapse of time or giving of notice or both would become a default
or violation, has occurred in the due observance of any permit.
(c) There
does not exist any actual or, to the best knowledge of the Company, threatened
or contemplated condemnation or eminent domain proceedings that affect any
Company Property or any part thereof, and the Company has not received any
notice, oral or written, of the intention of any Governmental Body or other
person to take or use all or any part thereof.
(d) The
Company has not received any written notice from any insurance company that
has
issued a policy with respect to any Company Property requiring performance
of
any structural or other repairs or alterations to such Company
Property.
(e) The
Company does not own or hold, and is not obligated under or a party to, any
option, right of first refusal or other contractual right to purchase, acquire,
sell, assign or dispose of any real estate or any portion thereof or interest
therein.
3.12. Tangible
Personal Property.
(a) Schedule
3.12(a) sets forth all leases of personal property (“Personal Property Leases”)
involving annual payments in excess of $10,000 relating to personal property
used in the business of the Company or to which the Company is a party or by
which the properties or assets of the Company is bound. The Company has
delivered or otherwise made available to the Buyer true, correct and complete
copies of the Personal Property Leases, together with all amendments,
modifications or supplements thereto.
(b) The
Company has a valid leasehold interest under each of the Personal Property
Leases under which it is a lessee, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally and subject, as to enforceability, to general principles
of
equity (regardless of whether enforcement is sought in a proceeding at law
or in
equity), and there is no default under any Personal Property Lease by the
Company or, to the best knowledge of the Company, by any other party thereto,
and no event has occurred that with the lapse of time or the giving of notice
or
both would constitute a default thereunder.
(c) The
Company has good and marketable title to all of the items of tangible personal
property reflected in the Company Balance Sheet (except as sold or disposed
of
subsequent to the date thereof in the ordinary course of business consistent
with past practice), free and clear of any and all liens other than as set
forth
on Schedule 3.12. All such items of tangible personal property which,
individually or in the aggregate, are material to the operation of the business
of the Company are in good condition and in a state of good maintenance and
repair (ordinary wear and tear excepted) and are suitable for the purposes
used.
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(d) All
of
the items of tangible personal property used by the Company under the Personal
Property Leases are in good condition and repair (ordinary wear and tear
excepted) and are suitable for the purposes used.
3.13. Intangible
Property.
The
Company owns each patent, trademark, trade name, service xxxx and copyright
for
any and all intellectual property used by the Company as well as all
registrations thereof and pending applications therefor, and each license or
other agreement relating thereto. Except as set forth on Schedule 3.13, each
of
the foregoing is owned by the Company, free and clear of all mortgages, claims,
liens, security interests, charges and encumbrances and is in good standing
and
not the subject of any challenge. There have been no claims made and the Company
has not received any notice or otherwise knows or has reason to believe that
any
of the foregoing is invalid or conflicts with the asserted rights of others.
The
Company possesses, owns or licenses all patents, patent licenses, trade names,
trademarks, service marks, brand marks, brand names, copyrights, know-how,
formulate and other proprietary and trade rights necessary for the conduct
of
its business as now conducted, not subject to any restrictions and without
any
known conflict with the rights of others and has not forfeited or otherwise
relinquished any such patent, patent license, trade name, trademark, service
xxxx, brand xxxx, brand name, copyright, know-how, formulate or other
proprietary right necessary for the conduct of its business as conducted on
the
date hereof. The Company is under no obligation to pay any royalties or similar
payments in connection with any license to any Affiliate thereof. As used in
this Agreement, “Affiliate” means, with respect to any person, any other person
directly or indirectly controlling, controlled by or under common control with
such person and for purposes of individuals, Affiliates would include an
individual’s spouse and minor children.
3.14. Material
Contracts.
Schedule
3.14 sets forth all of the following Contracts to which the Company is a party
or by which it is bound (collectively, the “Material Contracts”): (i) Contracts
with any current officer or director of the Company; (ii) Contracts with any
labor union or association representing any employee of the Company; (iii)
Contracts pursuant to which any party is required to purchase or sell a stated
portion of its requirements or output from or to another party; (iv) Contracts
for the sale of any of the assets of the Company other than in the ordinary
course of business or for the grant to any person of any preferential rights
to
purchase any of its assets; (v) joint venture agreements; (vi) material
Contracts containing covenants of the Company not to compete in any line of
business or with any person in any geographical area or covenants of any other
person not to compete with the Company in any line of business or in any
geographical area; (vii) Contracts relating to the acquisition by the Company
of
any operating business or the capital stock of any other person; (viii)
Contracts relating to the borrowing of money; or (ix) any other Contracts,
other
than Real Property Leases, which involve the expenditure of more than $25,000
in
the aggregate or $10,000 annually or require performance by any party more
than
one year from the date hereof. There have been made available to the Buyer,
its
affiliates and their representatives true and complete copies of all of the
Material Contracts. Except as set forth on Schedule 3.14, all of the Material
Contracts and other agreements are in full force and effect and are the legal,
valid and binding obligation of the Company, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally and subject, as to enforceability, to general principles
of
equity (regardless of whether enforcement is sought in a proceeding at law
or in
equity). Except as set forth on Schedule 3.14, the Company is not in default
in
any material respect under any Material Contracts, nor, to the knowledge of
the
Company, is any other party to any Material Contract in default thereunder
in
any material respect.
-10-
3.15. Employee
Benefits.
(a) Schedule
3.15(a) sets forth a complete and correct list of (i) all “employee benefit
plans”, as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”), and any other pension plans or employee
benefit arrangements, programs or payroll practices (including, without
limitation, severance pay, vacation pay, company awards, salary continuation
for
disability, sick leave, retirement, deferred compensation, bonus or other
incentive compensation, stock purchase arrangements or policies,
hospitalization, medical insurance, life insurance and scholarship programs)
maintained by the Company or to which the Company contributes or is obligated
to
contribute thereunder with respect to employees of the Company (“Employee
Benefit Plans”) and (ii) all “employee pension plans”, as defined in Section
3(2) of ERISA, maintained by the Company or any trade or business (whether
or
not incorporated) which are under control, or which are treated as a single
employer, with Company under Section 414(b), (c), (m) or (o) of the Code (“ERISA
Affiliate”) or to which the Company or any ERISA Affiliate contributed or is
obligated to contribute thereunder (“Pension Plans”). Schedule 3.15(a)
identifies, in separate categories, Employee Benefit Plans or Pension Plans
that
are (i) subject to Section 4063 and 4064 of ERISA (“Multiple Employer Plans”),
(ii) multiemployer plans (as defined in Section 4001(a)(3) of ERISA)
(“Multiemployer Plans”) or (iii) “Benefit Plans”, within the meaning of Section
5000(b)(1) of the Code providing continuing benefits after the termination
of
employment (other than as required by Section 4980B of the Code or Part 6 of
Title I of ERISA and at the former employee’s or his beneficiary’s sole
expense).
(b) Each
of
the Employee Benefit Plans and Pension Plans intended to qualify under Section
401 of the Code (“Qualified Plans”) so qualifies and the trusts maintained
thereto are exempt from federal income taxation under Section 501 of the Code,
and, except as disclosed on Schedule 3.15(b), nothing has occurred with respect
to the operation of any such plan which could cause the loss of such
qualification or exemption or the imposition of any liability, penalty or tax
under ERISA or the Code.
(c) All
contributions and premiums required by Law or by the terms of any Employee
Benefit Plan or Pension Plan which are money purchase plans or any agreement
relating thereto have been timely made (without regard to any waivers granted
with respect thereto) to any funds or trusts established thereunder or in
connection therewith, and no accumulated funding deficiencies exist in any
of
such plans subject to Section 412 of the Code.
(d) No
Employee Benefit Plans and Pension Plans are subject to Title IV of
ERISA.
(e) Each
of
the Employee Benefit Plans and Pension Plans has been maintained, in all
material respects, in accordance with its terms and all provisions of applicable
Law.
-11-
3.16. Labor.
(a) Except
as
set forth on Schedule 3.16(a), the Company is not party to any labor or
collective bargaining agreement and there are no labor or collective bargaining
agreements which pertain to employees of the Company. The Company has delivered
or otherwise made available to the Buyer true, correct and complete copies
of
the labor or collective bargaining agreements listed on Schedule 3.16(a),
together with all amendments, modifications or supplements thereto.
(b) Except
as
set forth on Schedule 3.16(b), no employees of the Company are represented
by
any labor organization. No labor organization or group of employees of the
Company has made a pending demand for recognition, and there are no
representation proceedings or petitions seeking a representation proceeding
presently pending or, to the best knowledge of the Company, threatened to be
brought or filed, with the National Labor Relations Board or other labor
relations tribunal. There is no organizing activity involving the Company
pending or, to the best knowledge of the Company, threatened by any labor
organization or group of employees of the Company.
(c) There
are
no (i) strikes, work stoppages, slowdowns, lockouts or arbitrations or (ii)
material grievances or other labor disputes pending or, to the best knowledge
of
the Company, threatened against or involving the Company. There are no unfair
labor practice charges, grievances or complaints pending or, to the best
knowledge of the Company, threatened by or on behalf of any employee or group
of
employees of the Company.
3.17. Litigation.
Except
as set forth in Schedule 3.17, there is no suit, action, proceeding,
investigation, claim or order pending or, to the knowledge of the Company,
overtly threatened against the Company (or to the knowledge of the Company,
pending or threatened, against any of the officers, directors or key employees
of the Company with respect to their business activities on behalf of the
Company, or to which the Company is otherwise a party, which, if adversely
determined, would have a Material Adverse Effect, before any court, or before
any governmental department, commission, board, agency, or instrumentality;
nor
to the knowledge of the Company is there any reasonable basis for any such
action, proceeding, or investigation. The Company is not subject to any
judgment, order or decree of any court or governmental agency except to the
extent the same are not reasonably likely to have a Material Adverse Effect
and
is not engaged in any legal action to recover monies due it or for damages
sustained by it.
3.18. Compliance
with Laws; Permits. Except
as
set forth in Schedule 3.18, the Company is in compliance with all federal,
state
and local statutes, laws, rules, regulations, orders and ordinances (“Laws”)
applicable to it or to the conduct of its business or operations or the use
of
its properties (including any leased properties) and assets, except for such
non-compliances as would not, individually or in the aggregate, have a Material
Adverse Effect. The Company has all governmental permits and approvals from
state, federal or local authorities which are required for it to operate its
business, except for those the absence of which would not, individually or
in
the aggregate, have a Material Adverse Effect.
3.19. Environmental
Matters.
Except
as set forth on Schedule 3.19 hereto:
-12-
(a) the
operations of the Company are in compliance with all applicable laws promulgated
by any governmental entity which prohibit, regulate or control any hazardous
material or hazardous material activity (“Environmental Laws”) and all permits
issued pursuant to Environmental Laws or otherwise;
(b) the
Company has obtained all permits required under all applicable Environmental
Laws necessary to operate its business;
(c) the
Company is not the subject of any outstanding written order or Contract with
any
governmental authority or person respecting (i) Environmental Laws, (ii)
remedial action or (iii) any release or threatened release of a Hazardous
Material (“Release”);
(d) the
Company has not received any written communication alleging either or both
that
it may be in violation of any Environmental Law, or any permit issued pursuant
to Environmental Law, or may have any liability under any Environmental
Law;
(e) the
Company does not have any current contingent liability in connection with any
Release into the indoor or outdoor environment (whether on-site or
off-site);
(f) there
are
no investigations of the business, operations, or currently or previously owned,
operated or leased property of the Company pending or, to the Company’s
knowledge, threatened which could lead to the imposition of any liability
pursuant to Environmental Law;
(g) to
the
Company’s knowledge, there is not located at any of the properties of the
Company any (i) underground storage tanks, (ii) asbestos-containing material
or
(iii) equipment containing polychlorinated biphenyls; and,
(h) the
Company has provided to the Buyer all environmentally related audits, studies,
reports, analyses, and results of investigations that have been performed with
respect to the currently or previously owned, leased or operated properties
of
the Company.
3.20. Insurance.
Schedule
3.20 sets forth a complete and accurate list of all policies of insurance of
any
kind or nature covering the Company or any of its employees, properties or
assets, including, without limitation, policies of life, disability, fire,
theft, workers compensation, employee fidelity and other casualty and liability
insurance. All such policies are in full force and effect, and, to the Company’s
knowledge, it is not in default of any provision thereof, except for such
defaults as would not, individually or in the aggregate, have a Material Adverse
Effect.
3.21. Inventories;
Receivables; Payables.
(a) The
inventories of the Company are in good and marketable condition, and are
saleable in the ordinary course of business.
-13-
(b) All
accounts receivable of the Company have arisen from bona fide transactions
in
the ordinary course of business consistent with past practice. All accounts
receivable of the Company reflected on the Company Balance Sheet are good and
collectible at the aggregate recorded amounts thereof, net of any applicable
reserve for returns or doubtful accounts reflected thereon, which reserves
are
adequate and were calculated in a manner consistent with past practice and
in
accordance with GAAP consistently applied. All accounts receivable arising
after
the Company Balance Sheet Date are good and collectible at the aggregate
recorded amounts thereof, net of any applicable reserve for returns or doubtful
accounts, which reserves are adequate and were calculated in a manner consistent
with past practice and in accordance with GAAP consistently applied. The parties
agree and acknowledge that Buyer’s sole remedy for a breach of this
representation and warranty shall be to require Company to repurchase
uncollected accounts receivable.
(c) All
accounts payable of the Company reflected in the Company Balance Sheet or
arising after the date thereof are the result of bona fide transactions in
the
ordinary course of business and have been paid or are not yet due and
payable.
3.22. Customers
and Suppliers.
Schedule
3.22 sets forth a list of the twenty (20) largest customers and the twenty
(20)
largest suppliers of the Company, as measured by the dollar amount of purchases
therefrom or thereby, during each of the fiscal years ended 2007 and 2006,
showing the approximate total sales by the Company to each such customer and
the
approximate total purchases by the Company from each such supplier, during
such
period. Since the Company Balance Sheet Date, there has not been any material
adverse change in the business relationship of the Company with any customer
or
supplier listed on Schedule 3.22.
3.23. Banks.
Schedule
3.23 contains a complete and correct list of the names and locations of all
banks in which the Company has accounts or safe deposit boxes and the names
of
all persons authorized to draw thereon or to have access thereto. Except as
set
forth on Schedule 3.23, no person holds a power of attorney to act on behalf
of
the Company.
3.24. No
Misrepresentations.
No
representation or warranty of the Company contained in this Agreement or in
any
schedule hereto or in any certificate or other instrument furnished by the
Company to the Buyer pursuant to the terms hereof, taken as a whole, contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained herein or therein not
misleading.
3.25. Financial
Advisors.
No
person has acted, directly or indirectly, as a broker, finder or financial
advisor for the Company in connection with the transactions contemplated by
this
Agreement and no person is entitled to any fee or commission or like payment
in
respect thereof.
3.26. Investment
Intention.
The
Owners are acquiring the Common Stock for their own account, for investment
purposes only and not with a view to the distribution (as such term is used
in
Section 2(11) of the Securities Act of 1933. The Owners understands that the
Common Stock has not been registered under the Securities Act and cannot be
sold
unless subsequently registered under the Securities Act or an exemption from
such registration is available.
3.27. Accredited
Investor.
The
Owners are each an “accredited investor” within the meaning of Rule 501
promulgated under the Securities Act. The Owners are in a financial position
to
hold the Common Stock and is able to bear the economic risk and withstand a
complete loss of the Owners’ investment in the Common Stock. The Owners
recognize that the Common Stock involves a high degree of risk. Each of the
Owners is a sophisticated investor, able to fend for himself in the transaction
contemplated by this Agreement, and has such knowledge and experience in
financial and business matters that the Owners are capable of evaluating the
merits and risks of the prospective investment in the Common Stock.
-14-
3.28. Patriot
Act.
The
Company certifies that, to the best of the Company’s knowledge, the Company has
not been designated, and is not owned or controlled, by a “suspected terrorist”
as defined in Executive Order 13224. The Company hereby acknowledges that the
Buyer seeks to comply with all applicable Laws concerning money laundering
and
related activities. In furtherance of those efforts, the Company hereby
represents, warrants and agrees that: (i) none of the cash or property owned
by
the Company has been or shall be derived from, or related to, any activity
that
is deemed criminal under United States law; and (ii) no contribution or payment
by the Company has, and this Agreement will not, cause the Company to be in
violation of the United States Bank Secrecy Act, the United States International
Money Laundering Control Act of 1986 or the United States International Money
Laundering Abatement and Anti-Terrorist Financing Act of 2001.
ARTICLE
IV.
REPRESENTATIONS
AND WARRANTIES OF
BUYER
The
Buyer
represents and warrants that:
4.1. Organization
and Good Standing. The
Buyer
is a corporation duly organized, validly existing and in good standing under
the
laws of the State of Nevada; and
4.2. Authorization
of Agreement. The
Buyer
has full corporate power and authority to execute and deliver this Agreement,
the Employment Agreement and each other agreement, document, instrument or
certificate contemplated by this Agreement or to be executed by the Buyer in
connection with the consummation of the transactions contemplated hereby and
thereby (the “Buyer Documents”), and to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance by the Buyer of
this
Agreement and each Buyer Document have been duly authorized by all necessary
corporate action on behalf of the Buyer. This Agreement has been, and each
Buyer
Document will be at or prior to the Closing, duly executed and delivered by
the
Buyer and (assuming the due authorization, execution and delivery by the other
parties hereto and thereto) this Agreement constitutes, and each Buyer Document
when so executed and delivered will constitute, legal, valid and binding
obligations of the Buyer, enforceable against the Buyer in accordance with
their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors’ rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in
equity).
-15-
4.3. Conflicts;
Consents of Third Parties.
(a) Except
as
set forth on Schedule 4.3 hereto, neither of the execution and delivery by
the
Buyer of the Buyer Documents, nor the compliance by the Buyer with any of the
provisions hereof or thereof will (i) conflict with, or result in the breach
of,
any provision of the certificate of incorporation, or certificate of
incorporation or by-laws of the Buyer, (ii) conflict with, violate, result
in
the breach of, or constitute a default under any note, bond, mortgage,
indenture, license, agreement or other obligation to which the Buyer is a party
or by which the Buyer, or its properties or assets are bound or (iii) violate
any statute, rule, regulation, order or decree of any governmental body or
authority by which the Buyer is bound, except, in the case of clauses (ii)
and
(iii), for such violations, breaches or defaults as would not, individually
or
in the aggregate, have a Material Adverse Effect on the business, properties,
results of operations, prospects, conditions (financial or otherwise) of the
Buyer and its subsidiaries, taken as a whole.
(b) No
consent, waiver, approval, order, permit or authorization of, or declaration
or
filing with, or notification to, any person or Governmental Body is required
on
the part of the Buyer in connection with the execution and delivery of this
Agreement or the Buyer Documents or the compliance by Buyer with any of the
provisions hereof or thereof.
4.4. Litigation.
There
are no legal proceedings pending or, to the best knowledge of the Buyer,
threatened that are reasonably likely to prohibit or restrain the ability of
the
Buyer to enter into this Agreement or consummate the transactions contemplated
hereby.
4.5. Financial
Advisors.
Except
as set forth on Schedule 4.5, no person has acted, directly or indirectly,
as a
broker, finder or financial advisor for the Buyer in connection with the
transactions contemplated by this Agreement and no person is entitled to any
fee
or commission or like payment in respect thereof.
4.6. Investment
Intention.
The
Buyer is acquiring the Units for their own account, for investment purposes
only
and not with a view to the distribution (as such term is used in Section 2(11)
of the Securities Act of 1933. The Buyer understands that the Units have not
been registered under the Securities Act and cannot be sold unless subsequently
registered under the Securities Act or an exemption from such registration
is
available.
4.7. Accredited
Investor.
The
Buyer is an “accredited investor” within the meaning of Rule 501 promulgated
under the Securities Act. The Buyer is in a financial position to hold the
Units
and is able to bear the economic risk and withstand a complete loss of the
Buyers’ investment in the Units. The Buyer recognizes that the Units involve a
high degree of risk. The Buyer is a sophisticated investor, able to fend for
itself in the transaction contemplated by this Agreement, and has such knowledge
and experience in financial and business matters that the Buyer is capable
of
evaluating the merits and risks of the prospective investment in the Units.
4.8. Patriot
Act.
The
Buyer certifies that, to the best of the Buyer’s knowledge, the Buyer has not
been designated, and is not owned or controlled, by a “suspected terrorist” as
defined in Executive Order 13224. The Buyer hereby acknowledges that the Company
seeks to comply with all applicable Laws concerning money laundering and related
activities. In furtherance of those efforts, the Buyer hereby represents,
warrants and agrees that: (i) none of the cash or property owned by the Company
has been or shall be derived from, or related to, any activity that is deemed
criminal under United States law; and (ii) no contribution or payment by the
Buyer has, and this Agreement will not, cause the Buyer to be in violation
of
the United States Bank Secrecy Act, the United States International Money
Laundering Control Act of 1986 or the United States International Money
Laundering Abatement and Anti-Terrorist Financing Act of 2001.
-16-
4.9. No
Knowledge of Breaches.
Buyer
does not have actual knowledge of any breach of any representation and warranty
made by Company and the Owners hereunder.
ARTICLE
V.
COVENANTS
5.1. Access
to Information.
The
Company and Owners agree that, prior to the Closing Date, the Buyer shall be
entitled, through its officers, employees and representatives (including,
without limitation, its legal advisors and accountants), to make such
investigation of the properties, businesses and operations of the Company and
such examination of the books, records and financial condition of the Company
as
it reasonably requests and to make extracts and copies of such books and
records. Any such investigation and examination shall be conducted during
regular business hours and under reasonable circumstances, and the Company
shall
cooperate fully therein. No investigation by the Buyer prior to or after the
date of this Agreement shall diminish or obviate any of the representations,
warranties, covenants or agreements of the Company contained in the Company
Documents. In
order
that the Buyer may have full opportunity to make such physical, business,
accounting and legal review, examination or investigation as it may reasonably
request of the affairs of the Company, Company shall cause its officers,
employees, consultants, agents, accountants, attorneys and other representatives
to cooperate fully with such representatives in connection with such review
and
examination.
5.2. Conduct
of the Business Pending the Closing.
(a) Except
as
otherwise expressly contemplated by this Agreement or with the prior written
consent of the Buyer, the Company shall:
(i) conduct
its business only in the ordinary course consistent with past
practice;
(ii) use
its
best efforts to (A) preserve its present business operations, organization
(including, without limitation, management and the sales force) and goodwill
and
(B) preserve its present relationship with persons having business dealings
with
it;
(iii) maintain
(A) all of its assets and properties in their current condition, ordinary wear
and tear excepted and (B) insurance upon all of its properties and assets in
such amounts and of such kinds comparable to that in effect on the date of
this
Agreement;
(iv) (A)
maintain its books, accounts and records in the ordinary course of business
consistent with past practices, (B) continue to collect accounts receivable
and
pay accounts payable utilizing normal procedures and without discounting or
accelerating payment of such accounts, and (C) comply with all contractual
and
other obligations applicable to its operation; and
(v) comply
in
all material respects with applicable Laws.
-17-
(b) Except
as
otherwise expressly contemplated by this Agreement or with the prior written
consent of the Buyer, the Company shall not:
(i) except
for trade payables and for indebtedness for borrowed money incurred in the
ordinary course of business and consistent with past practice, borrow monies
for
any reason or draw down on any line of credit or debt obligation, or become
the
guarantor, surety, endorser or otherwise liable for any debt, obligation or
liability (contingent or otherwise) of any other person;
(ii) subject
to any Lien (except for liens that do not materially impair the use of the
property subject thereto in their respective businesses as presently conducted),
any of its properties or assets (whether tangible or intangible);
(iii) acquire
any material properties or assets or sell, assign, transfer, convey, lease
or
otherwise dispose of any of its material properties or assets (except for fair
consideration in the ordinary course of business consistent with past
practice);
(iv) cancel
or
compromise any debt or claim or waive or release any material right except
in
the ordinary course of business consistent with past practice;
(v) enter
into any commitment for capital expenditures in excess of $10,000 for any
individual commitment and $25,000 for all commitments in the
aggregate;
(vi) introduce
any material change with respect to its operation, including any material change
in the types, nature, composition or quality of its products or services,
experience any material change in any contribution of its product lines to
its
revenues or net income, or, other than in the ordinary course of business,
make
any change in product specifications or prices or terms of distributions of
such
products;
(vii) enter
into any transaction or make or enter into any Contract which by reason of
its
size or otherwise is not in the ordinary course of business consistent with
past
practice;
(viii) enter
into or agree to enter into any merger or consolidation with, any corporation
or
other entity, and not engage in any new business or invest in, make a loan,
advance or capital contribution to, or otherwise acquire the securities of
any
other person;
(ix) except
for transfers of cash pursuant to normal cash management practices, make any
investments in or loans to, or pay any fees or expenses to, or enter into or
modify any contract with any Affiliate; or
(x) agree
to
do anything prohibited by this Section 5.2 or anything which would make any
of
the representations and warranties of the Company in this Agreement or the
Company Documents untrue or incorrect in any material respect as of any time
through and including the Closing Date.
-18-
5.3. Consents.
The
Company shall use its best efforts, and the Buyer shall cooperate with the
Company, to obtain at the earliest practicable date all consents and approvals
required to consummate the transactions contemplated by this Agreement,
including, without limitation, the consents and approvals referred to in Section
3.5(b) hereof; provided, however, that neither the Company nor the Buyer shall
be obligated to pay any consideration therefor to any third party from whom
consent or approval is requested.
5.4. Other
Actions.
Each of
the Company, Owners and Buyer shall use its best efforts to (i) take all actions
necessary or appropriate to consummate the transactions contemplated by this
Agreement and (ii) cause the fulfillment at the earliest practicable date of
all
of the conditions to their respective obligations to consummate the transactions
contemplated by this Agreement.
5.5. No
Solicitation.
The
Company will not, and will not cause or permit any of its members, officers,
employees, representatives or agents (collectively, the “Representatives”) to,
directly or indirectly, (i) discuss, negotiate, undertake, authorize, recommend,
propose or enter into, either as the proposed surviving, merged, acquiring
or
acquired corporation, any transaction involving a merger, consolidation,
business combination, purchase or disposition of any amount of the assets or
capital stock or other equity interest in it other than the transactions
contemplated by this Agreement (an “Acquisition Transaction”), (ii) facilitate,
encourage, solicit or initiate discussions, negotiations or submissions of
proposals or offers in respect of an Acquisition Transaction, (iii) furnish
or
cause to be furnished, to any person, any information concerning its business,
operations, properties or assets in connection with an Acquisition Transaction,
or (iv) otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other person to do or
seek
any of the foregoing. The Company will inform the Buyer in writing immediately
following the receipt by the Company or any Representative of any proposal
or
inquiry in respect of any Acquisition Transaction.
5.6. Preservation
of Records.
The
Company, Owners and the Buyer agree that each of them shall preserve and keep
the records held by it relating to the business of the Company for a period
of
three years from the Closing Date (six years with respect to tax related
records) and shall make such records and personnel available to the other as
may
be reasonably required by such party in connection with, among other things,
preparation of financial statements, disclosure of information to the Securities
and Exchange Commission, stock exchange or similar entity, any insurance claims
by, legal proceedings against or governmental investigations of the Company,
the
Buyer or any of their Affiliates or in order to enable the Company or the Buyer
to comply with their respective obligations under this Agreement, the Employment
Agreements and each other agreement, document or instrument contemplated hereby
or thereby. In the event the Company or the Buyer wishes to destroy such records
after that time, such party shall first give ninety (90) days prior written
notice to the other and such other party shall have the right at its option
and
expense, upon prior written notice given to such party within that ninety (90)
day period, to take possession of the records within one hundred and eighty
(180) days after the date of such notice.
5.7. Publicity.
Neither
the Company, the Owners nor the Buyer shall issue any press release or public
announcement concerning this Agreement or the transactions contemplated hereby
without obtaining the prior written approval of the other party hereto, which
approval will not be unreasonably withheld or delayed, unless, in the sole
judgment of the Buyer or the Company, disclosure is otherwise required by
applicable Law or by the applicable rules of any stock exchange on which the
Buyer or the Company lists securities, provided that, to the extent required
by
applicable Law, the party intending to make such release shall use its best
efforts consistent with such applicable Law to consult with the other party
with
respect to the text thereof.
-19-
5.8. Use
of Name.
The
Company hereby agrees that upon the consummation of the transactions
contemplated hereby, the Buyer shall have the sole right to the use of the
name
“Investment Tools and Training” and variations thereof and the Company shall
not, and shall not cause or permit any Affiliate to use such name or any
variation or simulation thereof.
5.9. Board
Appointments.
The
Buyer hereby agrees that upon the consummation of the transactions contemplated
hereby, the Owners shall have the right to nominate two independent qualified
individuals to serve as members of the Board of Directors of the Buyer and
that
the Buyer shall take all actions necessary to elect, or have elected, such
individuals. Notwithstanding the foregoing, the Buyer shall have the right
to
determine the qualifications of such individuals nominated by the
Owners.
ARTICLE
VI.
CONDITIONS
TO CLOSING
6.1. Conditions
Precedent to Obligations of Buyer.
The
obligation of the Buyer to consummate the transactions contemplated by this
Agreement is subject to the fulfillment, on or prior to the Closing Date, of
each of the following conditions (any or all of which may be waived by the
Buyer
in whole or in part to the extent permitted by applicable Law):
(a) all
representations and warranties of the Company and Owners contained herein shall
be true and correct as of the Closing Date;
(b) all
representations and warranties of the Company contained herein qualified as
to
materiality shall be true and correct, and the representations and warranties
of
the Company contained herein not qualified as to materiality shall be true
and
correct in all material respects, at and as of the Closing Date with the same
effect as though those representations and warranties had been made again at
and
as of that time;
(c) the
Company shall have performed and complied in all material respects with all
obligations and covenants required by this Agreement to be performed or complied
with by it on or prior to the Closing Date;
(d) the
Buyer
shall have been furnished with certificates (dated the Closing date and in
form
and substance reasonably satisfactory to the Buyer) executed by the Company
certifying as to the fulfillment of the conditions specified in Sections 6.1(a),
6.1(b) and 6.1(c) hereof;
(e) the
Buyer
shall have obtained all consents and waivers referred to in Section 4.3 hereof
with respect to the transactions contemplated by this Agreement and the Buyer
Documents;
(f) there
shall not have been or occurred any event which will have a Material Adverse
Effect;
-20-
(g) the
Company shall have obtained all consents and waivers referred to in Section
3.5
hereof, in a form reasonably satisfactory to the Buyer, with respect to the
transactions contemplated by this Agreement and the Company
Documents;
(h) no
legal
proceedings shall have been instituted or threatened or claim or demand made
against the Company or the Buyer seeking to restrain or prohibit or to obtain
substantial damages with respect to the consummation of the transactions
contemplated hereby, and there shall not be in effect any order by a
Governmental Body of competent jurisdiction restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated
hereby;
(i) the
Buyer
shall have completed its due diligence review of the operations Company, and
the
results of such review shall be satisfactory to the Buyer in its sole and
absolute discretion;
(j) the
Buyer
shall have obtained the financing required to consummate the transaction
contemplated hereunder on terms reasonably satisfactory to it;
(k) the
Buyer
shall have received disclosure schedules required pursuant to Article 3 hereof,
which shall be reasonably satisfactory to the Buyer; and
6.2. Conditions
Precedent to Obligations of the Company and Owners.
The
obligations of the Company and Owners to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, prior to or
on
the Closing Date, of each of the following conditions (any or all of which
may
be waived by the Company in whole or in part to the extent permitted by
applicable law):
(a) all
representations and warranties of the Buyer contained herein shall be true
and
correct as of the date hereof;
(b) all
representations and warranties of the Buyer contained herein qualified as to
materiality shall be true and correct, and all representations and warranties
of
the Buyer contained herein not qualified as to materiality shall be true and
correct in all material respects, at and as of the Closing Date with the same
effect as though those representations and warranties had been made again at
and
as of that date;
(c) the
Buyer
shall have performed and complied in all material respects with all obligations
and covenants required by this Agreement to be performed or complied with by
Buyer on or prior to the Closing Date;
(d) the
Company shall have been furnished with certificates (dated the Closing Date
and
in form and substance reasonably satisfactory to the Company) executed by the
Chief Executive Officer and Chief Financial Officer of the Buyer certifying
as
to the fulfillment of the conditions specified in Sections 6.2(a), 6.2(b) and
6.2(c), and resolutions of the Board of Directors of the Buyer authorizing
the
acquisition of the Company;
(e) Xxxxxxxx
X. Xxxxxx and Xxxx Xxxxx shall enter into a Voting and Support Agreement with
Newsgrade Corporation, a shareholder of the Buyer, pursuant to which Xx. Xxxxxx
and Xx. Xxxxx shall be granted a proxy with the right vote the shares of common
stock of the Buyer owned by Newsgrade Corporation; and
-21-
(f) there
shall not be in effect any order by a Governmental Body of competent
jurisdiction restraining, enjoining or otherwise prohibiting the consummation
of
the transactions contemplated hereby.
ARTICLE
VII.
DOCUMENTS
TO BE DELIVERED
7.1. Documents
to be Delivered by the Company and/or the Owners.
At the
Closing, the Company and/or the Owners shall deliver, or cause to be delivered,
to the Buyer the following:
(a) an
amended and restated operating agreement for the Company and any other necessary
documentation reflecting the transfer of the Units, duly executed;
(b) copies
of
all consents and waivers referred to in Section 6.1(g) hereof;
(c) Employment
Agreements, substantially in the form of Exhibit B hereto, duly executed;
(d) Registration
Rights Agreement, substantially in the form of Exhibit C hereto, duly executed;
(e) Lock
Up
Agreement, substantially in the form of Exhibit D hereto, duly executed by
each
of the Owners; and
(f) such
other documents as the Buyer shall reasonably request.
7.2. Documents
to be Delivered by the Buyer.
At the
Closing, the Buyer shall deliver to the Company the following:
(a) the
Common Stock pursuant to in Section 1.2(b)(i) hereof;
(b) the
certificates and resolutions referred to in Section 6.2(d) hereof;
(c) Employment
Agreements, substantially in the form of Exhibit B hereto, duly executed;
(d) Registration
Rights Agreement, substantially in the form of Exhibit C hereto, duly executed;
and
(e) such
other documents as the Company shall reasonably request.
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ARTICLE
VIII.
INDEMNIFICATION
8.1. Indemnification.
(a) Subject
to Section 8.2 hereof, the Company and the Owners hereby agree to defend,
indemnify and hold the Buyer and its directors, officers, employees, Affiliates,
agents, successors and assigns (collectively, the “Buyer Indemnified Parties”)
harmless from and against:
(i) any
and
all liabilities of the Company of every kind, nature and description, absolute
or contingent, existing as against the Company prior to and including the
Closing Date or thereafter coming into being or arising by reason of any state
of facts existing, or any transaction entered into, on or prior to the Closing
Date, except to the extent that the same have been fully provided for (and
accrued and applied as a liability) in the Buyer Balance Sheet or were incurred
in the ordinary course of business between the Buyer Balance Sheet Date and
the
Closing Date;
(ii) any
and
all losses, liabilities, obligations, damages, costs and expenses based upon,
attributable to or resulting from the failure of any representation or warranty
of the Company set forth in Article IV hereof, or any representation or warranty
contained in any certificate delivered by or on behalf of the Company pursuant
to this Agreement, to be true and correct in all respects as of the date made;
(iii) any
and
all losses, liabilities, obligations, damages, costs and expenses based upon,
attributable to or resulting from the breach of any covenant or other agreement
on the part of the Company under this Agreement;
(iv) any
and
all notices, actions, suits, proceedings, claims, demands, assessments,
judgments, costs, penalties and expenses, including attorneys’ and other
professionals’ fees and disbursements (collectively, “Expenses”) incident to any
and all losses, liabilities, obligations, damages, costs and expenses with
respect to which indemnification is provided hereunder (collectively,
“Losses”).
(b) Subject
to Section 8.2 hereof, the Buyer hereby agrees to defend, indemnify and hold
the
Company, the Owners and their Affiliates, agents, successors and assigns
(collectively, the “Company Indemnified Parties”) harmless from and
against:
(i) any
and
all Losses based upon, attributable to or resulting from the failure of any
representation or warranty of the Buyer set forth in Article 5 hereof, or any
representation or warranty contained in any certificate delivered by or on
behalf of the Buyer pursuant to this Agreement, to be true and correct as of
the
date made;
(ii) any
and
all Losses based upon, attributable to or resulting from the breach of any
covenant or other agreement on the part of the Buyer under this Agreement;
(iii) any
and
all Losses of the Buyer of every kind, nature and description, absolute or
contingent, existing as against the Buyer after the Closing Date coming into
being or arising by reason of any state of facts existing, or any transaction
entered into, after the Closing Date, except for (A) such Losses for which
Company and the Owners have an obligation to indemnify the Buyer Indemnified
Parties pursuant to Section 8.1 and (B) such Losses that affect all shareholders
of Buyer by virtue of their status as shareholders; and
-23-
(iv) any
and
all Expenses incident to the foregoing.
8.2. Limitations
on Indemnification. An
indemnifying party shall not have any liability under Section 8.1(a) or Section
8.1(b) hereof unless the aggregate amount of Losses and Expenses to the
indemnified parties finally determined to arise thereunder exceeds $20,000,000
(the “Basket”) and, in such event, the indemnifying party shall be required to
pay the entire amount of such Losses and Expenses. Notwithstanding anything
else
contained herein, the maximum liability the Sellers in the aggregate shall
be
required to pay hereunder shall be the amount of $15,320,000. In addition to
the
foregoing, in the event that the Owners are an indemnifying party under Section
8.1(a), the Owners shall not be jointly liable for the aggregate amount of
and
such Losses and Expenses and each Owner shall be severally liable solely for
their respective proportionate shares of such Losses and Expenses.
8.3. Indemnification
Procedures.
(a) In
the
event that any Legal Proceedings shall be instituted or that any claim or demand
(“Claim”) shall be asserted by any person in respect of which payment may be
sought under Section 8.1 hereof (regardless of the Basket referred to above),
the indemnified party shall reasonably and promptly cause written notice of
the
assertion of any Claim of which it has knowledge which is covered by this
indemnity to be forwarded to the indemnifying party. The indemnifying party
shall have the right, at its sole option and expense, to be represented by
counsel of its choice, which must be reasonably satisfactory to the indemnified
party, and to defend against, negotiate, settle or otherwise deal with any
Claim
which relates to any Losses indemnified against hereunder. If the indemnifying
party elects to defend against, negotiate, settle or otherwise deal with any
Claim which relates to any Losses indemnified against hereunder, it shall within
five (5) days (or sooner, if the nature of the Claim so requires) notify the
indemnified party of its intent to do so. If the indemnifying party elects
not
to defend against, negotiate, settle or otherwise deal with any Claim which
relates to any Losses indemnified against hereunder, fails to notify the
indemnified party of its election as herein provided or contests its obligation
to indemnify the indemnified party for such Losses under this Agreement, the
indemnified party may defend against, negotiate, settle or otherwise deal with
such Claim. If the indemnified party defends any Claim, then the indemnifying
party shall reimburse the indemnified party for the Expenses of defending such
Claim upon submission of periodic bills. If the indemnifying party shall assume
the defense of any Claim, the indemnified party may participate, at his or
its
own expense, in the defense of such Claim; provided, however, that such
indemnified party shall be entitled to participate in any such defense with
separate counsel at the expense of the indemnifying party if, (i) so requested
by the indemnifying party to participate or (ii) in the reasonable opinion
of
counsel to the indemnified party, a conflict or potential conflict exists
between the indemnified party and the indemnifying party that would make such
separate representation advisable; and provided, further, that the indemnifying
party shall not be required to pay for more than one such counsel for all
indemnified parties in connection with any Claim. The parties hereto agree
to
cooperate fully with each other in connection with the defense, negotiation
or
settlement of any such Claim.
-24-
(b) After
any
final judgment or award shall have been rendered by a court, arbitration board
or administrative agency of competent jurisdiction and the expiration of the
time in which to appeal therefrom, or a settlement shall have been consummated,
or the indemnified party and the indemnifying party shall have arrived at a
mutually binding agreement with respect to a Claim hereunder, the indemnified
party shall forward to the indemnifying party notice of any sums due and owing
by the indemnifying party pursuant to this Agreement with respect to such matter
and the indemnifying party shall be required to pay all of the sums so due
and
owing to the indemnified party by wire transfer of immediately available funds
within ten (10) business days after the date of such notice.
(c) The
failure of the indemnified party to give reasonably prompt notice of any Claim
shall not release, waive or otherwise affect the indemnifying party’s
obligations with respect thereto except to the extent that the indemnifying
party can demonstrate actual loss and prejudice as a result of such
failure.
ARTICLE
IX.
MISCELLANEOUS
9.1. Payment
of Sales, Use or Similar Taxes.
All
sales, use, transfer, intangible, recordation, documentary stamp or similar
Taxes or charges, of any nature whatsoever, applicable to, or resulting from,
the transactions contemplated by this Agreement shall be borne by the
Buyer.
9.2. Survival
of Representations and Warranties.
The
parties hereto hereby agree that the representations and warranties contained
in
this Agreement or in any certificate, document or instrument delivered in
connection herewith, shall survive the execution and delivery of this Agreement,
and the Closing hereunder, regardless of any investigation made by the parties
hereto; provided, however, that any claims or actions with respect thereto
shall
terminate unless within twenty-four (24) months after the Closing Date written
notice of such claims is given to the Company or such actions are
commenced.
9.3. Expenses.
Except
as otherwise provided in this Agreement, the Company, the Buyer and the Owners
shall each bear its own expenses incurred in connection with the negotiation
and
execution of this Agreement and each other agreement, document and instrument
contemplated by this Agreement and the consummation of the transactions
contemplated hereby and thereby.
9.4. Specific
Performance.
The
Company and Owners acknowledge and agree that the breach of this Agreement
would
cause irreparable damage to the Buyer and that the Buyer will not have an
adequate remedy at law. Therefore, unless validly terminated pursuant to Section
2.2 of this Agreement, the obligations of the Company under this Agreement,
including, without limitation, the Company’s obligation to sell the Assets to
the Buyer, shall be enforceable by a decree of specific performance issued
by
any court of competent jurisdiction, and appropriate injunctive relief may
be
applied for and granted in connection therewith. Such remedies shall, however,
be cumulative and not exclusive and shall be in addition to any other remedies
which any party may have under this Agreement or otherwise.
9.5. Further
Assurances.
The
Company, the Buyer and the Owners each agree to execute and deliver such other
documents or agreements and to take such other action as may be reasonably
necessary or desirable for the implementation of this Agreement and the
consummation of the transactions contemplated hereby.
-25-
9.6. Submission
to Jurisdiction; Consent to Service of Process
(a) The
parties hereto hereby irrevocably submit to the non-exclusive jurisdiction
of
any federal or state court located within the State of New York over any dispute
arising out of or relating to this Agreement or any of the transactions
contemplated hereby and each party hereby irrevocably agrees that all claims
in
respect of such dispute or any suit, action proceeding related thereto may
be
heard and determined in such courts. The parties hereby irrevocably waive,
to
the fullest extent permitted by applicable Law, any objection which they may
now
or hereafter have to the laying of venue of any such dispute brought in such
court or any defense of inconvenient forum for the maintenance of such dispute.
Each of the parties hereto agrees that a judgment in any such dispute may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
(b) Each
of
the parties hereto hereby consents to process being served by any party to
this
Agreement in any suit, action or proceeding by the mailing of a copy thereof
in
accordance with the provisions of Section 9.10.
9.7. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York.
9.8. Entire
Agreement; Amendments and Waivers.
This
Agreement (including the schedules and exhibits hereto) represents the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof and can be amended, supplemented or changed, and any
provision hereof can be waived, only by written instrument making specific
reference to this Agreement signed by the party against whom enforcement of
any
such amendment, supplement, modification or waiver is sought. No action taken
pursuant to this Agreement, including without limitation, any investigation
by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representation, warranty, covenant
or
agreement contained herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a further
or
continuing waiver of such breach or as a waiver of any other or subsequent
breach. No failure on the part of any party to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of such right, power or remedy
by such party preclude any other or further exercise thereof or the exercise
of
any other right, power or remedy. All remedies hereunder are cumulative and
are
not exclusive of any other remedies provided by law.
9.9. Table
of Contents and Headings.
The
table of contents and section headings of this Agreement are for reference
purposes only and are to be given no effect in the construction or
interpretation of this Agreement.
9.10. Notices.
All
notices and other communications under this Agreement shall be in writing and
shall be deemed given when delivered personally or mailed by certified mail,
return receipt requested, to the parties (and shall also be transmitted by
facsimile to the persons receiving copies thereof) at the following addresses
(or to such other address as a party may have specified by notice given to
the
other party pursuant to this provision):
-26-
If
to
Buyer:
XxxXxxxxxxxxxXxxxxxxx.xxx,
Inc.
000
Xxxxxxx Xxxxxx, 00xx xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attn:
Xxxxxxxx X. Xxxxxx, Chief Executive Officer
Phone:
(000) 000-0000
Fax: (000)
000-0000
With
a
copy to:
Xxxxxx
Xxxxxxx, Esq.
Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
00
Xxxxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Phone:
000-000-0000
Fax:
000-000-0000
If
to
Company or Owners:
Investment
Tools and Training, LLC
[_________]
[_________]
Attn:
[_________]
Phone:
[_________]
Fax:
[_________]
With
a
copy to:
Xxxxxx
& XxXxxxxx, P.C.
Attorneys
at Law
000
Xxxx
000 Xxxxx
Xxxx,
Xxxx 00000
Attn:
Xxxxxxx X. Xxxxx, Esq.
Phone:
(000) 000-0000
Fax:
(000) 000-0000
9.11. Severability.
If any
provision of this Agreement is invalid or unenforceable, the balance of this
Agreement shall remain in effect.
-27-
9.12. Binding
Effect; Assignment.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns. Nothing in this Agreement
shall create or be deemed to create any third party beneficiary rights in any
person or entity not a party to this Agreement except as provided below. No
assignment of this Agreement or of any rights or obligations hereunder may
be
made by either the Company or the Buyer (by operation of law or otherwise)
without the prior written consent of the other parties hereto and any attempted
assignment without the required consents shall be void; provided, however,
that
the Buyer may assign this Agreement and any or all rights or obligations
hereunder (including, without limitation, the Buyer’s rights to purchase the
Assets, the Buyer’s rights to seek indemnification and the Buyer’s rights to
rely on any of Company’s or the Owners’ representations and warranties made
hereunder) to any Affiliate of the Buyer. Upon any such permitted assignment,
the references in this Agreement to the Buyer shall also apply to any such
assignee unless the context otherwise requires.
9.13. Counterparts.
This
Agreement may be executed in counterparts, each of which when executed by any
party will be deemed to be an original and all of which counterparts will
together constitute one and the same Agreement. Delivery of executed copies
of
this Agreement by facsimile will constitute proper delivery, provided that
originally executed counterparts are delivered to the parties within a
reasonable time thereafter.
[Remainder
of page intentionally left blank]
-28-
IN
WITNESS WHEREOF
the
parties have executed this Agreement effective as of the day and year first
above written.
|
By:
|
/s/
Xxxxxxxx X. Xxxxxx
|
|
|
Name:
Xxxxxxxx X. Xxxxxx
|
||
|
Title:
Chief Executive Officer
|
||
|
INVESTMENT
TOOLS AND TRAINING, LLC
|
||
|
By:
|
/s/
Xxxxx Xxxxxxxx
|
|
|
Name:
Xxxxx Xxxxxxxx
|
||
|
Title:
Manager
|
||
|
OWNERS:
|
||
|
BOYA
SYSTEMS, LLC
|
||
|
By:
|
/s/
Xxxxx Xxxxxxxx
|
|
|
Name:
Xxxxx Xxxxxxxx
|
||
|
Title:
Manager
|
||
|
XXXX
CREEK CAPITAL MANAGMENT, LLC
|
||
|
By:
|
/s/
Xxxx Xxxxx
|
|
|
Name:
Xxxx Xxxxx
|
||
|
Title:
Manager
|
||
|
LUCASA,
LLC
|
||
|
By:
|
/s/
Xxxxx Xxxxx
|
|
|
Name:
Xxxxx Xxxxx
|
||
|
Title:
Manager
|
||
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