SECURITIES PURCHASE AGREEMENT
Exhibit
10.1
THIS
SECURITIES PURCHASE AGREEMENT
is made
and entered into as of July 19, 2006, among The Medical Exchange Inc., a
Nevada corporation (the “Purchaser”),
IDO
Securities Limited., a company incorporated under the laws of the State of
Israel (the “Company”)
and
the
selling shareholders whose
names, addresses and signatures are set forth on the Signature Pages to this
Agreement (the “Vendors”
and
collectively with Purchaser and Company, the “Parties”).
W
I T N E S S E T B H
WHEREAS,
the
Company currently has 50,000 shares of NIS 1.00 par value per share of ordinary
shares (“Company
Shares”)
authorized, of which 1,025 shares are outstanding as of the date hereof ,
and
WHEREAS,
as of
the date hereof the Vendors own the number of Company Shares of the Company
set
forth opposite their name on the Appendix
A
to this
Agreement which comprise all of the issued and outstanding Company Shares
(the
“Purchased
Shares”);
and
WHEREAS,
the
Purchaser and the Vendors believe that it is desirable and in their mutual
best
interests that Purchaser acquires
100% of the issued and outstanding Company Shares upon the terms and conditions
set forth herein, which upon the Closing of the Purchase according to this
Agreement would make Company a wholly owned subsidiary of the Purchaser;
and
WHEREAS
the
Parties desire to make certain representations, warranties, covenants and
agreements in connection with the Purchase and also to prescribe various
conditions to the Purchase.
NOW,
THEREFORE,
in
consideration of the foregoing and the mutual covenants and agreements herein
contained, and intending to be legally bound hereby, the Company, the Purchaser
and the Vendors hereby agree as follows:
ARTICLE
I
Purchase
& Sale
1.1
Agreement
for Purchase and Sale Subject
to the terms and conditions hereof:
(a)
the
Vendors agree to sell, assign and transfer to the Purchaser and the Purchaser
agrees to purchase the Purchased Shares and any loans which Vendors have
outstanding against Company (set forth in the audited financial statements
of
the Company the “Loans”)
(together, the “Purchase”).
(b)
The
Purchaser shall use reasonable commercial efforts to cause the Company’s bank to
release Vendors from their personal guarantees with respect to Company debt
and
accounts. As of the date hereof the sole personal guarantee of Vendors is from
Xxx Xxxxx to Company’s bank. Prior to Closing Gil shall void his said personal
guarantee.
1.2
Closing.
The
closing of the Purchase (the “Closing”)
will
take place on the date the Parties agree upon after satisfaction or waiver
of
the conditions set forth in Article VII, and no later than 31 August 2006 (the
“Closing
Date”).
1.3
Directors.
At the
Closing the following persons shall be appointed as directors of the Company
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be:
Xxx
Xxxxx, Xxxx Xxxxxx and Xxxxxxx Xxxxxxxx.
1.4
Purchase
Price
Amount
of Purchase Price.
At
Closing the aggregate purchase price payable by the Purchaser to the Vendors
for
the Purchase shall be the sum of One Million US Dollars ($1,000,000) (the
“Purchase
Price”)
to be
paid to each of the Vendors as set forth opposite their respective names in
Appendix
A.
ARTICLE
II
Representations
& Warranties of Vendors
2.0
Vendors
Representations & Warranties.
Each
Vendor represents and warrants to the Purchaser that:
2.1
Ownership
and Right to Sell Purchased Shares.
The
Vendor beneficially owns and controls and has good and marketable title to
the
Purchased Shares registered in the Vendor’s name free and clear of any and all
mortgages, charges, liens, pledges, encumbrances, demands, security interest
or
claims of others (the “Liens”)
and
has the absolute right, power and authority to sell, transfer and assign the
said Purchased Shares to the Purchaser in accordance with the terms and
conditions herein contained.
2.2
No
Litigation against Purchased Shares.
The
Vendor is not aware of any injunctions, judgments, orders, legal actions, or
similar proceedings, either threatened, pending or outstanding, against or
relating to the Purchased Shares or the Vendor which would or could affect
or
prohibit the completion by the Vendor of the transactions contemplated
hereby.
2.3
No
Litigation against Vendor.
There
are no actions, suits, claims, complaints, judgments, injunctions, orders,
awards, executions or legal, administrative, arbitrations or similar
proceedings, governmental investigations, or other proceedings pending or
threatened against or affecting the Vendor at law or in equity or before any
state, municipal or other government department, commission, board, bureau,
agency or instrumentality, domestic or foreign which would or could affect
or
prohibit the completion by the Vendor of the transactions contemplated
hereby.
2
2.4
No
Options.
No
party other than the Purchaser under this Agreement has any agreement or option
or any right capable of becoming an agreement or option for the purchase from
the Vendor of the Purchased Shares. As of the Closing the Vendors waive any
rights of first refusal that they have towards the other Vendors and terminate
any and all shareholder agreements amongst or between Vendors.
2.5
Non
contravention.
The
execution, delivery and performance of this Agreement and all other agreements
and documents required to be executed, issued or delivered by the Vendor
hereunder is not in contravention of any of the terms of any indenture, trust
deed, bond, mortgage, charge, debenture, agreement or undertaking to which
the
Vendor is a party or by which the Vendor is bound.
2.6
Representation.
Each
Vendor acknowledges that it has had the opportunity to consult with legal
counsel respecting this Agreement.
2.7
It
is
agreed and understood that the representations and warranties set out in this
Section 2 from each of the Vendors relates only to the specific Vendor and
that
specific Vendor’s common shares in the capital of the Corporation representing
part of the Purchased Shares and such representations and warranties shall
not
extend to or include any representations and warranties in respect of any of
the
other Vendors.
2.8
Waiver
& Releases by Each Vendor.
Each
Vendor (on his behalf and on behalf of each of his agents, attorneys, heirs,
successors, executors, personal representatives and assigns) does hereby
absolutely and unconditionally waive, release and forever discharge each of
the
Company, its affiliates and subsidiaries, their respective past, present and
future officers, directors, shareholders, employees, agents, attorneys,
successors and assigns, from any claims, demands, obligations, liabilities,
rights, causes of action and damages, whether liquidated or unliquidated,
absolute or contingent, known or unknown, from the beginning of time to the
date
of the Closing. This
Section 2.8 shall not affect any of Xxx Xxxxx’ rights against the Company as
detailed in the employment agreement attached hereto as Appendix
6.5.
ARTICLE
III
Representations
and Warranties of the President of the Company and the Company
As
of the
date hereof and as of the Closing, except as otherwise provided in the
Disclosure Schedule, the Company
represents and warrants to the Purchaser and Xxx Xxxxx, President of the
Company, represents and warrants to the Purchaser to the best of his knowledge
and belief (for the purposes of this Agreement, “best of his knowledge and
belief” shall mean the actual knowledge of Xxx Xxxxx and the knowledge Xxx Xxxxx
would reasonably be expected to have in his capacity as President of the
Company) that:
3.1
Organization.
The
Company is a corporation duly organized, validly existing under the laws of
the
State of Israel and has all requisite corporate power and authority to carry
on
its business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power and authority
could not be reasonably expected to (i) prevent or materially delay the
consummation of the Purchaser, or (ii) have a material adverse effect (as
defined in Section 9.3) on the Company. The Company is duly qualified or
licensed to do business and in good standing in each jurisdiction in which
the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in
good
standing could not reasonably be expected to have a material adverse effect
on
the Company or prevent or materially delay the consummation of the Purchase.
The
Company has made available to the Purchase complete and correct copies of its
Articles of Association and Certificate of Incorporation.
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3.2
No
Subsidiaries.
The
Company does not own, directly or indirectly, any capital stock or other
ownership interest in any corporation, partnership, joint venture or other
entity.
3.3
Capitalization.
The
authorized capital of the Company consists of 50,000 Ordinary Shares, nominal
value 1.00 NIS (“Ordinary
Shares”),
of
which 1,025 Ordinary Shares are issued and outstanding and all of which are
held
and beneficially owned by the Vendors as set forth on Appendix A.
All
outstanding shares of capital stock of the Company are duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
As of
the date of this Agreement, there are no bonds, debentures, notes or other
indebtedness of the Company. There are not any securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any
kind
to which the Company is a party or by which it is bound obligating the Company
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of the Company or obligating
the Company to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking. There
are not any outstanding contractual obligations of the Company to repurchase,
redeem or otherwise acquire any shares of capital stock of the
Company.
3.4
Authority.
(a)
The
Company has the requisite corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and other transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company and no other corporate proceedings on the part of
the
Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly executed and
delivered by the Company and, assuming this Agreement constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally.
The
Board
of Directors of the Company duly and unanimously adopted resolutions approving
this Agreement
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3.5
Consents
and Approvals; No Violations.
Except
for filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of Israel Company Registrar, and the
filings contemplated in connection with the Purchase, neither the execution,
delivery or performance of this Agreement by the Company nor the consummation
by
the Company of the transactions contemplated hereby will (i) conflict with
or
result in any breach of any provision of the Articles of Incorporation or
Certificate of Incorporation of the Company, (ii) require any filing with,
or
permit, authorization, consent or approval of, any state or local government
or
any court, tribunal, administrative agency or commission or other governmental
or other regulatory authority or agency, domestic, foreign or supranational
(a
“Governmental Entity”) (except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings could not
reasonably be expected to have a material adverse effect on the Company or
prevent or materially delay the consummation of the Merger), (iii) result in
a
violation or breach of, or constitute (with or without due notice or lapse
of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, license, contract, agreement
or
other instrument or obligation to which the Company is a party or by which
the
Company or its properties or assets may be bound; or (iv) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Company
or any of its properties or assets, except in the case of clauses (iii) or
(iv)
for violations, breaches or defaults that could not reasonably be expected
to
have a material adverse effect on the Company or prevent or materially delay
the
consummation of the Purchaser.
3.6
Financial
Statements
As of
the Closing the audited financial statements of the Company set forth in
Section 3.6 of the Disclosure Schedule as of and for the year ended
31.12.2005, (the “Balance Sheet Date”) comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the Securities and Exchange Commission (the “SEC”) and the
Public Company Accounting Oversight Board (the “PCAOB”) with respect thereto,
have been prepared in accordance with generally accepted accounting principles
(“GAAP”) applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly present the financial position
of the Company as at the dates thereof and the results of the Company’s
operations and cash flows for the periods then ended.
3.7
Absence
of Certain Changes or Events.
As of
the Balance Sheet Date, the Company has conducted its businesses only in the
ordinary course consistent with past practice, there has not been any material
adverse change with respect to the Company. Since the Balance Sheet Date, there
has not been (i) any declaration, setting aside or payment of any dividend
or
other distribution with respect to the Company’s capital stock or any
redemption, purchase or other acquisition of any of its capital stock, (ii)
any
split, combination or reclassification of any of the Company’s capital stock or
any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock,
(iii)
any material change in accounting methods, principles or practices by the
Company, (iv) (w) any granting by the Company to any employee of the Company
of
any increase in compensation except as provided for in written employment
agreement, , (x) any granting by the Company to any employee of any increase
in
severance or termination pay, except as part of a standard employment package
to
any person promoted or hired, or as was required under employment, severance
or
termination agreements in effect as of the Balance Sheet Date, (y) except
employment arrangements in the ordinary course of business consistent with
past
practice with employees, any entry by the Company into any employment, severance
or termination agreement with any employee, or (z) any increase in or
establishment of any bonus, insurance, deferred compensation, pension,
retirement, profit-sharing, stock option (including the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards or the amendment of any existing stock options, stock appreciation
rights, performance awards or restricted stock awards), stock purchase or other
employee benefit plan or agreement or arrangement, (v) any damage,
destruction or loss, whether or not covered by insurance, that has or reasonably
could be expected to have a material adverse effect on the Company, (vi) any
amendments or changes in the Certificate of Incorporation or Articles of
Association of the Company, (vii) any material revaluation by the Company of
any
of its assets, including writing down the value of inventory or writing off
notes or accounts receivable other than in the ordinary course of business,
(viii) any increase in debt over $20,000 or (ix) any other action or event
that
would have required the consent of the Purchaser pursuant to Section 5.1 had
such action or event occurred after the date of this Agreement.
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3.8
No
Undisclosed Liabilities.
To the
knowledge of the Company, the Company did not have any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise,
that
would be required by GAAP to be reflected on a balance sheet of the Company
(including the notes thereto). Since the Balance Sheet Date and except for
liabilities or obligations incurred in the ordinary course of business
consistent with past practice, the Company has not incurred any liabilities
of
any nature, whether or not accrued, contingent or otherwise, that could be
reasonably expected to have a material adverse effect on the Company, or would
be required by GAAP to be reflected on a consolidated balance sheet of the
Company (including the notes thereto).
3.9
Benefit
Plans; Chief Scientist.
The
Company has not adopted any employee benefit plans. The Company has not applied
for or received any benefits from the Israeli Ministry of Industry and Trade.
3.10 Other
Compensation Arrangements.
Except
as disclosed as of the date of this Agreement, the Company is not a party to
any
oral or written (i) consulting agreement that is not terminable on not more
than
30 calendar days notice, or union or collective bargaining agreement, (ii)
agreement with any executive officer or other key employee of the Company (iii)
agreement with a third party in which a Company officer or other employee is
a
shareholder, partner, consultant or employee or (iii) any stock option plan,
stock appreciation right plan, restricted stock plan or stock purchase
plan.
3.11 Litigation.
There
is no suit, claim, action, proceeding or investigation pending before any
Governmental Entity or, to the best knowledge of the Company, threatened against
the Company that could reasonably be expected to have a material adverse effect
on the Company or prevent or materially delay the consummation of the Purchase.
The Company is not subject to any outstanding order, writ, injunction or decree
that could reasonably be expected to have a material adverse effect on the
Company or prevent or materially delay the consummation of the
Purchase.
6
3.12 Permits;
Compliance with Law.
To the
best of its knowledge, the Company holds all permits, licenses, variances,
exemptions, orders and approvals of all Governmental Entities necessary for
the
lawful conduct of its business (the “Company
Permits”),
except for failures to hold such permits, licenses, variances, exemptions,
orders and approvals that could not reasonably be expected to have a material
adverse effect on the Company. The Company is in compliance with the terms
of
the Company Permits, except where the failure so to comply could not reasonably
be expected to have a material adverse effect on the Company. To the knowledge
of the Company, the business of the Company is not being conducted in violation
of any law, ordinance or regulation of any Governmental Entity, except for
possible violations that could not reasonably be expected to have a material
adverse effect on the Company or prevent or materially delay the consummation
of
the Purchase. As of the date of this Agreement, no investigation, inquiry or
review by any Governmental Entity with respect to the Company is pending or,
to
the best knowledge of the Company, threatened, nor has any Governmental Entity
indicated an intention to conduct any such investigation, inquiry or review,
other than, in each case, those the outcome of which could not be reasonably
expected to have a material adverse effect on the Company or prevent or
materially delay the consummation of the Purchase.
3.13 Tax
Matters.
(a)
The
financial statements of the Company (the “Company Financial Statements”) reflect
an adequate reserve for all taxes payable by the Company for all taxable periods
and portions thereof through the Balance Sheet Date. The unpaid taxes do not
exceed that reserve as adjusted for the passage of time through the Closing
Date.
(b)
To
the
best of its knowledge, the Company is not under audit or examination by any
taxing authority, and no written or unwritten notice of such an audit or
examination has been received by the Company. No claim has ever been made by
an
authority in a jurisdiction where Company does not file tax returns that it
is
or may be subject to taxation by that jurisdiction.
(c)
There
is
no agreement or other document extending, or having the effect of extending,
the
period of assessment or collection of any taxes and no power of attorney with
respect to any taxes has been executed or filed with any taxing
authority.
(d)
No
liens
for taxes exist with respect to any assets or properties of the Company, except
for liens for taxes not yet due.
(e)
The
Company is not liable for taxes of any other person nor is the Company a party
to or bound by any tax sharing agreement, tax indemnity obligation or similar
agreement, arrangement or practice with respect to taxes (including any advance
pricing agreement, closing agreement or other agreement relating to taxes with
any taxing authority).
(f)
The
Company shall not be required to include in a taxable period ending after the
Closing Date taxable income attributable to income that accrued in a prior
taxable period but was not recognized in any prior taxable period.
7
(g)
As
used
in this Agreement, “taxes” shall include all state, local and foreign income,
property, sales, excise, withholding and other taxes, tariffs or governmental
charges of any nature whatsoever, together with all interest, penalties and
additions imposed with respect to such amounts.
(h)
The
Company is not a party to any joint venture, partnership, or other arrangement
or contract which could be treated as a partnership for income tax
purposes.
(i)
All
material elections with respect to taxes affecting the Company are disclosed
or
attached to the Company’s tax returns.
(j)
There
are
no private letter rulings in respect of any tax pending between the Company
and
any taxing authority.
3.14 Intellectual
Property.
(a)
Except
to
the extent that the inaccuracy of any of the following (or the circumstances
giving rise to such inaccuracy) could not reasonably be expected to have a
material adverse effect on the Company to the best knowledge of the Company
and
Xxx Xxxxx:
(1)
the
Company owns an interest in, or is licensed or otherwise has the legally
enforceable right to use (in each case, clear of any liens or encumbrances
of
any kind), all Intellectual Property (as hereinafter defined) used in or
necessary for the conduct of its business as currently conducted;
(2)
no
claims
are pending or, to the best knowledge of the Company, threatened that the
Company is infringing on or otherwise violating the rights of any person with
regard to any Intellectual Property used by, owned by and/or licensed to the
Company and, to the best knowledge of the Company, there are no valid grounds
for any such claims;
(3)
To
the
best of its knowledge, no person is infringing on or otherwise violating any
right of the Company with respect to any Intellectual Property owned by and/or
licensed to the Company.
(4)
To
the
best of its knowledge, there are no valid grounds for any claim challenging
the
ownership or validity of any Intellectual Property owned by the Company or
challenging the Company’s license or legally enforceable right to use any
Intellectual Property licensed by it; and
(5)
all
patents, registered trademarks, service marks and copyrights held by the Company
are valid and subsisting.
(b)
For
purposes of this Agreement, “Intellectual Property” means trademarks (registered
or unregistered), service marks, brand names, certification marks, trade dress,
assumed names, trade names and other indications of origin, the goodwill
associated with the foregoing and registrations in any jurisdiction of, and
applications in any jurisdiction to register, the foregoing, including any
extension, modification or renewal of any such registration or application;
inventions, discoveries and ideas, whether patented, patentable or not in any
jurisdiction; trade secrets and confidential information and rights in any
jurisdiction to limit the use or disclosure thereof by any person; writings
and
other works of authorship, whether copyrighted, copyrightable or not in any
jurisdiction; registration or applications for registration of copyrights in
any
jurisdiction, and any renewals or extensions thereof; any similar intellectual
property or proprietary rights and computer programs and software (including
source code, object code and data); licenses, immunities, covenants not to
xxx
and the like relating to the foregoing; and any claims or causes of action
arising out of or related to any infringement or misappropriation of any of
the
foregoing.
8
(c)
Section
3.14(c) of the Disclosure Schedule identifies each patent or registration which
has been issued to the Company with respect to any of its Intellectual Property,
identifies each pending patent application or application for registration
which
the Company has made with respect to any of its Intellectual Property, and
identifies each material license, agreement, or other permission which the
Company has granted to any third party with respect to any of its Intellectual
Property (together with any exceptions). The Company has delivered to the
Purchaser or its counsel correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as amended
to date). Section 3.14(c) of the Disclosure Schedule also identifies each
registered trademark used by the Company in connection with any of its
businesses. With respect to each item of Intellectual Property required to
be
identified in Section 3.14(c) of the Disclosure Schedule:
(i) to
the
knowledge of Xxx Xxxxx and the Company, the Company possesses all right, title,
and interest in and to the item, free and clear of any security interest,
license, or other restriction;
(ii) to
the
knowledge of Xxx Xxxxx and the Company the item is not subject to any
outstanding injunction, judgment, order, decree, ruling, or charge;
(iii) the
Company has not received notice of any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
knowledge of the Company, is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(iv) The
Company has not agreed to indemnify any person for or against any interference,
infringement, misappropriation, or other conflict with respect to the item,
other than customary intellectual indemnities contained in its customer
agreements.
(d)
Section
3.14(d) of the Disclosure Schedule identifies each material item of Intellectual
Property that any third party owns and that the Company uses pursuant to
license, sublicense, agreement, or permission, other than “off the shelf”
software licensed to the Company pursuant to shrinkwrap or clickwrap agreements.
The Company has delivered to the Purchase or its counsel correct and complete
copies of all such licenses, sublicenses, agreements, and permissions (as
amended to date). With respect to each item of Intellectual Property required
to
be identified in Section 3.14(d) of the Disclosure Schedule:
(i) the
license, sublicense, agreement, or permission covering the item is legal, valid,
binding, enforceable, and in full force and effect in all material
respects;
9
(ii) no
party
to the license, sublicense, agreement, or permission is in material breach
or
default, and no event has occurred which with notice or lapse of time would
constitute a material breach or default or permit termination, modification,
or
acceleration thereunder;
(iii) no
party
to the license, sublicense, agreement, or permission has repudiated any material
provision thereof; and
(iv) the
Company not has granted any sublicense or similar right with respect to the
license, sublicense, agreement, or permission in violation of such license,
sublicense, agreement or permission.
3.15 Labor
Matters.
(i)
there are no controversies pending or, to the knowledge of the Company,
threatened, between the Company and any of its employees, which controversies
have had, or could reasonably be expected to have, a material adverse effect;
(ii) the Company is not a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by the Company, nor does
the
Company know of any activities or proceedings of any labor union to organize
any
such employees; and (iii) the Company does not have any knowledge of any
strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or with
respect to any employees of the Company which could reasonably be expected
to
have a material adverse effect.
3.16 Title
to Property.
The
Company has good and defensible title to all of its properties and assets,
free
and clear of all liens, charges and encumbrances, except liens for taxes not
yet
due and payable and such liens or other imperfections of title, if any, as
do
not materially detract from the value of or interfere with the present use
of
the property affected thereby or which could not reasonably be expected to
have
a material adverse effect; and, to the knowledge of the Company, all leases
pursuant to which the Company leases from others material amounts of real or
personal property are in good standing, valid and effective in accordance with
their respective terms, and there is not, to the knowledge of the Company,
under
any of such leases, any existing default or event of default (or event which
with notice or lapse of time, or both, would constitute a default), except
where
the lack of such good standing, validity and effectiveness or the existence
of
such default or event of default could not reasonably be expected to have a
material adverse effect.
3.17 Accounts
Receivable.
The
accounts receivable of the Company as reflected in the Balance Sheet Date
financial statements, to the extent uncollected on the date hereof, and the
accounts receivable reflected on the books of the Company, are valid and
existing and represent monies due, and the Company has made reserves reasonably
considered adequate for receivables not collectible in the ordinary course
of
business, and (subject to the aforesaid reserves) are subject to no refunds
or
other adjustments and to no defenses, rights of setoff, assignments,
restrictions, encumbrances or conditions enforceable by third parties on or
affecting any thereof, except for such refunds, adjustments, defenses, rights
of
setoff, assignments, restrictions, encumbrances or conditions as would not
reasonably be expected to have a material adverse effect.
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3.18 Absence
of Certain Payments.
None of
the Company, or any of its respective affiliates, officers, directors, employees
or agent or other people acting on behalf of any of them have (used any
corporate or other funds for unlawful contributions, payments, gifts or
entertainment, or made any unlawful expenditures relating to political activity
to government officials or others. None of the Company, or any of its
affiliates, directors, officers, employees or agents of other persons acting
on
behalf of any of them, has accepted or received any unlawful contributions,
payments, gifts or expenditures.
3.19 Insurance.
The
Company maintains insurance set forth in section 3.19 of the Disclosure
Schedule.
3.20 Full
Disclosure.
To the
best of its knowledge, no statement contained in any certificate or schedule
furnished or to be furnished by the Company to the Purchaser in, or pursuant
to
the provisions of, this Agreement, contains or will contain any untrue statement
of a material fact or omits to state any material fact necessary, in light
of
the circumstances under which it was made, in order to make the statements
herein or therein not misleading. To Xxx Xxxxx’x and the Company’s knowledge,
there is no fact known to the Company that has not been disclosed in writing
to
the Purchaser that would reasonably be expected to have or result in a material
adverse effect.
3.21 Contracts.
Section
3.21 of the Disclosure Schedule lists the following contracts and other
agreements to which the Company is a party, which are in effect at the date
of
this Agreement:
(a)
any
agreement (or group of related agreements) for the lease of personal property
to
or from any person providing for lease payments in excess of $25,000 per
annum;
(b)
any
agreement (or group of related agreements) for the purchase or sale of raw
materials, commodities, supplies, products, or other personal property, or
for
the furnishing or receipt of services, the performance of which will extend
over
a period of more than one year or involve consideration in excess of
$10,000;
(c)
any
agreement concerning a partnership or joint venture;
(d)
any
agreement (or group of related agreements) under which it has created, incurred,
assumed, or guaranteed any indebtedness for borrowed money, or any capitalized
lease obligation, in excess of $10,000 or under which it has imposed a Security
Interest on any of its assets, tangible or intangible;
(e)
any
material agreement concerning confidentiality or noncompetition;
(f)
any
material agreement between the Company and its affiliates;
(g)
any
profit sharing, stock option, stock purchase, stock appreciation, deferred
compensation, severance, or other material plan or arrangement for the benefit
of its current or former directors, officers, and employees;
(h)
any
collective bargaining agreement;
11
(i)
any
agreement for the employment of any individual on a full-time
basis;
(j)
any
agreement under which it has advanced or loaned any amount to any of its
directors, officers, and employees outside the ordinary course of
business;
(k)
any
agreement under which the consequences of a default or termination would have
a
material adverse effect on the business, financial condition, operations or
results of operations of the Company or a Company Subsidiary; or
(l)
any
other
agreement (or group of related agreements) the performance of which involves
consideration in excess of $10,000.
The
Company has delivered to the Purchaser or its counsel a complete copy of each
written agreement listed in Section 3.21 of the Disclosure Schedule (as amended
to date). With respect to each such agreement: (i) the agreement is valid and
binding on the Company and in full force and effect in all material respects;
(ii) to Xxx Xxxxx’x and the Company’s knowledge, no party is in material breach
or default, and, no event has occurred which with notice or lapse of time would
constitute a material breach or default, or permit termination, modification,
or
acceleration, under the agreement; and (iii) no party has provided the Company
with notice of repudiation of any material provision of the
agreement.
3.22 Real
Property.
The
Company does not own any real property. Section 3.22 of the Disclosure Schedule
lists and describes briefly all real property leased or subleased to the
Company. Company has delivered to the Purchaser or its counsel correct and
complete copies of the leases and subleases listed in Section 3.22 of the
Disclosure Schedule (as amended to date). With respect to each lease and
sublease listed in Section 3.22 of the Disclosure Schedule, except as otherwise
stated therein:
(a)
the
lease
or sublease is legal, valid, binding, enforceable, and in full force and effect
in all material respects;
(b)
no
party
to the lease or sublease is in material breach or material default, and, to
the
Company’s knowledge, no event has occurred which, with notice or lapse of time,
would constitute a material breach or material default or permit termination,
modification, or acceleration thereunder;
(c)
to
the
Company’s knowledge, no party to the lease or sublease has repudiated any
material provision thereof;
(d)
there
are
no material disputes, oral agreements, or forbearance programs in effect as
to
the lease or sublease;
(e)
The
Company has not assigned, transferred, conveyed, mortgaged, deeded in trust,
or
encumbered any interest in the leasehold or subleasehold; and
(f)
To
the
best of its knowledge, all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including material licenses
and permits) required in connection with the operation thereof, except where
the
lack of such approvals, licenses or permits would not have a material adverse
effect on the Company, and have been operated and maintained in accordance
with
applicable laws, rules, and regulations in all material respects.
12
3.23 No
Other Representations.
The
Company and Vendors shall not be deemed to have made a representation or
warranty to the Purchaser other than those expressly set forth in Sections
2 and
3 above.
ARTICLE
IV
Representations
and Warranties of the Purchaser
The
Purchaser represents and warrants to the Company as of the date hereof and
as of
the Closing that, except as
otherwise provided in the Disclosure Schedule or in Purchaser’s Form 10K for
2005 or Form 10Q for end of March 2006 (the “SEC
Documents”)
:
4.1
Organization.
The
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing
or to
have such power and authority could not be reasonably expected to (i) prevent
or
materially delay the consummation of the Purchase or (ii) have a material
adverse effect on the Purchaser. The Purchaser is duly qualified or licensed
to
do business and in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by
it
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing
could
not reasonably be expected to have a material adverse effect on the Purchaser
or
prevent or materially delay the consummation of the Purchase. The Purchaser
has
made available to the Vendors and Company complete and correct copies of its
certificate of incorporation and bylaws.
4.2
Authority.
The
Purchaser
has
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby will have been duly authorized by all necessary corporate
action on the part of the Purchaser
and
no
other corporate proceedings on the part of the Purchaser
are
necessary to authorize this Agreement or to consummate such transactions. This
Agreement has been duly executed and delivered by the Purchaser,
and,
assuming this Agreement constitutes a valid and binding obligation of the
Company, constitutes a valid and binding obligation of the Purchaser
enforceable
against it in accordance with its terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally. The Board of
Directors of the Purchaser,
unanimously adopted resolutions approving this Agreement and the
Purchase.
4.3
Consents
and Approvals; No Violations.
Except
for filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Exchange Act of
1934
(the “Exchange
Act”),
or
the Nevada revised Statutes Chapter 78, neither the execution, delivery or
performance of this Agreement by the Purchaser
nor
the
consummation by the Purchaser
of
the
transactions contemplated hereby will (i) conflict with or result in any breach
of any provision of the certificate or articles of incorporation or bylaws
of
the Purchaser,
(ii)
require any filing with, or permit, authorization, consent or approval of,
any
Governmental Entity (except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings could not be
reasonably expected to prevent or materially delay the consummation of the
Purchase), (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, any of
the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
lease, contract, agreement or other instrument or obligation to which the
Purchaser
is
a
party or by which it or any of its properties or assets may be bound or (iv)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Purchaser
or
any of
its properties or assets, except in the case of clauses (iii) and (iv) for
violations, breaches or defaults that could not be reasonably be expected to
have a material adverse effect on the Purchaser
or
prevent or materially delay the consummation of the Purchase.
13
4.4
Sophisticated
Purchaser.
The
Purchaser
(including its members) has such knowledge, experience and sophistication in
business and financial matters as to be capable of evaluating the merits and
risks
of
the Purchase, is able to bear the economic risk of such purchase and is able
to
afford a complete loss of such purchase.
Without
derogating or limiting the rights and remedies of the Purchaser with respect
to
misrepresentation or omissions on the part of the Company, the Purchaser
represents that it has been furnished by the Company and the Vendors with all
documents and information regarding the Company which the Purchaser has
requested; The Purchaser has been afforded the opportunity to ask questions
and
receive answers from duly authorized officers or other representatives of the
Company, concerning the Company’s business, assets, legal, intellectual property
and financial position, as well as any additional information which they have
requested and based on the above the Purchaser has decided to enter into this
Agreement.
4.5
Full
Disclosure.
No
statement contained in any certificate or schedule furnished or to be furnished
by the Neither the
Purchaser nor any of its to
the
Vendors or Company in, or pursuant to the provisions of, this Agreement contains
or shall contain any untrue statement of a material fact or omits or will omit
to state any material fact necessary, in the light of the circumstances under
which it was made, in order to make the statements herein or therein not
misleading. To the Purchaser’s knowledge, there is no fact known to the
Purchaser that has not been disclosed in writing to the Company or Vendors
that
would reasonably be expected to have or result in a material adverse
effect.
4.7
No
Other Representations.
The
Purchaser shall not be deemed to have made a representation or warranty to
the
Vendors or Company other than those expressly set forth in Article IV
above.
14
ARTICLE
III
Covenants
5.1
Covenants.
Each of
the Vendors, Company and the Purchaser agrees as to itself that (except as
expressly contemplated or permitted by this Agreement, as set forth in the
Disclosure Schedule or to the extent that the other party shall otherwise
consent in writing in advance), from and after the execution of this Agreement
through the earlier of Closing or termination of this Agreement:
(a)
Ordinary
Course.
Each of
the Company and the Purchaser shall, and the Company shall cause the Company
Subsidiaries to, carry on their respective businesses in the usual, regular
and
ordinary course and each of the Company and the Purchaser shall, and the Company
shall cause the Company Subsidiaries to, use all reasonable efforts
to preserve intact their present business organizations, keep available the
services of their present officers and employees and preserve their
relationships with customers, suppliers and others having business dealings
with
the Company or the Purchaser, respectively.
(b)
Dividends;
Changes in Stock.
Neither
the Company nor the Purchaser shall, and the Company shall not permit the
Company Subsidiaries to, (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock, except for, (ii) split,
combine or reclassify any of its capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (iii) repurchase, redeem
or otherwise acquire any shares of its capital stock or the capital stock of
its
subsidiaries or any other securities thereof.
(c)
Issuance
of Securities.
The
Company shall not, and the Company shall not permit the Company Subsidiaries
to,
issue, deliver, sell, pledge or encumber, or authorize or propose the issuance,
delivery, sale, pledge or encumbrance of, any shares of its capital stock of
any
class or any securities convertible into, or any rights, warrants, calls,
subscriptions or options to acquire, any such shares or convertible securities,
or any other ownership interest (including stock appreciation rights or phantom
stock) other than the issuance of shares of the Company Ordinary Shares upon
the
exercise of the Company options or Company warrants outstanding on the date
of
this Agreement and in accordance with the terms of such the Company options
or
Company warrants.
(d)
Governing
Documents.
Neither
the Company nor the Purchaser shall, and the Company shall not permit any of
the
Company Subsidiaries to, amend or propose to amend its certificate or articles
of incorporation or bylaws (or similar organizational documents).
(e)
No
Acquisitions.
Neither
the Company nor the Purchaser shall, and the Company shall not permit any of
the
Company Subsidiaries to, acquire or agree to acquire by merging or consolidating
with, or by purchasing any equity interest in or any substantial assets of
(other than inventory and equipment in the ordinary course consistent with
past
practice, to the extent not otherwise prohibited by this Agreement), or by
any
other manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof.
15
(f)
No
Dispositions.
Other
than dispositions in the ordinary course of business consistent with past
practice, neither the Company nor the Purchaser shall, and the Company shall
not
permit any of the Company Subsidiaries to, sell, lease, license, encumber or
otherwise dispose of, or agree to sell, lease, license, encumber or otherwise
dispose of, any of its assets.
(g)
Indebtedness.
The
Company shall not, and the Company shall not permit any of the Company
Subsidiaries to, (i) incur any indebtedness for borrowed money or guarantee
any
such indebtedness or issue or sell any debt securities or warrants or rights
to
acquire any debt securities of the Company, or any of the Company Subsidiaries,
guarantee any debt securities of others, enter into any “keep-well” or other
agreement to maintain any financial statement condition of another person or
enter into any arrangement having the economic effect of any of the foregoing,
or (ii) make any loans, advances or capital contributions to, or investments
in,
any other person.
(h)
Advice
of Changes; Filings.
Each of
the Company and the Purchaser shall confer with the other party on a regular
and
frequent basis as reasonably requested by the other party, report on operational
matters and promptly advise the other party orally and, if requested by the
other party, in writing of any change or event having, or which, insofar as
can
reasonably be foreseen, is likely to have, a material adverse effect on the
Company or the Purchaser, as applicable. Each of the Company and the Purchaser
shall promptly provide to the other party (or its counsel) copies of all filings
made by such party with any Governmental Entity in connection with this
Agreement and the transactions contemplated hereby.
(i)
Accounting
Changes.
Neither
the Company nor the Purchaser shall make any material change, other than in
the
ordinary course of business, consistent with past practice, or as required
by
the SEC, PCAOB or law, with respect to any accounting methods, principles or
practices used by such party (except insofar as may be required by a change
in
GAAP, of which the other party shall be promptly notified).
(j)
Discharge
of Liabilities.
Except
for fees and expenses related to the transactions contemplated herein, neither
the Company nor the Purchaser shall, and the Company shall not permit any of
the
Company Subsidiaries to, without the prior written consent of the other party,
pay, discharge, settle or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than
the payment, discharge, settlement or satisfaction, in the ordinary course
of
business consistent with past practice or in accordance with their terms, of
(i) liabilities recognized or disclosed in the Company Financial
Statements, (ii) liabilities incurred since the date of such financial
statements in the ordinary course of business consistent with past practice,
or
(iii) the liabilities of the Company set forth in Section 5.01(j) of the
Disclosure Schedule. Neither the Company nor the Purchaser shall, and the
Company shall not permit any of the Company Subsidiaries to, waive the benefits
of, or agree to modify in any manner, any confidentiality, standstill or similar
agreement to which such party or any of its subsidiaries is a
party.
(k)
Compensation
of Employees.
Neither
the Company nor the Purchaser or any of the Company Subsidiaries will, without
the prior written consent of the other party, except as may be required by
law
or otherwise provided in this Agreement, (i) enter into, adopt, amend or
terminate any Company Benefit Plan, or other employee benefit plan or any
agreement, arrangement, plan or policy for the benefit of any director,
executive officer or current or former key employee, (ii) increase in any manner
the compensation or fringe benefits of, or pay any bonus to, any director,
executive officer or key employee, except as required by any Company Benefit
Plan or agreement with such employees existing on the date of this Agreement,
(iii) enter into, adopt, amend or terminate any Company Benefit Plan or other
benefit plan or agreement, arrangement, plan or policy for the benefit of any
employees other than increases in compensation as required by written agreement,
or (iv) pay any benefit not required by any plan or arrangement as in effect
as
of the date hereof (including the granting of, acceleration of exercisability
of
or vesting of stock options, stock appreciation rights or restricted
stock).
16
(l)
Material
Contracts.
Neither
the Company nor the Purchaser or any of the Company Subsidiaries shall
(i) modify, amend or terminate any material contract or agreement to which
the such party is a party, or (ii) waive, release or assign any material rights
or claims.
(m)
No
Dissolution, Etc.
Neither
the Company nor the Purchaser shall authorize, recommend, propose or announce
an
intention to adopt a plan of complete or partial liquidation of the Company
or
the Purchaser or any of its subsidiaries, respectively.
(n)
Tax
Election.
Neither
the Company nor the Purchaser or any of the Company Subsidiaries shall not
make
any tax election or settle or compromise any material income tax
liability.
(o)
Other
Actions.
Neither
the Vendors, Company nor the Purchaser shall nor will the Company permit any
of
the Company Subsidiaries to take or agree or commit to take any action that
is
reasonably likely to result in any of the Vendors’, Company’s or the
Purchaser’s, as applicable, representations or warranties hereunder being untrue
in any material respect at, or as of any time prior to, the Closing, without
the
prior written consent of the other party.
(p) Financing.
From
the date of this Agreement until its termination the Purchaser shall use its
best commercial efforts to obtain financing on terms acceptable to the Company
of not less than $40,000 per month to finance the monthly business operations
of
the Company to be paid no later than the last day of each month.
(q)
General.
Neither
the Vendors, Company nor the Purchaser shall, and the Company shall not permit
the Company Subsidiaries to, authorize any of, or commit or agree to take any
of, the foregoing actions described in this Section 5.1.
5.2
No
Solicitation.
(a)
The
Vendors, Company and its officers, directors, employees, representatives and
agents and the Purchaser and its officers, directors, employees, representatives
and agents all shall immediately cease any discussions or negotiations with
any
parties that may be ongoing with respect to an Acquisition Proposal (as
hereinafter defined). From and after the date hereof until the termination
of
this Agreement, neither the Company nor the Purchaser shall, nor the Company
shall not permit any of the Company Subsidiaries to, authorize or permit any
of
their respective officers, directors or employees or any investment banker,
financial advisor, attorney, accountant or other representative retained by
it
or any of its subsidiaries to, directly or indirectly, (i) solicit, initiate
or
knowingly encourage (including by way of furnishing non-public information
or
assistance), or knowingly take any other action to facilitate, any inquiries
or
the making of any proposal which constitutes, or may reasonably be expected
to
lead to, any Acquisition Proposal, or (ii) participate in any discussions or
negotiations regarding any Acquisition Proposal. For purposes of this Agreement,
“Acquisition Proposal” means any inquiry, proposal or offer from any person
relating to any direct or indirect acquisition or purchase of 20% or more of
the
assets of the Company or the Purchaser, the Company Subsidiaries, as applicable
or 20% or more of any class of equity securities of the Company, or any of
the
Company Subsidiaries, as applicable, any tender offer or exchange offer that
if
consummated would result in any person beneficially owning 20% or more of any
class of equity securities of the Company or the Company Subsidiaries, any
merger, consolidation, business combination, sale of all or substantially all
the assets, recapitalization, liquidation, dissolution or similar transaction
involving the Company or the Purchaser, or any of the Company Subsidiaries,
as
applicable, (other than the transactions between the parties hereto contemplated
by this Agreement), or any other transaction the consummation of which could
reasonably be expected to impede, interfere with, prevent or materially delay
the Purchase or which could reasonably be expected to dilute materially the
benefits to the other party hereto of the transactions contemplated hereby.
17
(b)
The
Company shall promptly advise the Purchaser orally and in writing of any request
for information relating to a potential or actual Acquisition Proposal, the
material terms and conditions of such request or Acquisition Proposal and the
identity of the person making such request or Acquisition Proposal.
5.3
Other
Actions.
The
Vendors, Company or the Purchaser shall not, and the Company shall not permit
any of the Company Subsidiaries to, take any action that could reasonably be
expected to result
in
(i) any of its representations and warranties set forth in this Agreement that
are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in
any
material respect, or (iii) any of the conditions to the Purchase set forth
in
Article V hereof not being satisfied in all material respects.
ARTICLE
IVI
Additional
Agreements
6.1
Access
to Information.
Upon
reasonable notice and subject to restrictions contained in confidentiality
agreements to which such party is subject (from which it shall use reasonable
efforts to be released), the Vendors, Company and the Purchaser shall, and
the
Company cause each of the Company Subsidiaries to, afford to the other party
and
to the officers, employees, accountants, counsel and other representatives
of
the other party (on a need to know basis) access, during normal business hours
to all their respective properties, books, contracts, commitments and records
and, during such period, the Vendors, Company and the Purchaser shall (and
shall
cause each of its subsidiaries to) furnish promptly to the other party (a)
a
copy of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to SEC requirements, and (b)
all
other information concerning its business, properties and personnel as the
other
party may reasonably request.
18
6.2
Reasonable
Efforts.
Each of
the Vendors, Company, the Purchaser agrees to use its reasonable efforts to
take, or cause to be taken, all actions necessary to comply promptly with all
legal requirements which may be imposed on itself with respect to the Purchase
(which actions shall include furnishing all information required in connection
with approvals of or filings with any other Governmental Entity) and shall
promptly cooperate with and furnish information to each other in connection
with
any such requirements imposed upon any of them or any of their subsidiaries
in
connection with the Purchase. Each of the Vendors, Company, the Purchaser,
and
the Company shall cause the each of the Company Subsidiaries to, use its
reasonable efforts to take all reasonable actions necessary to obtain (and
will
cooperate with each other in obtaining) any consent, authorization, order or
approval of, or any exemption by, any Governmental Entity or other public or
private third party required to be obtained or made by the Purchaser, the
Company, any of the Company Subsidiaries in connection with the Purchase or
the
taking of any action contemplated by this Agreement, except that no party need
waive any substantial rights or agree to any substantial limitation on its
operations or to dispose of or hold separate any material assets.
6.3
Confidentiality.
Prior
to the Closing, each of the Company and the Purchaser shall, and shall cause
its
affiliates (as defined in Section 9.3) and its and their employees, agents,
accountants, legal counsel and other representatives and advisers to, hold
in
strict confidence all, and not divulge or disclose any information of any kind
concerning the other party and its business; provided, however, that the
foregoing obligation of confidence shall not apply to (i) information that
is or
becomes generally available to the public other than as a result of a disclosure
by such party, any of its affiliates or any of their respective employees,
agents, accountants, legal counsel or other representatives or advisers, (ii)
information that is or becomes available to such party, any of its affiliates
or
any of their respective employees, agents, accountants, legal counsel or other
representatives or advisers on a nonconfidential basis, and (iii) information
that is required to be disclosed by such party, any of its affiliates or any
of
their respective employees, agents, accountants, legal counsel or other
representatives or advisers as a result of any applicable law, rule or
regulation of any Governmental Entity; and provided further that such party
promptly shall notify the other party of any disclosure pursuant to clause
(iii)
of this Section 6.3. Promptly after any termination of this Agreement, each
of
the Company and the Purchaser, and their respective representatives shall return
to the other party or destroy all copies of documentation with respect to the
other party that were supplied by or on behalf of the other party pursuant
to
this Agreement, without retaining any copy thereof.
19
6.4
Fees
and Expenses.
Except
as
provided below in this Section 6.4, all fees and expenses incurred in connection
with the Purchase, this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such fees or expenses, provided
that the Purchaser shall pay all such fees and expenses of the Company upon
consummation of the Purchase.
6.5
Xxx
Xxxxx’ Employment.
At
Closing the Purchaser shall cause the Company to enter into the Employment
Agreement attached hereto as Appendix 6.5.
6.6
Promissory
Notes.
The
Purchaser shall provide the Company with funds to pay-off all the promissory
notes detailed in Section 3.21(p ) ix - xii of the Disclosure Schedule,
according to the terms of such notes, as may be amended.
ARTICLE
VI
Conditions
7.1
Conditions
to Each Party’s Obligation To Effect the Purchase.
The
respective obligation of each party to effect the Purchase shall be subject
to
the satisfaction prior to the Closing Date of the following
conditions:
(a)
All
consents, authorizations, orders and approvals of (or filings or registrations
with) any Governmental Authority or other regulatory body required in connection
with the execution, delivery and performance of this Agreement, the failure
to
obtain which would prevent the consummation of the Purchase or have a material
adverse effect on the Purchased Shares, Company or the Purchaser, shall have
been obtained; and
(b)
No
Governmental Entity or other regulatory body (including any court of competent
jurisdiction) shall have enacted, issued, promulgated, enforced or entered
any
law, rule, regulation, executive order or decree, or any ruling, injunction
or
other order (whether temporary, preliminary or permanent) which is then in
effect and has the effect of making illegal, materially restricting or in any
way preventing or prohibiting the Purchase or the transactions contemplated
by
this Agreement; provided, however, that each of the parties shall have used
reasonable efforts (subject to the other terms and conditions of this Agreement)
to prevent the entry of any such injunction or other order.
7.2
Conditions
to Obligations of the Purchaser to Effect the Purchaser.
The
obligations of the Purchaser to effect the Purchase are further subject to
satisfaction or waiver at or prior to the Closing Date of the following
conditions.
20
(e)
The
Vendors and an officer of the Company shall have delivered to the Purchaser
a
certificate to the effect that each of the conditions specified in Sections
7.2
(a),
(b),
(c)
and
(d)
is
satisfied in all respects;
(f)
All
authorizations, consents, waivers and approvals from parties to contracts or
other agreements to which the Company is a party, or by which it is bound,
as
may be required to be obtained by it in connection with the performance of
this
Agreement, the failure to obtain which would prevent the consummation of the
Purchase or have, individually or in the aggregate, a material adverse effect
on
Company or the Purchased Shares, shall have been obtained;
(g)
The
Purchaser shall have received an opinion, dated the Closing Date, of Balter,
Guth, Aloni & Co., counsel to the Company, in form and substance reasonably
satisfactory to the Purchaser with respect to Sections 3.3 and the Company’s
signatory rights, relaying on declarations of Xx. Xxx Xxxxx and Xx. Xxxx Xxxxx.
(c) No
suit,
action or proceeding before any court or any governmental or regulatory
authority shall have been commenced and be pending by any person against the
Vendors, Company, the Purchaser, or any of their affiliates, associates,
officers or directors (i) challenging the Purchase, seeking to restrain or
prohibit the consummation of the transactions contemplated by this Agreement
or
seeking to obtain any substantial damages relating to the consummation of the
transactions contemplated by this Agreement, (ii) seeking to prohibit or
impose any material limitation on the ownership or operation by the Purchaser
(or any of its affiliates or subsidiaries) of all or a material portion of
the
business or assets or properties of the Company or the Purchased Shares or
to
compel the Purchaser (or any of its affiliates or subsidiaries) to dispose
of or
hold separate all or any portion of the business or assets of the Company,
(iii) seeking to impose any material limitation upon the ability of the
Purchaser (or any of its affiliates) effectively to acquire or hold or to
exercise full rights of ownership of the Company, or (iv) which otherwise
is reasonably likely to have a material adverse effect on the Company or he
Purchased Shares;
(h)
The
Company shall deliver to the Purchaser audited financial statements, pursuant
to
Section 3.6, for its fiscal year ended December 31, 2005;
(i)
A transfer deed signed by Xx. Xxx Xxxxx for the transfer of all of his right,
title and interest in the patent, detailed in Disclosure Schedule 3.14(c) to
the
Company
7.3
Conditions
to Obligations of the Company and the Vendors to Effect the
Purchase.
The
obligations of the Company and the Vendors to effect the Purchase are further
subject to satisfaction or waiver at or prior to the Closing Date of the
following conditions:
21
(c)
The
representations and warranties of the Purchaser in this Agreement that are
not
qualified by materiality shall be true and correct in all material respects
as
of the date of this Agreement and as of the Closing Date;
(e)
The
Purchaser shall have delivered to the Vendors a certificate to the effect that
each of the conditions specified in Sections 7.3 (l), (m), (n) and (o) is
satisfied in all respects;
(f)
All
authorizations, consents, waivers and approvals from parties to contracts or
other agreements to which the Purchaser is a party, or by which it is bound,
as
may be required to be obtained by it in connection with the performance of
this
Agreement, the failure to obtain which would prevent the consummation of the
Purchase or have, individually or in the aggregate, a material adverse effect
on
Company, shall have been obtained;
(g)
No
suit,
action or proceeding before any court or any governmental or regulatory
authority shall have been commenced and be pending by any person against the
Vendors, Company, the Purchaser, or any of their affiliates, associates,
officers or directors (i) challenging the Purchase, seeking to restrain or
prohibit the consummation of the transactions contemplated by this Agreement
or
seeking to obtain any substantial damages relating to the consummation of the
transactions contemplated by this Agreement, (ii) seeking to prohibit or
impose any material limitation on the ownership or operation by the Purchaser
(or any of its affiliates or subsidiaries) of all or a material portion of
the
business or assets or properties of the Company or the Purchased Shares or
to
compel the Purchaser (or any of its affiliates or subsidiaries) to dispose
of or
hold separate all or any portion of the business or assets of the Company,
(iii) seeking to impose any material limitation upon the ability of the
Purchaser (or any of its affiliates) effectively to acquire or hold or to
exercise full rights of ownership of the Company, or (iv) which otherwise
is reasonably likely to have a material adverse effect on the Company or he
Purchased Shares;
ARTICLE
XIII
Deliveries
at Closing
At
the
Closing date, the Parties shall, inter alia, meet, perform and deliver the
following:
22
8.1
The
Vendors and the Company shall deliver to the Purchaser:
(a)
executed deeds of transfer, properly endorsed or otherwise in proper form for
transfer for the Purchased Shares pursuant to Section 1.1(a).
(b)
Assignment of loans pursuant to Section 1.1(a).
(c
) A
transfer deed signed by Xx. Xxx Xxxxx for the transfer of all of its right
in
the patent, detailed in Disclosure Schedule 3.14(c) to the Company.
(d)
Audited financial statements of the Company for the year ended 2005 pursuant
to
Section 7.2(ka).
(e)
Certificates as to satisfaction of conditions pursuant to section
7.2(g).
(f)
Opinion of counsel pursuant to Section 7.2(i).
(g)
Letter from Shikumit Ltd., in form satisfactory to Purchaser, waiving any and
all claims or demands against Company.
8.2
(a)
Purchaser shall deliver to the Vendors the Purchase Price pursuant to Section
1.4.
(b) The Purchaser shall deliver to the Vendors and the Company certificates as to satisfaction of conditions pursuant to Section 7.2(p).
8.3
All actions to be taken and documents to be delivered at the Closing, shall
be
deemed to take place simultaneously and none of them shall be deemed to have
occurred or to have been delivered until all shall have occurred and been
delivered.
ARTICLE
IX
Termination
and Amendment
9.1
Termination.
This
Agreement may be terminated at any time prior to the Closing Date:
23
(d)
by
any
Party if the Closing shall not have occurred on or before July 1, 2006, unless
extended by agreement of the Parties hereto.
9.2
Effect
of Termination.
In the
event of a termination of this Agreement by any Party as provided in Section
9.1, this Agreement shall forthwith become void and there shall be no liability
or obligation on the part of the any Party or their respective officers,
directors, stockholders or affiliates, except with respect to Section 6.3,
this Section 9.2 and Article X; provided,however,
that
nothing herein shall relieve the Purchaser or the Company or the Vendors for
liability for any breach hereof.
9.3
Amendment
This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
9.4
Waiver.
The
failure of any party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of those
rights.
ARTICLE
X
Miscellaneous
10.1 Survival
of Representations and Warranties
The
representations and warranties in this Agreement and in any instrument delivered
pursuant to this Agreement shall survive the Closing Date for a period of 18
months. This Section 10.1 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Closing
Date.
10.2 Notices
and Addresses.
All
notices, offers, acceptance and any other acts under this Agreement shall be
in
writing, and shall be sufficiently given if delivered to the addressees in
person, by Federal Express or similar overnight next business day delivery,
or
by facsimile delivery followed by overnight next business day delivery, as
follows:
24
|
(a)
if to Vendors
|
Xx.
Xxx Xxxxx
41
Nahal Lacish St., Asdod
Israel
Xx.
Xxxx Xxxxx
00
Xxxxx Xx., X.X. Xxx 0000
Cesarea
00000
Xxxxxx
Mr.
Shlomo Xxxxxxxxxxx
00
Xxxxxxx Xx., Xxx-Xxxxxxxx
Xxxxxx
|
||
|
(b) if
to the Company, to:
|
IDO
Security 2000 Ltd.
6
Sapir St., Reshon-Lezion
Israel
|
||
|
(c
) if to Purchaser, to:
|
To
be provided at Closing. Unitil such date c/o Aboudi & Xxxxxxxxxx
|
||
|
With
a copy to:
|
Aboudi
& Xxxxxxxxxx
Law
offices
Xxxxxx
0, Xxxx Xxxx, Xxxxxx
Fax:
000-0-000-0000
|
or
to
such other address as any of them, by notice to the other may designate from
time to time. The transmission confirmation receipt from the sender’s facsimile
machine shall be evidence of successful facsimile delivery. Time shall be
counted from the date of transmission.
10.2
Interpretation.
When a
reference is made in this Agreement to an Article or a Section, such reference
shall be to an Article or a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words “include,” “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by
the words “without limitation.” The phrase “made available” in this Agreement
shall mean that the information referred to has been made available if requested
by the party to whom such information is to be made available. As used in this
Agreement, the term “subsidiary” of any person means another person, an amount
of the voting securities, other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its Board of Directors
or
other governing body (or, if there are no such voting interests, 50% or more
of
the equity interests of which) is owned directly or indirectly by such first
person, and the term “affiliate” shall have the meaning set forth in Rule 12b-2
promulgated under the Exchange Act. As used in this Agreement, “material adverse
change” or “material adverse effect” means, when used in connection with a
person, any change or effect (or any development that, insofar as can reasonably
be foreseen, is likely to result in any change or effect) that, individually
or
in the aggregate with any such other changes or effects, is materially adverse
to the business, prospects, assets (including intangible assets), financial
condition or results of operations of such person and its subsidiaries taken
as
a whole.
25
10.3
Counterparts.
This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement and shall become effective when said
counterparts have been signed by each of the parties and delivered to the other
parties, it being understood that all parties need not sign the same
counterpart.
10.4 Entire
Agreement; Third Party Beneficiaries.
This
Agreement (including the documents and the instruments referred to herein)
(a) constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) are not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
10.5 Governing
Law.
This
Agreement shall be governed and construed in accordance with the laws of the
State of Israel and, to the extent provided herein, the Nevada Revised Statutes
Chapter 78, without regard to any applicable conflicts of law.
10.6 Assignment.
Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by either of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties. Subject
to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors
and
assigns.
10.7 No
Remedy in Certain Circumstances.
Each
party agrees that, should any court or other competent authority hold any
provision of this Agreement to be null, void or unenforceable, or order any
party to take any action inconsistent herewith or not to take an action
consistent herewith or required hereby, the validity, legality and
enforceability of the remaining provisions and obligations contained or set
forth in this Agreement shall not in any way be affected or impaired thereby,
unless the foregoing inconsistent action or the failure to take an action
constitutes a material breach of this Agreement or makes this Agreement
impossible to perform, in which case this Agreement shall terminate pursuant
to
Article VIII hereof. Except as otherwise contemplated by this Agreement, to
the
extent that a party hereto took an action inconsistent herewith or failed to
take action consistent herewith or required hereby pursuant to an order or
judgment of a court or other competent authority, such party shall incur no
liability or obligation unless such party did not in good faith seek to resist
or object to the imposition or entering of such order or judgment.
26
IN
WITNESS WHEREOF, the Parties have caused this Agreement to be signed as of
the
date first written above.
| IDO SECURITY LIMITED | ||
| |
|
|
| By: | /s/ Xxxx Xxxxx | |
|
|
||
| President | ||
| THE MEDICAL EXCHANGE INC. | ||
| |
|
|
| By: | /s/ Xxxxxxx Xxxxxxx | |
|
|
||
| President | ||
List
Vendors
| /s/ Xxx Xxxxx | |||
|
Xxx
Xxxxx
|
|||
| /s/
Xxxx Xxxxx
Xxxx
Xxxxx
|
|||
| /s/
Xxxxxx Helbershtat
Xxxxxx
Helbershtat
|
|||
| /s/
Xxxxxx Xxxxxxxxxx
Aboudi
& Xxxxxxxxxx, Law Offices
|
27
Appendix
A
| Name
|
|
#
of Shares
of Company |
|
Purchase
Price
|
|
||
|
Xxx
Xxxxx
|
780
|
$
|
655,000
|
||||
|
Xxxx
Xxxxx
|
200
|
$
|
250,000
|
||||
|
Xxxxxx
Helbershtat
|
20
|
$
|
95,000
|
||||
|
Aboudi
& Xxxxxxxxxx
|
25
|
0
|
|||||
28
