PURCHASE AGREEMENT
PURCHASE
AGREEMENT
THIS
STOCK PURCHASE AGREEMENT
(the
“Agreement”) is
made and entered into as of September 30, 2006, by and among Emerge
Capital Corp.,
a
Delaware corporation (the “Purchaser”),
Kipling
Holdings, Inc.,
a
Delaware corporation (the “Company”)
and
Xxxxxxx
X. Xxxxxxxx, an
individual and the holder of one hundred percent (100%) of the capital stock
of
the Company (the “Selling
Shareholder”).
RECITALS:
WHEREAS,
the
Selling Shareholder owns one hundred percent (100%) of the total issued and
outstanding capital stock of the Company, which such issued and outstanding
capital stock consists of One Million (1,000,000) shares of common stock
(“Common
Stock”),
par
value $0.001 per share (the Selling Shareholder’s Common Stock being sold
pursuant to the terms and conditions herein are referred to as the “Shares”);
and
WHEREAS,
as of
the date of this Agreement, the Selling Shareholder beneficially owns 82,279
shares of the Purchaser’s Series B preferred stock, par value $0.01 per share
(the “Emerge
Series B Preferred”),
of
which 69,935 shares are held directly by the Selling Shareholder, 12,344 shares
are held by the Selling Shareholder’s spouse (together with the Selling
Shareholder, the “Emerge
Shareholders”)
and
One Hundred Thousand (100,000) shares of Emerge Series B Preferred are currently
issued and outstanding; and
WHEREAS,
collectively, all of the shares of Emerge Series B Preferred are convertible,
at
the option of the holders of a majority of the shares of Emerge Series B
Preferred at any time after the date of issuance of such shares into ninety-five
percent (95%) of the outstanding capital stock of the Purchaser as of August
31,
2005, calculated on a fully diluted basis and after giving effect to such
conversion (the “Existing
Anti-Dilution Rights”);
and
WHEREAS,
the
Selling Shareholder desires to sell to the Purchaser, and the Purchaser desires
to purchase from the Selling Shareholder, the Shares in exchange for (a) the
Purchaser’s assumption of all of the liabilities of the Company, (b) the
Purchaser expanding the Existing Anti-Dilution Rights in favor of the Selling
Shareholder and (c) a nominal cash amount equal to the direct costs incurred
by
the Selling Shareholder in connection with this Agreement, on the terms and
conditions set forth herein.
NOW,
THEREFORE,
in
consideration of the mutual agreements, covenants and premises set forth herein
for certain other good and valuable consideration, the receipt and adequacy
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
AGREEMENT:
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1.
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STOCK
PURCHASE, PURCHASE PRICE AND RELATED TRANSACTIONS.
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1.1. Purchase
Price and Sale.
The Purchaser
shall acquire from the Selling Shareholder, and the Selling Shareholder shall
sell to the Purchaser, the Shares, which such Shares equal one hundred percent
(100%) of the total issued and outstanding capital stock of the Company in
exchange for the following consideration (collectively, the “Purchase
Price”):
(a)
the Purchaser’s assumption of all of the liabilities of the Company, including,
without limitation, those certain obligations of the Company under the
Transaction Documents set forth in Item 3.2 of the Disclosure Schedule attached
hereto (collectively, the “Liabilities”),
(b)
those certain Additional Anti-Dilution Rights set forth in Section 1.2 herein
below and (c) all legal and other costs and expenses incurred by the Selling
Shareholder in connection with this Agreement and the transactions contemplated
hereby.
1.2. Additional
Anti-Dilution Rights.
As
partial consideration for the acquisition by the Purchaser of all of the
outstanding capital stock of the Company in accordance with Section 1.1(b)
above, within five (5) business days following the Closing Date (as defined
below), the Selling Shareholder shall relinquish all Existing Anti-Dilution
Rights by delivering to the Purchaser those shares of Emerge Series B Preferred
held by the Emerge Shareholders and, in exchange therefore, the Purchaser shall
issue and deliver to the Emerge Shareholders, in the denominations set forth
opposite each Emerge Shareholder’s name on Schedule
A
attached
hereto, shares of its convertible Series D preferred stock, par value $0.01
per
share (the “Emerge
Series D Preferred”).
The
Emerge Series D Preferred shares will have substantially the same powers,
designations, preferences and relative, participating, optional and other
special rights as the Emerge Series B Preferred except that holders of Emerge
Series D Preferred will receive those additional anti-dilution rights (the
“Additional
Anti-Dilution Rights”)
set
forth in Section 4 of that certain Certificate of Designation of Emerge Series
D
Preferred Stock (the “Certificate
of Designation”)
in the
form attached hereto as Exhibit
A.
Upon
the satisfaction of those obligations set forth in Section 1.4.4 (a) and (b)
herein the Emerge Series B Preferred shall be cancelled and be of no further
force or effect.
1.3. Termination
of Additional Anti-Dilution Rights.
The
Additional Anti-Dilution Rights shall terminate in accordance with the terms
and
conditions set forth in the Certificate of Designation.
1.4. Closing
and Closing Date.
1.4.1. The
closing shall occur simultaneously with the execution of this Agreement (the
“Closing”).
The
date of Closing is referred to herein as the “Closing
Date”.
1.4.2. At
the
Closing: (a) the Selling Shareholder shall deliver to the Purchaser all original
stock certificates representing the Shares, together with stock powers duly
executed in blank and (b) the Company shall become a one hundred percent (100%)
wholly-owned subsidiary of the Purchaser.
1.4.3. Within
five (5) days following the execution of this Agreement: (a) the Purchaser
shall
file with the Secretary of State of the State of Delaware the Certificate of
Designation and receive confirmation from the State of the effectiveness of
such
Certificate of Designation.
1.4.4. Within
two (2) business days following the date upon which the Purchaser receives
confirmation from the State of Delaware of the effectiveness of the Certificate
of Designation: (a) the Purchaser shall deliver to the Selling Shareholder
original stock certificates representing the Emerge Series D Preferred in the
denominations set forth opposite each Emerge Shareholder’s name on Schedule
A
attached
hereto and (b) the Selling Shareholder shall deliver to the Purchaser all
original stock certificates representing the Emerge Series B Preferred for
cancellation in accordance with Section 1.2 above.
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2.
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ADDITIONAL
AGREEMENTS.
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2.1. Access
and Inspection.
The
Selling Shareholder has allowed the Purchaser and its authorized representatives
full access to all of the properties, books, contracts, commitments and records
of the Company, including, without limitation, the Transaction Documents set
forth in Item 3.2 of the Disclosure Schedule attached hereto, for the purpose
of
making such investigations as the Purchaser has reasonably requested in
connection with the transactions contemplated hereby.
2.2. Confidential
Treatment of Information.
From and
after the date hereof, the parties hereto shall and shall cause their
representatives to hold in confidence this Agreement (including the
Schedules hereto), all matters relating hereto and all data and information
obtained with respect to the other parties or their business, except such data
or information as is published or is a matter of public record, or as compelled
by legal process.
2.3. Public
Announcements.
The
parties will consult with each other before issuing any press releases or
otherwise making any public statement with respect to this Agreement or any
of
the transactions contemplated hereby and no party will issue any such press
release or make any such public statement without the prior written consent
of
the other parties, except as may be required by law or by the rules and
regulations of any governmental authority or securities exchange.
2.4. Additional
Documents.
The
parties hereto shall deliver any and all other instruments or documents required
to be delivered pursuant to, or necessary or proper in order to give effect
to,
the provisions of this Agreement, including, without limitation, all necessary
stock powers and such other instruments of transfer as may be necessary or
desirable to transfer ownership of the shares to the Purchaser and to consummate
the transactions contemplated by this Agreement.
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3.
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REPRESENTATIONS,
COVENANTS AND WARRANTIES OF SELLING SHAREHOLDER AND
THE
COMPANY.
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To
further induce the Purchaser to enter into this Agreement and to consummate
the
transactions contemplated hereby, the Selling Shareholder and the Company each
hereby jointly and severally represent and warrant to and covenant with the
Purchaser as follows:
3.1. Organization
and Qualification; Absence of Subsidiaries.
The Company
is a corporation duly organized and validly existing and in good standing under
the laws of the State of Delaware and has the requisite power and authority
to
own, lease and operate its properties and to carry on its business as it is
currently being conducted. the Company is duly qualified or licensed and is
in
good standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that would not, individually or in the aggregate, have
a
material adverse effect on the business, properties, assets, financial
condition, prospects or future business of the Company. the Company does not
have any subsidiaries nor an equity interest in any partnerships or joint
venture arrangements or other business entity.
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3.2. Shares;
Capitalization.
The
authorized capital stock of the Company consists of (a) Two Million (2,000,000)
shares of Common Stock, par value $0.001 per share, of which One Million
(1,000,000) shares are issued and outstanding and Five Hundred Thousand
(500,000) shares are held in escrow pursuant to that certain Escrow Shares
Escrow Agreement, date December 2, 2005 by and among the Company, Highgate
House
Funds, Ltd. and Gottbetter & Partners, LLP and (b) One Hundred Thousand
(100,000) shares of Series A preferred stock, par value $0.001 per share, of
which zero (0) shares are issued and outstanding. Zero (0) shares are held
in
the Company’s treasury. All Shares of Common Stock are owned of record, legally
and beneficially by the Selling Shareholder. The Shares are free and clear
of
any and all security interests, encumbrances, and rights of any kind or nature
whatsoever (collectively, “Encumbrances”),
and
upon delivery of the Shares hereunder, the Purchaser will acquire title thereto,
free and clear of any and all Encumbrances. Other than voting rights, redemption
rights and such other rights conferred by the Company’s charter documents, by
applicable Delaware statutes and as disclosed in Item 3.2 of the Disclosure
Schedule attached hereto, there exist no Securities Rights (as defined
herein) with respect to the Company’s Common Stock. All rights and powers
to vote the Shares are held exclusively by the Selling Shareholder. All of
the
Shares are validly issued, fully paid and nonassessable, were not issued in
violation of the terms of any agreement or other understanding, and were issued
in compliance with all applicable federal and state securities or “blue
sky”
laws
and regulations. The certificates representing the Shares to be delivered to
the
Purchaser at the Closing are, and the signatures and endorsements thereof or
stock powers relating thereto will be, valid and genuine. For the purposes
of
this section, “Securities
Rights”
means,
with respect to the Company’s Common Stock (whether issued or unissued), any
other securities convertible into or exchangeable for shares of Common Stock,
and includes all written or unwritten contractual rights relating to the
issuance, sale, assignment, transfer, purchase, redemption, conversion,
exchange, registration or voting of the Common Stock and all rights conferred
by
the Company’s governing documents and by any applicable agreement.
3.3. Liabilities
and Obligations.
Except
as set forth in Item 3.3 of the Disclosure Schedule attached hereto, the Company
has no debt, obligation or liability, absolute, fixed, contingent or otherwise,
of any nature whatsoever, whether due or to become due, including any unasserted
claim, whether incurred directly or by any predecessor thereto, and whether
arising out of any act, omission, transaction, circumstance, sale of goods
or
services, state of facts or other condition.
3.4. Certificate
of Incorporation and ByLaws.
The
Company has heretofore made available to the Purchaser a complete and correct
copy of the Certificate of Incorporation and the Bylaws of the Company Such
Certificate of Incorporation and Bylaws are in full force and
effect.
3.5. Financial
Statements.
The
Company has delivered to the Purchaser prior to Closing (a) the audited balance
sheet and supporting documents of the Company dated as of December 31, 2005
and
(b) the unaudited balance sheet and supporting documents of the Company dated
as
of June 30, 2006 (together, the “Company
Financial Statements”).
To
the Selling Shareholder’s knowledge, all of the Company Financial Statements are
accurate and complete in all material respects, and the dollar amount of each
line item in the Company Financial Statements is accurate in all material
respects.
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3.6. Absence
of Changes.
Since
June 30, 2006: (a) there has not been any material adverse change in the
Company’s business, condition, Assets, Liabilities, operations, financial
performance, net income or prospects (or in any aspect or portion thereof),
and
no event has occurred that might have a material adverse effect on the Company’s
business, condition, Assets, Liabilities, operations, financial performance,
net
income or prospects (or in any aspect or portion thereof, (b) the Company has
not changed any of its methods of accounting or accounting practices in any
respect and (c) the Company has not entered into any transaction or taken any
other action outside of the ordinary course of business of the Company.
3.7. Title
to Assets.
The
Company owns, leases or has the right to use all the properties and assets
used
in the conduct of its business or otherwise owned, leased, or used by the
Company and, with respect to contract rights, is a party to and enjoys the
right
to the benefits of all contracts, agreements and other arrangements used or
intended to be used by the Company or in or relating to the conduct of its
business (all such properties, assets and contract rights being the
“Assets”).
The
Company has good and marketable title to, or, in the case of any leased or
subleased Assets, valid and subsisting leasehold interests in, all the Assets,
free and clear of all Encumbrances.
3.8. Absence
of Litigation.
There is
no legal or administrative action or proceeding pending or, to the knowledge
of
the Selling Shareholder or the Company after reasonable investigation,
threatened against the Company or any property or Asset of the
Company.
3.9. Permits
and Licenses; Compliance.
To the
best knowledge of the Selling Shareholder and the Company, the Company is in
possession of all permits and licenses necessary for the conduct of its business
and, as of the date hereof, no suspension or cancellation of any such permits
or
licenses is pending or, to the knowledge of the Selling Shareholder and the
Company after reasonable investigation, threatened.
3.10. Authority
Relative to This Agreement.
The
Selling Shareholder and the Company have all necessary power and authority
to
execute and deliver this Agreement, to perform its obligations hereunder and
to
consummate the transactions contemplated by this Agreement. The Selling
Shareholder and the Company have full right and capacity to enter into this
Agreement and to carry out his/its obligations hereunder. The execution and
delivery of this Agreement by the Selling Shareholder and the Company, the
performance by the Selling Shareholder and the Company of their obligations
hereunder and the consummation by the Company of the transactions contemplated
by this Agreement have been duly authorized by all necessary action on the
part
of the Selling Shareholder and the Company as are necessary to authorize this
Agreement or to consummate the transactions contemplated by this Agreement.
This
Agreement has been duly and validly executed and delivered by the Selling
Shareholder and the Company and constitutes the legal, valid and binding
obligations of the Selling Shareholder and the Company, enforceable against
the
Selling Shareholder and the Company in accordance with its terms, except as
the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or other similar laws of general application affecting the enforcement of
creditors’ rights generally.
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3.11. Execution;
No Inconsistent Agreements; Etc.
Except
as set forth in Item 3.11 of the Disclosure Schedule attached hereto, the
execution and delivery of this Agreement by the Selling Shareholder and the
Company does not, and the consummation of the transactions contemplated hereby
will not, constitute a breach or violation of the Certificate of Incorporation
or Bylaws of the Company, or a default under any of the terms, conditions or
provisions of (or an act or omission that would give rise to any right of
termination, cancellation or acceleration under) any material note, bond,
mortgage, lease, indenture, agreement or obligation to which the Company is
a
party, pursuant to which the Company otherwise receives benefits, or to which
any of the properties of the Company is subject.
3.12. Corporate
Records.
The
statutory records, including the stock register and minute books of the Company,
fully reflect all issuances, transfers and redemptions of its capital stock,
correctly show and will correctly show the total number of shares of its capital
stock issued and outstanding on the date hereof and on the Closing Date, the
charter or other organizational documents and all amendments thereto, and its
Bylaws as amended and currently in force.
3.13. Compliance
With Law.
The
business and activities of the Company have at all times been conducted in
accordance with its Certificate of Incorporation and Bylaws and, to the best
knowledge of the Selling Shareholder and the Company, any applicable law,
regulation, ordinance, order, license, permit, rule, injunction or other
restriction or ruling of any court or administrative or governmental agency,
ministry or body.
3.14. Contingencies.
There
are no actions, suits, claims or proceedings pending, or, to the knowledge
of
the Selling Shareholder and the Company after reasonable investigation,
threatened against, by or affecting the Company in any court or before any
arbitrator or governmental agency. To the knowledge of the Selling Shareholder
and the Company after reasonable investigation, there is no valid basis upon
which any such action, suit, claim, or proceeding may be commenced or asserted
against the Company. There are no unsatisfied judgments against the Company
and
no consent decrees or similar agreements to which the Company is
subject.
3.15. Taxes.
The
Company has (a) filed all Tax (as defined herein) returns required to
be filed by it prior to the date of this Agreement, (b) paid or accrued all
Taxes shown to be due on such returns and paid all applicable ad
valorem
and
value added Taxes as are due, and (c) paid or accrued all Taxes for which a
notice of assessment or collection has been received. The Company has not
received from any governmental authority any written notice of proposed
adjustment, deficiency or underpayment of any Taxes, which notice has not been
satisfied by payment or been withdrawn, and there are no material claims that
have been asserted or threatened relating to such Taxes against the Company.
The
Company has withheld or collected and paid over to the appropriate governmental
authorities (or is properly holding for such payment) all Taxes required by
law to be withheld or collected, except for amounts which would not,
individually or in the aggregate, have a material adverse effect on the Company.
For purposes of this Agreement, “Tax”
or
“Taxes”
means
any and all taxes, fees, levies, duties, tariffs, imposts and other charges
of
any kind (together with any and all interest, penalties, additions to tax and
additional amounts imposed with respect thereto) imposed by any government
or taxing authority, including, without limitation: taxes or other charges
on or
with respect to income, franchises, windfall or other profits, gross receipts,
property, sales, use, capital stock, payroll, employment, social security,
workers’ compensation, unemployment compensation, or net worth; taxes or other
charges in the nature or excise, withholding, ad
valorem,
stamp,
transfer, value added or gains taxes, license, registration and documentation
fees, and custom duties, tariffs and similar charges.
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3.16. Full
Disclosure.
No
representation or warranty of the Selling Shareholder or the Company contained
in this Agreement, and none of the statements or information concerning the
Company contained in this Agreement and the Exhibits and Schedules hereto,
contains or will contain any untrue statement of a material fact nor will such
representations, warranties, covenants or statements taken as a whole omit
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.
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4.
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REPRESENTATIONS
AND WARRANTIES OF PURCHASER.
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To
induce
the Selling Shareholder and the Company to enter into this Agreement and to
consummate the transactions contemplated hereby, the Purchaser represents and
warrants to and covenants with the Selling Shareholder and the Company as
follows:
4.1. Organization.
The
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Purchaser is entitled to own or
lease its properties and to carry on its business as and in the places where
such business is now conducted, and the Purchaser is duly licensed and qualified
in all jurisdictions where the character of the property owned by it or the
nature of the business transacted by it makes such license or qualification
necessary, except where such failure would not result in a material adverse
effect on the Purchaser.
4.2. Execution;
No Inconsistent Agreements; Etc.
4.2.1. The
execution and delivery of this Agreement and the performance of the transactions
contemplated hereby have been prior to the Closing Date duly and validly
authorized and approved by the Purchaser and this Agreement is a valid and
binding agreement of the Purchaser, enforceable against the Purchaser in
accordance with its terms, except as such enforcement may be limited by
bankruptcy or similar laws affecting the enforcement of creditors' rights
generally, and the availability of equitable remedies.
4.2.2. The
execution and delivery of this Agreement by the Purchaser does not, and the
consummation of the transactions contemplated hereby will not, constitute a
breach or violation of the Certificate of Incorporation (as amended) or Bylaws
of the Purchaser, or a default under any of the terms, conditions or provisions
of (or an act or omission that would give rise to any right of termination,
cancellation or acceleration under) any material note, bond, mortgage,
lease, indenture, agreement or obligation to which Purchaser is a party,
pursuant to which it otherwise receives benefits, or by which any of its
properties may be bound.
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4.3. Full
Disclosure.
No
representation or warranty of the Purchaser contained in this Agreement, and
none of the statements or information concerning the Purchaser contained in
this
Agreement and the Schedules, contains or will contain any untrue statement
of a
material fact nor will such representations, warranties, covenants or statements
taken as a whole omit 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.
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5.
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CONDITIONS
TO CLOSING.
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5.1. Conditions
to Obligations of the Selling Shareholder and the
Company.
The
obligation of the Selling Shareholder and the Company to consummate the
transactions contemplated by this Agreement are subject to the satisfaction,
on
or before the Closing Date, of each of the following conditions, any or all
of
which may be waived in whole or in part by the joint agreement of the Selling
Shareholder and the Company:
5.1.1. No
action
or proceeding shall have been brought or threatened before any court or
administrative agency to prevent the consummation or to seek damages in a
material amount by reason of the transactions contemplated hereby, and no
governmental authority shall have asserted that the within transactions shall
constitute a violation of law or give rise to material liability on the part
of
the Purchaser; and
5.1.2. The
representations and warranties contained in Section 4 of this Agreement and
in any certificate, instrument, schedule, agreement or other writing delivered
by or on behalf of Purchaser in connection with the transactions contemplated
by
this Agreement shall be true and correct in all material respects (except for
representations and warranties which are by their terms qualified by
materiality, which shall be true, correct and complete in all
respects) when made and shall be deemed to be made again at and as of the
Closing Date and shall be true at and as of such time in all material respects
(except for representations and warranties which are by their terms qualified
by
materiality, which shall be true, correct and complete in all respects);
and
5.1.3. Purchaser
shall have performed and complied with all material agreements and conditions
required by this Agreement to be performed or complied with by Purchaser prior
to or on the Closing Date; and
5.1.4. The
Purchaser shall have executed this Agreement and delivered the same to the
Selling Shareholder and the Company.
5.2. Conditions
to Obligations of the Purchaser.
The
obligation of the Purchaser to consummate the transactions contemplated by
this
Agreement are subject to the satisfaction, on or before the Closing Date, of
each of the following conditions, any or all of which may be waived in whole
or
in part by the Purchaser:
5.2.1. No
action
or proceeding shall have been brought or threatened before any court or
administrative agency to prevent the consummation or to seek damages in a
material amount by reason of the transactions contemplated hereby, and no
governmental authority shall have asserted that the within transactions shall
constitute a violation of law or give rise to material liability on the part
of
the Selling Shareholder or the Company; and
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5.2.2. The
representations and warranties contained in Section 3 of this Agreement and
in any certificate, instrument, schedule, agreement or other writing delivered
by or on behalf of the Selling Shareholder and the Company in connection with
the transactions contemplated by this Agreement shall be true and correct in
all
material respects (except for representations and warranties which are by their
terms qualified by materiality, which shall be true, correct and complete in
all
respects) when made and shall be deemed to be made again at and as of the
Closing Date and shall be true at and as of such time in all material respects
(except for representations and warranties which are by their terms qualified
by
materiality, which shall be true, correct and complete in all respects); and
5.2.3. The
Selling Shareholder and the Company shall have performed and complied with
all
material agreements and conditions required by this Agreement to be performed
or
complied with by the Selling Shareholder and the Company prior to or on the
Closing Date; and
5.2.4. The
Selling Shareholder and the Company shall have executed this Agreement and
delivered the same to Purchaser; and
5.2.5. The
Company shall have provided to the Purchaser a certificate of good standing
from
the secretary of state from the state in which the Company
is
incorporated.
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6.
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INDEMNIFICATION.
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6.1. Indemnification
by the Selling Shareholder and the Company.
Subject
to Section 6.5, the Selling Shareholder and the Company (hereinafter
collectively called the “Indemnitor”) shall
jointly and severally defend, indemnify and hold harmless the Purchaser, its
direct and indirect parent corporations, subsidiaries (including the Company
after Closing) and affiliates, their officers, directors, employees and
agents (hereinafter collectively called “Indemnitees”) against
and in respect of any and all loss, damage, liability, fine, penalty, cost
and
expense, including reasonable attorneys' fees and amounts paid in settlement
(collectively, “Indemnified
Losses”),
suffered or incurred by any Indemnitee by reason of, or arising out
of:
(a) any
misrepresentation, breach of warranty or breach or non-fulfillment of any
agreement of the Selling Shareholder and the Company contained in this Agreement
or in any certificate, schedule, instrument or document delivered to the
Purchaser by or on behalf of the Selling Shareholder and the Company pursuant
to
the provisions of this Agreement (without regard to materiality thresholds
contained therein); and
(b) any
liabilities of the Company of any nature whatsoever (including tax
liability, penalties and interest), whether accrued, absolute, contingent or
otherwise, except for the Liabilities defined in Section 1.1 herein
above.
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6.2. Indemnification
by Purchaser.
Subject
to Section 6.5, Purchaser (hereinafter called the “Indemnitor”) shall
defend, indemnify and hold harmless the Selling Shareholder and the
Company (hereinafter called “Indemnitee”) against
and in respect of any and all loss, damage, liability, cost and expense,
including reasonable attorneys' fees and amounts paid in
settlement (collectively, “Indemnified
Losses”),
suffered or incurred by the Indemnitee by reason of or arising out of any
misrepresentation, breach of warranty or breach or non-fulfillment of any
material agreement of the Purchaser contained in this Agreement or in any other
certificate, schedule, instrument or document delivered to the Selling
Shareholder by or on behalf of the Purchaser pursuant to the provisions of
this
Agreement.
6.3. Defense
of Claims.
6.3.1. Should
any claim or action by a third party arise after the Closing Date for which
an
Indemnitor is liable under the terms of this Agreement, the Indemnitee shall
notify the Indemnitor within ten (10) days after such claim or action
arises and is known to Indemnitee, and shall give the Indemnitor a reasonable
opportunity to participate in any proceedings and to settle or defend any such
claim or action. The expenses of all proceedings, contests or lawsuits with
respect to such claims or actions shall be borne by the Indemnitor. If the
Indemnitor wishes to assume the defense of such claim or action, the Indemnitor
shall give written notice to the Indemnitees within ten (10) days after
notice from the Indemnitees of such claim or action, and the Indemnitor shall
thereafter assume the defense of any such claim or liability, through counsel
reasonably satisfactory to the Indemnitees, provided that Indemnitees may
participate in such defense at their own expense, and the Indemnitor shall,
in
any event, have the right to control the defense of the claim or
action.
6.3.2. If
the
Indemnitor shall not assume the defense of, or if after so assuming it shall
fail to defend, any such claim or action, the Indemnitees may defend against
any
such claim or action in such manner as they may deem appropriate and the
Indemnitees may settle such claim or litigation on such terms as they may deem
appropriate but subject to the Indemnitor's approval, such approval not to
be
unreasonably withheld; provided, however, that any such settlement shall be
deemed approved by the Indemnitor if the Indemnitor fails to object thereto,
by
written notice to the Indemnitees, within fifteen (15) days after the
Indemnitor's receipt of a written summary of such settlement. The Indemnitor
shall promptly reimburse the Indemnitees for the amount of all expenses, legal
and otherwise, incurred by the Indemnitees in connection with the defense and
settlement of such claim or action.
6.3.3. If
a
non-appealable judgment is rendered against any of the Indemnitees in any action
covered by the indemnification hereunder, or any lien attaches to any of the
assets of any of the Indemnitees, the Indemnitor shall immediately upon such
entry or attachment pay such judgment in full or discharge such lien unless,
at
the expense and direction of the Indemnitor, an appeal is taken under which
the
execution of the judgment or satisfaction of the lien is stayed. If and when
a
final judgment is rendered in any such action, the Indemnitor shall forthwith
pay such judgment or discharge such lien before any of the Indemnitees is
compelled to do so.
10
6.4. Waiver.
The
failure of any Indemnitee to give any notice or to take any action hereunder
shall not be deemed a waiver of any of the rights of such Indemnitee hereunder,
except to the extent that Indemnitor is actually prejudiced by such
failure.
6.5. Limitations
on Indemnification.
Notwithstanding anything to the contrary contained in this
Agreement:
6.5.1. Time
Limitation.
No party
shall be responsible hereunder for any Indemnified Loss unless the Indemnitee
shall have provided such party with written notice containing a reasonable
description of the claim, action or circumstances giving rise to such
Indemnified Loss within one (1) year after the Closing Date (the
“Indemnity
Notice Period”);
provided, however, that:
(a) there
shall be no limit on the Indemnity Notice Period for indemnity claims against
any party based on fraud, intentional breach or misrepresentation.
6.5.2. Indemnification
Basket.
No party
shall have any liability hereunder for Indemnified Losses after Closing, with
respect to a breach of the representations and warranties contained herein,
until the aggregate of all Indemnified Losses for which the Selling Shareholder
and the Company as a group or the Purchaser, as applicable, are responsible
under this Agreement exceeds Ten Thousand Dollars ($10,000)(the “Basket”);
provided that once this Basket amount is exceeded for the Selling Shareholder
and the Company as a group or the Purchaser, as applicable, the responsible
party or parties shall be responsible for all Indemnified Losses, from the
first
dollar as if such Basket never existed; and further provided that this the
6.5.2 shall not limit in any respect indemnity claims: (i) based upon
fraud, intentional breach or misrepresentation; (ii) arising from a breach
by the Indemnitor of any covenant contained in Sections 2.2 and 2.3 hereof;
or
(iii) arising from a breach by Selling Shareholder of any representation or
warranty contained in Section 3.2 hereto.
|
7.
|
MISCELLANEOUS.
|
7.1. Notices.
7.1.1. All
notices, requests, demands, or other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given upon
delivery if delivered in person or if sent by Federal Express (or similar
recognized overnight courier service) to the parties at the following
addresses:
|
If
to the Selling Shareholder:
|
Xxxxxxx
X. Xxxxxxxx
0000
Xxxxxxx Xxxx Xxxx
Xxxxxxx,
Xxxxx 00000
|
|
|
If
to the Company:
|
Kipling
Holdings, Inc.
000
Xxxxx Xxxx Xxx Xxxx, Xxxxx 000
Xxxxxxx,
Xxxxx 00000
Attention:
Xxxxxxx X. Xxxxxxxx
|
|
11
|
If
to Purchaser:
|
000
Xxxxx Xxxx Xxx Xxxx, Xxxxx 000
Xxxxxxx,
Xxxxx 00000
Attention:
Xxxxxxx X. Xxxxxxxx
|
|
|
With
a copy to:
|
Xxxxxxxxxxx
& Xxxxxxxx Xxxxxxxxx Xxxxxx LLP
000
Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxx
0000, Xxxxx Xxxxxx
Xxxxx,
Xxxxxxx 00000
Attention:
Xxxxxxx X. Xxxxxx, Esq.
|
|
7.1.2. Notices
may also be given in any other manner permitted by law, effective upon actual
receipt. Any party may change the address to which notices, requests, demands
or
other communications to such party shall be delivered or mailed by giving notice
thereof to the other parties hereto in the manner provided herein.
7.2. Survival.
The
representations, warranties, agreements and indemnifications of the parties
contained in this Agreement or in any writing delivered pursuant to the
provisions of this Agreement shall survive any investigation heretofore or
hereafter made by the parties and the consummation of the transactions
contemplated herein and shall continue in full force and effect and survive
after the Closing, subject to the limitations of Section 6.5.
7.3. Counterparts;
Interpretation.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed an original, and all of which shall constitute one instrument. This
Agreement supersedes all prior discussions and agreements between the parties
with respect to the subject matter hereof, and this Agreement contains the
sole
and entire agreement among the parties with respect to the matters covered
hereby. All Schedules and Exhibits hereto shall be deemed a part of this
Agreement. This Agreement shall not be altered or amended except by a written
instrument signed by or on behalf of all of the parties hereto. No ambiguity
in
any provision hereof shall be construed against a party by reason of the fact
it
was drafted by such party or its counsel. For purposes of this Agreement
“herein”,
“hereby”,
“hereof”,
“hereunder”,
“herewith”,
“hereafter”
and
“hereinafter”
and
similar words refer to this Agreement in its entirety, and not to any particular
subsection or paragraph. References to “including”
means
including without limiting the generality of any description preceding such
term. Nothing expressed or implied in this Agreement is intended, or shall
be
construed, to confer upon or give any person other than the parties hereto
any
rights or remedies under or by reason of this Agreement.
7.4. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Delaware. The parties hereto agree that any claim, suit, action or
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby shall be submitted for adjudication exclusively in any
state
or federal court sitting in Houston, Texas and each party hereto expressly
agrees to be bound by such selection of jurisdiction and venue for purposes
of
such adjudication. Each party (a) waives any objection which it may have that
such court is not a convenient forum for any such adjudication, (b) agrees
and
consents to the personal jurisdiction of such court with respect to any claim
or
dispute arising out of or relating to this Agreement or the transactions
contemplated hereby and (c) agrees that process issued out of such court or
in
accordance with the rules of practice of such court shall be properly served
if
served personally or served by certified mail or other form of substituted
service, as provided under the rules of practice of such court.
12
7.5. Partial
Invalidity and Severability.
All
rights and restrictions contained herein may be exercised and shall be
applicable and binding only to the extent that they do not violate any
applicable laws and are intended to be limited to the extent necessary to render
this Agreement legal, valid and enforceable. If any terms of this Agreement
not
essential to the commercial purpose of this Agreement shall be held to be
illegal, invalid or unenforceable by a court of competent jurisdiction, it
is
the intention of the parties that the remaining terms hereof shall constitute
their agreement with respect to the subject matter hereof and all such remaining
terms shall remain in full force and effect. To the extent legally permissible,
any illegal, invalid or unenforceable provision of this Agreement shall be
replaced by a valid provision which will implement the commercial purpose of
the
illegal, invalid or unenforceable provision.
7.6. Waiver.
Any term
or condition of this Agreement may be waived at any time by the party which
is
entitled to the benefit thereof, but only if such waiver is evidenced by a
writing signed by such party. No failure on the part of a party hereto to
exercise, and no delay in exercising, any right, power or remedy created
hereunder, shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or remedy by any such party preclude any other
future exercise thereof or the exercise of any other right, power or remedy.
No
waiver by any party hereto to any breach of or default in any term or condition
of this Agreement shall constitute a waiver of or assent to any succeeding
breach of or default in the same or any other term or condition
hereof.
7.7. Headings.
The
headings as to contents of particular paragraphs of this Agreement are inserted
for convenience only and shall not be construed as a part of this Agreement
or
as a limitation on the scope of any terms or provisions of this
Agreement.
7.8. Expenses.
Except
as otherwise expressly provided herein, all legal and other costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by each party as each party incurs such
expenses.
7.9. Finder's
Fees.
Purchaser represents to the Selling Shareholder and the Company that no broker,
agent, finder or other party has been retained by it in connection with the
transactions contemplated hereby and that no other fee or commission has been
agreed by the Purchaser to be paid for or on account of the transactions
contemplated hereby. The Selling Shareholder and the Company represent to the
Purchaser that no broker, agent, finder or other party has been retained by
the
Selling Shareholder or the Company in connection with the transactions
contemplated hereby and that no other fee or commission has been agreed by
the
Selling Shareholder or the Company to be paid for or on account of the
transactions contemplated hereby.
7.10. Gender.
Where
the context requires, the use of the singular form herein shall include the
plural, the use of the plural shall include the singular, and the use of any
gender shall include any and all genders.
13
7.11. Recitals.
The
Recitals to this Agreement, which the Parties acknowledge are true and correct,
are hereby incorporated herein by this reference.
7.12. Acceptance
by Fax.
This
Agreement shall be accepted, effective and binding, for all purposes, when
the
parties shall have signed and transmitted to each other, by telecopier or
otherwise, copies of the signature pages hereto.
7.13. Opportunity
to Hire Counsel; Role of Xxxxxxxxxxx & Xxxxxxxx Xxxxxxxxx Xxxxxx
LLP.
The
Selling Shareholder and the Company expressly acknowledge that they have been
advised and have been given an opportunity to hire counsel with respect to
this
Agreement and the transactions contemplated hereby, including but not limited
to, tax counsel. The Selling Shareholder and the Company further acknowledge
that the law firm of Xxxxxxxxxxx & Xxxxxxxx Xxxxxxxxx Xxxxxx LLP
did
not
provide them with any legal advice, including but not limited to, any tax advice
with respect to the transactions contemplated by this Agreement. The Selling
Shareholder and the Company further acknowledge that the law firm of Xxxxxxxxxxx
& Xxxxxxxx Xxxxxxxxx Xxxxxx LLP
has
solely represented the Purchaser in connection with this Agreement and the
transactions contemplated hereby and no other person.
7.14. Time
is of the Essence.
It is
understood and agreed among the parties hereto that time is of the essence
in
this Agreement and this applies to all terms and conditions contained
herein.
7.15. Attorneys’
Fees.
In the
event of any litigation or other proceeding arising out of or in connection
with
this Agreement, the prevailing party or parties shall be entitled to recover
its
or their reasonable attorneys’ fees and court costs from the other party or
parties.
7.16. NO
JURY TRIAL.
EACH OF THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT AND ANY DOCUMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT
FOR THE PARTIES' ACCEPTANCE OF THIS AGREEMENT.
[Remainder
of Page Intentionally Left Blank]
14
IN
WITNESS WHEREOF,
the
parties have executed this Stock Purchase Agreement or have caused this Stock
Purchase Agreement to be duly executed by their duly authorized officers as
of
the date first above written.
|
Purchaser:
|
|
|
By: /s/
Xxxx Xxxxxx
|
|
|
Name:
Xxxx Xxxxxx
|
|
|
Title:
Controller
|
|
|
Company:
|
|
|
Kipling
Holdings, Inc.
|
|
|
By: /s/
Xxxxxxx X. Xxxxxxxx
|
|
|
Name:
Xxxxxxx X. Xxxxxxxx
|
|
|
Title:
Chief Executive Officer
|
|
|
Selling
Shareholder:
|
|
|
Xxxxxxx
X. Xxxxxxxx, an Individual
|
|
|
By: /s/
Xxxxxxx X. Xxxxxxxx
|
|
|
Name:
Xxxxxxx X. Xxxxxxxx
|
|
15
DISCLOSURE
SCHEDULE
Item
3.2
On
December 2, 2005 the Company entered into that certain Securities Purchase
Agreement (“SPA”)
with
Highgate House Funds, Ltd. (“Highgate”
and
together with the Company, the “Parties”)
pursuant to which the Company issued and sold to Highgate Six Million Two
Hundred Twenty-Five Thousand Dollars ($6,225,000) of secured convertible
debentures (the “Debentures”),
due
December 1, 2010. In connection with the SPA and of even date therewith, the
Parties entered into (a) that certain Escrow Shares Escrow Agreement
(“ESEA”)
pursuant to which the Company issued and delivered 500,000 shares of Common
Stock which the Escrow Agent (as defined therein) shall distribute to Highgate
in the event Highgate exercises its right to conversion under the Debentures;
(b) that certain investor registration rights agreement (the “IRRA”)
pursuant to which the Company agreed to provide to Highgate certain registration
rights under the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder and other applicable state securities laws, (c) that
certain Security Agreement (“SA”),
pursuant to which the Company pledged certain Pledged Property (as such term
is
defined therein) to secure its Obligations (as such term is defined therein)
under the Debentures, the SPA, those certain Irrevocable Transfer Agent
Instructions (“ITAI”)
and
any other amounts owed to Highgate by the Company and (d) that certain warrant
(“Warrant”),
which
entitles Highgate to purchase 3,735,000 shares of Common Stock at any time
at an
exercise price of $0.01 (subject to certain adjustments set forth therein)
through December 1, 2010 and (e) that certain option (“Option”
and
together with the SPA, the Debentures, the ESEA, the IRRA, the SA, the ITAI
and
the Warrant, the “Transaction
Documents”)
pursuant to which Highgate may purchase 33,334 Units (each Unit consisting
of
ten (10) shares of Common Stock and one (1) share of Preferred Stock) at any
time at an exercise price of $1.10 per Unit through December 1, 2010.
Item
3.3
On
December 2, 2005 the Company entered into that certain Securities Purchase
Agreement with Highgate House Funds, Ltd. (“Highgate”)
pursuant to which the Company issued and sold to Highgate the principal amount
of Six Million Two Hundred Twenty-Five Thousand Dollars ($6,225,000) of secured
convertible debentures (the “Debentures”).
As of
September 30, 2006, the principal amount of the Debentures, plus accrued
interest, remains outstanding as is most recently reflected in the line item
entitled “Total Long Term Liabilities” on the Company’s unaudited Balance Sheet
dated as of June 30, 2006 and attached hereto as Exhibit
B.
Item
3.11
The
parties acknowledge that, in accordance with the Transaction Documents set
forth
in Item 3.2 in this Disclosure Schedule, the consent of Highgate is required
in
order to consummate this transaction, Therefore, the Company shall obtain the
written consent of Highgate, effective as of the date hereof.
16
SCHEDULE
A
Emerge
Series D Preferred Denominations
Name
of Series D Preferred Stockholder: Number
of Shares:
|
Name
of Series D Preferred Stockholder:
|
Number
of Shares:
|
|
|
Xxxxxxx
X. Xxxxxxxx
|
The
number of Series D Preferred shall be determined at such time
the
|
|
|
Purchaser
files that certain Certificate of
Designation in accordance with Section 1.4.3
herein.
|
||
|
|
||
|
Jan
Xxxxxx Xxxxxxxx
|
The
number of Series D Preferred shall be determined at such time the
Purchaser files that certain Certificate of Designation in accordance
with
Section 1.4.3 herein.
|
17
EXHIBIT
A
[FORM
OF
CERTIFICIATE OF DESIGNATION OF
THE
SERIES D PREFERRED STOCK OF THE PURCHASER]
A
- 1
EXHIBIT
B
B
- 1
B
- 2
