EXHIBIT 99.1
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of October 25, 2005 by and between Dial Thru International
Corporation, a publicly-traded Delaware corporation (the "Buyer") and
Integrated Telecommunications, Inc., a New York corporation (the "Seller").
RECITALS
A. Seller is engaged in the business of providing communication
service and related products (the "Business").
B. The Boards of Directors of each of Seller and Buyer believe it
is in the best interests of each company and their respective stockholders
that Buyer acquire certain of the assets of, and assume certain of the
liabilities of Seller comprising the Business (the "Acquisition").
C. In connection with the Acquisition Buyer will issue to Seller
(a) up to a maximum aggregate of 1,900,000 shares of Buyer's common stock,
$0.001 par value per share (the "Common Stock"), and (b) warrants to
purchase up to a maximum aggregate of 600,000 shares of Common Stock under
the terms and conditions set forth herein.
D. The Buyer is a publicly-traded Delaware corporation whose Common
Stock is registered pursuant to Section 12(g) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and is quoted on the OTC Bulletin
Board under the symbol "DTIX".
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, the sufficiency and receipt of which are hereby acknowledged,
the parties agree as follows:
ARTICLE I
THE ACQUISITION
1.1 Purchase of Assets.
(a) Purchase and Sale of Assets. On the terms and subject to the
conditions set forth in this Agreement, Seller will sell, convey, transfer,
assign and deliver to Buyer and Buyer will purchase and acquire from Seller
on the Closing Date (as defined below), all of Seller's right, title and
interest in and to the assets and properties of Seller relating to the
Business (collectively the "Assets") identified on Schedule 1.1(a) hereto.
Notwithstanding the foregoing, the Assets to be so purchased shall not
include those assets (the "Excluded Assets") set forth on Schedule 1.1(a):
(b) Assumption of Liabilities. At the Closing (as defined below),
Buyer shall assume those obligations and liabilities of Seller set forth
on Schedule 1.1(b) hereto (collectively, the "Assumed Liabilities").
(c) Liabilities Not Assumed. Other than the Assumed Liabilities,
Buyer shall not assume, nor shall Buyer or any affiliate of Buyer be deemed
to have assumed or guaranteed, any other liability or obligation of any
nature of Seller, or claims of such liability or obligation, whether
accrued, matured or unmatured, liquidated or unliquidated, fixed or
contingent, known or unknown arising out of (i) acts or occurrences related
to any of the Assets, prior to the Closing Date, or (ii) any other liability
or obligation of Seller which is not an Assumed Liability (collectively, the
"Unassumed Liabilities"). Seller will remain responsible for all Unassumed
Liabilities.
1.2. Purchase Price. The aggregate price for the purchase of the Assets
(the "Purchase Price") shall be equal to the sum of (i) 950,000 fully-paid
and non-assessable shares of Common Stock (the "Shares"), subject to
adjustment as set forth in Section 1.3 below), plus (ii) the Earn-Out Shares
(as defined below), plus (iii) the Warrants (as defined below). The number
of Earn-Out Shares to be issued to Seller shall be determined in accordance
with the provisions of Section 1.4, and the number of Warrants to be issued
to Seller shall be determined in accordance with the provisions of Section
1.5. Buyer shall also assume the Assumed Liabilities.
1.3 Adjustment to Shares. In the event that Seller does not transfer to
Buyer at Closing retail and wholesale traffic having a monthly minimum
gross profit (before selling, general and administrative expenses) ("Gross
Profit") of $40,000 per month (the "Closing Threshold"), Buyer shall instead
issue to Seller that number of shares of Common Stock determined by reducing
the total number of the Shares by the same percentage reduction in the Gross
Profit at Closing as compared to the Closing Threshold.
1.4 Earn-Out Shares. In the event the Assets generate during the 12-month
period immediately following the Closing Date (the "Relevant Period") a
Gross Profit (before selling, general and administrative expenses) in excess
of $480,000, (the "Earn-Out Threshold"), Buyer shall issue to Seller up to a
maximum of 950,000 fully-paid and non-assessable shares of Common Stock (the
"Earn-Out Shares") within 30 days of the one year anniversary of the Closing
Date. Within 15 days after the one-year anniversary of the Closing Date,
Buyer shall deliver to Seller a written notice setting forth the Gross
Profit generated by the Business during the Relevant Period, which notice
shall be certified as accurate and complete by a duly authorized officer of
Buyer (the "Gross Profit Notice"). In the event that the Gross Profit
Notice reflects Gross Profit greater than or equal to the Earn-Out
Threshold, Buyer shall issue the Earn-Out Shares to Seller within 15 days
after delivery of the Gross Profit Notice. In the event that the revenues
and Gross Profits set forth in the Gross Profit Notice are less than the
Earn-Out Threshold, Buyer shall instead issue to Seller that number of the
shares of Common Stock determined by reducing the total number thereof by
the same percentage reduction in revenues and Gross Profit set forth in the
Gross Profit Notice as compared to the Earn-Out Threshold. As an example,
if the Gross Profit is 50% of the $480,000 Gross Margin as set forth in this
agreement, then the total number of shares earned will be reduced by 50%.
This will be based the entire 1.9 million shares.
1.5 Warrants. For each of the two six month periods immediately following
the Closing October 31, 2005), that generate at least a 50% increase in
Gross Profit, as measured from the $40,000 margin per month and then the
average margin on the first six month period, Buyer shall issue to Seller
300,000 warrants to purchase shares of Common Stock at the then current
market price as determined by the closing bid price of the stock on the Day
of Measurement. The period of measurement will start on October 31, 2005
and run through the first six months of the fiscal year and then the
subsequent six month period until the close of the fiscal year October 31,
2005 through October 31, 2006 All Gross Profits measured will be Gross
Profits earned from the assets acquired as set forth in Annex A. In the
event that the growth in the Gross Profit is less than 50%, Buyer shall
instead issue to Seller that number of warrants determined by reducing the
total number thereof by the same percentage shortfall in Gross Profit as
compared to the required 50% increase. If in either of the six month
periods the Gross Profit goals are not met by at least 50%, then no
warrants will be earned.
1.6 Allocation of Purchase Price. Within 45 days following the Closing
Buyer shall prepare and deliver to Seller, subject to Seller's approval,
an allocation of the Purchase Price plus any other consideration properly
allocable among the Assets (the "Allocation"). The parties agree that all
tax returns and reports (including Internal Revenue Service ("IRS") Form
8594) and all financial statements shall be prepared in a manner consistent
with (and the parties shall not otherwise take a position inconsistent with)
the Allocation unless required by the IRS or state taxing authority. The
Allocation shall be prepared in a manner consistent with Section 1060 of the
Internal Revenue Code of 1986, as amended (the "Code"), and the income tax
regulations promulgated thereunder.
1.7 Transfer Taxes. Buyer shall pay and promptly discharge when due the
entire amount of any and all sales and use tax ("Sales Taxes") imposed or
levied by reason of the sale of the Assets to Buyer. The parties shall
cooperate with each other to the extent reasonable requested and legally
permitted to minimize any such Sales Taxes.
1.8 Transfer of Customers.
(a) Transfer of Customers.
(i) Intent. It is the intent of parties hereto that all of
the Business and all of Seller's backlog, if any relating to the Assets.
Accordingly, all parties agree to facilitate the transfer of customers of
Assets from Seller to Buyer following the Closing.
(ii) Purchase Order Data. Seller shall make available to Buyer,
upon request (A) a list of all outstanding written customer orders, purchase
orders and other customer commitments from the current customers of the
Business (the "Current Customers"), (B) the names of all Current Customers,
and (C) data regarding Seller's standard cost of sales for the items covered
by such orders.
(iii) Transfer of Orders. Prior to the Closing, Seller and
Buyer agree to cooperate with each other in conducting joint contracts with
the Current Customers (as appropriate) for the purpose of attempting to
obtain such customers' consent to transfer orders from Seller to Buyer (if
necessary, or to issue new orders to Buyer for the same or similar items)
and to assign Seller's rights and benefits under the contracts included in
the Assets to Buyer as of the Closing.
(iv) Assumption of Obligation. To the extent that an order is
transferred or assigned to Buyer or that Buyer accepts a new purchase order
from a Current Customer, Buyer agrees to assume and perform all obligations
thereunder.
1.9 Non-Assignment of Certain Items. Notwithstanding anything to the
contrary in this Agreement, to the extent that the assignment or license
hereunder of any of the Assets shall require the consent of any other party
(or in the event that any of the Assets shall be non-assignable), neither
this Agreement nor any action taken pursuant to its provisions shall
constitute an assignment or license or an agreement to assign or license
such Assets if the requisite consents are not obtained and such assignment
or license or attempted assignment or license would constitute a material
breach or result in the loss or diminution thereof; provided, however, that
Seller shall, at its own expense, use reasonable commercial efforts to
obtain all third party consents necessary to assign or license the Assets
to Buyer, and Seller hereby consents to Buyer using such efforts as it
deems necessary or appropriate to effect the same. In the event that
notwithstanding the efforts of Seller and Buyer all assignments or licenses
needed to assign or license the Assets to Buyer cannot be provided to Buyer,
Seller shall negotiate an alternative assignment or license as to such
Assets so as to afford Buyer, to the extent practicable, the same or similar
benefits and rights as if such assignment or license had occurred.
1.10 Closing. Unless this Agreement is earlier terminated pursuant to
Article VII, the closing of the transactions contemplated by this Agreement
(the "Closing") shall be held at the offices of Xxxxxxxx & Xxxxxxx, LLP, 000
Xxxxxxxx Xxxxxxxxx, Xxxxx 0000, Xxxxx Xxxxxx, Xxxxxxxxxx 00000, at 10:00
a.m. on October 31, 2005. (the actual date on which the Closing occurs is
referred to herein as the "Closing Date").
1.11 Delivery.
(a) At the Closing:
(i) Buyer shall deliver to Seller an instrument of assumption of
liabilities by which Buyer shall assume the Assumed Liabilities as of the
Closing in the form attached hereto as Exhibit "A";
(ii) Seller shall deliver to Buyer all bills of sale,
endorsements, assignments, consents to assignments to the extent obtained
and other instruments and documents as Buyer may reasonably request to sell,
convey, assign, transfer and deliver to Buyer Seller's title to all the
Assets; and
(iii) Seller and Buyer shall deliver or cause to be delivered
to one another such other instruments and documents necessary or appropriate
to evidence the due execution, delivery and performance of this Agreement.
(b) Within five days of the Closing, Buyer shall deliver to Seller a
certificate or certificates representing the Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as described with reasonable particularity in the Seller
Disclosure Schedule (which shall cross-reference to the particular section
below to which such description applies) delivered by Seller to Buyer
simultaneously with the execution of this Agreement (the "Seller Disclosure
Schedule"), Seller represents and warrants to buyer that:
2.1 Organization, Standing and Power. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State
of New York, and has all requisite corporate power and authority to own,
operate and lease its properties and to carry on its business as now being
conducted. Seller is duly qualified as a foreign corporation and is in good
standing in each jurisdiction in which the failure to so qualify reasonably
would be expected to have a Material Adverse Effect on the Seller. As used
in this Agreement, "Material Adverse Effect" shall mean an individual or
cumulative material adverse change in, or material adverse effect upon, the
Assets or the financial condition of the Business as presently conducted
which would materially impair the value of the Assets; provided, however,
that any change, effect or impact on the condition of the Business or the
Assets as a result of any change in the general economy of any jurisdiction
or in any of the industries that the Business serves shall in no event
constitute a Material Adverse Effect. Seller has made available to Buyer
complete and correct copies of the Certificate of Incorporation and Bylaws
of Seller, as amended to the date hereof.
2.2 Authority. Seller has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement, the performance by
Seller of its obligations hereunder and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Seller, and have been approved by the Board
of Directors of Seller. No other corporate proceeding on the part of Seller
is necessary to authorize the execution and delivery of this Agreement
by Seller or the performance of Seller's obligations hereunder or the
consummation of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Seller and constitutes a legal, valid
and binding obligation of Seller enforceable against Seller in accordance
with its terms, except as enforcement may be limited by bankruptcy,
insolvency, or other similar laws affecting the enforcement of creditors'
rights generally and except that the availability of equitable remedies is
subject to the discretion of the court before which any proceeding therefore
may be brought. Subject to satisfaction or waiver of the conditions set
forth in Article V the execution of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with
or resulting any violation of any statute, law, rule, regulation, judgment,
order, decree, or ordinance applicable to Seller, or its properties or
assets that, individually or in the aggregate, reasonably would be expected
to have a Material Adverse Effect, or conflict with any provision of the
Certificate of Incorporation or Bylaws of Seller or result in any breach or
default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, or result in the creation
of a lien or encumbrance on any of the properties or assets of Seller
pursuant to any agreement, contract, note, mortgage, indenture, lease,
instrument, permit, concession, franchise or license to which Seller is a
party or by which Seller or its properties or assets may be bound that would
reasonably be expected, either individually or in the aggregate, to have a
Material Adverse Effect. No consent, approval, order or authorization of,
or registration, declaration or filing with any court, administrative
agency, commission, regulatory authority or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity"), is required
by or with respect to Seller in connection with the execution and delivery
of this Agreement or the consummation by Seller of the transactions
contemplated hereby except such consents, approvals, orders, authorizations,
registrations, declarations and filings as would not have a Material Adverse
Effect on the ability of Seller to transfer the Assets to Buyer at the
Closing.
2.3 Financial Statements. Seller has furnished Buyer with unaudited
financial information concerning the Business as of December 31, 2004
and October 31, 2005 (the foregoing financial information is referred to
collectively as the "Financial Information"). The Financial Information has
been prepared in accordance with generally accepted accounting principles
consistently applied (except as may be indicated in the notes thereto) and
fairly present, in all material aspects, the financial position of the
Business as of the dates thereof and the results of operations for the
periods then ended. There has been no material change in Seller's
accounting policies during such periods relating to the Business.
2.4 Compliance with Law. Seller has conducted the Business so as to comply
in all material respects with all laws, rules, and regulations, judgments,
decrees or orders of any Governmental Entity applicable to its operations
except where the failure so to comply reasonably would not be expected to
have a Material Adverse Effect. As of the date hereof, there are no
judgments or orders, injunctions, decrees, stipulations or awards (whether
rendered by a court or administrative agency or by arbitration) against
Seller with any continuing effect that reasonably would be expected to have
a Material Adverse Effect. To the knowledge of Seller, there is no
investigation by any Governmental Entity with respect to Seller pending
against Seller which is reasonably likely to have a Material Adverse Effect
on the Business.
2.5 No Defaults. To the knowledge of Seller, Seller is not, nor has it
received written notice that it would be with the passage of time, (i) in
violation of any provision of its Certificate of Incorporation or Bylaws
or (ii) in default or violation of any term, condition or provision of (A)
any judgment, decree, order, injunction or stipulation applicable to the
Business or (B) any agreement, note, mortgage, indenture, contract, lease or
instrument, permit, concession, franchise or license to which Seller is a
party (with respect to the Business) or by which the Business may be bound,
in any such case in a manner that reasonably would be expected to have a
Material Adverse Effect.
2.6 Litigation. There is no action, suit, proceeding, claim or
governmental investigation pending or, to the knowledge of Seller,
threatened, against Seller that reasonably would be expected to have a
Material Adverse Effect. There is no action, suit, proceeding, claim or
governmental investigation pending against Seller as of the date hereof that
in any manner challenges or seeks to prevent, enjoin, alter or materially
delay any of the transactions contemplated hereby.
2.7 Absence of Certain Changes. Since June 30, 2005, Seller has conducted
the Business in the ordinary course and, except for the execution, delivery
and performance of this Agreement or as required hereby, there has not
occurred: (a) any Material Adverse Effect; (b) any entry into any material
commitment or transaction by Seller relating to the Business, other than
in the ordinary course of business; (c) any damage, destruction or loss,
whether covered by insurance or not, materially and adversely affecting
the Business; (d) any acquisition or disposition of a material amount of
property or assets of Seller relating to the Business outside of the
ordinary course of business; (e) any transfer or grant by Seller of a right
under any Seller Intellectual Property Rights (as defined below), other than
those transferred or granted in the ordinary course of business.
2.8 Agreements. With respect to the Business, Seller is not a party to,
and the Business is not subject to:
(a) Any union contract or any employment contract or arrangement
providing for future compensation, written or oral, with any officer,
consultant, director or employee which is not cancelable by Seller on 30
days' notice or less without penalty or obligation to make payments related
to such termination, other than (A) (in the case of employees other than
executive officers of Seller) such agreements as are not materially
different from standard arrangements offered to employees generally in the
ordinary course of business consistent with Seller's past practices and (B)
such agreements as may be imposed or implied by law;
(b) Any plan, contract, or arrangement, the obligations under which
exceed $100,000, written or oral, providing for bonuses, pensions, deferred
compensation, severance pay or benefits, retirement payments, profit-
sharing, or the like;
(c) As of the date hereof, any existing OEM agreement, distribution
agreement, volume purchase agreement, or other similar agreement in which
the annual amount paid or received by Seller during the 12-month period
ended October 31, 2005 exceeded $100,000;
(d) Any lease or month-to-month tenancy for real or personal property
in which the amount of payments which Seller is required to make on an
annual basis exceeds $100,000;
(e) Any contract containing covenants purporting to limit Seller's
freedom to compete in any line of business in any geographic area; or
(f) Any license to a third party involving Seller Intellectual
Property Rights, source or binary code which includes a right to sublicense
such source or binary code without additional payment.
Each agreement, contract, mortgage, indenture, plan, lease, instrument,
permit, concession, franchise, arrangement, license, and commitment listed
in the Seller Disclosure Schedule pursuant to this Section is valid and
binding on Seller, and is in full force and effect, and Seller has not
breached any provision of, nor is it in default under the terms of, any such
agreement, contract, mortgage, indenture, plan, lease, instrument, permit,
concession, franchise, arrangement, license or commitment except for such
failures to be valid and binding or in full force and effect and such
breaches or defaults as reasonably would not be expected to have a Material
Adverse Effect.
2.9 Tax Returns and Reports.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax"
or "Taxes" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and
liabilities relating to taxes, including taxes based upon or measured by
gross receipts, income, profits, sales, use and occupation, and value added,
ad valorem transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and
additions imposed with respect to such amounts and any obligations under
any agreements or arrangements with any other person with respect to such
amounts and including any liability for taxes of a predecessor entity.
(b) Tax Returns and Audits. Except as reasonably would not be
expected to have a Material Adverse Effect:
(i) Seller has timely filed all federal, state, local and foreign
returns, estimates, information statements and reports ("Returns") relating
to Taxes required to be filed by it, except such Returns which are not
material to the Business, and has paid all Taxes shown to be due on such
Returns or is contesting them in good faith.
(ii) Seller has withheld with respect to its employees all federal
and state income taxes, FICA, FUTA and other Taxes required to be withheld.
(iii) Seller has not been delinquent in the payment of any Tax
nor is there any Tax deficiency outstanding, proposed or assessed against
Seller, nor has Seller executed any waiver of any statute of limitations on
or extending the period for the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of Seller is
presently in progress, nor has Seller been notified of any request for such
an audit or other examination.
(v) None of the Assets are treated as "tax-exempt use property"
within the meaning of Section 168(h) of the Code.
(vi) Seller is not, and has not been at any time, a "United States
real property holding corporation" within the meaning of Section 897(c)(2)
of the Code.
2.10 Technology. To the knowledge of Seller, as of the date hereof, Seller
owns, co-owns or is licensed or otherwise entitled to use rights to all
patents, trademarks, trade names, service marks, copyrights, mask work
rights, trade secret rights, and other intellectual property rights and
any applications therefore, and all mask works, net lists, schematics,
technology, source code, know-how, computer software programs and all
other tangible information or material, that are used in the Business
as currently conducted (the "Seller Intellectual Property Rights"). The
Seller Disclosure Schedule lists, as of the date hereof, (i) all patents,
registered copyrights, trademarks, service marks, mask work rights, and any
applications therefore, included in the Seller Intellectual Property Rights;
(ii) the jurisdictions in which each such Seller Intellectual Property Right
has been issued or registered or in which an application for such issuance
and registration has been filed, including the respective registration or
application numbers; and (iii) which, if any, of such products have been
registered for copyright protection with the United States Copyright Office
and any foreign offices. The Seller Disclosure Schedule also sets forth a
list of license agreements which, to Seller's knowledge, constitutes all
license agreements under which Seller licenses as licensee the intellectual
property rights of third parties relating to technology or software which is
incorporated in existing products of the Business for which products Seller
has received revenues in excess of $100,000 in the 12-month period ended
June 30, 2005. To Seller's knowledge, Seller is not in material violation
of any such license agreement. With respect to the Business, Seller is not
a party to nor is the Business subject to (i) any joint venture contract or
arrangement or any other agreement that involves a sharing of profits with
other persons other than the payment or receipt of royalties by Seller; (ii)
any agreement pursuant to which Seller was obligated to make payment of
royalties in the 12-month period ended June 30, 2005 of $100,000 or more;
or (iii) any agreement pursuant to which Seller utilizes the intellectual
property rights of others in any products currently marketed by Seller and
which is either non-perpetual or terminable by the licensor thereunder in
the event of the Acquisition and which, if terminated, reasonably would be
expected to have a Material Adverse Effect. No claims with respect to the
Seller Intellectual Property Rights have been communicated in writing to
Seller (i) to the effect that the manufacture, sale or use of any product
of the Business as now used or offered by Seller infringes on any copyright,
patent, trade secret or other intellectual property right of a third
party or (ii) challenging the ownership or validity of any of the Seller
Intellectual Property Rights, any or all of which claims reasonably would be
expected to have a Material Adverse Effect. To the knowledge of Seller, as
of the date hereof, all patents and registered trademarks, service marks and
registered copyrights held by Seller in connection with the Business are
valid and subsisting except for failures to be valid and subsisting that
reasonably would not be expected to have a Material Adverse Effect. Seller
does not know of any unauthorized use, infringement or misappropriation of
any of the Seller Intellectual Property Rights by any third party that
reasonably would be expected to have a Material Adverse Effect.
2.11 Title to Properties; Absence of Liens and Encumbrances.
(a) The Seller Disclosure Schedule sets forth a list of all real
property owned or, as of the date hereof, leased by Seller for use in
connection with the Business and the aggregate annual rental or mortgage
payment or other fees payable under any such lease or loan.
(b) Seller has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of the tangible
properties and assets, real, personal, and mixed, which are material to
the conduct of the Business, free and clear of any liens, charges, pledges,
security interests or other encumbrances, except for such of the foregoing
as (A) are reflected in the Seller Financial Statements, or (B) arise out of
taxes or general or special assessments not in default and payable without
penalty or interest or the validity of which is being contested in good
faith by appropriate proceedings, or (C) such imperfections of title and
encumbrances, if any, which are not substantial in character, amount or
extent, and which do not materially detract from the value, or interfere
with the present use, of the property subject thereto or affected thereby.
2.12 Governmental Authorizations and Licenses. Seller is the holder of
all licenses, authorizations, permits, concessions, certificates and other
franchises of any Governmental Entity required to operate the Business,
the failure to hold which reasonably would be expected to have a Material
Adverse Effect (collectively, the "Licenses"). The Licenses are in full
force and effect. There is not now pending, or to the knowledge of Seller
is there threatened, any action, suit, investigation or proceeding against
Seller before any Governmental Entity with respect to the Licenses, nor is
there any issued or outstanding notice, order or complaint with respect
to the violation by Seller of the terms of any License or any rule or
regulation applicable thereto, except in any such case as reasonably
would not be expected to have a Material Adverse Effect.
2.13 Environmental Matters. To Seller's knowledge, Seller has at all
relevant times with respect to the Business been in material compliance with
all environmental laws, and has received no potentially responsible party
notices or functionally equivalent notices from any governmental agencies or
private parties concerning releases or threatened releases of any "hazardous
substance" as that term is defined under 42 U.S.C. 960(1)(14).
2.14 Investment Intent. The purchase of the Shares, the Earn-Out Shares and
the Warrants (collectively, the "Securities") pursuant to this Agreement is
for the account of Seller for the purpose of investment and not with a
view to or for sale in connection with any distribution thereof within the
meaning of the Securities Act of 1933, as amended (the "Securities Act") and
the rules and regulations promulgated thereunder, and that Seller has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, Seller further
represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to
such person or to any third person, with respect to any of the Securities.
2.15 Reliance Upon Seller's Representations. Seller understands that the
Securities are not registered under the Securities Act on the ground that
the sale provided for in this Agreement and the issuance of the Securities
hereunder is exempt from registration under the Securities Act pursuant
to Section 4(2) thereof, and that Buyer's reliance on such exemption is
predicated on Seller's representations set forth herein. Seller realizes
that the basis for the exemption may not be present if, notwithstanding such
representations, Seller has in mind merely acquiring the Securities for a
fixed or determinable period in the future, or for a market rise, or for
sale if the market does not rise. Seller presently does not have any such
intention.
2.16 Receipt of Information. Seller believes it has received all the
information it considers necessary or appropriate for deciding whether
to purchase the Securities. Seller further represents that it has had an
opportunity to ask questions and receive answers from Buyer regarding the
terms and conditions of the offering of the Securities and the business,
properties, prospects and financial condition of Buyer and to obtain
additional information (to the extent Buyer possessed such information or
could acquire it without unreasonable effort or expense) necessary to verify
the accuracy of any information furnished to it or to which it had access.
The foregoing, however, does not limit or modify the representations and
warranties of the Buyer in Article III of this Agreement or the right of
the Seller to rely thereon.
2.17 Intentionally Deleted
2.18 Restricted Securities. Seller understands that the Securities may not
be sold, transferred, or otherwise disposed of without registration under
the Securities Act or an exception therefrom, and that in the absence of an
effective registration statement covering the Securities or an available
exemption from registration under the Securities Act, the Securities must be
held indefinitely. In particular, Seller is aware that the Securities may
not be sold pursuant to Rule 144 promulgated under the Securities Act unless
all of the conditions of that rule are met.
2.19 Legends. To the extent applicable each certificate or other document
evidencing any of the Securities shall be endorsed with the legends set
forth below, and Seller covenants that, except to the extent such
restrictions are waived by Buyer, Seller shall not transfer the securities
represented by any such certificate without complying with the restrictions
on transfer described in the legends endorsed on such certificate:
(a) The following legend under the Securities Act
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1993, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR COMPLIANCE WITH
RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND
ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as described with reasonable particularity in the Buyer
Disclosure Schedule (which shall cross reference to the particular section
below to which such description applies) delivered by Buyer to Seller
simultaneously with this Agreement (the "Buyer Disclosure Schedule"), and
except as disclosed in Buyer's SEC Documents (as defined below), Buyer
represents and warrants to Seller that
3.1 Organization, Standing and Power. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware, and has all requisite corporate power and authority to own,
operate and lease its properties and to carry on its business as now being
conducted. Buyer is duly qualified as a foreign corporation and is in good
standing in each jurisdiction in which the failure to so qualify would
reasonably be expected to have a Material Adverse Effect on Buyer. Buyer
has made available to Seller complete and correct copies of the Certificate
of Incorporation and Bylaws of Buyer, as amended to the date hereof.
3.2 Authority. Buyer has all requisite corporate power and authority to
enter into this Agreement and, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement, the performance by
Buyer of its obligations hereunder and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Buyer, and have been approved by the Board
of Directors of Buyer. No other corporate proceeding on the part of Buyer
is necessary to authorize the execution and deliver of the Agreement
by Buyer or the performance of Buyer's obligations hereunder or the
consummation of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Buyer and constitutes a legal, valid and
binding obligation of Buyer enforceable against Buyer in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency, or
other similar laws affecting the enforcement of creditor's rights generally
and except that the availability of equitable remedies is subject to the
discretion of the court before which any preceding therefore may be brought.
Subject to satisfaction or waiver of the condition set forth in Article V,
the execution and delivery of this Agreement does not, and the consummation
of the transactions contemplated hereby will not conflict with or result
in any violation of any statute, law, rule, regulation, judgment, order,
decree, or ordinance applicable to Buyer or its properties or assets that
individually or in the aggregate, reasonably would be expected to have a
Material Adverse Effect on Buyer, or conflict with any provision of the
Certificate of Incorporation or Bylaws of Buyer or result in any breach or
default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation, or acceleration of any
obligation or to loss of a material benefit under, or result in the creation
of a lien or encumbrance on any of the properties or assets of Buyer
pursuant to any agreement, contract, note, mortgage, indenture, lease,
instrument, permit, concession, franchise or license to which Buyer is a
party or by which Buyer or its properties or assets may be bound that would
reasonably be expected to have a Material Adverse Effect on Buyer. No
consent, approval, order or authorization of, or registration, declaration
or filing with any Governmental Entity is required by or with respect to
Buyer in connection with the execution and delivery of this Agreement or the
consummation by Buyer of the transactions contemplated hereby, except for
(i) filings following the Closing under federal and state securities laws
relating to issuance of the Securities; and (ii) such concerns, approvals,
adverse effect on the ability of Buyer to issue the Securities to Seller and
assume the Assumed Liabilities at the Closing.
3.3 Capitalization. The authorized capital stock of Buyer consists of
84,169,100 shares of Common Stock and 10,000,000 shares of preferred stock,
$0.001 par value ("Preferred Stock"), of which there were issued and
outstanding as of the close of business on October 21, 2005, 28,022,183
shares of Common Stock and 0 shares of Preferred Stock. There are no other
outstanding shares of capital stock or voting securities of Buyer other than
shares of Common Stock issued after October 16, 2005 upon the exercise of
options issued under the Buyer's 2002 Stock Option Plan (the "Buyer Stock
Option Plan"), 6,238,391 warrants issued in connection with Buyers related
party and convertible debentures ("Convertible Debt"), and approximately
42,000,000 shares issuable in connection with the Buyers Convertible Debt,
calculated on an "if converted" basis on October 15, 2005. All outstanding
shares of the Common Stock of Buyer have been duly authorized, validly
issued, fully paid and are non-assessable and free of any liens or
encumbrances other than any liens or encumbrances created by or imposed upon
the holders thereof. As of the close of business on October 21, 2005, Buyer
has reserved 2,000,000 shares of Common Stock for issuance to employees,
directors and independent contractors pursuant to the Buyer Stock Option
Plan, of which 353,000 shares are subject to outstanding, unexercised
options. In addition, the Buyer has approximately 1,221,000 shares subject
to outstanding, unexercised options under its 1990 Stock Option Plan (the
"1990 Plan"). The Company is no longer issuing securities under the 1990
Plan. In addition, the Buyer has committed approximately 325,000 to be
issued in connection with past services provided to the Buyer by third party
professional service providers. Other than this Agreement, there are no
other options, warrants, calls, rights, commitments or agreements of any
character to which Buyer is a party or by which it is bound obligating
Buyer to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of the capital stock of
Buyer, or obligating Buyer to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement. The shares of Buyer Common
Stock to be issued pursuant to this Agreement will be duly authorized,
validly issued, fully paid and non-assessable.
3.4 SEC Documents; Buyer Financial Statements. Buyer has made available
to Seller a true and complete copy of each statement, annual, quarterly and
other report, and definitive proxy statement filed by Buyer with the SEC
since January 1, 2004 (the "Buyer SEC Documents"), which are all the
documents (other than preliminary material) that Buyer was required to file
with the SEC since such date. As of their respective filing dates, the
Buyer SEC Documents complied in all material respects with the requirements
of the Securities Exchange Act of 1934 (the "Exchange Act") or the
Securities Act, as the case may be, and none of the Buyer SEC Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were
made, not misleading. The financial statements of Buyer included in the
Buyer SEC Documents (the "Buyer Financial Statements") comply as to form in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles (except
as may be indicated in the notes therein or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) and fairly present the
consolidated financial position of Buyer and its consolidated subsidiaries
at the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal, recurring audit adjustments). Since January 1, 2004,
there has been no material change in Buyer's accounting policies except as
described in the notes to Buyer's Financial Statements.
3.5 Compliance with Law. Buyer has conducted its business so as to comply
in all material respects with all laws, rules, and regulations, judgments,
decrees or orders of any Governmental Entity applicable to its operations
except where the failure so to comply reasonably would not be expected to
have a Material Adverse Effect on Buyer. As of the date hereof, there are
no judgments or orders, injunctions, decrees, stipulations or awards
(whether rendered by a court or administrative agency or by arbitration)
against Buyer with any continuing effect that reasonably would be expected
to have a Material Adverse Effect on Buyer. To the knowledge of Buyer,
there is no investigation by any Governmental Entity with respect to Buyer
pending against Buyer which is reasonably likely to have a Material Adverse
Effect on Buyer.
3.6 No Defaults. To the knowledge of the Buyer, Buyer is not nor has
received written notice that it would be with the passage of time, (i) in
violation of any provision of its Certificate of Incorporation or Bylaws or
(ii) in default or violation of any term, condition or provision of (A) any
judgment, decree, order, injunction or stipulation applicable to Buyer or
(B) any agreement, note, mortgage, indenture, contract, lease or instrument,
permit, concession, franchise or license to which Buyer is a party or by
which Buyer may be bound, in any such case in a manner that reasonably would
be expected to have a Material Adverse Effect on Buyer.
3.7 Litigation. Except as set forth in Schedule 3.7, there is no action,
suit, proceeding, claim or governmental investigation pending or, to the
knowledge of the Buyer, threatened, against Buyer which reasonably would be
expected to have, a Material Adverse Effect on Buyer. There is no action,
suit, proceeding, claim or governmental investigation pending against Buyer
as of the date hereof which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay any of the transactions contemplated
hereby.
3.8 Status of Securities. When issued to Seller at the Closing, the
Securities will be duly authorized, validly issued, fully paid and non-
assessable, free and clear of any and all liens and encumbrances of any
kind, except as may be imposed by Seller.
3.9 No Implied Representations. It is the explicit intent of each party
hereto that Buyer is not making any representation or warranty whatsoever,
express or implied, except those representations and warranties of Buyer
contained in this Agreement or in the Buyer Disclosure Schedule.
ARTICLE IV
CERTAIN COVENANTS
4.1 Conduct of Business of Seller. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement and the Closing Date, Seller agrees (except to the extent that
Buyer shall otherwise consent in writing), to carry on the Business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, including sales of products and services in a manner
and on terms consistent with past practices, to pay or perform other
obligations when due and use all reasonable efforts consistent with past
practice and policies to preserve intact the Business, keep available the
services of its present officers and key employees and preserve their
relationships with customers, suppliers, distributors, licensors, licensees,
and others having business dealings with it, all with the goal of preserving
unimpaired the Business at the Closing Date. Except as contemplated by this
Agreement, Seller shall not, with respect to the Business, without the prior
written consent of Buyer (which shall be given, or reasonably withheld,
within one business day after receipt of written request therefore) (a)
enter into any commitment or transaction not in the ordinary course of
business, or (b) enter into any strategic alliance or joint marketing
arrangement or agreement.
4.2 No Solicitation. Until the earlier to occur of (i) the Closing Date
and (ii) the date of termination of the Agreement pursuant to its terms, as
the case may be, Seller will not (nor will Seller permit any of Seller's
officers, directors, agents, representatives or affiliates to) directly or
indirectly, take any of the following actions with any party other than the
Buyer and its designees: solicit, encourage, initiate or participate in any
negotiations or discussions with respect to, any offer or proposal to
acquire all or any portion of the Business. Until the earlier to occur
of (i) the Closing Date and (ii) the date of termination of the Agreement
pursuant to its term, as the case may be, and except to the extent of the
Board of Directors of Buyer believes (after consultation with outside legal
counsel) it necessary to comply with its fiduciary duties, Buyer will
not (nor will Buyer permit any of Buyer's officers, directors, agents,
representatives or affiliates to) directly or indirectly, take any of the
following actions with any party other than the Seller and its designees:
solicit, encourage, initiate or participate in any negotiations or
discussions with respect to, any offer or proposal to acquire all or any
portion of the business of Buyer.
4.3 Access to Information. Seller and Buyer shall each afford the other
and its accountants, counsel and other representatives, reasonable access
during normal business hours during the period prior to the Closing Date to
(a) all of its properties, books, contracts, commitments and records, and
(b) all other information concerning the business, properties and personnel
(subject to restrictions imposed by applicable law) of it as the other may
reasonably request.
4.4 Confidentiality. Each of the parties hereto hereby agrees to keep such
information or knowledge obtained in any investigation pursuant to Section
4.3 confidential; provided, however, that the forgoing shall not apply to
information or knowledge which (a) a party can demonstrate was already
lawfully in its possession prior to the disclosure thereof by the other
party, (b) is generally known to the public and did not become so known
through any violation of law or this Agreement, (c) became known to the
public through no fault of such party, (d) is later lawfully acquired by
such party from other sources, (e) is required to be disclosed by order of
court or government agency with subpoena powers or (f) which is disclosed
in the course of any litigation between any of the parties hereto.
4.5 Expenses. Whether or not the Acquisition is consummated, all fees
and expenses incurred in connection with the Acquisition including without
limitation, all legal, accounting, financial advisory, consulting and all
other fees and expenses of third parties ("Third Party Expenses") incurred
by a party in connection with the negotiation and effectuation of the terms
and conditions of this Agreement and the transactions contemplated thereby,
shall be the obligation of the respective party incurring such fees and
expenses.
4.6 Public Disclosure. Buyer and Seller shall issue a joint press release
with respect to the subject matter of this Agreement.
4.7 Consents. Seller shall use commercially reasonable efforts to obtain
all necessary consents, waivers, and approvals under any of the contracts of
the Business as may be required in connection with the Acquisition so as to
transfer to Buyer all rights of Seller thereunder as of the Closing.
4.8 Commercially Reasonable Efforts. Subject to the terms and conditions
provided in this Agreement, each of the parties hereto shall use its
commercially reasonable efforts to take promptly, or cause to be taken,
all actions, and to do promptly, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations, to consummate
and make effective the transactions contemplated hereby, to obtain all
necessary registrations and filings, and to remove any injunctions or other
impediments or delays, legal or otherwise, in order to consummate and make
effective the transactions contemplated by this Agreement.
4.9 Notification of Certain Matters. Seller shall give prompt notice to
Buyer, and Buyer shall give notice to Seller, of (i) the occurrence or non-
occurrence of any event, the occurrence or non-occurrence of which is likely
to cause any representation or warranty of Seller or Buyer, respectively,
contained in this Agreement to be untrue or inaccurate on or prior to the
Closing Date and (ii) any failure of Seller or Buyer, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided however that subject to Section
4.10, the delivery of any notice pursuant to this Section shall not limit or
otherwise affect any remedies available to the party receiving such notice.
4.10 Additional Documents and Further Assurances. Each party hereto, at
the request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be
necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
4.11 Treatment of Employees of the Business.
(a) Transferred Employees. The employees of the Seller who shall be
transferred to and become employees of the Buyer are set forth on Schedule
4.11(a) (the "Transferred Employees").
(b) Following the execution and delivery of this Agreement and prior
to October 31, 2005, the person(s) responsible for the hiring of Buyer's
personnel and the person(s) responsible for the hiring of Seller's personnel
shall agree upon an employee benefit package (the "Benefits Package") which
in their mutual opinion shall be sufficiently enticing to attract and retain
the Transferred Employees. The transferred employees will be offered
employment from the buyer in accordance with all hiring policies of the
buyer and will only offer employment to those employees that the Buyer deems
helpful to the over all business plan of the combined companies. Except as
may be agreed between Buyer and Seller in accordance with the preparation of
the Benefits Package, Buyer shall not be required to assume any obligations
of Seller with respect to liabilities relating to such employees, including
without limitation, obligations for accrued vacation time, severance
arrangements, workers' compensation or any liability for any insurance,
medical or other welfare benefits, other than under Buyer's plans. In
addition, all welfare or benefit claims relating to the period prior to
midnight on the Closing Date shall be the responsibility of Seller. Buyer
agrees to have completed all hiring of employees pursuant to this Section
4.11 prior to October 31, 2005. Seller's employees shall continue to be
employees of Seller through the Closing and through the Closing Seller shall
continue in force all employee benefits and salaries in place as of the date
of this Agreement, subject to such changes as may occur in the ordinary
course of Seller's business. Seller agrees to use its reasonable commercial
efforts to support the transition of the Business to Buyer, including
without limitation, cooperation between Seller's sales and field service
personnel to help assure an orderly transition of customer accounts.
4.12 Tax Returns. Seller shall be responsible for and pay when due (i) all
of Seller's Taxes attributable to or levied or imposed upon the Assets
relating or pertaining to the period (or that portion of any period) ending
on or prior to the Closing Date, except for Sales Taxes, if any, which are
the responsibility of Buyer pursuant to Section 1.7 hereof, and (ii) all
Taxes attributable to, levied or imposed upon, or incurred in connection
with the Seller's business operations, other than the Business, following
the Closing Date.
4.13 Bulk Sales. Buyer hereby agrees to waive the requirement, if any,
that Seller comply with any bulk transfer law which may be applicable to the
transactions contemplated by this Agreement; provided, that Seller agrees to
indemnify and hold harmless Buyer with respect to any noncompliance with
such laws and Buyer's waiver with respect thereto.
4.14 Audited Financials. The parties shall work diligently together to
prepare audited financial statements relating to the Assets as may be
required for Buyer's financial reporting requirements under the federal
securities laws. The costs associated with preparation of any required
audited financial statements shall be paid by the Buyer.
ARTICLE V
CONDITIONS TO THE ACQUISITION
5.1 Conditions to Obligations of Each Party to Effect the Acquisition.
The respective obligations of each party to this Agreement to effect the
Acquisition shall be subject to the satisfaction at or prior to the Closing
Date of the following conditions:
(a) No Injunctions or Restraints Illegally. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Acquisition shall be in effect, nor shall
any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any
of the foregoing be pending, nor shall there be any action taken, or any
statue, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Acquisition, which makes the consummation of the
Acquisition illegal.
5.2 Additional Conditions to Obligations of Seller. The obligations of
Seller to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to
the Closing Date of each of the following conditions, any of which may be
waived, in writing, exclusively by Seller.
(a) Representations, Warranties and Covenants. The representations
and warranties of Buyer in this Agreement shall be true and correct in
all material respects on and as of the Closing Date as though such
representations and warranties were made on and as such time and Buyer shall
have performed and complied with all covenants, obligations and conditions
of this Agreement required to be preformed and complied with by it in all
material respects as of the Closing Date.
(b) Certificate of Buyer. Seller shall have been provided with a
certificate duly executed on behalf of Buyer to the effect that, as of the
Closing Date.
(i) all representations and warranties made by the Buyer in this
Agreement are true and complete in all material respects;
(ii) all covenants, obligations and conditions of this Agreement
to be performed by Buyer on or before such date have been so performed in
all material respects; and
(iii) there are no pending negotiations with respect to any
offer to acquire all or any portion of the business of Buyer.
(c) Board Approval. A written resolution of the Buyer's Board of
Directors authorizing the acquisition of the Assets and the issuance of
the Shares, the Earn-out Shares and the Warrants.
5.3 Additional Conditions to the Obligations of Buyer. The obligations
of Buyer to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction on or prior to the
Closing Date of each of the following conditions, any one of which may be
waived, in writing, exclusively by Buyer:
(a) Representations, Warranties and Covenants. The representations
and warranties of Seller in this Agreement shall be true and correct in all
material respects on or as of such xxxx Xxxxxx shall have performed and
complied with all covenants, obligations and conditions of this Agreement
required to be performed and complied with by it as of the Closing Date in
all material respects.
(b) Certificate of Seller. Buyer shall have been provided with a
certificate executed on behalf of Seller by its Chief Executive Officer to
the effect that, as of the Closing Date:
(i) all representations and warranties made by Seller in this
Agreement are true and complete in all material respects, and
(ii) all covenants, obligations and conditions of this Agreement
to be performed by Seller on or before such date have been performed in all
material respects.
(c) Legal Opinion. Buyer shall have received a legal opinion from
legal counsel to Seller, in form and substance reasonably satisfactory to
Buyer, relating to due authority, execution, validity, and similar matters.
(d) No Material Adverse Changes. There shall not have occurred any
material adverse changes in the Business between the date of this Agreement
and the Closing Date.
ARTICLE VI
REGISTRATION RIGHTS
Registration Rights.
(a) Resale Registration. On or prior to May 1, 2006 (the "Filing
Date"), the Buyer shall prepare and file with the Securities and Exchange
Commission (the, "SEC") a "resale" registration statement (the "Registration
Statement") providing for the resale of the Shares of Common Stock, the
Earn-Out Shares and all shares of common stock underlying the Warrants
(collectively the "Registrable Securities") for an offering to be made
on a continuous basis pursuant to Rule 415 of the Securities Act. The
Registration Statement shall be on Form SB-2 (except if the Buyer is not
then eligible to register for resale the Registrable Securities on Form SB-
2, in which case such registration shall be on another appropriate form in
accordance with the Securities Act and the rules promulgated thereunder).
The Buyer shall use its best efforts to cause the Registration Statement to
be declared effective under the Securities Act as promptly as possible after
the Filing Date (the "Effectiveness Date"), and to keep such Registration
Statement continuously effective under the Securities Act until such date
that is the earlier of (x) the date when all Registrable Securities covered
by such Registration Statement have been sold or (y) the date on which the
Registrable Securities may be sold without any restriction pursuant to Rule
144(k) as determined by the counsel to the Buyer pursuant to a written
opinion letter, addressed to the Buyer's transfer agent to such effect (the
"Effectiveness Period").
(b) Piggy-Back Registration. If at any time prior to the Filing Date
the Buyer shall determine to register any of its securities for its own
account (other than a registration relating solely to employee stock option
or purchase plans or relating solely to a Rule 145 transaction), Buyer will:
(i) promptly give to Seller written notice thereof (which shall
include a list of the jurisdictions in which Buyer intends to attempt to
qualify such securities under the applicable blue sky or other state
securities laws); and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all or part of the Registrable Securities, specified in a written
request or requests, made within 30 days after the date of such written
notice from Buyer to Seller, except as set forth in Section 6.1(b).
(c) Expenses of Registration.
(i) Subject to Section 6.1(c)(ii), all expenses incurred in
connection with any registration pursuant to Section 6.1, including, without
limitation, all registration, filing and qualification fees, printing
expenses, fees and disbursements of counsel for Buyer, expenses of complying
with state securities or blue sky laws (including fees of counsel for Buyer
and counsel for the underwriters), accountants' fees and expenses incident
to or required by any such registration, expenses incident to the listing
of securities or any exchange in which the Registrable Securities are to be
listed, expenses of any special audits incidental to or required by such
registration, shall be borne by Buyer.
(ii) Notwithstanding anything to the contrary elsewhere in this
Section 6.1(c), all underwriters' discounts, commissions, or applicable
stock transfer and documentary stamp taxes (if any) relating to the sale
of Registrable Securities shall be borne by the Seller of the Registrable
Securities in all cases.
(d) Registration Procedures.
(i) In the case of each registration effected by Buyer pursuant
to Section 6.1, Buyer will keep Seller advised in writing as to the
initiation of each registration and as to the completion thereof. At its
expense (except as otherwise provided in Section 6.1(c) above) Buyer will:
(A) keep such registration effective for a period of six months or until
Seller has completed the distribution described in the registration
statement relating thereto, whichever first occurs; (B) furnish such number
of prospectuses and other documents incident thereto as Seller from time to
time may reasonably request; and (C) notify Seller, (1) when a prospectus or
any prospectus supplement or post-effective amendment has been filed, and,
with respect to the registration statement or any post-effective amendment,
when the same has become effective; (2) of a request by the SEC or any other
federal or state governmental authority during the period of effectiveness
of the registration statement for amendments or supplements to the
registration statement or related prospectus or for additional information
relating to the registration statement, (3) of the issuance by the SEC or
any other federal or state governmental authority of any stop order
suspending the effectiveness of the registration statement or the initiation
of any proceeding from that purpose, (4) of the receipt by Buyer of any
notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for sale
in any jurisdiction or the initiation of any proceeding for such purpose;
or (5) of the happening of any event which makes any statement made in the
registration statement or related prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any material
respect or which requires the making of changes in the registration
statement or prospectus so that, in the case of the registration statement,
it will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of the prospectus
it will not contain any untrue statement of a material fact or omit to state
any material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made not misleading.
(e) Buyer may, upon the happening of any event (x) of the kind
described in clauses (2), (3), (4), or (5) of Section 6.1(d)(i)(C) or (y)
that, in the judgment of Buyer's Board of Directors, renders it advisable to
suspend use of the prospectus due to pending corporate developments, public
filings with the SEC or similar events, suspend use of the prospectus on
written notice to the Seller, in which case Seller shall discontinue
disposition of the Registrable Securities covered by the registration or
prospectus until copies of a supplemented or amended prospectus are
distributed to Seller or until Seller is advised in writing by Buyer that
the use of the applicable prospectus may be resumed. Buyer shall use its
reasonable efforts to ensure that the use of the prospectus may be resumed
as soon as practicable. Buyer shall use every reasonable effort to obtain
the withdrawal of any order suspending the effectiveness of the registration
statement, or the lifting of any suspension of the qualification (or
exemption from qualification) of any of the securities for sale in any
jurisdiction, at the earliest practicable moment. Buyer shall prepare
as soon as practicable a supplement or post-effective amendment to the
registration statement or a supplement to the released prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the
Registrable Securities being sold thereunder, such prospectus will not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made not
misleading.
(f) Indemnification.
(i) Buyer will indemnify and hold harmless Seller, each of its
officers and directors, and each person controlling Seller, with respect to
which a registration has been effected pursuant to this Section 6.1 and each
underwriter, if any, and each person who controls any underwriter of the
Registrable Securities held by or issuable to Seller, against all claims,
losses, damages, costs, expenses and liabilities whatsoever (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any registration
statement, preliminary or final prospectus contained therein or any
amendment or supplement thereto, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by
Buyer of the Securities Act or any state securities law or of any rule or
regulation promulgated under the Securities Act or any state securities law
applicable to Buyer and relating to action or inaction required of Buyer in
connection with any such registration, and will reimburse Seller, each of
its officers and directors, and each person controlling Seller, each such
underwriter and each person who controls any such underwriter, for any
legal and any other expenses as reasonably incurred in connection with
investigating or defending any such claim, loss, damage, cost, expense,
liability or action, provided that Buyer will not be liable in any such case
to the extent that any such claim, loss, damage, cost, expense, or liability
arises out of or is based on any untrue statement or omission based upon
written information furnished to Buyer by an instrument duly executed by
Seller or any underwriter and stated to be specifically for use therein.
(ii) Seller will, if Registrable Securities held by or issuable to
Seller are included in the securities as to which such registration is being
effected, indemnify and hold harmless Buyer, each of its directors and
officers who sign such registration statement, each underwriter, if any, of
Buyer's securities covered by such registration statement, each person who
controls Buyer within the meaning of the Securities Act against all claims,
losses, damages, costs, expenses and liabilities whatsoever (or actions in
respect thereof) arising out of or based on any untrue statement of a
material fact contained in any such registration statement, preliminary or
final prospectus contained therein or any amendment or supplement thereto,
incident to any such registration, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by
Seller of the Securities Act or of state securities laws or any rule or
regulation promulgated under the Securities Act or any state securities law
applicable to Seller and relating to action or inaction required of Seller
in connection with any such registration and will reimburse Buyer, such
directors, officers, persons or underwriters for any legal or any other
expenses as reasonably incurred in connection with investigating or
defending any such claim, loss, damage, cost, expense, liability or actions,
in each case to the extent, but only to the extent, that such untrue
statement or omission is made in such registration statement, prospectus, in
reliance upon and in conformity with written information furnished to Buyer
by an instrument duly executed by Seller and stated to be specifically for
use therein; provided, however, that the foregoing indemnity agreement is
subject to the condition that, insofar as it relates to any such untrue
statement or omission made in the preliminary prospectus but eliminated or
remedied in the amended prospectus on file with the SEC at the time the
registration statement becomes effective or the amended prospectus filed
with the SEC pursuant to Rule 424(b) (the "Final Prospectus"), such
indemnity agreement shall not inure to the benefit of Buyer, or any
underwriter, if there is no underwriter, if a copy of the Final Prospectus
was not furnished to the person or entity asserting the loss, liability,
claim or damage at or prior to the time such action is required by the
Securities Act.
(iii) Each party entitled to indemnification under this Section
6.1(f) (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the defense
of any such claim or any litigation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense of such
claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such party's expense. No Indemnifying Party,
in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof
the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation. If
any such Indemnified Party shall have been advised by counsel chosen by it
that there may be one or more legal defenses available to such Indemnified
Party which are different from or additional to those available to the
Indemnifying Party, the Indemnifying Party shall not have the right to
assume the defense of such action on behalf of such Indemnified Party and
will promptly reimburse such Indemnified Party and any person controlling
such Indemnified Party for the reasonable fees and expenses of any counsel
retained by the Indemnified Party, it being understood that the Indemnifying
Party shall not, in connection with any one action or separate but similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses
of more than one separate firm of attorneys for such Indemnified Party or
controlling person, which firm shall be designated in writing by the
Indemnified Party to the Indemnifying Party.
(g) Contribution. If the indemnification provided for in Section
6.1(f) is unavailable or insufficient to hold harmless an Indemnified Party
thereunder, then each Indemnifying Party thereunder shall contribute to the
account paid or payable by such Indemnified Party as a result of the losses,
claims, damages, costs, expenses, liabilities or actions referred to in
Section 6.1(f)(i) or (ii), as the case may be in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on
the one hand and the Indemnified Party on the other in connection with
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault shall be determined by reference in, among other things,
whether the untrue or alleged untrue statement of a material fact relates
to information supplied by the Indemnifying Party or the Indemnified Party
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statements or omission.
The parties hereto agree that it would not be just and equitable if
contributions pursuant to this Section 6.1(g) were to be determined by pro
rata or per capita allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
first sentence of this Section 6.1(g). The amount paid by an Indemnified
Party as a result of the losses, claims, damages or liabilities referred to
in the first sentence of this Section 6.1(g) shall be deemed to include any
legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any action or claim which is the
subject of this Section 6.1(g). Promptly after receipt by an Indemnified
Party of notice of the commencement of any action against such party
in respect of which a claim for contribution may be made against an
Indemnifying Party under this Section 6.1(g), such Indemnified Party shall
notify the Indemnifying Party in writing of the commencement thereof if the
notice specified in Section 6.1(f)(iii) has not been given with respect to
such action; provided that the omission so to notify the Indemnifying Party
shall not relieve the Indemnifying Party from any liability which it may
have to any Indemnified Party otherwise under this Section 6.1(g), except
to the extent that the Indemnifying Party is actually prejudiced by such
failure to give notice. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(h) Information by Seller. Seller shall furnish to Buyer such
information regarding Seller and the distribution proposed by Seller
as Buyer may reasonably request in writing and as shall be required in
connection with any registration referred to in this Section 6.1.
(i) Rule 144 Reporting. With a view to making available to Seller the
benefits of certain rules and regulations of SEC which may permit the sale
of Registrable Securities to the public without registration, Buyer agrees
to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all
times after 90 days after the effective date of the first registration filed
by Buyer which involves a sale of securities of Buyer to the general public;
(ii) file with the SEC in a timely manner all reports and other
documents required of Buyer under the Securities Act and the Exchange Act;
and
(iii) furnish to Seller so long as it owns any Registrable
Securities forthwith upon request a written statement by Buyer that it has
complied with the reporting requirements of said Rule 144 (at any time after
90 days after the effective date of said first registration statement filed
by Buyer), and of the Securities Act and the Exchange Act (at any time after
it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of Buyer, and such other reports and
documents so filed by Buyer as may be reasonably requested in availing
Seller of any rule or regulation of the SEC permitting the selling of
any such securities without registration.
(j) Transfer of Registration Rights. Any registration rights granted
by Buyer under this Section 6.1 may not be assigned by Seller.
(k) Termination of Registration Rights. All registration rights
provided hereunder shall terminate upon the earlier to occur of (a) the
tenth anniversary of the Closing and (b) such time as Seller is able to sell
all of its Registrable Securities under Rule 144 during any two successive,
three-month periods.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. Except as provided by Section 7.2 below, this Agreement
may be terminated and the Acquisition abandoned at any time prior to the
Closing Date:
(a) by mutual consent of Seller and Buyer;
(b) by Buyer or Seller if (i) the Closing has not occurred by October
31, 2005; (ii) there shall be a final non-appealable order by a federal or
state court in effect preventing consummation of the Acquisition; or (iii)
there shall be any statute, rule, regulation or order enacted, promulgated
or issued or decreed applicable to the Acquisition by any Governmental
Entity that would make consummation of the Acquisition illegal;
(c) by Buyer if it is not in material breach of this Agreement and
there has been a material breach of any representation, warranty, covenant
or agreement contained in this Agreement on the part of Seller and such
breach has not been cured within ten days after written notice to Seller
(provided that, no cure period shall be required for a breach which by its
nature cannot be cured);
(d) by Buyer at any time prior to October 31, 2005, if as a result
of its due diligence review of the Business subsequent to the date of this
Agreement it discovers a fact or condition existing on the date of this
Agreement and not disclosed to Buyer prior to or on the date of this
Agreement that Buyer reasonably determines has a Material Adverse Effect
on Seller;
(e) by Seller at any time prior to October 31, 2005 if as a result of
its due diligence review of Buyer subsequent to the date of this Agreement
it discovers a fact or condition existing on the date of this Agreement not
disclosed to the Seller prior to or on the date of this Agreement that
Seller reasonably determines has a Material Adverse Effect on Buyer;
(f) by Seller if it is not in material breach of this Agreement and
there has been a material breach of any representation, warrant, covenant or
agreement contained in this Agreement on the part of Buyer and such breach
has not been cured within ten days after written notice to Buyer (provided
that, no cure period shall be required for a breach which by its nature
cannot be cured).
7.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 7.1, this Agreement shall forthwith become void and
there shall be no liability or obligation on the part of Buyer or Seller, or
their respective officers, directory or shareholders, provided that each
party shall remain liable for any breaches of this Agreement prior to its
termination.
7.3 Amendment. This Agreement may be amended by the parties herein at any
time by execution of an instrument in writing signed on behalf of each of
the parties hereto.
7.4 Extension; Waiver. At any time prior to the Closing Date, Buyer on the
one hand, and Seller, on the other, may, to the extent legally allowed, (i)
extend the time for the performance of any of the obligations of the other
party herein, (ii) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered
pursuant hereto, and (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid
only if sat forth in an instrument in writing signed on behalf of such
party.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification Given By Seller. Seller and its successors and
permitted assigns, subject to the limitations set forth in this Article
VIII, shall indemnify Purchaser and its successors and permitted assigns
from and against any and all losses, claims, liabilities, actions, suits,
proceedings, fines, expenses, penalties and damages including reasonable
legal fees and costs, whether or not involving a third-party claim
(collectively, "Losses") arising from or in connection with:
(a) Any breach of any representation or warranty made by Seller in
Article II of this Agreement;
(b) Any breach of any covenant or obligation of Seller in this
Agreement; and
(c) The performance or non-performance by Seller under any of the
Business Contracts or the provision by Seller of any service or sale of any
product relating to the Business, in either case at any time prior to the
Closing Date.
8.2 Indemnification Given by Buyer. Buyer and its successors and permitted
assigns, subject to the limitations set forth in this Article VIII, shall
indemnify Seller and its successors and permitted assigns from and against
any and all Losses arising from or in connection with:
(a) Any breach of any representation or warranty made by Buyer in
Article III this Agreement;
(b) Any breach of any covenant or obligation of Buyer in this
Agreement;
(c) Any assessment, claim or other liability (including interest
and penalties) for Taxes assessed against the Assets or relating to the
operation of the Business in any jurisdiction, in either case for any period
commencing on or after the Closing Date; and
(d) Any failure of Buyer to pay or perform any of the Assumed
Liabilities from and after the Closing Date.
8.3 Satisfaction of Indemnification Claims against Seller. All claims for
indemnification against Seller and its successors and permitted assigns
shall be satisfied solely by the return of Securities delivered to Seller
pursuant to Section 1.3 and not by cash payment; provided, however, that
to the extent that any such claim cannot be satisfied by the return of
Securities, then Buyer shall be entitled to payment in cash from Seller in
respect of such claim. The value of the Common Stock to be returned in
connection with the satisfaction of any such claim for indemnification shall
be determined based on the per share price as of the date on which the
indemnification claim is satisfied. Notwithstanding any cash payment
required pursuant to this Section, the maximum aggregate liability of Seller
and its successors and permitted assigns for indemnification pursuant to
this Article VIII shall be limited to the aggregate value of the Common
Stock as of the date on which the indemnification claim is satisfied.
8.4 Satisfaction of Indemnification Claims against Buyer. All claims for
indemnification against Buyer and its successors and permitted assigns shall
be satisfied by cash payment or by the delivery of additional shares of
Common Stock, determined as provided in Section 8.3 above, at Buyer's sole
discretion. The maximum aggregate liability of Buyer and its successors and
permitted assigns for indemnification pursuant to this Article VIII shall be
limited to the aggregate value of the Common Stock as of the date on which
the indemnification claim is satisfied, determined based on the per share
price as of the date on which the indemnification claim is satisfied.
8.5 Survival. All representations, warranties and covenants made in this
Agreement shall survive, and shall not be extinguished by, the Closing;
provided, however, no party shall be entitled to indemnification or payment
from the other party pursuant to this Article VIII, unless the Indemnified
Party (as defined below) shall have provided the Indemnifying Party (as
defined below) with notice of its claim to indemnification pursuant to
Section 8.7 or 8.8 (as applicable) within one year after the Closing Date.
8.6 Limitations on Losses. Anything in this Agreement or otherwise to the
contrary notwithstanding:
(a) No party shall be entitled to indemnification for the amount of
any Losses in excess of the amount of such Losses which would have been
incurred, but for the failure of such party to take reasonable action to
mitigate such Losses upon becoming aware of any claim.
(b) No party shall be entitled to indemnification for the amount of
any Losses in excess of the amount of such Losses which would have been
incurred, but for: (a) the unlawful conduct of such party; or (b) the breach
or default by such party of any representation, warranty, covenant,
obligation or agreement under this Agreement.
(c) In determining the amount of any claim for which an Indemnified
Party is entitled to indemnification pursuant to this Article VIII, the
parties shall make appropriate adjustments for tax benefits.
(d) No party shall be entitled to indemnification under this Agreement
for any incidental, indirect, special, collateral, consequential, exemplary
or punitive damages.
(e) All indemnification payments under this Article VIII shall be
deemed adjustments to the Purchase Price.
8.7 Procedure for Indemnification - Defense of Third-Party Claims. If
any third party shall notify a party hereto (the "Indemnified Party") with
respect to any matter (a "Third Party Claim") which may give rise to a claim
for indemnification against the other party hereto (the "Indemnifying
Party") under this Article VIII, then the Indemnified Party shall promptly
after receiving notice of the Third Party Claim notify the Indemnifying
Party thereof in writing describing in reasonable detail the facts
constituting the basis for the Third Party Claim; provided, however, that
the failure of the Indemnified Party to so notify the Indemnifying Party of
such Third Party Claim shall not affect the Indemnified Party's right to
indemnification hereunder, except to the extent that (a) the resolution of
such claim is materially prejudiced by the Indemnified Party's failure to
give such notice in such a timely fashion or (b) the Indemnifying Party is
required to pay a materially greater amount or accrue material additional
expenses with respect to such claim. The Indemnifying Party shall have the
right at any time to participate in the defense of any Third Party Claim
and, to the extent it wishes, to assume and thereafter conduct the defense
of any Third Party Claim using legal counsel reasonably satisfactory to the
Indemnified Party; provided, however, that the Indemnifying Party shall not
consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnified Party, which consent shall not be unreasonably withheld. Unless
and until the Indemnifying Party assumes the defense of the Third Party
Claim as provided in this Section 8.7, the Indemnified Party may defend
against the Third Party Claim in any manner it reasonably may deem
appropriate. In no event shall the Indemnified Party consent to the entry
of any judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld. If the Indemnifying Party
assumes the defense of the Third Party Claim the Indemnified Party agrees,
if requested by the Indemnifying Party, to cooperate with the Indemnifying
Party and its counsel in contesting the Third Party Claim, or, if
appropriate and related to the Third Party Claim in question, in making
any counterclaim against the Person asserting the Third Party Claim or any
cross-complaint against any Person. After assumption of the defense by the
Indemnifying Party, the Indemnified Party shall have the right to employ its
own counsel in such matter, but the fees and expenses of the Indemnified
Party's counsel shall be at the Indemnified Party's expense. Buyer and
Seller consent to the non-exclusive jurisdiction of any court in which a
proceeding is brought against the other party by a third party for purposes
of any claim that Buyer or Seller may have under this Agreement with respect
to such proceeding or the matters alleged therein. Buyer and Seller agree
that process may be served on them with respect to such a claim anywhere in
the world.
8.8 Procedure for Indemnification - Other Claims. A claim for
indemnification for any matter not involving a Third Party Claim shall be
asserted by the Indemnified Party by notice to the Indemnifying Party in
writing, promptly and in any case within 20 days, after discovery of the
facts supporting the claim; provided, however, that the failure of the
Indemnified Party to promptly notify the other or to give notice of a claim
within such 20-day period shall not affect the Indemnified Party's right to
indemnification hereunder, except to the extent that (a) the resolution of
such claim is materially prejudiced by the Indemnified Party's failure to
give such notice in such a timely fashion or (b) the Indemnifying Party is
required to pay a materially greater amount or accrue material additional
expenses with respect to such claim. Such notice shall describe the facts
constituting the basis for the claim of indemnification in reasonable
detail.
ARTICLE IX
GENERAL PROVISIONS
9.1 Construction. The headings of Articles and Sections of this
Agreement are inserted for convenience only and shall not affect the
construction or interpretation of this Agreement. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of
this Agreement. Whenever this Agreement refers to a number of days, such
number shall refer to calendar days unless specified otherwise. Whenever in
this Agreement "or" is used, it is used in the inclusive sense of "and/or."
As used in this Agreement, the word "including" (and with correlative
meaning "include") means including without limiting the generality of any
description preceding such term. This Agreement and the Exhibits and other
documents delivered pursuant to this Agreement are being entered into by and
among competent and sophisticated parties who are experienced in business
matters and represented by counsel and other advisors, and have been
reviewed by the parties and their counsel and other advisors. Therefore,
any ambiguous language in this Agreement or any agreements, documents,
instruments, schedules, exhibits and certificates delivered pursuant hereto
will not be construed against any particular party as the drafter of the
language.
9.2 Notices. All notices, consents, waivers and other communication
under this Agreement must be in writing and shall be deemed given to a party
when: (a) delivered to the appropriate address by hand or by nationally
recognized overnight courier service (costs prepaid), (b) sent by confirmed
facsimile if sent during normal business hours of the recipient, if not,
then on the next day, or (c) received or rejected by the addressee if sent
certified mail, return receipt requested, in each case to the following
address or facsimile number and marked to the attention of the individual
(by name or title) designated below (or to such other address, facsimile
number or individual as a party may designate by notice to the other
parties):
If to Seller: Integrated Telecommunications, Inc.
0000 Xxxxxxx Xxxxxxxx, Xxxxx 000
Xxxxxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxx, President
Facsimile: 000-000-0000
with a copy to: Levy & Boonshoft, P.C.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxxxxxx, Esq.
Facsimile: (000) 000-0000
If to Buyer: Dial Thru International Corporations
00000 Xxxxxx Xxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxxx, Chief Executive Officer
Facsimile: 000-000-0000
with a copy to: Xxxxxxxx & Xxxxxxx, LLP
000 Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx
Facsimile: 000-000-0000
9.3 Benefit and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto, and their respective successors,
permitted assigns, heirs and legal representatives. Neither Seller nor
Buyer shall assign or attempt to assign this Agreement without the prior
written consent of the other party. Neither this Agreement nor any
provisions hereof is intended to, or shall, create any rights in or confer
any benefits to any Person other than the parties hereto.
9.4 Entire Agreement. This Agreement supersedes all prior agreements
and communication between the parties with respect to its subject matter
(including the letter of intent from Buyer to Seller dated August 30, 2005)
and constitutes (along with the Exhibits and other documents delivered
pursuant to this Agreement) a complete and exclusive statement of the terms
of the agreement between the parties with respect to its subject matter.
9.5 Waiver. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by
any party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement shall operate as a waiver of
such right, power, or privilege, and no single or partial exercise of any
such right, power, or privilege shall preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right,
power, or privilege. To the maximum extent permitted by applicable Law:
(a) no waiver that may be given by a party shall be applicable except in the
specific instance for which it is given; and (b) no notice to or demand on
one party shall be deemed to be a waiver of any obligation of such party or
of the right of the party giving such notice or demand to take further
action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
9.6 Severability. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement shall remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part or
degree shall remain in full force and effect to the extent not held invalid
or unenforceable.
9.7 Governing Law. This Agreement shall be governed, construed and
enforced in accordance with the laws of the State of California without
regard to conflict of laws principles that would require the application
of any other law.
9.8 Counterparts. This Agreement may be executed in one or more
counterparts and by facsimile, each of which shall be deemed to be an
original copy of this Agreement and all of which, when taken together,
shall be deemed to constitute one and the same agreement.
[Signature page follows]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
PURCHASER:
Dial Thru International Corporation
By: /s/ Xxxx Xxxxxxx
-------------------------------------
Xxxx Xxxxxxx, Chief Executive Officer
SELLER:
Integrated Telecommunications, Inc.
By: /s/ Xxxxx Xxxxxx
-------------------------------------
Xxxxx Xxxxxx, President
Schedule 1.1 A Assets purchased
Defined Integrated Assets
Retail Revenue of approximately $175,000 per month
Alliance Group Services (AT&T) (Attach Customer List)
Paetec (Attach Customer List)
Velocita - (2 way pager) - (Attach Customer list)
Wholesale Revenue of approximately $175,000 per month
(Customer List attached)
Vendors
(List of vendors attached to the assets)
Equipment Assets
Nextone (Model, # and software)
Cisco 2625 located at 00 Xxxxx Xx.
Xxxxxxx Xxxxxx located at 00 Xxxxx Xx.
Cables, etc. in connection with equipment
Copy of Billing software
Leases
Any favorable leases directly related and needed to facilitate the
revenue and subsequent gross margin that are assignable
Customer List
-------------
3 G's Supply East LLC Abdullah, Prakhruddin
Accatel,Inc Xxxxxx, Xxxxx
Xxxxxxxxxx, Xxxxxxxxxx Advanced Business Concepts
Allianzgi Dresdner Asset Management Allied Office Products
Xxxxxx Group/World Marketing Solutions Xxxxxx Vilandrie & Company
Xxxxxxx Group Amber Tel
American Vending Xxxxxx Xxxxx for Govenor
APSCO Enterprises Aquis Communications
Arbinet/ITM Group Asif, Alam S.
Asset Management Astrocom Communications
Attar Twin Media Automated Waste Disposal Inc.
AVA Companies Aventine Renewable Energy Inc.
Babu, Xxxxx Xxx, Xxxx
Xxxxxxxxx, Xxxxxxx Bartizan
Xxxxxxx, Xxxxxxx Xxxx Bayview Motors
Bhardwaj, Xxxxx Xxxxx, Xxxxx
Xxxxxxx, Xxxx Xxxx Rock
Xxxxxxxx, Xxxx Xxxxxx & Associates PC
Xxxxxxxx, Xxxx Broadway Jewelers, Inc.
Xxxxxxxx, Xxxxxxx XX Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxx and Associates
Xxxxxxx, Xxxxxxx Xxxxxx
Cavec CC&T
Xxxxxxxxxx and Park LLP Charter Global, Inc.
Xxxxxxx, Xxxxxxxxx Xxxxxxx, Xxxxxxx
Chopard, Xxxxx Cingular Wireless
Cinram-Commerce Operations Cinram International Inc.
Clear Channel Collections Plus Usage
Compass Global, Inc Comstar
Congers Fire District Xxxxxx, Xxxxx
Consultative Resources Corp. County of Santa Xxxxxxx
Xxxxx, Xxxx Xxxxxxx Fine Arts Inc.
Cuomo, Xxxxxx Xxxxx, Xxxxx
Dairyland Dairyland
Defonte Trading LLC Xxxxxx & Xxxxxxxx
Xxxxxxx, Xxxx Diamante Del Mar
XxXxxx And Sons Building Supplies Xxxxxx, Xxxxx Xxxxx
Xxxxxx, Xxxxxxx Xxxxxxxxx, Xxxxxx
Xx. Xxxxxxx Duquesne Capital
E2 Open EC Solutions
Xxxxx, Xxxxxxx Inc EG Clemente Contracting Corp.
eGolfscore Xxxxx, Xxxx
Ellora Telecom Sell Xxxxxxx, Xxxxx
Emerald Asset Management Espresso Motors
Estate Title Management Inc. Xxxxx, Xxxxxxx X.
Xxxxxx, Xxxxxxx Federal Tax Services
Fein, Xxxxxxx Xxxxxxx, T.
First New York Securities First NLC Financial Services
First Telephone Company Xxxx, Xxxxx
Fishing Partnership Health Plan FL Apparel
Xxxxxxx Capital Xxxxx Flexible Packaging
Fonetel Xxxx, Xxx
Friday, Xxxx Frontline Communications Intl
Xxx, Xxxx Fusion Telecommunications,
Xxxxxxxxxxxx, Xxxxxxx Ganz, Xxxxx
Xxxxxx, Xxxxx Xxxxx, Xxxxxxx X.
Xxxxxxx, Xxxxx GCC Telecom
Global Contacts Global Gateway Communications
Global Resource Mgmt. Global Telephony Exchg Carrier Inc
Globalnet Gold, Xxx
Xxxxxx Valley Property Mgmt Xxxxxxxxx, Xxxxxx
Gotham Sound And Communications, Inc. Xxxxxx, Xxxxx
Graphnet Green, Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxx, Xxxx
Xxxxxx Services Harder, Xxxxx
Xxxxxxxx, Xxx Xxxxxxxxx Sports Management
Hillel, Presser Holland, Xxxxxx
Xxxx, Xxxxx Xxxxxxxx, Viru
Xxxx, Guilday, Tucker, Xxxxxxxx & Wm. Huntington Telecom
I Engineer i Talk Communications
I.C.S., Inc IDG Ventures
IDT Xxxxxxx, Xxxxxxx
ILX Impact Protection
Index Fund Advisors Infinity Headwear & Apparel
Integrated Telecom Intra Global Comm Sell
InVoip iOnosphere, Inc
IPEX, Inc. ISP Toolz - PA Networks, Inc.
Israel Cancer Research Xxxxxxx, Xxxxx
IVODAX J&S Communications, Inc
Xxxxxxx Xxxxx, Xxxxxx Jamaica Xxxx
Xxxxx, Xxxxxxx/ Reuters America Xxxx Xxxxxx & Sons Building Supply
Xxxx Xxxxxx Insurance Xxxxxxx Fashions LTD
JST Corporation Kanderis, Xxx
Xxxxxx, Xxxxx Xxxxx, Xxxxxxxxxxx
Xxxxxx, Xxxx Xxxxxxx, Xxxxx
Kytel Pager Account Xxxxxx Xxxxxx & Co
LC Link LineFire
Little Big Man Xxxxx, Xxxxxxxxx
Xxxxx, Xxx Xxxxx, Xxxxxxxx
Xxxxxxx, Xxxxx Xxxxx, Xxxxx
Xxxxxxx, Xxxxxx Maroon Entertainment
Matisse Mayekawa, Xxxxx
Xxxx, Xxxxxxx X. XxXxxxxx, Xxxx & Xxxxxxxx
XxXxxxxx, Xxxx X. MCM
XxXxxxx, Xxxxx Metrocall
MG New York, Inc Milana Residence
Milana, Xxxx Xxxxxx, Xxxxx
Xxxxxxxx, Xxxx MJB Food Services
MJB Food Services Mobitex Technology Inc.
Xxxxx Capital Xxxxxx, Xxxxxxxx
Xxxx, Xxxxx Xxxxxx, Xxxxxxxx
Xxxxxx, Xxxxxx Xxxxxxxxx, Xxxxxxx
Network IP Network. Express
New Atlantic Seafood 6 NJ Dealers Auto Mall, Inc.
NJSGA Xxxxx, Xxxx
Xxxxxxx, Xxxxxx/Univ Cal, Santa Xxxx One Sansome Property LLC
Oradell Capital Management Orbicom
Orion Telecom Oxford Capital Management
Pan Medix, Inc. Peace Products Co.
Xxxxxxx, Xxx Pettitte, Xxxx
Xxxxxxxx, Xxxxx Xxxxxxxxxxx Fur Fashion
Postal Connections of America Xxxxxx, Xxx
Prebon, Yamane Xxxxxx, Xxxxx
Primus Telecommunications, Inc Procaccianti Group
QT Telecom Security Quotel
Xxxxxxxx, Xxxxxxx Reuters Model Center
Reuters Moneyline Telerate Xxxxxxx, Xxxxx & Hayden
Risk Assessment Strategies Xxxxxxxxxx, Xxxxxx
Xxxxx, Xxxx Sakon, Callingcard
Xxxxxxx Xxxx San Xxxx Corp
Scan n SHop Xxxxxxxxxxxxxx, Xxxx
Scherschmidt, Xxxx Xxxxxxxx, Xxxxxxx
Xxxxxxxxxxx Price & Partners Securities Training Corporation
Sellect One Semaphore
Sempra Metals and Concentrates Sempra Trading Corp
Xxxxxxxx, Xxxxxxx Show Card
Shuttlebutt Productions SJE Partners and Sandbox Mgmt
XX Xxxxx Realty Corp Xxxxxx, Xxxxx
Xxxxxxxxxx, Inc. Spiniello Companies
Stagnos Bakery Standard Advisors
Standard Security (Xxxxxxxx) Standard Security (Xxxxxx)
Standard Security Life (Ketting) Standard Security Life (XxXxxxxxx)
Stat Stat Products Inc.(Use other a/c)
State Teach/XX Xxxxxxxx Equities Stella Labs
Xxxxxxx, Xxxx Xxxxxxxx National Bank
Xxxxxxx, Xxxx Xxxxxxx, Xxxxxxx
Xxxxxxx, Xxxxx Surpass Chemical
Systems 2 Communication Systems Solutions
Xxxxxx, Xxxxx Techneat Inc Airtime
Teegrus MGT TeleNova
Telepacket Teleworks
Telintel TellMe Networks
Xxxxxx Xxxxxx, Xx Xxxxxx, Xxxxxx
TL One Customer TNJ Cigar Co.
Total Office Planning Transborder Air Cargo Inc.
Travel Air TriState/Systems Solutions PA
Xxxx, Xxxxxxxx Xxxxxx, Xxxxxx
Value Village Thrift Stores Varada, Xxxxx
Xxxxxx, Xxxx Xxxx Asset Management
Xxxx Plus Asset Management VGM Telecom cust
Video Network Vinculum Communications
Vintage Filings Virginia Community Policing Inst.
Xxxxxxx, Xxxxxx VOIP Atlantic, Inc.
Vsevolozhsky, Xxxx W-Limo
Xxxxx, Xxxx Will, Xxxxx
Xxxxxxxx, Xxxxxx Xxxxxx Xxxxx
Xxxxxxx Personnel Winston Staffing
XX Xxxxxxxx Advertising Inc. Xxxxxxx, Xxxxx
Worldlink Telecom Xxxxxxxxxx, Xxxxxxxxx
York Claims York Insurance
Xxxxx, Xxxxx Your Personal Concierge
Zagnoli, XxXxxx & Xxxxx Xxxxxxx, Ali
Schedule 1.1 B
Liabilities - NONE
Schedule 3.7
Cygnus
On June 12, 2001, Cygnus Telecommunications Technology, LLC ("Cygnus"),
filed a patent infringement suit (case no. 01-6052) in the United States
District court, Central District of California, with respect to the
Company's "international reorigination" technology. The injunctive relief
that Cygnus sought in this suit has been denied, but Cygnus continues to
seek a license fee for the use of the technology. The Company believes that
no license fee is required as the technology described in the patent is
different from the technology used by the Company. As the Company's main
focus is now on providing VoIP originated services, the Company believes
that this lawsuit should have little bearing on future revenues.
In August 2002, Cygnus filed a motion for a preliminary injunction to
prevent the Company from providing "reorigination" services. The Company
filed a cross motion for summary judgment of non-infringement. Both motions
were denied. On August 22, 2003, the Company re-filed the motion for
summary judgment for non-infringement. In response to this filing, during
August 2004, the court narrowly defined the issue to relate to a certain
reorigination technology which the Company believes it does not now, nor has
it ever utilized to provide any of its telecommunications services. The
Company intends to continue defending this case vigorously, and though its
ultimate legal and financial liability with respect to such legal proceeding
is therefore expected to be minimal, it cannot be estimated with any
certainty at this time. (See Subsequent Events).
On August 17, 2005, the United States District Court for the Northern
District of California issued a stay in the Company's patent infringement
lawsuit with Cygnus for the purpose of reexamining Cygnus patent. This stay
is the result of a reexamination request received by the United States
Patent and Trademark Office ("USPTO"), whereby the USPTO has found that
there is a "substantial new question of patentability." All hearing and
scheduling dates have been vacated by the court. A Case Management
Conference to review the status of the lawsuit and the appropriateness of a
continued stay is scheduled for December 2, 2005.
State of Texas/Southland
The State of Texas ("State") performed a sales tax audit of the
Company's former parent, Canmax Retail Systems ("Canmax"), for the years
1995 to 1999. The State determined that the Company did not properly remit
sales tax on certain transactions, including asset purchases and software
development projects that Canmax performed for specific customers. The
Company's current and former management filed exceptions, through its
outside sales tax consultant, to the State's audit findings, including the
non-taxable nature of certain transactions. In correspondence from the
State in June 2003, the State agreed to consider certain offsetting
remittances received by Canmax during the audit period. The State has
refused to consider other potential offsets. Based on this correspondence
with the State, management's estimate of the potential liability was
originally recorded at $350,000 during the fiscal year ended October 31,
2003. Based on further correspondence with the State, this estimated
liability was increased to $1.1 million during the first quarter of fiscal
year 2004 (See Note 11). Since this sales tax liability represents an
adjustment to amounts previously reported in discontinued operations, it was
classified separately during the first quarter of fiscal year 2004 in
discontinued operations, and is included in the July 31, 2005 and October
31, 2004 consolidated balance sheets in "Net current liabilities from
discontinued operations". The Company will continue to aggressively
pursue the collection of unpaid sales taxes from former customers of Canmax,
primarily Southland Corporation, as a majority of the amount owed to the
State of Texas is the result of uncollected taxes from the sale of software
to Southland during the period under audit (see below). However, there can
be no assurance that the Company will be successful with respect to such
collections.
On January 12, 2004, the Company filed a suit against Southland
Corporation ("Southland") in the 000xx Xxxxxxxx Xxxxx in Dallas, Texas. The
Company's suit claims a breach of contract on the part of Southland in
failing to reimburse it for taxes paid to the State as well as related taxes
for which the Company is currently being held responsible by the State. The
Company's suit seeks reimbursement for the taxes paid and a determination by
the court that Southland is responsible for paying the remaining tax
liability to the State. The Company is discussing possible settlement
options with Southland, but as of yet, no agreement has been reached.
On August 5, 2005, the State of Texas filed a lawsuit in the 00xx Xxxxxxxx
Xxxxxxxx Xxxxx xx Xxxxxx Xxxxxx, Xxxxxx, Xxxxx against the Company. The
lawsuit requests payment of approximately $1.1 million plus penalties,
interest and attorneys fees of approximately $50,000 for state and local
sales. The Company previously recorded an estimated liability of $1.1
million, as of January 31, 2004, representing the entire amount due as
determined by the state of Texas. During the three months ended July 31,
2005, the Company has accrued an additional $62,000. Management believes
that it will be able to negotiate a reduced settlement amount with the
state, although there can be no assurance that the Company will be
successful with respect to such negotiations. The Company has previously
accrued the full amount of the liability.
