EXHIBIT 2.1
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (herein, together with all Exhibits,
"Agreement") is entered in to as of November 10, 2006 by and between Citytalk,
Inc., a Nevada corporation ("Citytalk") and Semotus Solutions, Inc., a Nevada
corporation ("Semotus").
This Agreement sets forth the terms and conditions upon which Citytalk will
merge with and into Semotus (the "Merger"), pursuant to an Agreement and Plan of
Merger (the "Merger Agreement") in substantially the form attached hereto as
Exhibit A, which provides, among other things, for the conversion and exchange
of all issued and outstanding shares of $.001 par value common stock of Citytalk
("Citytalk Stock") into an aggregate of four hundred eighteen million, seven
hundred forty four thousand (418,744,000) shares of voting $.01 par value common
stock of Semotus ("Semotus Common Stock") (together, the "Merger
Consideration").
The parties intend the merger to qualify as a tax-free reorganization under
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code")
In consideration of the mutual agreement and covenants contained
herein, Semotus and Citytalk agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms (whether used in singular or
plural forms) shall have the following meanings:
"Charter Documents" shall mean the Articles or Certificate of
Incorporation and the Bylaws of the applicable corporation.
"Closing" means the delivery and execution of all monies, common stock,
agreements, consents, exhibits and any other documents to and from all parties.
"Contract" means any contract, mortgage, deed of trust, bond,
indenture, lease, license, note, franchise, certificate, option, warrant, right,
or other contract, commitment, instrument, document, agreement, obligation,
binding arrangement, binding understanding, or binding undertaking, whether
written or oral, that has not been terminated and that contains any continuing
obligation or liability of a party, including any invoice or purchase order made
or issued in the ordinary course of business.
"GAAP" means generally accepted accounting principles, as that term is
defined by the American Institute of Certified Public Accountants.
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"Indemnified Liabilities" means any and all claims, actions, causes of
action, demands, losses, liabilities, obligations, losses, damages, penalties
and expenses of any kind or nature whatsoever with respect to or arising out of
this Agreement and regardless of whether claimed or alleged by any of the
parties hereto or any third party, the transaction, the actual or proposed
execution, delivery, enforcement and performance of this Agreement or the
ancillary documents, and/or otherwise arising directly or indirectly, by reason
of or resulting from any breach by the parties of any of their representations,
warranties, covenants, or agreements contained in this Agreement or in any
certificate delivered pursuant hereto, regardless of whether discovered prior to
or after the Closing and regardless of whether the Closing occurs.
"Intellectual Property" means, collectively, all of the following
rights in any and all jurisdictions throughout the world, whether or not filed,
perfected, registered or recorded and whether now or hereafter existing, filed,
issued or acquired: (i) issued patents, pending patent applications, patent
disclosures and patent rights, including any and all continuations,
continuations-in-part, divisionals, provisionals, resissues, reexaminations,
utility, model and design patents or any extensions thereof, inventions,
invention disclosures, discoveries and improvements, whether patentable or not;
, (ii) any rights in trademarks, trademark registrations and applications
therefor, service marks, service names, trade dress, logos, trade names,
corporate names, and other source identifiers, including any goodwill symbolized
by any of the foregoing; (iii) works of authorship and rights associated with
works of authorship, including copyrights, copyright registrations and copyright
applications; (iv) rights related to trade secrets (including those trade
secrets identified in the Uniform Trade Secrets Act and under corresponding
foreign statutory and common law), confidential business and technical
information and know-how; (v) Internet domain names, URLs and any goodwill
associated therewith and any other rights relating thereto granted by any
governmental or quasi-governmental authority, including Internet domain name
registrars; (vi) claims, causes of action, defenses and rights to xxx for past
infringement related to the enforcement of any of the foregoing; and (vii) all
other intellectual or proprietary rights in any jurisdictions throughout the
world.
"Knowledge" of Semotus of or with respect to any matter means that any
of the executive officers or directors of Semotus has, or after due inquiry and
investigation would have, actual awareness or knowledge of such matter, and
"Knowledge" of Citytalk of or with respect to any matter means that any of the
executive officers or directors of Citytalk has, or after due inquiry and
investigation would have, actual awareness or knowledge of such matter.
"Legal Requirement" means any federal, state, local, municipal, foreign
or other law, statute, constitution, principle of common law, resolution,
ordinance, code, edict, decree, judgment, injunction, rule, regulation, order,
technical or other standard, requirement, or procedure enacted, adopted,
promulgated, implemented, applied, followed or otherwise put into effect by any
governmental authority.
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"Lien" means any security agreement, financing statement filed with any
governmental authority, conditional sale statement filed with any governmental
authority, conditional sale or other title retention agreement, any lease,
consignment or bailment given for purposes of security, any lien, mortgage,
indenture, pledge, option, encumbrance, adverse interest, constructive trust or
other trust, claim, attachment, exception to or defect in title or other
ownership interest (including but not limited to reservations, rights of entry,
possibilities of reverter, encroachments, easement, rights-of-way, restrictive
covenants leases and licenses) of any kind, which otherwise constitutes an
interest in or claim against property, whether arising pursuant to any Legal
Requirement, Contract or otherwise.
"Material Adverse Effect" of a company means any adverse change or
effect that when taken individually or together with all other adverse changes
and effects, is or is reasonably likely to be materially adverse to the
business, operations, results of operations or financial condition of such
company.
"Software" of a party means all material computer software owned,
controlled or licensed by or on behalf of such party and used, manufactured,
distributed, sold, licensed or marketed by such party.
"Surviving Corporation" means Semotus Solutions, Inc.
"Tax" (including, with correlative meaning, the terms "Taxes" and
Taxable") includes all federal, state, local and foreign income tax, profits,
franchise, gross receipts, environmental, customs duty, capital stock,
communications services, severance, stamp, payroll, sales, employment,
unemployment, disability, use, property, withholding, excise, production, value
added, occupancy and other taxes, duties or assessments of any nature
whatsoever, together with all interest, penalties and additions imposed with
respect to such amounts and any interest in respect to such penalties and
additions, and includes any liability for taxes of another person by contract,
as a transferee or successor, under Treasury Regulation Section 1.1502-6 or
analogous state, local, or foreign law provision, or otherwise.
"Tax Return" includes all returns and reports (including elections,
declarations, disclosures, schedules, estimates and information returns)
required to be supplied to a Tax authority relating to Taxes.
"Treasury Regulations" means the regulations prescribed under the Code.
ARTICLE 2
MERGER
Section 2.1 Merger. Subject to the terms and conditions contained in this
Agreement, Citytalk will be merged by statutory merger with and into Semotus
pursuant to the Merger Agreement at a Closing at the Effective Time of the
Merger as defined in the
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Merger Agreement. In the Merger, all shares of Citytalk Stock issued and
outstanding immediately prior to the effective time of the Merger will be
converted into and exchanged on a pro rata basis for a total of four hundred
eighteen million, seven hundred forty four thousand (418,744,000) common shares
of Semotus (the "Semotus Shares").
Section 2.2 Name Change. The name of the Surviving Corporation shall be amended
to be Citytalk, Inc. or a name to be determined solely by the Board of Citytalk,
Inc.
Section 2.3 Amendment to Articles of Incorporation. The Articles of
Incorporation of Semotus shall be amended prior to the Closing to increase the
number of authorized common shares from 50,000,000 common shares to 750,000,000
common shares.
Section 2.4 Management Contracts. At the Closing, the Surviving Corporation
shall enter into a three year employment contract with Xxxxxxx XxXxxx, current
chief executive officer of Semotus. The employment contract shall provide that
Xx. XxXxxx shall receive an annual salary of $240,000. Additionally, the
employment contract shall provide that if the Surviving Corporation is sold or
dissolved, Xx. Xxxxxx shall receive any remaining amounts due pursuant to the
employment contract.
As an inducement for Xx. XxXxxx to enter into the employment contract, assume
the position of Vice Chairman of the Surviving Corporation and continue running
the business operations of the Semotus division of the Surviving Corporation,
Citytalk shall issue to Xx. XxXxxx prior to the Closing a certain number of
shares of common stock of Citytalk, which will equal five percent (5%) of the
total outstanding shares of common stock of the Surviving Corporation at
Closing.
The Surviving Corporation shall also enter into a one year employment contract
with Xxxxxx XxXxxx. The employment contract shall provide for termination if the
Surviving Corporation is sold or dissolved.
Section 2.5 The Closing.
(a) Subject to the terms of this Agreement, the Closing of the
transactions contemplated hereby shall take place at the offices
of Citytalk or a mutually agreed upon venue at such time and date
as the parties may mutually agree (the "Closing Date").
(b) At the Closing, Semotus shall deliver to Citytalk:
i. The Merger Consideration;
ii. Semotus's officers' certificate referred to in Section
6.1(d);
iii. A certified copy of the Articles of Incorporation of
Semotus, evidencing the increase in Semotus' authorized
common stock set forth in Section 2.3; and
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iv. Such other instruments and documents, in form and
substance reasonably acceptable to Citytalk, as may be
necessary to effect the Closing.
(c) At the Closing, Citytalk shall deliver to Semotus:
i. Citytalk's officers' certificate referred to in Section
6.2(d);
ii. The stock certificates evidencing shares of the common
stock of Citytalk;
iii. A certified copy of the Charter Documents of Citytalk,
and a good standing certificate for Citytalk issued by
the Secretary of State of the State of Nevada; and
iv. Such other instruments and documents, in form and
substance reasonably acceptable to Semotus, as may be
necessary to effect the Closing.
Section 2.6 Mechanics for Closing Merger. At the Closing, each party shall
execute and deliver, or cause to be executed and delivered to the other party,
all monies, common stock, documents and instruments, in form and substance
satisfactory as reasonably required to carry out or evidence the terms of this
Agreement. Upon the approval of the shareholders of Citytalk and Semotus, the
executed Articles of Merger shall be filed with the Nevada Secretary of State.
Section 2.7 Effects of the Merger. The Merger shall have the effects set forth
in the Nevada Revised Statutes (the "NRS"). Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, except as otherwise
provided herein, all of the property, rights, privileges, powers and franchises
of Citytalk shall rest in the Surviving Corporation, and all debts, liabilities
and duties of Citytalk shall become the debts, liabilities and duties of the
Surviving Corporation.
Section 2.8 Effect of the Merger on Capital Stock. At the effective time of the
Merger (the "Effective Time"), by virtue of the Merger and without any action on
the part of the shareholders, or the Board of Directors of Semotus or Citytalk,
(i) all of the Citytalk Stock held by the shareholders of Citytalk (the
"Citytalk Shareholders") (other than Dissenting Shares) shall be converted into
and represent the right to receive, on a pro rata basis, the Merger
Consideration, rounded to the nearest whole share, and (ii) any other securities
of Citytalk or any shares that are owned by Citytalk as treasury stock, shall be
canceled and retired and shall cease to exist and no shares of Semotus shall be
delivered in exchange therefore. Certificates representing Semotus' common
shares will be delivered to the Citytalk Shareholders upon surrender to Semotus
of valid stock certificates representing their Citytalk Stock. As used
throughout this Agreement, the "pro rata basis" shall be determined by giving
effect to all outstanding shares (other than treasury shares) of Citytalk's
common stock.
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Section 2.9 Surrender of Certificates. The procedures for surrendering the
Citytalk Stock for Merger Consideration pursuant to the Merger are as follows:
(a) Expedited Payment. Citytalk Shareholders who desire to receive at
the Closing certificates representing the number of Semotus Shares allocable to
their Citytalk Stock shall: (a) surrender to Semotus at the Closing the
certificates representing the Citytalk Stock for which they desire expedited
exchange; and (b) provide to Semotus, at least two business days before the
Closing Date, a copy of the certificate or certificates that they intend to so
surrender. Semotus shall deliver to each such Shareholder at the Closing a
certificate representing such Semotus Shares on a pro rata basis in exchange for
the surrendered certificates representing Citytalk Stock.
(b) No Fractional Shares. No certificate or scrip representing
fractional Semotus Shares shall be issued upon the surrender for exchange of
Citytalk Shares, and such fractional share interest will not entitle the owner
thereof to vote or to any other rights of a stockholder of Semotus.
Notwithstanding any other provision of this Agreement, each holder of Shares
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of a Semotus Share (after taking into account all
Certificates delivered by such holder) shall be rounded to the nearest whole
Semotus Share.
(c) Certificates representing the Semotus Shares of Common Stock will
bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER SAID ACT OR UNLESS AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE."
Section 2.10 Shareholder Meetings. Each of Citytalk and Semotus, and its
respective Board of Directors shall take all action necessary in accordance with
the NRS and its respective Charter Documents to duly call and hold, as soon as
reasonably practicable after the date hereof, a meeting of the company's
shareholders (the "Special Meeting") for the purpose of considering and voting
upon the approval and adoption of (a) this Agreement, (b) the Merger and (c) any
other action or transaction by the company contemplated by this Agreement that
requires approval of the shareholders under the company's Charter Documents or
the NRS (the "Merger Proposals"). The only matters each party shall propose to
be acted on by the shareholders at the Special Meeting shall be the Merger
Proposals. Each company's Board of Directors will recommend, subject to its
fiduciary obligations to its shareholders under all applicable laws, that the
shareholders vote in favor of approval of the Merger Proposals and each company
shall use its commercially reasonable best efforts to secure the votes of its
shareholders required by the NRS and its company's Charter Documents to effect
the Merger.
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Citytalk shall also use its best efforts to obtain a statement from each of its
shareholders that such persons intend to vote all their shares in favor of the
Merger at the Special Meeting.
Section 2.11 Vote Required. The only vote of Shareholders required under the NRS
and the Charter Documents in order to approve and adopt the Merger Proposals is
the affirmative vote of a majority of the votes cast, and no other vote or
approval of or other action of holders of capital stock of either company is
required.
Section 2.12 Dissenters' Rights. Notwithstanding anything contained herein to
the contrary, any Shares held by Citytalk Shareholders who properly exercise and
perfect the dissenters' rights set forth in the NRS ("Dissenting Shares") shall
not be converted pursuant to Section 2.1, but shall instead be converted into
the right to receive the fair value of the shares as may be determined to be due
with respect to such Dissenting Shares pursuant to the provisions of the NRS.
Semotus shall have the right to control all negotiations and proceedings with
respect to the determination of the fair value of the Company Shares. Citytalk
agrees that, without the prior written consent of Semotus or as required under
the NRS, it will not voluntarily make any payment with respect to, or determine
or offer to determine, the fair value of Citytalk's Common Stock. Each holder of
Dissenting Shares (a "Dissenting Shareholder") who, pursuant to the provisions
of the NRS, becomes entitled to payment of the fair value of Citytalk Shares
shall receive payment therefor from the Surviving Corporation (but only after
the fair value therefor shall have been agreed upon or finally determined
pursuant to the provisions of the NRS). In the event that any holder of the
Company Shares fails to make an effective demand for payment or otherwise loses
his, her or its status as a Dissenting Shareholder, Semotus shall, as of the
later of the Effective Time or the occurrence of such event, issue and deliver,
upon surrender by such Dissenting Shareholder of his, her or its Certificate(s),
the Merger Consideration without interest thereon to which such Dissenting
Shareholder would have otherwise been entitled under this Agreement.
Section 2.13 Charter Documents of the Surviving Corporation. At the Effective
Time of the Merger, the Charter Documents of Semotus as in effect immediately
prior to the Effective Date shall be the Charter Documents of the Surviving
Corporation, except that the name of the Surviving Corporation shall be amended
as per this Agreement through the filing of the Articles of Merger.
Section 2.14 Further Assurances. At the Closing, Citytalk, at the request of
Semotus, shall promptly execute and deliver, or cause to be executed and
delivered, to Semotus all such documents and instruments, in form and substance
satisfactory to Semotus, as Semotus reasonably may request in order to carry out
or evidence the terms of this Agreement.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CITYTALK
Citytalk represents and warrants to Semotus that the statements contained in
Article 3 are true and complete, as of the date of this Agreement, and the
statements and Exhibits contained in Article 3 will be correct and complete as
of Closing, as follows:
Section 3.1 Organization and Qualification of Citytalk. Citytalk is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to carry on its business as it is now being conducted. Citytalk is
duly qualified to do business and is in good standing as a foreign corporation
in all jurisdictions where the nature of the property owned or leased by it, or
the nature of the business conducted by it, makes such qualification necessary
and the absence of such qualification would, individually or in the aggregate,
have a Material Adverse Effect on Citytalk.
Section 3.2 Authority. Citytalk has all requisite corporate power and authority
to execute, deliver and perform this Agreement. The execution, delivery and
performance of this Agreement by Citytalk have been duly and validly authorized
by all necessary action on the part of Citytalk. This Agreement has been duly
and validly executed and delivered by Citytalk, and is a valid and binding
obligation of Citytalk, enforceable against Citytalk in accordance with its
terms, except as such enforceability may be subject to the effects of
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting the rights of creditors and of general principles of equity.
Section 3.3 Ownership and Number of Shares of Citytalk Stock. The shareholders
listed on Exhibit 3.3 own all of the issued and outstanding shares of the
Citytalk Stock, beneficially and of record, free and clear of all liens (the
"Citytalk Shareholders"). The Citytalk Stock is not subject to, or bound or
affected by, any proxies, voting agreements, or other restrictions on the
incidents of ownership hereof. There are not, and will not be at Closing more
than thirty million (30,000,000) outstanding common shares of Citytalk.
Section 3.4 Subsidiaries. Except as disclosed on Exhibit 3.4, Citytalk does not
control or hold direct or indirect equity interests in, or hold rights to
control or acquire direct or indirect equity interests in, any corporation,
partnership, limited liability company, joint venture or other legal entity..
Section 3.5 Capitalization of Citytalk. The authorized capital stock of Citytalk
consists of one hundred million (100,000,000) shares of common stock $.0001 par
value per share, of which thirty million (30,000,000) shares are validly issued
and outstanding, fully paid and non-assessable. There are no other authorized,
issued or outstanding subscriptions, options, convertible securities, preferred
securities, warrants, calls or other rights of any kind issued or granted by, or
binding upon, Citytalk to purchase or otherwise acquire any securities of or
equity interest in Citytalk. All of the issued and outstanding shares of CTI
were issued in compliance with all applicable state and federal securities laws,
and shall remain free from any encumbrances or Liens. The Citytalk
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Stock received by Semotus at the Closing will be validly issued and outstanding,
fully paid and non-assessable. The Citytalk Stock will not be subject to, nor
bound or affected by, any proxies, voting agreements, or other restrictions on
the ownership thereof.
Section 3.6 No Conflicts; Required Consents. The execution, delivery and
performance by Citytalk of this Agreement does not and will not:
(i) conflict with or violate any provision of the Charter
Documents of Citytalk;
(ii) violate any Legal Requirements;
(iii) conflict with, violate, result in a breach of,
constitute a default under (without regard to
requirements of notice, lapse of time, or elections of
other persons, or any combination thereof) or
accelerate or permit the acceleration of the
performance required by, any Contract or Lien to which
Citytalk is a party or by which Citytalk or the assets
or properties owned or leased by it are bound or
affected;
(iv) result in the creation or imposition of any Lien
against or upon the Citytalk Stock or any of the assets
or properties owned or leased by Citytalk; or
(v) require any consent, approval, or authorization of, or
filing of any certificate, notice, application, report
or other document with, any governmental authority or
other person, except for the filing of the Merger
Agreement with the Secretary of State of Nevada.
Section 3.7 Litigation. Other than disclosed in Exhibit 3.7, there is no
litigation pending or, to Citytalk's knowledge, threatened, by or before any
governmental authority or private arbitration tribunal, against Citytalk or its
operations or assets, nor, to Citytalk's knowledge, is there any basis for any
such litigation.
Section 3.8 Compliance with Applicable Legal Requirements. Conduct by Citytalk
of its activities as currently conducted does not violate or infringe any Legal
Requirements currently in effect, or, to the knowledge of Citytalk, proposed to
become effective; and Citytalk has received no notice of any violation by
Citytalk of any Legal Requirements applicable to Citytalk or its activities as
currently conducted; and Citytalk knows of no basis for the allegation of any
such violation.
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Section 3.9 Financial Statements. Citytalk will deliver to Semotus the audited
financial statements from inception to November 15, 2006 (the "Financial
Statements") as soon as they are completed. The Financial Statements will be
prepared in accordance with GAAP applied on a consistent basis and present
fairly the financial position of Citytalk as of the date indicated.
Section 3.10 Liabilities. Citytalk has no liabilities or obligations, whether
absolute, accrued, contingent or otherwise, that are not reflected in the
Financial Statements or non-delinquent obligations for ordinary and recurring
expenses, including in the ordinary course of business of Citytalk since the
date of the Financial Statements. At Closing, Citytalk shall have no liabilities
or obligations, including state and federal tax liabilities, except as set forth
in Exhibit 3.10.
Section 3.11 Taxes.
(a) Except as set forth in Exhibit 3.11(a), all Tax Returns required
to be filed by or with respect to Citytalk have been properly and
timely filed and all such Tax Returns are complete and accurate
in all material respects. Except to the extent reserved or
reflected against on the Financial Statements, all Taxes due with
respect to such Tax Returns or which are otherwise due and
payable by Citytalk have been paid in full. All Taxes required to
be withheld and paid over by Citytalk to any relevant Tax
authority in connection with payments to employees, independent
contractors, creditors, stockholders or to third parties have
been so withheld and paid over.
(b) Except as set forth in Exhibit 3.11(b):
(i) no Tax authority in a jurisdiction where Citytalk does
not file Tax Returns has made a written claim,
assertion or threat that Citytalk is or may be subject
to tax in such jurisdiction;
(ii) no deficiencies for any tax have been threatened,
proposed, asserted or assessed against Citytalk that
have not been satisfied;
(iii) no audits or examinations with respect to Citytalk are
ongoing or have been threatened or proposed, in writing
by the Internal Revenue Service or the appropriate
state, local or foreign Tax authority;
(iv) no waivers or extensions of statutes of limitation with
respect to Taxes have been given by or requested with
respect to Citytalk;
(v) there are no Tax rulings, requests for rulings, closing
agreements relating to Citytalk that could affect the
liability for Taxes of Citytalk for any period (or
portion of a period) after the Closing; and
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(vi) no power of attorney has been granted by Citytalk with
respect to any matter relating to Taxes of Citytalk
that is currently in force.
(c) Citytalk is not a party to or liable to under any tax sharing
agreement with respect to taxes of any consolidated, combined or
unitary group other than the consolidated, combined or unitary
group disclosed in Exhibit 3.11(c). Except as set forth in
Exhibit 3.11(c), Citytalk has not with respect to any taxable
period for which the applicable statute of limitations has not
run, filed a combined consolidated or unitary tax return with
respect to any jurisdictions (foreign and domestic) in which
Citytalk has filed income tax returns for taxable periods ending
on or December 31, 1996. Citytalk will not, in the absence of a
closing agreement provided for in the Treasury Regulations under
Section 1503 of the Internal Revenue Code of 1986. (the "Code"),
trigger the recapture of any dual consolidated losses (as defined
in Section 1503 of the Code) by virtue of the transactions
contemplated by this Agreement.
(d) There are no tax Liens on any assets of Citytalk, except Liens
for taxes not yet due and payable.
Section 3.12 Absence of Certain Changes or Events. Except as set forth in
Exhibit 3.12, since the date of the Financial Statements there has not occurred:
(a) any material and adverse change in the financial condition or
operations of Citytalk;
(b) any damage, destruction or loss to or of any of the material assets
or properties owned or leased by Citytalk;
(c) the creation or attachment of any Lien against the capital stock of
Citytalk;
(d) any waiver, release, discharge, transfer, or cancellation by
Citytalk of any rights or claims of material value;
(e) any issuance by Citytalk of any securities, or any merger or
consolidation of Citytalk with any other Person, or any acquisition by Citytalk
of the business of any other Person;
(f) any incurrence, assumption or guarantee by Citytalk of any
indebtedness or liability;
(g) any declaration, setting aside or payment by Citytalk of any
dividends on, or any other distribution with respect to, any capital stock of
Citytalk or any repurchase, redemption, or other acquisition of any capital
stock of Citytalk;
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(h) (A) any payment of any bonus, profit sharing, pension or similar
payment or arrangement or special compensation to any employee of Citytalk,
except in the ordinary course of the business of Citytalk, or (B) any material
increase in the compensation payable or to become payable to any employee of
Citytalk; or
(i) the entry by Citytalk into any Contract to do any of the foregoing.
Section 3.13 Material Citytalk Contracts. As of the date of this Agreement,
Citytalk does not have except as disclosed in Exhibit 3.13:
(a) contracts evidencing or relating to any liabilities or obligations
of Citytalk, whether absolute, accrued, contingent or otherwise, or granting any
person a Lien or against any properties or assets owned or leased by Citytalk;
(b) joint venture or partnership Contracts between Citytalk and any
other person;
(c) Contracts limiting the employees/officers/shareholders of Citytalk
to engage in or to compete in any activity, or to use or disclose any
confidential information in its possession;
(d) any other Contracts to which Citytalk is a party or by which it or
the assets or properties owned or leased by it are bound or affected that are
not set forth on other Exhibits hereto, which in the aggregate contemplate
payments to or by Citytalk exceeding $50,000 in any twelve-month period
(collectively herein as the "Material Citytalk Contract"). Citytalk has
delivered to Semotus true and complete copies of each of the Material Citytalk
Contracts, including any amendments thereto or, in the case of oral Material
Citytalk Contracts, a written description and representation that the contract
is valid, in full force and effect and enforceable in accordance with its terms
against the parties thereto other than Citytalk, and Citytalk has fulfilled when
due, or has taken all action necessary to enable it to fulfill when due, all of
its obligations thereunder);
(e) there has not occurred any default (without regard to lapse of
time, the giving of notice, or the election of any person other than Citytalk,
or any combination thereof) by Citytalk, nor, to the knowledge of Citytalk, has
there occurred any default (without regard to lapse of time, the giving of
notice, or the election of Citytalk, or any combination thereof) by any other
person, under any of the Material Citytalk Contracts; and
(f) neither Citytalk nor, to the knowledge of Citytalk, any other
person is in arrears in the performance or satisfaction of its obligations under
any of the Material Citytalk Contracts, and no waiver has been granted by any of
the parties thereto.
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Section 3.14 Assets and Properties.
(a) Citytalk has good title to, or enforceable leasehold interests in,
or valid rights under Contract to use, all of the material tangible personal
assets and properties which it purports to own (including those reflected on the
Financial Statements, except for assets and properties sold, consumed or
otherwise disposed of in the ordinary course of business since the date of the
Financial Statements, which are not individually or in the aggregate material)
or use, in each case free and clear of all Encumbrances, except as set forth in
Exhibit 3.14(a) and (b) or liens for taxes not yet due and payable or due but
not delinquent or being contested in good faith by appropriate proceedings.
Except as set forth in Exhibit 3.14(a), the assets owned or leased by Citytalk
constitute all the assets used in and necessary to conduct the business as
currently conducted.
(b) All material tangible property and assets owned or utilized by
Citytalk are in good operating condition and repair (except for ordinary wear
and tear), free from any defects (except such minor defects as do not interfere
with the use thereof in the conduct of the normal operations), have been
maintained consistent with the standards generally followed in the industry and
are sufficient to carry on the business as presently conducted. All buildings,
plants and other structures owned or otherwise utilized by Citytalk are in good
condition and repair (except for ordinary wear and tear) in all material
respects.
(c) Citytalk owns no real property.
(d) Citytalk does not lease any real property.
Section 3.15 Books and Records. All of the books, records and accounts of
Citytalk are in all material respects true and complete, are maintained in
accordance with good business practice and all applicable Legal Requirements,
accurately present and reflect in all material respects all of the transactions
therein described, and are reflected accurately in the Financial Statements.
Citytalk has previously delivered to Semotus the complete stock record book of
Citytalk and true and complete copies of all of the minutes of meetings and all
other corporate actions of the stockholders, Board of Directors and committees
of the Board of Directors of Citytalk since the date of its incorporation.
Section 3.16 Certain Interests. Except as disclosed in Exhibit 3.16, none of
Citytalk or its officers, directors, or holders of ten percent (10%) or more of
Citytalk Common Stock, directly or indirectly is, or owns any interest in, or
controls, or is an employee, officer, director or partner of or participant in,
or consultant to, any person or entity that is a competitor, supplier or
customer of Citytalk or Semotus.
Section 3.17 Bank Accounts. Exhibit 3.17 sets forth all bank accounts, brokerage
accounts, and safe deposit boxes of any kind maintained by Citytalk and, in each
case, identifies the persons that are authorized signatories for, or which are
authorized to have access to, each of them.
Page 13 of 45
Section 3.18 Changes in Circumstances. Citytalk has no knowledge of:
(i) any current or future condition or state of facts or
circumstances which could reasonably be expected to
result in a material and adverse change in the
financial condition of operations of Citytalk; or
(ii) any Legal Requirements currently in effect from which
Citytalk currently is, or any currently proposed Legal
Requirements from which Citytalk would be, exempt by
reason of any "grandfather" clauses or provisions
contained therein, but which would be applicable to
Citytalk following closing.
Section 3.19 Intellectual Property.
(a) Exhibit 3.19(a) sets forth a true and complete list of all
(i) Software, registered U.S. and foreign patents and
patent applications, registered U.S. and foreign
trademark applications, registered U.S. and foreign
copyrights and copyright applications and other
Intellectual Property , in each case owned by Citytalk
and material to the business of Citytalk ("Citytalk
Owned Intellectual Property"),
(ii) licenses for the Software licensed to Citytalk or by
Citytalk to a third party (as hereinafter defined), in
each case that are material to the business of Citytalk
("Citytalk Licensed Intellectual Property"), and
(iii) all Software and Intellectual Property that is licensed
by Citytalk to a third party ("Third Party Licensed
Intellectual Property").
(b) To the knowledge of Citytalk, the conduct of the business of
Citytalk as currently conducted does not infringe or misappropriate the
Intellectual Property rights of any third party, and no claim has been asserted
against Citytalk that the conduct of the business of Citytalk as currently
conducted infringes or may infringe or misappropriate the Intellectual Property
rights of any third party.
(c) With respect to each item of Citytalk Owned Intellectual Property,
Citytalk is the sole owner of the entire right, title and interest in and to
such Intellectual Property and without limitation of the foregoing is entitled
to use such Intellectual Property in the continued operation of its business.
(d) With respect to each item of Citytalk Licensed Intellectual
Property, Citytalk has the right to use such Citytalk Licensed Intellectual
Property in the continued operation of its business in accordance with the terms
of the license agreement governing such Citytalk Licensed Intellectual Property.
Page 14 of 45
(e) To the knowledge of Citytalk, Citytalk Owned Intellectual Property
is valid and enforceable, and has not been adjudged invalid or unenforceable in
whole or part.
(f) To the knowledge of Citytalk, no person is engaging in any activity
that infringes upon Citytalk Owned Intellectual Property.
(g) To the knowledge of Citytalk, each license of Citytalk Licensed
Intellectual Property and Third Party Licensed Intellectual Property is valid
and enforceable, is binding on all parties to such license, and is in full force
and effect.
(h) To the knowledge of Citytalk, neither party to any license of
Citytalk Licensed Intellectual Property nor any Third Party Licensed
Intellectual Property is in breach thereof or default thereunder.
(i) The Software of Citytalk is free of all viruses, worms, trojan
horses and other material known contaminants, and does not contain any bugs,
errors, or problems of a material nature that disrupt its operation or have an
adverse impact on the operation of other software programs or operating systems.
(j) No rights in the Software of Citytalk have been transferred to any
third party except to the customers of Citytalk to whom Citytalk has licensed
the right to use all Software in the ordinary course of business.
(k) Citytalk has the right to use all software development tools,
library functions, compilers, and other third party software that is material to
the business of Citytalk, or that is required to operate or modify the Software
of Citytalk.
(l) The consummation of the Merger and the other transactions
contemplated by this Agreement and any ancillary agreements will not result in
any termination or other material restriction being imposed on any Citytalk
Owned Intellectual Property or Citytalk Licensed Intellectual Property.
Section 3.20 Commitments.
(a) Exhibit 3.20(a) sets forth, as of the date hereof, each contract or
agreement, whether written or oral (including any and all amendments thereto),
to which Citytalk is a party, or by which Citytalk is bound (collectively, the
"Commitments") of the following types:
(i) Commitments for the sale of any real or personal
(tangible or intangible) properties other than in the
ordinary course of business, or for the grant of any
option or preferential rights to purchase any such
properties;
Page 15 of 45
(ii) Commitments for the construction, modification or
repair of any building, structure or facility or for
the incurrence of any capital expenditures or for the
acquisition of fixed assets, providing for aggregate
payments in excess of $50,000.00;
(iii) Commitments relating to the acquisition by Citytalk or
a Subsidiary of any operating business or the capital
stock of any other person or entity that have not been
consummated or that have been consummated but contain
representations, covenants, guaranties, indemnities or
other obligations that remain in effect;
(iv) Commitments pursuant to which any party is required to
purchase or sell a stated portion of its requirements
or output to another party or perform a stated amount
of service for, on behalf of, or upon the referral of
another party;
(v) Commitments relating to any Litigation (as defined
hereinafter in Section 3.7);
(vi) Commitments under which Citytalk agrees to indemnify
any person or entity;
(vii) Commitments containing covenants of Citytalk not to
compete, do business in any line of business or in any
geographical area or with any person or entity, or to
disclose certain information, or covenants of any
person or entity not to compete with Citytalk in any
line of business or in any geographical area or
disclose information concerning Citytalk;
(viii) Commitments pursuant to which Citytalk (A) leases,
subleases, licenses or otherwise has the right to use
any personal property or (B) is the lessor of any
personal property;
(ix) Commitments in respect of any joint venture,
partnership or other similar arrangement (including,
without limitation, any joint development agreement);
(x) Commitments relating to any governmental or regulatory
authority;
(xi) Commitments for the lease or sub-lease of any real
property;
(xii) Commitments for the leasing of any personal property;
(xiii) Commitments relating to outstanding letters of credit
or performance bonds or creating any obligation or
liability as guarantor, surety, co-signer, endorser,
co-maker, indemnitor or
Page 16 of 45
otherwise in respect of the obligation of any person or
entity, except as endorser or maker of checks or
letters of credit endorsed or made in the ordinary
course of business;
(xiv) Commitments that involve in excess of $50,000.00 in the
aggregate or that may not be terminated on less than
ninety (90) days' notice;
(xv) Commitments (other than those specified in any of
clauses (i) through (xiv) of this paragraph (a)) which
relate to or affect the business or any of the assets
or properties of Citytalk in any way that are material
to the business; and
(xvi) Commitments currently in negotiation by Citytalk of a
type, which if entered into would be required to be
listed on Exhibit 3.20(a) or to be disclosed on any
other Schedule hereto.
(b) Except as set forth in Exhibit 3.20(b), all of the Commitments
referred to in the preceding paragraph (a) are valid, binding, in full force and
effect and enforceable in accordance with their terms against Citytalk, and to
the knowledge of Citytalk, against the respective counterparties to such
Commitments. Complete copies (or, if oral, full written descriptions) of all
Commitments required to be so listed, including all amendments thereto, and
complete copies of all standard form Commitments used in the conduct of the
Business, have been delivered to Citytalk. Except as set forth in Exhibit
3.20(b):
(i) there is no breach, violation or default and no event
which, with notice or lapse of time or both, would
constitute a breach, violation or default, or give rise
to any Encumbrance or right of termination,
modification, cancellation, prepayment, suspension,
limitation, revocation or acceleration under, any
Commitment listed in Exhibit 3.20(a), except for
breaches, violations and defaults, or Encumbrances or
rights of termination, modification, cancellation,
prepayment, suspension, limitation, revocation or
acceleration which, individually or in the aggregate,
are not material; and
(ii) neither Citytalk nor any other party to any of the
Commitments listed in Exhibit 3.20(a) is in material
arrears in respect of the performance or satisfaction
of the terms and conditions on its part to be performed
or satisfied under any of such Commitments and no
material waiver or material indulgence has been granted
by any of the parties thereto.
Section 3.21 Compliance with Laws. Except as set forth in Exhibit 3.21, Citytalk
has not received any written notice of any violation of any applicable laws,
rules, regulations and orders relating to the operation, conduct or ownership of
the business. Citytalk has all permits, licenses, certificates and
authorizations of governmental and regulatory
Page 17 of 45
authorities necessary for the conduct of their business as presently conducted,
except where the failure to have any such permit, certificate, or authorization
would not have a Material Adverse Effect.
Section 3.22 Employee Benefit Plans; Labor Matters.
(a) With respect to each employee benefit plan, program, arrangement
and contract (including, without limitation, any "Employee Benefit Plan", as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), all "specified fringe benefit plans" (as defined in
Section 6039D(d)(1) of the Code), all "nonqualified deferred compensation plans"
(as defined in Sections 409A(d)(1) or 3121(v)(2)(C) of the Code) and all bonus,
incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance, termination, unemployment, disability,
bonus, stock options, stock appreciation rights or other forms of incentive
compensation, health, vision, dental or other insurance, or other benefit plans,
programs or arrangements), maintained or contributed to by Citytalk, or with
respect to which Citytalk could incur liability under Section 4069 or 4201(c) of
ERISA (Citytalk Benefit Plans"), Exhibit 3.22(a) contains a true and complete
list of, and Citytalk has made available to Semotus a true and correct copy of
(i) the most recent annual report (Form 5500) filed with
the Internal Revenue Service (the "IRS"),
(ii) such Citytalk Benefit Plan (or a description of any
unwritten Citytalk Benefit Plan),
(iii) each trust agreement relating to such Citytalk Benefit
Plan,
(iv) the most recent summary plan described for each
Citytalk Benefit Plan for which a summary plan
described is required,
(v) the most recent actuarial report or valuation relating
to a Citytalk Benefit Plan subject to Title IV of
ERISA, if any, and
(vi) the most recent determination letter, if any, issued by
the IRS with respect to any Citytalk Benefit Plan
qualified under Section 401 (a) of the Code.
(b) With respect to Citytalk Benefit Plans, no event has occurred and,
to the knowledge of Citytalk, there exists no condition or set of circumstances,
in connection with which Citytalk could be subject to any liability under the
terms of such Citytalk Benefit Plans, ERISA, the Code or any other applicable
law except as would not have a Citytalk Material Adverse Effect. Citytalk has no
actual or contingent liability under Title IV of ERISA (other than the payment
of premiums to the Pension Benefit Guaranty Corporation) except as would not
have a Citytalk Material Adverse Effect.
Page 18 of 45
(c) Exhibit 3.22(c) contains a true and complete list of, and Citytalk
has made available to Semotus:
(i) copies of all employment agreements with officers or
key employees of Citytalk or any of its subsidiaries;
(ii) copies of all severance agreements, programs and
policies of Citytalk; and
(iii) copies of all plans, programs, agreements and other
arrangements of Citytalk, which contain change in
control provisions.
(d) Except as set forth in Exhibit 3.22(d), neither the execution nor
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will:
(i) result in any material payment (including, without
limitation, severance, unemployment compensation,
"golden parachute" or otherwise) becoming due to any
director, officer or employee of Citytalk under any
Citytalk Benefit Plan or otherwise;
(ii) materially increase any benefits otherwise payable
under any Citytalk Benefit Plan; or
(iii) result in any acceleration of the time of payment or
vesting of any material benefits.
(e) Except as set forth in Exhibit 3.22(e) or as required by law, no
Citytalk Benefit Plan provides retiree medical or retiree life insurance
benefits to any person.
(f) Citytalk
(i) is in material compliance with all applicable federal,
state and local laws, rules and regulations (domestic
and foreign) respecting employment, employment
practices, labor, terms and conditions of employment
and wages and hours, in each case, with respect to
employees;
(ii) has withheld all amounts required by law or by
agreement to be withheld from the wages, salaries and
other payments to employees;
(iv) is not liable for any arrears of wages or any taxes or
any penalty for failure to comply with any of the
foregoing; and
Page 19 of 45
(iv) is not liable for any payment to any trust or other
fund or to any governmental or administrative
authority, with respect to unemployment compensation
benefits, social security or other benefits for
employees.
(g) No employees are currently represented by any labor union for
purposes of collective bargaining and to the knowledge of Citytalk, no
activities the purpose of which is to achieve such representation of all or some
of such employees are threatened or ongoing. No work stoppage or labor strike
against Citytalk by employees is pending or to the knowledge of Citytalk
threatened. Citytalk is not:
(i) involved in or threatened with any labor dispute,
grievance, or litigation relating to labor matters
involving any employees, including, without limitation,
violation of any federal, state or local labor, safety
or employment laws (domestic or foreign), charges of
unfair labor practices or discrimination complaints;
(ii) engaged in any unfair labor practices within the
meaning of the National Labor Relations Act or the
Railway Labor Act; or
(iii) presently, nor has it been in the past a party to, or
bound by, any collective bargaining agreement or union
contract with respect to employees and no such
agreement or contract is currently being negotiated by
Citytalk or any of its affiliates.
(h) COBRA, FMLA, HIPAA, Cancer Rights. With respect to each Citytalk
Employee Plan, Citytalk has complied with:
(i) the applicable health care continuation and notice
provisions of the Consolidation Omnibus Budget
Reconciliation Act of 1985 ("COBRA") and the
regulations thereunder or any state law governing
health care coverage extension or continuation;
(ii) the applicable requirements of the Family and Medical
Leave Act of 1993 ("FMLA") and the regulations
thereunder;
(v) the applicable requirements of the Health Insurance
Portability and Accountability Act of 1996 ("HIPPAA");
and
(vi) the applicable requirements of the Cancer Rights Act of
1998, except to the extent that such failure to comply
could not reasonably be expected, individually or in
the aggregate, to have Material Adverse Effect on
Citytalk. Citytalk has no material unsatisfied
obligations to any employees, former employees or
qualified beneficiaries pursuant to COBRA, HIPAA or any
state law governing health care coverage extension or
continuation.
Page 20 of 45
Section 3.23 Environmental Matters.
(a) To the knowledge of Citytalk, it is and has at all times been in
compliance with all environmental laws governing Citytalk and its business,
operations, properties and assets, except as would not have a Material Adverse
Effect.
(b) There are no judgments and no material non-compliance orders,
warning letters, notices of violation, claims, suits, actions, penalties, fines,
or administrative or judicial investigations of any nature or to the knowledge
of Citytalk proceedings pending or threatened in writing against or involving
Citytalk, any Governmental Authority or third party with respect to any
environmental laws of licenses issued to Citytalk, except as would not have a
Material Adverse Effect.
Section 3.24 Insurance. All of the material assets of Citytalk and all aspects
of the business that are of insurable character are covered by insurance with
reputable insurers against risks of liability, casualty and fire and other
losses and liabilities customarily obtained to cover comparable businesses and
assets in amounts, scope and coverage which are consistent with prudent industry
practice. Citytalk is not in default with respect to its obligations under any
material insurance policy maintained by it. Exhibit 3.24 sets forth a true and
complete list of all insurance coverage carried by Citytalk, the carrier and the
terms and amount of coverage. All such policies and other instruments are in
full force and effect and all premiums with respect thereto have been paid.
Citytalk has not failed to give any notice or present any claim under any such
insurance policy in due and timely fashion or as required by any of such
insurance policies, and Citytalk has not otherwise, through any act, omission or
non-disclosure, jeopardized or impaired full recovery of any claim under such
policies, and there are no claims by Citytalk under any of such policies to
which any insurance company is denying liability or defending under a
reservation of rights or similar clause. Citytalk has not received notice of any
pending or threatened termination of any of such policies or any premium
increases for the current policy period with respect to any of such policies and
the consummation of the transactions contemplated by this Agreement will not
result in any such termination or premium increase.
Section 3.25 Accuracy of Information. None of the written information and
documents which have been or will be furnished by Citytalk or any
representatives of Citytalk to Semotus or any of the representatives of Semotus
in connection with the transactions contemplated by this Agreement contains or
will contain, as the case may be, any untrue statement of a material fact, or
omits or will omit to state a material fact necessary in order to make the
statements therein not misleading in light of the circumstances in which made.
To the knowledge of Citytalk, Citytalk has disclosed to Semotus as the purchaser
of Semotus Common Stock all material information relating to Citytalk and its
activities as currently conducted.
Section 3.26 Dissenter Rights Procedures. Citytalk will perform and will be in
compliance with any and all obligations required of a domestic corporation under
the NRS, and Citytalk will inform Semotus of any and all Shareholders who have
notified Citytalk of their appraisal rights in accordance with the NRS.
Page 21 of 45
Section 3.27 Transactions with Certain Persons. Except as set forth on Schedule
3.27, no officer, director or employee of Citytalk, nor any member of any such
person's immediate family, is presently a party to any transaction with
Citytalk, including without limitation, any contract, agreement or other
arrangement (i) providing for the furnishing of services by, (ii) providing for
the rental of real or personal property from, or (iii) otherwise requiring
payments to (other than for services as officers, directors or employees of the
Company ) any such person or corporation, partnership, trust or other entity in
which any such person has an interest as a shareholder, officer, director,
trustee or partner.
Section 3.28 Employees. As of the date of this Agreement, Citytalk does not have
any employees except as disclosed in Exhibit 3.28.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SEMOTUS
Semotus represents and warrants to Citytalk that the statements made in Article
4 are true and complete, as of the date of this Agreement and the statements and
Exhibits made in Article 4 will be correct and complete as of Closing, as
follows:
Section 4.1 Organization and Qualification of Semotus. Semotus is a corporation
duly organized, validly existing, and in good standing under the laws of the
state of Nevada, and has all requisite corporate power and authority to own and
lease the properties and assets it currently owns and leases and to conduct its
activities as currently conducted. Semotus is duly qualified to do business as a
foreign corporation in all jurisdictions in which the ownership or leasing of
the properties and assets owned or leased by it or the nature of its activities
makes such qualification necessary and the absence of such qualification would,
individually or in the aggregate, have a Material Adverse Effect on Semotus.
Section 4.2 Authority. Semotus has all requisite corporate power and authority
to execute, deliver and perform this Agreement. The execution, delivery, and
performance of this Agreement by Semotus have been duly and validly authorized
by all necessary action on the part of Semotus. This Agreement has been duly and
validly executed and delivered by Semotus, and is the valid and binding
obligation of Semotus, enforceable against Semotus in accordance with its terms,
except as such enforceability may be subject to the effects of bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or affecting
the rights of creditors and of general principles of equity.
Section 4.3 Capitalization of Semotus. The authorized capital stock of Semotus
consists of fifty million (50,000,000) authorized shares of common stock $.01
par value per share of which Thirty Five Million, Five Hundred Forty Nine
Thousand, Ninety Five (35,549,095) shares are issued and outstanding fully paid
and non assessable. Except as listed in Exhibit 4.3, there are no other
authorized or outstanding subscriptions, options,
Page 22 of 45
convertible securities, warrants, calls or other rights of any kind issued or
granted by, or binding upon, Semotus to purchase or otherwise acquire any
securities of or equity interest in Semotus.
Section 4.4 No Conflicts; Required Consents. The execution, delivery and
performance by Semotus of this Agreement does not and will not: (i) conflict
with or violate any provisions of the Charter Documents of Semotus; (ii) violate
any provision of any Legal Requirements; or (iii) conflict with, violate, result
in a breach of, constitute a default under (without regard to requirements of
notice, lapse of time, or elections of other persons, or any combination
thereof) or accelerate or permit the acceleration of the performance required
by, any Contract or Lien to which Semotus is a party or by which Semotus or the
assets or properties owned or leased by it are bound or affected; or (iv)
require any consent, approval or authorization, report or other document with,
any Governmental Authority or other person.
Section 4.5 Validity and Ownership of Semotus Common Stock. The Semotus Common
Stock received by the shareholders of Citytalk at the Closing will be validly
issued and outstanding, fully paid and non-assessable. The Semotus Common Stock
will not be subject to, nor bound or affected by, any proxies, voting
agreements, or other restrictions on the ownership thereof, and shall remain
free from any encumbrances or Liens.
Section 4.6 Subsidiaries. Semotus does not control or hold direct or indirect
equity interests in, or hold rights to control or acquire direct or indirect
equity interests in, any corporation, partnership, limited liability company,
joint venture or other legal entity other than described in Exhibit 4.6.
Section 4.7 Litigation. Other than disclosed in Exhibit 4.7, there is no
litigation pending or, to Semotus's knowledge, threatened, by or before any
governmental authority or private arbitration tribunal, against Semotus or its
operations, nor, to Semotus's knowledge, is there any basis for any such
litigation.
Section 4.8 Compliance with Applicable Legal Requirements. Conduct by Semotus of
its activities as currently conducted does not violate or infringe any Legal
Requirements currently in effect, or, to the knowledge of Semotus, proposed to
become effective; and Semotus has received no notice of any violation by Semotus
of any Legal Requirements applicable to Semotus or its activities as currently
conducted; and Semotus knows of no basis for the allegation of any such
violation.
Section 4.9 Financial Statements. Semotus has delivered to Citytalk the audited
financial statements of Semotus for the respective years ended March 31, 2006
and 2005 and the unaudited interim financial statements of Semotus for the six
months ended September 30, 2006 and 2005, respectively (the "Semotus Financial
Statements"). The Financial Statements were prepared in accordance with GAAP and
present fairly the financial position of Semotus as of the date indicated.
Page 23 of 45
Section 4.10 Liabilities. Semotus has no liabilities or obligations, whether
absolute, accrued, contingent or otherwise, that are not reflected in the
balance sheet or non-delinquent obligations for ordinary and recurring expenses,
including in the ordinary course of business of Semotus since the date of the
Financial Statements. At Closing, Semotus shall have no liabilities or
obligations, including state and federal tax liabilities.
Section 4.11 Tax Returns and Payments. Except as set forth in Exhibit 4.11(a),
all Tax Returns required to be filed by or with respect to Semotus have been
properly and timely filed and all such Tax Returns are complete and accurate in
all material respects. Except to the extent reserved or reflected against on the
Financial Statements, all Taxes due with respect to such Tax Returns or which
are otherwise due and payable by Semotus have been paid in full. All Taxes
required to be withheld and paid over by Semotus to any relevant Tax authority
in connection with payments to employees, independent contractors, creditors,
stockholders or to third parties have been so withheld and paid over.
(b) Except as set forth in Exhibit 4.11(b):
(i) no Tax authority in a jurisdiction where Semotus does not
file Tax Returns has made a written claim, assertion or threat
that Citytalk is or may be subject to tax in such jurisdiction;
(ii) no deficiencies for any tax have been threatened, proposed,
asserted or assessed against Semotus that have not been
satisfied;
(iii) no audits or examinations with respect to Semotus are
ongoing or have been threatened or proposed, in writing by the
Internal Revenue Service or the appropriate state, local or
foreign Tax authority;
(iv) no waivers or extensions of statutes of limitation with
respect to Taxes have been given by or requested with respect to
Semotus;
(v) there are no Tax rulings, requests for rulings, closing
agreements relating to Semotus that could affect the liability
for Taxes of Semotus for any period (or portion of a period)
after the Closing; and
(iv) no power of attorney has been granted by Semotus with
respect to any matter relating to Taxes of Semotus that is
currently in force.
(c) Semotus is not a party to or liable to under any tax sharing
agreement with respect to taxes of any consolidated, combined or unitary group
other than the consolidated, combined or unitary group other than the
consolidated, combined or unitary group disclosed in Exhibit 4.11(c). Except as
set forth in Exhibit 4.11(c), Semotus has not with respect to any taxable period
for which the applicable statute of limitations has not run, filed a combined
consolidated or unitary tax return with respect to any jurisdictions (foreign
and domestic) in which Semotus has filed income tax returns for taxable periods
ending on or December 31, 1996. Semotus will not, in the absence of a
Page 24 of 45
closing agreement provided for in the Treasury Regulations under Section 1503 of
the Internal Revenue Code of 1986. (the "Code"), trigger the recapture of any
dual consolidated losses (as defined in Section 1503 of the Code) by virtue of
the transactions contemplated by this Agreement.
(d) There are no tax liens on any assets of Semotus, except liens for
taxes not yet due and payable.
Section 4.12 Absence of Certain Changes or Events. Since the date of the Semotus
Financial Statements there has not occurred:
(a) any material and adverse change in the financial condition or
operations of Semotus;
(b) any damage, destruction or loss to or of any of the material assets
or properties owned or leased by Semotus;
(c) the creation or attachment of any Lien against the Common Stock of
Semotus;
(d) any waiver, release, discharge, transfer, or cancellation by
Semotus of any rights or claims of material value;
(e) any issuance by Semotus of any securities, or any merger or
consolidation of Semotus with any other Person, or any acquisition by Semotus of
the business of any other Person;
(f) any incurrence, assumption or guarantee by Semotus of any
indebtedness or liability;
(g) any declaration, setting aside or payment by Semotus of any
dividends on, or any other distribution with respect to, any capital stock of
Semotus or any repurchase, redemption, or other acquisition of any capital stock
of Semotus;
(h) (A) any payment of any bonus, profit sharing, pension or similar
payment or arrangement or special compensation to any employee of Semotus,
except in the ordinary course of the administration of Semotus, or (B) any
increase in the compensation payable or to become payable to any employee of
Semotus; or
(i) the entry by Semotus into any Contract to do any of the foregoing.
Section 4.13 Material Semotus Contracts. As of the date of this Agreement,
Semotus does not have except as disclosed in Exhibit 4.13:
Page 25 of 45
(a) contracts evidence or evidencing or relating to any liabilities or
obligations of Semotus, whether absolute, accrued, contingent or otherwise, or
granting any Person a Lien or against any properties or assets owned or leased
by Semotus;
(b) joint venture or partnership Contracts between Semotus and any
other person;
(c) contracts limiting the employees of Semotus to engage in or to
compete in any activity, or to use or disclose any confidential information in
its possession;
(d) any other contracts to which Semotus is a party or by which it or
the assets or properties owned or leased by it are bound or affected that are
not set forth on other Exhibits hereto, which in the aggregate contemplate
payments to or by Semotus exceeding $50,000 in any twelve-month period
(collectively herein as the "Material Semotus Contracts"). Semotus has delivered
to Citytalk true and complete copies of each of the Material Semotus Contracts,
including any amendments thereto (or, in the case of oral Material Semotus
Contracts, a written description and representation that the contract is valid,
in full force and effect and enforceable in accordance with its terms against
the parties thereto other than Semotus, has fulfilled when due, or has taken all
action necessary to enable it to fulfill when due, all of its obligations
thereunder);
(e) there has not occurred any default (without regard to lapse of
time, the giving of notice, or the election of any person other than Semotus, or
any combination thereof) by Semotus, nor, to the knowledge of Semotus, has there
occurred any default (without regard to lapse of time, the giving of notice, or
the election of Semotus, or any combination thereof) by any other person, under
any of the Material Semotus Contracts; and
(f) neither Semotus nor, to the knowledge of Semotus, any other person
is in arrears in the performance or satisfaction of its obligations under any of
the Material Semotus Contracts, and no waiver has been granted by any of the
parties thereto.
Section 4.14
(a) Real Property. As of the date of this Agreement, Semotus does not
own any real property.
(b) Leased Property. Exhibit 4.14(b) sets forth a list of all real
property leased by Semotus (the "Leased Real Property"). Semotus has made
available to Citytalk true and complete copies of all leases and subleases
relating to the Leased Real Property. With respect to the Leased Real Property
except as set forth on Exhibit 4.14(b),
(i) Semotus has not received written notice of any pending or, to
the knowledge of the Stockholders, threatened condemnation or
eminent domain proceedings or their local equivalent with respect
to the Leased Real Property;
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(ii) the Leased Real Property, the use and occupancy thereof by
Semotus, and the conduct of the business thereon and therein does
not violate any deed restrictions, applicable law consisting of
building codes, zoning, subdivision or other land use or similar
laws the violation of which would materially adversely affect the
use, value or occupancy of any such property or the conduct of
the business thereon;
(iii) Semotus has not received written notice of a material
violation of the restrictions or laws described in the foregoing
clause (ii); and
(iv) none of the structures or improvements on any of the Leased
Real Property encroaches upon real property of another person or
entity, and no structure or improvement of another person or
entity encroaches upon any of the Leased Real Property, which
would materially interfere with the use thereof in the ordinary
course of business.
Section 4.15 Employees. As of the date of this Agreement, Semotus does not have
any employees except as disclosed in Exhibit 4.15.
Section 4.16 Books and Records. All of the books, records and accounts of
Semotus are in all material respects true and complete, are maintained in
accordance with good business practice and all applicable Legal Requirements,
accurately present and reflect in all material respects all of the transactions
therein described, and are reflected accurately in the Financial Statements.
Semotus has previously delivered to Citytalk the complete stock record book of
Semotus and true and complete copies of all of the minutes of meetings and all
other corporate actions of the stockholders, Board of Directors and committees
of the Board of Directors of Semotus since the date of its incorporation.
Section 4.17 Certain Interests. None of Semotus or its officers, directors, or
holders of ten percent (10%) or more of Semotus Common Stock, directly or
indirectly is, or owns any interest in, or controls, or is an employee, officer,
director or partner of or participant in, or consultant to, any person or entity
which is a competitor, supplier or customer of Semotus or Citytalk.
Section 4.18 Bank Accounts. Exhibit 4.18 sets forth all bank accounts, brokerage
accounts, and safe deposit boxes of any kind maintained by Semotus and, in each
case, identifies the persons that are authorized signatories for, or which are
authorized to have access to, each of them.
Section 4.19 Changes in Circumstances. Semotus has no knowledge of:
(a) any current or future condition or state of facts or circumstances
which could reasonably be expected to result in a material and adverse change in
the financial condition of operations of Semotus; or
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(b) any Legal Requirements currently in effect from which Semotus
currently is, or any currently proposed Legal Requirements from which Semotus
would be, exempt by reason of any "grandfather" clauses or provisions contained
therein, but which would be applicable to Semotus following closing.
Section 4.20 Insurance. All of the material assets of Semotus and all aspects of
the business that are of insurable character are covered by insurance with
reputable insurers against risks of liability, casualty and fire and other
losses and liabilities customarily obtained to cover comparable businesses and
assets in amounts, scope and coverage which are consistent with prudent industry
practice. Semotus is not in default with respect to its obligations under any
material insurance policy maintained by it. Exhibit 4.20 sets forth a list of
all insurance coverage carried by Semotus, the carrier and the terms and amount
of coverage. All such policies and other instruments are in full force and
effect and all premiums with respect thereto have been paid. Semotus has not
failed to give any notice or present any claim under any such insurance policy
in due and timely fashion or as required by any of such insurance policies, and
Semotus has not otherwise, through any act, omission or non-disclosure,
jeopardized or impaired full recovery of any claim under such policies, and
there are no claims by Semotus under any of such policies to which any insurance
company is denying liability or defending under a reservation of rights or
similar clause. Semotus has not received notice of any pending or threatened
termination of any of such policies or any premium increases for the current
policy period with respect to any of such policies and the consummation of the
transactions contemplated by this Agreement will not result in any such
termination or premium increase.
Section 4.21 Accuracy of Information. None of the written information and
documents which have been or will be furnished by Semotus or any representatives
of Semotus to Semotus or any of the representatives of Semotus in connection
with the transactions contemplated by this Agreement contains or will contain,
as the case may be, any untrue statement of a material fact, or omits or will
omit to state a material fact necessary in order to make the statements therein
not misleading in light of the circumstances in which made. To the knowledge of
Semotus, Semotus has disclosed to Citytalk all material information relating to
Semotus and its activities as currently conducted.
ARTICLE 5
COVENANTS OF CITYTALK AND SEMOTUS
Section 5.1 Affirmative Covenants of Citytalk. Except as Semotus may otherwise
consent in writing, between the dates of this Agreement and Closing, Citytalk
shall:
(a) conclude the financing arrangements with Barclays Capital, Inc., or
another institution acceptable to Citytalk, so that an agreement to invest at
least sixty million dollars ($60,000,000) into the Surviving Corporation is duly
authorized, executed
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and delivered within thirty days after the execution of this Agreement, and will
be valid, legally binding and enforceable against Barclays Capital, Inc., or
another institution acceptable to Citytalk, concurrent upon the Closing;
(b) acquire the common shares and/or assets of NTCH Colorado, Inc.,
NTCH Idaho, Inc. and NTCH Tennessee, Inc. which assets include named towers,
wireless assets and licenses (the "NTCH Assets") so that the agreement related
to the acquisition of the NTCH Assets is duly authorized, executed and delivered
within five days of the execution of this Agreement and will be valid, legally
binding and enforceable against Citytalk concurrent upon the Closing, such that
Citytalk will have good and marketable title to all the NTCH Assets, free and
clear of all encumbrances;
(c) conduct its business only in the usual, regular, and ordinary
course and in accordance with past practices:
(d) (i) duly comply with all applicable Legal Requirements;
(ii) perform all of its obligations under all Citytalk
Contracts, if any, without default; and
(iii) maintain its books, records, and accounts on a basis
consistent with past practices.
(e) (i) give to Semotus and its counsel, accountants and other
representatives reasonable access during normal
business hours to the premises of Citytalk, all of the
assets and properties owned or leased by Citytalk,
Citytalk's books and records, and Citytalk's personnel;
(ii) furnish to Semotus and such representatives the Article
3 Exhibits within three business days from the date of
this Agreement, and all such additional documents
(certified by an officer of Citytalk, if requested),
financial information and other information as Semotus
may from time to time reasonably request; and
(iii) cause Citytalk's accountants to permit Semotus and its
accountants to examine the records and working papers
pertaining to Citytalk's Financial Statements' provided
that no investigation by Citytalk or its
representatives will affect or limit the scope of any
of the representations and warranties of Citytalk
herein or in any Exhibit or other related document.
(f) use its best efforts to obtain in writing as promptly as possible
all approvals and consents required to be obtained by Citytalk in order to
consummate the transactions contemplated hereby and deliver to Citytalk copies,
satisfactory in form and substance to Citytalk, of such approvals and consents;
Page 29 of 45
(g) promptly deliver to Semotus true and complete copies of all monthly
and quarterly financial statements of Citytalk and any reports with respect to
the activities of Citytalk which are prepared by or for Citytalk at any time
from the date hereof until Closing; and
(h) promptly notify Semotus of any circumstance, event or action, by
Citytalk or otherwise:
(i) which, if known at the date of this Agreement, would
have been required to be disclosed in or pursuant to
this Agreement; or
(ii) the existence, occurrence or taking of which would
result in any of the representations and warranties of
Citytalk in this Agreement or any Exhibit not being
true and correct in all material respects.
(i) Arrange for the investment of two hundred twenty five thousand
dollars ($225,000) in Semotus to occur within two (2) business days of the
signing of this Agreement, such that an investment agreement in substantially
the form attached hereto as Exhibit B is duly authorized, executed and delivered
concurrent with the execution of this Agreement, and $225,000 is wired to
Semotus' bank account within two business days after the execution of this
Agreement.
Section 5.2 Negative Covenants of Citytalk. Except as Semotus may otherwise
consent in writing, between the dates of this Agreement and Closing, Citytalk
shall not:
(a) change the character of its business;
(b) incur any liability or obligation or enter into any Contract
except, in each case, in the ordinary course of business consistent with prior
practices and not prohibited by any other provision hereof;
(c) incur, assume or guarantee any indebtedness or liability in respect
of borrowed money;
(d) make any capital expenditure or commitment for capital expenditure
exceeding $50,000 for a single project or $100,000 for all projects, whether or
not in the ordinary course of business;
(e) modify, terminate, or abrogate any Material Citytalk Contract other
than in the ordinary course of business, or waive, lease, discharge, transfer or
cancel any rights or claims of material value;
(f) create or permit the creation or attachment of any Lien against any
of the assets or properties owned or leased by it;
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(g) except as otherwise required by this Agreement, prepay any material
liabilities or obligations;
(h) issue any securities, or merge or consolidate with any other
person, or acquire any of the securities, partnership or joint venture
interests, or business of any other person;
(i) declare, set aside or pay any dividends on, or make any other
distribution with respect to, any of its capital stock, or repurchase, redeem or
otherwise acquire any of its capital stock; or
(j) enter into any transaction or permit the taking of any action that
would result in any of the representations and warranties in this Agreement not
being true and correct in all material respects at Closing.
Section 5.3 Affirmative Covenants of Semotus. Except as Citytalk may otherwise
consent in writing, between the dates of this Agreement and Closing, Semotus
shall:
(a) conduct its business only in the usual, regular, and ordinary
course and in accordance with past practices;
(b) provide any and all documentation reasonably requested by Barclay's
Capital in relation to the debt capital raise in Citytalk prior to closing to
fund a portion of the acquisition of certain assets of NTCH, Inc.
(c) (i) duly comply with all applicable Legal Requirements;
(ii) perform all of its obligations under all Semotus
Contracts without default; and
(iii) maintain its books, records, and accounts on a basis
consistent with past practices.
(d) (i) give to Citytalk and its counsel, accountants and other
representatives reasonable access during normal business hours to the premises
of Semotus, all of the assets and properties owned or leased by Semotus,
Semotus's books and records, and Semotus's personnel:
(ii) furnish to Citytalk and such representatives the
Article 4 Exhibits within three business days from the
date of this Agreement, and all such additional
documents (certified by an officer of Semotus, if
requested), financial information and other information
as Citytalk may from time to time reasonably request;
and
(iii) cause Semotus's accountants to permit Citytalk and its
accountants to examine the records and working papers
pertaining to Semotus's Financial Statements' provided
that no investigation by Citytalk or
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its representatives will affect or limit the scope of
any of the representations and warranties of Semotus
herein or in any Exhibit or other related document.
(e) use its best efforts to obtain in writing as promptly as possible
all approvals and consents required to be obtained by Semotus in order to
consummate the transactions contemplated hereby and deliver to Citytalk copies,
satisfactory in form and substance to Citytalk, of such approvals and consents;
(f) promptly deliver to Citytalk true and complete copies of all
monthly and quarterly financial statements of Semotus and any reports with
respect to the activities of Semotus which are prepared by or for Semotus at any
time from the date hereof until Closing; and
(g) promptly notify Citytalk of any circumstance, event or action, by
Semotus or otherwise:
(i) which, if known at the date of this Agreement, would
have been required to be disclosed in or pursuant to
this Agreement; or
(ii) the existence, occurrence or taking of which would
result in any of the representations and warranties of
Semotus in this Agreement or in any Transaction
Document not being true and correct in all material
respects.
Section 5.4 Negative Covenants of Semotus. Except as Citytalk may otherwise
consent in writing, between the dates of this Agreement and Closing, Semotus
shall not:
(a) change the character of its business;
(b) incur any liability or obligation or enter into any Contract
except, in each case, in the ordinary course of business consistent with prior
practices and not prohibited by any other provision hereof;
(c) incur, assume or guarantee any indebtedness or liability in respect
of borrowed money, except a pending financing agreement with Silicon Valley
Bank, based upon Semotus' accounts receivable;
(d) make any capital expenditure or commitment for capital expenditure
exceeding $5,000 for a single project or $10,000 for all projects, whether or
not in the ordinary course of business;
(e) modify, terminate, or abrogate any material Semotus Contract other
than in the ordinary course of business, or waive, lease, discharge, transfer or
cancel any rights or claims of material value;
Page 32 of 45
(f) create or permit the creation or attachment of any Lien against any
of the assets or properties owned or leased by it;
(g) except as otherwise required by this Agreement, prepay any material
liabilities or obligations;
(h) issue any securities, except stock options under Semotus' 2005
Stock Option Plan or shares issuable upon the exercise of existing warrants or
stock options under the Company's stock option plans, or merge or consolidate
with any other person, or acquire any of the securities, partnership or joint
venture interests, or business of any other person;
(i) declare, set aside or pay any dividends on, or make any other
distribution with respect to, any of its capital stock, or repurchase, redeem or
otherwise acquire any of its capital stock; or
(j) enter into any transaction or permit the taking of any action that
would result in any of the representations and warranties in this Agreement not
being true and correct in all material respects at Closing.
Section 5.5 Joint Undertakings. Each of Citytalk and Semotus shall cooperate and
exercise commercially reasonable efforts to facilitate the consummation of the
transactions contemplated by this Agreement so as to permit Closing to take
place on the date provided herein and to cause the satisfaction of conditions to
Closing set forth in Article 6.
Section 5.6 Confidentiality.
(a) Any non-public information that Semotus may obtain from Citytalk in
connection with this Agreement, including but not limited to information
concerning trade secrets, licenses, research projects, costs, profits, markets,
sales, customer lists, strategies, plans for future development and any other
information of a similar nature, shall be deemed confidential and, unless and
until Closing shall occur, Semotus shall not disclose any such information to
any third party (other than its directors, officers and employees, and persons
whose knowledge thereof is necessary to facilitate the consummation of the
transactions contemplated hereby) or use such information to the detriment of
Citytalk; PROVIDED THAT
(i) Semotus may use and disclose any such information once
it has been publicly disclosed (other than by Semotus
in breach of its obligations under this Section) or
which rightfully has come into the possession of
Semotus (other than from Citytalk); and
(ii) to the extent that Semotus may become compelled by
Legal Requirements to disclose any of such information,
Semotus may disclose such information if it shall have
used all reasonable
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efforts, and shall have afforded Citytalk the
opportunity, to obtain an appropriate protective order,
or other satisfactory assurance of confidential
treatment, for the information compelled to be
disclosed. In the event of termination of this
Agreement, Semotus shall use all reasonable efforts to
cause to be delivered to Citytalk, and retain no copies
of, any documents, work papers and other materials
obtained by Semotus or on its behalf from Citytalk,
whether so obtained before or after the execution
hereof.
(b) Any non-public information that Citytalk may obtain from Semotus in
connection with this Agreement, including but not limited to information
concerning trade secrets, licenses, research projects, costs, profits, markets,
sales, customer lists, strategies, plans for future development and any other
information of a similar nature, shall be deemed confidential and, unless and
until Closing shall occur, Citytalk shall not disclose any such information to
any third party (other than its directors, officers and employees, and persons
whose knowledge thereof is necessary to facilitate the consummation of the
transactions contemplated hereby) or use such information to the detriment of
Semotus; provided that
(i) Citytalk may use and disclose any such information once
it has been publicly disclosed (other than by Citytalk
in breach of its obligations under this Section) or
which rightfully has come into the possession of
Citytalk (other than from Semotus); and
(ii) to the extent that Citytalk may become compelled by
Legal Requirements to disclose any of such information,
Citytalk may disclose such information if it shall have
used all reasonable efforts, and shall have afforded
Semotus the opportunity, to obtain an appropriate
protective order, or other satisfactory assurance of
confidential treatment, for the information compelled
to be disclosed. In the event of termination of this
Agreement, Citytalk shall use all reasonable efforts to
cause to be delivered to Semotus, and retain no copies
of, any documents, work papers and other materials
obtained by Citytalk or on its behalf from Semotus,
whether so obtained before or after the execution
hereof.
Section 5.7 Publicity. Semotus and Citytalk shall each consult with and obtain
the consent of the other before issuing any press release or making any other
public disclosure concerning this Agreement or the transactions contemplated
hereby unless, in the reasonable judgment of the disclosing party, a release or
disclosure is required to discharge its disclosure obligations under applicable
Legal Requirements, in which case it shall in good faith consult with the other
party about the form, content and timing of such release or disclosure prior to
its release or disclosure.
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Section 5.8 Citytalk's Responsibility for Taxes; Returns; Audits.
(a) Tax Returns; Filing and Payments.
(i) Citytalk shall timely prepare (or cause to be
prepared), and shall timely file (or cause to be timely
filed) all Tax Returns of Citytalk for any taxable year
or period ending on or before the Closing Date which
are not required to be filed on or before the Closing
Date.
(ii) Citytalk shall prepare (or cause to be prepared) and
file (or cause to be filed) all Tax Returns of Citytalk
for any Taxable year or period commencing prior to the
Closing Date and ending subsequent to the Closing Date.
(iii) The Tax Returns referred to in this Section 5.8(a)(i)
and (ii), shall, to the extent not otherwise required
by law, be prepared in a manner consistent with
Citytalk's past practice (including any Tax elections
and methods of accounting). With respect to any Tax
Return referred to in Sections 5.8(a)(i) and (ii)
above, the party preparing such return shall provide
the other party a draft of such Tax Return and Tax
information (including, without limitation, work papers
and schedules) for review of such Tax Return in a
timely manner no later than thirty (30) days prior to
the due date (taking into account valid extensions) for
the filing of such Tax Return. The parties shall
consult in good faith with regard to the form and
content of such Tax Returns, provided that, in the
event of any disagreement, the Tax Returns shall be
filed in the form set forth by the party with
responsibility for the preparation of the Tax Return.
(b) Termination of Tax Sharing Agreements; Powers of Attorney.
(i) Any Tax Sharing Agreement to which Citytalk is a party
shall be terminated as of the Closing Date, and
Citytalk shall have no further obligations thereunder.
For purposes of this Agreement, the term "Tax Sharing
Agreement" includes any agreement or arrangement,
whether or not written, providing for the sharing or
allocation of liability for Taxes of the parties
thereto.
(ii) All powers of attorney granted by Citytalk with respect
to Taxes shall be revoked as of the Closing Date.
Between the date of the Agreement and the Closing Date, Citytalk will not cause
or permit Citytalk to:
(i) make any change in Citytalk's Tax accounting methods,
any new election with respect to Taxes or any
modification or revocation of any existing election
with respect to Taxes; or
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(ii) settle or otherwise dispose of any Tax audit, dispute,
or other Tax proceeding, in each case without Citytalk'
express written consent thereto.
(c) Assistance and Cooperation.
(i) Before the Closing Date, to the extent reasonably
requested by the other party, Semotus and Citytalk
shall assist and cooperate with each other in the
preparation of any Tax Return which the other party is
responsible to file pursuant to Section 5.8(a) herein
and shall assist and cooperate with the other party in
preparing for any audits or disputes relating to Taxes
for which the other party is responsible pursuant to
this Agreement. Before the Closing Date, Semotus and
Citytalk shall, pursuant to the other party's
reasonable request, make available to the other party
all information, records and documents reasonably
available to that party, which are necessary for the
preparation of any Tax Return or resolution of any
audit or dispute. In all such cases, the party seeking
assistance or cooperation shall bear the expenses of
the other party incurred in connection with respect
thereto.
(ii) Before the Closing Date, Semotus and Citytalk shall
provide timely notice to the other in writing of any
pending or threatened tax audits or assessments of
Citytalk for taxable periods for which the other is
liable under this Agreement, and shall furnish the
other with copies of all correspondence received from
any taxing authority in connection with any tax audit
or information request with respect to any such taxable
period.
Section 5.8 Semotus's Responsibility for Taxes; Returns; Audits.
Tax Returns; Filing and Payments.
(i) Semotus shall timely prepare (or cause to be prepared),
and shall timely file (or cause to be timely filed) all
Tax Returns of Semotus for any taxable year or period
ending on or before the Closing Date which are not
required to be filed on or before the Closing Date
(ii) The Tax Returns referred to in this Section 5.9 shall,
to the extent not otherwise required by law, be
prepared in a manner consistent with Semotus' past
practice (including any Tax elections and methods of
accounting). With respect to any Tax Return referred to
in Section 5.9 above, between the dates of the
Agreement and the Closing Date, Citytalk will not make
any change in Semotus's Tax accounting methods, any new
election with respect to Taxes or any modification or
revocation of any existing election with respect to
Taxes.
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Section 5.10 Cooperation with Public Filings. Citytalk shall cooperate with
Semotus and its affiliates and advisors in the preparation and filing of any
public filings (and any related documentation or filings) in a timely fashion
and shall use its reasonable best efforts to assist Semotus in having any such
registration statement declared effective by the Securities and Exchange
Commission as promptly as practicable and in maintaining the effectiveness of
any such registration statement. If Citytalk shall obtain knowledge of any
information pertaining to Citytalk that would require any amendment or
supplement to any registration statement, Citytalk shall so advise Semotus in
writing and shall promptly furnish Semotus with all information as shall be
required for such amendment or supplement and shall promptly take such action as
shall be required to amend or supplement any such registration statement.
Section 5.11 Tax Reorganization. Each party to this Agreement hereby intends and
agrees to take all reasonable actions to cause the Merger to qualify as a
reorganization within the meaning of Section 368(a) of the Code and will
immediately notify each of the other parties of any circumstance or condition of
which it is or becomes aware of which might cause the Merger to fail to so
qualify. Citytalk represents that it has not taken any action that would cause
the Merger to fail to so qualify as reorganization within the meaning of Section
368(a) of the Code, and is not aware of any circumstances, which would cause the
Merger to fail to so qualify.
ARTICLE 6
CONDITIONS PRECEDENT
Section 6.1 Conditions to Citytalk's Obligations. The obligations of Citytalk to
consummate the transactions contemplated by this Agreement are subject to the
following conditions:
(a) Accuracy of Representations and Warranties. The representations and
warranties of Semotus in this Agreement or in any Exhibit hereto shall be true
and accurate in all material respects at and as of Closing with the same effect
as if made at and as of Closing, except as affected by the transactions
contemplated hereby.
(b) Performance of Covenants. Semotus shall have performed all
obligations and agreements and complied with all covenants in this Agreement to
be performed and complied with by it at or before Closing.
(c) Receipt of Semotus Common Stock. Semotus shall have delivered to
Citytalk Shareholders at Closing, certificates representing four hundred
eighteen million, seven hundred forty four thousand (418,744,000) shares of
Semotus Common Stock issued in the name of the shareholders of Citytalk.
(d) Officer's Certificate. Citytalk shall have received a certificate
executed by an executive officer of Semotus, dated as of Closing, reasonably
satisfactory in form and substance to Citytalk certifying that the conditions
stated in subparagraphs (a) and (b) of this Section have been satisfied.
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(e) No Proceedings, Litigation or Laws. No Action by any governmental
authority or other person shall have been instituted or threatened against
Semotus, Citytalk or the Shareholders which questions the validity or legality
of the transactions contemplated hereby and which, in the reasonable opinion of
the Citytalk, makes it inadvisable to consummate such transaction.
(f) Consents. Citytalk shall have obtained evidence, in form and
substance satisfactory to it, that there has been obtained all consents,
approvals and authorizations required by this Agreement.
(g) Resignation of Directors. Each of the directors of Semotus, with
the exception of Xxxxxxx X. XxXxxx, shall have delivered their resignation to
Citytalk effective as of the Closing.
(h) Legal Matters Satisfactory to Citytalk's Counsel. All actions,
proceedings, instruments and documents required to carry out the transactions
contemplated by this Agreement or incidental thereto and all related legal
matters shall be reasonably satisfactory to and approved by Citytalk's counsel,
and such counsel shall have been furnished with such certified copies of actions
and proceedings and such other instruments and documents as it shall have
reasonably requested.
Section 6.2 Conditions to Semotus' Obligations. The obligations of Semotus to
consummate the transactions contemplated by this Agreement are subject to the
following conditions:
(a) Accuracy of Representations and Warranties. The representations and
warranties of Citytalk in this Agreement or in any Exhibit hereto shall be true
and accurate (in all material respects) at and as of Closing with the same
effect as if they were made at and as of Closing, except as affected by the
transactions contemplated hereby.
(b) Performance of Covenants. Citytalk shall have performed all
obligations and agreements and complied with all covenants in this Agreement or
in any Transaction Document to which it is a party to be performed and complied
with by it at or before Closing.
(c) Delivery of Citytalk Stock. Citytalk shall have delivered to
Semotus at Closing, certificates representing thirty million (30,000,000) shares
of common stock.
(d) Officer's Certificate. Semotus shall have received a certificate
executed by an executive officer of Citytalk, dated as of Closing, reasonably
satisfactory in form and substance to Semotus, certifying that the conditions
stated in subparagraphs (a), and (b) of this Section have been satisfied.
(e) Employment Agreements. Citytalk shall have entered into employment
agreements with Xxxxxxx Xx Xxxx and Xxxxxx Xx Xxxx pursuant to Section 2.4
hereof.
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(f) No Proceedings, Litigation or Laws. No Action by any governmental
authority or other person shall have been instituted or threatened against
Semotus, Citytalk or the Shareholders which question the validity or legality of
the transactions contemplated hereby and which, in the reasonable opinion of
Semotus, makes it inadvisable to consummate such transaction. .
(g) Consents. Semotus shall have received evidence, in form and
substance satisfactory to it, that there have been obtained all consents,
approvals, and authorizations required by this Agreement.
(h) Legal Matters Satisfactory to Semotus and its Representatives. All
actions, proceedings, instruments and documents required to carry out the
transactions contemplated by this Agreement or incidental thereto and all
related legal matters shall be reasonably satisfactory to and approved by
Semotus's counsel, and such counsel shall have been furnished with such
certified copies of actions and proceedings and such other instruments and
documents as it shall have reasonably requested.
ARTICLE 7
TERMINATION
Section 7.1 Termination Events. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned:
(a) at any time, by the mutual written agreement duly authorized by the
Boards of Directors of Semotus and Citytalk;
(b) by either Semotus and Citytalk, if the other is in material breach
or default of its respective covenants, agreements or other obligations
hereunder or if any of its representations and warranties herein are not true
and accurate in all material respects when made or when otherwise required by
this Agreement to be true and accurate.
(c) by Semotus, if any of the conditions to its obligations set forth
in Section 6.1 shall not have been satisfied as of Closing, unless satisfaction
shall have been frustrated or made impossible by an act or failure to act of
Citytalk; or
(d) by Citytalk, if any of the conditions to its obligations set forth
in Section 6.2 shall not have been satisfied as of Closing, unless satisfaction
shall have been frustrated or made impossible by an act or failure to act of
Semotus; or
(e) by either Semotus or Citytalk, if the Merger shall not have been
consummated on or before March 1, 2007, provided that the right to terminate
this Agreement pursuant to this clause (a) (ii) shall not be available to any
party whose failure to perform any of its obligations under this Agreement
resulted in, or has been the cause of a or a substantial cause of, the failure
of the Merger to be consummated on or before
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such date, and provider further that if the Merger has not been consummated on
or before March 1, 2007 solely or primarily as a result of the failure of the
conditions set forth in Sections 6.1(e) or 6.2(f) to be satisfied or waived, any
party, by written notice to each other party, may extend such date up to April
1, 2007.
Section 7.2 Effect of Termination. If this Agreement shall be terminated prior
to Closing, all obligations of the parties hereunder shall terminate, except for
the obligations set forth in Section 5.6, 5.7, 8.2 and 8.10.
ARTICLE 8
MISCELLANEOUS
Section 8.1 Waiver and Modifications. Any of the provisions of this Agreement
may be waived at any; time by the party entitled to the benefit thereof, upon
the authority of the Board of Directors of such party; provided, however, that
no waiver by Citytalk shall be authorized after the last vote of the
stockholders of Citytalk if such waiver shall, in the judgment of the Board of
Directors of Semotus, affect materially and adversely the benefits of the
Semotus stockholders under this Agreement or the Agreement of Merger. Any of the
provisions of this Agreement (including the exhibits and the Agreement of
Merger) may be modified at any time prior to and after the vote of the
stockholders of Citytalk by agreement in writing approved by the Board of
Directors of each party and executed in the same manner (but not necessarily by
the same persons) as this Agreement, provided that such modification, after the
last vote of the stockholders of Semotus shall not, in the judgment of the Board
of Directors of Citytalk, affect material and adversely the benefits of
Citytalk's stockholders under this Agreement or the Agreement of Merger. To the
extent permitted by law, the powers of the Board of Directors may be delegated
by the Board of the Executive Committee of such Board or by such Board (or by
the Executive Committee to the extent any matter has been delegated to such
Committee by the Board) to any officer or officers of such party, and any
notices, consents or other action referred to in this Agreement may be given or
taken by any officer so authorized.
Section 8.2 Finder Commissions. Citytalk represents and warrants that no broker
or finder is entitled to any brokerage or finder's fee or other commission based
on agreements, arrangements or understandings made by it with respect to the
transactions contemplated by this Agreement or by the Agreement of Merger, other
than set forth in Exhibit 8.2.
Section 8.3 Notices. Any notice, request, instruction or other document to be
given hereunder or under the Agreement of Merger by any party to another shall
be in writing and delivered personally or sent by registered or certified mail,
postage prepaid,
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if to Citytalk, addressed to:
Xxxxxxx X. Xxxxxxxx
Citytalk, Inc
000 Xxxxx Xxxxxxx Xxxxx
Xxxxx 000, Xxxx Xxxxx
Xxxx Xxxxx, XX 00000
With Copies To:
Xxxx X. Xxxxxx
Attorney At Law
0000 Xxxxx Xxxxxxxx Xxx
Xxxxxxxxxx, XX 00000
if to Semotus, addressed to:
Xxxxxxx XxXxxx
Semotus Solutions, Inc.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Section 8.4 Entire Agreement. This Agreement including Exhibits and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, represents the entire agreement between
the parties and supersedes all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof.
Section 8.5 Governing Law. This Agreement shall be governed by, construed, and
enforced in accordance with the laws of the State of California (without
reference to the choice of law provisions of California law),except with respect
to matters of law concerning the internal corporate affairs of any corporate
entity which is a party to or the subject of this Agreement, and as to those
matters the law of the jurisdiction under which the respective entity derives
its powers shall govern.
Section 8.6 Counterparts. In order to facilitate the filing and recording of
this Agreement the same may be executed in any number of counterparts, each of
which shall be deemed to be an original.
Section 8.7 Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties hereto; provided, however, that this Agreement may not be
assigned by either party hereto without the prior written consent of the other
(except that Semotus may without the prior written consent of Citytalk assign
this Agreement to any affiliate of Semotus so long as such assignee shall
execute a counterpart of this Agreement agreeing to be bound by the provisions
hereof as "Semotus," and agreeing to be jointly and severally liable with the
assignor and any other assignee for all of the obligations of the
Page 41 of 45
assignor hereunder), but no such assignment of this Agreement or any of the
rights or obligations hereunder shall relieve Semotus of its obligations under
this Agreement. Notwithstanding anything contained in this Agreement to the
contrary, nothing in this Agreement, express or implied, is intended to confer
on any person other than the parties hereto or their respective heirs,
successors, executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
Section 8.8 Headings. The headings of the Articles, Sections and paragraphs of
this Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
Section 8.9 Modification and Waiver. No amendment, modification or alteration of
the terms or provisions of this Agreement shall be binding unless the same shall
be in writing and duly executed by the parties hereto, except that any of the
terms or provisions of this Agreement may be waived in writing at any time by
the party which is entitled to the benefits of such waived terms or provisions.
No waiver of any of the provisions of this Agreement shall be deemed to or shall
constitute a waiver of any other provision hereof (whether or not similar). No
delay on the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof.
Section 8.10 Expenses. Except as otherwise provided herein, Semotus and Citytalk
shall pay their respective costs and expenses incurred by them or it or on their
or its behalf in connection with this Agreement and the transactions
contemplated hereby, including, without limiting the generality of the
foregoing, fees and expenses of their respective financial consultants,
accountants and counsel. Notwithstanding the foregoing, Citytalk shall prepay
the costs and expenses related to Semotus' proxy statement preparation, filing
and mailing, and the costs and expenses related to holding a special
shareholders' meeting required to approve the Merger.
Section 8.11 Severability. If any provision of this Agreement is held to be
void, illegal or unenforceable under present or future laws, such provision
shall be fully severable and this Agreement shall be construed and enforced as
if such void, illegal or unenforceable provision never comprised a part hereof,
and the remaining provisions of this Agreement shall remain in full force and
effect and shall not be affected in any way by the void, illegal or
unenforceable provision or by its severance herefrom. Furthermore, in lieu of
such severed provision, there shall be added automatically as part of this
Agreement a provision as similar in its terms to such severed provision as may
be possible and be valid, legal and enforceable
Section 8.12 Survival of Representations, Etc. All statements contained in the
disclosure schedules or exhibits, or in any certificate, schedule, exhibit or
instrument or conveyance delivered by or on behalf of the parties pursuant to
this Agreement or in connection with the transactions contemplated hereby shall
be deemed to be representations and warranties by the parties hereunder. The
representations, warranties, covenants and agreements of Semotus and Citytalk
contained herein shall survive the consummation of the transactions contemplated
hereby and the Closing Date, without regard to any investigation made by any of
the parties hereto. Except as provided in this
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sentence, all such representations and warranties and all claims and causes of
action with respect thereto (other than the provisions of Sections 3.11 and 3.27
and this Section 8.12, and all claims and causes of action with respect thereto)
shall terminate upon expiration of two (2) years after the Closing Date
("Expiration Date"). The representations and warranties in Sections 3.11 and
3.27 shall survive until the expiration of the applicable statute of limitations
(with extensions) with respect to the matters addressed in such sections. The
representations and warranties in Sections 3.5 shall survive indefinitely. The
termination of the representations and warranties provided herein shall not
affect the rights of a party in respect of any claim made by such party in a
writing received by the other party prior to the expiration of the applicable
survival period provided herein.
Section 8.13 Indemnification. Each Party shall indemnify and save and hold
harmless the other and each of their affiliates and subsidiaries, and their
respective representatives, from and against any and all Indemnified
Liabilities; provided however, that the Indemnified Party makes a written claim
for indemnification against the Indemnifying Party within the applicable
survival period.
IN WITNESS WHEREOF, Semotus and Citytalk, by their duly authorized officers,
have executed and delivered this Agreement effective as of the date first above
written.
Citytalk, Inc.
By: /s/ Xxxxx Xxxxxxxx
---------------------------------
Name: Xxxxx Xxxxxxxx
Title: President
Attest: /s/ Xxxxxxx Xxxxxx
-----------------------------
Xxxxxxx Xxxxxx, Secretary
Semotus Solutions, Inc.
By: /s/ Xxxxxxx XxXxxx
---------------------------------
Name: Xxxxxxx XxXxxx
Title: Chief Executive Officer
Attest: /s/ Xxxx Xxxxxx
------------------------------
Xxxx Xxxxxx, Secretary
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EXHIBIT A
---------
See attached
Agreement and Plan of Merger
Page 44 of 45
