EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
dated as of
September 12, 2001,
between
MINDARROW SYSTEMS, INC.,
RADICAL COMMUNICATION, INC.
and
XXXXXXXXXX.XXX, LLC
TABLE OF CONTENTS
Page
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 Transfer of Assets ................................................ 1
1.2 Assets Not Transferred ............................................ 3
ARTICLE 2
CLOSING/PURCHASE PRICE/ ASSUMPTION OF LIABILITIES
2.1 The Closing ....................................................... 4
2.2 Purchase Price .................................................... 4
2.3 Payment to RCI on Closing Date .................................... 4
2.4 Instruments of Conveyance and Transfer ............................ 4
2.5 Assumption of Certain Liabilities ................................. 4
2.6 Tax Allocation .................................................... 5
2.7 Sales and Use Tax ................................................. 5
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS
3.1 Organization, Corporate Power and Authority ....................... 6
3.2 Authorization and Approval of Agreements .......................... 6
3.3 Effect of Agreement ............................................... 7
3.4 Approvals ......................................................... 7
3.5 Permits ........................................................... 7
3.6 Financial Statements .............................................. 7
3.7 Absence of Certain Changes ........................................ 8
3.8 Trade Accounts and Other Receivables .............................. 9
3.9 Intellectual Property ............................................. 9
3.10 Customers and Suppliers ........................................... 11
3.11 Tax Matters ....................................................... 12
3.12 Material Contracts ................................................ 12
3.13 Condition of Property ............................................. 12
3.14 Use of Leasehold Interests ........................................ 13
3.15 Legal Proceedings ................................................. 13
3.16 Insurance ......................................................... 13
3.17 Compliance with Law ............................................... 14
3.18 Employee Benefits ................................................. 14
3.19 Bank Accounts, Powers, etc ........................................ 15
3.20 Environmental Matters ............................................. 15
3.21 Real Property ..................................................... 15
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TABLE OF CONTENTS
(continued)
Page
3.22 No Brokers or Finders .......................................... 15
3.23 Investment Representations ..................................... 15
3.24 Accuracy of Information ........................................ 17
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Organization, Corporate Power and Authority .................... 18
4.2 Authorization of Agreement ..................................... 18
4.3 Effect of Agreement ............................................ 18
4.4 Governmental Approvals ......................................... 18
4.5 Capital Structure .............................................. 19
4.6 SEC Filings; Representations and Warranties .................... 19
4.7 No Brokers or Finders .......................................... 19
4.8 Valid Issuance of Purchased Shares ............................. 19
4.9 Legal Proceedings .............................................. 20
4.10 Absence of Certain Changes ..................................... 20
4.11 Compliance with Law ............................................ 21
4.12 Accuracy of Representations and Warranties ..................... 21
ARTICLE 5
[RESERVED]
ARTICLE 6
ADDITIONAL CONTINUING COVENANTS
6.1 Confidentiality ................................................ 21
6.2 Tax Cooperation ................................................ 22
6.3 Excluded Assets ................................................ 22
6.4 Sellers' Covenant Not to Compete ............................... 22
6.5 Registration of the Purchased Shares ........................... 23
6.6 Piggy-back Registration Rights ................................. 25
6.7 Restrictions on Conversion of Series C Preferred Stock ......... 26
6.8 Board Nominee .................................................. 26
6.9 Permits and Approvals; Third Party Consents .................... 26
6.10 Audit Cooperation .............................................. 27
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TABLE OF CONTENTS
(continued)
Page
ARTICLE 7
ITEMS TO BE DELIVERED AT CLOSING
7.1 Deliveries to be Made by Sellers ........................ 27
7.2 Deliveries to be Made by Buyer .......................... 27
ARTICLE 8
SURVIVAL
8.1 Survival of Representations and Warranties .............. 27
ARTICLE 9
INDEMNIFICATION
9.1 Obligations of Sellers .................................. 28
9.2 Obligations of Buyer .................................... 28
9.3 Procedure ............................................... 28
9.4 Limitations Upon Sellers' Indemnification ............... 30
9.5 Limitations Upon Buyer's Indemnification ................ 30
9.6 Arbitration ............................................. 30
ARTICLE 10
GENERAL
10.1 Amendments; Waivers ..................................... 31
10.2 Schedules; Exhibits; Integration ........................ 31
10.3 Best Efforts; Further Assurances ........................ 31
10.4 Governing Law ........................................... 31
10.5 No Assignment ........................................... 31
10.6 Headings ................................................ 32
10.7 Counterparts ............................................ 32
10.8 Publicity and Reports ................................... 32
10.9 Remedies Cumulative ..................................... 32
10.10 Parties in Interest ..................................... 32
10.11 Notices ................................................. 32
10.12 Expenses and Attorneys Fees ............................. 33
10.13 Specific Performance .................................... 33
10.14 Bulk Transfer Laws ...................................... 33
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TABLE OF CONTENTS
(continued)
ARTICLE 11
DEFINITIONS
Page
Exhibits
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EXHIBIT A Form of Voting Agreement
EXHIBIT B Form of Note
EXHIBIT C Assignment and Assumption Agreement
EXHIBIT D Xxxx of Sale
EXHIBIT E Form of Opinion of Counsel to Seller
EXHIBIT F Form of Opinion of Counsel to Buyer
Schedules
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Disclosure Schedule
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Other Schedules
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into as of September 12,
2001, among MindArrow Systems, Inc., a Delaware corporation ("Buyer"), Radical
Communication, Inc., a Delaware corporation ("RCI"), and XXXXXXxxxx.xxx, LLC, a
California limited liability company and wholly owned subsidiary of RCI
("STREAMedia" each of RCI and STREAMedia is individually a "Seller" and
collectively they are the "Sellers"). Capitalized terms used herein without
definition are defined in ARTICLE 11.
R E C I T A L S
WHEREAS, Sellers own certain assets more particularly described in
this Agreement, used by them in the Business;
WHEREAS, Sellers desire to sell, and Buyer desires to buy, those
assets and Buyer is willing to assume certain associated obligations and
liabilities, for the consideration and on the terms and conditions described
herein; and
WHEREAS, as a condition and in order to induce Buyer to acquire the
assets on the terms set forth herein, Buyer and certain stockholders of RCI have
entered into Voting Agreements, the form of which is attached hereto as Exhibit
A, pursuant to which such stockholders have, among other things, granted to
Buyer an irrevocable proxy to vote in favor of the adoption of this Agreement
and all other actions necessary to consummate the transactions contemplated by
this Agreement, the shares of common stock of RCI, par value $.001 per share,
and the Series A preferred stock of RCI, par value $.001 per share, owned by
such stockholders as specified therein, upon the terms and subject to the
conditions specified therein, such common stock constituting a majority of the
outstanding common stock of RCI on an as converted basis, and such Series A
preferred stock constituting a majority of the outstanding Series A preferred
stock of RCI.
A G R E E M E N T
In consideration of the mutual promises contained herein and
intending to be legally bound, the parties agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 Transfer of Assets. Subject to the terms and conditions of this
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Agreement, on the Closing Date, Sellers will sell, transfer, assign and deliver
to Buyer, and Buyer will purchase from Sellers, all of Sellers' right, title and
interest in and to all of Sellers' assets, rights and properties, of every kind
or nature, which are used in or are related to the Business or are necessary for
the operation of the Business as presently conducted, except the Excluded Assets
(the "Assets"). The Assets include, but are not limited to, the following:
(a) Personal Property. All tangible personal property, including,
-----------------
but not limited to, fixtures, servers and other computer equipment, vehicles,
machinery and equipment,
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furniture, tools, supplies and inventory, a list of which as of the date hereof
is set forth in Section 1.1(a) of the Disclosure Schedule;
(b) Accounts Receivable and Prepayments. All accounts receivable
-----------------------------------
(including, without limitation, all accounts receivable arising from sales prior
to the Closing Date, even if the invoices relating to such sales have not been
issued), notes receivable, prepaid items, deferred charges, credits, reserves
and deposits paid by Sellers, a list of which as of the date hereof is set forth
in Section 1.1(b) of the Disclosure Schedule;
(c) Cash and Cash Equivalents. All cash on hand and cash equivalents
-------------------------
(including, but not limited to, bank accounts and temporary cash investments);
(d) Intellectual Property. Any or all of the following and all
---------------------
rights in, arising out of, or associated therewith, including, but not limited
to, all such rights used in the operation of the Business: (i) all United
States, international and foreign patents and applications therefore and all
reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical information, data and customer lists,
engineering procedures and all documentation relating to any of the foregoing;
(iii) all copyrights, copyrights registrations and applications therefore, and
all other rights corresponding thereto throughout the world; (iv) all industrial
designs and any registrations and applications therefore throughout the world;
(v) all trade names, logos, domain names, common law trademarks and service
marks, brand names, trademark and service xxxx registrations and applications
therefore throughout the world; (vi) all software (excluding "shrink wrapped"
software which is generally available to the public); (vii) customer lists,
mailing lists, and know-how; (viii) all works of authorship, databases and data
collections and all rights therein throughout the world; and (ix) any similar or
equivalent rights to any of the foregoing anywhere in the world, together with
the goodwill and the business appurtenant thereto and any rights, claims or
choses in action relating to or deriving from any of the foregoing
(collectively, the "Intellectual Property"), including, without limitation, the
specific items identified in Section 3.9 of the Disclosure Schedule;
(e) Sales Materials. All of Sellers' sales data and information,
---------------
customer lists, supplier lists, mailing lists, catalogues, brochures, sales
literature, promotional material, advertising material and other selling
material;
(f) Books and Records. All books and records (other than accounting
-----------------
and tax records, copies of which have been provided to Buyer) and all files,
documents, papers and agreements (including, but not limited to, those contained
in computerized storage media) pertaining to the Assets, the Assumed Liabilities
or otherwise to the Business;
(g) Assigned Contracts. Subject to the receipt pursuant to Section
------------------
6.9 of consent of the applicable contracting party to the assignment of the
applicable Contract, all rights of Sellers under all Contracts, guarantees and
warranties from third parties, including but not limited to the Contracts listed
on any section of the Disclosure Schedule (the "Assigned Contracts");
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(h) Leasehold Interests. The leasehold interests listed on Section
-------------------
1.1(h) of the Disclosure Schedule, including all leasehold improvements to the
leased premises (the "Leasehold Interests");
(i) Permits. All transferable Permits and equivalent documents;
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(j) Corporate Name. Radical Communication corporate name and
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STREAMedia company name; and
(k) Rights Under Insurance Policies. All of each Seller's rights and
-------------------------------
interests arising under or in connection with any insurance policies covering
all or a portion of the Assets or the Business.
1.2 Assets Not Transferred. The following assets, rights and
----------------------
properties of Sellers are specifically excluded from the Assets and shall be
retained by Sellers (the "Excluded Assets"):
(a) Refund Claims. Rights to or claims for refunds of taxes and any
-------------
other governmental charges for periods ending on or prior to the Closing Date
and the benefit of net operating loss carry-forwards or other tax credits of
Sellers;
(b) Corporate Assets. As set forth in Section 1.2(b) of the
----------------
Disclosure Schedule, all nontransferable Permits and assets relating to Sellers'
corporate functions (including, but not limited to, the corporate charter,
taxpayer and other identification numbers, income tax and accounting records,
seals, minute books and stock transfer books, but excluding the corporate names
of Radical Communication and STREAMedia);
(c) Sellers' Rights. Sellers' rights under the Transaction Documents;
---------------
and
(d) Hello Litigation Reimbursement Claim. Sellers' rights to or
------------------------------------
claims for reimbursement of legal fees and costs with regard to the litigation
between xxxxxXxxxxxx.xxx, Inc. on the one hand and STREAMedia and RCI on the
other hand, which litigation has been settled pursuant to that certain
Settlement Agreement dated June 1, 2001 and dismissed with prejudice by
stipulation of the parties on June 8, 2001 in United States District Court for
the Central District of California, Western Division.
ARTICLE 2
CLOSING/PURCHASE PRICE/
ASSUMPTION OF LIABILITIES
2.1 The Closing. The Closing will take place at the offices of
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O'Melveny & Xxxxx LLP, 000 Xxxxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000, on the
date hereof or on such later date as Sellers and Buyer may agree.
2.2 Purchase Price. Subject to the terms and conditions of this
--------------
Agreement, Buyer agrees to acquire the Assets from Sellers, to assume the
Assumed Liabilities and to pay RCI the following consideration: (i) 135,000
shares of the Buyer's Series C Preferred Stock (the "Series C Preferred Stock"),
(ii) 1,980,000 shares of the Buyer's Common Stock (the "Common
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Stock" and collectively with the Series C Preferred Stock, the "Buyer's
Shares"), and (iii) an unsecured subordinated promissory note (the "Buyer's
Note") from the Buyer in the aggregate amount of $1.0 million, the form of which
is appended as Exhibit B hereto.
2.3 Payment to RCI on Closing Date. On the Closing Date, Buyer shall
------------------------------
issue the Buyer's Shares and the Buyer's Note to RCI.
2.4 Instruments of Conveyance and Transfer. On the Closing Date,
--------------------------------------
Sellers shall execute and deliver or cause to be delivered to Buyer (a) the Xxxx
of Sale, (b) the Assignment and Assumption Agreement, (c) intellectual property
assignment agreements in form and substance reasonably satisfactory to Buyer
with respect to the Intellectual Property, (d) assignments and estoppel
agreements in form and substance reasonably satisfactory to Buyer with respect
to all material Leasehold Interests, (e) the opinions, certificates, consents
and other documents referred to herein as then deliverable by Sellers, and (f)
such other documents as may be reasonably requested by Buyer in order to carry
out the Transactions.
2.5 Assumption of Certain Liabilities.
---------------------------------
(a) Liabilities Not Assumed. Except for the liabilities and
-----------------------
obligations specifically assumed pursuant to and identified in Section 2.5(b)
below, Buyer shall not assume, shall not take subject to and shall not be liable
for, any liabilities or obligations of any kind or nature, whether absolute,
contingent, accrued, known or unknown, of Sellers or any Affiliate of Sellers,
(the "Excluded Liabilities") including, but not limited to, the following:
(i) Any liabilities or obligations incurred, arising from or
out of, or in connection with Sellers' operations, the condition of their assets
or places of business, or their ownership of the Assets, occurring prior to the
Closing Date or the issuance, sale, repayment or repurchase of any of their
securities.
(ii) Any liabilities or obligations incurred, arising from or
out of, in connection with or as a result of any alleged or actual defect in any
product or in connection with any alleged or actual breach of warranty (whether
express or implied) in relation to any product sold by Sellers prior to the
Closing Date.
(iii) Any liabilities or obligations (whether assessed or
unassessed) of Sellers for any Taxes, including any Taxes arising by reason of
the transactions contemplated herein (with the exception of sales taxes payable
by Buyer pursuant to Section 2.7), as of, or for any period ending on or prior
to, the Closing Date.
(iv) All fees and expenses of Sellers in connection with the
transactions contemplated herein.
(v) Any liabilities or obligations to or with respect to
former or current officers, directors, employees, consultants or Affiliates of
Sellers, including without limitation any liabilities or obligations of Sellers
in connection with (1) any profit-sharing, deferred compensation, bonus, stock
option, stock purchase, pension, retainer, consulting, retirement, severance,
welfare or incentive plan, agreement or arrangement, (2) any plan, agreement or
arrangement providing for "fringe benefits" or perquisites to employees,
officers, directors or
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agents, including but not limited to, benefits relating to company automobiles,
clubs, vacation, child care, parenting, sabbatical, sick leave, medical, dental,
hospitalization, life insurance and other types of insurance, (3) any retiree
health or other benefit plan, agreement or arrangement, (4) any collective
bargaining, labor or employment agreement or other similar arrangement or (5)
any other employee benefit plan, agreement or similar arrangement.
(vi) Any liabilities or obligations of any nature to members,
stockholders or former members or stockholders of Sellers.
(vii) Any liabilities or obligations of any nature related to
the litigation described in Section 1.2(e).
(viii) Any liabilities or obligations of any nature related to
the matters set forth in Items 2 and 4 of Section 3.15 of the Disclosure
Schedule.
(ix) Any liabilities or obligations of any nature relating to
conduct of the Sellers prior to the Closing related to the matters set forth in
Items 1 and 3 of Section 3.15 of the Disclosure Schedule.
(x) Any liabilities or obligations of Sellers incurred,
arising from or out of or in connection with this Agreement or the events or
negotiations leading up to this Agreement.
(b) Assumed Liabilities. Notwithstanding Section 2.5(a), but subject
-------------------
to the receipt pursuant to Section 6.9 of consent of the applicable contracting
party to the assignment of the applicable Contract on the Closing Date, Buyer
shall assume the liabilities or obligations specifically identified on Schedule
2.5(b) attached hereto and incorporated herein by this reference (the "Assumed
Liabilities").
2.6 Tax Allocation. Buyer and Sellers shall allocate the Purchase
--------------
Price to broad categories constituting components of the Assets in accordance
with the basis of allocation set forth in Section 2.6 of the Disclosure
Schedule. Each party will report the Transactions in accordance with the agreed
upon allocation for all federal, state, local and other tax purposes, but such
allocation shall not constrain reporting for other purposes.
2.7 Sales and Use Tax. Buyer and Sellers shall cooperate in
-----------------
preparing and filing use and sales tax returns relating to, and Buyer shall pay
any and all sales taxes due with regard to, the Transactions.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as otherwise indicated on the Disclosure Schedule previously
delivered to Buyer and attached hereto, Sellers jointly and severally represent,
warrant and agree:
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3.1 Organization, Corporate Power and Authority.
-------------------------------------------
(a) RCI is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. STREAMedia is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of California. RCI is qualified to do business as a
foreign corporation in the State of California, and neither the character nor
the location of the assets owned or used by Sellers nor the nature of the
business conducted by Sellers requires licensing or qualification under the laws
of any other jurisdiction. Sellers have all requisite corporate power and
authority to own, operate and lease the Assets, to conduct the Business, to
execute and deliver the Transaction Documents and to perform their obligations
thereunder.
(b) With the exception of STREAMedia, RCI has no subsidiaries and
owns no capital stock of, or any equity interest of any nature, in any other
entity. STREAMedia is a single-member limited liability company, whose sole
member is RCI. STREAMedia has no subsidiaries and owns no capital stock of, or
any equity interest of any nature, in any other entity. Neither Seller has
agreed or is obligated to make, nor bound by any written, oral or other
agreement, contract, subcontract, lease, binding understanding, instrument,
note, option, warranty, purchase order, license, sublicense, insurance policy,
benefit plan or legally binding commitment or undertaking of any nature, as in
effect as of the date hereof or as may hereinafter be in effect under which it
may become obligated to make, any future investment in or capital contribution
to any other entity. Neither Seller has, at any time, been a general partner of
any general partnership, limited partnership or other entity.
3.2 Authorization and Approval of Agreements.
----------------------------------------
(a) The execution, delivery and performance by Sellers of the
Transaction Documents, and the consummation by them of the Transactions, have
been duly authorized by all necessary corporate action by each Seller. This
Agreement has been, and each other Transaction Document will be at the Closing,
duly executed and delivered by each Seller and constitutes, or will, when
delivered, constitute the legal, valid and binding obligations of each Seller,
enforceable against each Seller in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium,
and other similar laws and equitable principles relating to or limiting
creditors' rights generally.
(b) This Agreement and the transactions contemplated hereby have
been approved by the affirmative vote of the holders of a majority of the
outstanding shares of common stock of RCI and a majority of the outstanding
shares of Series A Preferred Stock of RCI, such percentages being sufficient as
required for approval of a sale of all or substantially all of Sellers' assets
in accordance with the provisions of Sellers' respective charter documents,
Delaware General Corporation Law, California Limited Liability Company Act and
any other applicable corporate and securities laws.
3.3 Effect of Agreement. The execution, delivery and performance by
-------------------
Sellers of the Transaction Documents, and the consummation by them of the
Transactions, will not violate the charter documents or bylaws of either Seller
or any Law to which either Seller is subject, or any judgment, award or decree
or any indenture, agreement or other instrument to
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which either Seller is a party, or by which either Seller or the Assets are
bound, or conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any Encumbrance of any
nature whatsoever upon any of the Assets.
3.4 Approvals. Except as set forth in Section 3.4 of the Disclosure
---------
Schedule, no Approval or Order or action of or filing with any Governmental
Entity or other Person is required to be obtained by Sellers for the execution
and delivery by Sellers of the Transaction Documents or the consummation by them
of the Transactions.
3.5 Permits. Section 3.5 of the Disclosure Schedule sets forth each
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Permit (and applications therefore) obtained by Sellers in connection with the
conduct of the Business together with the name of the Governmental Entity
issuing such Permit. Such Permits are valid and in full force and effect. Except
as set forth in Section 3.5 of the Disclosure Schedule, all such Permits are
freely transferable by Sellers, and upon Closing Buyer will have all right,
title and interest of the holder thereof. All Permits reasonably necessary in
connection with the operation of the Business as presently conducted have been
obtained. No suspension, cancellation or termination of any Permits required by
any Governmental Entity to permit the Business to be conducted is threatened or
imminent.
3.6 Financial Statements.
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(a) RCI has heretofore furnished Buyer with the unaudited
consolidated balance sheets of the Sellers dated as of December 31, 1999,
December 31, 2000 and June 30, 2001 and the related unaudited consolidated
statements of operations and retained earnings and statements of cash flows for
the years then ended (or with respect to the June 30, 2001 statements, the six
month period then ended). All such financial statements have been prepared on a
consistent basis subject to the notes contained therein. The unaudited
consolidated balance sheet of the Sellers as of June 30, 2001 shall hereinafter
be referred to as the "Balance Sheet." Such financial statements have been
prepared in accordance with GAAP, except for the absence of notes as required by
GAAP or as otherwise indicated therein.
(b) The Balance Sheet fairly presents the unaudited consolidated
financial position of the Sellers at June 30, 2001 (the "Balance Sheet Date")
and, except as indicated therein, reflects all material claims against and all
debts and liabilities of the Sellers, fixed or contingent, as at the Balance
Sheet Date and the related statements of income, stockholders' equity and cash
flows fairly present the results of operations and cash flows of the Sellers for
the period then ended. The balance sheets of the Sellers dated as of December
31, 1999 and December 31, 2000 fairly present the financial position of the
Sellers at the respective dates thereof and, except as indicated therein,
reflect all material claims, individually and in the aggregate, against and all
debts and liabilities of the Sellers, fixed or contingent, as at the dates
thereof, and the related unaudited consolidated statements of income or
operations and retained earnings and cash flows fairly present the results of
operations and cash flows of the Sellers for the years then ended.
(c) The Sellers have made available to Buyer copies of each
management letter or other letter delivered to the Sellers by its outside
accountants in connection with the
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Sellers' financial statements or relating to any review by the Sellers' outside
accountants of the internal controls of the Seller.
(d) As of the date hereof, the Sellers have a collective cash
balance of $3,416.62 (determined in a manner consistent with that used to
determine the cash balance reported in the Balance Sheet).
(e) Since the Balance Sheet Date, whether or not in the ordinary
course of business, there has not been, occurred or arisen any change in or
event affecting Sellers or the Business that has had or may reasonably be
expected to have a material adverse effect on Sellers or the Business.
3.7 Absence of Certain Changes. Except as set forth in Section 3.7
--------------------------
of the Disclosure Schedule, since the Balance Sheet Date, neither Seller has:
(a) conducted its business other than in the usual and ordinary
manner and in the ordinary course of business, including making all regularly
scheduled payments and commitments (e.g., payroll, taxes, rent and lease
payments) as such payments and commitments come due;
(b) suffered any material adverse change in its working capital,
financial condition, assets, liabilities (absolute, accrued, contingent or
otherwise), reserves, business or operations;
(c) waived any claims or rights of the Seller of substantial value;
(d) sold, transferred or otherwise disposed of any of the Seller's
properties or assets (real, personal or mixed, tangible or intangible) with a
value of $10,000 or more except in the ordinary course of business and
consistent with past practice;
(e) disposed of or permitted to lapse any Intellectual Property
rights or (x) disclosed to any person other than representatives of Buyer or (y)
third parties subject to confidentiality or non-disclosure agreements, copies of
which have been delivered to Buyer, any trade secret, formula, process or
know-how of either Seller not theretofore a matter of public knowledge, the
disclosure or lapse of which would have a material adverse affect on the
business, operations, assets or financial condition of either Seller;
(f) granted any general increase in the compensation of either
Seller's employees (including any such increase pursuant to any bonus, pension,
profit sharing or other plan or commitment) or any increase in the compensation
payable or to become payable to any employee of either Seller other than
increases reasonable in amount and in the ordinary course of business;
(g) made any loan, guaranty or other extension of credit, or entered
into any commitment to make any loan, guaranty or other extension of credit, to
or for the benefit of any director, officer, employee, stockholder or any of
their respective Associates or Affiliates;
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(h) declared, issued, made or paid any dividend or other
distribution of assets, whether consisting of money, other personal property,
real property or other thing of value;
(i) made any special or extraordinary payments to any Person;
(j) made any material investment, by purchase, contributions to
capital, property transfers, or otherwise, in any other Person;
(k) issued, sold, redeemed or acquired for value any debt
obligations or equity of either Seller other than the loans described on
Schedule 3.7 of the Disclosure Schedule (the "Bridge Loans");
(l) failed to maintain or repair any Asset in accordance with good
and prudent maintenance and repair procedures;
(m) made any change in any method of accounting or accounting
practice that would have a material adverse effect on the assets or operations
of either Seller; or
(n) agreed, whether in writing or otherwise, to take any action
described in this Section 3.7.
3.8 Trade Accounts and Other Receivables. All accounts receivable
------------------------------------
and other receivables due or recorded in the records and books of account of the
Sellers as being due to the Sellers as at the Balance Sheet Date (less the
amount of any allowances or reserves therefor made in the records and books of
account of the Sellers) were actually made in the ordinary course of business
and shall (subject to the amount of any allowances or reserves therefor made in
the records and books of account of the Sellers) be good and collectible in full
in the ordinary course of business. The Sellers have delivered to Buyer a
complete and accurate aging list of all receivables of the Sellers as at the
Balance Sheet Date. No such receivable has been pledged or assigned to any other
Person and no defense or set off to any such receivable has been asserted in
writing by the receivable obligor, or, to the knowledge of each Seller, exists.
3.9 Intellectual Property. Section 3.9 of the Disclosure Schedule
---------------------
lists all of the Intellectual Property owned by Sellers, including:
(a) all patents held by the Sellers and all pending patent
applications by the Sellers, including for each such patent the serial or patent
number, country, filing and expiration date and title;
(b) all registered trademarks and service marks of the Sellers, and
all pending applications for registration by the Sellers of trademarks,
including for each such trademark or service xxxx, the registration or
application number, country, filing and expiration date;
(c) all registered copyrights of the Sellers and all applications by
the Sellers for registration of copyrights, including the registration number,
country and filing and expiration date of each such copyright;
9
(d) all domain names and unregistered Intellectual Property owned or
used by Sellers;
(e) all licenses by the Sellers to any person or entity of (i) any
of the rights identified in subparagraphs (a) through (d) above, and (ii) any of
the Sellers' other proprietary information; and
(f) all licenses by any other person or entity to the Sellers of any
Intellectual Property.
Each license, sublicense or other agreement identified in Section
3.9 of the Disclosure Schedule (each a "Seller License") is a valid and binding
obligation of the respective Seller, enforceable in accordance with its terms.
With respect to each Seller License, there is no default (or event that with the
giving of notice or passage of time would constitute a default) by the
respective Seller or, to the knowledge of the respective Seller, the other party
thereto. Neither Seller has received any notice (and neither Seller has
knowledge) of claims asserted by any person to use any patents, trademarks,
service marks, trade names, copyrights, technology, know-how or processes
licensed by or to either Seller or challenging or questioning the validity or
effectiveness of any Seller License.
The Sellers have good and valid title to, or otherwise possesses
adequate rights to use pursuant to Section 3.9(f), all Intellectual Property
necessary to permit the Sellers to conduct the business and operations of the
Sellers in substantially the same manner as it had been conducted during the
last fiscal year and immediately prior to the date hereof.
The domain names listed in Section 3.9(d) are validly registered in
each respective Seller's name. Each Seller owns and has good and exclusive title
to, and has the exclusive right to use, all of such domain names and such
unregistered Intellectual Property.
All licenses by any other person or entity to the Sellers of any
Intellectual Property are assignable and have been assigned to the Buyer as of
the date hereof.
The employees and consultants of the Sellers have taken all actions
necessary, appropriate or desirable to irrevocably assign or otherwise transfer
to Sellers all of their respective right, title and interest in and to any
Intellectual Property rights owned by them which are necessary to permit the
Sellers to conduct the business and operations of the Sellers in substantially
the same manner as it has been conducted during the last fiscal year and
immediately prior to the date hereof.
Neither Seller has received any written threat, demand or notice of
claim from any person or entity asserting that such Seller's use of any of the
Intellectual Property or the registration thereof constitutes any infringement,
interference, violation, misappropriation, breach or wrongful use of the
intellectual property rights of any other person or entity and neither Seller is
a party to any proceeding or outstanding decree, order, judgment, agreement or
stipulation restricting in any manner the use, transfer, or licensing by such
Seller of any Intellectual Property, or which may affect the validity, use or
enforceability of such Intellectual Property by Sellers.
10
Buyer's use of the Assets, including without limitation, the
Intellectual Property, in connection with the operation of the Business in
substantially the same manner as it had been conducted during the last fiscal
year and immediately prior to the date hereof by the Sellers, will not infringe
any Third Party rights, including, without limitation, proprietary rights,
intellectual property rights, moral rights and privacy rights.
The disclosure by Sellers, and the use and further disclosure by Buyer
to Affiliates of Buyer or Third Parties, of all customer, vendor, supplier and
consumer data assigned to Buyer hereunder will not violate any privacy policy,
data-sharing agreement, confidentiality agreement or non-disclosure agreement of
which either Seller is a party, or infringe or violate the privacy rights of any
party.
All software, hardware and firmware used in the Sellers' products,
except as set forth in Section 3.9 of the Disclosure Schedule, was entirely
internally-developed by employees of the Sellers or validly transferred by such
employees to Sellers, and all inventorship, ownership, authorship, patent,
copyright, trademark, trade secret and other rights relating to such
Intellectual Property are owned by the Sellers free and clear of any obligation
or agreement to any other person and will not, as a result of the transactions
contemplated by this Agreement, be the subject of any obligation or agreement to
any third party except as set forth on Section 3.9 of the Disclosure Schedule.
Except as set forth in Section 3.9 of the Disclosure Schedule, the
Sellers have taken all steps necessary, appropriate or desirable (including,
without limitation, entering into appropriate confidentiality, non-disclosure
and non-competition agreements with all officers, employees and consultants of
the Sellers with access to or knowledge of the Sellers' patents, trademarks,
trade names, copyrights, inventions, trade secrets, software licenses and other
proprietary information) to safeguard and maintain the secrecy and
confidentiality of, and its proprietary rights in, all of the Sellers'
Intellectual Property.
3.10 Customers and Suppliers. Section 3.10 of the Disclosure
-----------------------
Schedule lists the names of and describes all contracts with and the appropriate
percentage of Business attributable to, the ten largest customers of and ten
most significant suppliers of the Sellers during the last fiscal year. Except as
disclosed in Section 3.10 of the Disclosure Schedule, as of the Closing Date,
neither Seller has received any notice that any of its customers has ceased, or
will cease, to use the Seller's products and services during the six-month
period immediately following the Closing Date.
3.11 Tax Matters.
-----------
(a) Each Seller has timely filed all Tax Returns required of it and
has paid all Taxes shown thereon to be due. Adequate provision has been made in
the books and records of each Seller, and in the Financial Statements for all
Taxes for all periods or portions of periods ending on or before the Closing
Date, whether or not due and payable and whether or not disputed to the extent
not paid.
(b) Neither Seller has elected to be treated as a consenting
corporation under Section 341(f) of the Code.
11
(c) Section 3.11 of the Disclosure Schedule lists the date or dates
through which the Internal Revenue Service and any other Governmental Entity
have examined the United States federal income tax returns and any other Tax
Returns of each Seller. Except as set forth in Section 3.11 of the Disclosure
Schedule, no Governmental Entity has examined or is in the process of examining
any Tax Returns of either Seller. Except as set forth in Section 3.11 of the
Disclosure Schedule, no Governmental Entity has proposed in writing any
deficiency, assessment or claim for Taxes and there is no basis for any such
delinquency assessment or claim. No waiver of the statute of limitations with
respect to Tax Returns of either Seller has been given by or requested from any
Seller.
3.12 Material Contracts. Section 3.12 of the Disclosure Schedule
------------------
lists each Contract to which a Seller is a party or to which a Seller or the
Assets is subject or by which a Seller or the Assets is bound that is a Material
Contract. The following Contracts shall be deemed to be "Material Contracts":
any Contract that (a) after the Balance Sheet Date obligates either Seller to
pay an amount of $25,000 or more, (b) has an unexpired term as of the Balance
Sheet Date in excess of six months, (c) the Business is substantially dependent
upon or which is otherwise material to the Business, (d) provides for an
extension of credit other than credit agreements with banks having normal credit
terms, (e) limits or restricts the ability of a Seller to compete or otherwise
to conduct the Business in any manner or place, (f) provides for a guaranty or
indemnity by a Seller, (g) grants a power of attorney, agency or similar
authority to another Person, (h) grants a right to, or obligation of, any
Affiliate, officer or director or any Associate of a Seller, (i) requires a
Seller to buy or sell goods or services with respect to which there will be
material losses or will be costs and expenses materially in excess of expected
receipts, or (j) was not made in the ordinary course of business. Each Material
Contract is valid and subsisting; each Seller has duly performed all its
obligations thereunder to the extent that such obligations to perform have
accrued; and no breach or default, alleged breach or default, or event which
would (with the passage of time, notice or both) constitute a breach or default
thereunder by such Seller, or, to the best knowledge of such Seller, any other
party or obligor with respect thereto, has occurred or as a result of the
Transactions will occur. True copies of the written Contracts listed on Section
3.12 of the Disclosure Schedule, including all amendments and supplements
thereto, have been delivered to Buyer, together with full, complete and accurate
descriptions of all oral Contracts.
3.13 Condition of Property. Sellers have good and marketable title
---------------------
to, free of Encumbrances, all of the Assets, except for (a) liens for Taxes not
yet due, (b) imperfections in title, if any, not material in amount, and which,
individually or in the aggregate, do not interfere with the conduct of the
Business or the use of the Assets, and (c) the matters set forth in Section 3.13
of the Disclosure Schedule. All material Leasehold Interests held by each Seller
as lessee are held under valid, binding and enforceable leases, subject only to
such exceptions as are not, individually or in the aggregate, material to the
Business. All of the Assets are in good operating condition and repair as
required for their use in the Business. The Assets are all of the assets which
are necessary and sufficient to conduct the Business as now being conducted.
3.14 Use of Leasehold Interests. All Leasehold Interests are used
--------------------------
and operated in compliance and conformity with all applicable leases and
Contracts except to the extent that the failure so to conform would not
materially adversely affect the Business. Sellers have not received notice of
any violation of any applicable zoning or building regulation or
12
ordinance relating to the Leasehold Interests and, to the knowledge of Sellers,
there is no such violation.
3.15 Legal Proceedings. Except as set forth in Section 3.15 of the
-----------------
Disclosure Schedule, there is no Order or Action pending, or, to the best
knowledge of Sellers, threatened, against or affecting a Seller or the Assets
that individually or when aggregated with one or more other Orders or Actions
has or would reasonably be expected to have a material adverse effect on the
Business or on either Seller's ability to perform its obligations under the
Transaction Documents. Section 3.15 of the Disclosure Schedule lists each Order
and each Action that involves a claim or potential claim of aggregate liability
in excess of $10,000 against, or that enjoins or seeks to enjoin any activity by
a Seller or any Affiliate. There is no matter as to which a Seller or any
Affiliate has received any notice, claim or assertion, or, to the best knowledge
of each Seller, which otherwise has been threatened or is reasonably expected to
be threatened or initiated, against or affecting any director, officer,
employee, agent or representative of such Seller or any other Person.
3.16 Insurance. Sellers are insured with reputable insurers against
---------
all risks normally insured against by companies engaged in similar businesses.
All insurance policies and bonds are in full force and effect. Section 3.16 of
the Disclosure Schedule lists all insurance policies and bonds that are material
to the Business. Sellers are not in default under any such policy or bond and
have received no notice of cancellation of any such policy or bond. Except as
set forth on Section 3.16 of the Disclosure Schedule, Sellers have timely filed
claims with their respective insurers with respect to all matters and
occurrences for which Sellers believe they have coverage. All insurance policies
maintained by Sellers will remain in full force and effect and may reasonably be
expected to be renewed on comparable terms in favor of Buyer following
consummation of the transactions contemplated by this Agreement (subject to such
entities' continuing compliance with the applicable terms thereof and any right
of insurers to terminate without cause), and neither Seller has received notice
or other indication from any insurer or agent of any intent to cancel or not so
renew any of such insurance policies.
3.17 Compliance with Law. Sellers have conducted the Business
-------------------
substantially in accordance with all applicable Laws. The forms, procedures and
practices of each Seller are in compliance with all such Laws, to the extent
applicable.
3.18 Employee Benefits.
-----------------
(a) Employee Benefit Plans, Collective Bargaining and Employee
----------------------------------------------------------
Agreements, and Similar Arrangements.
------------------------------------
(i) Section 3.18(a)(i) of the Disclosure Schedule lists all
employee benefit, compensation and fringe benefit plans and arrangements,
including without limitation, any "employee benefit plan" (within the meaning of
Section 3(3) of ERISA) to which each Seller is or ever has been a party or by
which each Seller is or ever has been bound, legally or otherwise.
(ii) Sellers have delivered to Buyer true and complete copies
of all documentsand summary plan descriptions with respect to such plans,
agreements and
13
arrangements, or summary descriptions of any such plans, agreements or
arrangements not otherwise in writing.
(iii) Except as set forth in Section 3.18(a)(iii) of the
Disclosure Schedule there are no negotiations, demands or proposals that are
pending or have been made which concern matters now covered, or that would be
covered, by plans, agreements or arrangements of the type described in this
section.
(iv) Each Seller and each trade or business (whether or not
incorporated) that is a member of a group of which such Seller is a member and
which is under common control within the meaning of Section 414(b) and (c) of
the Code ("ERISA Affiliate") are in full compliance with the applicable
provisions of ERISA and all other Laws applicable with respect to all such
plans, agreements and arrangements and to all group health plans of any ERISA
Affiliate. Each Seller and its ERISA Affiliates have performed all of their
obligations under all such plans, agreements and arrangements. There are no
Actions (other than routine claims for benefits) pending or threatened against
such plans or their assets, or arising out of such plans, agreements or
arrangements, and, to the best knowledge of Sellers, no facts exist which could
give rise to any such Actions.
(v) Except as specified in Section 3.18(a)(v) of the
Disclosure Schedule, each of the plans, agreements or arrangements can be
terminated by Sellers within a period of thirty (30) days following the Closing
Date, without payment of any additional compensation or amount or the additional
vesting or acceleration of any benefits.
(b) Qualified Stock, Pension and Profit-Sharing Plans. No plan
-------------------------------------------------
listed in Section 3.18 of the Disclosure Schedule is a stock bonus, pension or
profit-sharing plan within the meaning of Section 401(a) of the Code.
(c) Pension Plans (Defined Benefit). No plan listed in Section 3.18
-------------------------------
of the Disclosure Schedule is a plan subject to Title IV of ERISA.
(d) Multiemployer Plans. No plan listed in Section 3.18 of the
-------------------
Disclosure Schedule is a "multiemployer plan" (within the meaning of Section
3(37) of ERISA). Sellers have never contributed to or had an obligation to
contribute to any multiemployer plan.
3.19 Bank Accounts, Powers, etc. Section 3.19 of the Disclosure
--------------------------
Schedule lists each bank, trust company, savings institution, brokerage firm,
mutual fund or other financial institution with which each Seller has an account
or safe deposit box and the names and identification of all Persons authorized
to draw thereon or to have access thereto.
3.20 Environmental Matters. Except as set forth in Section 3.20 of
---------------------
the Disclosure Schedule, (i) neither of the Sellers with reference to the
Business and the Assets nor any Affiliate has generated, used, transported,
treated, stored, released or disposed of, or has suffered or permitted anyone
else to generate, use, transport, treat, store, release or dispose of any
Hazardous Substance in violation of any Law; (ii) there has not been any
generation, use, transportation, treatment, storage, release or disposal of any
Hazardous Substance in connection with the conduct of the Business of Sellers or
the use of any property or facility of either Seller or any nearby or adjacent
properties which has created or might reasonably be expected to create
14
any liability under any Law or which would require reporting to or notification
of any Governmental Entity; (iii) no asbestos or polychlorinated biphenyl or
underground storage tank is contained in or located at any facility of either
Seller; and (iv) any Hazardous Substance handled or dealt with in any way in
connection with the businesses of either Seller, whether before or during such
Seller's ownership, has been and is being handled or dealt with in all respects
in compliance with all applicable Laws.
Neither Seller is required to maintain documents and records or to
make any filings pursuant to applicable Law, relating to air or water quality,
waste management, Hazardous Substances, or the protection of health or the
environment. The air and water emission, discharge and waste disposal practices
used by each Seller fully comply with, and have at all times fully complied
with, all applicable Laws in all material respects. To the best knowledge of
Sellers, none of the Assets is contaminated with any Hazardous Substance.
3.21 Real Property. Neither Seller owns, and has not since
-------------
inception, owned any real property.
3.22 No Brokers or Finders. No agent, broker, finder, or investment
---------------------
or commercial banker, or other Person or firm engaged by or acting on behalf of
either Seller or any of their respective Affiliates in connection with the
negotiation, execution or performance of the Transaction Documents, is or will
be entitled to any brokerage or finder's or similar fee or other commission as a
result of this Agreement or the Transactions.
3.23 Investment Representations. RCI has informed Buyer that it
--------------------------
intends to distribute the Buyer's Shares to a Liquidating Trust subsequent to
the Closing Date. As such, each of RCI and the Liquidating Trust make the
representations set forth below to Buyer and acknowledge that Buyer's reliance
on federal and state securities law exemptions from registration and
qualification is predicated, in part, on such representations (all such
representations and warranties being made as of the date hereof and as of the
Closing Date):
(a) No Intent to Sell. RCI represents that it is acquiring the
-----------------
Buyer's Shares solely for its own account, for investment purposes only, and not
with a view to or an intent to sell, or to offer for resale in connection with
any unregistered distribution of all or any portion of the Buyer's Shares within
the meaning of the Securities Act of 1933, as amended (the "Securities Act"), or
applicable state securities laws.
(b) Accredited Investor. RCI represents that it is an "accredited
-------------------
investor" as defined in Regulation D promulgated under the Securities Act.
(c) No Reliance on Company. In evaluating the merits and risks of
----------------------
an investment in the Buyer's Shares, RCI represents that it has and will rely
upon the advice of its own legal counsel, tax advisors, and/or investment
advisors. Accordingly, RCI hereby represents and warrants that it has reviewed
the legal, accounting, tax and other economic aspects of RCI's acquisition of
Buyer's Shares with its own advisors and is not relying on Buyer for any legal,
tax, accounting or other advice involved in its acquisition of the Buyer's
Shares.
(d) Relationship to and Knowledge About Company. RCI represents
-------------------------------------------
that it is knowledgeable about Buyer. As a result of such relationship, it is
familiar with, among other
15
characteristics, Buyer's business and financial circumstances. RCI has received
all information it considers necessary or appropriate for deciding whether to
purchase the Buyer's Shares hereunder, including without limitation, copies of
Buyer's filings with the Securities and Exchange Commission ("SEC"). RCI
represents that it will rely solely on its own business judgment and
investigations with respect to Buyer and the Buyer's Shares.
(e) Restrictions on Buyer's Shares. RCI represents that it
------------------------------
understands that the Buyer's Shares are and will be characterized as "restricted
securities" under the federal securities laws since the Buyer's Shares are being
acquired from Buyer in a transaction not involving a public offering and that
under such laws and applicable regulations such securities may be resold without
registration under the Securities Act only in certain limited circumstances. RCI
represents that it will not and will not permit the Liquidating Trust to make
any disposition of all or any portion of the Buyer's Shares, except in
compliance with Section 6.7 and all applicable federal and state securities laws
and unless and until: (a) there is then in effect a registration statement under
the Securities Act filed by Buyer with the SEC covering such proposed
disposition and such disposition is made in accordance with such registration
statement; or (b) such disposition is made in accordance with Rule 144 under the
Securities Act or similar rule or regulation then in effect; or (c) such
proposed disposition is made in accordance with an exemption under the
Securities Act then in effect, and, if requested by Buyer, an opinion of counsel
acceptable to Buyer's counsel, that such disposition will not require
registration under the Securities Act and will be in compliance with all
applicable state securities laws. RCI represents that it is familiar with Rule
144 under the Securities Act and understands the resale limitations imposed
thereby and by the Securities Act and applicable state securities laws. Except
as provided in this Agreement, Buyer has no obligation to register the Buyer's
Shares or file any registration statement under either federal or state
securities laws.
(f) No General Solicitation. RCI represents that other than the
-----------------------
representations set forth in ARTICLE 4 hereof, it was not presented with or
solicited by any promotional meeting or material relating to the Buyer's Shares.
(g) Share Certificate Legend. RCI represents that it understands
------------------------
and acknowledges that any certificate evidencing the Buyer's Shares (or
evidencing any other securities issued with respect thereto pursuant to any
stock split, stock dividend or other form of reorganization or recapitalization)
when issued shall bear, in addition to any other legends which may be required
by applicable state securities laws, the following legend:
OWNERSHIP OF THE PURCHASED SHARES EVIDENCED BY THIS CERTIFICATE AND
ANY INTEREST THEREIN ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER APPLICABLE
LAW AND UNDER AN AGREEMENT WITH MINDARROW SYSTEMS, INC., INCLUDING RESTRICTIONS
ON SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER DISPOSITION, A COPY OF WHICH IS
AVAILABLE FOR REVIEW AT THE OFFICE OF THE SECRETARY OF MINDARROW SYSTEMS, INC.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR
QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), NOR HAVE THEY
BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. NO TRANSFER
OF SUCH SECURITIES WILL BE
16
PERMITTED UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH
TRANSFER, THE TRANSFER IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR IN
THE OPINION OF COUNSEL TO THE CORPORATION, REGISTRATION UNDER THE ACT IS
UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT AND WITH
APPLICABLE STATE SECURITIES LAWS.
In addition to the foregoing legends each certificate representing
Series C Preferred Stock shall bear the following legend:
The securities represented hereby are subject to certain conversion
restrictions pursuant to an agreement with MINDARROW SYSTEMS, INC., A COPY OF
WHICH IS AVAILABLE FOR REVIEW AT THE OFFICE OF THE SECRETARY OF MINDARROW
SYSTEMS, INC.
(h) Following the Closing, RCI shall distribute the Buyer's Shares
and the Buyer's Note to a Liquidating Trust to be established for the benefit of
creditors and shareholders of RCI (the "Liquidating Trust") pursuant to a plan
of liquidation to be adopted by RCI. Subject to the restrictions set forth in
ARTICLE 6 and ARTICLE 9 hereof, such Liquidating Trust shall hold and not
distribute the Buyer's Shares for six (6) months from the Closing Date and shall
not distribute the Buyer's Note for twenty-four (24) months from the Closing
Date but may distribute any payments received from Buyer with respect to such
note.
3.24 Accuracy of Information. All information furnished by or on
-----------------------
behalf of a Seller to Buyer, its agents or representatives in connection with a
Seller, the Business, the Purchased Assets, the Excluded Assets, the Assumed
Liabilities and the Excluded Liabilities, this Agreement, and the Transactions
is true and complete in all material respects and does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
any statement therein not misleading. None of the information supplied or to be
supplied by or on behalf of a Seller (a) to any Person for inclusion, or
included, in any document or application filed with any Governmental Entity
having jurisdiction over or in connection with the transactions contemplated by
this Agreement or (b) to Buyer, its agents or representatives in connection with
these Transactions or this Agreement, did contain, or at the respective times
such information is delivered or becomes effective, will contain any untrue
statement of a material fact, or omitted or will omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents, warrants and agrees as follows:
4.1 Organization, Corporate Power and Authority. Buyer is a
-------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the state in which it is incorporated and is duly qualified to do business as
a foreign corporation in the jurisdictions in which Buyer conducts its business,
except where the failure to so qualify will not have a material
17
adverse effect on Buyer's ability to perform its obligations under the
Transaction Documents. Buyer has all requisite corporate power and authority to
execute and deliver the Transaction Documents to which it is a party and to
perform its obligations thereunder.
4.2 Authorization of Agreement. The execution, delivery and
--------------------------
performance by Buyer of the Transaction Documents to which it is a party, and
the consummation by it of the Transactions, have been duly authorized by all
necessary corporate action by Buyer. This Agreement has been, and each other
Transaction Document to which Buyer is a party will be at the Closing, duly
executed and delivered by Buyer and constitute, or will, when delivered,
constitute, the legal, valid and binding obligations of Buyer, enforceable
against Buyer in accordance with their respective terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws and equitable principles relating to or limiting creditors' rights
generally.
4.3 Effect of Agreement. The execution, delivery and performance by
-------------------
Buyer of the Transaction Documents to which it is a party, and the consummation
by it of the Transactions, will not violate the charter documents or bylaws of
Buyer or any Law to which Buyer is subject, or any judgment, award or decree or
any material indenture, material agreement or other material instrument to which
Buyer is a party, or by which Buyer or its properties or assets are bound, or
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under, any such indenture, agreement or other
instrument, or result in the creation or imposition of any Encumbrance of any
nature whatsoever upon any of the properties or assets of Buyer, except to the
extent the effect thereof will not be materially adverse to Buyer's ability to
fulfill its obligations under the Transaction Documents.
4.4 Governmental Approvals. Except as set forth in Schedule 4.4, no
----------------------
Approval or Order or action of or filing with any Governmental Entity is
required to be obtained by Buyer for the execution and delivery by Buyer of the
Transaction Documents to which it is a party or the consummation by it of the
Transactions.
4.5 Capital Structure. Buyer has an authorized capitalization
-----------------
consisting of 30,000,000 shares of common stock, $0.001 par value per share, of
which, as of August 31, 2001, 11,494,716 shares are issued and outstanding, and
10,000,000 shares of Preferred Stock, of which 1,750,000 shares have been
designated as Series B Preferred Stock, $0.001 par value per share and 3,000,000
shares have been designated as Series C Preferred Stock, $0.001 par value per
share. Of the 10,000,000 authorized shares of Preferred Stock, as of August 31,
2001, 1,002,449 shares of Series B Preferred Stock are issued and outstanding
and 762,000 shares of Series C Preferred Stock are issued and outstanding. All
such outstanding shares have been duly authorized and validly issued and are
fully paid and nonassessable. Except as set forth in Schedule 4.5, as of August
31, 2001, there are no outstanding options, warrants, rights, calls,
commitments, conversion rights, rights of exchange, plans or other agreements of
any character providing for the purchase, issuance or sale of any shares of
capital stock of Buyer, other than as contemplated by this Agreement.
18
4.6 SEC Filings; Representations and Warranties.
-------------------------------------------
(a) Since August 18, 2000 and through the date of this Agreement,
Buyer has timely filed with the SEC all required reports and forms and other
documents (the "Buyer SEC Filings"). A schedule listing all of the Buyer SEC
Filings is set forth as Schedule 4.6. As of their respective dates and except to
the extent modified by subsequent disclosure in the Buyer SEC Filings (including
but not limited to disclosure by the Buyer in the Buyer SEC Filings of
information with respect to the fraud perpetrated against Buyer by its former
transfer agent), the Buyer SEC Filings complied in all material respects with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the SEC promulgated thereunder applicable to
such Buyer SEC Filings and none of the Buyer SEC Filings contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(b) Each set of consolidated financial statements (including, in
each case, any related notes thereto) contained in the Buyer SEC Filings was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto) and except to
the extent modified by subsequent disclosure in the Buyer SEC Filings (including
but not limited to disclosure by the Buyer in the Buyer SEC Filings of
information with respect to the fraud perpetrated against Buyer by its former
transfer agent), each fairly presents the consolidated financial position of
Buyer at the respective dates thereof and the consolidated results of its
operations and cash flows for the periods indicated.
4.7 No Brokers or Finders. No agent, broker, finder or investment
---------------------
or commercial banker, or other Person or firm engaged by or acting on behalf of
Buyer or its Affiliates in connection with the negotiation, execution or
performance of the Transaction Documents, is or will be entitled to any broker's
or finder's or similar fees or other commissions as a result of this Agreement
or such transactions.
4.8 Valid Issuance of Purchased Shares. Each of (i) the Buyer's
----------------------------------
Shares and (ii) the shares of Buyer Common Stock to be issued upon the
conversion of Series C Preferred Stock will, when issued and delivered to RCI in
accordance with the terms hereof, be duly authorized, validly issued, fully paid
and non-assessable, and issued in compliance with applicable federal and state
securities laws.
4.9 Legal Proceedings. Except as set forth on Schedule 4.9, there
-----------------
is no Order or Action pending or to the best knowledge of Buyer, threatened
against Buyer that individually or when aggregated with one or more other Orders
or Actions has or might reasonably be expected to have a material adverse effect
on Buyer's business or its ability to perform its obligations under the
Transaction Documents.
4.10 Absence of Certain Changes. Except as set forth in Schedule
--------------------------
4.10, since June 30, 2001, the Buyer has not:
(a) conducted its business other than in the usual and ordinary
manner and in the ordinary course of business, including making all regularly
scheduled payments and
19
commitments (e.g., payroll, taxes, rent and lease payments) as such payments and
commitments come due;
(b) suffered any material adverse change in its working capital,
financial condition, assets, liabilities (absolute, accrued, contingent or
otherwise), reserves, business or operations;
(c) waived any claims or rights of the Buyer of substantial value;
(d) sold, transferred or otherwise disposed of any of the Buyer's
properties or assets (real, personal or mixed, tangible or intangible) with a
value of $100,000 or more except in the ordinary course of business and
consistent with past practice;
(e) disposed of or permitted to lapse any intellectual property
rights or disclosed to any person any trade secret, formula, process or know-how
of the Buyer not theretofore a matter of public knowledge, the disclosure or
lapse of which would have a material adverse affect on the business, operations,
assets or financial condition of the Buyer;
(f) granted any general increase in the compensation of the Buyer's
employees (including any such increase pursuant to any bonus, pension, profit
sharing or other plan or commitment) or any increase in the compensation payable
or to become payable to any employee of the Buyer other than increases
reasonable in amount and in the ordinary course of business;
(g) made any loan, guaranty or other extension of credit, or
entered into any commitment to make any loan, guaranty or other extension of
credit, to or for the benefit of any director, officer, employee, stockholder or
any of their respective Associates or Affiliates;
(h) declared, issued, made or paid any dividend or other
distribution of assets, whether consisting of money, other personal property,
real property or other thing of value;
(i) made any special or extraordinary payments to any Person;
(j) made any material investment, by purchase, contributions to
capital, property transfers, or otherwise, in any other Person;
(k) issued, sold, redeemed or acquired for value any debt
obligations or equity of Buyer;
(l) failed to maintain or repair its assets in accordance with good
and prudent maintenance and repair procedures;
(m) made any change in any method of accounting or accounting
practice that would have a material adverse effect on the assets or operations
of the Buyer; or
(n) agreed, whether in writing or otherwise, to take any action
described in this Section 4.10.
20
4.11 Compliance with Law. Buyer has conducted its business
-------------------
substantially in accordance with all applicable Laws.
4.12 Accuracy of Representations and Warranties. All representations
------------------------------------------
and warranties made by Buyer herein are true and complete in all material
respects and do not contain any untrue statement of a material fact or omit to
state a material fact necessary to make any statement therein not misleading.
ARTICLE 5
[Reserved]
ARTICLE 6
ADDITIONAL CONTINUING COVENANTS
6.1 Confidentiality. All non-public information disclosed by any
---------------
party (or its representatives) whether before or after the date hereof, in
connection with the transactions contemplated by, or the discussions and
negotiations preceding, this Agreement to any other party (or its
representatives) shall be kept confidential by such other party and its
representatives and shall not be used by any such Persons other than as
contemplated by this Agreement, except to the extent that such information may
otherwise be required by Law or to the extent such duty as to confidentiality is
waived in writing by the other party.
Neither Seller nor any of Sellers' representatives or Affiliates
shall, at any time, make use of, divulge or otherwise disclose, directly or
indirectly, any trade secret or other proprietary data (including, but not
limited to, any customer list, record or financial information) concerning the
Business. In addition, neither Seller, nor any of the Sellers' representatives
or Affiliates shall make use of, divulge or otherwise disclose, directly or
indirectly, to Persons other than Buyer, any confidential information concerning
the Business.
6.2 Tax Cooperation. After the Closing, Sellers and Buyer shall,
---------------
and shall cause their respective Affiliates to, cooperate fully in the
preparation of all Tax Returns and shall provide, or cause to be provided to
each other any records and other information requested by such parties in
connection therewith as well as access to, and the cooperation of, their
respective accountants. Sellers and Buyer shall, and shall cause their
respective Affiliates to, cooperate fully in connection with any Tax
investigation, audit or other proceeding. Any information obtained pursuant to
this Section 6.2 or pursuant to any other Section hereof providing for the
sharing of information or the review of any Tax Return or other Schedule
relating to Taxes shall be subject to Section 6.1.
6.3 Excluded Assets. If, after the Closing Date, Excluded Assets
---------------
shall remain on the premises transferred to Buyer hereunder, then Buyer shall
take reasonable efforts to deliver such Excluded Assets to Sellers at the
expense of Sellers and, so long as such Excluded Assets shall remain on said
premises, Buyer shall exercise the same reasonable degree of care with respect
thereto as it does with respect to its own property.
21
6.4 Sellers' Covenant Not to Compete.
--------------------------------
(a) Restrictions on Competitive Activities. Each Seller agrees
--------------------------------------
that, after the Closing, Buyer shall be entitled to the goodwill and going
concern value of the Business and to protect and preserve the same to the
maximum extent permitted by law. Each Seller also acknowledges that its
management contributions to the Business have been uniquely valuable and involve
proprietary information that would be competitively unfair to make available to
any competitor of the Business. For these and other reasons and as an inducement
to Buyer to enter into this Agreement, each Seller agrees that for a period of 5
years after the date hereof each Seller will not, directly or indirectly, for
its own benefit or as agent for another, carry on or participate in the
ownership, management or control of, or the financing of, or be employed by, or
consult for or otherwise render services to, or allow its name or reputation to
be used in or by any other present or future business enterprise that competes
with Buyer in activities similar to the Business as of the Closing Date in
California for so long as Buyer or any person entitled to or acquiring ownership
of the goodwill of the Business or the Purchased Assets through Buyer carries on
a like business therein.
(b) Exceptions. Nothing contained herein shall limit the right of
----------
either Seller as an investor to hold and make investments in securities of any
corporation or limited partnership that is registered on a national securities
exchange or admitted to trading privileges thereon or actively traded in a
generally recognized over-the-counter market, provided the aggregate equity
interest therein of Sellers (other than as to Buyer's Shares) does not exceed 5%
of the outstanding shares or interests in such corporation or partnership.
(c) Restrictions on Soliciting Employees. In addition, to protect
------------------------------------
Buyer against any efforts by Sellers to cause employees of the Business to
terminate their employment, each Seller agrees that for a period of 5 years
following the Closing Date, Sellers will not directly or indirectly (i) induce
any employee of the Business to leave Buyer or to accept any other employment or
position, or (ii) assist any other entity in hiring any such employee.
(d) Special Remedies and Enforcement. Sellers and Buyer agree that
--------------------------------
a breach by either Seller of any of the covenants set forth in this Section 6.4
could cause irreparable harm to Buyer, that Buyer's remedies at law in the event
of such breach would be inadequate, and that, accordingly, in the event of such
breach, a restraining order or injunction or both may be issued against either
or both Sellers, in addition to any other rights and remedies that are available
to Buyer. In connection with any such action or proceeding for injunctive
relief, each Seller hereby waives the claim or defense that a remedy at law
alone is adequate and agrees, to the maximum extent permitted by Law, to have
each provision of this Section 6.4 specifically enforced against such Seller and
consents to the entry of injunctive relief against such Seller enforcing or
restraining any breach or threatened breach of this Section 6.4.
(e) Severability. If this Section 6.4 is more restrictive than
------------
permitted by the Laws of any jurisdiction in which Buyer seeks enforcement
hereof, this Section 6.4 shall be limited to the extent required to permit
enforcement under such Laws. In particular, the parties intend that the
covenants contained in Section 6.4(a) shall be construed as a series of separate
covenants, one for each county and city in which the Business has been carried
on and in which Buyer conducts a similar business after the Closing Date. Except
for geographic coverage, each
22
such separate covenant shall be deemed identical in terms. If, in any
proceeding, a court or arbitrator shall refuse to enforce any of the separate
covenants, then such unenforceable covenant shall be deemed eliminated from this
Section 6.4 for the purpose of those proceedings to the extent necessary to
permit the remaining separate covenants to be enforced. If the provisions of
this Section 6.4 shall ever be deemed to exceed the duration or geographic
limitations or scope permitted by applicable law, then such provisions shall be
reformed to the maximum time or geographic limitations in scope, as the case may
be, permitted by applicable Law.
6.5 Registration of the Purchased Shares.
------------------------------------
(a) Buyer shall, subject to the terms and conditions of this
Agreement, file a registration statement with the SEC to register the
Registrable Securities for resale under the Securities Act. The "Registrable
Securities" means, as owned by RCI or after distribution by RCI to the
Liquidating Trust (i) all shares of Common Stock issued pursuant to this
Agreement, and (ii) all shares of Common Stock issuable upon the conversion or
exercise of Series C Preferred Stock. With respect to the Registrable Securities
(which term shall include all shares or other securities received on account of
or in exchange for such shares, including as a result of any reorganization,
merger, stock split, or similar event ) to be registered, Buyer shall take the
following actions:
(i) Prepare, file with the SEC on or before six months from
the Closing Date, and use commercially reasonable efforts to cause to become
effective as soon as possible thereafter and keep effective until the date on
which the Registrable Securities are freely tradable to the public without
restriction pursuant to Rule 144 promulgated under the Securities Act, but in no
event later than eighteen (18) months after the Closing Date a registration
statement on Form S-3 covering the resale by RCI of the Registrable Securities,
and reasonable and necessary amendments (the "Registration Statement");
(ii) Furnish to RCI and, as applicable the Liquidating Trust,
such number of copies of a prospectus, including a preliminary prospectus, and
all amendments and supplements thereto, in conformity with the requirements of
the Securities Act and as may reasonably be required to facilitate the
disposition of the Registrable Securities;
(iii) Use commercially reasonable efforts to register and
qualify the securities covered by the Registration Statement under such other
securities or Blue Sky laws of selected jurisdictions deemed reasonably
necessary by RCI and, as applicable the Liquidating Trust, and prepare and file
in those jurisdictions such amendments (including post-effective amendments) and
supplements and to take such other actions as may be necessary to maintain such
registration and qualification as necessary;
(iv) Notify RCI and, as applicable the Liquidating Trust, at
any time when a prospectus relating to securities covered by the Registration
Statement is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing; in such event RCI and, as applicable the Liquidating Trust, shall
refrain from thereafter selling securities
23
until an amendment or supplement to the Registration Statement is filed to
correct any such untrue statement or omission or until such statement or
omission is otherwise no longer untrue; and
(v) Notify RCI and, as applicable the Liquidating Trust, of
the issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose.
(vi) Cause all Registrable Securities included in such
registration statement to be listed, upon official notice of issuance, for
trading on Nasdaq, if the same class of Buyer's securities are then listed for
trading on Nasdaq, or any securities exchange upon which the same class of
Buyer's securities are then listed for trading.
(vii) Make available for inspection by RCI or the Liquidating
Trust, and their respective attorneys, accountants, or other agents retained by
either, all financial and other corporate documents of Buyer to enable RCI or
the Liquidating Trust to exercise their "due diligence" responsibility with
respect to the disposition of the Registrable Securities.
(b) Notwithstanding the foregoing, Buyer shall not be obligated to
take any action pursuant to this Section 6.5:
(i) if Form S-3 is not available for such offering of the
Buyer's Registrable Securities;
(ii) in any particular jurisdiction in which Buyer would be
required to execute a general consent to service of process in affecting such
registration, qualification or compliance, unless Buyer is already subject to
service in such jurisdiction and except as may be required by the Securities
Act;
(iii) in any particular jurisdiction for which Buyer
determines it is not reasonably feasible to obtain such registration,
qualification or compliance, or the cost to do so exceeds $2,500; or
(iv) if, at such time, the Registrable Securities held by RCI
and, as applicable the Liquidating Trust, are freely tradable without regard to
any volume restrictions under Rule 144 promulgated under the Securities Act.
(c) All expenses incurred in connection with registrations pursuant
to this Section 6.5, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for Buyer, fees and disbursements of one counsel for
RCI or the Liquidating Trust in an amount up to $10,000, blue sky fees and
expenses and the expense of any special audits incident to or required by any
such registration shall be borne by Buyer. All underwriting discounts, selling
commissions and stock transfer taxes applicable to the Registrable Securities
being registered by RCI and, as applicable the Liquidating Trust, shall be borne
by RCI and, as applicable the Liquidating Trust. Buyer's obligations to register
such Registrable Securities pursuant to this Section 6.5 shall be conditioned
upon the execution and delivery by RCI and, as applicable the Liquidating Trust,
24
and Buyer of the usual and customary indemnification agreements, in form
reasonably satisfactory to Buyer.
6.6 Piggy-back Registration Rights.
------------------------------
(a) In the event that after six months after the Closing Date Buyer
has not included the Registrable Securities in a registration statement filed
with the SEC, and Buyer proposes to register (including for this purpose a
registration effected by Buyer for stockholders other than RCI or the
Liquidating Trust) any of its securities under the Securities Act in connection
with the public offering of such securities solely for cash (other than a
registration form relating to: (i) a registration of a stock option, stock
purchase or compensation or incentive plan or of stock issued or issuable
pursuant to any such plan, or a dividend investment plan; (ii) a registration of
securities issued or proposed to be issued in exchange for securities or assets
of or in connection with a merger or consolidation with, another corporation; or
(iii) a registration of securities issued or proposed to be issued in exchange
for other securities of Buyer), Buyer shall, as promptly as reasonably
practical, give RCI and, as applicable the Liquidating Trust, written notice of
such registration. Upon the written request of RCI and, as applicable the
Liquidating Trust, given within ten (10) days after receipt of such written
notice from Buyer, Buyer shall, subject to the provisions of Section 6.6(b) (in
the case of an underwritten offering), use its reasonable efforts to cause to be
registered under the Securities Act all of the Registrable Securities that RCI
and, as applicable the Liquidating Trust, have requested to be registered.
(b) The right of RCI and the Liquidating Trust to "piggyback" in an
underwritten public offering of Buyer's securities pursuant to Section 6.6(a)
shall be conditioned upon each of RCI's and Liquidating Trust's, as applicable,
participation in such underwriting and the inclusion of RCI's and the
Liquidating Trust's, as applicable Registrable Securities in the underwriting to
the extent provided herein. RCI and, as applicable the Liquidating Trust, shall
(together with Buyer and any other shareholders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for underwriting by Buyer.
Notwithstanding any other provision of Section 6.6(a) and this Section 6.6(b),
if the underwriter determines that marketing factors require a limitation of the
number of shares to be underwritten, the underwriter may exclude some or all of
the Registrable Securities from such registration and underwriting, provided
that RCI and, as applicable, the Liquidating Trust are allowed to participate in
the offering in the same proportion (based on the total number of securities to
be registered) as any other stockholder of Buyer (i) participating in such
offering and (ii) having registration rights on parity with RCI and the
Liquidating Trust; provided, however, that nothing in this Agreement shall be
construed to limit Buyer's ability to grant registration rights on parity with
or senior to those rights of RCI and the Liquidating Trust contained herein. If
RCI or the Liquidating Trust disapproves of the terms of any such underwriting,
it may elect to withdraw therefrom by written notice to Buyer. Any Registrable
Securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration. Buyer's obligations to use commercially reasonable efforts to
register such Registrable Securities pursuant to this Section 6.6 shall be
conditioned upon the execution and delivery by RCI and, as applicable the
Liquidating Trust, and Buyer of usual and customary indemnification agreements,
in form reasonably satisfactory to Buyer.
25
(c) The rights granted to RCI and the Liquidating Trust under this
Section 6.6 shall terminate upon inclusion of the Registrable Securities in a
Registration Statement pursuant to Section 6.5.
6.7 Restrictions on Conversion of Series C Preferred Stock. RCI and
------------------------------------------------------
the Liquidating Trust shall not convert any of the shares of the Series C
Preferred Stock into more than two (2) shares of Common Stock; provided,
however, that such limit shall not apply to adjustments to the conversion ratio
of the Series C Preferred Stock pursuant to Article IV, Series C Preferred Stock
Section 7(a) (adjustments for stock dividends and stock splits) of the Company's
Restated Certificate of Incorporation. All transferees of the Series C Preferred
Stock shall agree, as a precondition to a transfer by the Liquidating Trust to
such transferee of shares of Series C Preferred Stock, to the restriction on
conversion set forth in this Section 6.7.
6.8 Board Nominee. Buyer shall appoint Xxxxx Xxxxx to Buyer's Board
-------------
of Directors.
6.9 Permits and Approvals; Third Party Consents.
-------------------------------------------
(a) Buyer and Sellers will each continue to use their best efforts
to obtain all Approvals and Permits that may be necessary or that may be
reasonably requested by Buyer to consummate the transactions contemplated by
this Agreement.
(b) To the extent that the Approval of a third party with respect
to any Contract is required in connection with the transactions contemplated by
this Agreement, and in the event that any such Approval is not obtained prior to
the Closing Date, each Seller shall cooperate with Buyer to ensure that Buyer
obtains the benefits of each such Contract and shall indemnify and hold harmless
Buyer for and against any and all Losses as a result, directly or indirectly, of
the failure to obtain any such Approval.
Notwithstanding anything herein to the contrary, the parties hereto
acknowledge and agree that Sellers will not assign to Buyer any Assigned
Contract that by its terms requires, prior to such assignment, the consent of
any other contracting party thereto unless such consent has been obtained. With
respect to each such Assigned Contract not assigned on the Closing Date, after
the Closing Date Sellers shall continue to deal with the other contracting
party(ies) to such Assigned Contract as the prime contracting party, and Buyer
and Sellers shall use their best efforts to obtain the consent of all required
parties to the assignment of such Assigned Contract. Such Assigned Contract
shall be promptly assigned by Sellers to Buyer after receipt of such consent
after the Closing Date. Notwithstanding the absence of any such consent, Buyer
shall be entitled to the benefits of such Assigned Contract accruing after the
Closing Date; and Buyer agrees to perform all of the obligations of Sellers to
be performed under such Assigned Contract after the Closing Date.
6.10 Audit Cooperation. After the Closing, Sellers shall, and shall
-----------------
cause their respective Affiliates to, cooperate fully in the preparation of all
financial statements determined by Buyer to be necessary to meet its financial
and SEC reporting obligations in connection with the consummation of the
Transactions contemplated by this Agreement. Sellers shall provide, or
26
cause to be provided to Buyer any records and other information requested by
Buyer in connection therewith as well as access to, and the cooperation of,
their accountants.
ARTICLE 7
ITEMS TO BE DELIVERED AT CLOSING
7.1 Deliveries to be Made by Sellers.
--------------------------------
(a) Opinion of Counsel. Sellers shall deliver to Buyer at the
------------------
Closing from Buchalter, Nemer, Fields & Younger, counsel to Sellers, an opinion
dated the Closing Date, substantially in the form of Exhibit E.
7.2 Deliveries to be Made by Buyer.
------------------------------
(a) Opinion of Counsel. Buyer shall deliver to Sellers at the
------------------
Closing from O'Melveny & Xxxxx LLP, counsel to Buyer, an opinion dated the
Closing Date, substantially in the form of Exhibit F.
ARTICLE 8
SURVIVAL
8.1 Survival of Representations and Warranties. The representations
------------------------------------------
and warranties contained in or made pursuant to this Agreement shall survive the
Closing and expire on the second anniversary of the Closing except that if a
claim or notice is given under ARTICLE 9 with respect to any representation or
warranty prior to the applicable expiration date, such representation or
warranty shall continue indefinitely until the applicable claim is finally
resolved. Nothing in this Section 8.1 shall bar, prohibit or prevent any claim
by any party based on fraud or intentional misrepresentation. All covenants to
be performed by either party after the Closing Date shall continue indefinitely.
ARTICLE 9
INDEMNIFICATION
9.1 Obligations of Sellers. Subject to the limitations set forth in
----------------------
this ARTICLE 9, each Seller, jointly and severally, agrees to indemnify and hold
harmless Buyer and its directors, officers, employees, affiliates, agents,
advisors and assigns from and against any and all Losses, directly or
indirectly, as a result of, or based upon or arising from:
(a) any inaccuracy in or breach or nonperformance of any
representation, warranty or covenant of Sellers made in this Agreement,
including the Disclosure Schedule and Exhibits hereto;
(b) any liability or obligation of, or claims against, Sellers or
the Business other than the Assumed Liabilities;
(c) any third party claims or demands in respect of the Business
(or regarding the conduct of the Business) prior to the Closing and not
specifically included in the Assumed Liabilities, that are pending as of or
asserted prior to or after the Closing;
27
(d) any and all Losses resulting from the assertion of claims made
against the Assets sold hereunder or against Buyer by creditors of Sellers under
any bulk sales law with respect to liabilities and obligations of Sellers not
assumed by Buyer;
(e) except for those claims specifically included in the Assumed
Liabilities, any claim by a current of former employee of either Seller, the
facts upon which such claim is based occurred prior to the Closing Date,
including but not limited to, claims alleging wrongful discharge by either
Seller, employment discrimination by either Seller, wage and hour violations of
either Seller, severance obligations of either Seller and accrued vacation
obligations of either Seller;
(f) any claims, demands or obligations of any nature by or to
stockholders, members or former stockholders or members of Sellers;
(g) any claims, demands or obligations of any nature related to the
litigation described in Section 1.2(d);
(h) any claims, demands or obligations of any nature related to the
matters set forth in Items 2 and 4 of Section 3.15 of the Disclosure Schedule;
(i) any claims, demands or obligations of any nature relating to
conduct of the Sellers prior to the Closing related to the matters set forth in
Items 1 and 3 of Section 3.15 of the Disclosure Schedule; or
(j) the Excluded Liabilities.
9.2 Obligations of Buyer. Subject to the limitations set forth in
--------------------
this ARTICLE 9, Buyer agrees to indemnify and hold harmless, Sellers and their
respective directors, officers, employees, affiliates, agents, advisors and
assigns from and against any Losses of Sellers, directly or indirectly, as a
result of, or based upon or arising from, any inaccuracy in or breach or
nonperformance of any of the representations, warranties, covenants or
agreements made by Buyer in or pursuant to this Agreement.
9.3 Procedure.
---------
(a) Notice. Whenever any claim shall arise for indemnification
------
under this Agreement, the party entitled to indemnification (the "Indemnified
Party") shall promptly notify the other party (the "Indemnifying Party") of the
claim in writing, which notice shall include the facts constituting the basis
for such claim. A failure to notify or to give notice as hereinabove set forth
to the Indemnifying Party shall in no case prejudice the rights of the
Indemnified Party under this Agreement unless the Indemnifying Party shall be
prejudiced by such failure and then only to the extent the Indemnifying Party
shall be prejudiced by such failure. The Indemnified Party shall not settle or
compromise any claim by a third party for which it is entitled to
indemnification hereunder without the prior written consent of the Indemnifying
Party (which shall not be unreasonably withheld).
(b) Defense. In connection with any claim giving rise to indemnity
-------
under this Agreement resulting from or arising out of any claim or legal
proceeding by a party who is not a
28
party to this Agreement, the Indemnifying Party at its sole cost and expense
shall assume the defense of any such claim or legal proceeding with legal
counsel approved by the Indemnified Party in its reasonable discretion. The
Indemnified Party shall be entitled to participate in (but not control) the
defense of any such action, with its own counsel and at its own expense;
provided, however, if (i) the named parties to any such proceeding (including
any impleaded parties) include both the Indemnifying Party and the Indemnified
Party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them (other
than differing interests associated with an Indemnifying Party's obligation to
indemnify), or (ii) the employment of counsel by such Indemnified Party has been
authorized in writing by the Indemnifying Party, or (iii) the Indemnifying Party
has not in fact employed counsel to assume the defense of such action within a
reasonable time; then, the Indemnified Party shall have the right to retain its
own counsel at the sole cost and expense of the Indemnifying Party, which costs
and expenses shall be paid by the Indemnifying Party on a current basis. If
after notification thereof, the Indemnifying Party does not assume the defense
of any such claim or litigation resulting from a claim within a timely manner so
as not to prejudice the rights of the Indemnified Party, the Indemnified Party
may defend against such claim or litigation, in such manner as it may deem
reasonably appropriate, including, but not limited to, settling such claim or
litigation, after giving notice of the same to the Indemnifying Party, on such
terms as the Indemnified Party may deem appropriate (within the exercise of
reasonable discretion). The liability of the Indemnifying Party shall be
conclusively established by such settlement by the Indemnified Party to the
extent entered into on the basis of its reasonable discretion, the amount of
such liability to include, but not be limited to, both the settlement
consideration and the reasonable costs and expenses, including attorneys' fees,
incurred by the Indemnified Party in effecting such settlement.
(c) Adjustments for Insurance Proceeds. The amount of any Loss
----------------------------------
entitling a party to indemnification under this ARTICLE 9 shall be reduced by
the amount of any insurance proceeds recovered by the Indemnified Party for such
Loss, net of all costs and expenses incurred in collecting such insurance
proceeds (including, without limitation, reasonable attorneys' fees). Nothing in
this Section 9.3 shall be deemed to obligate any person to maintain any
insurance or to pursue any claim against any insurer or third party.
(d) Tax Adjustments. If such Indemnified Party is liable for any
---------------
additional Taxes as a result of the payment of amounts in respect of a Loss, the
Indemnifying Party will pay to the Indemnified Party in addition to such amounts
in respect of the Loss within 10 days after being notified by the Indemnified
Party of the payment of such liability (x) an amount equal to such additional
Taxes (the "Tax Reimbursement Amount") plus (y) any additional amounts required
to pay additional Taxes imposed with respect to the Tax Reimbursement Amount and
with respect to amounts payable under this clause (y), with the result that the
Indemnified Party shall have received from the Indemnifying Party an amount
equal to the Loss.
9.4 Limitations Upon Sellers' Indemnification.
-----------------------------------------
(a) Buyer shall not be entitled to any indemnification hereunder
unless and until the claim or claims asserted by Buyer are in excess of $25,000
in the aggregate and such claims are determined pursuant to this ARTICLE 9 to be
payable, in which case Buyer shall be entitled to recover all amounts determined
to be payable including the first $25,000.
29
(b) Any indemnification to be paid by Sellers to Buyer pursuant to
this ARTICLE 9 shall be satisfied and paid solely from the Buyer's Note. RCI and
the Liquidating Trust, as the case may be, shall not distribute or transfer
Buyer's Note prior to payment thereon by Buyer and Buyer shall have the right to
withhold from any payment required thereunder an amount equal to the claim or
claims asserted in accordance with the provisions of this ARTICLE 9. If and when
it is finally determined that any such claims are entitled to indemnification
pursuant to this ARTICLE 9, the amount of such claims may be offset against the
retained payments and the remainder, if any, shall be delivered to RCI, or the
Liquidating Trust, as the case may be, with interest on such remainder payable
at the rate of 5% per annum. Following payment of Buyer on the Buyer's Note, RCI
or the Liquidating Trust may distribute such proceeds in accordance with the
Plan of Liquidation to be adopted by RCI.
9.5 Limitations Upon Buyer's Indemnification.
----------------------------------------
(a) Sellers shall not be entitled to any indemnification hereunder
unless and until the claim or claims asserted by Sellers are in excess of
$25,000 in the aggregate and such claims are determined pursuant to this ARTICLE
9 to be payable in which case Sellers shall be entitled to recover all amounts
determined to be payable including the first $25,000.
(b) Any indemnification to be paid by Buyer to Sellers pursuant to
this ARTICLE 9 shall be limited to the aggregate principal amount then remaining
outstanding and payable on the Buyer's Note.
9.6 Arbitration. All claims, disputes and other matters in question
-----------
arising out of, or relating to, this Agreement or the performance hereof,
including, without limitation, Indemnifiable Claims, shall be submitted to, and
determined by, arbitration if good faith negotiations among the parties hereto,
if any, does not resolve such claim, dispute or other matter. Such arbitration
shall proceed in accordance with the then-current rules for arbitration
established by Judicial Arbitration Mediation Services, Inc./ENDISPUTE ("JAMS"),
unless the parties hereto mutually agree otherwise, and pursuant to the
following procedures:
(a) Buyer on the one hand and RCI on the other hand shall each
appoint an arbitrator from the JAMS panel of retired judges, and those
party-appointed arbitrators shall appoint a third arbitrator from the JAMS panel
of retired judges within ten (10) days. If the party-appointed arbitrators fail
to appoint a third arbitrator within the ten (10) days, such third arbitrator
shall be appointed by JAMS in accordance with its rules.
(b) Reasonable discovery shall be allowed in arbitration.
(c) All proceedings before the arbitrators shall be held in Orange
County, California. The governing law shall be as specified in Section 10.4.
(d) The award rendered by the arbitrators shall be final and binding,
and judgment may be entered in accordance with applicable Law and in any court
having jurisdiction thereof.
(e) The award rendered by the arbitrators shall include (i) a
provision that the prevailing party in such arbitration recover its costs
relating to the arbitration and reasonable
30
attorneys' fees from the other party, (ii) the amount of such costs and fees,
and (iii) an order that the losing party pay the fees and expenses of the
arbitrators.
(f) The arbitrator shall by the agreement of the parties expressly be
prohibited from awarding punitive damages in connection with any claim being
resolved by arbitration hereunder.
ARTICLE 10
GENERAL
10.1 Amendments; Waivers. This Agreement and any schedule or exhibit
-------------------
attached hereto may be amended only by agreement in writing of all parties. No
waiver of any provision nor consent to any exception to the terms of this
Agreement shall be effective unless in writing and signed by the party to be
bound and then only to the specific purpose, extent and instance so provided.
10.2 Schedules; Exhibits; Integration. Each schedule and exhibit
--------------------------------
delivered pursuant to the terms of this Agreement shall be in writing and shall
constitute a part of this Agreement, although schedules need not be attached to
each copy of this Agreement. This Agreement, together with such schedules and
exhibits, constitutes the entire agreement among the parties pertaining to the
subject matter hereof and supersedes all prior agreements and understandings of
the parties in connection therewith.
10.3 Best Efforts; Further Assurances. Each party will use its best
------------
efforts to cause all conditions to its and the other parties' obligations
hereunder to be timely satisfied and to perform and fulfill all obligations on
its part to be performed and fulfilled under this Agreement, to the end that the
transactions contemplated by this Agreement shall be effected substantially in
accordance with its terms as soon as reasonably practicable. Each party shall
execute and deliver such further certificates, agreements and other documents
and take such other actions as the other party may reasonably request to
consummate or implement the transactions contemplated hereby or to evidence such
events or matters.
10.4 Governing Law. This Agreement and the legal relations between the
-------------
parties shall be governed by and construed in accordance with the laws of the
State of California applicable to contracts made and performed in such State and
without regard to conflicts of law doctrines except to the extent that certain
matters are preempted by federal law or are governed by the law of the
jurisdiction of incorporation of the respective parties.
10.5 No Assignment. Neither this Agreement nor any rights or
-------------
obligations under it are assignable except that Buyer may assign its rights
hereunder to any post-Closing purchaser of a substantial part of the Assets.
10.6 Headings. The descriptive headings of the Articles, Sections and
--------
subsections of this Agreement are for convenience only and do not constitute a
part of this Agreement.
10.7 Counterparts. This Agreement and any amendment hereto or any
------------
other agreement (or document) delivered pursuant hereto may be executed in one
or more counterparts
31
and by different parties in separate counterparts. All of such counterparts
shall constitute one and the same agreement (or other document) and shall become
effective (unless otherwise provided therein) when one or more counterparts have
been signed by each party and delivered to the other party.
10.8 Publicity and Reports. Neither Seller shall issue any press
---------------------
release, public statement or other public notice relating to this Agreement, or
the transactions contemplated by this Agreement, without obtaining the prior
consent of Buyer except as required by applicable Law and then only after
providing as much advance notice to Buyer as practicable and cooperating with
Buyer with respect to any confidential treatment request or similar procedure.
Sellers shall obtain the prior consent of Buyer to the form and content of any
application or report made to any Governmental Entity or which relates to this
Agreement, which consent shall not be unreasonably withheld. Buyer shall provide
Sellers with advance notice and an opportunity to review any press release
proposed to be issued by Buyer and relating to this Agreement, or the
transactions contemplated by this Agreement.
10.9 Remedies Cumulative. All rights and remedies existing under this
-------------------
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available. In addition, ARTICLE 9 shall not be deemed to preclude or
otherwise limit in any way the exercise of any other rights or pursuit of other
remedies for the breach of this Agreement or with respect to any
misrepresentation. 10.10 Parties in Interest. This Agreement shall be binding
upon and inure to the benefit of each party, and nothing in this Agreement,
express or implied, is intended to confer upon any other Person any rights or
remedies of any nature whatsoever under or by reason of this Agreement. Nothing
in this Agreement is intended to relieve or discharge the obligation of any
third Person to any party to this Agreement.
10.11 Notices. Any notice or other communication hereunder must be
-------
given in writing and (a) delivered in person, (b) transmitted by telex, telefax
or telecommunications mechanism provided that any notice so given is also mailed
as provided in clause (c) or (c) mailed by certified or registered mail, postage
prepaid, receipt requested as follows:
If to Buyer, addressed to:
MindArrow Systems, Inc.
000 Xxxxxxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxx, Chief Financial Officer
With a copy to:
O'Melveny & Xxxxx LLP
000 Xxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: J. Xxx Xxxxxx, Esq.
32
If to Sellers, addressed to:
Radical Communication, Inc.
0000 Xxxxxxx Xxx.
Xxxxxx Xxx Xxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxx, Chief Executive Officer
With a copy to:
Buchalter, Nemer, Fields & Younger, P.C.
A Professional Corporation
000 Xxxxx Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
or to such other address or to such other person as either party shall have last
designated by such notice to the other party. Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number so specified in (or pursuant to) this
Section 10.11 and an appropriate answerback is received, (ii) if given by mail,
three days after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iii) if given by any other means,
when actually delivered at such address.
10.12 Expenses and Attorneys Fees. Sellers and Buyer shall each pay
---------------------------
their own expenses incident to the negotiation, preparation and performance of
this Agreement and the transactions contemplated hereby, including but not
limited to the fees, expenses and disbursements of their respective accountants
and counsel. In the event of any Action for the breach of this Agreement or
misrepresentation by any party, the prevailing party shall be entitled to
reasonable attorney's fees, costs and expenses incurred in such Action.
10.13 Specific Performance. Sellers and Buyer each acknowledge that,
--------------------
in view of the uniqueness of the Business and the transactions contemplated by
this Agreement, each party would not have an adequate remedy at law for money
damages in the event that this Agreement has not been performed in accordance
with its terms, and therefore agrees that the other party shall be entitled to
specific enforcement of the terms hereof in addition to any other remedy to
which it may be entitled, at law or in equity.
10.14 Bulk Transfer Laws. Sellers and Buyer hereby waive compliance
------------------
with any applicable bulk transfer laws, including, but not limited to, the bulk
transfer provisions of the Uniform Commercial Code of any state, or any similar
statute, with respect to the transactions contemplated hereby. Each Seller
agrees to indemnify, defend and hold harmless Buyer from any and all Losses
resulting from the assertion of claims made against the Assets sold hereunder or
against Buyer by creditors of Sellers under any bulk sales law with respect to
liabilities and obligations of Sellers not assumed by Buyer hereunder, such
indemnity to be in accordance with ARTICLE 9 hereof without regard to any
limitations contained in Section 9.4.
33
ARTICLE 11
DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly
provided,
(a) the terms defined in this ARTICLE 11 have the meanings assigned
to them in this Article 11 and include the plural as well as the singular,
(b) all accounting terms not otherwise defined herein have the
meanings assigned under GAAP,
(c) all references in this Agreement to designated "Articles,"
"Sections" and other subdivisions are to the designated Articles, Sections and
other subdivisions of the body of this Agreement,
(d) pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms, and
(e) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision.
As used in this Agreement and the Exhibits and Schedules delivered
pursuant to this Agreement, the following definitions shall apply.
"Action" means any action, complaint, petition, investigation, suit or
other proceeding, whether civil or criminal, in law or in equity, or before any
arbitrator or Governmental Entity.
"Affiliate" means a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, a specified Person.
"Approval" means any approval, authorization, consent, qualification or
registration, or any waiver of any of the foregoing, required to be obtained
from, or any notice, statement or other communication required to be filed with
or delivered to, any Governmental Entity or any other Person.
"Assignment and Assumption Agreement" means an Assignment and
Assumption Agreement substantially in the form of Exhibit C hereto.
"Associate" of a Person means
(i) a corporation or organization (other than a party
to this Agreement) of which such Person is an officer or partner or is, directly
or indirectly, the beneficial owner of 10% or more of any class of equity
securities;
(ii) any trust or other estate in which such Person has
a substantial beneficial interest or as to which such Person serves as trustee
or in a similar capacity; and
34
(iii) any relative or spouse of such person or any
relative of such spouse who has the same home as such person or who is a
director or officer of Sellers or any of its Affiliates.
"Xxxx of Sale" means a Xxxx of Sale substantially in the form of
Exhibit D hereto.
"Business" means the collective business of Sellers providing software
solutions, including, but not limited to, solutions for use in rich media
environments, email marketing and interactive marketing, which is headquartered
at Marina Del Rey, California, and shall be deemed to include, by way of example
and not limitation, any of the following incidents of such business: income,
cash flow, operations, condition (financial or other), assets, contracts,
intellectual property, brand, good will, anticipated revenues, and prospects.
"Closing" means the consummation of the Transactions.
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended, or as
hereafter amended.
"Contract" means any contract, agreement, lease, license, sales order,
purchase order, or other legally binding commitment or instrument, whether or
not in writing.
"Disclosure Schedule" means the Disclosure Schedule dated as of the
date hereof, delivered by Sellers to Buyer and attached hereto.
"Encumbrance" means any claim, charge, easement, encumbrance, lease,
covenant, security interest, lien, option, pledge, rights of others, or
restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, law, equity or otherwise.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the related regulations and published interpretations.
"Financial Statements" means the financial statements referred to in
Section 3.6(a).
"GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time.
"Governmental Entity" means any government or any agency, district,
bureau, board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state or
local, domestic or foreign.
"Hazardous Substance" means (but shall not be limited to) substances
that are defined or listed in, or otherwise classified pursuant to, any
applicable Laws as "hazardous substances," "hazardous materials," "hazardous
wastes" or "toxic substances," or any other formulation intended to define, list
or classify substances by reason of deleterious properties such
35
as ignitibility, corrosivity, reactivity, radioactivity, carcinogenicity,
reproductive toxicity or "EP toxicity," and petroleum and drilling fluids,
produced waters and other wastes associated with the exploration, development,
or production of crude oil, natural gas or geothermal energy.
"Indemnifiable Claim" means any Loss for or against which any party is
entitled to indemnification under this Agreement; "Indemnified Party" means the
-----------------
party entitled to indemnity hereunder; and "Indemnifying Party" means the party
------------------
obligated to provide indemnification hereunder.
"Intellectual Property" has the meaning specified in Section 1.1(d).
"Law" means any constitutional provision, statute or other law, rule,
regulation, or interpretation of any Governmental Entity and any Order.
"Loss" means any action, cost, damage, disbursement, expense,
liability, loss, deficiency, diminution in value, obligation, penalty or
settlement of any kind or nature, whether foreseeable or unforeseeable,
including but not limited to, interest or other carrying costs, penalties,
reasonable legal, accounting and other professional fees and expenses incurred
in the investigation, collection, prosecution and defense of claims and amounts
paid in settlement, that may be imposed on or otherwise incurred or suffered by
the specified person.
"Order" means any decree, injunction, judgment, order, ruling,
assessment or writ.
"Permit" means any license, permit, franchise, certificate of
authority, or order, or any waiver of the foregoing, required to be issued by
any Governmental Entity.
"Person" means an association, a corporation, an individual, a
partnership, a trust or any other entity or organization, including a
Governmental Entity.
"Tax" means any foreign, federal, state, county or local income, sales,
use, excise, franchise, ad valorem, real and personal property, transfer, gross
receipt, stamp, premium, profits, customs, duties, windfall profits, capital
stock, production, business and occupation, disability, employment, payroll,
severance or withholding taxes, fees, assessments or charges of any kind
whatever imposed by any Governmental Entity, any interest and penalties (civil
or criminal), additions to tax, payments in lieu of taxes or additional amounts
related thereto or to the nonpayment thereof, and any Loss in connection with
the determination, settlement or litigation of any Tax liability.
"Tax Return" means a declaration, statement, report, return or other
document or information required to be filed or supplied with respect to Taxes.
"Transaction Documents" means this Agreement, the Buyer's Note, the
Assignment and Assumption Agreement and the Xxxx of Sale.
"Transactions" means the transactions contemplated by the Transaction
Documents.
36
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officers as of the day and year
first above written.
MINDARROW SYSTEMS, INC.
By: ________________________________________
Xxxxxx X. Xxxxxx
Chief Executive Officer
By: ________________________________________
Xxxxxxx X. Xxxxxx
Chief Financial Officer
RADICAL COMMUNICATION, INC.
By: ________________________________________
Xxxxx Xxxxx
Chief Executive Officer
By: ________________________________________
Xxxx Xxxxxxxx
Chief Financial Officer
XXXXXXXXXX.XXX, LLC
By: RADICAL COMMUNICATION, INC.
Its: MANAGING MEMBER
By: ________________________________________
Xxxxx Xxxxx
Chief Executive Officer
37
EXHIBIT A
FORM OF VOTING AGREEMENT
[attached hereto]
A-1
EXHIBIT B
FORM OF PROMISSORY NOTE
[attached hereto]
B-1
EXHIBIT C
ASSIGNMENT AND ASSUMPTION AGREEMENT
[attached hereto]
C-1
EXHIBIT D
XXXX OF SALE
[attached hereto]
D-1
EXHIBIT E
FORM OF BODY OF OPINION OF
COUNSEL TO SELLER
[attached hereto]
E-1
EXHIBIT F
FORM OF BODY OF OPINION OF
COUNSEL TO BUYER
[attached hereto]
F-1
DISCLOSURE SCHEDULES
--------------------
