SECURITIES PURCHASE AGREEMENT
BY AND AMONG
KI EQUITY PARTNERS VI, LLC
AND
IPORUSSIA, INC.
DATED AS OF MARCH 8, 2007
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is made
and entered into as of March 8, 2007, by and among KI Equity
Partners VI, LLC, a Delaware limited liability company (the
"Buyer") and IPORUSSIA, INC., a Delaware corporation (the
"Company").
RECITALS
A. The Company currently has 15,744,492 shares of common
stock, $0.0001 par value, issued and outstanding ("Common Stock").
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B. The Company desires to issue 65,789,474 shares of Common
Stock ("Shares") to the Buyer, and the Buyer desires to purchase
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the Shares from the Company ("Stock Issuance"), for a purchase
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price of $625,000, or approximately $0.0095 per share, and on
such other terms and conditions set forth herein.
C. As a condition of the Stock Issuance, the proceeds of
the purchase price from the Stock Issuance shall be used to pay
certain liabilities and obligations of the Company, all as more
specifically set forth herein.
D. As a further condition to the Stock Issuance, Xxxxxxxx
X. Xxxxxxxxx, an adult resident of Moscow, Russian Federation
("Kuznetsov"), Xxxx X. Xxxxxx, resident of the State of New York,
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U.S.A. ("Xxxx X. Xxxxxx"), Xxxx Xxxxxx, an adult resident of the
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State of New York, U.S.A. ("Suroff"), not individually but in her
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capacity as the designated personal representative of the estate
of Xxxxxxx X. Xxxxxx, and Xxxxxxx Xxxxxxxxx, an adult resident of
the State of New York, U.S.A. ("Xxxxxxxxx") (individually, a
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"Principal" and collectively, the "Principals") will each agree
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to terminate any and all agreements and contracts with the
Company and irrevocably release the Company from any and all
debts, liabilities and obligations, pursuant to the terms and
conditions set forth in a certain release agreement ("Release
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Agreement"), in a form attached hereto as Exhibit A.
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E. As a further condition to the closing of the Stock
Issuance, Xxxxxxxxx, Xxxx X. Xxxxxx and Xxxxxxxxx will agree to
indemnify and hold the Company harmless from all liabilities and
obligations related to the period prior to Closing, pursuant to
the terms and conditions set forth in a certain indemnity
agreement ("Indemnity Agreement"), in a form attached hereto as
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Exhibit B.
F. In connection with the Stock Issuance, the Shares
issued by the Company to the Buyer will be granted registration
rights pursuant to the terms and conditions set forth in a
certain registration rights agreement between the Company and the
Buyer of even date, the form of which is attached hereto as
Exhibit C ("Registration Rights Agreement").
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G. The execution and delivery of this Agreement, the
consummation of the transactions contemplated under this
Agreement and the execution and delivery of the Registration
Rights Agreement have been duly authorized and approved by the
directors of the Company, and no approval of the stockholders of
the Company is required with respect to any of the foregoing.
NOW, THEREFORE, in consideration of the above recitals, the
covenants, promises and representations set forth herein, and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
SALE AND PURCHASE
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1.1 Sale and Purchase of Shares; Registration Rights.
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At the Closing and subject to and upon the terms and conditions
of this Agreement, the Company agrees to sell and issue to the
Buyer, and the Buyer agrees to purchase from the Company, the
Shares. The Shares, when issued, shall have registration rights
pursuant to the terms and conditions of the Registration Rights
Agreement, which Registration Rights Agreement shall be executed
and delivered by the Company and the Buyer at Closing. Any
registration statement to be filed with respect to the Shares,
including any costs associated therewith, shall be the
responsibility of the Company after the Closing. As of Closing,
the Shares shall constitute not less than 80.7% of the issued
and outstanding shares of the Company's Common Stock. The sale
and purchase of Shares contemplated hereunder shall be referred
to herein as the "Transaction" or the "Stock Issuance".
1.2 Closing. Unless this Agreement shall have been
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terminated pursuant to Article IX hereof, and subject to the
satisfaction and waiver of the conditions set forth in Article
VI hereof, the closing of the Transaction (the "Closing") shall
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take place at the offices of the Escrow Agent on March 23, 2007
or such other date mutually agreeable to the Buyer and the
Company (the "Closing Date").
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1.3 Purchase Price. The aggregate purchase price for the
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Shares shall be Six Hundred Twenty Five Thousand Dollars
($625,000) ("Purchase Price"). At Closing, subject to the escrow
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provisions contained in Sections 1.6, 1.7 and 5.1 hereof, the
Purchase Price payable to the Company (less the amount of the
Deposit) shall be paid to the Escrow Agent, and the Escrow Agent
shall disburse the Purchase Price to pay the Company Closing
Obligations as set forth in Section 5.1 hereof.
1.4 Issuance of Certificates Representing the Shares. At
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Closing, the Company shall deliver certificate(s) representing
the Shares in accordance with directions delivered to the
Company's transfer agent, OTC Corporate Transfer Service Company
("Transfer Agent") to issue to the Buyer certificates
representing the Shares ("Certificates") with the restrictive
legend under the Securities Act of 1933, as amended ("Securities
Act"), and the Company's legal counsel, Law Office of Xxxxxx
Xxxxxxx Xxxxxxx, P.A., shall deliver to the Transfer Agent a
legal opinion in such form that is acceptable to the Transfer
Agent so that the certificates representing the Shares may be
promptly issued and delivered to the Buyer ("Transfer Agent
Opinion").
1.5 Taking of Necessary Action; Further Action. If, at
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any time after the Closing, any further action is necessary or
desirable to carry out the purposes of this Agreement and to
vest Buyer with full right, title and possession to the Shares,
the Company will take all such lawful and necessary action.
1.6 Escrow Agreement. The parties hereto hereby agree
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that the Deposit, the Purchase Price and the Certificates shall
be delivered in escrow to Law Office of Xxxxxx Xxxxxxx Xxxxxxx,
P.A., in its capacity as escrow agent ("Escrow Agent") to be held
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pursuant to the terms and conditions of a certain escrow
agreement, the form of which is attached hereto as Exhibit D
("Escrow Agreement"). The Escrow Agreement shall be executed
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and delivered at the time this Agreement is executed and
delivered by the parties.
1.7 Escrow Deposit. Within three (3) business days
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following execution of this Agreement, the Buyer shall deposit
$25,000 as a refundable deposit ("Deposit") in the escrow account
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maintained by the Escrow Agent ("Escrow Account") to be held by
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the Escrow Agent in accordance with the terms and conditions
under Section 1.7 hereof and the Escrow Agreement. At Closing,
the Deposit shall be a credit toward the Purchase Price. If the
Transaction fails to close solely as a result of failure by the
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Buyer to satisfy the conditions precedent to Closing that are
applicable to it under Section 6.2 of this Agreement, or as a
result of a material breach or misrepresentation of any warranty,
representation, agreement or covenant by the Buyer under this
Agreement, the Deposit shall be promptly paid to the Company. If
the Transaction fails to close for any other reason, the Deposit
shall be promptly refunded and paid to the Buyer.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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The Company hereby represents and warrants to, and covenants
with, the Buyer, as follows:
2.1 Organization and Qualification.
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(a) The Company is a corporation duly incorporated or
organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power
and authority to own, lease and operate its assets and properties
and to carry on its business as it is now being conducted by the
Company. The Company is in possession of all franchises, grants,
authorizations, licenses, permits, easements, consents,
certificates, approvals and orders ("Approvals") necessary to
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own, lease and operate the properties it purports to own, operate
or lease and to carry on its business as it is now being by the
Company. The Company is duly qualified to conduct its business
in each state and each foreign jurisdiction listed on Schedule
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2.1 hereof. Except as set forth in Schedule 2.1 hereof, the
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Company has filed each annual corporate or information report
("Annual Report") required to be filed by it in the state of
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Delaware and in each state and foreign jurisdiction in which it
is required to be qualified to do business as a foreign
corporation. Complete and correct copies of the articles of
incorporation or organization and by-laws (or other comparable
governing instruments with different names) (collectively
referred to herein as "Charter Documents") of the Company, as
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amended and currently in effect, and each Annual Report filed by
the Company have been heretofore delivered to the Buyer. The
Company is not in violation of any of the provisions of the
Company's Charter Documents.
(b) The minute books of the Company contain true,
complete and accurate records of all meetings and consents in
lieu of meetings of its Board of Directors (and any committees
thereof), similar governing bodies and stockholders ("Corporate
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Records"), since the time of the Company's organization. Copies
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of such Corporate Records of the Company have been heretofore
delivered to the Buyer.
(c) The Company has heretofore delivered to the Buyer
a true, complete and accurate record of the registered ownership
of the Company's capital stock maintained by the Transfer Agent
as of a recent date acceptable to the Buyer and a record of the
beneficial ownership of the Company's capital stock as of a
recent date acceptable to the Buyer, together stock transfer and
issuance ledgers and records from the Transfer Agent ("Stock
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Records").
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2.2 Subsidiaries. Set forth in Schedule 2.2 hereto is a
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true and complete list of all subsidiaries stating, with respect
to each subsidiary, its jurisdiction of incorporation or
organization, and equity ownership. The Company's wholly-owned
subsidiary, IPOR Capital, LLC ("IPOR Capital"), is validly
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existing and in good standing under the laws of the jurisdiction
of its organization, and the Company's wholly-owned subsidiary,
IPORussia Limited ("IPORussia Limited") is a United Kingdom
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corporation duly incorporated or organized and now pending
dissolution under the laws of the jurisdiction of its
incorporation or organization ("Dissolution"). IPOR Capital and
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IPORussia are referred to herein individually as the "Subsidiary"
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and collectively the "Subsidiaries." Each Subsidiary is duly
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qualified to conduct its business in each state listed on
Schedule 2.2 hereof. Except as set forth in Schedule 2.2 hereof,
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each Subsidiary has filed each Annual Report required to be
filed by it in each state in which it is required to be qualified
to do business as a foreign corporation. All of the outstanding
shares of capital stock or membership interests of each
Subsidiary have been duly and validly authorized and issued, are
fully paid and non-assessable, have not been issued in violation
of any preemptive or other right of any Person or of any laws,
and are owned beneficially and of record by the Company as
specified on Schedule 2.2, free and clear of all liens, claims,
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charges, encumbrances, pledges, mortgages, security interests,
options, rights to acquire, proxies, voting trusts or similar
agreements, restrictions on transfer or adverse claims of any
nature whatsoever ("Liens"). Complete and correct copies of the
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Charter Documents of each Subsidiary, as amended and currently in
effect and each Annual Report filed by each Subsidiary have been
heretofore delivered to the Buyer. All documents related to the
Company's application for the Dissolution shall be delivered to
the Buyer at or prior to Closing. Neither Subsidiary is in
violation of any of the provisions of its Charter Documents.
Except as described in Schedule 2.2 hereto, neither the
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Company nor any Subsidiary owns, directly or indirectly, any
ownership, equity, profits or voting interest in any Person
(other than Subsidiaries) or has any agreement or commitment to
purchase any such interest, and the Company and its Subsidiaries
have not agreed and are not obligated to make nor are bound by
any written, oral or other agreement, contract, subcontract,
lease, binding understanding, instrument, note, option, warranty,
purchase order, license, sublicense, insurance policy, benefit
plan, commitment or undertaking of any nature, as of the date
hereof , under which any of them may be obligated to make any
future investment in or capital contribution to any other entity.
For purposes of this Agreement, the term "subsidiary"
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shall mean any Person in which the Company or any subsidiary
directly or indirectly, owns beneficially securities or interests
representing 50% or more of (x) the aggregate equity or profit
interests, or (y) the combined voting power of voting interests
ordinarily entitled to vote for management or otherwise.
2.3 Authority Relative to this Agreement. The Company has
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all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby (including the
Transaction). The execution and delivery of this Agreement and
the consummation by the Company of the transactions contemplated
hereby (including the Transaction) have been duly and validly
authorized by all necessary corporate action on the part of
Company (including the approval by its board of directors), and
no other corporate proceedings on the part of the Company
(including the approval of the Company's stockholders) are
necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Company and, assuming
the due authorization, execution and delivery thereof by the
Buyer, constitutes the legal and binding obligation of the
Company, enforceable against the Company in accordance with its
terms, except as may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity
and public policy.
2.4 No Conflict; Required Filings and Consents.
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(a) The execution and delivery of this Agreement by
the Company do not, and the performance of this Agreement by the
Company shall not: (i) conflict with or violate the Company's
Charter Documents, (ii) conflict with or violate any Legal
Requirements to which the Company is bound, or (iii) result in
any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or
materially impair the Company's rights or alter the rights or
obligations of any third party under, or give to others any
rights of termination, amendment, acceleration or cancellation
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of, or result in the creation of a lien or encumbrance on any of
the properties or assets of the Company pursuant to any Contracts
(as defined in Section 2.16) except, with respect to clauses (ii)
or (iii), for any such conflicts, violations, breaches, defaults
or other occurrences that would not, individually and in the
aggregate, have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole. For purposes of this Agreement,
"Legal Requirements" means any federal, state, local, municipal,
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foreign or other law, statute, constitution, principle of common
law, resolution, ordinance, code, edict, decree, rule,
regulation, ruling or requirement issued, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under
the authority of any Governmental Entity (as defined in Section
2.4(b)), and all requirements set forth in applicable Contracts.
(b) The execution and delivery of this Agreement by
the Company does, and the performance of its obligations
hereunder will not, require any consent, approval, authorization
or permit of, filing with, or notification to, any court,
administrative agency, commission, governmental or regulatory
authority, domestic or foreign (a "Governmental Entity"), except
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for applicable requirements, if any, of the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
state securities laws ("Blue Sky Laws"), and the rules and
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regulations thereunder, and appropriate documents with the
relevant authorities of other jurisdictions in which the Company
is qualified to do business.
2.5 Capitalization.
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(a) The authorized capital stock of the Company
consists of 100,000,000 shares of common stock, $0.0001 par value
("Common Stock") and 1,000,000 shares of preferred stock, $0.0001
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par value ("Preferred Stock"). At the close of business on the
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business day prior to the date hereof: (i) 15,744,492 shares of
Common Stock were issued and outstanding, all of which are
validly issued, fully paid and nonassessable; (ii) no shares of
Common Stock are held in the Company's treasury; (iii) no shares
of Preferred Stock were issued and outstanding; (iv) no shares of
Common Stock were reserved for issuance upon the exercise of
options to purchase Common Stock granted to employees of the
Company or other parties ("Stock Options"), with all Stock
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Options previously granted having expired by their terms or been
cancelled by mutual agreement of the Company and the holder
thereof pursuant to cancellation agreements to be delivered to
the Buyer prior to Closing ("Option Cancellation Agreements");
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(v) no shares of Common Stock were reserved for issuance upon the
exercise of warrants to purchase Common Stock ("Warrants"),
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except for warrants to purchase 70,000 shares of the Company's
Common Stock issued in connection with the underwriting of the
Company's initial public offering, the terms and record holders
of which are set forth on Schedule 2.5 hereto ("Underwriters
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Warrants"); and (vi) no shares of Common Stock were reserved for
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issuance upon the conversion of the Preferred Stock or any
outstanding convertible notes, debentures or securities
("Convertible Securities"). All shares of Common Stock subject
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to issuance under the Underwriters Warrants, upon issuance on the
terms and conditions specified in the instrument pursuant to
which they are issuable, will be duly authorized, validly issued,
fully paid and nonassessable. All securities of the Company have
been issued and granted in compliance with (i) all applicable
securities laws and regulations, (ii) all Legal Requirements, and
(iii) all requirements set forth in any applicable contracts.
None of the shares of the Company's currently outstanding Common
Stock were issued by the Company at a time when the Company was a
"blank check" company or a "shell" company, as defined under the
Securities Act, the Exchange Act and the regulations promulgated
thereunder.
(b) Except as set forth in Schedule 2.5 hereof or as
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set forth in Section 2.5(a) hereof there are no subscriptions,
options, warrants, equity securities, partnership interests or
similar ownership interests, calls, rights (including preemptive
rights), commitments or agreements of any character to which the
Company or any Subsidiary is a party or by which it is bound
obligating the Company or any Subsidiary to issue, deliver or
sell, or cause to be issued, delivered or sold, or to repurchase,
5
redeem or otherwise acquire, or cause the repurchase, redemption
or acquisition of, any shares of capital stock, partnership
interests or similar ownership interests of the Company or any
Subsidiary or obligating the Company or any Subsidiary to grant,
extend, accelerate the vesting of or enter into any such
subscription, option, warrant, equity security, call, right,
commitment or agreement. Except as set forth in Schedule 2.5
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hereof, there are no lock up agreements or other agreements
affecting the transfer of any equity security of any class of the
Company or any Subsidiary. Except as set forth in Schedule 2.5,
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no bonds, debentures, notes or other indebtedness of the Company
having the right to vote (or convertible into, or exchangeable
for, securities having the right to vote) on any matters on which
the stockholders of the Company may vote are issued or
outstanding.
(c) Except as contemplated by this Agreement and
except as set forth in Schedule 2.5 hereto, there are no
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registration rights, and there is no voting trust, proxy, rights
plan, anti-takeover plan, or other agreement or understanding to
which the Company or any Subsidiary is a party or by which
the Company or any Subsidiary is bound with respect to any
equity security of any class of the Company or any Subsidiary.
(d) The Shares to be issued with respect to the
Transaction contemplated under this Agreement shall, when issued,
be duly authorized, validly issued, fully paid and nonassessable,
shall be free and clear of all Liens and shall have been issued
in compliance with all Legal Requirements.
2.6 Compliance. The Company and its Subsidiaries have
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complied with, are not in violation of, any laws, rules or
regulations of any Governmental Entity including, without
limitation, any and all applicable securities laws and
regulations, laws and regulations governing broker-dealers
licensed and regulated by the National Association of Securities
Dealer, Inc. ("NASD"), environmental laws and regulations, and
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laws and regulations regarding hazardous and toxic substances
and materials, except for failures to comply or violations which,
individually or in the aggregate, have not had and are not
reasonably likely to have a Material Adverse Effect on the
Company or its Subsidiaries.
2.7 Financial Statements; Filings.
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(a) The Company has made available to the Buyer each
report and statement filed by the Company and each Subsidiary
with any Governmental Entity (the "Company Reports"), which are
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all the forms, reports and documents required to be filed by the
Company with any Governmental Entity, and such Company Reports
(together with the 2006 Annual Report to be filed and made
available to the Buyer prior to the Closing) are true, correct
and complete. As of their respective dates, the Company Reports
(i) were prepared in accordance and complied in all material
respects with the requirements of the applicable Governmental
Entity, and the rules and regulations of such Governmental
Entities applicable to such Company Reports, and (ii) did not
at the time they were filed (and if amended or superseded by a
filing prior to the date of this Agreement then on the date of
such filing and as so amended or superceded) contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under
which they were made, not misleading. Except to the extent set
forth in the preceding sentence, the Company makes no
representation or warranty whatsoever concerning the Company
Reports as of any time o ther than the time they were filed.
(b) The Company has provided to the Buyer a correct
and complete copy of the audited financial statements (including,
in each case, any related notes thereto) of the Company and
each Subsidiary for the prior three fiscal years ended, complied
as to form in all material respects with the published rules
and regulations of any applicable Governmental Entity, prepared
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in accordance with the generally accepted accounting principles
of the United States ("U.S. GAAP") applied on a consistent
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basis throughout the periods involved (except as may be indicated
in the notes thereto), audited by a certifying accountant
registered with the Public Company Accounting Oversight Board
("PCAOB"), and each fairly presents in all material respects
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the financial position of the Company and Subsidiaries at the
respective dates thereof and the results of its operations and
cash flows for the periods indicated.
(c) The Company shall provide to the Buyer prior to
the Closing, a correct and complete copy of the audited
consolidated financial statements (including all related notes
thereto) of the Company and Subsidiaries for the year ended
December 31, 2006, complied as to form in all material respects
with the published rules and regulations of any applicable
Governmental Entity, prepared in accordance with U.S. GAAP
applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes thereto), and fairly
presenting in all material respects the financial position of the
Company and Subsidiaries at the date thereof and the results of
its operations and cash flows for the periods indicated.
(d) The Company has previously furnished to the Buyer
a complete and correct copy of any amendments or modifications,
which have not yet been filed with the applicable Governmental
Entities but which are required to be filed with respect to the
Company or any Subsidiary, to agreements, documents or other
instruments which previously had been filed by the Company or any
Subsidiary with the applicable Governmental Entities pursuant to
applicable rules and regulations. The books of account and
other financial records of the Company and each Subsidiary have
been maintained in accordance with good business practice.
(e) The Company is in full compliance with, and
current in, all of the reporting, filing and other requirements
under the Exchange Act. The shares of the Company's Common Stock
have been duly and properly registered under Section 12(g) of the
Exchange Act, no other securities of the Company are registered
under Section 12(g) of the Exchange Act, and the Company is in
full compliance with all of the requirements under, and imposed
by, Section 12(g) of the Exchange Act.
2.8 No Liabilities.
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Except as set forth in Schedule 2.8 hereto and except for
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the obligations of the Company under the Registration Rights
Agreement, the Company and each Subsidiary have no Liabilities.
For purposes of this Agreement, "Liability" or "Liabilities"
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shall mean, as to any Person, all debts, liabilities and
obligations, direct, indirect, absolute or contingent of such
Person, whether accrued, vested or otherwise, whether known or
unknown and whether or not reflected, or required in accordance
with U.S. GAAP to be reflected, in such Person's balance sheet.
The proceeds of the Purchase Price will be sufficient to pay and
satisfy in full, at Closing, all Liabilities set forth on
Schedule 2.8 hereto ("Scheduled Liabilities").
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2.9 Absence of Certain Changes or Events.
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Except as set forth in Schedule 2.9 hereto, since September
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30, 2006, there has not been: (i) any Material Adverse Effect on
the Company or any Subsidiary, (ii) any declaration, setting
aside or payment of any dividend on, or other distribution
(whether in cash, stock or property) in respect of, any of the
Company's or any Subsidiary's capital stock, or any purchase,
redemption or other acquisition of any of the Company's or any
Subsidiary's capital stock or any other securities of the Company
or any Subsidiary or any options, warrants, calls or rights to
acquire any such shares or other securities, (iii) any split,
combination or reclassification of any of the Company's capital
stock, (iv) any granting by the Company or any Subsidiary of any
increase in compensation or fringe benefits, except for normal
increases of cash compensation in the ordinary course of business
consistent with past practice, (v) any material change by the
Company or any Subsidiary in its accounting methods, principles
or practices, except as required by concurrent changes in U.S.
GAAP, (vi) any change in the auditors of the Company or any
Subsidiary, (vii) any issuance of capital stock of the Company or
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any of its Subsidiaries, or (vii) any revaluation by the Company
or any Subsidiary of any of their respective assets, other than
in the ordinary course of business.
2.10 Litigation. Except as disclosed in Schedule 2.10
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hereto, (a) there are no claims, suits, actions or proceedings
(at law or in equity) pending or threatened against the Company
or any Subsidiary, before any Governmental Entity, NASD or
arbitrator (including, without limitation, any allegation of
criminal conduct or a violation of the Racketeer and Influenced
Corrupt Practices, as amended), and (b) the Company and its
Subsidiaries are not subject to any outstanding order, writ,
judgment, injunction, order, decree or arbitration order. There
are no suits, actions, claims, proceedings pending or threatened,
seeking to prevent, hinder, modify or challenge the transactions
contemplated under this Agreement.
2.11 Employee Benefit Plans.
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(a) Except as set forth on Schedule 2.8 and
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Schedule 2.11 hereto, neither the Company nor any of its
--------------
Subsidiaries has in place any arrangement or policy (written or
oral) providing for insurance coverage, workers' compensation,
disability benefits, supplemental unemployment benefits, vacation
benefits, severance or termination benefits, retirement or
deferred compensation, profit sharing, bonuses, stock options,
stock appreciation rights, stock purchases or other forms of
incentive compensation or post-retirement insurance, compensation
or benefits which is maintained or administered by the Company or
any of its Subsidiaries, or to which the Company or any of its
Subsidiaries contributes, and which covers any employee or former
employee of the Company or any of its Subsidiaries or under which
the Company or any of its Subsidiaries has any liability,
including any "employee welfare benefit plan," "employee benefit
plan" and "employee pension benefit plan" as defined under the
Employee Retirement Income Security Act of 1974, as amended
("ERISA").
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(b) Except as disclosed on Schedule 2.11 hereto,
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neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will result
in any payment (including severance, unemployment compensation,
golden parachute, bonus or otherwise) becoming due to any
stockholder, director, employee or consultant of the Company or
any Subsidiary.
2.12 Labor Matters. Neither the Company nor any of its
--------------
Subsidiaries is a party to any collective bargaining agreements
or labor union contract. There are no strikes or labor
disputes or lawsuits, unfair labor or unlawful employment
practice charges, contract grievances or similar actions pending
or threatened by any of the employees, former employees or
employment applicants of the Company or any of its Subsidiaries.
2.13 Restrictions on Business Activities.
-----------------------------------
There is no agreement, commitment, judgment, injunction,
order or decree binding upon Company or a Subsidiary or to which
Company or a Subsidiary is a party which has or could reasonably
be expected to have the effect of prohibiting or materially
impairing any business practice of the Company or a Subsidiary,
any acquisition of property by the Company or a Subsidiary or the
current or future conduct of business by the Company or a
Subsidiary.
2.14 Taxes.
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(a) Definition of Taxes. For the purposes of this
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Agreement, "Tax" or "Taxes" refers to any and all federal,
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state, local and foreign taxes, including, without limitation,
gross receipts, income, profits, sales, use, occupation, value
added, ad valorem, transfer, franchise, withholding, payroll,
recapture, employment, excise and property taxes, assessments,
governmental charges and duties together with all interest,
penalties and additions imposed with respect to any such amounts
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and any obligations under any agreements or arrangements with any
other person with respect to any such amounts and including any
liability of a predecessor entity for any such amounts.
(b) Tax Returns and Audits. Except as set forth in
----------------------
Schedule 2.14 hereto:
-------------
(i) the Company and each Subsidiary have timely
filed all federal, state, local and foreign returns, estimates,
information statements and reports relating to Taxes ("Returns")
-------
required to be filed by the Company or a Subsidiary with any Tax
authority prior to the date hereof, except such Returns which are
not material to the Company or a Subsidiary. All such Returns
are true, correct and complete in all material respects. The
Company and each Subsidiary have paid all Taxes shown to be due
on such Returns.
(ii) All Taxes that the Company or a Subsidiary
is required by law to withhold or collect have been duly withheld
or collected, and have been paid over to the proper governmental
authorities.
(iii) The Company and each Subsidiary have not
been delinquent in the payment of any material Tax nor is there
any material Tax deficiency outstanding, proposed or assessed
against the Company or any Subsidiary, nor has the Company or any
Subsidiary executed any unexpired waiver of any statute of
limitations on or extending the period for the assessment or
collection of any Tax.
(iv) No audit or other examination of any Return
of the Company or any Subsidiary by any Tax authority is
presently in progress, nor has the Company or any Subsidiary been
notified of any request for such an audit or other examination.
(v) No adjustment relating to any Returns filed
by the Company or any Subsidiary has been proposed in writing,
formally or informally, by any Tax authority to the Company or
any Subsidiary or any representative thereof.
(vi) The Company and its Subsidiaries have no
liability for any Taxes for its current fiscal year, whether or
not such Taxes are currently due and payable.
2.15 No Brokers; Third Party Expenses. Neither the Company
--------------------------------
nor the Principals have incurred, nor will they incur, directly
or indirectly, any liability for brokerage commissions in
connection with this Agreement or any transaction contemplated
hereby.
2.16 Agreements, Contracts and Commitments. Except as set
-------------------------------------
forth in Schedule 2.16, (a) there are no written employment
--------------
agreements, termination or severance agreements, or consulting
agreements with the current or former officers, directors,
employees or consultants of the Company or its Subsidiaries and
to which the Company or its Subsidiaries are a party; (b) neither
the Company nor any of its Subsidiaries is a party to or bound by
any commitment, agreement or other instrument which contemplates
payment of any monies or which is otherwise material to the
operations, assets or financial condition of the Company or
either of its Subsidiaries, including but not limited to any
royalty, franchising fees, or any other fee based on a percentage
of revenues or income; (c) neither the Company nor its
Subsidiaries is a party to or is bound by any commitment,
agreement or instrument which limits the freedom of the Company
or its Subsidiaries to compete in any line of business or with
any Person; and (d) neither the Company nor its Subsidiaries is
in default in any material respect under any material lease,
contract, mortgage, indentures, note, deed of trust, loan
agreement, bond, guaranty, liens, license, permit, franchise,
purchase orders, sales orders, arbitration awards, judgments,
decrees, orders, documents, instruments, understandings and
commitments, or other instrument or obligation of any kind,
9
whether written or oral. True, correct and complete copies of
each contract, commitment, agreement, obligation or instrument to
which the Company or its Subsidiaries is currently a party or
bound under (or written summaries in the case of oral contracts)
have been heretofore delivered to the Buyer.
2.17 Interested Party Transactions. Except as set forth in
-----------------------------
Schedule 2.8 and Schedule 2.17 hereto or the Company Reports, no
------------ -------------
employee, officer, director or 5% or more stockholder of the
Company or a member of his or her immediate family is indebted to
the Company, nor is the Company indebted (or committed to make
loans or extend or guarantee credit) to any of them, other than
(i) for payment of salary for services rendered, (ii)
reimbursement for reasonable expenses incurred on behalf of the
Company or any Subsidiary, and (iii) for other employee benefits
made generally available to all employees, and all related party
transactions between such persons and the Company have been fully
and properly disclosed in the Company Reports.
2.18 Over-the-Counter Bulletin Board Quotation. The
Company's common stock is quoted on the Over-the-Counter Bulletin
Board ("OTC BB"). There is no action or proceeding pending or,
------
to Company's knowledge, threatened against the Company by NASDAQ
or the National Association of Securities Dealers ("NASD") with
----
respect to any intention by such entities to prohibit or
terminate the quotation of the Company's Common Stock on the OTC
BB. There is no action pending or threatened, to Company's
knowledge, by any market maker in the Company's common stock to
discontinue their market making activities with respect thereto.
2.19 Investment Company Act. The Company is not an
------------------------
"investment company" or an "affiliated person" of or "promoter"
or "principal underwriter" or an "investment company" as such
terms are defined in the Investment Company Act of 1940, as
amended, nor is the Company otherwise subject to regulation
thereunder. The Company is not a "holding company" as that term
is defined in, and is not otherwise subject to regulation under,
the Public Utility Holding Company Act of 1935.
2.20 Bankruptcy and Criminal Proceedings. Neither the
-------------------------------------
Company and its respective officers, directors, affiliates,
promoters nor any predecessor of the Company have been subject to
or suffered any of the following:
(a) a petition under the Federal bankruptcy laws or
any other insolvency or moratorium law or has a receiver, fiscal
agent or similar officer been appointed by a court for such
person, or any partnership in which such person was a general
partner at or within two years before the time of such filing, or
any corporation or business association of which such person was
an executive officer at or within two years before the time of
such filing;
(b) a conviction in a criminal proceeding or a named
subject of a pending criminal proceeding (excluding traffic
violations which do not relate to driving while intoxicated or
driving under the influence);
(c) any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring
suspending or otherwise limiting such person's involvement in any
type of business, securities or banking activities; or
(d) been found guilty by a court of competent
jurisdiction in a civil action or by the U.S. Securities and
Exchange Commission ("SEC"), the Commodity Futures Trading
Commission ("CFTC") or state securities regulators and
commissions to have violated any federal or state securities or
commodities law, regulation or decree and the judgment in such
civil action or finding by the SEC, CFTC or state securities
regulators or commissions has not been subsequently reversed,
suspended or vacated.
10
2.21 Assets; Properties and Insurance. At Closing, neither
--------------------------------
the Company nor any of its Subsidiaries will have any assets,
whether tangible or intangible, will own any real or personal
property or maintain any insurance of any kind.
2.22 Environmental Matters. Neither the Company nor any of
---------------------
its Subsidiaries: (a) has received any written notice, citation,
claim, assessment, proposed assessment or demand for abatement
alleging that either of them is responsible for the correction
or cleanup of any condition resulting from a violation of any
law, ordinance or other governmental regulation regarding
environmental matters; (b) has any knowledge that any toxic or
hazardous substances or materials have been emitted, generated,
disposed of or stored on any real property owned or leased by
them, or owned or controlled by them as a trustee or fiduciary
(collectively, the "Properties"), in any manner that violates or,
after the lapse of time may violate, any presently existing
federal, foreign, regional, state or local law or regulation
governing or pertaining to such substances and materials; or (c)
has any knowledge that, during their ownership or lease of such
Properties, any of such Properties has been operated in any
manner that violated any applicable federal, foreign, regional,
state or local law or regulation governing or pertaining to toxic
or hazardous substances and materials.
2.23 Intellectual Property. There are no arrangements
---------------------
relating to the use by the Company or any of its Subsidiaries of
any intellectual property owned by another Person, and neither
the Company nor any of its Subsidiaries has at any time been in
breach of such arrangements. Neither the Company nor any of its
Subsidiaries has granted or is obligated to grant a license,
assignment or other right with respect to any intellectual
property.
2.24 Representations and Warranties Complete. The
---------------------------------------------
representations and warranties of the Company included in this
Agreement and any list, statement, document or information set
forth in, or attached to, any Schedule provided pursuant to this
Agreement or delivered hereunder, are true and complete in all
material respects and do not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained
therein not misleading, under the circumstance under which they
were made.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
-------------------------------------------
Buyer represents and warrants to, and covenants with, the
Company, as follows:
3.1 Organization. The Buyer is a limited liability
------------
company duly organized and validly existing under the laws of the
State of Delaware and has the requisite power and authority to
own, lease and operate its assets and properties and to carry on
its business as it is now being or currently planned by the Buyer
to be conducted.
3.2 Authority Relative to this Agreement. The Buyer has
------------------------------------
full power and authority to: (i) execute, deliver and perform
this Agreement, and each ancillary document which the Buyer has
executed or delivered or is to execute or deliver pursuant to
this Agreement, and (ii) carry out the Buyer's obligations
hereunder and thereunder and, to consummate the transactions
contemplated hereby (including the Transaction). The execution
and delivery of this Agreement and the consummation by the Buyer
of the transactions contemplated hereby (including the
Transaction) have been duly and validly authorized by all
necessary action on the part of the Buyer (including the approval
by its Board of Managers), and no other proceedings on the part
of the Buyer are necessary to authorize this Agreement or to
11
consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by the Buyer
and, assuming the due authorization, execution and delivery
thereof by the Company, constitutes the legal and binding
obligation of the Buyer, enforceable against the Buyer in
accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by
general principles of equity and public policy.
3.3 No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery of this Agreement
by the Buyer does not, and the performance of this Agreement by
the Buyer, shall not: (i) conflict with or violate the Buyer's
certificate of organization or operating agreement, or (ii)
subject to obtaining the adoption of this Agreement and the
Transaction by the Board of Managers, conflict with or violate
any laws or regulations.
(b) The execution and delivery of this Agreement
by the Buyer does not, and the performance of its obligations
hereunder will not, require any consent, approval, authorization
or permit of, or filing with or notification to, any Governmental
Entity, except for applicable requirements, if any, of the
Exchange Act and the rules and regulations thereunder.
3.4 Brokers. Buyer has not incurred, nor will it incur,
-------
directly or indirectly, any liability for brokerage or finders'
fees or agent's commissions or any similar charges in connection
with this Agreement or any transaction contemplated hereby.
3.5 Approval. The Board of Managers of the Buyer has, as
--------
of the date of this Agreement, unanimously declared the
advisability of the Transaction and approved this Agreement and
the transactions contemplated hereby.
3.6 Acquisition of Shares for Investment. The Buyer is an
------------------------------------
"accredited investor," as such term is defined in Section 2(15)
of the Securities Act and Rule 501 of Regulation D promulgated
thereunder, the Buyer is purchasing the Shares for the Buyer's
own account, solely for investment purposes, and not with a view
to, or for resale in connection with, any distribution thereof or
with any present intention of distributing or selling any of the
Shares, except as allowed by the Securities Act, or any rules and
regulations promulgated thereunder. The Buyer understands and
agrees that the Shares being acquired pursuant to this Agreement
have not been registered under the Securities Act or under any
applicable state securities laws and may not be sold, pledged,
assigned, hypothecated or otherwise transferred ("Transfer"),
except pursuant to an effective registration statement under the
Securities Act or pursuant to an exemption from registration
under the Securities Act, the availability of which shall be
established to the satisfaction of the Company at or prior to the
time of Transfer. The Buyer acknowledges that it must bear the
economic risk of its investment in the Shares for an indefinite
period of time since the Shares have not been registered under
the Securities Act and therefore cannot be sold unless the Shares
are subsequently registered or an exemption form registration is
available. The Buyer has received and reviewed such information
concerning the Company as it deems necessary to evaluate the
risks and merits of its investment in the Company. The Buyer has
such knowledge and experience in financial matters as to be
capable of evaluating the merits and risks of an investment in
the Shares. The sale of the Shares to the Buyer is being made
without any public solicitation or advertisements.
3.7 Bankruptcy and Criminal Proceedings. Neither the Buyer
-----------------------------------
nor its managers, affiliates, promoters nor any predecessor of
the Buyer have been subject to or suffered any of the following:
(a) a petition under the Federal bankruptcy laws or
any other insolvency or moratorium law or has a receiver, fiscal
agent or similar officer been appointed by a court for such
12
person, or any partnership in which such person was a general
partner at or within two years before the time of such filing, or
any corporation or business association of which such person was
an executive officer at or within two years before the time of
such filing;
(b) a conviction in a criminal proceeding or a named
subject of a pending criminal proceeding (excluding traffic
violations which do not relate to driving while intoxicated or
driving under the influence);
(c) any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring
suspending or otherwise limiting such person's involvement in any
type of business, securities or banking activities; or
(d) been found guilty by a court of competent
jurisdiction in a civil action or by the U.S. Securities and
Exchange Commission ("SEC"), the Commodity Futures Trading
---
Commission ("CFTC") or state securities regulators and
----
commissions to have violated any federal or state securities or
commodities law, regulation or decree and the judgment in such
civil action or finding by the SEC, CFTC or state securities
regulators or commissions has not been subsequently reversed,
suspended or vacated.
3.8 Representations and Warranties Complete. The
---------------------------------------------
representations and warranties of the Buyer included in this
Agreement and any list, statement, document or information set
forth in, or attached to, any Schedule provided pursuant to this
Agreement or delivered hereunder, are true and complete in all
material respects and do not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained
therein not misleading, under the circumstance under which they
were made.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
-----------------------------------
During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Closing, the Company, except to the
extent that the Buyer shall otherwise consent in writing, shall
carry on its business in the usual, regular and ordinary course
consistent with past practices, in substantially the same manner
as heretofore conducted and in compliance with all applicable
laws and regulations, pay its debts and taxes when due subject to
good faith disputes over such debts or taxes, pay or perform
other material obligations when due, and use its commercially
reasonable efforts consistent with past practices and policies to
preserve substantially intact its present business organization.
ARTICLE V
ADDITIONAL AGREEMENTS
---------------------
5.1 Payment of Company Closing Obligations. Any and all
---------------------------------------
debts, liabilities or obligations of the Company, whether or not
such obligations are due at the time of Closing (including,
without limitation: (i) the Scheduled Liabilities and all fees
and expenses incurred by the Company for attorneys, accountants,
advisors and consultants in connection with the Transaction
(except for the Buyer's obligations to pay certain Compliance
Costs at the Closing as set forth in Section 5.11 hereof) and the
period prior to Closing, (ii) the consideration payable to
Kuznetsov, Xxxxxxxxx and Xxxx X. Xxxxxx under and pursuant to the
terms of the Indemnity Agreement, (iii) any and all liabilities
and obligations of the Company incurred by the Company through
and including the date of Closing which are not included in the
Disbursement Schedule (as defined below), (iv) any Taxes related
to the period prior to the Closing or payable under the 2006 Tax
13
Returns, as defined below (including any Taxes, fees and costs
associated with the surrender of any certificate of authority to
do business as a foreign corporation), (v) the Company's
Compliance Costs (as defined in Section 5.11 hereof), and (vi)
any costs and expenses incurred by the Company in connection with
the transactions contemplated hereunder (including, without
limitation, all costs and expenses related to the preparation,
filing and mailing of the Information Statement, as defined
below)(collectively, the "Company Closing Obligations"), shall be
---------------------------
paid at Closing from the proceeds of the Purchase Price deposited
in the Escrow Account. The Company shall prepare the
Disbursement Schedule identifying each Company Closing
Obligation, the name of the payee and the amount of each
obligation, together with a copy of any invoices related thereto
("Disbursement Schedule") and shall, at least two (2) business
----------------------
days prior to the Closing, deliver the final thereof to the
Escrow Agent and the Buyer, which Disbursement Schedule shall be
subject to the Buyer's acceptance and approval but only insofar
as the Disbursement Schedule reflects a full and complete
satisfaction and payment of all Company Closing Obligations at
Closing (other than those obligations for which proceeds from the
Purchase Price will be held by the Escrow Agent in the Additional
Closing Escrow as provided by Section 3(a) of the Indemnity
Agreement).
5.2 Resignations and Appointments of Company's Officers
-----------------------------------------------------
and Directors. At or prior to Closing, the Company shall deliver
-------------
to the Buyer resignations, in a form and substance acceptable to
the Buyer, providing for the resignation of all of the directors
and officers of the Company effective as of the Closing (the
"Closing Resignations"). At or prior to Closing, the Company
---------------------
shall deliver to the Buyer duly adopted resolutions, in a form
and substance acceptable to the Buyer, providing for the
appointment of Xxxxx X. Xxxxxxx to serve as the sole director,
President, Treasurer and Secretary of the Company, each effective
as of the Closing (the "Closing Appointments").
--------------------
5.3 Undertaking by Company Accountants. At or prior to
----------------------------------
Closing, the Company shall obtain, and deliver to the Buyer,
an undertaking from the Company's accountants, Xxxxx Xxxxx, CPA
("Accountant"), in a form and substance satisfactory to the
----------
Buyer, providing that: (i) the Accountant agrees to an engagement
with Company to serve as its registered public accounting firm
following the Closing for purposes of the Company's ongoing
reporting requirements under the Exchange Act including, without
limitation, the filing of Forms 10-QSB and 10-KSB, at the rates
and charges acceptable to the Buyer, (ii) the Accountant is duly
registered with the U.S. Public Company Accounting Oversight
Board ("PCAOB"), and (iii) the Accountant shall provide its
-----
consent to the use of its audited financial statements and
accompanying report in any regulatory filing by the Company prior
to or following the Closing ("Undertaking").
-----------
5.4 Intentionally Omitted.
---------------------
5.5 Other Actions; Due Diligence Schedule. The Buyer and
-------------------------------------
the Company shall cooperate with each other and use their
respective reasonable best efforts to take or cause to be taken
all actions, and do or cause to be done all things, necessary,
proper or advisable on their part under this Agreement and
applicable laws to consummate the Transaction and the other
transactions contemplated hereby by or before March 23, 2007,
including preparing and filing as soon as practicable all
documentation to effect all necessary notices, reports and other
filings, and obtaining as soon as practicable all consents,
registrations, approvals, permits and authorizations necessary or
advisable to be obtained from any third party and/or any
Governmental Entity in order to consummate the Transaction or any
of the other transactions contemplated hereby. The Company shall
provide the Buyer with all reasonably requested due diligence
materials on or before March 14, 2007. The Buyer shall provide
written notice to the Company of its acceptance or rejection of,
or objection to, the due diligence materials provided by the
Company on or before March 16, 2007. In the event of any Buyer's
objection or rejection made in a timely manner, the Company shall
in good faith and using its commercially reasonable efforts
attempt to cure the objection or rejection on or before March 23,
2007. If any rejection or objection shall not have been cured by
the Company or waived by the Buyer on or before March 23, 2007,
14
either the Buyer or the Company may elect to terminate this
Agreement by written notice thereof to the other party and, upon
delivery of said notice, this Agreement shall terminate forthwith
and be of no further force or effect and the Deposit shall be
promptly returned to the Buyer.
5.6 Confidentiality; Access to Information. Each party
---------------
agrees to maintain and hold in strict confidence any material,
non-public information provided by any other party in connection
with transactions contemplated hereunder. The Company shall
afford the Buyer and its financial advisors, accountants, counsel
and other representatives reasonable access during normal
business hours, upon reasonable notice, to the properties, books,
records and personnel of the Company and its Subsidiaries during
the period prior to the Closing to obtain all information
concerning the business, including financial condition,
properties, results of operations and personnel of the Company
and its Subsidiaries, as the Buyer may reasonably request. No
information or knowledge obtained by the Buyer in any
investigation pursuant to this Section 5.6 will affect or be
deemed to modify any representation or warranty contained herein
or the conditions to the obligations of the parties to consummate
the Transaction.
5.7 No Solicitation. Other than with respect to the
----------------
Transaction, the Company agrees that it shall not, and shall
direct and use its reasonable best efforts to cause its officers,
directors, employees, representatives, agents, or affiliates
(including, but not limited to any investment banker, attorney,
or accountant retained by the Company) to, directly or
indirectly, solicit, knowingly encourage, initiate discussions or
negotiations with, or knowingly provide any nonpublic information
to, any corporation, partnership, person, or other entity or
group concerning any proposed Alternative Transaction (as defined
below), or otherwise knowingly facilitate any effort or attempt
to make or implement an Alternative Transaction. For purposes of
this Agreement, the term "Alternative Transaction" shall mean any
of the following involving the Company or any subsidiary: (i) any
tender offer, exchange offer, merger, consolidation, share
exchange, business combination or similar transaction involving
capital stock of the Company; (ii) any transaction or series of
related transactions pursuant to which any person or entity (or
its shareholders), (a "Third Party") acquires shares (or
securities exercisable for or convertible into shares)
representing more that 20% of the outstanding shares of any class
of capital stock of the Company; or (iii) any sale, lease,
exchange, licensing, transfer or other disposition pursuant to
which a Third Party acquires control of more than 20% of the
assets (including, but not limited to, intellectual property
assets) of the Company (determined by reference to the fair
market value of such assets), in a single transaction or series
of related transactions. The Company shall immediately terminate
all discussions with Third Parties concerning any proposed
Alternate Transaction, and will request that such Third Parties
promptly return any confidential information furnished by the
Company in connection with any proposed Alternative Transaction.
5.8 Public Disclosure. The Buyer and the Company shall
-----------------
consult with each other and agree in writing before issuing any
press release or otherwise making any public statement with
respect to the Transaction or this Agreement and will not
issue any such press release or make any such public statement
prior to such consultation. Upon the execution of this Agreement,
the Company will file a Current Report on Form 8-K announcing
the execution of this Agreement, which Form 8-K shall be
acceptable to the Buyer.
5.9 Business Records. At Closing, the Company shall
-----------------
deliver to Buyer all records and documents relating to the
Company, wherever located, including, without limitation, books,
records, supplier and customer lists and files, government
filings, the Returns, consent decrees, orders, and
correspondence, financial information and records, electronic
files containing any financial information and records, and other
documents used in or associated with the Company ("Business
--------
Records").
-------
15
5.10 Ownership Records; Transfer Agent Undertaking. At
------------------------------------------------
Closing, the Company shall deliver to Buyer a full and complete
listing of all stockholders of the Company, dated within three
(3) business days prior to Closing, from and certified by the
Transfer Agent showing the name and address of each stockholder,
the number of shares owned by each stockholder, and the
certificate number and issue dates for the shares owned by each
stockholder. At or prior to Closing, the Company shall obtain,
and deliver to the Buyer, an undertaking from the Transfer Agent,
in a form and substance satisfactory to the Buyer, stating the
amount of any and all fees and charges owed to Transfer Agent by
the Company for services rendered prior to Closing together with
a copy of the current agreement in place between the Company and
the Transfer Agent ("Transfer Agent Undertaking").
--------------------------
5.11 Compliance Matters. Prior to and as a condition of the
------------------
Closing, the Company shall: (i) update and complete the books and
records of the Company and its Subsidiaries through December 31,
2006 and deliver the same to the Buyer, (ii) prepare and have
audited by the Accountant its financial statements for the years
ended December 31, 2005 and 2006 ("2006 Audit"), (iii) prepare
----------
and file with the SEC the Company's annual report on Form 10-KSB
for the year ended December 31, 2006 (the "2006 Annual Report"),
provided that the Buyer shall prepare, with the cooperation of
the Company, the first draft of the Annual Report, and further
provided that the Company shall have the full and complete
responsibility for the accuracy and completeness of the Annual
Report, and (iv) prepare and file all of the Company's and
Subsidiary's income, franchise and other tax returns for the year
ended December 31, 2006 ("2006 Tax Returns")(collectively, the
----------------
"Compliance Matters"). Subject to the Closing of the
--------------------
transactions contemplated under this Agreement, all third party
professional costs associated with the preparation and/or filing
of the 2006 Audit and the 2006 Tax Returns shall be paid by the
Buyer (or out of additional funds contributed to the Company by
the Buyer following the Closing) ("Compliance Costs"); provided,
----------------
however, that the Company shall be responsible for the payment of
the cost of the 2006 Audit and 2006 Tax Returns in excess of
$5,000, which amount shall be paid by the Company ("Company's
---------
Compliance Costs") either at Closing from the proceeds of the
-----------------
Purchase Price proceeds deposited into the Escrow Account or the
payment thereof shall have been reserved at the Closing in the
Additional Closing Escrow as set forth in Section 3(a) of the
Indemnity Agreement.
5.12 Post-Closing Stock Issuances. Following the Closing,
----------------------------
the Company may issue up to 18,396,034 additional shares of the
Company's Common Stock ("Permitted Securities") at such price per
--------------------
share and under such terms and conditions as determined by the
Company's then current directors to: (i) the Buyer for an
additional cash contribution, (ii) to certain officers, directors
and advisors for services rendered to the Company, and (iii) to
others for cash contribution or services rendered. The Company
shall not issue additional securities of the Company in excess of
the Permitted Securities if such issuance would result in the
Current Outstanding Stock (as defined below) representing less
than 15.74% of the total outstanding shares of the Company's
equity on a fully diluted basis excluding the Underwriters
Warrants; provided, however, that this restriction and limitation
on future issuance of securities by the Company shall not apply
to the issuance of the Company's securities in connection with
its combination with a private company in a reverse merger or
reverse takeover transaction ("Reverse Merger") or any capital
--------------
raise being conducted as part of the Reverse Merger. The
provisions of this Section 5.12 shall be void and be of no full
force and effect immediately following the closing of the Reverse
Merger. It is the intention of the parties hereto that the
Current Outstanding Stock will represent not less than 15.74% of
the total outstanding shares of the Company's Common Stock
immediately prior to the issuance of securities in connection
with the Reverse Merger and related capital raise. For purposes
of this Agreement, the "Current Outstanding Stock" shall mean
-------------------------
15,744,492 shares of the Company's Common Stock which are
currently outstanding as of the date of this Agreement. Nothing
contained herein shall prevent or restrict the Company from
issuing shares of the Company's Common Stock pursuant to an
exercise of the Underwriters Warrants.
16
ARTICLE VI
CONDITIONS TO THE TRANSACTION
-----------------------------
6.1 Conditions to Obligations of Each Party to Effect the
------------------------------------------------------
Transaction. The respective obligations of each party to this
Agreement to effect the Transaction shall be subject to the
satisfaction at or prior to the Closing Date of the following
conditions:
(a) No Order. No Governmental Entity shall have
--------
enacted, issued, promulgated, enforced or entered any statute,
rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is in
effect and which has the effect of making the Transaction illegal
or otherwise prohibiting consummation of the Transaction,
substantially on the terms contemplated by this Agreement. All
waiting periods, if any, under any law in any jurisdiction in
which the Company or Buyer has material operations relating to
the transactions contemplated hereby will have expired or
terminated.
(b) Transaction Form 8-K. At least five (5) days
--------------------
prior to Closing, the Buyer shall prepare, with the assistance
and cooperation of the Company, the Form 8-K announcing the
Closing, and such other information that may be required to be
disclosed with respect to the Transaction in any report or form
to be filed with the SEC ("Transaction Form 8-K"), which shall be
--------------------
in a form acceptable to the Company and in a format acceptable
for XXXXX filing. At the Closing, the Company shall file the
Transaction Form 8-K with the SEC.
6.2 Additional Conditions to Obligations of the Company.
-----------------------------------------------------
The obligations of the Company to consummate and effect the
Transaction shall be subject to the satisfaction at or prior to
the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by the Company:
(a) Representations and Warranties. Each
------------------------------
representation and warranty of the Buyer contained in this
Agreement (i) shall have been true and correct as of the date of
this Agreement and (ii) shall be true and correct on and as of
the Closing Date with the same force and effect as if made on the
Closing Date. The Company shall have received a certificate
with respect to the foregoing signed on behalf of the Buyer by an
authorized manager of the Buyer ("Buyer Closing Certificate").
--------------------------
(b) Agreements and Covenants. The Buyer shall have
------------------------
performed or complied in all material respects with all
agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing Date,
except to the extent that any failure to perform or comply (other
than a willful failure to perform or comply or failure to
perform or comply with an agreement or covenant reasonably
within the control of the Buyer) does not, or will not,
constitute a Material Adverse Effect with respect to the
Buyer taken as a whole, and the Company shall have received the
Buyer Closing Certificate to such effect.
(c) Other Deliveries. At or prior to Closing, the
-----------------
Buyer shall have delivered to the Company: (i) the resolutions
by the Buyer's board of managers approving this Agreement and the
transactions contemplated hereunder, (ii) the duly executed
Registration Rights Agreement, and (iii) such other documents or
certificates as shall reasonably be required by the Company and
its counsel in order to consummate the transactions contemplated
hereunder. At or prior to the Closing, the Buyer shall have
delivered the Purchase Price (less the amount of the Deposit) to
the Escrow Agent, which Purchase Price shall be handled and
disbursed in accordance with Section 5.1 hereof and in accordance
with the terms and conditions of the Escrow Agreement.
17
6.3 Additional Conditions to the Obligations of the Buyer.
------------------------------------------------------
The obligations of the Buyer to consummate and effect the
Transaction shall be subject to the satisfaction at or prior to
the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by the Buyer:
(a) Representations and Warranties.
Each representation and warranty of the Company contained
in this Agreement (i) shall have been true and correct as of the
date of this Agreement and (ii) shall be true and correct on and
as of the Closing Date with the same force and effect as if made
on and as of the Closing. The Buyer shall have received a
certificate with respect to the foregoing signed on behalf of
the Company with respect to the warranties and representations
made by the Company under this Agreement ("Company Closing
---------------
Certificate").
-----------
(b) Agreements and Covenants. The Company shall have
------------------------
performed or complied in all material respects with all
agreements and covenants required by this Agreement to be
performed or complied with by the Company at or prior to the
Closing Date except to the extent that any failure to perform
or comply (other than a willful failure to perform or comply or
failure to perform or comply with an agreement or covenant
reasonably within the control of the Company) does not, or will
not, constitute a Material Adverse Effect on the Company, and the
Buyer shall have received the Closing Certificate to such effect.
(c) Due Diligence; Company Disclosure Schedules. The
-------------------------------------------
Buyer shall have completed its due diligence investigation and
review of the Company in accordance with the provisions and
schedule set forth in Section 5.5 hereof. The Company shall have
delivered the disclosure schedules under Article II to the Buyer,
and such disclosure schedules are reasonably satisfactory to the
Buyer.
(d) Cancellation and Termination of Options and
------------------------------------------------
Contracts. The Company shall have delivered to the Buyer: (i)
---------
duly executed Option Cancellation Agreements, and (ii) written
instruments evidencing that all agreements, contracts and
commitments under which the Company is a party or under which the
Company has any obligations have been cancelled or terminated
without any further liability to the Company.
(e) 14f-1 Stockholder Notice. At least ten (10) days
------------------------
prior to Closing, the Company shall have filed with the SEC the
Schedule 14f-1 information statement ("Information Statement"),
----------------------
in form acceptable to the Buyer, shall have mailed the
Information Statement to each of the stockholders of the Company,
and shall have otherwise complied with all of the requirements
under the Exchange Act with respect to the change of control
contemplated by this Agreement and the Transaction.
(f) Release Agreement; Indemnity Agreement. The
-----------------------------------------
Company and the Principals have executed and delivered to the
Buyer the Release Agreement, and the Company, Kuznetsov,
Xxxxxxxxx and Xxxx X. Xxxxxx shall have executed the Indemnity
Agreement.
(g) Broker-Dealer License Withdrawal. The Company and
--------------------------------
its Subsidiary shall have filed any required documents with the
NASD and the SEC to terminate and withdraw the broker-dealer
license and registration held by the Subsidiary ("Withdrawal"),
and such Withdrawal shall have become effective without further
action by or liability to the Company or the Subsidiary.
(h) Corporate Matters. The Company shall have
------------------
delivered to the Buyer a certified copy of the Company's
certificate of incorporation, with any amendments thereto, a
certified copy of the Company's bylaws, with any amendments
thereto, a certificate of good standing in Delaware.
(i) Legal Opinions. The Company's legal counsel shall
--------------
have issued and delivered to the Transfer Agent, with a copy to
the Buyer, the Transfer Agent Opinion. The Company's legal
18
counsel shall have issued and delivered to the Buyer its legal
opinion ("Legal Opinion") regarding (i) the corporate existence
and status of the Company, (ii) the authorization and
enforceability of this Agreement, the Registration Rights
Agreement, the Release Agreement, the Indemnity Agreement and the
transactions contemplated thereunder, and (iii) that the Shares
issued to the Buyer under this Agreement are duly authorized,
validly issued, fully paid and nonassessable and have been issued
in compliance with all Legal Requirements.
(j) Stock Option Plans; S-8 Registration Statement.
------------------------------------------------
The Company shall have terminated any and all stock option or
stock incentive plans previously adopted by the Company and shall
have withdrawn any S-8 Registration Statement currently in
effect.
(k) Taxes. All Taxes related to the period prior to
-----
the Closing shall be paid by the Company either at Closing from
the proceeds of the Purchase Price proceeds deposited into the
Escrow Account or the payment thereof shall have been reserved at
the Closing in the Additional Closing Escrow as set forth in
Section 3(a) of the Indemnity Agreement.
(l) Other Deliveries. At or prior to Closing,
----------------
the Company shall have delivered to the Buyer: (i) a copy of the
duly executed direction letter to the Transfer Agent as
contemplated by Section 1.4 hereof, (ii) the resolutions by the
Company's board of directors approving this Agreement and the
transactions contemplated hereunder, (iii) the duly executed
Registration Rights Agreement, and (vi) such other documents or
certificates as shall reasonably be required by the Buyer and its
counsel in order to consummate the transactions contemplated
hereunder. At or prior to the Closing, the Company shall have
caused the Certificates to delivered to the Escrow Agent, which
Certificates shall be delivered by the Escrow Agent to the Buyer
in accordance with the terms and conditions of the Escrow
Agreement.
ARTICLE VII
SURVIVAL
--------
Except for the provisions of Section 5.12 hereof, all
representations, warranties, agreements and covenants contained
in or made pursuant to this Agreement, or any Schedule hereto or
thereto or any certificate delivered at the Closing, shall not
survive the Closing, and no claims by virtue of the breach such
representations, warranties, agreements and covenants shall be
made after the Closing; provided, however, that nothing contained
in the Agreement shall affect, limit or modify the obligations of
Kuznetsov, Xxxxxxxxx and Xxxx X. Xxxxxx and the rights of the
Company under the Indemnity Agreement, which Indemnity Agreement
shall be separately enforceable against Kuznetsov, Xxxxxxxxx and
Xxxx X. Xxxxxx following the Closing in accordance with the terms
and conditions thereof.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
8.1 Termination. This Agreement may be terminated at any
-----------
time prior to the Closing:
(a) by mutual written agreement of the Buyer and the
Company;
19
(b) by either the Buyer or the Company if the
Transaction shall not have been consummated for any reason by
March 23, 2007 or such other date mutually agreeable to the Buyer
and the Company,; or
(c) by either the Buyer or the Company if a
Governmental Entity shall have issued an order, decree or ruling
or taken any other action, in any case having the effect of
permanently restraining, enjoining or otherwise prohibiting the
Transaction, which order, decree, ruling or other action is final
and nonappealable.
(d) by either the Buyer or the Company in accordance
with the provisions of Section 5.5 hereof.
8.2 Notice of Termination; Effect of Termination. Any
----------------------------------------------
termination of this Agreement under Section 8.1 above will be
effective immediately upon the delivery of written notice of the
terminating party to the other parties hereto. In the event of
the termination of this Agreement as provided in Section 8.1,
this Agreement shall be of no further force or effect and the
Transaction shall be abandoned, except (i) as set forth in this
Section 8.2, Section 8.3 and Article IX (General Provisions),
each of which shall survive the termination of this Agreement,
(ii) as set forth in Section 1.7 hereof with respect to the
handling of the Deposit, and (ii) nothing herein shall relieve
any party from liability for any intentional or willful breach of
this Agreement.
8.3 Fees and Expenses. All fees and expenses incurred in
-----------------
connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses whether
or not the Transaction is consummated. Without limiting the
foregoing sentence, the Company shall be responsible for all
costs associated with the Information Statement, which shall be
paid at Closing.
8.4 Amendment. This Agreement may be amended by the
---------
parties hereto at any time by execution of an instrument in
writing signed on behalf of each of the Buyer and the Company.
8.5 Extension; Waiver. At any time prior to the Closing,
-----------------
any party hereto may, to the extent legally allowed, (i) extend
the time for the performance of any of the obligations or other
acts of the other parties hereto, (ii) waive any inaccuracies
in the representations and warranties made to such party
contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions
for the benefit of such party contained herein. Any agreement on
the part of a party hereto to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed
on behalf of such party. Delay in exercising any right under
this Agreement shall not constitute a waiver of such right.
ARTICLE IX
GENERAL PROVISIONS
------------------
9.1 Notices. All notices and other communications
-------
hereunder shall be in writing and shall be deemed given if
delivered personally or by commercial delivery service, or sent
via telecopy (receipt confirmed) to the parties at the following
addresses or telecopy numbers (or at such other address or
telecopy numbers for a party as shall be specified by like
notice):
20
(a) if to the Buyer, to:
KI Equity Partners VI, LLC
Attn: Xxxxxxx X. Xxxxxxx, Manager
0000 XXX Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
(000) 000-0000 fax
(b) if to the Company (prior to Closing), to:
Xxxx X. Xxxxxx
00 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
(000) 000-0000 fax
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxx, Esq.
Xxxxxx Xxxxxxx Xxxxxxx, P.A.
000 XX 0xx Xxxxxx
Xxxx Xxxxxxxxxx, XX 00000
(000) 000-0000 fax
9.2 Interpretation.
--------------
(a) When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement
unless otherwise indicated. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of
this Agreement. Unless otherwise indicated the words "include,"
"includes" and "including" when used herein shall be deemed in
each case to be followed by the words "without limitation." The
table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. When reference is
made herein to "the business of" an entity, such reference shall
be deemed to include the business of all direct and indirect
Subsidiaries of such entity. Reference to the Subsidiaries of an
entity shall be deemed to include all direct and indirect
Subsidiaries of such entity.
(b) For purposes of this Agreement, the term "Material
--------
Adverse Effect" when used in connection with an entity means any
--------------
change, event, violation, inaccuracy, circumstance or effect,
individually or when aggregated with other changes, events,
violations, inaccuracies, circumstances or effects, that is
materially adverse to the business, assets (including intangible
assets), revenues, financial condition or results of operations
of such entity and its Subsidiaries, if any, taken as a whole (it
being understood that neither of the following alone or in
combination shall be deemed, in and of itself, to constitute a
Material Adverse Effect: (a) changes attributable to the public
announcement or pendency of the transactions contemplated hereby,
(b) changes in general national or regional economic conditions
or (c) changes affecting the industry generally in which Company
or Buyer operates).
(c) For purposes of this Agreement, the term "Person"
shall mean any individual, corporation (including any non-profit
corporation), general partnership, limited partnership, limited
liability partnership, joint venture, estate, trust, company
(including any limited liability company or joint stock company),
firm or other enterprise, association, organization, entity or
Governmental Entity.
21
(b) For purposes of this Agreement, all monetary
amounts set forth herein are referenced in United States dollars,
unless otherwise noted.
9.3 Counterparts. This Agreement may be executed in one
------------
or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when one or more
counterparts have been signed by each of the parties and
delivered to the other party, it being understood that all
parties need not sign the same counterpart. Facsimile and
electronic signatures to this Agreement by the parties shall be
accepted and shall be treated as original signatures hereto.
9.4 Entire Agreement; Third Party Beneficiaries. This
-------------------------------------------
Agreement and the documents and instruments and other agreements
among the parties hereto as contemplated by or referred to
herein, including the Schedules hereto (a) constitute the entire
agreement among the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the
subject matter hereof, including that certain non-binding
proposal by and among the Company and KI Equity Partners IV, LLC
dated November 28, 2006, as amended and (b) are not intended
to confer upon any other person any rights or remedies hereunder
(except as specifically provided in this Agreement).
9.5 Severability. In the event that any provision of this
------------
Agreement, or the application thereof, becomes or is declared by
a court of competent jurisdiction to be illegal, void or
unenforceable, the remainder of this Agreement will continue in
full force and effect and the application of such provision to
other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The
parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable
provision.
9.6 Other Remedies; Specific Performance. Except as
------------------------------------
otherwise provided herein, any and all remedies herein expressly
conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or
equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy.
The parties hereto agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties
shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms
and provisions hereof in any court of the United States or any
state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
9.7 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Colorado,
USA, regardless of the laws that might otherwise govern under
applicable principles of conflicts of law thereof.
9.8 Rules of Construction. The parties hereto agree that
---------------------
they have been represented by counsel during the negotiation and
execution of this Agreement and, therefore, waive the application
of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be
construed against the party drafting such agreement or document.
9.9 Assignment. No party may assign either this Agreement
----------
or any of its rights, interests, or obligations hereunder without
the prior written approval of the other parties. Subject to the
first sentence of this Section 9.9, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
22
9.10 Arbitration. Any disputes or claims arising under or in
-----------
connection with this Agreement or the transactions contemplated
hereunder shall be resolved by binding arbitration. Notice of a
demand to arbitrate a dispute by either party shall be given in
writing to the other at their last known address. Arbitration
shall be commenced by the filing by a party of an arbitration
demand with the American Arbitration Association ("AAA") in its
---
office in Denver, Colorado USA. The arbitration and resolution
of the dispute shall be resolved by a single arbitrator appointed
by the AAA pursuant to AAA rules. The arbitration shall in all
respects be governed and conducted by applicable AAA rules, and
any award and/or decision shall be conclusive and binding on the
parties. The arbitration shall be conducted in Denver, Colorado.
The arbitrator shall supply a written opinion supporting any
award, and judgment may be entered on the award in any court of
competent jurisdiction. Each party shall pay its own fees and
expenses for the arbitration, except that any costs and charges
imposed by the AAA and any fees of the arbitrator for his
services shall be assessed against the losing party by the
arbitrator. In the event that preliminary or permanent
injunctive relief is necessary or desirable in order to prevent a
party from acting contrary to this Agreement or to prevent
irreparable harm prior to a confirmation of an arbitration award,
then either party is authorized and entitled to commence a
lawsuit solely to obtain equitable relief against the other
pending the completion of the arbitration in a court having
jurisdiction over the parties. All rights and remedies of the
parties shall be cumulative and in addition to any other rights
and remedies obtainable from arbitration.
[Remainder of this page intentionally left blank.]
23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the date first written above.
KI Equity Partners VI, LLC
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------
Xxxxxxx X. Xxxxxxx, Manager
IPORUSSIA, INC.
By: /s/ Xxxxxxxx X. Xxxxxxxxx
------------------------------
Xxxxxxxx X. Xxxxxxxxx, CEO
and President
By: /s/ Xxxx X. Xxxxxx
-------------------------------
Xxxx X. Xxxxxx, Executive Vice
President, Secretary and
Treasurer
24
Index of Exhibits
Exhibit A - Release Agreement
Exhibit B - Indemnity Agreement
Exhibit C - Registration Rights Agreement
Exhibit D - Escrow Agreement
Schedules
---------
Disclosure Schedules by the Company
25
