PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the "Agreement") is made and entered into as of
the 18th day of November 2005, by and between Xxxxx X. Xxxxx, an individual,
Xxxxxxx Xxxxxxxx, an individual, (collectively hereinafter, the "Sellers" or
"Seller"), on the one hand, and Detto Technologies, Inc., a Delaware corporation
("DETTO") on the other hand. The Sellers and DETTO are referred to collectively
herein as the "Parties".
W I T N E S S E T H
WHEREAS, subject to the terms and conditions of this Agreement, DETTO and
Sellers desire for DETTO to purchase from Sellers, and Sellers desire to sell to
DETTO, all of the outstanding common stock of WhiteCanyon, Inc., a Utah
corporation ("WhiteCanyon") and Channel Access, Inc., a Utah corporation
("Channel Access"); and
WHEREAS, the Board of Directors of DETTO deems it desirable and in the
best interests of DETTO and its stockholders that DETTO purchase WhiteCanyon and
Channel Access for good and valuable consideration paid to the Sellers; and
WHEREAS, Sellers deem it desirable and in the best interests of Sellers
that Sellers sell the common shares of WhiteCanyon and Channel Access to DETTO;
and
WHEREAS, DETTO and Sellers desire to provide for certain undertakings,
conditions, representations, warranties, and covenants in connection with the
transactions contemplated by this Agreement; and
WHEREAS, Sellers and the Board of Directors of DETTO have approved and
adopted this Agreement, subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties hereto do hereby agree as follows:
SECTION 1
DEFINITIONS
1.1 "Agreement", "WhiteCanyon", "Channel Access", "DETTO", "DETTO Shares",
"Sellers", respectively, shall have the meanings defined in the foregoing
preamble and recitals to this Agreement.
1.2 "Closing Date" shall mean 6:00 p.m. (PST), November 18, 2005.
1.3 "Closing" shall mean the closing of the transactions contemplated by
this Agreement.
1.4 "Detto Stock" has the meaning set forth in Section 2.2(a) below.
1.5 "1933 Act" shall mean the Securities Act of 1933, as amended.
1.6 "1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
1.7 "SEC Documents" shall have the meaning defined in Section 3.5 hereof.
1.8 "Confidential information" shall have the meaning defined in Section
10.1 hereof.
1.9 "Governmental Entity" shall mean any local, state, federal or foreign
(i) court, (ii) government or (iii) governmental department, commission,
instrumentality, board, agency or authority, including the IRS and other taxing
authorities.
1.10 "Hazardous Material" shall mean any flammable, ignitable, corrosive,
reactive, radioactive or explosive substance or material, hazardous waste, toxic
substance or related material and any other substance or material defined or
designated as a hazardous or toxic substance, material or waste by any
Environmental Law currently in effect or as amended or promulgated in the
future.
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1.11 "Lien" shall mean all liens (including judgment and mechanics' liens,
regardless of whether liquidated), mortgages, assessments, security interests,
easements, claims, pledges, trusts (constructive or other), deeds of trust,
options or other charges, encumbrances or restrictions.
1.12 "Notes" or "Note" has the meaning set forth in Section 2.2(b) below.
1.13 "Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
1.14 "Permitted Lien" means (i) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the Ordinary Course of Business by operation of law
with respect to a liability that is not yet due or delinquent and (iii) any
minor imperfection of title or similar Lien which individually or in the
aggregate with other such Liens does not materially impair the value of the
property subject to such Lien or the use of such property in the conduct of a
business.
1.15 "Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
1.16 "Intellectual Property Rights" means all patents, patent
applications, trade names, logos, trademarks, service marks, trademark and
service xxxx registrations and applications, copyrights, copyright registrations
and applications, Internet domain names, 1-800 and 1-888 telephone numbers used
by WhiteCanyon and Channel Access, respectively, in the conduct of each of their
businesses, whether registered or not.
1.17 "Requisite Shareholder Approval" means the affirmative vote of the
holders of a majority of the issued and outstanding capital stock of WhiteCanyon
and Channel Access in favor of this Agreement.
1.18 "Securities" means the Detto Stock and any restricted shares of
DETTO's common stock issued to the Sellers upon conversion of the Notes.
1.19 "Tax" shall mean any federal, state, local or foreign income, gross
receipts, license, payroll, unemployment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), employment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated tax or other
tax, assessment or charge of any kind whatsoever, including, without limitation,
any interest, fine penalty or addition thereto, whether disputed or not.
1.20 "Tax Return" shall mean any return, declaration, report, claim for
refund or information, or statement relating to Taxes, and any exhibit,
schedule, attachment or amendment thereto.
SECTION 2
AGREEMENT FOR PURCHASE AND SALE OF
WHITECANYON AND CHANNEL ACCESS STOCK
2.1 Substantive Terms of the Purchase and Sale of WhiteCanyon and Channel
Access Stock.
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(a) Xxxxxxx Xxxxxxxx shall sell to DETTO one hundred percent (100%)
of the issued and outstanding common stock of WhiteCanyon (the "WhiteCanyon
Stock"), enabling DETTO to become the record and beneficial owner of said common
stock, which represents all of the issued and outstanding common stock of
WhiteCanyon.
(b) Xxxxx X. Xxxxx shall sell to DETTO one hundred percent (100%) of
the issued and outstanding common stock of Channel Access (the "Channel Access
Stock") , enabling DETTO to become the record and beneficial owner of said
common stock, which represents all of the issued and outstanding common stock of
Channel Access.
2.2 Consideration Paid by DETTO.
(a) On the Closing Date, DETTO shall pay to the Sellers one million
dollars ($1,000,000) payable by the issuance of restricted shares of DETTO's
common stock (the "Detto Stock). The "Price Per Share" for determining the
number of Detto Stock to be issued to Sellers shall be the ten (10) Market day
average prior to the Closing Date of the daily average bid and ask price of the
common stock of Detto. The Detto Stock shall be evidenced by two stock
certificates. One certificate shall be issued in favor of Xxxxxxx Xxxxxxxx for
seventy percent (70%) of the Detto Stock and the other certificate shall be
issued in favor of Xxxxx X. Xxxxx for the remaining thirty percent (30%) of the
Detto Stock. The Common Stock shall be issued pursuant to an exemption from
registration under the 1933 Act and from registration under any and all
applicable state securities laws and the certificates representing the Common
Stock and the common stock issued upon conversion of the Common Stock shall bear
the restrictive legend set forth in Rule 144 of the Rules and Regulations of the
1933 Act and any appropriate legend required under applicable state securities
laws.
(b) On the Closing Date, DETTO shall also pay to the Sellers three
million dollars ($3,000,000), payable by the issuance of two Convertible Notes
(the "Notes" or individually the "Note") with a maturity date of 120 days from
the Closing date ("Note Maturity"). One Note shall be issued in favor of Xxxxxxx
Xxxxxxxx for $2,100,000 and the other Note shall be issued in favor of Xxxxx X.
Xxxxx (collectively "Holders") for $900,000. The Notes will bear interest at
three percent (3%) per annum and be convertible as set forth in the form of the
Notes attached hereto as Exhibit A. The Notes shall be delivered to the Sellers
on the Closing Date.
(c) DETTO will also pay to the Sellers additional payments based on
the results of WhiteCanyon and Channel Access as defined in the Employment
Agreement ("Earnout").
(d) Following the Closing Date, WhiteCanyon and Channel Access will
operate as independent subsidiaries ("Subsidiaries") of DETTO at least until all
of the cash and/or stock held in Escrow are fully distributed.
2.3 Stock in Escrow
(a) On the Closing Date, the Detto Stock will be placed in a
mutually agreed upon escrow account ("Escrow") for one hundred and twenty (120)
days after the Closing Date pursuant to an Escrow Agreement, in the form of
Exhibit B (the "Escrow Agreement") to be entered into by the Parties on or prior
to the Closing Date.
(b) The WhiteCanyon Stock and the Channel Access stock will also be
placed in Escrow for one hundred and twenty (120) days after the Closing Date
pursuant to the Escrow Agreement.
(c) The Parties shall each have the right to rescind this Agreement
if the Notes are either not fully paid or not fully converted per the terms of
the Notes within 120 days after the Closing Date. Should this Agreement be
rescinded, the Detto Stock shall be released from Escrow and returned to DETTO
and Sellers will cancel the Notes received as part of the purchase price for the
WhiteCanyon and Channel Access stock. Upon such rescission, all WhiteCanyon
stock and Channel Access stock will be returned to their respective previous
owners. Neither Party will have any additional rights, remedies, or obligations
as to the other if this Agreement is rescinded.
(d) The WhiteCanyon Stock and Channel Access Stock shall be released
from Escrow and delivered to DETTO if the Notes are paid in full or are
converted per the terms of the Notes on the date of conversion or full payment
of the Notes by DETTO.
(e) If the Notes are paid in full by DETTO or are converted per the
terms of the Notes, the Detto Stock shall remain in Escrow for twelve (12)
months after the Closing Date pursuant to the Sellers' indemnification
obligations under Section 8.8 of this Agreement.
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(f) No change will be made in the management, marketing contracts or
operating procedures of WhiteCanyon or Channel Access until the WhiteCanyon
Stock and Channel Access stock placed in Escrow has been fully distributed.
Until all of the WhiteCanyon Stock and Channel Access stock held in Escrow have
been fully distributed, no assets from the WhiteCanyon or Channel Access or any
of their subsidiaries, if any, can be transferred in or out, except in the
Ordinary Course of Business.
2.4 Repurchase Option. The Detto Stock shall also be subject to a
repurchase option. Sellers agree that DETTO may repurchase each Seller's
respective shares of the Detto Stock from the Sellers for a period of twenty
four (24) months after the Closing Date at $0.01 per share (the "Repurchase
Option"). DETTO's right to repurchase the Detto Stock from each Seller shall
lapse each month as to 1/24 of each Seller's respective shares of Detto Stock
over the twenty four month period after the Closing Date. The Parties shall
enter into a Repurchase Option Agreement as set forth in Exhibit D.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF DETTO
DETTO, in order to induce the Sellers to execute this Agreement and to
consummate the transactions contemplated herein, represents and warrants to
Sellers that the statements in this Section 3 are correct and complete as of the
date of this Agreement, except as set forth in the Disclosure Schedule. The
Disclosure Schedule will be arranged in paragraphs corresponding to the numbered
and lettered paragraphs contained in this Section 3.
3.1 Organization and Qualification. DETTO is a corporation duly organized,
validly existing, and in good standing under the laws of Delaware, with all
requisite power and authority to own its property and to carry on its business
as it is now being conducted. DETTO is duly qualified as a foreign corporation
and in good standing in each jurisdiction where the ownership, lease, or
operation of property or the conduct of business requires such qualification,
except where the failure to be in good standing or so qualified would not have a
material, adverse effect on the financial condition or business of DETTO.
3.2 Ownership of DETTO. DETTO is authorized to issue up to 100,000,000
common shares, no par value per share, of which approximately 20,000,000 are
currently issued and outstanding on September 30, 2005, and up to 20,000,000
preferred shares, $0.0001 par value per share of which there are no shares
outstanding.
3.3 Authorization and Validity. DETTO has the requisite power and is duly
authorized to execute and deliver and to carry out the terms of this Agreement.
The board of directors and stockholders of DETTO have taken all action required
by law, its Articles of Incorporation and Bylaws, both as amended, or otherwise
to authorize the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby, subject to the satisfaction or waiver
of the conditions precedent set forth in Section 8 of this Agreement. Assuming
this Agreement has been approved by all action necessary on the part of Sellers,
this Agreement is a valid and binding agreement of DETTO, enforceable in
accordance with its terms and conditions, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity.
3.4 No Defaults. DETTO is not in default under or in violation of any
provision of its Articles of Incorporation or Bylaws, both as amended. DETTO is
not in default under or in violation of any material provision of any indenture,
mortgage, deed of trust, lease, loan agreement, or other agreement or instrument
to which it is a party or by which it is bound or to which any of its is
subject, if such default would have a material, adverse effect on the financial
condition or business of DETTO. DETTO is not in violation of any statute, law,
ordinance, order, judgment, rule, regulation, permit, franchise, or other
approval or authorization of any court or governmental agency or body having
jurisdiction over it or any of its properties which, if enforced, would have a
material, adverse effect on the financial condition or business of DETTO.
Neither the execution and delivery of this Agreement, nor the consummation of
the transactions contemplated herein, will conflict with or result in a breach
of or constitute a default under any of the foregoing or result in the creation
of any lien, mortgage, pledge, charge, or encumbrance upon any asset of DETTO
and no consents or waivers thereunder are required to be obtained in connection
therewith in order to consummate the transactions contemplated by this
Agreement.
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3.5 SEC Documents; Financial Statements. As of the Closing, DETTO has
filed all reports, schedules, forms, statements and other documents required to
be filed by it with the SEC pursuant to the reporting requirements of the 1934
Act (all of the foregoing filed prior to the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
Documents"). As of their respective dates, the SEC Documents substantially
complied in all material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of their respective dates, the financial statements of DETTO
included in the SEC Documents substantially complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in substantial accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of DETTO as of the dates thereof and
the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of DETTO to the
Sellers which is not included in the SEC Documents, including, without
limitation, contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they are or were made, not misleading.
Neither DETTO nor any of its officers, directors, employees or agents has
provided the Sellers with any material, non-public information.
3.6 Absence of Certain Changes. Since the most recent filing by DETTO with
the SEC, there has been no material adverse change and no material adverse
development in the business, properties, operations, financial condition,
results of operations or prospects of DETTO. DETTO has not taken any steps, and
does not currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does DETTO have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings.
3.7 Documents. The copies of all agreements and other instruments that
have been delivered by DETTO to Sellers are true, correct, and complete copies
of such agreements and instruments and include all amendments thereto.
3.8 Disclosure. The representations and warranties made by DETTO herein
and in any schedule, statement, certificate, or document furnished or to be
furnished by DETTO to Sellers pursuant to the provisions hereof or in connection
with the transactions contemplated hereby, taken as a whole, do not and will not
as of their respective dates contain any untrue statements of a material fact,
or omit to state a material fact necessary to make the statements made not
misleading.
3.9 Due Diligence. DETTO has completed its due diligence and is satisfied
with the results.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, in order to induce DETTO to execute this Agreement and to
consummate the transactions contemplated herein, represents and warrants to
DETTO that the statements in this Section 4 are correct and complete as of the
date of this Agreement, except as set forth in the disclosure schedule
accompanying this Agreement (the "Disclosure Schedule"). The Disclosure Schedule
will be arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this Section 4. The representation and warranties made
in regards to WhiteCanyon in this Section are made by Xxxxxxx Xxxxxxxx only. The
representations and warranties made in regards to Channel Access in this Section
are made by Xxxxx X. Xxxxx only.
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4.1 Organization and Qualification. WhiteCanyon and Channel Access are
corporations duly organized, validly existing, and in good standing under the
laws of the State of Utah with all requisite power and authority to own its
property and assets and to carry on its business as it is now being conducted.
4.2 Ownership of WhiteCanyon and Channel Access Stock.
(a) WhiteCanyon is authorized to issue one class of stock, of up to
50,000 shares of common stock, no par value per share. At the date hereof, of
such authorized shares, 10,000 shares of common stock have been validly issued
and are outstanding, fully paid, and non-assessable. All 10,000 shares of
WhiteCanyon's issued and outstanding stock are solely held by shareholder
Xxxxxxx Xxxxxxxx. All of the shares of WhiteCanyon's common stock are owned of
record and beneficially by Xxxxxxx Xxxxxxxx, who has not granted any options,
warrants, or other securities exercisable or convertible into or any calls,
commitments, or agreements of any kind relating to any issued equity securities
of WhiteCanyon. There are no options, warrants, or other securities exercisable
or convertible into or any calls, commitments, or agreements of any kind
relating to any unissued equity securities of WhiteCanyon by or on behalf of
WhiteCanyon.
(b) Channel Access is authorized to issue one class of stock, of up
to 10,000 shares of common stock, no par value per share. At the date hereof, of
such authorized shares, 1,000 shares of common stock have been validly issued
and are outstanding, fully paid, and non-assessable. All 1,000 shares of Channel
Access' issued and outstanding stock are solely held by shareholder Xxxxx X.
Xxxxx. All of the shares of Channel Access' common stock are owned of record and
beneficially by Xxxxx X. Xxxxx, who has not granted any options, warrants, or
other securities exercisable or convertible into or any calls, commitments, or
agreements of any kind relating to any issued equity securities of Channel
Access. There are no options, warrants, or other securities exercisable or
convertible into or any calls, commitments, or agreements of any kind relating
to any unissued equity securities of Channel Access by or on behalf of Channel
Access.
4.3 Authorization and Validity. Each of the Sellers has the requisite
power and is duly authorized to execute and deliver and to carry out the terms
of this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Sellers, including any
necessary votes by shareholders, and no further action is required on the part
of Sellers to authorize this Agreement and the transactions contemplated hereby.
This Agreement is a valid and binding obligation of Sellers, enforceable in
accordance with its terms and conditions, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity. No shareholders have dissented from votes regarding the
transactions contemplated hereby.
4.4 No Conflicts. The execution and delivery by each of the Sellers of
this Agreement and the consummation of the transactions contemplated hereby do
not and will not conflict with or result in any violation of, or default under,
or give rise to a right of termination, cancellation, modification or
acceleration of any obligation or loss of any benefit (any such event, a
"Conflict") under (i) any provision of WhiteCanyon's or Channel Access"
Certificate of Incorporation or WhiteCanyon's or Channel Access' Bylaws, each as
currently in effect, (ii) any material mortgage, indenture, lease, contract,
covenant or other agreement, instrument or commitment, permit, concession,
franchise or license or any Transferred Contract (each a "Material Contract" and
collectively the "Material Contracts") to which each of the Sellers, WhiteCanyon
or Channel Access or any of their respective properties or assets is subject, or
(iii) any judgment or any order or decree issued by a Governmental Entity, or to
Seller's, WhiteCanyon's or Channel Access' knowledge, any other order or decree,
statute, law, ordinance, rule or regulation applicable to Sellers, WhiteCanyon
and Channel Access or any of their respective properties or assets (tangible and
intangible).
4.5 Consents. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity, or a party to
any material contract with Seller (so as not to trigger any Conflict) is
required by or with respect to Sellers, WhiteCanyon or Channel Access in
connection with the execution and delivery of this Agreement or any Ancillary
Agreement or the consummation of the transactions contemplated hereby.
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4.6 WhiteCanyon and Channel Access Financial Statements.
(a) WhiteCanyon's and Channel Access' financial statements (as
prepared by Sellers as the management of WhiteCanyon and Channel Access) for the
current fiscal years ending December 31, 2004 and 2003 and the results through
September 30, 2005 and any notes thereto, fairly and accurately present the
financial condition and the results of operations, income, expenses, assets,
liabilities, changes in shareholders' equity, and cash flows of WhiteCanyon and
Channel Access, consistent with the past practices of WhiteCanyon and Channel
Access (collectively, "the Financial Statements"). There has been no material
change in WhiteCanyon's and Channel Access' financial performance or statements
since September 30, 2005, outside of the normal course of business.
(b) WhiteCanyon and Channel Access financial statements are capable
of being examined and reported upon with an unqualified opinion expressed by an
independent public or certified public accountant and will comply with the
requirements and standards set forth in Regulation S-X, as promulgated and
adopted by the Securities and Exchange Commission.
(c) WhiteCanyon and Channel Access financial statements are
auditable for fiscal years 2004 and 2003 in the case of WhiteCanyon and for 2004
(inception to date) for Channel Access and can be prepared according to GAAP in
the United States of America.
4.7 Conduct and Transactions of WhiteCanyon and Channel Access. Since
inception, WhiteCanyon and Channel Access have conducted the operations of their
businesses consistent with past practice and used their best efforts to maintain
and preserve their properties, key employees, and relationships with customers
and suppliers. During the period from Closing Date until the date the Notes are
converted into restricted shares of DETTO's common stock or paid in lawful money
of United States in full by DETTO but no later than March 17, 2005, WhiteCanyon
and Channel Access will not:
(a) Incur any liabilities except to maintain their facilities and
assets in the Ordinary Course of Business;
(b) Declare or pay any dividends on any shares of capital stock or
make any other distribution of assets to the holders thereof, other than the
normal course of business;
(c) Issue, reissue, or sell, or issue options or rights to subscribe
to, or enter into any contract or commitment to issue, reissue, or sell, any
shares of capital stock or acquire or agree to acquire any shares of capital
stock;
(d) Amend their Articles of Incorporation or Bylaws or merge or
consolidate with or into any other corporation or sell all or substantially all
of their assets or change in any manner the rights of its capital stock or other
securities;
(e) Pay or incur any obligation or liability, direct or contingent,
except in the Ordinary Course of Business;
(f) Incur any indebtedness for borrowed money, assume, guarantee,
endorse, or otherwise become responsible for obligations of any other party, or
make loans or advances to any other party except in the Ordinary Course of
Business;
(g) Increase in any manner the compensation, direct or indirect, of
any of their officers or executive employees, other than the normal course of
business;
(h) Make any capital expenditures except in the Ordinary Course of
Business; or
(i) Enter into any agreements with respect to WhiteCanyon's or
Channel Access' intellectual property or with respect to the intellectual
property of any third party other than end-user license agreements in the
Ordinary Course of Business.
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4.8 Compensation Due Employees. As of the Closing Date, WhiteCanyon and
Channel Access will not have any outstanding liability for payment of wages,
payroll taxes, vacation pay (whether accrued or otherwise), salaries, bonuses,
pensions, contributions under any employee benefit plans or other compensation,
current or deferred, under any labor or employment contracts, whether oral or
written, based upon or accruing in respect of those services of employees of
WhiteCanyon and Channel Access that have been performed prior to the Closing
Date. As of the Closing Date, WhiteCanyon and Channel Access will not have any
unfunded, contingent or other liability under any defined benefits plan or any
other retirement or retirement-type plan, whether such plan(s) are to continue
or are thereupon terminated, except for the normal on-going obligations for
future contributions under such plan(s) not related, generally or specifically,
to the termination of such plan(s).
4.9 Union Agreements and Employment Agreements. WhiteCanyon and Channel
Access are not a party to any union agreements or any organized labor disputes.
Except for the employment agreements disclosed to DETTO in the Disclosure
Schedule, WhiteCanyon and Channel Access have no written or verbal employment
agreements with any of its employees.
4.10 Insurance. Each of the Sellers', WhiteCanyon's and Channel Access'
policies and binders are in full force and effect, all premiums with respect
thereto are currently paid, and such policies and binders are reasonably
believed to be adequate for the Business. Each of the Sellers, WhiteCanyon and
Channel Access is, and will be through the Closing Date, adequately insured with
responsible insurers against risks normally insured against by companies in
similar lines of business under similar circumstances. Each of the Sellers,
WhiteCanyon and Channel Access (i) have not failed to give any notice or present
any claim under any such policy or binder in due and timely fashion, (ii) have
not received notice of cancellation or non-renewal of any such policy or binder,
(iii) are not aware of any threatened or proposed cancellation or non-renewal of
any such policy or binder, (iv) have not received notice of any insurance
premiums which will be materially increased in the future, and (v) are not aware
of any insurance premiums which will be materially increased in the future.
There are no outstanding claims under any such policy which have gone unpaid for
more than 45 days, or as to which the insurer has disclaimed liability.
4.11 Inventories. The inventories and supplies of the business set forth
or reflected in the Financial Statements are at normal and adequate levels, and
of a type and quality, necessary for the continuation of the business in the
Ordinary Course of Business. The value at which inventories are carried on the
Financial Statements reflects the normal inventory valuation policy of
WhiteCanyon and Channel Access, on a basis consistent with that of preceding
period, of stating inventory at its lower of cost or market value, and,
consistent therewith, all non-current or obsolete inventory held by the
WhiteCanyon and Channel Access as of the Financial Statement has been valued at
its current market value on the Financial Statement.
4.12 Liabilities. Except (i) to the extent set forth or provided for in
the Financial Statements, or (ii) as set forth in the Disclosure Schedule, or
(iii) for current liabilities in the Ordinary Course of Business since the date
of the Financial Statements, as of the date hereof, WhiteCanyon and Channel
Access have no liabilities, whether accrued, absolute, contingent or otherwise,
whether due or to become due and whether the amounts thereof are readily
ascertainable or not, or any unrealized or anticipated losses from any
commitments of a contractual nature, including Taxes with respect to or based
upon the transaction or events occurring prior to the Closing.
4.13 Receivables. Receivables reflected on the December 31, 2004 Financial
Statements and all receivables arising subsequent to the date of the December
31, 2004 Financial Statements that have arisen in the Ordinary Course of
Business of WhiteCanyon and Channel Access, represent valid and enforceable
obligations due to Sellers, WhiteCanyon and Channel Access and the goods and
services sold and delivered that gave rise to such accounts were sold and
delivered in conformity with all applicable express and implied warranties,
purchase orders, agreements and specifications. To the knowledge of each of the
Sellers, such accounts receivable are subject to no valid defense, offset or
counterclaim, and to the knowledge of each of the Sellers, are fully collectible
within ninety (90) days after the Closing Date, except to the extent of the
allowance for doubtful accounts or unearned revenues reflected on the Financial
Statements.
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4.14 Material Contracts. There have been delivered or made available to
DETTO true and complete copies of all of the Material Contracts (and all
amendments, waivers or other modifications thereto). All of such Material
Contracts are in full force and effect, binding upon Sellers, WhiteCanyon and
Channel Access and to the knowledge of each of the Sellers, binding upon the
other parties thereto in accordance with their terms, and Sellers, WhiteCanyon
and Channel Access have paid in full or accrued all amounts now due thereunder
and has satisfied in full or provided for all of its liabilities and obligations
thereunder which are presently required to be satisfied or provided for, and is
not in default in any material respect under any of them, nor, to the best
knowledge of each of the Sellers, is any other party to any such contract or
other agreement in default thereunder, nor does any condition exist that with
notice or lapse of time or both would constitute a default in any material
respect there under. WhiteCanyon and Channel Access are not a party to any
written or oral leases, commitments, or any other agreements other than those
disclosed in the Disclosure Schedule or the Financial Statements.
4.15 Trademarks, Patents, License Agreements, Etc.
(a) True and complete copies of all documentation related to the
Intellectual Property Rights of WhiteCanyon and Channel Access have been
delivered to the DETTO heretofore.
(b) Except as described in the Disclosure Schedule, WhiteCanyon and
Channel Access each own exclusively and each have the exclusive and unrestricted
right to use their respective Intellectual Property Rights, and all renewals
therefore and claims for infringement thereof, and every trade secret, know-how,
process, discovery, development, design, technique, customer and supplier list,
promotional idea, marketing and purchasing strategy, computer program (including
source code), technical data, invention, process, confidential data and other
information (collectively herein, "Proprietary Information") required for or
incident to the design, development, manufacture, operation, sale and use of all
products and services sold or rendered or proposed to be sold or rendered by
WhiteCanyon and Channel Access, free and clear of any right, equity or claim of
others and without infringing upon or otherwise acting adversely to the right or
claimed right of any third party under or with respect to any of the Proprietary
Information. WhiteCanyon and Channel Access have each taken reasonable security
measures to protect the secrecy, confidentiality and value of all Proprietary
Information.
(c) Except as described in the Disclosure Schedule, (A) WhiteCanyon,
Channel Access and the Sellers have not sold, transferred, assigned, licensed,
restricted, encumbered or subjected to any Lien, any Intellectual Property
Rights or Proprietary Information or any interest therein, and (B) WhiteCanyon
and Channel Access are not obligated or under any liability whatever to make any
payments by way of royalties, fees or otherwise to any owner or licensor of, or
other claimant to, any Intellectual Property Rights or Proprietary Information.
No other Proprietary Information is necessary to permit WhiteCanyon's or Channel
Access' business to be conducted as now conducted or as heretofore or proposed
to be conducted. True and complete copies of all documentation related to the
Proprietary Information have been made available to DETTO heretofore.
(d) There are no claims or demands of any Person pertaining to, or
any actions that are pending or threatened, which challenge the rights of
WhiteCanyon or Channel Access in respect of each of their respective
Intellectual Property Rights or any Proprietary Information.
4.16 Internal Controls. Since inception:
(a) There have been no transactions except in accordance with the
general or specific authorization of management of WhiteCanyon and Channel
Access;
(b) WhiteCanyon and Channel Access have devised and maintained
systems of internal accounting controls and procedures (the "Internal Controls")
that were designed with the objective of providing reasonable assurance that (1)
WhiteCanyon and Channel Access transactions were properly authorized; (2)
WhiteCanyon and Channel Access assets were safeguarded against unauthorized or
improper use; and (3) WhiteCanyon and Channel Access transactions were properly
recorded and reported, all (i) to permit the preparation of WhiteCanyon and
Channel Access financial statements in conformity with generally accepted
accounting principles and (ii) to maintain accountability for assets and
expenses.
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(c) WhiteCanyon and Channel Access's chief executive officers have
evaluated WhiteCanyon and Channel Access Internal Controls, which evaluation
included a review of the controls' objectives and design and the controls'
implementation by WhiteCanyon and Channel Access and its management. In the
course of the Internal Controls' evaluation, WhiteCanyon and Channel Access
management sought to identify data errors, controls problems, or acts of fraud
and to confirm that appropriate corrective action, including process
improvements, were being undertaken. Among other matters, WhiteCanyon and
Channel Access has sought to determine whether there were any "significant
deficiencies" or "material weaknesses" in the Internal Controls, or whether
WhiteCanyon and Channel Access had identified any acts of fraud involving
personnel who had a significant role in the Internal Controls. For purposes of
this subsection, "significant deficiencies" means "reportable conditions"
(control issues that could have a significant adverse effect on the ability to
record, process, summarize and report financial data in the financial
statements) and "material weakness" means a particularly serious reportable
condition where the Internal Controls do not reduce to a relatively low level
the risk that misstatements caused by error or fraud may occur in amounts that
would be material in relation to WhiteCanyon and Channel Access Financial
Statements and not be detected within a timely period by employees in the normal
course of performing their assigned functions. WhiteCanyon and Channel Access
have also sought to deal with other Internal Controls matters in the evaluation
thereof, and, in each case if a problem were identified, WhiteCanyon and Channel
Access considered what revision, improvement and/or correction to make in accord
with their on-going procedures.
4.17 Corporate Records. The minute books of WhiteCanyon and Channel Access
contain true, complete, and accurate records of all meetings and other corporate
actions of its shareholders and Board of Directors. True, complete and accurate
copies of WhiteCanyon's and Channel Access' Articles of Incorporation, Bylaws,
minute books and stock records have been delivered to counsel for DETTO prior to
the Closing Date. The signatures appearing on all documents contained therein
are the true signatures of the persons purporting to have signed the same.
4.18 Litigation. Except (i) to the extent set forth or provided for in the
Financial Statements, or (ii) as set forth in the Disclosure Schedule, as of the
date hereof, WhiteCanyon and Channel Access have no actions, suits, proceedings,
orders, investigations, or claims (whether or not purportedly on behalf of
WhiteCanyon and Channel Access) pending against or affecting WhiteCanyon and
Channel Access at law or in equity or before or by any federal, state,
municipal, or other governmental department, commission, board, agency, or
instrumentality, domestic or foreign, nor has any such action, suit, proceeding,
or investigation been pending or threatened in writing during the 12-month
period preceding the date hereof, which, if adversely determined, would
materially and adversely affect the financial condition of WhiteCanyon and
Channel Access which seeks to prohibit, restrict, or delay the consummation of
the stock sale contemplated hereby. WhiteCanyon and Channel Access is not
operating under or subject to, or in default with respect to, any order, writ,
injunction, or decree of any court or federal, state, municipal, or other
governmental department, commission, board, agency, or instrumentality.
4.19 Taxes. Except as set forth on the Disclosure Schedule,
(a) All Tax Returns required to be filed through and including the
date hereof in connection with the operations of the WhiteCanyon and Channel
Access are true, complete and correct in all respects and have been properly and
timely filed and the WhiteCanyon and Channel Access have not requested any
extension of time within which to file any Tax Return, which Tax Return has not
since been filed. DETTO has heretofore been provided the opportunity to obtain
from WhiteCanyon and Channel Access true, correct and complete copies of each
Tax Return of WhiteCanyon and Channel Access with respect to the past five (5)
taxable years, and of all reports of, and communications from, any Governmental
Entities relating to such period. WhiteCanyon and Channel Access have disclosed
on their respective Federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of income Taxes for federal
income tax purposes within the meaning of Code Section 6662.
(b) All Taxes required to be paid or withheld and deposited through
and including the date hereof in connection with the operations of WhiteCanyon
and Channel Access have been duly and timely paid or deposited by WhiteCanyon
and Channel Access; WhiteCanyon and Channel Access have properly withheld or
collected all amounts required by law for income Taxes and employment Taxes
relating to its employees, creditors, independent contractors and other third
parties, and for Taxes on sales, and has properly and timely remitted such
withheld or collected amounts to the appropriate Governmental Entity; and
WhiteCanyon and Channel Access have no liabilities for any Taxes for any taxable
period ending prior to or coincident with the Closing Date.
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(c) WhiteCanyon and Channel Access have made adequate provision on
their respective books of account for all Taxes with respect to their respective
businesses, properties and operations through the date of the Financial
Statements.
(d) WhiteCanyon and Channel Access have not (A) had a tax deficiency
proposed, asserted or assessed against it, (B) executed any waiver of any
statute of limitations on the assessment or collection of any Taxes, or (C) been
delinquent in the payment of any Taxes.
(e) No Tax Return of WhiteCanyon or Channel Access has been audited
or the subject of other Action by any Governmental Entity. WhiteCanyon and
Channel Access have not received any notice from any Governmental Entity of any
pending examination or any proposed deficiency, addition, assessment, demand for
payment or adjustment relating to or affecting WhiteCanyon or Channel Access or
its assets or properties and the Shareholders have no reason to believe that any
Governmental Entity may assess (or threaten to assess) any Taxes for any periods
ending on or prior to the Closing Date.
4.20 Permits, Licenses, Etc. WhiteCanyon and Channel Access possess, and
are operating in material compliance with, all franchises, licenses, permits,
certificates, authorizations, rights and other approvals of Governmental
Entities necessary to conduct its business as currently conducted and as
proposed to be conducted (the "Permits") except where the failure to do so
possess or operate would not have a Material Adverse Effect. Each Permit has
been lawfully and validly issued, and no proceeding is pending or threatened
looking toward the revocation, suspension or limitation of any Permit. The
consummation of the transactions contemplated by this Agreement will not result
in the revocation, suspension or limitation of any Permit and no Permit will
require the consent of its issuing authority to or as a result of the
consummation of the transactions contemplated hereby.
4.21 Regulatory Filings. WhiteCanyon and Channel Access have made all
required registrations and filings with and submissions to all applicable
Governmental Entities relating to the operations of the WhiteCanyon and Channel
Access as currently conducted and as proposed to be conducted, including,
without limitation, all such applicable Governmental Entities having
jurisdiction over any matters pertaining to conservation or protection of the
environment, and the treatment, discharge, use, handling, storage or production,
or disposal of Hazardous Materials. All such registrations, filings and
submissions were in material compliance with all Legal Requirements (including
all Environmental Laws) and other requirements when filed, no material
deficiencies have been asserted by any such applicable Governmental Entities
with respect to such registrations, filings or submissions and no facts or
circumstances exist which would indicate that a material deficiency may be
asserted by any such authority with respect to any such registration, filing or
submission.
4.22 Hazardous Materials.
(a) No Hazardous Material (A) has been, to the knowledge of Sellers,
WhiteCanyon and Channel Access, released, placed, stored, generated, used,
manufactured, treated, deposited, spilled, discharged, released or disposed of
on or under any real property currently or previously owned or leased by
WhiteCanyon and Channel Access (or any property adjoining any such real
property), (B) is presently maintained, used, generated, or permitted to remain
in place by WhiteCanyon and Channel Access in violation of any applicable
Environmental Laws, (C) is required by any applicable Environmental Laws to be
eliminated, removed, treated or mitigated by WhiteCanyon and Channel Access,
given the nature of its present condition, location, nature, material or
maintenance, or (D) is of a type, location, material, nature or condition which
requires special notification to third parties by WhiteCanyon and Channel Access
under applicable environmental Laws or common law.
(b) No notice, citation, summons or order has been received by
Sellers, WhiteCanyon and Channel Access and no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened by any Governmental Entity, with respect to (A) any alleged violation
by WhiteCanyon and Channel Access of any Environmental Laws or (B) any alleged
failure by WhiteCanyon and Channel Access to have any environmental permit,
certificate, license, approval, registration or authorization required in
connection with its business or properties, or (C) any use, possession,
generation, treatment, storage, recycling, transportation, release or disposal
by or on behalf of WhiteCanyon and Channel Access of any Hazardous Material.
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(c) Sellers, WhiteCanyon and Channel Access have not received any
request for information, notice of claim, demand or notification that it is or
that indicates that it may be a "potentially responsible party" with respect to
any investigation or remediation of any threatened or actual release of any
Hazardous Material.
(d) To the knowledge Sellers, WhiteCanyon and Channel Access, have
no above-ground or underground storage tanks, whether or not in use, are or have
ever been located at any property currently owned or leased by the WhiteCanyon
and Channel Access.
(e) Sellers, WhiteCanyon and Channel Access have not released,
transported, or arranged for the transportation of any Hazardous Material from
any property currently or previously owned, operated or leased by WhiteCanyon
and Channel Access.
4.23 No Defaults. WhiteCanyon and Channel Access is not in default under
or in violation of any provision of its Articles of Incorporation or Bylaws,
both as amended. WhiteCanyon and Channel Access is not in default under or in
violation of any material provision of any indenture, mortgage, deed of trust,
lease, loan agreement, or other agreement or instrument to which it is a party
or by which it is bound or to which any of its assets are subject, if such
default would have a material, adverse effect on the financial condition or
business of WhiteCanyon and Channel Access. WhiteCanyon and Channel Access is
not in violation of any statute, law, ordinance, order, judgment, rule,
regulation, permit, franchise, or other approval or authorization of any court
or governmental agency or body having jurisdiction over it or any of its
properties which, if enforced, would have a material, adverse effect on the
financial condition or business of WhiteCanyon and Channel Access. Neither the
execution and delivery of this Agreement, nor the consummation of the
transactions contemplated herein, will conflict with or result in a breach of or
constitute a default under any of the foregoing or result in the creation of any
lien, mortgage, pledge, charge, or encumbrance upon any asset of WhiteCanyon and
Channel Access and no consents or waivers thereunder are required to be obtained
in connection therewith in order to consummate the transactions contemplated by
this Agreement.
4.24 Documents. The copies of all agreements and other instruments that
have been delivered by Sellers, WhiteCanyon and Channel Access to DETTO are
true, correct, and complete copies of such agreements and instruments and
include all amendments thereto.
4.25 Disclosure. The representations and warranties made by Sellers,
WhiteCanyon and Channel Access herein and in any schedule, statement,
certificate, or document furnished or to be furnished by WhiteCanyon and Channel
Access and/or either of Sellers to DETTO pursuant to the provisions hereof or in
connection with the transactions contemplated hereby taken as a whole do not and
will not as of their respective dates contain any untrue statements of a
material fact, or omit to state a material fact necessary to make the statements
made not misleading.
4.26 No Material Adverse Change. Each of the Sellers warrants and
represents that there has been no material change in the assets, holdings or
sources of revenue of WhiteCanyon and Channel Access which would adversely
affect their valuations since the time of the signing of the Memorandum of Terms
between the parties on October 13, 2005. Since December 31, 2004, WhiteCanyon
and Channel Access have not:
(a) incurred any indebtedness for borrowed money in excess of $1,000
in the aggregate:
(b) declared or paid any dividend or declared or made any other
distribution of any kind to its shareholders, or made any direct or indirect
redemption, retirement, purchase or other acquisition if any its corporate
interests or units other than the normal course of business;
(c) made any loan or advance to any of its members, officers,
managers, employees, consultants, agents or other representatives;
(d) made any payment or commitment to pay any severance or
termination pay to any of its officers, managers, employees, consultants, agents
or other representatives;
(e) entered into any lease (as lessor or lessee) other than
disclosed; sold, abandoned or made any other disposition of any of its assets or
properties; granted or suffered any encumbrances on any of its assets or
properties; entered into or amended any material contract or other material
agreement to which it is a party, or by or to which it or its assets or
properties are bound or subject, or pursuant to which it agrees to indemnify any
party or to refrain from competing with any party:
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(f) except for inventory or equipment acquired in the Ordinary
Course of Business, made any acquisition of all or any substantial part of the
assets, properties, capital stock or business of any other person;
(g) incurred any contingent liability as a guarantor or otherwise
with respect to the obligations of others, cancelled any material debt or claim
or waived any material right;
(h) incurred any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting its properties, assets or
business;
(i) subjected to or permitted a Lien (other than a Permitted Lien)
upon or otherwise encumbered any of its assets, tangible or intangible;
(j) discharged or satisfied any Lien other than a Lien securing, or
paid any obligation or liability other than, current liabilities shown on the
Financial Statements and current liabilities incurred since the Financial
Statements, in each case in the Ordinary Course of Business;
(k) made any change in its accounting methods or practices, credit
practices or collection policies;
(l) other than in the Ordinary Course of Business, made or suffered
any amendment or termination of any material contract, agreement, lease or
license to which it is a party;
(m) paid, or made any accrual or arrangement for payment of, any
increase in compensation, bonuses or special compensation of any kind to any
employee other than pursuant to an agreement disclosed on the Disclosure
Schedule or other than in the Ordinary Course of Business, or paid, or made any
accrual or arrangement for payment of, any increase in compensation, bonuses or
special compensation of any kind to any officer or director of WhiteCanyon or
Channel Access or any consultant to WhiteCanyon or Channel Access;
(n) made or agreed to make any charitable contributions or incurred
any nonbusiness expenses;
(o) changed or suffered change in any compensation plan or labor
agreement affecting any employee of WhiteCanyon or Channel Access otherwise than
to conform to legal requirements; or
(p) entered into any agreement or otherwise obligated itself to do
any of the foregoing.
4.27 Access to Information. To the extent reasonably required for the
purpose of this Definitive Agreement, the Selling Shareholders will cause DETTO,
its counsel, accountants, advisors, certain insurance brokers, lenders, and all
other reasonable representatives of DETTO ("Representatives") to have access,
during normal business hours, to all the properties, books, contracts, and
records of WhiteCanyon and Channel Access, and will cause to be furnished to
DETTO and its Representatives all such information concerning the affairs of
WhiteCanyon and Channel Access as DETTO or such Representatives may reasonably
request. DETTO and its Representatives shall have access to customers and
supplier of WhiteCanyon and Channel Access for the purpose of gaining
information.
4.28 Sellers Representation Regarding the Securities. Each of the Sellers
understands that the Securities are "restricted securities" and have not been
registered under the Securities Act or any applicable state securities law and
is acquiring the Securities as principal for its own account and not with a view
to or for distributing or reselling such Securities or any part thereof, has no
present intention of distributing any of such Securities and has no arrangement
or understanding with any other persons regarding the distribution of such
Securities (this representation and warranty not limiting such Seller's right to
sell the Securities pursuant to the Registration Statement or otherwise in
compliance with applicable federal and state securities laws). The Sellers are
acquiring the Notes hereunder in the ordinary course of its business. Such
Seller does not have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the Securities.
13
4.29 Sellers Status. At the time each of the Sellers receive any of the
Securities, each of the Sellers will be an "accredited investor" as defined in
Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act. Each
of the Sellers is not required to be registered as a broker-dealer under Section
15 of the 1934 Act.
4.30 Experience of Such Sellers. Each of the Sellers, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Each of the Sellers is able
to bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.
4.31 General Solicitation. Each of the Sellers is not receiving the
Securities as a result of any advertisement, article, notice or other
communication regarding the Notes published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
4.32 Disclosure of Information. The Sellers believes that they have each
received all the information each considers necessary or appropriate for
deciding whether to accept the Securities as consideration in this transaction.
Each of the Sellers further represent that they have each had an opportunity to
ask questions and receive answers from DETTO regarding the terms and conditions
of the Notes and the Securities. Such Seller has reviewed the Company's Annual
Report on Form 10K-SB for the fiscal year ended December 31, 2004 (the
"10K-SB"), including, without limitation, all of the Risk Factors set forth
therein. Each such Seller understands and accepts all of the Risk Factors in
connection with such Seller's investment in the Securities. In addition, each
Seller has reviewed and is aware of the information set forth in all SEC Reports
filed with the SEC since the filing of the 10K-SB. The foregoing, however, does
not limit or modify the representations and warranties of DETTO in Section 3 of
this Agreement or the right of the Sellers to rely thereon.
SECTION 5
INVESTIGATION; PRESS RELEASE
5.1 Investigation.
(a) DETTO acknowledges that it has conducted due diligence of
WhiteCanyon and Channel Access. In the event of termination of this Agreement,
DETTO will deliver to Sellers all documents, work papers, and other materials
and all copies thereof obtained by DETTO, or on its behalf, from WhiteCanyon and
Channel Access or Sellers, whether obtained before or after the execution
hereof, will not use, directly or indirectly, any confidential information
obtained from WhiteCanyon and Channel Access or Sellers hereunder or in
connection herewith, and will keep all such information confidential and not
used in any way detrimental to WhiteCanyon, Channel Access or Sellers except to
the extent the same is publicly disclosed by WhiteCanyon, Channel Access or
Sellers.
(b) Sellers acknowledge that they have made an investigation of
DETTO, which has included, among other things, the opportunity of discussions
with executive officers of DETTO, and its accountants, investment bankers, and
counsel. In the event of termination of this Agreement, Sellers will deliver to
DETTO all documents, work papers, and other materials and all copies thereof
obtained by either of them, or on behalf of either of them, from DETTO, whether
obtained before or after the execution hereof and will not use, directly or
indirectly, any confidential information obtained from DETTO hereunder or in
connection herewith, and will keep all such information confidential and not
used in any way detrimental to DETTO, except to the extent the same is publicly
disclosed by DETTO.
(c) Except in the event that any party hereto discovers in the
course of its respective investigation any breach of a representation or
warranty by the other party hereto and does not disclose it to such other party
prior to the Closing Date, no investigation pursuant to this Section 5.1 shall
affect or be deemed to modify any representation or warranty made by any party
hereto.
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5.2 Press Release. DETTO and Sellers shall agree with each other as to the
form and substance of any press releases and the filing of any documents with
any federal or state agency related to this Agreement and the transactions
contemplated hereby and shall consult with each other as to the form and
substance of other public disclosures related thereto; provided, however, that
nothing contained herein shall prohibit either party from making any disclosure
that its counsel deems necessary.
SECTION 6
BROKERAGE
6.1 Brokers and Finders. Neither DETTO nor Sellers, WhiteCanyon, Channel
Access or any of their respective officers, directors, employees, or agents,
have employed any broker, finder, or financial advisor or incurred any liability
for any fee or commissions in connection with initiating the transactions
contemplated herein. Each party hereto agrees to indemnify and hold the other
party harmless against or in respect of any other commissions, finder's fees, or
brokerage fees incurred or alleged to have been incurred with respect to
initiating the transactions contemplated herein as a result of any action of the
indemnifying party.
SECTION 7
CLOSING AGREEMENTS AND POST-CLOSING
7.1 Closing Agreements. On the Closing Date, the following activities
shall occur, the following agreements shall be executed and delivered, and the
respective parties thereto shall have performed all acts that are required by
the terms of such activities and agreements to have been performed
simultaneously with the execution and delivery thereof as of the Closing Date:
(a) Conditions to Obligation of DETTO. The obligation of DETTO to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 4
of this Agreement shall be true and correct in all material respects;
(ii) Sellers shall have delivered the certificates evidencing
the WhiteCanyon Stock and Channel Access Stock to Escrow;
(iii) No action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the right of DETTO to own the
capital stock of WhiteCanyon or Channel Access, or (D) affect adversely the
right of DETTO to own WhiteCanyon's or Channel Access' assets and to operate
such businesses (and no such injunction, judgment, order, decree, ruling, or
charge shall be in effect);
(iv) Xxxxxxx Xxxxxxxx shall individually execute an employment
agreement with DETTO, whereby he will have agreed to continue to act as a
consultant for a twenty four month period of time with a twelve month renewal
thereafter by mutual agreement and an agreement to not compete with DETTO,
WhiteCanyon and Channel Access for a period of twenty-four months from the Close
Date as defined in the form of Employment Agreement attached hereto as Exhibit
C.
(v) Xxxxx X. Xxxxx shall individually execute an employment
agreement with DETTO, whereby he will have agreed to continue to act as a
employee of Detto for a twenty four month period of time with a twelve month
renewal thereafter by mutual agreement and an agreement to not compete with
DETTO, WhiteCanyon and Channel Access for a period of twenty-four months from
the Close Date as defined in the form of Employment Agreement attached hereto as
Exhibit C;
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(vi) Certain employees of WhiteCanyon and Channel Access, to
be designated by DETTO, shall have signed agreements not to compete in any
business relating to the design, development, marketing or implementation of
data migration, synchronization disk cleaning or security software products or
services, and not to solicit employees of DETTO, WhiteCanyon or Channel Access
prior to the second anniversary of the Closing Date;
(vii) Certain employees of WhiteCanyon and Channel Access, to
be mutually agreed upon by DETTO and Sellers, shall have entered into at-will
employment arrangements with DETTO, upon proof of appropriate employment
authorization from the U.S. Immigration and Naturalization Service or the U.S.
Department of State reflecting a right to work in the United States, and subject
to and in compliance with DETTO's standard of human resources policies and
procedures;
(viii) Sellers shall have delivered to DETTO, duly executed by
Sellers, this Agreement;
(ix) Sellers shall have delivered to DETTO, duly executed by
Sellers, the Escrow Agreement;
(x) Sellers shall have delivered to DETTO, duly executed by
Sellers, the Repurchase Option Agreement;
(xi) Employment Agreement
(xii) Sellers shall have executed and delivered an assignment
of any and all leases to DETTO, if so requested by DETTO;
(xiii) DETTO shall have received a legal opinion from counsel
for Sellers covering such matters as DETTO may reasonably request;
(xiv) the Sellers, WhiteCanyon and Channel Access shall have
performed and complied with all of its covenants hereunder in all material
respects through the Closing;
(xv) all actions to be taken by Sellers, WhiteCanyon and
Channel Access in connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other documents required
to effect the transactions contemplated hereby will be satisfactory in form and
substance to DETTO; and
(xvi) each outstanding warrant, option, purchase right,
subscription right, conversion right, exchange right or other contract or
commitment that could require WhiteCanyon or Channel Access to issue, sell or
otherwise cause to become outstanding any of their capital stock shall have been
terminated as of the Closing Date and there will be no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to WhiteCanyon or Channel Access on or prior to the Closing Date.
DETTO may waive any condition specified in this Section 7.1(a) if they execute a
writing so stating at or prior to the Closing.
(b) Conditions to Obligation of Sellers. The obligation of Sellers
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3
of this Agreement shall be true and correct in all material respects;
(ii) this Agreement shall have received the requisite approval
of DETTO;
(iii) DETTO shall have delivered the certificates evidencing
the Detto Stock to Escrow;
(iv) DETTO shall have delivered the Convertible Notes to the
Sellers;
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(v) DETTO shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing; and
(vi) all actions to be taken by DETTO in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be satisfactory in form and substance to Sellers.
Sellers may waive any condition specified in Section 7.1(b) if they execute a
writing so stating at or prior to the Closing.
SECTION 8
COVENANTS AND AGREEMENTS
8.1 General. Each party hereto, at the request of another party hereto,
shall execute and deliver such other instruments and do and perform such other
acts and things as may be reasonably necessary or desirable for effecting
completely the consummation of this Agreement and the transactions contemplated
hereby.
8.2 Notices and Consents. The Sellers, WhiteCanyon and Channel Access will
give any notices (and will cause each of its Subsidiaries to give any notices)
to third parties, and will use its best efforts to obtain (and will cause each
of its Subsidiaries to use its best efforts to obtain) any third party consents,
that DETTO may request.
8.3 Regulatory Matters and Approvals. Each of the Parties will give any
notices to, make any filings with, and use its reasonable best efforts to obtain
any applicable authorizations, consents, and approvals of governments and
governmental agencies with respect to the transactions contemplated in this
Agreement.
8.4 Full Access. Following the Closing, Seller will afford DETTO, its
counsel and its accountants, reasonable access to the books, records and other
data, if any, relating to the acquired assets in Seller's, WhiteCanyon's or
Channel Access' possession with respect to periods prior to the Closing and the
right to make copies and extracts there from, to the extent that such access may
be reasonably required by DETTO in connection with: (i) the preparation of Tax
Returns; (ii) compliance with the requirements of any Governmental Entity; and
(iii) in connection with any actual or threatened action or proceeding by a
third party.
8.5 Representations and Warranties. All of the representations and
warranties of Sellers, WhiteCanyon and Channel Access contained in this
Agreement shall be true, correct and complete in all material respects on and as
of the date hereof and on and as of the Closing Date, as if made on and as of
the Closing Date (except to the extent any such representation or warranty
speaks as of a different date, in which case such representation or warranty
shall still be true, correct and complete as of such different date).
8.6. Notification; Updates to Disclosure Schedule.
(a) During the period between the date hereof and the Closing,
Sellers, WhiteCanyon or Channel Access shall promptly notify DETTO in writing of
the discovery by Sellers, WhiteCanyon or Channel Access of: (A) any event,
condition, fact or circumstance that occurred or existed on or prior to the date
of this Agreement and that caused or constitutes a breach of or inaccuracy in
any representation or warranty made by the Sellers, WhiteCanyon or Channel
Access in this Agreement; (B) any event, condition, fact or circumstance that
occurs, arises or exists after the date of this Agreement and that would cause
or constitute a breach of or inaccuracy in any representation or warranty made
by Sellers, WhiteCanyon or Channel Access in this Agreement; (C) any breach of
any covenant or obligation of Sellers, WhiteCanyon or Channel Access contained
in this Agreement; and (D) any event, condition, fact or circumstance that may
make the timely satisfaction of any of the conditions set forth in Section
7.1(a) impossible or unlikely.
17
(b) If any event, condition, fact or circumstance that is required
to be disclosed pursuant to this Section 8.6(a) requires any change in any
disclosure schedule hereunder, or if any such event, condition, fact or
circumstance would require such a change assuming the disclosure schedule were
dated as of the date of the occurrence, existence or discovery of such event,
condition, fact or circumstance, then Sellers, WhiteCanyon or Channel Access
shall promptly deliver to DETTO an update to the disclosure schedule (a "Sellers
Disclosure Schedule Update") specifying such change. No such Sellers Disclosure
Schedule Update shall be deemed to supplement or amend the disclosure schedule
for the purpose of (A) determining the accuracy of any of the representations
and warranties made by the Sellers in this Agreement as of the Closing, or (ii)
determining whether the conditions set forth in Section 7.1(a) have been
satisfied; provided, however that the Closing of the transaction contemplated by
this Agreement will be deemed a waiver by DETTO of any untrue representation or
warranty made by Sellers, if and to the extent such inaccuracy is fairly and
accurately disclosed in any of the Disclosure Schedules or any such Seller
Disclosure Schedule Update.
(c) During the period between the date hereof and the Closing, DETTO
shall promptly notify the Sellers, in writing, of the discovery by DETTO of: (A)
any event, condition, fact or circumstance that occurred or existed on or prior
to the date of this Agreement and that caused or constitutes a breach of or
inaccuracy in any representation or warranty made by DETTO in this Agreement;
(B) any event, condition, fact or circumstance that occurs, arises or exists
after the date of this Agreement and that would cause or constitute a breach of
or inaccuracy in any representation or warranty made by DETTO in this Agreement;
(C) any breach of any covenant or obligation of DETTO contained in this
Agreement; and (D) any event, condition, fact or circumstance that may make the
timely satisfaction of any of the conditions set forth in Section 7.1(b)
impossible or unlikely.
(d) If any event, condition, fact or circumstance that is required
to be disclosed pursuant to Section 8.6(c) requires any change in any disclosure
schedule hereunder, or if any such event, condition, fact or circumstance would
require such a change assuming the disclosure schedule were dated as of the date
of the occurrence, existence or discovery of such event, condition, fact or
circumstance, then DETTO shall promptly deliver to Sellers an update to the
disclosure schedule (a "Buyer Disclosure Schedule Update") specifying such
change. No such Buyer Disclosure Schedule Update shall be deemed to supplement
or amend the disclosure schedule for the purpose of (i) determining the accuracy
of any of the representations and warranties made by DETTO in this Agreement as
of the Closing, or (ii) determining whether the conditions set forth in Section
7.1(b) have been satisfied; provided, however that the Closing of the
transaction contemplated by this Agreement will be deemed a waiver by Sellers of
any untrue representation or warranty made by DETTO if and to the extent such
inaccuracy is fairly and accurately disclosed in any of the Disclosure Schedules
or any such Buyer Disclosure Schedule Update.
8.7 Exclusivity. Sellers, WhiteCanyon and Channel Access (including
WhiteCanyon's and Channel Access' officers, directors, members, shareholders,
agents, representatives or affiliates) will not solicit, initiate, or encourage
the submission of any proposal or offer from any Person relating to the
acquisition of all or substantially all of the capital stock or assets of
WhiteCanyon or Channel Access, if any (including any acquisition structured as a
merger, consolidation, or share exchange); provided, however, that the
WhiteCanyon and Channel Access, and their respective directors and officers will
remain free to participate in any discussions or negotiations regarding, furnish
any information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person to do or seek any of the
foregoing to the extent their fiduciary duties may require. The Sellers,
WhiteCanyon and Channel Access shall notify DETTO immediately if any Person
makes any proposal, offer, inquiry, or contact with respect to any of the
foregoing.
8.8 Indemnification.
(a) Each of Xxxxxxx Xxxxxxxx and Xxxxx X. Xxxxx jointly and
severally, up to their share of the Detto Stock ("Seller Indemnifying Party"),
shall indemnify and hold DETTO, its subsidiaries and each of their directors,
officers, shareholders, members, employees and agents (each, an "Buyer
Indemnified Party") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation ("Losses") that any such Buyer Indemnified Party may
suffer or incur as a result of or relating to any misrepresentation, breach or
inaccuracy, of any of the representations, warranties, covenants or agreements
made by the Sellers in this Agreement that arise during the period ending on the
date twelve (12) months after the Closing Date. If any action shall be brought
against any Buyer Indemnified Party in respect of which indemnity may be sought
pursuant to this Agreement, such Buyer Indemnified Party shall promptly notify
the Seller Indemnifying Party in writing, and the Seller Indemnifying Party
shall have the right to assume the defense thereof with counsel of its own
choosing. Any Buyer Indemnified Party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Buyer Indemnified
Party except to the extent that the employment thereof has been specifically
authorized by the Seller Indemnifying Party in writing, the Seller Indemnifying
Party has failed after a reasonable period of time to assume such defense and to
employ counsel or in such action there is, in the reasonable opinion of such
separate counsel, a material conflict on any material issue between the position
of the Seller Indemnifying Party and the position of such Buyer Indemnified
Party. The Seller Indemnifying Party will not be liable to any Buyer Indemnified
Party under this Section 8.8(a) for any settlement by a Buyer Indemnified Party
effected without the Seller Indemnifying Party's prior written consent, which
shall not be unreasonably withheld or delayed.
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(b) Limitation on Claims. In case any event shall occur which would
otherwise entitle a Party to assert a claim for indemnification pursuant to this
Section 8.8, no Losses shall be deemed to have been sustained by such Party to
the extent of (i) any tax savings realized by such Party with respect thereto,
or (ii) any proceeds received by such Party from any insurance policies with
respect thereto.
(c) The Buyer Indemnified Party's sole remedy for indemnification
under Section 8.8 during the twelve (12) months after the Closing Date against
Seller Indemnifying Party for Losses suffered or incurred as a result of or
relating to any nonfraudulent and/or nonwillful misrepresentations, breaches or
inaccuracies, as to any of the representations, warranties, covenants or
agreements made by the Sellers in this Agreement that arise during the period
ending on the date twelve (12) months shall be the Detto Stock.
8.9 Transfer Restrictions for Securities.
(a) The Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144, to DETTO or to
an Affiliate of Sellers, DETTO may require the transferor thereof to provide to
DETTO an opinion of counsel selected by the transferor and reasonably acceptable
to DETTO, the form and substance of which opinion shall be reasonably
satisfactory to DETTO, to the effect that such transfer does not require
registration of such transferred Securities under the Securities Act. As a
condition of transfer, any such transferee shall agree in writing to be bound by
the terms of this Agreement and shall have the rights of a Seller under this
Agreement.
(b) Sellers agree to the imprinting, so long as is required by this
Section 8.9(b), of a legend on any of the Securities in the following form:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH
THESE SECURITIES ARE [CONVERTIBLE]] HAVE BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF
COUNSEL TO THE TRANSFEROR REASONABLY ACCEPTABLE TO THE
COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY.
SECTION 9
ASSUMPTION AND EXCLUSION OF LIABILITIES
9.1 DETTO shall have no Liability whatever for any Liabilities of Sellers,
WhiteCanyon and Channel Access which are not specifically assumed in accordance
with the provisions of this Agreement and not set forth in the Disclosure
Schedule, and Sellers, WhiteCanyon and Channel Access shall retain, and shall be
responsible for paying, performing and discharging when due, all other
Liabilities and obligations of Sellers, WhiteCanyon and Channel Access relating
to the operation or conduct of the business or ownership of the assets prior to
the Closing Date including, without limitation:
19
(a) all Taxes imposed on or with respect to income now or hereafter
owed by Sellers, WhiteCanyon or Channel Access or attributable to the business
relating to any period, or any portion of any period, ending on or prior to the
Closing Date;
(b) all costs and expenses, including, without limitation,
professional fees and expenses incurred by Sellers, WhiteCanyon or Channel
Access relating to the transactions contemplated by this Agreement;
(c) all Liabilities based upon or arising out of a violation of any
law, rule or regulation by Sellers, WhiteCanyon or Channel Access on or prior to
the Closing Date;
(d) any Damages arising out of any Claim of a third party,
including, without limitation, any Liabilities arising out of (i) any violation
by Sellers, WhiteCanyon or Channel Access of any rights of third parties in
respect of any Intellectual Property, (ii) any violation by Sellers, WhiteCanyon
or Channel Access of any other Intellectual Property rights of any third parties
in connection with Seller's s, WhiteCanyon's or Channel Access' operation of
their businesses, and (iii) any express or implied representation, warranty,
agreement or guarantee made by Sellers, WhiteCanyon or Channel Access, or which
is imposed by operation of law, in connection with any products or goods sold by
Sellers, WhiteCanyon or Channel Access or any of its Affiliates or any services
performed by Sellers, WhiteCanyon or Channel Access or any of its Affiliates,
including, without limitation, any claim of a third party relating to the repair
or replacement of any such product or seeking recovery for tort claims, property
damage, consequential Damages, loss, lost revenue or income or personal injury;
(e) all Liabilities for any pension, payroll, severance and other
employee benefits or obligations with respect to any of WhiteCanyon's or Channel
Access' employees for all periods during their employment with Seller.
SECTION 10
CONFIDENTIALITY
10.1 DETTO acknowledges that its principals have, and will, acquire
information and materials from Sellers and/or WhiteCanyon and Channel Access and
knowledge about the technology, business, products, strategies, customers,
clients and suppliers of WhiteCanyon and Channel Access and that all such
information, materials and knowledge acquired, are and will be trade secrets and
confidential and proprietary information of WhiteCanyon and Channel Access
(collectively, such acquired information, materials, and knowledge are the
"Confidential Information"). DETTO, itself, and behalf of its principals,
covenants to hold such Confidential Information in strict confidence, not to
disclose it to others or use it in any way, commercially or otherwise, except in
connection with the transactions contemplated by this Agreement and not to allow
any unauthorized person access to such Confidential Information.
10.2 The Confidential Information disclosed by the Sellers and/or
WhiteCanyon and Channel Access to DETTO shall remain the property of the
disclosing party.
10.3 DETTO, and its principals, shall maintain in secrecy all Confidential
Information disclosed to them by Sellers and/or WhiteCanyon and Channel Access
using not less than reasonable care. DETTO, and its principals, shall not use or
disclose in any manner to any third party any Confidential Information without
the express written consent of the Sellers unless or until the Confidential
Information is:
(a) publicly available or otherwise in the public domain; or
(b) rightfully obtained by any third party without restriction; or
(c) disclosed by Sellers and/or WhiteCanyon and Channel Access
without restriction pursuant to judicial action, or government regulations or
other requirements.
20
10.4 The obligations of DETTO under Sections 10.1, 10.2, and 10.3 of this
Agreement shall expire upon three years from the date hereof as to Confidential
Information consisting of commercial and financial information and three years
from the date hereof as to Confidential Information consisting of technical
information. For this purpose, technical information shall include without
limitation all developments, inventions, innovations, designs, discoveries,
trade secrets and know-how, whether or not patentable or copyrightable.
SECTION 11
NATURE AND SURVIVAL OF REPRESENTATIONS, ETC.
11.1 All statements contained in any certificate or other instrument
delivered by or on behalf of DETTO or Sellers pursuant to this Agreement or in
connection with the transactions contemplated hereby shall be deemed
representations and warranties by such party. All representations and warranties
and agreements made by DETTO or Sellers, WhiteCanyon or Channel Access in this
Agreement or pursuant hereto shall survive the Closing Date hereunder until the
expiration of the 12th month following the Closing Date.
SECTION 12
TERMINATION
12.1 Termination of Agreement. Any of the Parties may terminate this
Agreement with the prior authorization of its board of directors (whether before
or after stockholder approval) as provided below:
(a) the Parties may terminate this Agreement by mutual written
consent at any time prior to the Closing Date;
(b) DETTO may terminate this Agreement by giving written notice to
the Sellers, WhiteCanyon or Channel Access at any time prior to the Closing Date
(i) in the event Sellers, WhiteCanyon or Channel Access have breached any
material representation, warranty, or covenant contained in this Agreement in
any material respect, the DETTO has notified Sellers, WhiteCanyon and Channel
Access of the breach, and the breach has continued without cure for a period of
10 days after the notice of breach or (B) if the Closing shall not have occurred
on or before November 30, 2005, by reason of the failure of any condition
precedent under Section 7.1(a) hereof (unless the failure results primarily from
DETTO breaching any representation, warranty, or covenant contained in this
Agreement).
13.2 Effect of Termination. If any Party terminates this Agreement
pursuant to Section 12.1(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach).
SECTION 13
MISCELLANEOUS
13.1 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if written and delivered in person or sent
by registered mail, postage prepaid, addressed as follows:
If to Xxxxxxx Xxxxxxxx and/or WhiteCanyon, Inc.
WhiteCanyon, Inc.: 000 Xxxx Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
To Xxxxx X. Xxxxx and/or Channel Channel Access, Inc.
Access, Inc.: 000 Xxxx 0000 Xxxxx
Xxxx, Xxxx 00000
21
To Detto Technologies, Inc.: Detto Technologies, Inc.
00000 XX 00xx Xxxxxx, Xxxxx 00
Xxxxxxxx, Xxxxxxxxxx 00000
or such other address as shall be furnished in writing by the appropriate
person, and any such notice or communication shall not be deemed to have been
duly given unless and until it actually is received by the intended recipient.
13.2 Time of the Essence. Time shall be of the essence of this Agreement.
13.3 Costs. Each party will bear the costs and expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby, except
Detto will bear the audit costs for fiscal years ending 2003, 2004 and 2005.
13.4 Cancellation of Agreement. In the event that this Agreement is
canceled by mutual agreement of the parties neither Sellers, WhiteCanyon,
Channel Access nor DETTO shall be entitled to any damages, fees, costs, or other
consideration.
13.5 Entire Agreement and Amendment. This Agreement and documents
delivered at the Closing Date hereunder contain the entire agreement between the
parties hereto with respect to the transactions contemplated by this Agreement
and supersedes all other agreements, written or oral, with respect thereto. This
Agreement may be amended or modified in whole or in part, and any rights
hereunder may be waived, only by an agreement in writing, duly and validly
executed in the same manner as this Agreement or by the party against whom the
waiver would be asserted. The waiver of any right hereunder shall be effective
only with respect to the matter specifically waived and shall not act as a
continuing waiver unless it so states by its terms.
13.6 Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed to constitute an original and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other party.
13.7 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Washington, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively in
the state and federal courts sitting in the City of Seattle, Washington. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of Seattle, Washington for the adjudication
of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to the
enforcement of any of the Transaction Documents), and hereby irrevocably waives,
and agrees not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is improper or inconvenient venue for such proceeding. Each
party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
The parties hereby waive all rights to a trial by jury.
22
13.8 Attorneys' Fees and Costs. In the event any party to this Agreement
shall be required to initiate legal proceedings to enforce performance of any
term or condition of this Agreement, including, but not limited to, the
interpretation of any term or provision hereof, the payment of moneys or the
enjoining of any action prohibited hereunder, the prevailing party shall be
entitled to recover such sums, in addition to any other damages or compensation
received, as will reimburse the prevailing party for reasonable attorneys' fees
and court costs incurred on account thereof (including, without limitation, the
costs of any appeal) notwithstanding the nature of the claim or cause of action
asserted by the prevailing party.
13.9 Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
personal representatives, successors, and assigns, as the case may be. No Party
may assign either this Agreement or any of its rights, interests, or obligations
hereunder without the prior written approval of the other Parties.
13.10 Access to Counsel. Each party hereto acknowledges that each has had
access to legal counsel of his or its own choice and has obtained such advice
therefrom, if any, as such party has deemed necessary and sufficient prior to
the execution hereof. Each party hereto acknowledges that the drafting of this
Agreement has been a joint effort and any ambiguities or interpretative issues
that may arise from and after the execution hereof shall not be decided in favor
or, or against, any party hereto because the language reflecting any such
ambiguities or issues may have been drafted by any specific party or his or its
counsel.
13.11 Captions. The captions appearing in this Agreement are inserted for
convenience of reference only and shall not affect the interpretation of this
Agreement.
13.12 Public Disclosure. WhiteCanyon and Channel Access will not make any
disclosure of the existence of the Definitive Agreement without the written
consent of the DETTO unless required by law.
13.13 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
13.14 Incorporation of Exhibits and Schedules. The Exhibit and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
[SIGNATURES PAGE FOLLOW]
23
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
DETTO TECHNOLOGIES, INC.,
A Delaware Corporation
By:
-------------------------------------
Xxxxx X. Mana'o
Chief Executive Officer and Chairman
SELLERS:
-------------------------------------
Xxxxxxx Xxxxxxxx
-------------------------------------
Xxxxx X. Xxxxx
24
Exhibit A
FORM OF CONVERTIBLE NOTE
Exhibit B
FORM OF ESCROW AGREEMENT
Exhibit C
FORM OF EMPLOYMENT AGREEMENT
Exhibit D
FORM OF REPURCHASE OPTION AGREEMENT
DISCLOSURE SCHEDULES TO PURCHASE AGREEMENT
This Disclosure Schedule is the Disclosure Schedule referred to in the
Purchase Agreement (the "Disclosure Schedule"). Capitalized terms used but not
otherwise defined in this Disclosure Schedule have the meanings given to such
terms in the Purchase Agreement.
This Disclosure Schedule is qualified in its entirety by reference to
specific provisions of the Purchase Agreement and is not intended to constitute,
and shall not be construed as constituting, any representation or warranty of
the Sellers except as and to the extent expressly provided in the Purchase
Agreement.
Any matter disclosed pursuant to one section, provision or paragraph
hereof is deemed disclosed for all purposes of this Disclosure Schedule to the
extent the Purchase Agreement requires such disclosure. The section
cross-references to the Purchase Agreement are included for convenience only and
shall not be deemed a part of this Disclosure Schedule, to limit the disclosure
contained herein, or to affect the construction hereof.
The fact that any item of information is contained herein shall not be
construed to mean that such information is required to be disclosed in or by the
Purchase Agreement. The inclusion of any information herein shall not be used as
a basis for interpreting the term "material," "materially" or "materiality" in
the Purchase Agreement. The information contained herein is disclosed solely for
the purposes of the Purchase Agreement, and no information contained herein
shall be deemed to be an admission by any party hereto to any third party of any
matter whatsoever, including without limitation, any violation of law or breach
of any agreement.
