Exhibit 2.3
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (this "Agreement") made as of November 29,
2004, by and among EPIXTAR CORP. a Florida corporation ("Epixtar"), and the
Shareholders of INNOVATIVE MARKETING STRATEGIES, INC., a Florida corporation
(the "Acquired Company") executing this Agreement (the "Shareholders").
INTRODUCTION
WHEREAS, Epixtar is a corporation which, through its subsidiary, is
engaged in the contact center business;
WHEREAS, the Acquired Company is a corporation which is engaged in the
contact center business;
WHEREAS, the Shareholders own all the issued and outstanding shares of
the common stock, par value $1.00 per share of the Acquired Company (together,
the "Acquired Company Shares");
WHEREAS, Epixtar desires to acquire (the "Acquisition") all of the
Acquired Company Shares from the Shareholders with the result that the Acquired
Company shall become a wholly owned subsidiary of Epixtar or a Subsidiary of
Epixtar at the Closing Date, as hereinafter defined;
WHEREAS, the Shareholders desire to effect the aforesaid transaction;
and
WHEREAS, Epixtar has made advance payments in two (2) installments
aggregating Nine Hundred Thousand Dollars US (US $900,000), of which the first
was made to the Acquired Company for the benefit of the Shareholders, in the
amount of Six Hundred Thousand Dollars US (US $600,000.00) (the "Prior Note"),
and the second in the amount of Three Hundred Thousand Dollars US ($300,000.00),
of which both payments are evidenced by a newly executed note covering the
entire indebtedness in the principal amount of Nine Hundred Thousand Dollars
($900,000) (the "Advance Note"), the repayment of which is not guaranteed by the
Shareholders, but by the Acquired Company; however, the proceeds of the Advance
Note were never distributed or paid as a dividend to the Shareholders, but were
used for the benefit of, and promotion of the business of, the Acquired Company
to the benefit of the Acquired Company.
NOW, THEREFORE, in consideration of the premises, the parties hereto do
mutually agree as follows:
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ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the meanings indicated below:
"Acquired Group Companies or Acquired Company" shall refer to the
Acquired Company and the Acquired Subsidiary of the Acquired Company set forth
in Schedule 4.1.
"Acquired Subsidiary" shall refer to Innovative Marketing Strategies
International, Inc., a Philippines corporation.
"Advance Note" shall refer to a Note for the Nine Hundred Thousand
Dollars US (US $900,000.00) advanced to the Acquired Company for the benefit of
the Shareholders.
"Balance Sheet" shall refer to the reviewed consolidated balance sheet
of the Acquired Company at June 30, 2004.
"Balance Sheet Date" shall refer to June 30, 2004.
"Closing" shall refer to the consummation of the Acquisition or
Transactions.
"Closing Date" shall refer to January 3, 2005, the Closing Date.
"Closing Payment" shall refer to Three Hundred Thousand Dollars US
($300,000.00).
"Consents" shall refer to the consents or approval of any third party
to prevent the termination of any material contract including a lease which may
arise as a result of the transaction.
"Contract" shall mean any agreement, contract, license, indenture,
lease, mortgage, plan, arrangement, commitment or instrument including any note
or other debt instrument (whether written or oral to the extent any of the
foregoing represent binding obligations of a party).
"Enforceability Exceptions" shall mean the extent to which
enforceability of an obligation may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by principles of equity regarding the
availability of remedies.
"Epixtar Group Companies" shall mean Epixtar and each of its present
and future, if any, Subsidiaries.
"Epixtar Note" shall refer to the promissory note payable by Epixtar to
the order of the Shareholders substantially in the form delivered and accepted
at the Closing in the amount of (a) the Purchase Price less (b) the sum of the
amount of the Advance Note, the Tax Settlement Liability and DDM Liability, both
as hereinafter defined, and the Closing Payment, which Epixtar Note shall be (i)
secured by the Acquired Company Shares and "Secured Interest" as hereafter
defined and (ii) payable in an installments on the first (1st) business day of
each month for the succeeding twenty-four (24) months following the Closing.
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"GAAP" shall refer to generally accepted accounting principles as
applicable in the United States.
"Knowledge" shall mean with respect to a party's awareness of the
presence or absence of a fact, event or condition (a) actual knowledge plus, if
different, (b) the knowledge that would be obtained if such party conducted
itself faithfully and exercised a sound discretion in the management of his own
affairs.
"Laws" shall mean all laws, common laws, rules, regulations,
ordinances, codes, judgments, injunctions, orders, decrees, permits, policies
and other requirements of the United States or the Philippines and other
jurisdictions to which Epixtar, the Acquired Company and the Acquired
Subsidiary, as applicable, is subject, including all foreign and local
governments and all agencies and instrumentalities thereof, including any
administrative agencies or administrative body created by any such government.
"Liabilities" shall mean any indebtedness, liability, claim, loss,
damage, deficiency, obligation or responsibility, fixed or unfixed, xxxxxx or
inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute,
contingent or otherwise, whether or not of a kind required by generally accepted
accounting principles to be set forth on a financial statement including the
notes thereto.
"Lien" shall mean any mortgage, pledge, lien, encumbrance, charge,
adverse claim or restriction of any kind affecting title or resulting in an
encumbrance against property, real or personal, tangible or intangible, or a
security interest of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any third party option or
other agreement to sell and any filing of or agreement to give, any financing
statement under the Uniform Commercial Code (or equivalent statute) of any
jurisdiction.
"Material Adverse Effect" or "Material Adverse Change" with respect to
the Acquired Company means a change which would in the aggregate have material
adverse effect on the assets, liabilities (whether absolute, accrued, contingent
or otherwise), condition (financial or otherwise), results of operations,
business or future business or financial condition on a consolidated or combined
basis of such party.
"Organizational Documents" (i) the articles or certificates of
incorporation and bylaws of a corporation; (ii) the partnership agreement and
any statement of partnership of a general partnership; (iii) the limited
partnership agreement and certificate of limited partnership of a limited
partnership; (iv) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of any other Person; and (v) any
amendment to any of the foregoing.
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"Percentage Ownership" shall refer to the percent of Acquired Company
Shares owned by a Shareholder as of the Closing Date: (a) Xxxxx Xxxxxxxxx 70%,
(b) Xxxx Xxxxxx 21.1% and (c) Xxxxx Xxxxxxxx 8.9%.
"Person" shall mean any natural person, corporation, division of a
corporation, partnership, trust, joint venture, association, company, estate,
unincorporated organization or governmental entity.
"Prior Note" shall refer to the Promissory Note dated ____, 2004 in the
principal amount of Six Hundred Thousand Dollars US ($600,000.00) executed by
Acquired Company in favor of Epixtar, which note is superseded by the Advance
Note and which is no longer in effect.
"Purchase Price" shall be Seven Million Five Hundred Thousand Dollars
($7,500,000.00).
"Secured Interest" shall refer to a security interest in all assets of
the Epixtar Companies subordinate to present security interests, any future
institutional financing, accounts receivable financing and private and public
debt securities.
"Subsidiary" shall refer to any corporation or other entities in which
a Person has a majority interest or which is otherwise controlled by such
Person.
"Transactions" shall mean the transactions contemplated by this
Agreement.
ARTICLE II
THE ACQUISITION; RELATED TRANSACTIONS
2.1 The Acquisition. Upon the closing of this Agreement, (i) the
Shareholders agree to sell, and Epixtar agrees to purchase, all of the Acquired
Company Shares in exchange for the execution and delivery of the Epixtar Note
and the Closing Payment on the Closing Date. Upon execution of this Agreement,
Epixtar shall pay to Acquired Company Three Hundred Thousand Dollars US
($300,000.00), for the benefit of the Shareholders, pursuant to the Advance
Note, and Acquired Company shall execute and deliver to Epixtar the Advance Note
in the principal amount of Nine Hundred Thousand Dollars US ($900,000.00). In
connection with Epixtar's payment of the Three Hundred Thousand Dollars US
($300,000.00) and the execution and delivery by Acquired Company of the Advance
Note, (i) Epixtar agrees to return to Acquired Company and the Shareholders all
documentation in connection with the Prior Note, including without limitation
the originally executed Prior Note and the originally executed guarantees of the
payment and performance of the Prior Note, all marked as "Cancelled", and (ii)
Epixtar acknowledges and agrees that the Three Hundred Thousand Dollars US
($300,000.00) proceeds of the Advance Note extended to Acquired Company shall be
used for any suitable business purpose of the Acquired Company and that such
repayment shall not be in contravention of Section 6.2(vii) hereof.
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2.2 Direct Payment of Purchase Price. The Purchase Price shall be paid
directly to each shareholder based on each of their pro rata portions of the
Purchase Price and in accordance with instructions given by each of them at
closing.
2.3 Share Delivery. Simultaneously with receipt of the Purchase Price,
the Shareholders shall deliver the Acquired Company Shares to Frontier Partners,
a division of Frontier Investment Banking Corporation, c/o Xxxxxxx X. Xxxxxx,
Esq., 0000 Xxxxxxx Xxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxxx Xxxx, Xxxxxx 00000, the
escrow agent, pursuant to a Pledge and Escrow Agreement dated of even date
herewith ("Stock Escrow Agreement") which is attached for purposes of escrowing
the Acquired Company Shares. The Stock Escrow Agreement is to secure, in part,
Epixtar's obligations pursuant to the Epixtar Note and to perfect that security
interest in the Acquired Company Shares. The Acquired Shares shall remain in
escrow subject to that agreement.
2.4 Additional Collateral for the Payment of the Epixtar Note. The
payment of, and full performance by Epixtar under, the Epixtar Note shall be
secured by the pledge of the Acquired Company Shares and secured and
cross-collateralized by the Secured Interest, pursuant to a Pledge and Security
Agreement dated of even date herewith and attached hereto.
2.5 Specific Guarantee of Payment of Outstanding Debt/Satisfaction of
Acquired Company Obligations. Notwithstanding anything to the contrary contained
herein and in addition to those liabilities of the Acquired Company that, by
operation of law shall be assumed by Epixtar as a result of the purchase of the
Acquired Company Shares, Epixtar shall, and hereby does, guarantee the payment
for the following:
(a) Effective at the Closing, Epixtar guarantees the outstanding debt
of the Acquired Company pursuant to the tax liability of the Acquired Company
owed to the Internal Revenue Service ("IRS") pursuant to a tax settlement
agreement (the "Tax Settlement Liability") and liability to DDM Consulting, Inc.
("DDM Liability") as described in Schedule_2.4, including without limitation
those set forth on Schedule 2.4. In connection with the Tax Settlement
Liability, Epixtar specifically agrees to indemnify Xxxxx Xxxxxxxxx and Xxxx
Xxxxxx pursuant to Section 6.2 hereto and hereby agrees to pay such Tax
Settlement Liability as soon after the Closing Date as is practicable, but in
any event, no later than February 1, 2005.
(i) At the Closing, Epixtar shall receive documentation satisfactory to
it and its counsel that all loans made directly or indirectly by any
Shareholder, or any officer of the Acquired Company or Acquired
Subsidiary or any of his or their affiliates or related parties made to
Acquired Company or Acquired Subsidiary are forgiven or settled
("Satisfaction Documentation").
(ii) At the Closing, Epixtar shall receive documentation satisfactory
to it and counsel that the lease or leases relating to its executive
officers in Kansas is terminated without liability to the Acquired
Company. Such documentation will provide all property at this premises
shall be transferred to landlord except for all software and corporate
records and landlord will preserve such records and the computers
containing software and records and freely permit access to Acquired
Company or Epixtar for removal of such records and software ("Lease
Documents").
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(b) Epixtar shall guarantee, pay directly, indemnify or otherwise
reimburse each of the Shareholders who have executed and delivered a
guarantee on behalf of, or in furtherance of the business of, Acquired
Company, including without limitation the following guarantees or
guarantees of agreements between Acquired Company and the following:
(i) Xxxxx Fargo,
(ii) Ohio Valley Development authorities,
(iii)SER Dialers,
(iv) National Network Group, and
(v) Leases for facilities in Pittsburgh.
2.6 Purchase Price Adjustment.
(a) The parties acknowledge that Acquired Company should have
sufficient funds to pay (i) Acquired Company's payrolls and payroll tax
liabilities that are due as of the Closing Date ("Current Payroll") and (ii)
checks and/or debits of Acquired Company issued and outstanding on the Closing
Date ("Float"). Accordingly, in the event that Acquired Company has funds on the
Closing Date in excess the amount required to pay Acquired Company's Current
Payroll and Float, then an amount equal to the difference between Acquired
Company's cash position on the Closing Date, on the one hand, and Acquired
Company's Current Payroll and Float, on the other hand, shall be added to the
next succeeding payment to the Shareholders pursuant to the Epixtar Note.
However, in the event that Acquired Company has insufficient funds on the
Closing Date to pay Acquired Company's Current Payroll and Float, then an amount
equal to the difference between Acquired Company's cash position on the Closing
Date, on the one hand, and Acquired Company's Current Payroll and Float, on the
other hand, shall be deducted from the next succeeding payment to the
Shareholders pursuant to the Epixtar Note (collectively, the "Post Closing
Adjustment").
(b) Before taking any steps to make the Post Closing Adjustment,
Epixtar shall prepare a statement detailing the Post Closing Adjustment. If at
least two (2) of the Shareholders object to Epixtar in writing within thirty
(30) days of the date of receipt of such statement, then the Post Closing
Adjustment shall be determined by Arbitration (as hereinafter defined) pursuant
to Section 7.1 hereof. If there is no such objection, Epixtar shall make such
Post Closing Adjustment to the next succeeding payment pursuant to the Epixtar
Note.
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2.7 Closing. The closing of the Acquisition (the "Closing") shall be
held on January 3, 2005 but in any event no later than January 15, 2005, or such
date as the parties may agree. The Closing shall be held at such place and at
such time as the parties may mutually agree. The date upon which such Closing
shall occur shall be referred to as the "Closing Date."
2.8 Epixtar Subsidiary. At any time, Epixtar may designate a wholly
owned subsidiary (the "Epixtar Subsidiary") to acquire the Acquired Company
Shares as long as such subsidiary executes the Escrow Agreement and Security
Agreement. Epixtar shall remain fully liable hereunder.
2.8 Xxxxxxx Xxxxxx Employment. Simultaneously with the execution of
this Agreement, Xxxxxxx Xxxxxx shall execute an Employment Agreement with an
Epixtar Subsidiary and shall begin his employment with said subsidiary,
effective December 1, 2004.
ARTICLE III
CLOSING DELIVERIES
3.1 Acquired Company, Acquired Subsidiary and Shareholders' Closing
Deliveries. At the Closing, in addition to documents referred to elsewhere
herein, the Shareholders have executed and delivered, or caused to be executed
and delivered from the Acquired Company or other third parties, to Epixtar:
(1) Stock Certificates owned by the Shareholders representing all
of Acquired Company Shares duly transferred to Epixtar in
accordance with applicable law, which certificates shall be
canceled and reissued in the name of Epixtar, and deposited
with the Escrow Agent;
(2) Minute books and corporate records of the Acquired Company and
the Acquired Subsidiary, including the share certificates for
the Acquired Subsidiary from the Acquired Company;
(3) Any required Consents
(4) Certificate of officers of the Acquired Company affirming the
accuracy of representations, as of the Closing Date;
(5) Those opinions or assurances, if any, as requested by Epixtar
that the Acquired Subsidiary is and shall remain a subsidiary
of the Acquired Company upon the completion of these
Transactions, is duly incorporated or organized, validly
existing, and is in good standing under the laws of its
jurisdiction of incorporation or organization, with full
corporate or other entity power and authority to conduct its
business as it is now being conducted and to own or use the
properties and assets that it purports to own or use and that
is material to its business.
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(6) Resignations of all officers and directors of the Acquired
Company and its Acquired Subsidiary;
(7) Lease Documents
(8) Certified resolutions of the board of directors of the
Acquired Company appointing nominees of Epixtar as directors
as well as other officers of each of the Acquired Group
Companies;
(9) Executed original from each Shareholder of a Non-Compete
Agreement;
(10) Payment instructions from each shareholder for the payment of
the Epixtar Note;
(11) Satisfaction Documents;
(12) Any Finder's Fee Agreement(s) entered into by the shareholders
and the amount paid thereunder by the Acquired Company or
Acquired Subsidiary on behalf of the Shareholders;
(13) Any further documentation that may be required by our
investment bankers, lending institutions or outside counsel as
the case may be; and
(14) Agreements of each former subsidiary of the Acquired Company
which was disposed of prior to closing providing that such
subsidiary preserve all of its records at a convenient
location in the Kansas City Metropolitan area and to make such
records available to Epixtar and its accountants and
representatives for inspection and copying for a period of
five (5) years after closing;
3.2 Closing Deliveries to the Acquired Company and Shareholders. At the
Closing, in addition to documents referred to elsewhere, Epixtar executed and
delivered to the Shareholders:
(1) The Epixtar Note;
(2) The Security Agreement;
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(3) A Stock Escrow Agreement;
(4) Resolutions of the Board of Directors of Epixtar approving the
Transactions;
(5) The payment of the Closing Payment by wire transfer or delivery of
immediately available funds;
(6) Executed original from Epixtar of (i) a Consulting Agreement for
DDM Consulting and (ii) a Consulting Agreement for Xxxxx Xxxxxxxxx
all attached.
3.3 Post-Closing Deliveries. Subsequent to the Closing, Epixtar shall
deliver perfections of security interests. .
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Except as set forth in the Acquired Company Disclosure Schedule, the
Shareholders jointly and severally make the following representations and
warranties to Epixtar on the Closing Date with the knowledge and understanding
that Epixtar is relying materially upon such representations and warranties.
Notwithstanding the foregoing, the representations made that relate to such
Shareholder's own personal position and circumstances in Sections 4.3, 4.4(b)
(but only as to representations regarding the Ownership of Acquired Company
Shares and the authority of each shareholder to enter the Transactions) and 4.19
(collectively the "Individual Representations") shall be made individually and
not jointly and severally.
4.1 Organization and Standing of Acquired Group Companies.
(a) The Acquired Subsidiary is the only subsidiary of the Acquired
Company. Schedule 4.1(a) hereto contains a complete and accurate list for the
Acquired Company and the Acquired Subsidiary, of its name, its jurisdiction of
incorporation or organization, identification of the type of entity it is, other
jurisdictions in which it is authorized to do business, the names of its
directors and officers (or comparable executives) and, in the case of the
Acquired Subsidiary, its capitalization (including all authorized and
outstanding stock), the identity of each equity holder and the number of shares
or other ownership interest held by each such equity holder.
(b) The Acquired Company is a corporation and the Acquired Subsidiary
thereof is a corporation as set forth in Schedule 4.1(a) hereto duly
incorporated, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority to
conduct its business as it is now being conducted and to own or use the
properties and assets that it purports to own or use and that are material to
its business. Each Acquired Group Company is duly qualified to do business as a
foreign corporation or other entity and is in good standing under the laws of
each state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification, except where failure to qualify could not
reasonably be expected to have a Material Adverse Effect on the Acquired Company
or the Acquired Subsidiary.
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(c) The Acquired Company has delivered to Epixtar correct and complete
copies of the Organizational Documents of the Acquired Company and the Acquired
Subsidiary.
4.2 Capitalization.
(a) The total number of shares of capital stock, and the classes and
par values thereof, which the Acquired Company is authorized to issue, the
number of such shares which are issued and outstanding and the number of such
outstanding shares owned by each Shareholder, are as set forth in Schedule
4.2(a) showing collectively the Shareholders own one hundred percent (100 %) of
the Acquired Company Shares.
(b) There are not outstanding any (i) debt or equity securities of the
Acquired Company or of the Acquired Subsidiary convertible into or exchangeable
for any shares of capital stock or other securities of the Acquired Company or
the Acquired Subsidiary or (ii) subscriptions, options, warrants or other rights
entitling any third party to acquire from any Shareholder, the Acquired Company
or the Acquired Subsidiary any shares of capital stock or other securities of
the Acquired Company or the Acquired Subsidiary.
(c) The shares of capital stock of the Acquired Company and of the
Acquired Subsidiary that are owned by any Shareholder, the Acquired Company or
the Acquired Subsidiary, as the case may be, have been duly and validly issued,
are fully paid and nonassessable and are so owned free and clear of any Lien.
4.3 Share Ownership. Each Shareholder represents that the Shareholder
is the record and beneficial owner of the number of Acquired Company Shares and
the shares of common stock of the Acquired Subsidiary listed in Schedule 4.3
free and clear of all Liens. Upon execution of this Agreement and deliveries at
Closing of the certificates for Acquired Company Shares and the shares of the
Acquired Subsidiary, Epixtar shall receive marketable title to such Acquired
Company Shares and the shares of the Acquired Subsidiary free and clear of all
Liens and claims of third parties.
4.4 Authority.
(a) This Agreement has been duly executed and delivered by each
Shareholder and the Acquired Company pursuant to all necessary corporate or
other authorization and is binding upon and enforceable against each in
accordance with its terms, subject to the Enforceability Exception.
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(b) Except as set forth in Schedule 4.4, neither the execution and
delivery of this Agreement by any Shareholder or the Acquired Company nor the
consummation of the Transactions contemplated herein will (i) conflict with,
result in a breach of or constitute a default under, (A) a material provision of
the Organizational Documents of the Acquired Company or the Acquired Subsidiary,
(B) any Laws applicable to any Shareholder, the Acquired Company or any
Subsidiary of the Acquired Company or any of their respective assets which could
not reasonably be expected to have a Materially Adverse Effect, or (C) any court
or administrative order or process or any agreement or commitment to which any
Shareholder, the Acquired Company or any Subsidiary of the Acquired Company is a
party or by which any of them (or any of their respective material properties or
assets) is subject or bound which could not reasonably be expected to have a
Materially Adverse Effect, or (ii) result in the creation of, or give any party
the right to create, any Lien upon the Acquired Shares of any Shareholder, or
upon the property and assets the Acquired Company or the Acquired Subsidiary.
4.5 Assets.
(a) Each Acquired Group Company has good and marketable title to, or
lease or licenses to, all of the assets and properties which it purports to own
as reflected on the Balance Sheet or thereafter acquired and which are material
to the each Acquired Group Company's business. Except as set forth on Schedule
4.5 attached hereto, no material portion of the assets of any Acquired Group
Company is subject to any Lien or any governmental decree or other order to be
sold. None of the material assets of any Acquired Group Company is subject to
any restriction which would prevent continuation of the use currently made
thereof or which could not reasonably be expected to have a Materially Adverse
Effect on the value thereof.
4.6 Contracts. Schedule 4.6 consists of a true and complete list of all
Contracts to which any Acquired Group Company ("Material Contracts") is a party
which (i) contains any provision relating to a change of control or any
transaction comparable thereto, whether specifically pertaining to the
Transactions or otherwise (any payments becoming due and payable by any Acquired
Group Company or Shareholder, as a result thereof, whether currently or after
the lapse of time or the occurrence of any other event being referred to herein
as "Retention Payments"), or (ii) requires payments or receipts in excess of
Fifteen Thousand Dollars US ($15,000.00) per year or (iii) is not terminable by
the applicable Acquired Group Company on notice of thirty (30) days or less
without penalty or any Acquired Group Company being liable for damages.
Except as set forth on Schedule 4.6, each Material Contract is in full
force and effect and there is no default under any Material Contract which could
reasonably be expected to have a Materially Adverse Effect either by the
Acquired Group Company party thereto or, to the Knowledge of the Shareholders
and the Acquired Company, by any other party thereto, and no event has occurred
that with the lapse of time or the giving of notice or both would constitute a
default thereunder by such Acquired Group Company or, to the Knowledge of the
Acquired Company and Shareholders, any other party of which could result in
termination of a Material Contract or which alone or in the aggregate, would
provide the basis for a claim against any Acquired Group Company in excess of
$US15,000.
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4.7 Litigation. There is no claim, action, proceeding, or investigation
pending or, to the Knowledge of the Shareholders and the Acquired Company,
threatened against or affecting the Acquired Company or the Acquired Subsidiary
before or by any court, arbitrator or governmental agency or authority which
could reasonably have a Material Adverse Effect on the Acquired Company or the
Acquired Subsidiary. There are no decrees, injunctions or orders of any court,
governmental department, agency or arbitration outstanding against the Acquired
Company or the Acquired Subsidiary which could reasonably be expected to have a
Material Adverse Effect, and with respect to any action or claim covered by
insurance, the Acquired Company or the Acquired Subsidiary has complied with all
requirements of any such policy which are conditions to the defense and
continued defense of such claim or action.
4.8 Insurance. The Acquired Group Companies are not delinquent on any
premiums and, to their Knowledge, have in force insurance policies, or renewals
thereof, as identified and described in Schedule 4.8, reasonably adequate to
cover the assets and the business of the Acquired Group Companies against loss,
damage and liability and will maintain such insurance up to and including the
Closing Date.
4.9 Financial Statements.
(a) The Acquired Company and the Shareholders delivered to Epixtar true
and complete copies of audited financial statements of the Acquired Company for
the years 2002 and 2003 together with reviewed financial statements for the six
(6) months ended June 30, 2004. The financial statements shall consist of a
consolidated balance sheet as of December 31st of each such year and June 30,
2004 as the case may be, and consolidated statements of operations,
stockholders' equity and cash flows for the period then ended ("Delivered
Financial Statements"). The Shareholders shall be required to participate
actively in and work diligently towards completing the review of the September
30, 2004 financials including consolidated balance sheet as of such date,
statement of operations, stockholder's equity and such flows for the period then
ended, to be delivered on or before December 23, 2004. Such Delivered Financial
Statements and other financial statements (i) have been and will be prepared by
certified public accountants engaged by the Acquired Company (from the books and
records of the Acquired Company and the Acquired Subsidiary) in accordance with
GAAP consistently applied with prior periods, (ii) are and will be complete and
correct and fairly reflect, in each case and in all material respects, the
consolidated financial condition and results of operations of the Acquired
Company and the Acquired Subsidiary as of the dates and for the periods
indicated thereon, and are being and will be relied upon by Epixtar in this
regard, (iii) reflect and will reflect all assets at the lower of their cost or
net realizable value as presented in the 2002 and 2003 audited financials and
the June 30, 2004 review, and (iv) reflect no Material Adverse Change from June
30, 2004 through the closing date of this Agreement ("Material Financial
Change"). The books and accounts of the Acquired Company and the Acquired
Subsidiary have been maintained in all material respects in accordance with
sound business practices, and there have been no material transactions involving
the Acquired Company or the Acquired Subsidiary that properly should have been
set forth therein in accordance with, GAAP that have not been accurately so set
forth.
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4.10 Compliance with Law. (a) The Acquired Company and the Acquired
Subsidiary has complied and is presently complying, in all material respects,
with all Laws applicable to it in all jurisdictions where the business of each
such entity is conducted or to which each such entity is subject, including,
without limitation, all applicable Laws regulating the contact center business
where the failure to so comply could reasonably be expected to have a Material
Adverse Effect, and none of the Shareholders or Acquired Company has Knowledge
of any pending or anticipated changes to such Laws that could cause the current
business practices of any Acquired Group Company to fall out of compliance with
such Laws where the failure to so comply could reasonably be expected to have a
Material Adverse Effect. Neither the Acquired Company nor the Shareholders has
Knowledge of any assertion by any Person that any Acquired Group Company is in
violation in any material respect of any such Laws, orders, restrictions or
requirements with respect to its operations and no notice in that regard has
been received by any Shareholder or Acquired Group Company where any such
violation could reasonably be expected to have a Material Adverse Effect.
(b) Each Acquired Group Company has all material governmental licenses,
permits, authorizations and approvals necessary for the conduct of its business
as currently conducted ("Government Licenses and Permits") where failure to have
such Government Licenses and Permits could reasonably be expected to have a
Material Adverse Effect. Schedule 4.10 includes a list of all material
Government Licenses and Permits. All material Government Licenses and Permits
are in full force and effect, and no proceedings for the suspension or
cancellation of any thereof is pending or, to their Knowledge, threatened.
4.11 Employee Benefit Plans. Except as set forth on Schedule 4.11,
neither the Acquired Company nor the Acquired Subsidiary has maintained or
contributed to any employee benefit plan, or any stock purchase plan, stock
option plan, fringe benefit plan, bonus plan or any other deferred compensation
agreement, plan or funding arrangement, whether or not such plan has been
terminated and whether or not such plan is of legally binding nature in the form
of an informal understanding. With respect to the plans, the Laws, as applicable
thereto, have been fulfilled in all material respects, and no event has occurred
nor does any condition exist which would subject the Acquired Company or the
Acquired Subsidiary to any material penalty, excise tax or liability.
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4.12 Taxes.
(a) Except as set forth on Schedule 4.12, the Acquired Company and the
Acquired Subsidiary, respectively, has (i) duly and timely filed with the
appropriate governmental authorities all Tax Returns (as defined below) required
to be filed by it, and they each have not filed for an extension to file any Tax
Returns, and such Tax Returns are true, correct and complete in all material
respects, and (ii) duly paid in full or made adequate provision for the payment
of all Taxes (as defined in subsection (b) below) shown to be due on such Tax
Returns, except for the payment of state and local sales taxes which, alone or
in the aggregate, would not have a Material Adverse Effect on the business,
operations, properties, assets, condition (financial or other), result of
operations or prospects of such company. Except as set forth on Schedule 4.12,
any deficiencies asserted or assessments made as a result of any examinations of
Tax Returns by the IRS or any other governmental authority have been paid in
full, and no issues that have been raised by the relevant governmental authority
in connection with any such examination of any of the Tax Returns referred to in
clause (i) hereinabove are currently pending. No claim has been made by any
authority in a jurisdiction where the Acquired Company or, as applicable, the
Acquired Subsidiary, does not file a Tax Return that such activity is or may be
subject to Tax in such jurisdiction. No waiver of statutes of limitation have
been given by, or requested with respect to, any Taxes of Acquired Company, or,
as applicable, the Acquired Subsidiary. Acquired Company or, as applicable, the
Acquired Subsidiary has not agreed to any extension of time with respect to any
Tax deficiency. The Liabilities and reserves for Taxes reflected in Acquired
Company's Consolidated Balance Sheet will be adequate to cover all Taxes for all
periods ending on or prior to such respective dates, and there are no liens for
Taxes upon any property or asset of the respective company's, except for liens
for Taxes not yet due. There are no unresolved issues of law or fact arising out
of a notice of deficiency, proposed deficiency or assessment from the IRS or any
other governmental taxing authority with respect to Taxes of Acquired Company
or, the Acquired Subsidiary which, if decided adversely, singly or in the
aggregate, would have a Material Adverse Effect on the business, operations,
properties, assets, condition (financial or other), results of operations or
prospects of Acquired Company, or, as applicable, the Acquired Subsidiary.
Neither Acquired Company nor the Acquired Subsidiary, is a party to any
agreement providing for the allocation or sharing of Taxes with any entity.
Acquired Company and the Acquired Subsidiary have, as applicable, respectively
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.
(b) For purposes of this Agreement, the term "Taxes" shall mean all
taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, withholdings,
social security, occupation, use, service, service use, license, payroll,
franchise, transfer and recording taxes, fees and charges, imposed by the United
States, or any state, local or foreign government or subdivision or agency
thereof whether computed on a separate, consolidated, unitary, combined or any
other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable or imposed or with respect to any such taxes,
charges, fees, levies or other assessments.
(c) For purposes of this Agreement, the term "Tax Return" shall mean
any return, report or other document or information required to be supplied to a
taxing authority in connection with Taxes.
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4.13 Liabilities. Neither the Acquired Company nor the Acquired
Subsidiary has any material Liabilities other than (i) Liabilities fully and
adequately reflected or reserved against on the Balance Sheet, (ii) Liabilities
incurred since the Balance Sheet Date in the ordinary course of the business of
the Acquired Company or to be incurred in connection with this Transaction or
(iii) Liabilities otherwise disclosed in this Agreement, including the Acquired
Company's Disclosure Schedule.
4.14 Intellectual Property. Schedule 4.14 sets forth a complete and
correct list and summary description of all trademarks, trade names, service
marks, service names, brand names, copyrights and patents, registrations thereof
and applications therefore, applicable to or used in the business of the
Acquired Company and the Acquired Subsidiary. A complete list of all licenses
granted by or to such entities with respect to any of the foregoing is set forth
as a Material Contract in Schedule 4.6. Except as otherwise set forth in
Schedule 4.14, all such trademarks, trade names, service marks, service names,
brand names, copyrights and patents are owned by the Acquired Company or the
Acquired Subsidiary as applicable, free and clear of all Liens. Neither the
Acquired Company nor the Acquired Subsidiary is currently in receipt of any
notice of any violation or infringements of, and such entities are not knowingly
violating or infringing, the rights of others in any trademark, trade name,
service xxxx, copyright, patent, trade secret, know-how or other intangible
asset.
4.15 Accounts Receivable. Except as set forth in Schedule 4.15, all of
the accounts receivable of the Acquired Group Companies included in the Balance
Sheet including, but not limited to, amounts due to factors, as adjusted for
operations and transactions through the Closing Date in accordance with the past
custom and practice of the Acquired Group Companies, reflect or will reflect
actual transactions, have arisen or will arise in the ordinary course of
business, and none of them, (i) is or will be, to the Knowledge of the
Shareholders and the Acquired Company, with the lapse of time subject to offset
or deduction or other defense and, (ii) except as noted, can reasonably be
expected to be collectible at the aggregate recorded amounts thereof net of any
reserves established in a manner consistent with past practices or as reflected
in the Balance Sheets.
4.16 Real Property Leases. Schedule 4.16 contains a list of all real
property leases, licenses and personal property leases under which any Acquired
Group Company is the lessee or licensee ("Leased Property") together with a
summary thereof.
4.17 Condition of Assets. All material personal property owned by any
Acquired Group Company and all material personal property held by such entity
pursuant to lease is in good operating condition and repair, subject only to
ordinary wear and tear, has been operated, serviced and maintained properly
within the recommendation and requirements of the manufacturer thereof (if any)
and is suitable and appropriate for the use thereof made and proposed to be made
by such Acquired Group Company in its business operations. The personal property
pursuant to this Schedule 4.17 comprise all of the material personal property
used in, or necessary for the conduct of, each Acquired Group Company's business
as presently conducted by it.
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4.18 No Foreseeable Adverse Changes. No Material Adverse Change has
occurred since December 31, 2003. Neither the Acquired Company, the Acquired
Subsidiary nor any Shareholder has Knowledge of (i) any development including
trends or changes in technology or industry practice which would reasonably be
expected to materially affect its business as presently conducted or
contemplated to be conducted by it, (ii) any reason why any customers of,
suppliers to, or key employees of, any Acquired Group Company will terminate or
substantially diminish any relationship with such Acquired Group Company.
4.19 Related Transactions. Except as set forth on Schedule 4.19, there
are no agreements, arrangements or transactions involving or relating to any
Shareholder, officer or director of any Acquired Group Company or their
affiliates on the one hand and any Acquired Group Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF EPIXTAR
Epixtar represents and warrants to, and agrees with, the Shareholders
as follows as of the date hereof and the Closing Date with the Knowledge and
understanding that Shareholders are relying materially upon such representations
and warranties:
5.1 Organization and Standing of Epixtar. Epixtar is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida and has the corporate power to carry on its business as now conducted
and to own its assets and is duly qualified to transact business as a foreign
corporation in each state where such qualification is necessary except where the
failure to qualify could not reasonably be expected to have a Material Adverse
Effect on Epixtar or its business. The copies of the Articles of Incorporation
and By-laws of Epixtar that have been delivered to the Shareholders, are true
and complete copies of those documents as now in effect.
5.2 Governmental Approval; Consents. No authorization, license, permit,
franchise, approval, order or consent of, and no registration, declaration or
filing by Epixtar with, any governmental authority, domestic or foreign,
federal, state or local, is required in connection with Epixtar's execution,
delivery and performance of this Agreement and consummation of the Transactions.
5.3 Authority. This Agreement constitutes, and all other agreements
contemplated hereby will constitute, when executed and delivered by Epixtar in
accordance herewith, the valid and binding obligations of Epixtar enforceable in
accordance with their respective terms, subject to the Enforceability
Exceptions.
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5.4 Investment Intent. Epixtar hereby represents, warrants and agrees
that Epixtar will be acquiring the Acquired Company Shares for investment, for
its own account, and not with a view to the distribution of the Acquired Company
Shares.
5.5 Certain Proceedings. There is no pending lawsuit, action,
arbitration, hearing, investigation, dispute or other proceeding of any kind
("Proceeding") that has been commenced against Epixtar which challenges, or may
have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the Transactions. To Epixtar's Knowledge, no Proceeding
has been threatened in any manner.
ARTICLE VI
COVENANTS PENDING CLOSING
During the period between the date hereof and the earlier of the
Closing Date or Termination (as that term is defined in Section 9.1 hereof):
6.1 Monitoring/Access for and Cooperation with Epixtar.
(a) As the parties work towards the Closing, and in order to provide
for a smooth transition, the parties agree, until Closing or Termination, (i)
that Epixtar shall be given sufficient access and authority to monitor the
Acquired Company to ensure that the the Acquired Company and its Subsidiary are
complying with this Agreement and to monitor the Acquired Company's operations
in detail, including its financial operations and to participate in the
negotiation and making of material ongoing tranactions; and (ii) that the
Acquired Company and its Subsidiary provide such reasonable assurances that they
are complying with the terms of this Agreement.
(b) Until Closing or Termination, in addition to and not in limitation
of 6.1(a), the Shareholders shall cause each of the Acquired Company and its
Subsidiary to (i) give to Epixtar and its counsel, accountants and other
representatives full and reasonable access, during normal business hours
throughout the period prior to the Closing Date, to all of the entities'
properties, books, contracts, commitments, reimbursement and accounting records
relating to the assets, and all aspects of the entities' business, (ii) to
furnish to Epixtar, during such period, all information concerning the assets
and the business that Epixtar may reasonably request. In addition, the
Shareholders shall make themselves and all personnel available to answer any
questions relating to the Acquired Company Group. Any such investigation or
inspection by any party shall not be deemed a waiver of, or otherwise limit, the
representations, warranties and covenants of other party or parties contained
herein.
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6.2 Conduct of Business or Status. Until Closing or Termination, the
Acquired Company shall operate, and the Shareholders shall cause the business to
be operated by the Acquired Company and its Subsidiary, solely in the usual and
ordinary course of business and in compliance with the terms of this Agreement,
including without limiting the generality of the foregoing, using their best
efforts to preserve the business and its organization so as to (i) keep
available the services of the present employees and agents; (ii) complete or
maintain all of the material Contracts in full force and effect in accordance
with their existing terms, unimpaired by litigation; (iii) maintain the
integrity of all confidential information regarding the business presently
conducted by it; (iv) maintain in full force and effect the insurance policies
(or policies providing substantially the same coverage); (v) preserve the
goodwill of, and the business and contractual relationship with, suppliers,
customers and others having relations with the business; (vi) not issue or
repurchase any securities or (vii) make any distribution to Shareholders or
declare a dividend.
6.3 Certain Prohibitions. None of the parties hereto shall do anything
that would result in a breach of its representations or warranties contained
herein.
6.4 Consents and Notices. Each of the Shareholders and Epixtar shall,
on or prior to the Closing Date, at its own expense, obtain all Consents it is
obligated to obtain.
6.5 Mutual Cooperation. The parties hereto will cooperate with each
other, and will use all reasonable efforts to cause the fulfillment of the
conditions to the parties' obligations hereunder and to obtain as promptly as
possible all Consents, authorizations, orders or approvals from each and every
third party, whether private or governmental, required in connection with the
Transactions contemplated by this Agreement. Between (i) the date of this
Agreement and (ii) the Closing Date or Termination, the parties hereto agree to
use their best efforts to take the steps necessary to consummate the
Transactions as contemplated by this Agreement.
6.6 Changes in Representations and Warranties. Between the date of this
Agreement and the Closing Date, neither any Shareholder or Epixtar shall
directly or indirectly enter into any transaction, take any action, or by
inaction permit an event to occur, which would result in any of its or his
representations and warranties herein contained not being true and correct at
and as of the Closing Date. Each party shall promptly give written notice to the
other upon becoming aware of (a) any fact which, if known on the date hereof,
would have been required to be set forth or disclosed pursuant to this Agreement
and (b) any threatened breach in any material respect of any of their respective
representations and warranties contained in this Agreement and with respect to
the latter shall use all reasonable efforts to remedy the same.
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6.7 Nondisclosure. If this Agreement is validly terminated or the
transaction is otherwise not consummated, Epixtar will not at anytime after the
date of this Agreement until June 22, 2007, divulge, furnish to or make
accessible to anyone any Knowledge or information with respect to confidential
or secret processes, inventions, discoveries, improvements, formulae, plans,
material, devices or ideas or know-how, whether patentable or not, with respect
to any confidential or secret aspects of the business of the Acquired Company
(including, without limitation, customer lists, supplier lists and pricing
arrangements with customers or suppliers) ("Confidential Information"). In the
event that the Transactions contemplated hereby are not consummated, Epixtar
will not thereafter divulge, furnish to or make accessible to anyone any
Confidential Information, and all copies of all such information in Epixtar's
possession shall be returned by Epixtar to the Acquired Company.
Any information, which (i) at or prior to the time of disclosure by the
Acquired Company was generally available to the public through no breach of this
covenant, (ii) was available to the public on a non-confidential basis prior to
its disclosure by the Acquired Company or (iii) was made available to the public
from a third party provided that such third party did not obtain or disseminate
such information in breach of any legal obligation of the Acquired Company shall
not be deemed Confidential Information for purposes hereof, and the undertakings
in this covenant with respect to Confidential Information shall not apply
thereto.
6.8 Exclusivity to Epixtar. Until Closing or the lapse of this
provision as set forth below, none of the Shareholders or Acquired Company, nor
any of their respective directors, officers, shareholders, partners, agents,
investment bankers, or other representatives, shall, directly or indirectly, (a)
solicit, initiate or encourage submission of proposals or offers from any person
relating to any acquisition or purchase of all or a material part of the stock
or assets of, or a merger, consolidation or business combination with, any
Acquired Group Company or agreement to sell shares of capital stock of any
Acquired Group Company other than as contemplated by this Agreement (an
"Acquisition Proposal"), or (b) participate in any discussions or negotiations
regarding or furnish to any other person any information with respect to or
otherwise cooperate in any way, assist, facilitate or encourage any Acquisition
Proposal by any other person. If any Shareholder or any Acquired Group Company
shall receive any Acquisition Proposal or any inquiry regarding any such
proposal from a third party, the recipient shall promptly inform Epixtar of the
Acquisition Proposal. This restriction shall lapse if the Closing shall not have
occurred by January 15, 2005.
If the Acquired Company or Shareholders enter into any written
agreement with respect to an Acquisition Proposal in breach of this Section 6.8,
then the breaching party shall pay to Epixtar an amount equal to One Million
Dollars US (US $1,000,000.00).
6.9 Performance. The Acquired Company and the Shareholders, on the one
hand, and Epixtar, on the other hand, shall fulfill all of their obligations
under the Advance Note and the Note Agreement.
6.10 Survival. All covenants contained herein shall survive the Closing
for only one (1) year from the Closing Date.
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6.11 Public Announcement. No party other than Epixtar shall first make
a public announcement of the consummation of the Transactions which includes the
name of Epixtar or any Acquired Group Company without the prior approval of the
other parties.
ARTICLE VII
CONDITIONS TO SHAREHOLDER'S OBLIGATIONS
In addition to the deliveries provided for in Article III, the
Shareholders' obligation to consummate the Closing is subject to the following
conditions:
7.1 Compliance by Epixtar. Epixtar shall have performed and complied
with all agreements and conditions required by this Agreement to be performed or
complied with by Epixtar prior to or on the Closing Date.
7.2 Accuracy of Epixtar's Representations. None of the representations
or warranties contained in this Agreement, will contain at the Closing Date, any
false or misleading statement, or omits, or will omit at the Closing Date, any
fact or statement necessary to make the other statements or facts set forth
herein or therein not false or misleading.
7.3 Litigation. No litigation seeking to enjoin the Transactions
contemplated by this Agreement or to obtain damages on account hereof shall be
pending or threatened.
ARTICLE VIII
CONDITIONS TO EPIXTAR'S OBLIGATIONS
In addition to the deliveries provided for in Article III, Epixtar's
obligation to consummate the Closing is subject to the following conditions:
8.1 Compliance by the Shareholders. The Shareholders shall have
performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by the Acquired Company or the
Shareholders prior to or on the Closing Date.
8.2 Accuracy of the Shareholders' Representations. None of the
representations or warranties contained in this Agreement, including any
Disclosure Schedule, will contain at the Closing Date, any false or misleading
statement, or omits, or will omit at the Closing Date, any fact or statement
necessary to make the other statements or facts set forth herein or therein not
false or misleading.
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8.3 Litigation. No litigation seeking to enjoin the Transactions
contemplated by this Agreement or to obtain damages on account hereof shall be
pending or to Epixtar's Knowledge be threatened.
8.4 Financial Statements. Epixtar shall receive reviewed financial
statements of the Acquired Company, on or before December 23, 2004, for the nine
months ended September 30, 2004, in accordance with Section 4.9 herein. The
financial statements shall consisting of a consolidated balance sheet as of
September 30, 2004, as the case may be, and, consolidated statements of
operations, stockholders' equity and cash flows for the period then ended. The
financial statements shall be subject to the representations of Section 4.9.
8.5 Books and Records. Any and all books and records shall be complete
and correct and fairly reflect, in each case and in all material respects the
true condition of the company up to the date of closing.
8.6 Opinion of Counsel to Shareholders. Epixtar shall have received an
opinion of counsel to the Acquired Company. .
8.7 Consents. The Consents, if any, shall have been obtained and
delivered to Epixtar.
8.8 Documents. All documents and instruments to be delivered to Epixtar
by the Shareholders at the Closing pursuant to Section 3.1 shall have been
delivered in accordance with such section.
ARTICLE IX
TERMINATION
9.1 Termination Prior to Closing.
(a) If the Closing has not occurred by January 15, 2005, either Epixtar
or the Acquired Company may terminate this Agreement at any time thereafter by
giving written notice of termination to the other parties; provided, however,
that no party may terminate this Agreement if such party has materially breached
any of the terms and conditions hereof (as set forth in this Section and
elsewhere in this Agreement, a "Termination").
(b) Prior to January 15, 2005, either the Acquired Company or Epixtar
may terminate this Agreement following the insolvency or bankruptcy of the other
by written notice to the other, or if one of the conditions to Closing set forth
in Article VII or Article VIII shall become incapable of fulfillment and shall
not have been waived by the party for whose benefit the condition was
established, then the Acquired Company or Epixtar may terminate this Agreement.
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9.2 Consequences of Termination. Upon Termination of this Agreement,
the parties shall be relieved of any further obligation to the other parties
hereto except as specified in Sections 6.7; provided, however, that no
Termination of this Agreement, pursuant to Section 9.1 hereof or under any other
express right of Termination provided elsewhere in this Agreement, shall operate
to release any party from any liability to any other party incurred before the
date of such Termination or from any liability resulting from any willful
misrepresentation made in connection with this Agreement or willful breach
hereof. The Advance Note shall be unaffected by such Termination.
ARTICLE X
INDEMNITY
10.1 Indemnification by Shareholders. From the Closing Date and except
as otherwise provided herein for one (1) year thereafter, the Shareholders
agree, to the extent set forth herein, to defend, indemnify and hold harmless
Epixtar, its Affiliates and their respective employees, officers, directors,
shareholders, successors and assigns, (collectively the "Epixtar Group") as the
case may be, from and against all past, present and future demands, claims,
suits, actions or causes of action, assessments, losses, damages, Liabilities,
costs and expenses, including interest, penalties and reasonable attorneys'
fees, disbursements and expenses (collectively "Damages") arising from (i)
breach of any representation made by Shareholders within any Article and/or
Section of this Agreement, and/or (ii) any litigation, arbitration or other
proceeding or investigation of any nature whether existing on the closing date
or whether disclosed in any schedule hereto or not, but only if arising out of
circumstances or actions occurring prior to closing, (`Litigation Claim");
and/or (iii) breach of any Individual Representations; provided, however,
notwithstanding anything to the contrary contained herein the Shareholders'
indemnification obligation for all Damages not related to Individual
Representations shall be joint and several, but the Shareholders'
indemnification obligations for all Damages related to Individual
Representations shall not be joint and several, with each Shareholder being
liable only for Damages related to a breach by that Shareholder of any
particular Individual Representation.
10.2 Indemnification by Epixtar. From the Closing Date and for one (1)
year thereafter, Epixtar agrees to defend, indemnify and hold harmless each of
the Shareholders and their respective heirs, successors and assigns,
(collectively the "Shareholder Group") as the case may be, from and against all
past, present and future Damages (i) asserted against, imposed upon or incurred
by reason of or resulting from any Liabilities of the Acquired Group Companies
after the Closing Date, or (ii) breach of the assumption of any Liabilities
assumed pursuant to this Agreement or otherwise in breach of any other provision
of this Agreement; provided, however, in the event that the Shareholder Group
knew of any misrepresentation or breach of warranty at the time of the Closing,
then the foregoing indemnification provision shall not be applicable to any such
Damages. Notwithstanding anything to the contrary contained herein, Epixtar
specifically agrees to defend, indemnify and hold harmless Xxxxx Xxxxxxxxx, Xxxx
Xxxxxx and their respective heirs, successors and assigns, as the case may be,
from and against all past, present and future Damages in connection with the Tax
Settlement Liability.
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10.3 Set-Off.
(a) Subject to Section 10.5, Epixtar may set-off amounts due under the
Note for valid indemnification claims due to Epixtar pursuant to this Article X.
Notwithstanding anything to the contrary contained in the foregoing or elsewhere
in this Agreement, prior to any such set-off, Epixtar shall give written notice
as provided herein to the Shareholders of such intention to set-off, specifying
a factual basis of such indemnified claim in reasonable detail to the extent
then known by Epixtar and provided further that, should a majority of the
Shareholders object in writing to such set-off, the amount of the alleged
set-off shall be put into an escrow account, pursuant to a mutually satisfactory
agreement, until the issue is resolved by arbitration or otherwise in accordance
with this Article.
(b) In addition to set-offs against payments under the Note for
indemnity pursuant to Section 10.3(a), Epixtar may set-off agaisnt such payments
the amount of (i) any finder's fee of the Acquired Company which they are
obligated to pay, (ii) any deposits in transit up to and through the Closing
date that any Acquired Company bank has failed to honor. The set-offs in this
paragraph (b) shall not be subject to the provisions of Sections 10.3(a) or
10.5.
10.4 Brokers' Fees. Except for Southwest Equity Partners, Epixtar and
the Acquired Company and Shareholders shall save and hold the other harmless
from any claims made against the other on account of their acts or alleged acts
from any person for any other agent's, broker's or finder's fee or commission
incurred in connection with the Transactions. The provisions of this Section
shall apply to any claim within the scope of the preceding sentence.
10.5 Limitation upon Claims.
Subject to the provisions of Section 10.6.
(a) Epixtar's right to assert a claim pursuant to this Article shall
expire one (1) year from the Closing Date. Except as otherwise provided herein
the Shareholders shall have no liability (for indemnification or otherwise) with
respect to any representation, warranty, covenant or obligation to be performed
and complied with prior to the Closing Date, unless on or before the first
anniversary date Epixtar shall have notified the Shareholders in writing of a
claim specifying the factual basis of that claim in reasonable detail to the
extent then known by Epixtar.
(b) Except as otherwise provided, should Epixtar succeed in any of its
claims asserted pursuant to this Article, then each Shareholder shall only be
liable for that part of the claim which is equal to his Percentage Ownership of
the Purchase Price.
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(c) Except as otherwise provided herein, the Shareholders shall have no
liability for indemnification until the total Damages with respect to all
matters subject to indemnification that exceed Three Hundred Thousand Dollars
($300,000.00) in the aggregate, and then only for the amount by which such
Damages exceed such amount.
(d) Epixtar shall have no liability for indemnification with respect to
matters described in this Section until the total of all Damages with respect to
such matters exceeds Two Hundred and Fifty Thousand Dollars ($250,000.00) in the
aggregate, and then only for the amount by which such Damages exceed such
amount.
(e) Except as otherwise provided herein, notwithstanding anything to
the contrary contained in this Agreement, the Shareholders shall have no
liability (for indemnification) as to any matter in this Article or in
connection with the Transaction or this Agreement in excess of Three Million
Seven Hundred Fifty Thousand Dollars ($3,750,000).
10.6 Exceptions to Limitations on Claim.
(a) Notwithstanding anything to the contrary in Section 10.5(a), if a
claim subject to time limitation is asserted in writing by a party to the other
party within the one (1) year time limit as set forth in subsection (a) of this
Section, then such claim may be pursued thereafter and shall not be time barred.
Moreover (i) if the claim is Tax related, Epixtar may bring a claim for a period
of thirty-six (36) months from the filing of the first Tax Return subsequent to
the Closing Date; or (ii) if the claim (A) alleges fraud by any of the
Shareholders, or (B) is based on an Individual Representation, or (C) is based
on a misrepresentation that Shareholders own all Acquired Company Shares and
shares of Acquired Subsidiary, then Epixtar may bring a claim at any time and
for any amount.
(b) The provisions of Section 10.5(b) shall not apply to any breach of
the Shareholder's Individual Representation or any intentional breach by the
Shareholder of any covenant or obligation.
(c) The provisions of Section 10.5(c), (d) and (e) shall not apply if
the claim (A) alleges fraud by any of the Shareholders, or (B) is based on an
Individual Representation, or (C) is based on a misrepresentation that
Shareholders own all Acquired Company Shares and shares of Acquired Subsidiary.
10.7 Procedure for Indemnification--Third Party Claims.
(a) Either party hereto, who receives a claim or other matter that is
potentially covered by a claim for indemnification pursuant to this Agreement,
shall give written notice to the other party of such claim. Promptly after
receipt by an indemnified party under this Section of notice of the commencement
of any Proceeding against it regarding a claim that is potentially covered by
the indemnifying party's indemnification herein, such indemnified party will, if
a claim is to be made against an indemnifying party under this Article, give
written notice to the indemnifying party of the commencement of such claim.
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(b) If any Proceeding referred to in this Section is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party shall assume the defense
of such Proceeding. The indemnifying party will not, as long as it diligently
conducts such defense with counsel satisfactory to the indemnified party and the
indemnified party reasonably believes there is no conflict between the parties,
be liable to the indemnified party under this Section for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, no compromise or
settlement of such claims may be effected by the indemnifying party without the
indemnified party's consent, unless (A) there is no finding or admission of any
violation of any federal, state, local, municipal, foreign, international,
multinational, or other administrative order, constitution, law, ordinance,
principle of common law, regulation, statute, or treaty or any violation of the
rights of any Person and no effect on any other claims that may be made against
the indemnified party, or (B) the sole relief provided is monetary damages that
are paid in full by the indemnifying party. The indemnified party will have no
liability with respect to any compromise or settlement of such claims effected
without its consent.
(c) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates (other than as a result of monetary
damages for which it would be entitled to indemnification under this Agreement),
the indemnified party may, by notice to the indemnifying party, assume the
exclusive right to defend, compromise, or settle such Proceeding, but the
indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld or delayed).
ARTICLE XI
ARBITRATION
11.1 Arbitration in the Absence of Fraud. Except as set forth in
Section 10.2, any and all disputes, controversies and claims that any Sharholder
or Epixtar may assert against the other arising out of or relating to this
Acquisition Agreement or any document related to this acquisition (collectively,
the "Documents"), shall be determined exclusively by arbitration (each such
arbitration, an "Arbitration") in Miami, Florida before a panel of three neutral
arbitrators agreed to by Epixtar and the Shareholders (collectively, the
"Arbitrators") in accordance with and pursuant to the then existing commercial
arbitration rules of the American Arbitration Association. Each party accepts
jurisdiction in Miami, Florida. Except as set forth herein, each Shareholder and
Epixtar hereby irrevocably waives any right to assert such claims in any other
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forum. The Arbitrators shall have the power in their discretion to award
specific performance or injunctive relief and reasonable attorneys' fees and
expenses to any party in any arbitration. The Arbitrators may not change, modify
or alter any express condition, term or provision of this Acquisition Agreement
or of any other Document nor shall they have the power to render any award that
would have such effect. Each Arbitration award shall be final and binding upon
the parties subject thereto and judgment may be entered thereon in any court of
competent jurisdiction. The service of any notice, process, motion or other
document in connection with an Arbitration or for the enforcement of any
Arbitration award may be made in the same manner as communications may be given
under Section 8 hereof. Notwithstanding the foregoing, if the Arbitrators
determine that either party has committed fraud, neither the provisions of this
Section 7 nor any other provision contained in this Acquisition Agreement or in
any other Document shall limit in any manner whatsoever such party's right to
commence an action against or in connection with any such other party or their
respective properties in any court of competent jurisdiction or otherwise
utilize the applicable judicial process in connection with or arising out of
Epixtar's rights and remedies under this Acquisition Agreement and/or any other
Document or otherwise (any such action, a Court Action"). Court Actions may be
brought in any state or federal court of competent jurisdiction. In the event
that a finding of Shareholder fraud is made, then such Shareholder irrevocably
submits to the jurisdiction of such state and federal courts of the State of
Florida and irrevocably waives any claim or defense of inconvenient forum or
lack of personal jurisdiction in such forum or right of removal or right to jury
trial under any applicable law or decision or both. Service of any notice,
process, motion or other document in connection with a Court Action may be made
in the same manner as communications may be given under Section 8. In addition,
Epixtar or any Shareholder may serve process in any other manner permitted under
applicable law.
11.2 Finding of Fraud.
(a) If there is an assertion of fraud in a claim, then the Arbitrators
shall first make a determination as to whether there has been fraud committed by
a Shareholder or by Epixtar. If the Arbitrators make a specific finding of fraud
by any of the Shareholders or by Epixtar, then defrauded party has the right to
immediately discontinue the arbitration proceeding, and the Arbitrators shall no
longer have any jurisdiction over such claim. However, if the defrauded party
elects to discontinue the arbitration, then the determination of fraud by the
Arbitrators shall not be binding on all parties in a subsequent Court Action,
but shall be admissible as evidence of fraud only.
(b) Upon a finding of fraud and an election to discontinue the
arbitration proceeding, the defrauded party shall have the right to commence a
Court Action against or in connection with any the party determined to have
committed fraud or its/their respective properties in any court of competent
jurisdiction in the jurisdiction, as set forth more fully above in Section 10.1.
The defrauded party shall give notice of its election in the same manner as
communications may be given under Section 8 within thirty (30) days of receipt
of such finding, during which period all further proceedings shall be suspended.
If, however, the defrauded party decides to continue with the Arbitration rather
than proceeding to a Court Action, then the provisions of Section 10.1 shall
govern such Arbitration.
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ARTICLE VIII
MISCELLANEOUS
12.1 Expenses. Epixtar shall pay transaction expenses for the costs of
the reviewed financials for the nine (9) months ended September 30, 2004.
12.2 Investor Review. The Shareholders acknowledge that Laurus Master
Funds, Ltd. has the right to review, pursuant to its existing lending
relationship with Epixtar, this Agreement and any associated collateral
documents, and the Shareholders agree to respond reasonably and in good faith to
any requested changes to such docuemnts.
12.3 Required Documents Subsequent to Closing. Subsequent to the
closing of this transaction, Epixtar will require the former Shareholders of the
Acquired Company to cooperate in retrieving and/or executing any and all further
documentation that may be required by its investment bankers and/or lending
institutions. The former Shareholders agree to aid Epixtar in any reasonable way
possible in order to ensure prompt retrieval and/or execution of any such
documents so required. Epixtar agrees to pay any direct, out-of-pocket expenses
incurred by the former Shareholders in complying with this provision.
12.4 Prepayment of Epixtar Note. In the event an Epixtar subsidiary
engaged in the call center business or business processing outsourcing completes
a public offering that results in net proceeds amounting to at least Ten Million
Dollars ($10,000,000.00), then the Shareholders, individually or collectively,
and at the effective date of registration, may elect to take one half (1/2) of
the balance of the Note in cash and one half (1/2) in restricted stock of said
subsidiary valued at one hundred ten percent (110%) of such amount with the
stock valued at the public offering price. If not elected at the closing date of
the offering, the Shareholders shall have no further right to such prepayment.
12.5 Succession and Assignments; Third Party Beneficiaries. Except as
provided in Section 2.7, this Agreement may not be assigned (either voluntarily
or involuntarily) by any party hereto without the express written consent of the
other party. Any attempted assignment in violation of this Section shall be void
and ineffective for all purposes. In the event of an assignment permitted by
this Section, this Agreement shall be binding upon the heirs, successors and
assigns of the parties hereto. Except as expressly set forth in this Section
8.3, there shall be no third party beneficiaries of this Agreement.
12.6 Accuracy of Documents. All documents delivered by the Acquired
Company and Shareholders to Epixtar, and by Epixtar to any Acquired Group
Company, as photocopies faithfully reproduce the originals thereof, and such
originals are authentic and were, to the extent execution was required, duly
executed.
27
12.7 Notices. All notices, requests, demands, or other communications
with respect to this Agreement shall be in writing and shall be (i) sent by
facsimile transmission, (ii) or with respect of notices from the United States
sent by the United States Postal Service, registered or certified mail, return
receipt requested, (iii) or with respect of notices from the Philippines
personally delivered by a nationally recognized express overnight courier
service, charges prepaid, to the following addresses (or such other addresses as
the parties may specify from time to time in accordance with this Section):
(a) If to Epixtar: Epixtar Corp. 00000 Xxxxxxxx
Xxxxxxxxx Xxxxx 000 Xxxxx, Xxxxxxx 00000
Attention: Office of Corporate Secretary
Facsimile: (000) 000-0000
With a copy to:
Xxxxxxx XxXxxxxxxx, Esq.
000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, Xxx Xxxxxx 00000
Facsimile: (000) 000-0000
(b) If to Shareholders:
----------------------
----------------------
----------------------
Tel #:
Fax #:
----------------------
----------------------
----------------------
Tel #:
Fax #:
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----------------------
----------------------
----------------------
Tel #:
Fax #:
At the address set forth below his name on the signature page.
With a copy to:
All such notices shall, when sent in accordance with the preceding
sentence, be deemed to have been given and received on the earliest of (i) the
day delivered to such address or sent by facsimile transmission, (ii) the fifth
business day following the date deposited with the United States Postal Service,
or (iii) the next business day after shipment by such courier service.
12.8 Construction. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Florida (US) without giving
effect to the principles of conflicts of law thereof.
12.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same Agreement.
12.10 No Implied Waiver; Remedies. No failure or delay on the part of
the parties hereto to exercise any right, power, or privilege hereunder or under
any instrument executed pursuant hereto shall operate as a waiver nor shall any
single or partial exercise of any right, power, or privilege preclude any other
or further exercise thereof or the exercise of any other right, power, or
privilege. All rights, powers, and privileges granted herein shall be in
addition to other rights and remedies to which the parties may be entitled at
law or in equity.
12.11 Entire Agreement. Except for the Prior Note and Note Agreement,
this Agreement, including any schedules, exhibits and Disclosure Schedules
attached hereto, sets forth the entire understandings of the parties with
respect to the subject matter hereof, and it incorporates and merges any and all
previous communications, understandings, oral or written as to the subject
matter hereof, and cannot be amended, waived or changed except in writing,
signed by the party to be bound thereby.
12.12 Headings. The headings of the Sections of this Agreement, where
employed, are for the convenience of reference only and do not form a part
hereof and in no way modify, interpret or construe the meanings of the parties.
29
12.13 Rule of Construction. Each and every term and provision of this
Agreement has been mutually agreed to and negotiated by the parties hereto and
should be construed simply according to its fair meaning and not strictly for or
against any party.
12.14 Severability. To the extent that any provision of this Agreement
shall be invalid or unenforceable, it shall be considered deleted hereof and the
remainder of such provision and of this Agreement shall be unaffected and shall
continue in full force and effect.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
date hereof.
EPIXTAR CORP.
By: /s/ Xxxxx Xxxxx
-----------------------------------
Xxxxx Xxxxx
Shareholders:
/s/ Xxxxxx X. Xxxxxxxxx
---------------------------------------
Xxxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxxxx
---------------------------
12035 Xxxxx
---------------------------
Xxxxxxxx Xxxx, XX 00000
---------------------------
/s/ Xxxxx X. Xxxxxxxx
---------------------------------------
Xxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxxx
---------------------------
0000 Xxxx Xxxxx
---------------------------
Xxxxxxxxxxx, XX 00000
---------------------------
/s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
---------------------------
00000 Xxxxxxxx Xx.
---------------------------
Xxxxxxxx Xxxx, XX 00000
---------------------------
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