Exhibit 2.3
TECHNOLOGY ACQUISITION AGREEMENT
This TECHNOLOGY ACQUISITION AGREEMENT (the "Agreement") is dated
effective as of June 24, 2004 (the "Effective Date") by and among USED KAR
PARTS, INC., a Florida corporation ("UKP") and XENOMICS, a California
corporation ("Xenomics", together with UKP referenced herein as the "Company"),
on the one hand, and L. XXXXX XXXXX, XXXXXX XXXXXXX, XXXXXX X. XXXXXXXXX and
XXXXXXX X. XXXXX, each, a resident of the State of California and XXXXXXX X.
XXXXXXXXXXXX, a resident of Russia, (collectively, "Shareholders"), on the other
hand, with reference to the facts and circumstances set forth in the Recitals
below.
RECITALS
A. UKP, Shareholders, and Xenomics are parties to that certain
Securities Exchange Agreement ("Exchange Agreement") of even date herewith (to
which this Agreement is annexed as Exhibit E) pursuant to which UKP will acquire
all of the issued and outstanding shares of Xenomics' capital stock in exchange
for issuance of shares of UKP's capital stock to Xenomics' shareholders (the
"Exchange").
B. Following the closing of the Exchange (the "Closing"), Xenomics will
be UKP's wholly owned subsidiary.
C. As of the Effective Date, UKP has received net proceeds of
$1,750,000 (after giving effect to a redemption of outstanding UKP shares for
$500,000) from an equity financing (the "Initial Financing") to fund the Core
Technology Development (as defined below) and general working capital needs.
D. The Shareholders have been induced to enter into the Exchange
Agreement by UKP's promise to seek additional equity and debt financing
subsequent to the Closing to further fund the Core Technology Development.
E. Subject to the terms and conditions of this Agreement, Company
desires to grant to the Shareholders an option to acquire the Core Technology
from Company in the event that UKP fails to use fifty percent (50%) of the
proceeds of the Initial Financing and any additional financing for the Core
Technology Development.
F. The parties are executing this Agreement to memorialize their
understanding regarding the foregoing.
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals, the mutual
promises and covenants set forth herein and in the Exchange Agreement, and other
good and valuable consideration, the sufficiency and receipt of which is hereby
acknowledged, the parties, intending to be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. The terms below when used herein shall have the
following meanings:
(a) "Acquisition Option" shall have the meaning given in Section 2.1
below.
(b) "Affiliate" with respect to any Person shall mean any other Person
directly or indirectly controlling, controlled by or under common control with
such Person.
(c) "Aggregate Financing Amount" shall mean the sum of (i) the Initial
financing plus (ii) the total amount raised by Company or any direct or indirect
majority owned subsidiary in any equity or debt financing during the period
ending 90 days before the end of the Development Period, less Direct Offering
Expenses (as defined below).
(d) "Agreement" shall mean this Agreement and all exhibits and
schedules hereto, as the same may from time to time be amended or supplemented
by one or more instruments executed by the Parties hereto.
(e) "Assumed Liabilities" shall mean all liabilities and obligations of
Company relating to the Core Technology existing on the Exercise Date.
(f) "Closing" shall have the meaning given in Paragraph B of the
Recitals hereof.
(g) "Company Records" shall have the meaning given in Section 3.3
below.
(h) "Company Shares" shall mean the sum of 2,258,001 UKP shares issued
to the Xenomics shareholders in the Exchange, plus the number of Contingent
Shares (defined in the Exchange Agreement) released and shares to the Xenomics
Shareholders under the Exchange Agreement, plus the number of shares issued to
the Xenomics Shareholders upon the exercise of any option or warrant granted by
UKP, less Escrowed Shares (defined in the Exchange Agreement) cancelled during
the term of this Agreement.
(i) "Core Technology" shall mean all intellectual property and
technology underlying the Xenomics Patents, all divisionals, continuations,
continuations-in-part, substitutions, conversions, prolongations, extensions,
reissues, reexaminations, or renewals thereof, and any and all Improvements,
trade secrets, know how or other proprietary rights related thereto.
(j) "Core Technology Development" shall mean Company's research and
development relating to the Core Technology.
(k) "Development Period" shall mean the two (2) year period between the
Closing and the second anniversary of the Closing.
(l) "Development Report" shall have the meaning given in Section 3.3(b)
below.
m) "Direct Offering Expenses" shall mean the sum of commissions, agent
and underwriter expense reimbursements, legal, accounting, expert and due
diligence expenses, filing, printing and listing fees borne by the issuer of
securities in any financing.
(n) "Exercise Date" shall mean the date the Exercise Notice has been
delivered to Company.
(o) "Exercise Notice" shall have the meaning given in Section 2.2
below.
(p) "Exercise Period" shall mean, subject tolling pursuant to Section
3.3 below, the ninety (90) day period immediately following the Shareholders'
receipt of the Development Report from Company during which the Shareholders may
exercise the Acquisition Option.
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(q) "Improvements" shall mean any improvement, refinement, enhancement
or other modification of the Xenomics Patents that Company develops during the
Development Period.
(r) "Initial Financing" shall have the meaning given in Paragraph C of
the Recitals hereof.
(s) "Liabilities" shall mean claims, liabilities and obligations of
every nature or kind, whether accrued, absolute, contingent or otherwise and
whether asserted or unasserted, known or unknown and whether due or to become
due.
(t) "Market Value" shall mean, as of any date, the average of the
reporting closing prices of the Company Shares on the principal exchange or
quotation service for the 20 trading days preceding such determination,
multiplied by the number of Company Shares as to which the determination is
being made.
(u) "Parties" shall mean Company and the Shareholders.
(v) "Person" shall mean an individual, corporation, partnership, joint
venture, trust or unincorporated organization or a federal, state, city,
municipal or foreign government or an agency or political subdivision thereof.
(w) "Xenomics Patents" shall mean United States Patent Nos. 6,287,820,
6,492,144, and 6,251,638, pending International Patent Application PCT US
98/10965, and pending European Patent Application No. 98924998.2.
ARTICLE 2
GRANT OF ACQUISITION OPTION
2.1 Grant of Acquisition Option. Subject to the terms and conditions
herein, Company hereby grants to the Shareholders an option (the "Acquisition
Option") to acquire the Core Technology from Company. The option may be
exercised if Company expends less than fifty percent (50%) of the Aggregate
Financing Amount on Core Technology Development during the Development Period.
2.2 Exercise of Option. Provided that the condition set forth in
Section 2.1 above has been met, the Shareholders may exercise the Acquisition
Option during the Exercise Period by delivering written notice (the "Exercise
Notice") specifying the alleged failure by the Company to expend the amount
specified in Section 2.1, and signed by at least two of the Shareholders to
either UKP and Xenomics in any manner permitted under Section 4.4 below. The
Company shall then have 90 days (the "Cure Period") to remedy the inadequacies
specified in the Exercise Notice. In the event that the Company fails to remedy,
or otherwise states in writing that they do not wish to remedy, the specified
inadequacies within the Cure Period, the exercise of the Acquisition Option
shall become effective as of the end of the last day of the Cure Period. The
Acquisition may only be exercised in whole and not in part.
2.3 Consideration for Exercise. In consideration for the acquisition of
the Core Technology, each Shareholder, severally, and not jointly shall, (i)
transfer to Company all "Company Shares" and if the Shareholder no longer holds
all or any part of the Company Shares, the Market Value of the Shares not owned
on the Exercise Date by wire transfer to an account designated by the Company
(ii) cancel and terminate all options, other purchase rights to acquire Company
Shares, and securities convertible into Company Shares held by such Shareholder
as of the Exercise Date, and (iii) assume a proportionate portion of the Assumed
Liabilities, by instrument reasonable acceptable to the Company which provides
adequate indemnification for the Assumed Liabilities.
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2.4 Core Technology Assignment. Within thirty (30) days after the
Exercise Notice has become effective, Company shall transfer, in exchange for
the consideration set forth in Section 2.3, all rights, title and interest in
and to the Core Technology, without any encumbrance or lien (but subject to any
development or research right or licenses granted by the Company prior to the
Exercise Date), and deliver the Core Technology, including any documentation
thereto, to the Shareholders or any assignee of the Shareholders as directed in
the Exercise Notice. To the extent any of the rights, title and interest in and
to Core Technology cannot be assigned by Company to Shareholders, Company will
grant to Shareholders an exclusive, royalty-free, transferable, irrevocable,
worldwide license (with rights to sublicense through multiple tiers of
sublicensees) to practice such non-assignable rights, title and interest. To the
extent any of the rights, title and interest in and to the Core Technology can
be neither assigned nor licensed by Company to Shareholders, Company will
irrevocably waive and agree never to assert such non-assignable and
non-licensable rights, title and interest against Shareholders or any of
Shareholders' successors in interest to such non-assignable and non-licensable
rights, title and interest.
2.5 Cooperation in Perfecting Rights to Core Technology (a) Company
agrees to perform, within one hundred twenty (120) days after the assignment of
the Core Technology set froth in Section 2.4, all acts and deliver all documents
deemed necessary by Shareholders to permit and assist Shareholders, in obtaining
and enforcing the full benefits, enjoyment, rights and title throughout the
world in the Core Technology. Such acts may include, but are not limited to,
execution of documents and assistance or cooperation (i) in the filing,
prosecution, registration and memorialization of assignment of the Core
Technology and any applicable patents, copyrights, mask work, or other
applications and (ii) in the enforcement of any ownership rights in and to the
Core Technology and any applicable patents, copyrights, mask work, moral rights,
trade secrets, or other proprietary rights.
(b) In the event that Shareholders are unable for any reason to secure
Company's signature to any document required to evidence Shareholders' ownership
in and to the Core Technology or to file, prosecute, register, or memorialize
the assignment of the Core Technology or any patent, copyright, mask work or
other applications or to enforce any patent, copyright, mask work, moral right,
trade secret or other proprietary rights related to the Core Technology, Company
hereby irrevocably designates and appoints each Shareholder, severally and not
jointly, as Company's agent and attorney-in-fact to act for and on Company's
behalf and instead of Company, (i) to execute, file, prosecute, register and
memorialize the assignment of any such application, (ii) to execute and file any
documentation required for such enforcement, and (iii) to do all other lawfully
permitted acts to further the transfer of all right, title, and interest in and
to the Core Technology to Shareholders after delivery of the Exercise Notice,
and the filing, prosecution, registration, memorialization of assignment,
issuance, and enforcement of any ownership right in and to the Core Technology,
any patents, copyrights, mask works, moral rights, trade secrets or other rights
relating to the Core Technology, all with the same legal force and effect as if
executed by Company.
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ARTICLE 3
OWNERSHIP AND OBLIGATIONS OF COMPANY
3.1 Ownership of Core Technology. Subject to the Acquisition Option,
Company is and shall remain at all times, during the term of this Agreement, the
sole and exclusive owner of the Core Technology and neither the Shareholders nor
any third party, except as granted by Xenomics prior to the Effective Date or
such grants approved by the Company's boards of directors, including the
affirmative vote of the Xenomics Designees (defined in the Exchange Agreement),
shall have any right or interest therein.
3.2 Maintenance and Enforcement of Ownership Rights.
(a) Maintenance. During the term of this Agreement, Company shall
prepare, file, prosecute and maintain any and all patent applications and
patents, and other intellectual property rights, relating to the Core
Technology. If Company fails to take any action reasonably necessary to prepare,
file, prosecute or maintain patents and patent applications, and other
intellectual property rights relating to the Core Technology, the Shareholders
may take such action on behalf of Company and at Company's expense after first
providing Company with thirty (30) days written notice of its intention to do
so. Company shall promptly reimburse the Shareholders for all reasonable
out-of-pocket expenses the Shareholders have incurred, or may incur in the
future, for such preparation, filing, prosecution and maintenance.
(b) Enforcement. During the term of this Agreement, Company shall
actively prosecute actions and/or lawsuits against third parties for
infringement of Company's rights in the Core Technology. All costs and expenses
associated with such actions and lawsuits shall be borne by Company, which shall
be solely entitled to the full amount any recovery received as a result thereof,
whether by adjudication or settlement.
(c) Notice to Shareholders. Company agrees to notify the Shareholders
promptly in the event Company becomes aware of any infringement of any right of
Company in the Core Technology. Moreover, Company shall keep the Shareholders
informed of the status of any prosecution of actions or lawsuits against third
parties for infringement.
3.3 Reports and Records.
(a) Record Keeping. During the Development Period, Company shall keep
complete, accurate and authentic accounts, notes, data and records, including,
without limitation, any and all ideas for technical solutions, designs,
drawings, schematics, technical data, prototypes, inventions, or other
intellectual property, relating to the Core Technology Development
(collectively, "Company Records").
(b) Reports. Within 30 days after the second anniversary of the
Closing, Company shall furnish the Shareholders with a report (the "Development
Report") setting forth: (i) the Core Technology Development performed by Company
during the Development Period and a description (including patents and patent
filings) of the Core Technology; (ii) detailed accounting of the Aggregate
Financing Amount and the portion thereof applied to the Core Technology
Development during the Development Period, (iii) a listing of the Assumed
Liabilities as of the date of such Development Report, and (iii) any other
information the Shareholders may reasonably request to be included in such
Development Report.
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(c) Audit Rights. To ensure compliance with the terms of this
Agreement, the Shareholders shall have the right to inspect and audit Company
Records (including the Development Report) and Company's bookkeeping records
relating to the Core Technology, Assumed Liabilities, and the use of the
Aggregate Financing Amount with the assistance of professional consulting, law
and accounting firms that are reasonably acceptable to Company. All
representatives of such firms involved in the inspection and audit shall be
required to sign reasonable nondisclosure agreements and to abide by reasonable
site security requirements when carrying out the inspection and audit. The
inspection and audit shall be conducted during normal business hours at
Company's offices in such a manner as not unreasonably to interfere with
Company's normal business activities. Any such inspection and audit shall be at
the Shareholders' sole expense.
(d) New Development Report. If any inspection and audit of the
Development Report discloses material discrepancies as to the Core Technology,
the Assumed Liabilities, or the Aggregate Financing Amount applied to the Core
Technology Development, then (i) Company shall pay to the Shareholders the
reasonable fees and expenses charged by the professional consulting, law,
accounting firms and (ii) the Parties shall promptly engage a mutually agreeable
independent party to provide a final Development Report. The finding by such
independent party shall be binding upon the Parties. Company shall pay the
expenses arising from the work performed by such independent party.
(e) Tolling of Exercise Period. The Parties agree that the Exercise
Period shall be tolled for the duration of any audit pursuant to sub-section (c)
above, and any engagement by an independent party and preparation of a final
Development Report pursuant to sub-section (d) above.
3.4 Termination. The Company's obligations under this Article 3 shall
terminate and be of no further force or effect upon the later of: (a) the
transfer of the Core Technology under Sections 2.3 and 2.4 hereof, if the
Acquisition Option; or (b) end of the Exercise Period, if the Acquisition Option
is not exercised.
ARTICLE 4
MISCELLANEOUS PROVISIONS
4.1 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of the
State of New York applicable to agreements executed and to be performed solely
within such State without regard to conflicts of laws.
4.2 Jurisdiction. Any judicial proceeding brought against any of the
parties to this Agreement on any dispute arising out of this Agreement or any
matter related hereto may be brought in the courts of the State of New York, or
in the United States District Court for the Eastern or Southern District of New
York, and, by execution and delivery of this Agreement, each of the parties to
this Agreement accepts the exclusive jurisdiction of such courts, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement. The prevailing party or parties in any such litigation
shall be entitled to receive from the losing party or parties all costs and
expenses, including reasonable counsel fees, incurred by the prevailing party or
parties.
4.3 Captions. The Article and Section captions used herein for
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
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4.4 Notices. Any notice or other communication required or permitted
hereunder shall be deemed sufficiently given when delivered in person, one
business day after delivery to a reputable overnight carrier, four business days
if delivered by registered or certified mail, postage prepaid or when sent by
telecopy with a copy following by hand or overnight carrier or mailed, certified
or registered mail, postage prepaid, addressed as follows:
If to UKP:
Used Kar Parts, Inc.
0 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attn: President
with a required copy to:
Xxxxxxx X. Xxxxxx, Esq.
Xxxxxx & Xxxxxxxxx LLP
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx Xxxx, XX 00000
If to Xenomics:
Xenomics
0000 Xxxxxxxx Xxx.
Xxxxxxxx, XX 00000
Attn: President
with a required copy to:
Xxxx Xxxxxxx, Esq.
Xxxxxxxxxxx & Xxxxxxxx LLP
Four Xxxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
If to Shareholders:
L. Xxxxx Xxxxx
0000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Xxxxxx Xxxxxxx
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Xxxxxx X. Xxxxxxxxx
000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Xxxxxxx X. Xxxxxxxxxxxx
00 Xxxxxxxxxx shosse, Xxxx 0, Xxx. 000
Xxxxxx, Xxxxxx 000000
Xxxxxxx X. Xxxxx
000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
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4.5 Parties in Interest. With the exception of the Shareholders' right
to request transfer of the Core Technology to and to effectuate the acquisition
of the Core Technology through an assignee, this Agreement may not be
transferred, assigned, pledged or hypothecated by any party hereto, other than
by operation of law. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
4.6 Counterparts. This Agreement may be executed in two or more
counterparts and delivered by facsimile all of which taken together shall
constitute one instrument.
4.7 Entire Agreement. The Exchange Agreement and this Agreement,
including the exhibits hereto and the other documents referred to herein which
form a part hereof, contain the entire understanding of the parties hereto with
respect to the subject matter contained herein and therein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
4.8 Amendments. This Agreement may not be changed orally, but only by
an agreement in writing signed by Company and the Shareholders.
4.9 Severability. In case any provision in this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof will not in any way be affected or impaired
thereby.
4.10 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereof.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, undersigned parties have executed this Technology
Acquisition Agreement, as of the day and year first above written.
"UKP:" Used Kar Parts, Inc.,
a Florida corporation
By: /s/ Xxxxxxxxx Xxxxxxxx
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Name: Xxxxxxxxx Xxxxxxxx
Title: President
"XENOMICS:" Xenomics
a California corporation
By: /s/ Xxxxxx Xxxxxxx
--------------------------------
Name: Xxxxxx Xxxxxxx
Title: President
"SHAREHOLDERS:"
/s/ L. Xxxxx Xxxxx
--------------------------------
L. Xxxxx Xxxxx
/s/ Xxxxxx Xxxxxxx
--------------------------------
Xxxxxx Xxxxxxx
/s/ Xxxxxx X. Xxxxxxxxx
--------------------------------
Xxxxxx X. Xxxxxxxxx
/s/ Xxxxxxx X. Xxxxxxxxxxxx
--------------------------------
Xxxxxxx X. Xxxxxxxxxxxx
/s/ Xxxxxxx X. Xxxxx
--------------------------------
Xxxxxxx X. Xxxxx
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