ASSET PURCHASE AND CONTRIBUTION AGREEMENT
This Asset Purchase and Contribution Agreement (this
"Agreement") is entered into as of September 11, 1995, between
IndeNet, Inc., a Delaware Corporation (the "Buyer"), and
Channelmatic, Inc., a California corporation (the "Seller"). The
Buyer and the Seller are referred to collectively herein as the
"Parties."
This Agreement contemplates a transaction in which the
Buyer will purchase a portion of the assets of Seller (other than
the Excluded Land) and assume the liabilities of the Seller in
return for cash, the Buyer Note and 1,530,000 shares of the
Common Stock of Buyer. Immediately after the foregoing purchase
and sale of a portion of the Seller's assets, the Buyer will
contribute all of the assets acquired and liabilities assumed
from the Seller to a newly-formed Delaware corporation (herein
tentatively referred to as "NewCo") in exchange for shares of
NewCo's common stock, and the Seller will, concurrently with the
Buyer's contribution, contribute the remaining assets (other than
the Excluded Land) of the Seller to NewCo in exchange for shares
of NewCo's common stock.
Now, therefore, in consideration of the mutual promises
herein made, and in consideration of the representations,
warranties, and covenants herein contained, the Parties agree as
follows.
1. Definitions.
"Acquired Assets" means all right, title, and interest in
and to all of the assets of the Seller, including without
limitation all of its (a) leaseholds, subleaseholds,
improvements, fixtures, and fittings therein, (b) tangible
personal property (such as machinery, equipment, inventories of
raw materials and supplies, manufactured and purchased parts,
goods in process and finished goods, furniture, automobiles,
trucks, tractors, trailers, tools, jigs, and dies), (c)
Intellectual Property, goodwill associated therewith, licenses
and sublicenses granted and obtained with respect thereto, and
rights thereunder, (d) leases, and rights thereunder, (e)
contracts, instruments of indebtedness, Security Interests,
guaranties, other similar arrangements, and rights thereunder,
(f) accounts, notes, and other receivables and rights thereunder,
(g) claims, deposits, prepayments, refunds (including Tax refunds
and insurance refunds or rebates), (h) permits, licenses, orders,
registrations, certificates, and similar rights obtained from
governments and governmental agencies, (i) books, records,
ledgers, files, documents, correspondence, lists, drawings, and
specifications, creative materials, advertising and promotional
materials, studies, reports, and (j) Cash; provided, however,
that the Acquired Assets shall not include (i) the corporate
charter, taxpayer and other identification numbers, seals, minute
books, stock transfer books, and other documents relating to the
organization, maintenance, and existence of the Seller as a
corporation or (ii) the Excluded Land.
"Alpine Lease" means that certain Lease Agreement, dated
March 1, 1993, entered into between the Seller and Xxxxxxx X.
Xxxxxxx and Xxxxx X. Xxxxxxx with respect to the lease of
Seller's principal place of business located at 000 Xxxxxx Xxxx,
Xxxxxx, Xxxxxxxxxx.
"Assumed Liabilities" means (a) all liabilities of the
Seller set forth on the face of the balance sheet dated
June 30, 1995, (b) all liabilities of the Seller which have
arisen after the June 30, 1995 balance sheet of the Seller
in the Ordinary Course of Business (other than liabilities that
are required to be disclosed in the Disclosure Schedule), (c) all
obligations of the Seller under the licenses, sublicenses,
leases, subleases, contracts, and other arrangements referred to
in the definition of Acquired Assets, (d) the liabilities and
obligations of the Seller not included in the June 30, 1995
Balance Sheet that are specified in an appendix to the Disclosure
Schedule under an express statement (that the Buyer has
initialled) to the effect that the definition of Assumed
Liabilities will include the Liabilities and obligations so
disclosed, and (e) any sales tax liability of the Seller arising
due to the sale of its personal property to the Buyer; provided,
however, that the Assumed Liabilities shall not include (i) any
Liability of the Seller for income Taxes arising in connection
with the consummation of the transactions contemplated hereby
(including any income Taxes arising because the Seller is
transferring the Acquired Assets and the Assumed Liabilities),
(ii) any Liability of the Seller for legal fees (including such
counsel's costs and expenses) incurred in connection with this
Agreement or the consummation of the transactions contemplated
hereby, (iii) any Liability to any officers, directors, or
employees of the Seller arising prior to the Closing, whether by
agreement or otherwise, other than any liabilities that may be
assumed by the Buyer pursuant to Section 5(j) hereof, or (iv) any
Liability for Taxes other than Tax Liabilities included in
subparagraphs (a), (b), (d) or (e) above.
"Buyer" has the meaning set forth in the preface above.
"Buyer Note" has the meaning set forth in Section 2(c) below.
"Buyer Shares" has the meaning set forth in Section 2(c) below.
"Cash" means cash and cash equivalents/marketable
securities/short term investments.
"Closing" has the meaning set forth in Section 2(d) below.
"Closing Date" has the meaning set forth in Section 2(d) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contributed Assets" has the meaning set forth in Section 2(a)
below.
"Disclosure Date" means the thirtieth (30th) calendar day
after the date of this Agreement.
"Disclosure Schedule" has the meaning set forth in Section 3
below.
"Excluded Land" means that certain real estate owned by the
Seller and identified on Exhibit A hereto that is not subject to
transactions contemplated by this Agreement.
"GAAP" means United States generally accepted accounting
principles in effect from time to time.
"Intellectual Property" means all (a) patents, patent
applications, patent disclosures, and improvements thereto, (b)
trademarks, service marks, trade dress, logos, trade names, and
corporate names (including the name "Channelmatic, Inc.") and
registrations and applications for registration thereof, (c)
copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for
registration thereof, (e) computer software, data, documentation,
(f) trade secrets and confidential business information
(including ideas, formulas, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to
practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data,
copyrightable works, financial, marketing, and business data,
pricing and cost information, business and marketing plans, and
customer and supplier lists and information), (g) other
proprietary rights, and (h) copies and tangible embodiments
thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable
investigation. When referring to the Seller, "Knowledge" shall
include the Knowledge of the Seller Stockholder.
"Liability" means any obligation or liability (whether
known or unknown, whether absolute or contingent, whether
liquidated or unliquidated, and whether due or to become due).
"Most Recent Balance Sheet" means the balance sheet of the
Seller dated June 30, 1995.
"Most Recent Financial Statements" means the financial
statements of the Seller, dated June 30, 1995.
"Most Recent Fiscal Month End" means June 30, 1995.
"Most Recent Fiscal Year End" means December 31, 1994.
"NewCo" means a Delaware corporation to be formed by the
Buyer prior to the Closing, which corporation shall continue the
Seller's business after the consummation of all of the
transactions contemplated hereby.
"NewCo Common Stock" means the Common Stock, $.001 par
value, to be issued by NewCo.
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with
respect to quantity and frequency).
"Parties" or "Party" has the meaning set forth in the
preface above.
"Purchased Assets" has the meaning set forth in Section 2(a)
below.
"Purchase Price" has the meaning set forth in Section 2(c) below.
"Securities Act" means the Securities Act of 1933, as
amended.
"Securities Exchange Act" means the Securities Exchange Act
of 1934, as amended.
"Security Interest" means any mortgage, pledge, security
interest, encumbrance, charge, or other lien.
"Seller" has the meaning set forth in the preface above.
"Seller Stockholder" means Xxxxxxx X. Xxxxxxx and/or any
other person who or which holds any shares of capital stock of
the Seller on the date hereof and/or on the Closing Date.
"Tax" means any federal, state, local, or foreign income,
gross receipts, capital stock, franchise, profits, withholding,
social security, unemployment, disability, real property,
personal property, stamp, excise, occupation, sales, use,
transfer, value added, alternative minimum, estimated, or other
tax, including any interest, penalty, or addition thereto,
whether disputed or not.
2. Basic Transaction.
(a) Purchase and Sale of Assets. The "Purchased
Assets" shall refer to such portion of the Acquired Assets which
are equal in value to the Purchase Price. Seller shall
contribute all of the remaining Acquired Assets (referred to
hereinafter as the "Contributed Assets") to NewCo in exchange for
NewCo Common Stock in accordance with Section 8 of this Agreement. The
Purchased Assets shall be set forth on Exhibit M, attached
hereto.
(b) Assumption of Liabilities. On and subject to
the terms and conditions of this Agreement, the Buyer agrees to
pay or assume at the Closing and to thereafter become responsible
for the payment of all of the Assumed Liabilities. The Buyer
will not assume or have any responsibility, however, with respect
to any other obligation or Liability of the Seller not included
within the definition of Assumed Liabilities, which Liabilities
shall remain the sole obligation and responsibility of the
Seller.
(c) Determination of Purchase Price. The "Purchase
Price" for the Purchased Assets shall be an amount equal to the
sum of: (i) Five Million Six Hundred and Two Thousand Five
Hundred U.S. Dollars ($5,602,500) (payable in cash and by the
delivery of the Buyer Note, as described in Section 2(e) below); (ii)
the amount of the Assumed Liabilities (determined as of the
Closing Date); and (iii) the value of 1,530,000 unregistered
shares of Common Stock of Buyer (the "Buyer Shares"). In the
event the Buyer effects a stock split, stock dividend or
otherwise combines, divides or recapitalizes its shares of Common
Stock prior to the Closing, the number of Buyer Shares issued to
Seller at Closing shall be proportionately adjusted to reflect
such combination, division or other recapitalization. For
purposes of the purchase, the value of each share of Common Stock
of the Buyer Shares shall be deemed to be 70% of the average of
the Quoted Prices for all trading days during the 30-day period
prior to the Closing Date. The "Quoted Price" of the Buyer
Shares is the last reported sales price of a Buyer Share as
reported by The Nasdaq Stock Market, or if the Buyer Shares are
listed on another securities exchange, the last reported
sales price of the Buyer Shares on such exchange, or if they are
not so reported or listed, then the Quoted Price shall be equal
to the average of the last reported bid prices over such period,
as reported by the National Quotation Bureau, Inc., or any
similar reputable quotation and reporting service, if such
quotation is not reported during such period by the National
Quotation Bureau, Inc.
(d) The Closing. The closing of the purchase by
the Buyer and the sale by the Seller of the Purchased Assets and
the assumption of the Assumed Liabilities contemplated by this
Agreement (the "Closing") shall take place at the offices of the
Seller in Alpine, California, commencing at 9:00 a.m. local time
on the second business day following the satisfaction or waiver
of all conditions to the obligations of the Parties to consummate
the transactions contemplated hereby or such other date as the
Parties may mutually determine (the "Closing Date").
(e) Deliveries at Closing. At the Closing, the
Seller shall deliver to the Buyer the various certificates,
instruments, and documents referred to in Section 6(a) below. At the
Closing, the Buyer shall deliver to the Seller: (i) its
promissory note (the "Buyer Note") in the form of Exhibit B
attached hereto, in the aggregate principal amount of One Million
One Hundred and Two Thousand Five Hundred U.S. Dollars
($1,102,500); (ii) cash by wire transfer or delivery of other
immediately available funds for Four Million Five Hundred
Thousand U.S. Dollars ($4,500,000); (iii) the Buyer Shares; and
(iv) the various certificates, instruments, and documents
referred to in Section 6(b) below.
(f) Allocation. The Parties agree to allocate the
Purchase Price (and all other capitalizable costs) among the
Purchased Assets acquired by the Buyer for all purposes
(including financial accounting and tax purposes) in accordance
with the allocation schedule attached hereto as Exhibit M.
3. Representations and Warranties of the Seller. The
Seller represents and warrants to the Buyer that the statements
contained in this Section 3 are correct and complete as of the date of
this Agreement and will be correct and complete as of the Closing
Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 3),
except as set forth in the disclosure schedules to be attached to
this Agreement (the "Disclosure Schedule") on or before the
Disclosure Date, which Schedules shall be correct and complete as
of the Disclosure Date. The Disclosure Schedule will be arranged
in paragraphs corresponding to the lettered numbered paragraphs
contained in this Section 3.
(a) Organization of the Seller. The Seller is a
corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation.
(b) Authorization of Transaction. The Seller has
full power and authority (including full corporate power and
authority) to execute and deliver this Agreement and to perform
its obligations hereunder. Without limiting the generality of
the foregoing, the board of directors of the Seller and the
Seller Stockholder has duly authorized the execution, delivery,
and performance of this Agreement by the Seller. This Agreement
constitutes the valid and legally binding obligation of the
Seller, enforceable in accordance with its terms and conditions
except insofar as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting creditors rights generally and remedies generally
and general principals of equity. The Seller has good and
marketable title to all of the Acquired Assets, free and clear of
any Security Interest or restriction on transfer.
(c) Noncontravention. Except as set forth in
Schedule 3(c)(i), neither the execution and the delivery of this
Agreement nor the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in
Section 2 above and Section 8 below), will, to Seller's Knowledge, violate
any statute, regulation, rule, judgment, order, decree,
stipulation, injunction, charge, or other restriction of any
government, governmental agency, or court to which the Seller is
subject or any provision of the charter or bylaws of the Seller.
To Seller's Knowledge, Schedule 3(c)(ii) lists all written or
oral agreements, arrangements, contracts, leases, subleases,
licenses, sublicenses, franchises, permits, indentures,
agreements or mortgages for borrowed money, instruments of
indebtedness, Security Interests, or other arrangements to which
the Seller is a party or by which it is bound or to which any of
its assets is subject, that may be breached, accelerated,
terminated, modified or cancelled by either party thereto as a
result of the execution and the delivery of this Agreement or the
consummation of the transactions contemplated hereby. Except as
set forth in Schedules 3(c)(i) or 3(c)(ii), to Seller's Knowledge
the Seller does not need to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement
(including the assignments and assumptions referred to in Section 2
above and Section 8 below).
(d) Subsidiaries. The Seller has no subsidiaries.
(e) Financial Statements. Attached hereto as
Exhibit G are the following financial statements (collectively
the "Financial Statements"): (i) audited balance sheet and
statement of income, changes in stockholders' equity, and cash
flows as of and for the fiscal years ended December 31, 1992,
December 31, 1993, and December 31, 1994, (the "Most Recent
Fiscal Year End") for the Seller; and (ii) unaudited balance
sheet and statement of income, changes in stockholders' equity,
and cash flow (the "Most Recent Financial Statements") as of and
for the 6 months ended June 30, 1995 (the "Most Recent Fiscal
Month End") for the Seller. The Financial Statements have been
prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby, are true, correct and
complete, and are consistent with the books and records of the
Seller (which books and records are true, correct and complete);
provided, however, that the Most Recent Financial Statements
are subject to normal year-end adjustments (which will not be
material) and lack footnotes and other presentation items.
(f) Events Subsequent to Most Recent Fiscal Month
End. Except as set forth on Schedule 3(f), since the Most Recent
Fiscal Month End, there has not been any material adverse change
in the assets, Liabilities, business, financial condition,
operations, results of operations, or future prospects of the
Seller taken as a whole. Without limiting the generality of the
foregoing, since that date:
(i) the Seller has not sold, leased,
transferred, or assigned any of its assets, tangible or
intangible, other than for a fair consideration in the Ordinary
Course of Business;
(ii) the Seller has not entered into any
contract, lease, sublease, license, or sublicense (or series of
related contracts, leases, subleases, licenses, and sublicenses)
outside the Ordinary Course of Business;
(iii) no party has accelerated, terminated,
modified, or canceled any contract, lease, sublease, license, or
sublicense (or series of related contracts, leases, subleases,
licenses, and sublicenses) involving more than $10,000.00 to
which the Seller is a party or by which any of them is bound;
(iv) the Seller has not imposed any Security
Interest upon any of its assets, tangible or intangible;
(v) the Seller has not made any capital
expenditure (or series of related capital expenditures) outside
the Ordinary Course of Business;
(vi) the Seller has not created, incurred,
assumed, or guaranteed any indebtedness (including capitalized
lease obligations) either involving more than $10,000.00 singly
or $50,000.00 in the aggregate or outside the Ordinary Course of
Business;
(vii) the Seller has not delayed or postponed
(beyond its normal practice) the payment of accounts payable and
other Liabilities;
(viii) the Seller has not canceled,
compromised, waived, or released any right or claim (or series of
related rights and claims) outside the Ordinary Course of
Business;
(ix) the Seller has not granted any license
or sublicense of any rights under or with respect to any
Intellectual Property;
(x) the Seller has not declared, set aside,
or paid any dividend or distribution with respect to its capital
stock or redeemed, purchased, or otherwise acquired any of its
capital stock;
(xi) the Seller has not experienced any
material damage, destruction, or loss (whether or not covered by
insurance) to its property;
(xii) the Seller has not made or pledged to
make any charitable or other capital contribution outside the
Ordinary Course of Business;
(xiii) there has not been any other material
occurrence, event, incident, action, failure to act, or
transaction outside the Ordinary Course of Business involving the
Seller; and
(xiv) the Seller has not committed to any of
the foregoing.
(g) Additional Liabilities. The Most Recent
Balance Sheet sets forth all Liabilities of Seller within
Seller's Knowledge as of June 30, 1995. To Seller's Knowledge,
Schedule 3(g) sets forth all Liabilities which will be Assumed
Liabilities which have arisen since June 30, 1995 and which were
not incurred in the Ordinary Course of Business.
(h) Tax Matters. There are no Security Interests
on any of the assets of the Seller that arose in connection with
any failure (or alleged failure) to pay any Tax.
(i) Tangible Assets. The Seller owns or leases all
tangible assets necessary for the conduct of its business and
operations as currently in effect and as presently proposed to be
conducted.
(j) Owned Real Property. There is no real property
owned by Seller other than the Excluded Land.
(k) Intellectual Property.
(i) Schedule 3(k) lists all Intellectual
Property owned or used by the Seller.
(ii) to Seller's Knowledge, neither the
Seller, nor any of the directors and officers (and employees with
responsibility for Intellectual Property matters) of the Seller
have ever received any charge, complaint, claim, or notice
alleging any such interference, infringement, misappropriation,
or violation of Intellectual Property rights of third parties,
except as set forth on Schedule 3(k). To the Knowledge of the
Seller and the directors and officers (and employees with
responsibility for Intellectual Property matters) of the Seller,
no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Seller, except as set forth
in Schedule 3(k).
(iii) Schedule 3(k) of the Disclosure
Schedule identifies each patent or registration which has been
issued to the Seller with respect to any of its Intellectual
Property, identifies each pending patent application or
application for registration which the Seller has made with
respect to any of its Intellectual Property, and identifies each
license, agreement, or other permission which the Seller has
granted to any third party with respect to any of its
Intellectual Property (together with any exceptions). The Seller
has delivered to the Buyer correct and complete copies of all
such patents, registrations, applications, licenses, agreements,
and permissions (as amended to date) and has made available to
the Buyer correct and complete copies of all other written
documentation evidencing ownership and prosecution (if
applicable) of each such item. Except as otherwise set forth on
Schedule 3(k), with respect to each item of Intellectual Property
set forth on Schedule 3(k):
(A) to the Knowledge of Seller, the
Seller possesses all right, title, and interest in and to the
item;
(B) the item is not subject to any
outstanding judgment, order, decree, stipulation, injunction, or
charge;
(C) no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand is pending
or, to the Knowledge of the Seller or any of the directors and
officers (and employees with responsibility for Intellectual
Property matters) of the Seller, is threatened which challenges
the legality, validity, enforceability, use, or ownership of the
item; and
(D) the Seller has not agreed to
indemnify any person or entity for or against any interference,
infringement, misappropriation, or other conflict with respect to
the item.
(iv) Schedule 3(k) of the Disclosure
Schedule also identifies each item of Intellectual Property that
any third party owns and that the Seller uses pursuant to
license, sublicense, agreement, or permission. The Seller has
supplied the Buyer with correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended to
date). Except as otherwise set forth on Schedule 3(k), with
respect to each item of used Intellectual Property set forth on
Schedule 3(k):
(A) to Seller's Knowledge, no party to
the license, sublicense, agreement, or permission is in breach or
default, and no event has occurred which with notice or lapse of
time would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(B) to Seller's Knowledge, no party to
the license, sublicense, agreement, or permission has repudiated
any provision thereof;
(C) the underlying item of Intellectual
Property is not subject to any outstanding judgment, order,
decree, stipulation, injunction, or charge;
(D) no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand is pending,
or, to the Knowledge of the Seller, or any of the directors and
officers (and employees with responsibility for Intellectual
Property matters) of the Seller, is threatened which challenges
the legality, validity, or enforceability of the underlying item
of Intellectual Property; and
(E) the Seller has not granted any
sublicense or similar right with respect to the license,
sublicense, agreement, or permission.
(l) Real Property Leases. Schedule 3(l) of the
Disclosure Schedule lists and describes briefly all real property
leased or subleased to the Seller. The Seller has delivered to
the Buyer correct and complete copies of the leases and subleases
listed in Schedule 3(l) of the Disclosure Schedule (as amended to
date). With respect to the Alpine Lease and/or to each lease and
sublease listed in Schedule 3(l) of the Disclosure Schedule:
(i) the Alpine Lease is legal, valid,
binding, enforceable, and in full force and effect;
(ii) the Alpine Lease will continue to be
legal, valid, binding, enforceable, and in full force and effect
on identical terms following the Closing;
(iii) no party to any lease or sublease
listed on Schedule 3(l) is in breach or default, and no event has
occurred which, with notice or lapse of time, would constitute a
breach or default or permit termination, modification, or
acceleration thereunder;
(iv) no party to any lease or sublease
listed on Schedule 3(l) has repudiated any provision thereof;
(v) there are no disputes, oral agreements,
or forbearance programs in effect as to any lease or sublease
listed on Schedule 3(l);
(vi) the Seller has not assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered
any interest in any leasehold or subleasehold listed on Schedule
3(l);
(vii) the facilities leased under the Alpine
Lease has received all approvals of governmental authorities
(including licenses and permits) required in connection with the
operation thereof and have been operated and maintained in
accordance with applicable laws, rules, and regulations;
(viii) the owner of the facilities leased
under the Alpine Lease has good and marketable title to the
parcel of real property, knows of no restrictions that impair the
current use or occupancy.
(m) Contracts. Schedule 3(m) of the Disclosure
Schedule lists the following contracts, agreements, and other
written arrangements to which the Seller is a party:
(i) any written arrangement (or group of
related written arrangements) for the lease of personal property
from or to third parties providing for lease payments in excess
of $5,000.00 per annum;
(ii) any written arrangement (or group of
related written arrangements) for the purchase or sale of raw
materials, commodities, supplies, products, or other personal
property or for the furnishing or receipt of services which
either calls for performance over a period of more than one year
or involves more than the sum of $5,000.00;
(iii) any written arrangement concerning a
partnership or joint venture;
(iv) any written arrangements (or group of
related written arrangements) under which the Seller has created,
incurred, assumed, or guaranteed (or may create, incur, assume,
or guarantee) indebtedness (including capitalized lease
obligations) involving more than $5,000.00 or under which it has
imposed (or may impose) a Security Interest on any of its assets,
tangible or intangible;
(v) any written arrangements concerning
confidentiality or noncompetition;
The Seller has delivered to the Buyer a correct and complete copy
of each written arrangements listed in Schedule 3(m) of the
Disclosure Schedule. Except as otherwise set forth on Schedule
3(m) and to Seller's Knowledge, with respect to each written
arrangement so listed: (A) no party is in breach or default, and
no event has occurred which with notice or lapse of time would
constitute a breach or default or permit termination,
modification, or acceleration, under the written arrangement; and
(B) no party has repudiated any provision of the written
arrangement. The Seller is not a party to any verbal contract,
agreement, or other arrangement which, if reduced to written
form, would be required to be listed in Schedule 3(m) of the
Disclosure Schedule under the terms of this Schedule 3(m). No
major supplier of the Seller has indicated within the past year
that it will stop, or decrease the rate of, supplying materials,
products, or services to them and no major customer of the Seller
has indicated within the past year that it will stop, or decrease
the rate of, buying materials, products, or services from them.
(n) Powers of Attorney. Except as set forth on
Schedule 3(n), there are no outstanding powers of attorney
executed on behalf of the Seller.
(o) Insurance. Schedule 3(o) of the Disclosure
Schedule lists each insurance policy (including policies
providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which
the Seller is a party.
(p) Litigation. Except as set forth in Schedule
3(p), to the Knowledge of the Seller there are no claims,
actions, judgments, suits or proceedings commenced, pending or
threatened which will or might in any way affect, or which relate
to the obtaining of, the Purchased Assets or any of the other
rights and benefits by Buyer hereunder, and the Seller has no
Knowledge of any grounds on which any claims, actions, suits or
proceedings might be commenced with respect to the rights granted
by the Seller hereunder and/or the exploitation thereof by
Buyer. The Seller is not in default with respect to any order,
writ, injunction, or decree of any federal, state, local, or
foreign court, department, agency, or instrumentality.
(q) Employee Liabilities. Except to the extent
that such Liabilities are expressly assumed by the Buyer and/or
NewCo pursuant to Section 5(j) hereof, neither the Buyer nor
NewCo shall have any Liability to any of the Seller's employees
regarding any employment or employee-related matter that
occurred, or may occur, prior to the Closing Date, including any
Liability for salaries, bonuses, reimbursements, vacation pay, or
employee benefits of any kind, and neither the Purchased Assets
nor the Acquired Assets shall be subject to any lien that may
have arisen prior to the Closing Date regarding any of Seller's
employees.
(r) Guaranties. The Seller is not a guarantor or,
to Seller's Knowledge, otherwise is liable for any Liability or
obligation (including indebtedness) of any other person.
(s) Environment.
(i) Except as disclosed on Schedule 3(s),
the Seller has not handled or disposed of any substance in or on
any facilities or properties listed on Schedule 3(l) or operated
any properties or facilities listed on Schedule 3(l) in any
manner that could form the basis for any present or future
charge, complaint, action, suit, proceeding, hearing,
investigation, claim or demand (under the common law or pursuant
to any statute) against the Buyer or NewCo giving rise to any
Liability under any Environmental Law or otherwise for damage to
any site, location, or body of water (surface or subsurface) or
for illness or personal injury.
(ii) Except as disclosed on Schedule 3(s),
the Seller has obtained all permits, licenses, and other
authorizations which are required under, and has complied in all
material respects with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations,
schedules, and timetables which are contained in, all federal,
state, local, and foreign laws (including rules, regulations,
codes, plans, judgments, orders, decrees, stipulations,
injunctions, and charges thereunder) relating to public health
and safety, worker health and safety, and pollution or protection
of the environment, including laws relating to emissions,
discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes.
(iii) Except as disclosed on Schedule 3(s),
to the Knowledge of the Seller, no pollutant, contaminant, or
chemical, industrial, hazardous, or toxic material or waste ever
has been buried, stored, spilled, leaked, discharged, emitted, or
released on any real property.
(t) Legal Compliance.
(i) Except as set forth on Schedule 3(t),
the Seller has filed in a timely manner all material reports,
documents, and other materials it was required to file (and the
information contained therein was correct and complete in all
respects) under all applicable laws (including rules and
regulations thereunder) in order to conduct business in the
manner currently conducted.
(ii) The Seller has possession of all
material records and documents it is required to retain under all
applicable laws (including rules and regulations thereunder) in
order to conduct business in the manner currently conducted.
(u) Brokers' Fees. The Seller has no Liability or
obligation to pay any fees or commissions to any broker, finder,
or agent with respect to the transactions contemplated by this
Agreement for which the Buyer or NewCo could become liable or
obligated.
(v) Disclosure. The representations and warranties
contained in this Section 3 do not contain any untrue statement of a
fact or omit to state any fact necessary in order to make the
statements and information contained in this Section 3 not misleading.
(w) Investment. The Seller (i) understands that
the Buyer Shares have not been, and will not be, registered under
the Securities Act, (ii) the Seller is acquiring the Buyer Note
solely for its own account, (iii) is a sophisticated investor
with knowledge and experience in business and financial matters,
(iv) has received certain information concerning the Buyer and
has had the opportunity to obtain additional information as
desired in order to evaluate the merits and risks inherent in
holding the Buyer Shares, and (v) is able to bear the economic
risk and lack of liquidity inherent in holding the Buyer Shares.
In addition, the Seller understands that the Buyer Shares
must be held indefinitely unless such shares are registered under
the Securities Act or are exempt from registration and that,
unless registered, the Seller may not sell the Buyer Shares
pursuant to Rule 144, promulgated under the Securities Act by the
Securities and Exchange Commission, prior to the expiration of a
two-year period after the Closing Date. Any sales pursuant to
Rule 144 are limited in amount and can only be made in full
compliance with the provisions of Rule 144, which includes
specific requirements that the Buyer is then providing certain
information to the public with respect to its business and
financial affairs.
(x) Legend. The Seller understands that the Buyer
Shares shall bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT OR UNLESS
SOLD PURSUANT TO RULE 144 PROMULGATED UNDER SAID ACT, OR UNLESS,
IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO
THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION
PROVISIONS OF SAID ACT.
4. Representations and Warranties of the Buyer. The
Buyer represents and warrants to the Seller that the statements
contained in this Section 4 are correct and complete as of the date of
this Agreement and will be correct and complete as of the Closing
Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 4).
(a) Organization of the Buyer. The Buyer is a
corporation duly organized, validly, existing, and in good
standing under the laws of the jurisdiction of its incorporation.
(b) Authorization of Transaction. The Buyer has
full power and authority (including full corporate power and
authority) to execute and deliver this Agreement and to perform
its obligations hereunder. This Agreement constitutes the valid
and legally binding obligation of the Buyer, enforceable with its
terms and conditions except insofar as enforcement may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights generally and
remedies generally and general principals of equity.
(c) Noncontravention. Neither the execution and
the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby (including the assignments and
assumptions referred to in Section 2 above and in Section 8 below), will (i)
violate any statute, regulation, rule, judgment, order, decree,
stipulation, injunction, charge, or other restriction of any
government, governmental agency, or court to which the Buyer is
subject or any provision of its charter or bylaws or (ii)
conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice
under any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest, or other
arrangement to which the Buyer is a party or by which it is bound
or to which any of its assets is subject. The Buyer does not
need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the
assignments and assumptions referred to in Section 2 above and Section 8
below).
(d) Brokers' Fees. The Buyer has no Liability or
obligation to pay any fees or commissions to any broker, finder,
or agent with respect to the transactions contemplated by this
Agreement for which the Seller or NewCo could become liable or
obligated.
(e) Disclosure. The Buyer has delivered to the
Seller copies of the Buyer's (i) Form 10-KSB/A-2 for the fiscal
year ended December 31, 1994, (ii) Form 10-QSB/A for the
quarterly period ended Xxxxx 00, 0000, (xxx) Form 10-QSB for the
quarterly period ended June 30, 1995, (iv) Post-Effective
Amendment No. 1 to Form S-2, as filed with the Securities and
Exchange Commission on July 16, 1995, (v) the 1994 Annual Report,
(vi) the Proxy Statement, dated May 25, 1995 relating to the
annual meeting of shareholders held on June 25, 1995, and (vii) a
Registration Statement on Form S-3, as filed with the Securities
and Exchange Commission on June 16, 1995. In addition, pursuant
to Section 5(l) below, the Buyer has agreed to promptly deliver
to the Seller copies of all additional reports filed by the Buyer
with the Securities and Exchange Commission prior to the Closing
Date. All of the documents and reports referred to in this Section
4(e), at the time of filing thereof, conformed in all material
respects with the applicable requirements of the Securities Act
and Securities Exchange Act and the rules and regulations
thereunder and did not include any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.
5. Pre-Closing Covenants. The Parties agree as follows
with respect to the period between the execution of this
Agreement and the Closing.
(a) General. Each of the Parties will use its
reasonable best efforts to take all action and to do all things
necessary, proper, or advisable to consummate and make effective
the transactions contemplated by this Agreement (including
satisfying the closing conditions set forth in Section 6 and Section 8
below).
(b) Notices and Consents. The Seller will give any
notices to third parties, and the Seller will use its reasonable
best efforts to obtain any third party consents, that the Buyer
reasonably may request in connection with the matters pertaining
to (i) the sale to be effected pursuant to Section 2(a) hereof,
and (ii) the contribution of the Acquired Assets by the Parties
to NewCo pursuant to Section 8 hereof. Each of the Parties will
file and use its best efforts to obtain any further filings
pursuant thereto that may be necessary, proper, or advisable.
Each of the Parties will take any additional action that may be
necessary, proper, or advisable in connection with any other
notices to, filings with, and authorizations, consents, and
approvals of governments, governmental agencies, and third
parties that it may be required to give, make, or obtain.
(c) Operation of Business. The Seller will not
engage in any practice, take any action, embark on any course of
inaction, or enter into any transaction outside the Ordinary
Course of Business. Without limiting the generality of the
foregoing, the Seller will not engage in any practice, take any
action, embark on any course of inaction, or enter into any
transaction of the sort described in Section 3(f) above.
(d) Preservation of Business. The Seller will keep
its business and properties substantially intact, including its
present operations, physical facilities, working conditions, and
relationships with lessors, licensors, suppliers, customers, and
employees. Seller will use its best efforts to encourage
suppliers, licensees, licensors, customers, and employees to
continue their activities with NewCo, but Seller neither
represents, warrants or guarantees that NewCo will continue on
the same basis, or on any basis, with such persons.
(e) Full Access. The Seller will permit
representatives of the Buyer to have full access at all
reasonable times, and in a manner so as not to interfere with the
normal business operations of Seller, to all premises,
properties, books, records, contracts, Tax records, and documents
of or pertaining to the Seller.
(f) Organization of NewCo. The Buyer shall cause
NewCo to be incorporated in Delaware, shall cause Xxxxxxx X.
Xxxxxxx to be elected as the Chairman of the Board of Directors
of NewCo, and shall cause NewCo to issue 166,667 shares of NewCo
Common Stock to the Buyer in consideration of $3,000,000. The
Certificate of Incorporation to be filed in connection with the
incorporation of NewCo shall be substantially in the form
attached hereto as Exhibit H. The Parties hereto further agree
that prior to Closing, NewCo shall make a $2,995,000 loan to the
Buyer, which loan will be evidenced by a promissory note in the
form attached hereto as Exhibit I and be secured by a pledge of
the 166,667 shares of NewCo common stock owned by the Buyer. The
Buyer shall cause NewCo to execute and deliver to Xxxxxxx X.
Xxxxxxx an employment agreement substantially in the form
attached hereto as Exhibit F (the "Employment Agreement")
pursuant to which Xx. Xxxxxxx will be employed as the Chairman of
the Board of Directors of NewCo. The organizational documents of
NewCo shall provide that during the period that Seller is a
shareholder of NewCo, the following actions shall require the
unanimous approval of the shareholders of NewCo:
(i) doing business under any other name
than "Channelmatic, Inc.";
(ii) moving the location of NewCo's
principal place of business from Alpine, California;
(iii) selling all or substantially all the
assets of NewCo or merging NewCo with another company or entity;
(iv) issuance of any shares of NewCo capital
stock other than the shares issued to the Parties on or before
the Closing Date.
(g) Notice of Developments. Each Party will give
prompt written notice to the other Party of any material
development affecting the assets, Liabilities, business,
financial condition, operations, results of operations, or future
prospects of the disclosing Party. The Seller acknowledges that
certain information that the Buyer may be required to disclose to
the Seller pursuant to the foregoing sentence may constitute
non-public information and that, therefore, the Seller may be
required to enter into a confidentiality/non-use agreement with
the Buyer before such information is provided to the Seller.
Each Party will give prompt written notice to the other of any
material development affecting the ability of the Parties to
consummate the transactions contemplated by this Agreement. No
disclosure by any Party pursuant to this Section 5(g), however, shall
be deemed to amend or supplement the Disclosure Schedule or to
prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
(h) Exclusivity. During the period beginning with
the execution of this Agreement and ending on the earlier of the
Closing Date or the termination of this Agreement, the Seller
will not (i) solicit, initiate, or encourage the submission of
any proposal or offer from any person relating to any (A)
liquidation, dissolution, or recapitalization, (B) merger or
consolidation, (C) acquisition or purchase of securities or
assets, or (D) similar transaction or business combination
involving the Seller or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any
effort or attempt by any person to do or seek any of the
foregoing. The Seller will notify the Buyer immediately if any
person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing.
(i) Confidentiality. Until the Closing Date, the
Buyer shall, and shall cause each of its directors, officers,
employees, agents, advisors and representatives (the
"Representatives") to, (A) maintain in confidence any and all
non-public information concerning the Seller provided to them by
the Seller or otherwise learned by them in the course of the
negotiation of this Agreement and the transactions contemplated
hereby, and (B) disclose such non-public information only to
persons, corporations or other entities or third parties serving
as the Buyer's legal, accounting, financial or investment
advisors (including potential financing sources) to the extent
reasonably necessary for the consummation of the transactions
contemplated hereby. In the event the Buyer or any
Representative is legally compelled to disclose any of such
information, the Buyer shall give prompt notice thereof to the
Seller to enable the Seller to seek an appropriate protective
order and furnish, or cause to be furnished, only such portion of
such information as is legally required to be disclosed and use
its best efforts to obtain a protective order or other reliable
assurances that confidential treatment will be accorded to such
information. If the transaction contemplated by this Agreement
shall not be consummated for any reason, the documents containing
the information covered by this Section 5(i), including without
limitation, any copies, notes and extracts thereof delivered by
the Seller to the Buyer or the Representatives, shall immediately
thereafter be returned to the Seller.
(j) Employee Terminations and Transfers.
Immediately after the Closing, and effective as of the Closing
Date, NewCo intends to (but is not obligated to) hire all, or
substantially all, of the Seller's employees for the same salary
and with the same or similar employee benefits as in effect with
the Seller immediately prior to the Closing. The Parties hereto
agree to cooperate with each other in order to effect the
termination/re-hiring of the employees. In connection therewith,
the Parties agree to jointly prepare any and all notices,
releases or other instruments reasonably necessary to terminate
and re-hire the employees and agree to use their joint efforts to
cause all such necessary notices, releases or instruments to be
presented to, and signed by the employees. In order to effect
the re-hiring of the employees, NewCo may assume, in writing, the
Seller's obligations to its employees for unpaid salaries,
vacation pay, reimbursements, accrued and unused vacation time,
bonuses, commissions and other similar obligations, and NewCo
shall be liable and responsible for, to the extent of such
written assumptions, all such liabilities and obligations to the
employees. To the extent NewCo does not assume the Seller's
obligations to its employees as set forth herein, the Seller is
authorized to pay such amounts at or prior to the Closing in
order to eliminate any and all such obligations.
(k) Insurance Policies. The Buyer shall, within 60
days after the date hereof, notify the Seller in writing whether
the Insurance Policies listed on Schedule 3(o) should be
terminated effective as of the Closing Date or transferred to
NewCo as of the Closing Date. The Parties hereto agree to
cooperate in transferring or terminating the Insurance Policies
in accordance with the Buyer's written notice. The Parties agree
that all transferred Insurance Policies shall be included in the
definition of "Purchased Assets," and any refunds received by the
Seller, the Buyer or NewCo as a result of the termination of any
of the Insurance Policies shall likewise constitute "Purchased
Assets."
(l) Securities Exchange Act Reports. Until the
Closing Date or the termination of the Agreement, whichever is
sooner, the Buyer shall, within three business days of filing,
deliver to the Seller a copy of each report filed by the Buyer
with the Securities and Exchange Commission.
(m) Disclosure Schedule. The Seller shall prepare,
complete and deliver to the Buyer, on or before the Disclosure
Date, all of the Schedules referred to in Section 3 of this
Agreement. All Schedules delivered to the Buyer will become part
of this Agreement effective as of the Disclosure Date.
6. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The
obligation of the Buyer to consummate the transactions to be
performed by it in connection with the Closing is subject to
satisfaction of the following conditions:
(i) the representations and warranties set
forth in Section 3 above shall be true and correct in all material
respects at and as of the Closing Date;
(ii) the Seller shall have performed and
complied with all of its covenants hereunder in all material
respects through the Closing;
(iii) the Buyer shall have accepted any
additions made by the Seller to the representations and
warranties set forth in Section 3 above since the Disclosure Date
reflecting changes that have occurred since the Disclosure Date;
(iv) the Parties shall have procured all of
the third party consents specified in Section 5(b) above;
(v) no action, suit, or proceeding shall be
pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction wherein any unfavorable judgment, order, decree,
stipulation, injunction, or charge would (A) prevent consummation
of any of the transactions contemplated by this Agreement, (B)
cause any of the transactions contemplated by this Agreement to
be rescinded following consummation, or (C) affect adversely the
right of the Buyer or NewCo to own, operate, or control the
Purchased Assets or Acquired Assets (and no such judgment, order,
decree, stipulation, injunction, or charge shall be in effect);
(vi) the Buyer shall have received from
counsel to the Seller an opinion with respect to the matters set
forth in Exhibit N attached hereto, addressed to the Buyer and
dated as of the Closing Date;
(vii) the Buyer shall have received a copy of
the Stock Option Agreement, in the form attached hereto as
Exhibit E, duly executed and delivered by the Seller;
(viii) the Buyer shall have received a copy of
the Registration Rights and Lock-Up Agreement, in the form
attached hereto as Exhibit D, duly executed by the Seller;
(ix) the Buyer shall have received a General
Assignment and Xxxx of Sale, in the form attached hereto as
Exhibit L, and duly executed by the Seller;
(x) the Buyer shall have obtained, on terms
and conditions satisfactory to it, no less than $6,000,000 of
additional debt and/or equity financing from the offering
currently being effected on Buyer's behalf by Sutro & Co.
Incorporated;
(xi) The Buyer shall have received the
Amendment to Lease, the form of which is attached hereto as
Exhibit P, duly executed by Xxxxxxx X. Xxxxxxx and Xxxxx X.
Xxxxxxx;
(xii) all actions to be taken by the Seller
in connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby
will reasonably satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 6(a). If
one or more conditions specified in this Section 6(a) have not been
performed or satisfied, but Buyer consents to the Closing, any
such unperformed or unsatisfied conditions shall be deemed to
have been waived.
(b) Conditions to Obligation of the Seller. The
obligation of the Seller to consummate the transactions to be
performed by it in connection with the Closing is subject to
satisfaction of the following conditions:
(i) the representations and warranties set
forth in Section 4 above shall be true and correct in all material
respects at and as of the Closing Date;
(ii) the Seller shall have accepted any
additions made by the Buyer to the representations and warranties
set forth in Section 4 above since the date of this Agreement
reflecting changes that have occurred since the date hereof;
(iii) the Buyer shall have performed and
complied with all of its covenants hereunder in all material
respects through the Closing;
(iv) no action, suit, or proceeding shall be
pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge would (A) prevent consummation
of any of the transactions contemplated by this Agreement or (B)
cause any of the transactions contemplated by this Agreement to
be rescinded following consummation (and no such judgment, order,
decree, stipulation, injunction, or charge shall be in effect);
(v) the Seller shall have received a copy
of the Buyer Note duly executed by the Buyer;
(vi) the Seller shall have received a stock
certificate or certificates, date as of the Closing Date and
registered in the name of the Seller, representing the Buyer
Shares;
(vii) the Seller shall have received a copy
of the Pledge and Security Agreement, in the form attached hereto
as Exhibit C, duly executed by the Buyer;
(viii) the Seller shall have received a copy of
the Registration Rights and Lock-Up Agreement duly executed by
the Buyer;
(ix) the Seller shall have received from
counsel to the Buyer an opinion with respect to the matters set
forth in Exhibit O attached hereto, addressed to the Seller and
dated as of the Closing Date;
(x) the Buyer shall have executed the
Amendment to Lease, the form of which is attached hereto as
Exhibit P;
(xi) the stockholders of the Buyer
identified in the Voting Agreement, the form of which is attached
hereto as Exhibit Q, have executed and delivered the Voting
Agreement to the Seller for its execution;
(xii) the Buyer shall have executed and
delivered to Xx. Xxxxxxx X. Xxxxxxx the Indemnification
Agreement, the form of which is set forth as Exhibit R hereto;
(xiii) since the date of this Agreement, no
material adverse change has occurred in the financial condition
or in the results of operations of the Buyer; and
(xiv) all actions to be taken by the Buyer in
connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby
will be reasonably satisfactory in form and substance to the
Seller.
The Seller may waive any condition specified in this Section 6(b). If
one or more conditions specified in this Section 6(b) have not been
performed or satisfied, but Seller consents to the Closing, any
such unperformed or unsatisfied conditions shall be deemed to
have been waived.
7. Termination.
(a) Termination of Agreement. The Parties may
terminate this Agreement as provided below:
(i) the Buyer and the Seller may terminate
this Agreement by mutual written consent at any time prior to the
Closing;
(ii) the Buyer may terminate this Agreement
by giving written notice to the Seller at any time prior to the
Closing in the event the Seller is in breach, and the Seller may
terminate this Agreement by giving written notice to the Buyer at
any time prior to the Closing in the event the Buyer is in
breach, of any material covenant contained in this Agreement in
any material respect;
(iii) the Buyer may terminate this Agreement
by giving written notice to the Seller on or before the 60th day
following the date of this Agreement if the Buyer is not
satisfied with the results of its continuing business, legal, and
accounting due diligence regarding the Seller;
(iv) the Buyer may terminate this Agreement
by giving written notice to the Seller at any time after the
120th day following the date of this Agreement if the Closing
shall not have occurred on or before the 120th day following the
date of this Agreement for any reason other than a willful breach
by the Buyer of a representation, warranty, or covenant contained
in this Agreement; or
(v) the Seller may terminate this Agreement
by giving written notice to the Buyer at any time after the 120th
day following the date of this Agreement if the Closing shall not
have occurred on or before the 120th day following the date of
this Agreement for any reason other than a willful breach by the
Seller of a representation, warranty, or covenant contained in
this Agreement.
(b) Effect of Termination. If any Party terminates
this Agreement pursuant to Section 7(a)(i), Section 7(a)(iii),
Section 7(a)(iv) or Section 7(a)(v) above, all obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other
Party. Any termination under Section 7(a)(ii) shall be without prejudice to
any rights the terminating party may have against the breaching
party.
8. Post-Closing Covenants.
(a) NewCo Transaction. On the Closing Date,
immediately following the Closing, the Parties agree to
consummate the following additional transactions and to perform
the following additional acts, and the Buyer agrees to cause
Newco to complete each of the following transactions required to
be performed hereunder by it:
(i) The Buyer shall assign, sell, convey and
transfer to NewCo (i) all of the Purchased Assets at the Closing
and (ii) all of the Assumed Liabilities assumed by the Buyer of
the Closing, and NewCo shall acquire from the Buyer all such
assets and assume from the Buyer all such liabilities.
(ii) The Seller shall assign, sell, convey and
transfer to NewCo all of the Contributed Assets, and NewCo shall
acquire from the Seller all such assets.
(iii) In consideration for the transfer of the
assets and the assumption of liabilities effected pursuant to
Sections 8(i) and 8(ii) above, NewCo shall issue to the Buyer and
to the Seller 500,000 shares of NewCo Common Stock and 333,333
shares of NewCo Common Stock, respectively. Such issuances of
NewCo Common Stock shall be effected by the delivery of stock
certificates, dated as of the Closing Date, registered in the
Buyer's name (500,000 shares) and the Seller's name (333,333
shares), which delivery will be made concurrently with the
delivery to NewCo by the Buyer and the Seller of duly executed
instruments of sale, transfer, conveyance and assignment.
(iv) NewCo shall execute and deliver to the
Seller that certain Subsidiary Guaranty, the form of which is
attached hereto as Exhibit J, and that certain Subsidiary
Security Agreement, the form of which is attached hereto as
Exhibit K.
(v) The Seller shall file with the office of
the Secretary of State of California, an amendment to its
articles of incorporation changing its name from "Channelmatic,
Inc." to "Killer Barn, Inc." (or any other name selected by the
Seller, provided that such other name is not similar to
"Channelmatic"), and shall file with the appropriate offices of
all other states in which the Seller is qualified to do business
all certificates, notices and other instruments necessary to
change the name of the Seller in such states from "Channelmatic,
Inc." to "Killer Barn, Inc."
The Parties agree that each of the transactions and other
acts required to be performed on the Closing Date pursuant to the
provisions of this Section 8(a) is an integral and material part of the
transactions contemplated by this Agreement and that the failure
of either Party, or NewCo, to promptly and fully perform all acts
required by this Section 8(a) shall constitute a material breach of
this Agreement.
(b) Refinancing. Before or after the Closing Date,
on behalf of Seller/Newco, the Buyer may engage in negotiations
with Xxxxx Fargo Bank, currently the Seller's secured lender, in
order to refinance or restructure the Seller's obligation under
its current Xxxxx Fargo Bank credit facility (the "Credit
Facility"). In addition, after the Closing Date, the Buyer may
attempt to obtain alternate financing to replace the Credit
Facility. The Parties hereby agree that Buyer or NewCo may
restructure, refinance or otherwise replace the Credit Facility
with one or more secured loans or credit facilities on terms and
conditions satisfactory to the Buyer; provided however, that,
without the Seller's written consent, under such amended or new
loan or credit facility (i) the maximum amount of indebtedness
that is secured by NewCo's assets does not exceed $2,000,000 and
(ii) the maximum amount of principal for which NewCo will be
liable shall not exceed $2,000,000.
(c) State Sales Tax. The Parties acknowledge that the
Seller is obligated to prepare additional tax returns and forms
relating to the sales tax liability set forth in the Financial
Statements and that the Seller may be entitled to collect an
amount equal to such sales taxes from certain of its customers.
The Parties agree that NewCo, with the cooperation of the Seller,
shall (i) on behalf of the Seller, prepare and file all required
sales tax returns and forms, (ii) pay all such sales taxes (up to
the amount specified in the Financial Statements under the line
item "Other Taxes"), and (iii) collect and keep all amounts owing
to the Seller by its customers as a result of such sales tax
payments.
9. Miscellaneous.
(a) Survival. All of the representations,
warranties and covenants of the Parties contained in this
Agreement or in any writing delivered pursuant to the provisions
of this Agreement or at the Closing shall survive any prior
investigation or examination by or on behalf of any Party and the
consummation of the transactions contemplated hereby until the
date which is 24 months after the Closing Date, except for claims
in respect thereof pending at such time (which will survive until
finally determined or settled).
(b) Indemnification. The Seller hereby covenants
and agrees to indemnify and save and hold the Buyer and NewCo
harmless from and against any losses, liabilities, obligations,
costs, expenses, damages or judgments of any kind or nature
whatsoever (including reasonable attorneys', accountants' and
experts' fees, disbursements of counsel, and other costs and
expenses incurred in connection with pursuing such
indemnification) (the "Damages") arising out of or resulting from
(i) any material inaccuracy in or breach of any representation,
warranty, covenant or agreement made by the Seller in this
Agreement or in any writing delivered pursuant to this Agreement;
and (ii) the failure of the Seller to perform or observe fully
any covenant, agreement or provision to be performed or observed
by any of them pursuant to this Agreement or any writing
delivered pursuant to this Agreement.
Until the date that is 24 months after the Closing Date,
the Seller shall not, without the prior written approval of the
Buyer:
(i) Sell, distribute, pledge, encumber, or
in any way transfer some or all of, or an interest in, either the
Buyer Note, the Buyer Shares, or the NewCo Common Stock the
Seller acquires pursuant to Section 8 hereof;
(ii) Consolidate with or merge with or into
any other entity, or otherwise reorganize if immediately after
such consolidation, merger or reorganization the surviving entity
shall have a consolidated net worth (as determined by GAAP) of
less than $5,000,000;
(iii) liquidate, dissolve or wind up; or
(iv) incur or assume, in a single
transaction or through a series of related transactions,
obligations or liabilities if immediately after such transactions
the Seller's net worth (determined in conformity with GAAP,
except that the value of the Buyer Note shall be deemed to be
equal to the principal balance thereof as revised from time to
time) would be less than $5,000,000.
The Buyer covenants and agrees to indemnify and save and
hold the Seller harmless from and against any Damages arising out
of or resulting from (x) any inaccuracy in or breach of any
representation, warranty, covenant or agreement made by the Buyer
in this Agreement or in any writing delivered pursuant to this
Agreement; and (y) the failure of the Buyer or NewCo to perform
or observe any covenant, agreement, or condition to be performed
or observed by it pursuant to this Agreement or any agreement
delivered pursuant to this Agreement.
(c) Press Releases and Announcements. No Party
shall issue any press release or public announcement relating to
the subject matter of this Agreement without the prior written
approval of the other Party; provided, however, that any Party
may make any public disclosure it believes in good faith is
required by law or regulation (in which case the disclosing Party
will advise the other Party prior to making the disclosure).
(d) No Third Party Beneficiaries. This Agreement
shall not confer any rights or remedies upon any person other
than the Parties and their respective successors and permitted
assigns.
(e) Entire Agreement. This Agreement (including
the documents referred to herein) constitutes the entire
agreement between the Parties and supersedes any prior
understandings, agreements, or representations by or between the
Parties, written or oral, that may have related in any way to the
subject matter hereof.
(f) Succession and Assignment. This Agreement
shall be binding upon and inure to the benefit of the Parties
named herein and their respective successors and permitted
assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior
written approval of the other Party; provided, however, that the
Buyer may assign any or all of its rights and interests hereunder
to NewCo (in any or all of which cases the Buyer nonetheless
shall remain liable and responsible for the performance of all of
its obligations hereunder).
(g) Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an
original but all of which together will constitute one and the
same instrument.
(h) Headings. The section headings contained in
this Agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this
Agreement.
(i) Notices. All notices, requests, demands,
claims, and other communications hereunder will be in writing.
Any notice, request, demand, claim, or other communication
hereunder shall be deemed duly given if (and then two business
days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to the Seller: Copy to:
Xxxxxxx Xxxxxxx Xxxxx X. Xxxxxx, Esq.
c/o Channelmatic, Inc. King & Xxxxxx
000 Xxxxxx Xxxx 000 X Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000 Xxx Xxxxx, XX 00000
If to the Buyer: Copy to:
Xxxxxx Xxxxx Xxxxxx Xxxxx, Esq.
IndeNet, Inc. Xxxx & Xxxxx
0000 Xxxxx Xxxxx Xx. 0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxxxx, XX 00000 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Any Party may give any notice, request, demand, claim, or other
communication hereunder using any other means (including personal
delivery, expedited courier, messenger service, telecopy, telex,
ordinary mail, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the
individual for whom it is intended. Any Party may change the
address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other
Party notice in the manner herein set forth.
(j) Governing Law. This Agreement shall be
governed by and construed in accordance with the internal laws
(and not the law of conflicts) of the State of California.
(k) Amendments and Waivers. No amendment of any
provision of this Agreement shall be valid unless the same shall
be in writing and signed by the Buyer and the Seller. No waiver
by any Party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
(l) Severability. Any term or provision of this
Agreement that is invalid or unenforceable in any situation in
any jurisdiction shall not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of
a court of competent jurisdiction declares that any term or
provision hereof is invalid or unenforceable, the Parties agree
that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific
words or phrases, or to replace any invalid or unenforceable term
or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of
the invalid or unenforceable term or provision, and this
Agreement shall be enforceable as so modified after the
expiration of time within which the judgment may be appealed.
(m) Expenses. Each Party will bear its own costs
and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated
hereby. The legal, accounting and other fees and expenses
incurred by the Seller and/or the Seller Stockholder in
connection with the transactions contemplated by this Agreement
shall be paid by the Seller prior to the Closing and shall not be
included in the Assumed Liabilities. The Parties hereby
acknowledge that certain employees are actively involved in
facilitating the transactions contemplated by this Agreement.
The Parties hereby agree that the salaries of such employees, and
the other indirect expenses resulting from Seller's efforts to
consummate this Agreement, shall not be included in the cost and
expenses to be borne by each Party and that, therefore, the
Seller may pay both the salaries of such employees and such other
indirect expenses incurred by Seller in consummating this
Agreement.
(n) Construction. The language used in this
Agreement will be deemed to be the language chosen by the Parties
to express their mutual intent, and no rule of strict
construction shall be applied against any Party. Any reference
to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. Nothing in
the Disclosure Schedule shall be deemed adequate to disclose an
exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with particularity
and describes the relevant facts in detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a
copy (of a document or other item shall not be deemed adequate to
disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the
existence of the document or other items itself). The Parties
intend that each representation, warranty, and covenant contained
herein shall have independent significance. If any Party has
breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity)
which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
(o) Incorporation of Exhibits and Schedules. The
Exhibits and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
(p) Specific Performance. Each of the Parties
acknowledges and agrees that the other Party would be damaged
irreparably in the event any of the provisions of this Agreement
are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees
that the other Party shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court
of the United States or any state thereof having jurisdiction
over the Parties and the matter (subject to the provisions set
forth in Section 9(q) below), in addition to any other remedy to which
it may be entitled, at law or in equity.
(q) Submission to Jurisdiction. Each of the
Parties submits to the jurisdiction of the state or federal
courts sitting in San Diego County, California, in any action or
proceeding arising out of or relating to this Agreement, agrees
that all claims in respect of the action or proceeding may be
heard and determined in any such court, and agrees not to bring
any action or proceeding arising out of or relating to this
Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or
proceeding so brought and waives any bond, surety, or other
security that might be required of any other Party with respect
thereto.
(r) Bulk Transfer Laws. The Buyer acknowledges
that the Seller will not comply with the provisions of any bulk
transfer laws of any jurisdiction in connection with the
transactions contemplated by this Agreement.
(s) Further Assurances. The Parties hereby agree
from time to time to execute and deliver such further and other
transfer, assignments and documents and do all matters and things
which may be convenient or necessary to more effectively and
completely carry out the intentions of this Agreement.
IN WITNESS WHEREOF, the Parties hereby have executed this
Agreement as of the date first above written.
The "BUYER"
INDENET, INC.
a Delaware corporation
By:_____________________________
Title:__________________________
The "SELLER"
CHANNELMATIC, INC.
a California corporation
By:_____________________________
Title:__________________________
