PLAN OF MERGER AND STOCK PURCHASE AGREEMENT BY AND AMONG MODAVOX, INC. AND NEW AUG, LLC. AND NEWCO January 16 , 2009
Exhibit 2.2
PLAN
OF MERGER
BY
AND AMONG
MODAVOX,
INC.
AND
NEW
AUG, LLC.
AND
NEWCO
January
16 , 2009
PLAN
OF REORGANIZATION
AND
This Plan
of Reorganization and Stock Purchase Agreement (“Agreement”) is entered into as
of this 16th day of
January, 2009 by and among Modavox, Inc. (“Buyer”), a Delaware
corporation; New Aug, LLC (“Seller”), a Delaware
limited liability company; and Augme Mobile, Inc. (“Newco”), a Delaware
corporation. This Agreement in its entirety represents the Plan of
Reorganization and Stock Purchase Agreement between Buyer, Seller and
Newco. Buyer, Newco and Seller are sometimes referred to herein
individually as a “Party” or collectively as the “Parties.”
RECITALS
A.
Seller operates a technology and software company that specializes and in mobile
marketing solutions and services (the “Business”).
B. Seller
will transfer all of the assets and operations of the Business and substantially
all of the assets of Seller to Newco. Assets transferred will include
intellectual property, trademarks, and other intangibles, software, and all
other technology. Seller’s liabilities will not be tranferred into
Newco and must be cleared prior to the Closing Date; provided, however, that
existing contracts related to current and ongoing delivery of services and
management of the company will be transferred and honored by Newco.
C. Buyer
will acquire a majority interest totaling 60% of the stock of Newco from Seller
at the Closing, all upon the terms and subject to the conditions and provisions
set forth in this Agreement. Seller also grants to Buyer a contingent
option to acquire, after twelve (12) months, the remaining minority interest in
Newco.
D. Except
as specifically provided in this Agreement, neither Buyer nor Newco will assume
any Liabilities, actual or contingent, of either Seller or the
Business.
AGREEMENT
In
consideration of the Recitals, promises, representations, warranties and
covenants contained in this Agreement, the parties agree as
follows.
1. Definitions.
“Acquired Assets”
shall mean the assets used in, or held for use in, the Business, excluding Cash
(except that cash deposits and pre-pays from customers for work yet to be done
post-Closing by Newco will be a transferred Acquired Asset), including all of
the following:
Assets. Assets
transferred will include intellectual property, trademarks and other
intangibles, software, and all other technology including but not limited to the
following:
1. ALL
source codes, software, and technology that comprise Seller
systems,
including but not limited to the creation of QR codes or datamatrix barcodes,
websites, and any designs, diagrams, illustrations, enhancement or functionality
plans, or anything deemed by Modavox and Seller as Seller
Technology;
2. Domain
Names: Xxxxx.xxx and any other domain owned, operated, purchased, hosted, or
managed for the purpose of retailing the Seller system either in use or
practice; and
3. Any
trademark or patent related items belonging to Seller and any technology being
developed by Seller for future release.
2
Inventory. All of
the inventories and supplies of the Business as of the Closing Date (the “Inventory”).
Accounts
Receivable. All accounts receivable of as of the Closing Date
(the “Accounts
Receivable”).
Contracts. All of
the rights in, to and under any and all contracts of the Business (the “Assumed
Contracts”). To the extent that any Contracts are not
assignable as provided in this Agreement without the consent of another party,
this Agreement shall not constitute an assignment or an attempted assignment
thereof if such assignment or attempted assignment would constitute a breach
thereof. Seller agrees to obtain the consent, in form and substance
reasonably satisfactory to Buyer, of such other party to the assignment of any
such Assumed Contract to the Business, as owned by Buyer, in all cases in which
such consent is or may be required for such assignment.
Intellectual
Property. All rights in and to all Intellectual Property as
defined below.
Miscellaneous. Any
and all approvals, permits, licenses, orders, registrations, certificates,
variances and similar rights obtained from governments and governmental agencies
related to the Business. Any books and records relating to the
Business, the Acquired Assets or Assumed Liabilities.
“Basis” means any past
or present fact, situation, circumstance, status, condition, activity, practice,
plan, occurrence, event, incident, action, failure to act or transaction that
forms or could form the basis for any specified consequence.
“Cash” means cash and
cash equivalents.
“Closing” has the
meaning set forth in Section 2.6 below.
“Closing Date” has the
meaning set forth in Section 2.6 below.
“Code” means the
Internal Revenue Code of 1986, as amended.
3
“Damages” has the
meaning set forth in Section 8.1 below.
“Employee(s)” means
the individuals who were employed directly or indirectly by Seller or Newco
prior to the Closing.
“Employee Benefit
Plan” means any “employee benefit plan” (as such term is defined in ERISA
§3(3)) and any other employee benefit plan, program or arrangement of any
kind.
“Encumbrance” means
any mortgage, pledge, lien, encumbrance, charge or other security interest,
other than (a) mechanics’, materialmen’s, and similar liens, (b) liens for Taxes
not yet due and payable or for Taxes that the taxpayer is contesting in good
faith through appropriate proceedings, (c) purchase money liens and liens
securing rental payments under capital lease arrangements and (d) other liens
arising in the Ordinary Course of Business and not incurred in connection with
the borrowing of money.
“Excluded Assets”
means any asset of Seller listed as an Excluded Asset on Exhibit
A.
“Intellectual
Property” means any and all interests in and to (a) all inventions
(whether patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (b) the
Augme name and all trademarks, service marks, trade dress, logos, trade names
and corporate names, together with all translations, adaptations, derivations
and combinations thereof, and including all goodwill associated therewith, and
all applications, registrations and renewals in connection therewith, (c) all
copyrightable works, all copyrights and all applications, registrations, and
renewals in connection therewith, (d) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing, production and research processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information and business and marketing plans
and proposals), (e) all computer software, including software, and any and all
proprietary rights thereto, (f) all other proprietary rights, (g) all copies and
tangible embodiments of the foregoing (in whatever form or medium), (h) the
website having the web address of xxx.xxxxx.xxx, (i) all office and
studio phone and fax numbers, (j) active and conceptual work projects, new
project ideas conceived or in process, ideas and concepts relating to operations
marketing and management, and (k) goodwill associated with all of such
intellectual property.
"Knowledge"--an
individual will be deemed to have Knowledge of a particular fact or other matter
if:
(a) that
individual is actually aware of that fact or matter; or
(b) a
prudent individual could be expected to discover or otherwise become aware of
that fact or matter in the course of conducting a reasonably comprehensive
investigation regarding the accuracy of any representation or warranty contained
in this Agreement.
4
A Person
(other than an individual) will be deemed to have Knowledge of a particular fact
or other matter if any individual who is serving, or who has at any time served,
as a member, manager, director, officer, partner, executor or trustee of that
Person (or in any similar capacity) has, or at any time had, Knowledge of that
fact or other matter (as set forth in (a) and (b) above), and any such
individual (and any individual party to this Agreement) will be deemed to have
conducted a reasonably comprehensive investigation regarding the accuracy of the
representations and warranties made herein by that Person or
individual.
“Liabilities.” All
obligations of Seller or Newco under the contracts, leases, licenses, and other
arrangements referred to in the definition of Acquired Assets, including (i)
obligations of Seller or Newco to pay any Employee expenses such as salaries,
wages, benefits, withholding, social security or unemployment taxes; (ii) any
long or short-term debt of Seller or Newco (including any obligations to pay for
Trade Accounts Payable incurred prior to the Closing Date); (iii) any Liability
of Seller or Newco, any other Person for Taxes, (iv) any obligation of Seller or
Newco to indemnify any one including by reason of the fact that such Person was
a director, manager, officer, shareholder, Employee or agent of Seller or Newco;
(v) any Liability of Seller or Newco for costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby and (vi)
any Liability or obligation of Seller or Newco under this Agreement (or under
any side agreement between Seller on the one hand and Buyer on the other hand
entered into on or after the date of this Agreement).
“Liability” means any
liability (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated and whether due or to become due), including any liability for
Taxes.
“Manager(s)”
means the individuals who were managing members of Seller or Newco prior to the
Closing.
“Ordinary Course of
Business” means the ordinary course of business in the Business
consistent with past custom and practice of Seller.
“Person” means an
individual, corporation, partnership or limited liability company or any other
legal entity or organization.
“Purchase Price” has
the meaning set forth in Section 2.4 below.
“SEC” means the U.S.
Securities and Exchange Commission.
“Tax” means any
federal, state, local or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code §59A), customs duties, membership
interests, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated or
other tax of any kind whatsoever, including any interest, penalty or addition
thereto, whether disputed or not.
5
“Tax Return” means any
return, declaration, report, claim for refund or information return or statement
relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
“Trade Accounts
Payable” means the accounts payable arising from the Seller’s regular
historical suppliers of services and materials to customers of the
Business.
2. Basic
Transaction.
2.1 Reorganization of
Seller. Subject to the terms and conditions of this Agreement,
prior to the Closing Date Seller will transfer to Newco, free and clear of all
Encumbrances, all of the Acquired Assets, but not the Excluded Assets, in
exchange for 100% of the common stock of Newco.
2.2 Purchase and Sale of
Stock. On the Closing Date, and subject to the terms and
conditions of this Agreement, Buyer agrees to purchase from Seller, free and
clear of all Encumbrances, 60% of the issued and outstanding common stock of
Newco, and Seller agrees to sell, transfer, convey, assign and deliver to Buyer,
all of such common stock for the Purchase Price, described in Section
2.4.
2.3 No Assumption of
Liabilities. Neither Buyer nor Newco will assume or have any
responsibility with respect to any obligation or any of the Liabilities of
either Seller or the Business except for any Liability arising after the Closing
under contracts of the Business; provided, however, that existing
contracts related to current and ongoing delivery of services and management of
the company will be transferred and honored by Newco.
2.4 Purchase
Price. The total purchase price (the “Purchase Price”) will
be (i) $1,000,000 in operating cash (”Majority Cash”) transferred by Buyer to
Newco; (ii) issuance to Seller of shares of Buyer’s common stock (MDVX: Modavox
“Commons Stock”) as defined in Section 2.4(c) below (“Majority
Equity”); and (iii) grant to Newco of an exclusive, fully paid, perpetual and
irrevocable license to use, including the rights to sublicense, Modavox Patent
No. 6,594,691 and Patent No. 7,269,636 (the “Modavox Patents”) with respect to
the business of providing mobile interactive services, including SMS, MMS,
targeted mobile ad delivery and 2D/QR barcode publishing and management directly
to Internet and Mobile Internet Destinations (the “Modavox
Licenses”).
a. The
Majority Cash will be transferred to the account of Newco on the Closing Date,
which shall be no later than March 31, 2009, to be used for Newco operational
requirements and the continued development of Newco business strategies, sales
infrastructure, product development, and product deployment.
b. Upon
the Parties’ execution of this Agreement, which date shall not be later than
January 16, 2009 (the “Agreement Date”), Seller/Newco will be granted an
exclusive license to use, including the right to sublicense the Modavox Patents
with respect to the business of providing mobile interactive services, including
SMS, MMS, targeted mobile ad delivery and 2D/QR barcode publishing and
management directly to Internet and Mobile Internet destinations.
6
c. The
share price of Modavox common stock used to calculate the number of shares
required for the Majority Equity (“Acquisition Share Price”) will be the lesser
of (i) $1.50 per share, or (ii) the closing price of Modavox stock on the
Agreement Date, or (iii) the average closing price of Modavox stock during the
30-day period preceding Agreement Date. The number of Modavox shares included in
the Majority Equity will be $2,900,000 divided by the Acquisition Share Price.
(For example, if Acquisition Share Price remains $1.50 per share, the number of
shares that comprise the Majority Equity would be 1,933,333
shares.)
d.
Modavox has or will issue to Seller Modavox Common Stock shares, as evidenced by
two (2) Common Stock Certificates, as follows: (i) a 200,000 shares certificate
(the “First Certificate”); and (ii) a shares certificate for the number of
shares necessary to reach the Majority Equity when combined with the First
Certificate (e.g., 1,733,333 shares if the Acquisition Share Price remains $1.50
per share) (the “Second Certificate”). The First Certificate was issued to
Seller following the Parties’ execution of a Letter of Intent to enter into the
transaction contemplated hereunder. Upon the Agreement Date, a
lawyers trust (or lawyers trusts) will be established (i) to hold the Second
Certificate until the Closing Date, at which time the Second Certificate will be
delivered to Seller; and (ii) to hold a share certificate representing 60% of
the common stock of Newco until the Closing Date, at which time such share
certificate will be delivered to Modavox.
e. As
commitment to the success of Newco, Seller Management (i) will contract to
provide services for a period of at least twelve (12) months after the
Transaction Date; and (ii) will not sell any interest in Newco for a period of
one year after the Closing Date.
f. Except
with respect to Modavox shares evidenced by the First Certificate, all shares of
Modavox common stock transferred under this Agreement will have a restricted
legend limiting resale, and the restrictions will not be lifted for twelve (12)
months after the Closing Date, unless a change in control or acquisition of
Modavox occurs in which case the restriction is void.
g. If for
any reason Modavox is unable by March 31, 2009 (or, as extended by written
agreement of both Parties), to secure appropriate financing (whether by
investment, acquisition and/or settlement with infringing entities in connection
with pending patent and validity litigation) or otherwise fails to provide to
Newco the Majority Cash as described in Section 2.4(a), or, in the event Modavox
is acquired on or before March 31 (or as mutually extended) as described in
Section 2.4(i), Modavox fails to pay the consideration described in Section
2.4(i), then both parties agree that the purchase described in Section 2.2 (or,
if applicable, in Section 2.4(i)) will not occur (and shares of Modavox and
Newco held in trust as described in Section 2.4(d) above will be returned to
Modavox and Seller respectively); provided, however, that the parties further
agree that:
7
(i)
Seller will retain ownership of the Modavox Common Stock evidenced and conveyed
by the First Certificate; and
(ii)
Seller will retain its rights to the Modavox Licenses as described in
Section 2.4(b) provided that Seller pays to Modavox the transaction-based
/“click-through”-based license fees (“Per Transaction License Fees”) described
below related to Seller’s (and Seller’s clients’) use of the Modavox
Patents. Such Per Transaction License Fees will be equal to five
percent (5%) of the click-through/transaction fees collected by Seller from
Seller’s clients or end users related to use of the Modavox
Patents. For purposes of this paragraph, a Transaction occurs any
time a consumer accesses content or information through Seller’s mobile
interactive systems and services (or through a Seller sub-licensee) which
information is customized for the consumer due to Seller’s use of the Modavox
Patents.
h. At any
time after the Closing Date, if (i) Modavox discontinues its current business
operations, declares bankruptcy or experiences a liquidation event, then Seller
will be granted an option to re-acquire a portion of Majority Interest (“Buy
Back Option”). The Buy Back Option is defined as follows:
1. Seller
will have a 30-day option to re-acquire from Modavox 44.62% of Newco in exchange
for Seller returning to Modavox the number of Modavox shares issued to Seller as
Majority Equity;
2.
Modavox will retain 15.38% ownership interest in Newco, which is consideration
for the Majority Cash as an equity investment in Newco at a pre-money value of
$5,500,000;
3.
Continuation of Newco’s exclusive license to Modavox patents will be subject to
terms defined by Modavox and accepted by Newco; and
4.
Modavox will relinquish its seat on the Newco Board of Directors and lose rights
to the corresponding majority governance Control Provisions but shall gain any
and all rights and privileges available to the next round of Newco equity
investors, anticipated to be Series A Preferred Rights.
i. If
Modavox is acquired on or before the Closing Date, the transactions described
herein (including both the Basic Transaction to purchase 60% of Seller as
described in Section 2 and the Option to buy the remaining 40% of Seller as
described in Section 5) shall accelerate and the Closing Date for purposes of
this Agreement shall mean the day before the date on which Modavox is so
acquired. In such event, (i) the purchase price to be paid on the
Closing Date will be the sum of the consideration described in Section 2.4
(excluding the Majority Cash) and the consideration described in Section 5.2,
and (ii) upon receipt of such consideration, Seller will have sold 100% of Newco
and will not have the management rights described in Section 3 or the buy-back
rights described in Section 2.4(h).
8
2.5 Name
Change. Seller will inform its current clients and channel
partners of the transaction and the name change to Newco, and make available
upon request, where applicable, all contracts upon closing to
Buyer. Buyer understands there is limited revenue generated from
these clients. However, Seller will make every effort to renew those
contracts and assign them to Newco. Current contracts and channel
partner agreements are described in Exhibit A, attached
hereto.
2.6 Closing. The
closing of the transactions contemplated by this Agreement (the “Closing”) shall take
place on the business day following the satisfaction or waiver of all conditions
to the obligations of the parties to consummate the transactions contemplated
hereby (other than conditions with respect to actions the respective Parties
will take at the Closing itself) or such other date as the parties may mutually
determine (the “Closing Date”)
provided, however, that the Closing Date shall be no later than March 31,
2009.
3. Newco Management and
Governance.
3.1 Newco
management and governance will be structured such that Seller Management will
maintain authority to manage day-to-day operations of the company, subject to
certain “control provisions” to govern corporate actions and activities with
respect to major decisions.
3.2. A
Board of Directors comprised of three members, two from Seller Management and
one from Modavox Management. Board decisions will be made by majority
vote.
3.3. Control
Provisions will be put in place such that major decisions will require unanimous
consent of the Board.
3.4. Seller
understands that the governance and management of Newco will be impacted by the
status as a subsidiary of a publicly held company. Prior to the Closing Date,
Buyer will communicate such requirements to Seller.
3.5. Seller
Executive Committee Members, in their capacity as the management team of Newco
(a majority owned subsidiary of Buyer/Modavox), will be eligible for Modavox
Executive Stock Option Awards based on performance, meeting or exceeding budgets
and forecasts, and market penetration. These awards are typically given
following the Modavox annual company report and the second quarter
results.
4. Majority
Cash
4.1. Modavox
and Seller acknowledge that the Majority Cash provided to Newco by Modavox will
facilitate Newco business operations for a period of approximately twelve (12)
months, and that Newco may require additional operating cash prior to achieving
positive cash flow. If additional capital is required, the parties agree that
Newco will first seek funding from Modavox. If Modavox elects not to invest
additional operating cash at terms agreeable to Seller management, Newco has the
right to raise capital from external sources, subject to the following
provisions:
9
a.
Modavox maintains a right of first refusal on any terms negotiated with external
investors through the next round of funding; and
b. If
Newco fails to achieve pre-established first year milestones (to be determined
by both parties prior to the Closing Date), the next round of external
investment will not dilute Modavox’s ownership interest in Newco.
5. Option
Conditions
5.1 If
certain conditions (the “Option Conditions”) are satisfied as of twelve (12)
months after the Closing Date , or, if Modavox is acquired, at any time within
twelve (12) months after the Closing Date, Modavox (or its successor) will be
granted an option, which option shall last thirty (30) days (or, with respect to
a Modavox successor, for a period of thirty days after Modavox’s acquisition)
(the “Option Period”), to buy the remaining 40% ownership interest in Newco (the
“Option”). If the Option Conditions are satisfied, Modavox (or its successor)
may exercise the Option during the Option Period by issuing to Seller shares of
Modavox common stock (or the successor’s common stock) as defined in Section 5.2
below (the “Option Equity”).
5.2. The
share price of Modavox common stock used to calculate the number of
shares required for the Option Equity will be the Acquisition Share Price
(“Option Share Price”). The number of Modavox shares required to
exercise the Option will be $2,600,000 divided by the Option Share Price. (For
example, if Acquisition Share Price remains $1.50 per share, the Option Share
Price would be $1.50, and the number of shares that comprise the Minority Equity
would be 1,733,334 shares.)
5.3. Modavox
will hold Option Equity shares in trust as of the Closing Date and Modavox will
release these shares to Seller management if Modavox elects to exercise the
Option.
5.4. The
Option is only valid if the average closing share price of Modavox (or
successor) common stock for the 30-days preceding the one-year anniversary of
the Transaction Date is at least 80% of the Acquisition Share
Price.
5.5. If
Modavox (or its successor) does not exercise the Option during the Option
Period, then the Option will expire.
5.6. Upon
expiration of the Option, Seller will be granted the Buy Back Option described
in Section 2(g).
5.7. Upon
exercising the Option, Modavox (or its successor) will have transferred common
stock with a total value of at least $5,500,000 (the “Acquisition Price”) in
exchange for all Acquired Assets, and at such time will have acquired 100%
ownership of Newco.
10
6. Representations and
Warranties of Seller. Seller will warrant and guarantee that
the systems in place (i) conform to specifications provided by Seller and (ii)
are suitable for their intended purpose. Seller represents and
warrants to Buyer that the statements contained in this Section 6 are
correct and complete with respect to Seller and the Business as of the date of
this Agreement and will be correct and complete with respect to Newco and the
Business as of the Closing Date. The representations and warranties
will apply to Newco as though made through the Closing Date, with the Closing
Date substituted for the date of this Agreement throughout this Section 6,
and the name Newco substituted for Seller throughout this Section 6 except in
instances which clearly are intended to apply only to Seller. Seller
shall make and be responsible for all representations and warranties relating to
Newco.
6.1 Organization of Seller and
Newco. Seller is a limited liability company duly organized,
validly existing and in good standing under the laws
ofDelaware. Newco will be established as a corporation duly
organized, validly existing and in good standing under the laws of
Delaware.
6.2 Authorization of
Transaction. Seller has full corporate power and authority and
has obtained all corporate approvals and consents to execute and deliver this
Agreement and to perform its obligations hereunder. Newco has full
corporate power and authority and has obtained all corporate approvals and
consents to execute and deliver this Agreement and to operate the Business after
the Closing. This Agreement constitutes the valid and legally binding
obligation of Seller, enforceable in accordance with its terms and conditions,
subject to applicable bankruptcy, insolvency, reorganization and other similar
laws affecting the enforceability of creditors’ rights generally, general
equitable principles and the discretion of courts in granting equitable
remedies.
6.3 Noncontravention. Neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby will (i) require any consent from or violate
any regulation, ruling or other restriction of any government or agency to which
Seller is subject; (ii) conflict with any provision of the articles of
incorporation or bylaws of Newco or the Articles of Incorporation or Bylaws of
Seller; or (iii) conflict with, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease or other arrangement to which Seller
is a party or by which it is bound or to which any of its assets is subject (or
result in the imposition of any Encumbrance upon any of its
assets).
6.4 No
Broker. No broker or finder has acted for Seller in any manner
in connection with this Agreement and the consummation of the transactions
contemplated hereby.
6.5 Title to
Assets. Seller has, and Newco will have as of the Closing,
good and marketable title to, or a valid leasehold interest in all of the
Acquired Assets, free and clear of any Encumbrances or restriction on
transfer.
6.6 Non-Soliciation. Seller
and all related parties shall be bound by a no shop and no solicitation clause,
which requires Seller to negotiate exclusively with Modavox, and not solicit an
acquisition or merger proposal from any other entity without written consent
from Modavox for an “exclusivity period” lasting until March 31,
2009. Nothing in this paragraph in any way restricts Seller’s right, at any
time, to seek equity investments for the purpose of operating Seller’s business
and operations.
11
6.7 Material
Changes. Since the January 1, 2009, there have not been any
material adverse changes in the Business, financial condition, operations,
results of operations or future prospects of Seller and none are reasonably
expected.
6.8 Undisclosed
Liabilities. Seller has no Liability (and to Seller’s
Knowledge there is no Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand against it giving
rise to any Liability), except for Liabilities which have arisen in the Ordinary
Course of Business (none of which results from, arises out of, relates to, is in
the nature of, or was caused by any breach of contract, breach of warranty,
tort, infringement, or violation of law).
6.9 Legal Compliance.
a. To
Seller’s Knowledge, Seller has complied with all applicable laws and no action,
suit, or other proceeding, including an investigation, has been filed or
commenced against it alleging any failure so to comply.
b. Seller
has not been and is not currently involved in any litigation. Seller
is not subject to any outstanding injunction, judgment, order, decree, ruling or
charge, and is not a party to nor has it been threatened to be made a party to
any action, suit proceeding, hearing or investigation of, in, or before any
court or administrative agency of any federal, state, local or foreign
jurisdiction, or before any arbitrator.
6.10 Tax
Matters.
a. Seller
has filed all Tax Returns that it was required to file. All such Tax
Returns were correct and complete in all respects. All Taxes owed by
the Seller (whether or not shown on any Tax Return) have been
paid. The Seller is not currently the beneficiary of any extension of
time within which to file any Tax Return. There are no Encumbrances
on any of the assets of Seller that arose in connection with any failure (or
alleged failure) to pay any Tax.
b. Seller
has not waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.
c. Seller
(i) has not been a member of an affiliated group filing a consolidated federal
income Tax Return and (ii) to Seller’s Knowledge does not have any Liability for
the Taxes of any Person, whether as a transferee or successor, by contract, or
otherwise.
d. Seller
has consulted with its legal, tax, accounting, and financial advisors with
regard to the legal, tax, accounting and financial consequences and effects of
the transactions contemplated by this Agreement and acknowledges that Buyer has
not made any representations, warranties or assurances with respect to any of
such matters.
12
6.11 Real
Property. Seller owns no real property and no obligations
relating to owned or leased real property will be assumed by Newco or
Buyer.
6.12 Intellectual
Property.
a. Each
item of Intellectual Property owned or utilized in the Business by Seller
immediately prior to the Closing will be owned or available for use by Newco on
identical terms and conditions immediately subsequent to the
Closing. Seller has taken all necessary and desirable action to
maintain and protect each item of Intellectual Property that it owns or
uses.
b. To
Seller’s Knowledge, Seller has not interfered with, infringed upon,
misappropriated or otherwise come into conflict with any intellectual property
rights of third parties. Seller has never received any charge,
complaint, claim, demand or notice alleging any such interference, infringement,
misappropriation or violation (including any claim that Seller must license or
refrain from using any intellectual property rights of any third party) by
Seller.
c. Seller
possesses all right, title, and interest in and to its Intellectual Property,
free and clear of any Encumbrance. Except in the ordinary course of
operating its business, Seller has not sublicensed any Intellectual Property to
any third party.
6.13 Tangible
Assets. Seller owns or leases all equipment and other tangible
assets necessary for the conduct of the Business as presently conducted and as
presently proposed to be conducted. Each such tangible asset is
transferred “as is,” except that manufacturer’s or vendor’s warranties will be
transferred to Newco to the extent they are
assignable.
6.14 Contracts. Attached
as Schedule 6.14 is a list of the following contracts and other agreements to
which Seller is a party:
a. any
agreement (or group of related agreements) for the lease of personal property to
or from any Person providing for lease payments in excess of $1,000 per
annum;
b. any
agreement (or group of related agreements) for the purchase or sale of
commodities, supplies, products or other personal property, or for the
furnishing or receipt of services, in excess of $1,000;
c. any
purchase order for products or services in excess of $1,000 that has not been
completed or filled;
d. any
agreement concerning a partnership or joint venture;
13
e. any
agreement (or group of related agreements) under which Seller has created,
incurred, assumed or guaranteed any indebtedness for borrowed money, or any
capitalized lease obligation, in excess of $1,000 or under which has been
imposed an Encumbrance on any of its assets, tangible or
intangible;
f. any
agreement concerning confidentiality or noncompetition;
g. any
agreement involving any of the members of Seller as a party and Seller as the
other party;
h. any
profit sharing, stock option, stock purchase, stock appreciation, deferred
compensation, severance or other plan or arrangement for the benefit of its
current or former members, managers, directors, officers or
Employees;
i. any
agreement for the employment of any individual on a full-time, part-time,
consulting, or other basis providing annual compensation in excess of $1,000 or
providing severance benefits;
j. any
agreement under which the consequences of a default or termination could have a
material adverse effect on the Business, financial condition, operations,
results of operations or future prospects of the Business;
k. any
other agreement (or group of related agreements) the performance of which
involves total annual consideration in excess of $1,000.
Seller has delivered to Buyer a correct
and complete copy of each written agreement listed in Schedule 6.14 and a
written summary setting forth the terms and conditions of each oral
agreement. With respect to each such agreement: (i) the agreement is
legal, valid, binding, enforceable and in full force and effect; (ii) the
agreement will continue to be legal, valid, binding, enforceable and in full
force and effect on identical terms following the consummation of the
transactions contemplated by this Agreement; (iii) no party is in breach or
default, and no event has occurred which, with notice or lapse of time or both,
would constitute a breach or default, or permit termination, modification or
acceleration, under the agreement; and (iv) no party has repudiated any
provision of the agreement.
6.15 Notes and Accounts
Receivable. All notes and accounts receivable of Seller are
reflected properly on their books and records and are valid receivables.
6.16 Insurance. Newco will
be established to maintain property, casualty, liability and workers’
compensation coverage, in commercially reasonable amounts.
6.17 Warranty. The
services and products sold, leased or delivered by Seller have been in
conformity with all applicable contractual commitments and all express and
implied warranties, and Seller has no Liability (and, to Seller’s Knowledge,
there is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against Seller giving rise to
any Liability) for replacement or repair thereof or other damages in connection
therewith, subject only to the reserve for warranty claims. No
product or service sold, leased or delivered by Seller is subject to any
guaranty, warranty or other indemnity beyond the applicable standard terms and
conditions of sale. Attached with Schedule 6.17 is a copy of the
standard terms and conditions of sale for Seller’s products and services, if
such standard terms and conditions exist, (containing applicable, if any,
guaranty, warranty and indemnity provisions).
14
6.18 Product
Liability. Seller has no Liability (and to Seller’s Knowledge
there is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against Seller giving rise to
any Liability) arising out of any injury to individuals or property as a result
of the ownership, possession or use of any product or service manufactured,
sold, leased or delivered by Seller.
6.19 Employees &
Managers.
a. Seller
is not a party to nor is it bound by any collective bargaining agreement, nor
has it experienced any strikes, grievances, claims of unfair labor practices or
other collective bargaining disputes. Seller has not committed any
unfair labor practice. There is no organizational effort presently
being made or threatened by or on behalf of any labor union with respect to
Employees of Seller.
b. Schedule
6.19 lists for each Employee or Manager his or her name, title, current
compensation, vacation/sick time accrued, severance agreements and participation
in employee benefits. At the Closing, the Seller will pay directly to
all current Employees all compensation owed or accrued as of the Closing Date,
including wages, accruing but unpaid bonuses, vacation time, sick time or other
paid time off along with any fees and/or penalties, which may exist in
conjunction with the termination of such Employees as of the Closing
Date.
6.20.
Employee
Benefits. Schedule 6.20 lists each Employee Benefit Plan that
Seller maintains, to which Seller contributes or has any obligation to
contribute, or with respect to which Seller has any material Liability or
potential Liability.
6.21. Investment. Seller
understands that the Common Stock of Buyer issued pursuant to the terms of this
Agreement has not been registered under the Securities Act, or under any state
securities laws, and is being offered and sold in reliance upon federal and
state exemptions for transactions not involving any public
offering. Seller and any Person to whom stock is distributed (i) is
acquiring Buyer Common Stock solely for his or its own account for investment
purposes, and not with a view to the distribution thereof (except to Seller’s
shareholders), (ii) is a sophisticated investor with knowledge and
experience in business and financial matters, (iii) by reason of his or its
business or financial experience or the business or financial experience of his
or its professional advisors who are unaffiliated with and who are not
compensated by Buyer or any affiliate or selling agent of Buyer, directly or
indirectly, could be reasonably assumed to have the capacity to protect his or
its own interests in connection with the transaction. (iv) has received
certain information concerning Buyer and has had the opportunity to obtain
additional information as desired in order to evaluate the merits and the risks
inherent in holding Buyer Common Stock, (v) is able to bear the economic
risk and lack of liquidity inherent in holding Buyer Common Stock, and
(vi) is an Accredited Investor as defined in Regulation D promulgated by
the SEC.
15
6.22. Disclosure. To
Seller’s Knowledge, the representations and warranties contained in this
Section 6 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 3 not misleading.
7. Representations and
Warranties of Buyer. Buyer represents and warrants to Seller
that the statements contained in this Section 7 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).
7.1 Organization of
Buyer. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of Delaware.
7.2 Authorization of
Transaction. Buyer has full corporate power and authority and,
except as stated herein, has obtained all corporate approvals and consents to
execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of Buyer, enforceable in accordance with its terms and conditions,
subject to applicable bankruptcy, insolvency, reorganization and other similar
laws affecting the enforceability of creditors’ rights generally, general
equitable principles and the discretion of courts in granting equitable
remedies.
7.3 Non-contravention. Neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby will require any consent from or violate any
regulation, ruling or other restriction of any government or agency to which
Buyer is subject or any provision of the certificate of incorporation of
Buyer.
7.4 No
Broker. No broker or finder has acted for Buyer in any manner
in connection with this Agreement and the consummation of the transactions
contemplated hereby.
7.5 Stock. Assuming
the truthfulness and accuracy of the representations and warranties made by
Seller in Section 6.21 hereof, at the Closing, the shares of Buyer’s Common
Stock issued pursuant to Section 2.4 will be duly authorized, validly issued,
fully paid and non-assessable, and not issued in violation of any preemptive
rights of subscription or purchase.
8. Covenants.
8.1 General. During
the period between the execution of this Agreement and the Closing, each of the
Parties will use its reasonable best efforts to take all action and to do all
things necessary, proper or advisable in order to consummate and make effective
the transactions contemplated by this Agreement, including giving all notices to
third parties and obtaining all necessary third party consents.
8.2 Operation of
Business. During the period between the execution of this
Agreement and the Closing, Seller and Newco will not engage in any practice,
take any action or enter into any transaction outside the Ordinary Course of
Business. Without limiting the generality of the foregoing, Seller
will not (i) pay any amount to any third party outside of the Ordinary Course of
Business (ii) fail to pay any accounts payable of the Seller when due and
payable; or (iii) take any collections actions on accounts receivables outside
the Ordinary Course of Business.
16
8.3 Preservation of
Business. During the period between the execution of this
Agreement and the Closing, Seller and Newco will keep the Business and the
properties related thereto substantially intact, including its present
operations, physical facilities, working conditions and relationships with
lessors, licensors, suppliers, customers, and Employees.
8.4 Financial
Statements. Prior to or promptly after the Closing, Seller
will cooperate with Buyer to prepare financial statements for Newco or Seller as
are required for any filings Buyer will need to make with the SEC with respect
to the transaction contemplated by this Agreement.
8.5 Full Access and Continuing
Cooperation. Seller will permit representatives of 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 or Newco, to all premises,
properties, books, records (including Tax records), contracts and documents of
or pertaining to Seller and Newco.
9. Conditions to Obligation to
Close.
9.1 Conditions to Obligation of
Buyer. The obligation of Buyer to consummate the transactions
to be performed by it in connection with the Closing is subject to satisfaction
of the following conditions:
a. The
representations and warranties set forth in Section 6 above shall be true and
correct in all material respects at and as of the Closing Date;
b. Seller
shall have performed and complied with all of its covenants hereunder in all
material respects through the Closing, including obtaining all third party
consents and taking all measures necessary to effect a transfer of all Acquired
Assets upon the Closing;
Buyer may
waive any condition specified in this Section 9.1 if it executes a writing so
stating at or prior to the Closing.
9.2 Conditions to Obligation of
Seller. The obligation of Seller to consummate the
transactions to be performed by it in connection with the Closing is subject to
satisfaction of the following conditions:
a. The
representations and warranties set forth in Section 7 above shall be true and
correct in all material respects at and as of the Closing Date;
b. Buyer
shall have performed and complied with all of its covenants hereunder in all
material respects through the Closing.
Seller
may waive any condition specified in this Section 9.2 if it executes a writing
so stating at or prior to the Closing.
17
10. [Section Intentionally
Deleted]
11. Survival of Representations
and Warranties. All of the representations and warranties of
the Parties contained in this Agreement shall survive the Closing for a period
of one year.
12. Indemnification.
12.1 General.
a. From
and after the Closing, the Seller on the one hand and the Buyer on the other
hand shall indemnify each other as provided in this Section 12. As
used in this Agreement, the term “Damages” shall mean
all Liabilities, demands, claims, actions or causes of action, regulatory,
legislative or judicial proceedings or investigations, assessments, levies,
losses, fines, penalties, damages, costs and expenses, including reasonable
attorneys’, accountants’, investigators’, and experts’ fees and expenses,
sustained or incurred in connection with the defense or investigation of any
claim for indemnification.
b. In
connection with any claim for indemnification, the indemnified party will
cooperate in all reasonable requests of the indemnifying party.
12.2 Indemnification Obligations
of Seller to Buyer. Seller shall defend, indemnify, save and
keep harmless Buyer and its officers, directors, consultants, employees
successors and permitted assigns against and from all Damages sustained or
incurred by any of them resulting from or arising out of or by virtue
of:
a. any
inaccuracy in or breach of any representation and warranty made by Seller or
Newco in this Agreement or in any closing document delivered to Buyer in
connection with this Agreement;
b. any
breach by Seller of, or failure by Seller to comply with, any of its covenants
or obligations under this Agreement (including its obligations under this
Section 12);
c. the
failure to discharge when due any Liability or obligation of Seller or any claim
against Buyer with respect to any such Liability of Seller;
d. any
claims by parties other than Buyer to the extent caused by acts or omissions of
Seller on or prior to the Closing Date, including claims for Damages which arise
or arose out of Seller’s operation of the Business or by virtue of Seller’s
ownership of stock of Newco or the Acquired Assets on or prior to the Closing
Date;
e. any
Employee Pension Benefit Plan or any Employee Welfare Benefit Plan which Seller
or an ERISA affiliate has at any time maintained or administered or to which
Seller or any ERISA affiliate has at any time contributed (including any
liability for health continuation requirements under Code §4980B or Part 6 of
Subtitle B of Title I of ERISA and any liability arising pursuant to Title IV of
ERISA for plan termination, withdrawal or partial withdrawal from any
Multiemployer Plan, or any lien to enforce any Title IV liability);
18
f. any
benefits accrued pursuant to any Employee Welfare Benefit Plan or Employee
Benefit Plan, whether formal or informal, at or prior to the Closing Date other
than benefits payable under insurance policies constituting Acquired
Assets;
g. the
failure of Seller or Newco to withhold and/or pay any Taxes in connection with
amounts paid or owing to any Employee, independent contractor, creditor or any
other third party on or before the Closing Date; or
h. any
assessment of additional Taxes on Buyer for any period for which Seller's or
Newco’s Tax Returns have been filed or any dispute or claim concerning any Tax
Liability of Seller or Newco claimed or raised by any authority which accrued
prior to the Closing Date.
12.3 Buyer’s Indemnification
Covenants. Buyer shall defend, indemnify, save and keep
harmless Seller and its successors and permitted assigns against and from all
Damages sustained or incurred by any of them resulting from or arising out of or
by virtue of:
a. any
inaccuracy in or breach of any representation and warranty made by Buyer in this
Agreement or in any closing document delivered to Seller in connection with this
Agreement;
b. any
breach by Buyer of, or failure by Buyer to comply with, any of its covenants or
obligations under this Agreement (including its obligations under this
Section 12); or
c. any
claims by third parties which arise out of Buyer’s ownership of Newco stock or
operation of the Business after the Closing Date.
12.4 Limitations to
Liability. Notwithstanding anything to the contrary in this
Section 12, the liability of the parties hereto for any obligations under this
Section 12, except that provided in Sections 12.2(g) and 12.2(h), shall be
limited such that no party hereto shall be required to indemnify the other party
unless and until the aggregate amount of indemnifiable Damages that may be
recovered from such party exceeds $5,000 (after which the indemnifying party
shall be liable for the full Damages from the first dollar of
Damages). Buyer may deduct the amount of all of Seller’s liability
pursuant to this Section 12 from the Common Shares being held back pursuant to
Section 2.4. Any such deduction shall take place at a value of $1.50
per share.
12.5 Working
Capital.
a. Seller
will guarantee that Working Capital at Closing is not negative. “Working
Capital” is defined as Cash at Closing plus Accounts Receivable and Certain
Prepaid Items (as identified in Schedule 12.6), less Accounts Payable, accrued
bonus payments, and any deferred revenue determined by Seller in accordance with
generally accepted accounting principles (“GAAP”) applied on a basis consistent
with past practices as set forth on the Working Capital schedule attached to
this agreement as Exhibit C (the
“Estimated Working Capital Schedule”).
19
b. Not
more than five days before the Closing Date, Seller shall deliver to Buyer the
Estimated Working Capital Schedule setting forth Seller’s good-faith estimate of
the Working Capital at Closing (the “Estimated Working Capital”), which shall be
certified by the chief financial officer of Seller. Buyer shall be entitled to
inspect all work papers, schedules and other supporting materials relating to
the preparation of the Estimated Working Capital Schedule and to consult with
Seller and its representatives regarding the methods used to calculate the
Estimated Working Capital Schedule.
c. If
the Estimated Working Capital is less than -$5,000, at the Closing, an amount
equal to the difference, if any, between the Estimated Working Capital and $0.0
shall be deducted from the Common Stock issuable to Seller at the Closing, from
the first dollar below $0.0, at a value per share of $1.50. If the
Estimated Working Capital is less than -$25,000, the amount below -$25,000 shall
be contributed to Newco by Seller in cash as a condition to the
Closing.
12.6 Working Capital
Adjustment.
a. On
a date no later than 60 days after the Closing Date (the "Calculation Date"),
Buyer, with reasonable, good-faith assistance from Seller, shall prepare and
deliver to Seller a statement (the "Actual Working Capital Schedule") setting
forth Buyer's good-faith determination of the actual Working Capital at Closing
(the “Actual Working Capital”), which shall be certified by the chief financial
officer of Buyer. Seller shall be entitled to inspect all work papers, schedules
and other supporting materials relating to the preparation of the Actual Working
Capital Schedule and to consult with Buyer regarding the methods used to
calculate the Actual Working Capital.
b. The
Actual Working Capital Schedule shall become final and binding upon Seller and
Buyer unless Seller notifies Buyer of a disagreement with respect to any matter
contained therein (a "Notice of Disagreement") within 30 days after the receipt
thereof. A Notice of Disagreement shall specify in reasonable detail the nature
of any disagreement so asserted. For a period of 30 days after the delivery of
the Notice of Disagreement, Seller and Buyer shall attempt in good faith to
resolve in writing all of their differences with respect to each matter
specified in the Notice of Disagreement, in which case such resolution shall be
final and binding upon the parties.
c. If,
at the end of such 30-day period, Seller and Buyer have not resolved in writing
all of their differences with respect to any such matter, then each unresolved
matter (a "Disputed Matter") shall be submitted to and reviewed by an
independent certified public accounting firm (the "Accounting Arbitrator"). The
Accounting Arbitrator shall consider only the Disputed Matters and shall act
promptly to resolve in writing all Disputed Matters. The determinations of the
Accounting Arbitrator with respect to the Disputed Matters shall be final and
binding upon Seller and Buyer. Judgment upon the Accounting Arbitrator's award
may be entered in any court having jurisdiction thereof.
20
d. Seller
shall be responsible for and pay (1) all of its expenses incurred in preparing
the Estimated Working Capital Schedule, assisting in the preparation of and
reviewing the Actual Working Capital Schedule, and resolving any Disputed
Matter, and (2) 50% of the fees and expenses of any Accounting Arbitrator
incurred in resolving any Disputed Matter. Buyer shall be responsible for and
pay (1) all of its expenses incurred in reviewing the Estimated Working Capital
Schedule, preparing the Actual Working Capital Schedule, and resolving any
Disputed Matter, and (2) 50% of the fees and expenses of any Accounting
Arbitrator incurred in resolving any Disputed Matter.
e. Within
10 days after the final determination of the Actual Working Capital, an amount
equal to the difference, if any, between the Estimated Working Capital as shown
on the Estimated Working Capital Schedule and the Actual Working Capital shall
be paid by Buyer to Seller if the Actual Working Capital exceeds the Estimated
Working Capital or by Seller to Newco if the Estimated Working Capital exceeds
the Actual Working Capital; provided, such amount shall be adjusted for any
amounts paid by either Buyer or Seller pursuant to Section
8.5(c). Any payments by Seller to bring the level of Working Capital
to at least -$25,000 shall be paid in cash. Any payments by Seller to
raise the level of Working Capital between -$25,000 and $0.0 shall be payable in
Buyer’s Common Stock at a value of $1.50 per share. Any payments by
Buyer shall be in Common Stock or cash based on the thresholds shown
above.
12.7 Exclusive
Remedy. Absent fraud, the remedies available under this
Section 12 shall be the exclusive remedy available to the parties hereto for a
breach by the other party of any of the representations, warranties and
guarantees set forth herein.
13. Termination.
13.1 Termination of
Agreement. This Agreement may be terminated as provided
below:
a. Buyer
and Seller may terminate this Agreement by mutual written consent at any time
prior to the Closing;
b. Buyer
or Seller may terminate this Agreement if the other party has breached any
material representation or covenant in this Agreement.
21
13.2 Effect of
Termination. If any party terminates this Agreement pursuant
to Section 13.1 above, all rights and obligations of the parties hereunder
shall terminate without any Liability of any party to any other party (except
for any Liability of any party then in breach).
14. Non-Compete and
Non-Solicitation.
14.1 Covenant Not to
Compete. Beginning on the Closing Date and continuing for the
Time Period (as defined in Section 14.3) Seller will not engage directly or
indirectly in the Business or any related business within the Territory (as
defined in Section 14.4); provided, however, that Seller will not be deemed to
have engaged in the Business or any related business solely by reason of owning
less than 1% of the outstanding stock of any publicly traded
corporation.
14.2 Non-Solicitation. Beginning
on the Closing Date and continuing for the Time Period (as defined in Section
14.3) Seller will not, without the written consent of Buyer, solicit any past or
existing customers of the Buyer to perform services related to or in direct
competition with those performed by the Buyer.
14.3 Time
Period. For purposes of this Agreement “Time Period” shall
mean three years from the Closing Date unless a court of competent jurisdiction
determines that such period is unenforceable, in which case “Time Period” shall
mean two years, unless a court of competent jurisdiction determines that such
period is unenforceable, in which case “Time Period” shall mean one
year.
14.4 Territory. For
purposes of this Agreement “Territory” shall mean the entire world, unless a
court of competent jurisdiction finds such territory to be unenforceable, in
which case “Territory” shall mean the United States of America.
15. Miscellaneous.
15.1 Covenant to Maintain
Records. For a period of two years from the Closing Date,
Buyer agrees not to destroy any business records or files acquired in
conjunction with the Acquired Assets and further agrees to allow Seller
reasonable access to such business records and files for reasonable purposes
during normal business hours.
15.2 Press Releases and Public
Announcements. No Party shall issue any press release make any
public or private announcement or communication relating to the subject matter
of this Agreement prior to the Closing 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 applicable law (in which case the
disclosing party will use its reasonable best efforts to advise the other
Parties prior to making the disclosure).
15.3 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.
22
15.4 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, to the extent they related in any way to the subject matter
hereof.
15.5 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.
15.6 Counterparts PDF’s and
Facsimilies. 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. The exchange of
copies of this Agreement and of signature pages by facsimile transmission or by
e-mail in PDF format shall constitute effective execution and delivery of this
Agreement as to the Parties and may be used in lieu of the original Agreement
for all purposes. Signatures on behalf of the Parties transmitted by facsimile
or by e-mail in PDF format shall be deemed to be original signatures for all
purposes.
15.7 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.
15.8 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 when delivered personally or by
professional overnight courier addressed to the intended recipient as set forth
below:
If
to Seller or Newco:
CEO
New
Aug, LLC
000
Xxxx 00xx
Xxxxxx
0xx
Xxxxx
Xxx
Xxxx, XX 00000
908.325.0041
|
Copy
to:
General
Counsel
New
Aug, LLC
000
Xxxx 00xx
Xxxxxx
0xx
Xxxxx
Xxx
Xxxx, XX 00000
908.325.0041
|
If
to Buyer:
Modavox,
Inc.
Attn: Xxxxx
X. Xxx, CEO
0000
X. 00xx Xxxxxx
Xxxxx
000
Xxxxxxx,
XX 00000-0000
000.000.0000
Fax
|
Copy
to:
Xxxxxxx
& Xxxxx LLP
Attn:
P. Xxxxxx Xxxx
Two
North Central Avenue
Phoenix,
AZ 00000-0000
000-000-0000
fax
|
Any Party
may send any notice, request, demand, claim or other communication hereunder to
the intended recipient at the address set forth above using any other means
(including personal delivery, facsimile, 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 intended
recipient. 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.
23
15.9 Governing
Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Arizona without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Arizona or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Arizona.
15.10 Amendments and
Waivers. No amendment of any provision of this Agreement shall
be valid unless the same shall be in writing and signed by Buyer and
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.
15.11 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.
15.12 Expenses. Each
of Buyer and Seller will bear its own costs and expenses (including legal and
accounting fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby. Without limiting the generality of
the foregoing, all transfer, documentary, sales, use, stamp, registration and
other such Taxes, and all conveyance fees, recording charges and other fees and
charges (including any penalties and interest) incurred in connection with the
consummation of the transactions contemplated by this Agreement, if any, shall
be paid by the Seller when due, and the Seller will, at its own expense, file
all necessary Tax Returns and other documentation with respect to all such
Taxes, fees and charges, and, if required by applicable law, the Parties will,
and will cause their affiliates to, join in the execution of any such Tax
Returns and other documentation.
15.13 Incorporation of Exhibits
and Schedules. The exhibits and schedules identified in this
Agreement are incorporated herein by this reference and made a part
hereof.
15.14 Construction. All
references herein to the masculine, neuter or singular shall be construed to
include the masculine, feminine, neuter or plural, where
applicable. Whenever the words “include”, “includes” or “including”
are used in this Agreement, they shall be deemed to be followed by the words
“without limitation.” The language in all parts of this Agreement
shall in all cases be construed as a whole according to its fair meaning and not
strictly for or against either party. The Section headings contained
in the Agreement are for reference purposes only and will not affect the meaning
or interpretation of this Agreement in any way. A reference to a
numbered Section in this Agreement refers to a Section in this
Agreement.
15.15 Submission to
Jurisdiction. Each of the Buyer and Seller submits to the
jurisdiction of any state or federal court sitting in Arizona, in any action or
proceeding arising out of or relating to this Agreement and agrees that all
claims in respect of the action or proceeding may be heard and determined in any
such court. Each party also 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. Any party may make service on the other party by sending or
delivering a copy of the process to the party to be served at the address and in
the manner provided for the giving of notices in Section 15.8
above. Nothing in this Section 15.15, however, shall affect the
right of any party to serve legal process in any other manner permitted by
law. Each party agrees that a final judgment in any action or
proceeding so brought shall be conclusive and may be enforced by suit on the
judgment or in any other manner provided by law or in equity.
24
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written.
BUYER:
MODAVOX,
INC.
By /S/ Xxxxx X.
Xxx
Xxxxx X.
Xxx, CEO
SELLER:
NEW
AUG, LLC
By
Xxxxxxx
Xxxxxxxx, Managing Member
NEWCO:
NEW
AUG, LLC (AS OWNER OF NEWCO)
By
Xxxxxxx
Xxxxxxxx, Managing Member
[Signature Page to Stock Purchase
Agreement]
25
EXHIBIT
A
Transferred
and Excluded Assets
EXHIBIT
B
Revenues
of the Business, by Customer
EXHIBIT
C
Working
Capital Schedule
AMENDMENT
TO
PLAN
OF REORGANIZATION
AND
This
Amendment to the Plan of Reorganization and Stock Purchase Agreement entered
into by and among Modavox, Inc. (“Buyer”), a Delaware corporation, New Aug, LLC,
a Delaware limited liability company (“Seller”) and Augme Mobile, Inc. (“Newco”)
as of January 16, 2009 (the “Agreement”), is approved and entered into as of
March 3, 2009 (“Amendment Effective Date”). Capitalized terms used
but not defined herein have the meanings assigned to them in the
Agreement.
Recitals
WHEREAS, Buyer, Seller and Newco
previously entered into the Agreement;
WHEREAS, under the Agreement, Seller
agreed to transfer all of the assets and operations of the Business and
substantially all of the assets of Seller to Newco, and Buyer agreed to acquire,
at Closing, a majority interest in Newco totalling 60% of the stock of
Newco;
WHEREAS, under the Agreement, the
Purchase Price to be paid by Buyer at Closing includes (but is not limited to)
transferring to Newco one million dollars ($1,000,000) in operating cash
(“Majority Cash”);
WHEREAS, Section 15.10 of the Agreement
(“Amendment & Waivers”) permits the amendment of the Agreement by mutual
written agreement; and
WHEREAS, in order to assist Seller with
certain cash flow needs prior to Closing, Buyer desires to transfer to Seller as
described below twenty five thousand dollars ($25,000) as an advance on the
Majority Cash.
Agreement
The Parties hereto consent and agree as
follows:
1.
|
Section
2.4 of the Agreement (“Purchase Price”) is hereby amended to read, in its
entirety, as follows:
|
2.4 Purchase
Price. The total purchase price (the “Purchase Price”) will
be (i) $1,000,000 in operating cash (”Majority Cash”) transferred by Buyer to
Augme, with respect to twenty five thousand dollars ($25,000) (the “Majority
Cash First Installment”) and to Newco,
with respect to nine hundred and seventy five thousand dollars ($975,000) (the
“Majority Cash Second Installment”) as described in Section 2.4(a) below; (ii)
issuance to Seller of shares of Buyer’s common stock (MDVX: Modavox “Commons
Stock”) as defined in Section 2.4(c) below (“Majority Equity”); and
(iii) grant to Newco of an exclusive, fully paid, perpetual and irrevocable
license to use, including the rights to sublicense, Modavox Patent No. 6,594,691
and Patent No. 7,269,636 (the “Modavox Patents”) with respect to the business of
providing mobile interactive services, including SMS, MMS, targeted mobile ad
delivery and 2D/QR barcode publishing and management directly to Internet and
Mobile Internet Destinations (the “Modavox Licenses”).
a. The
Majority Cash will be transferred to Augme and Newco as follows: (i) with
respect to the Majority Cash First Installment, to the account of Augme on or
before March 8, 2009, to be used for Augme operational requirements prior to the
Closing Date; and (ii) with respect to the Majority Cash Second Installment, to
the account of Newco on the Closing Date, which shall be no later than March 31,
2009, to be used for Newco operational requirements and the continued
development of Newco business strategies, sales infrastructure, product
development, and product deployment.
b. Upon
the Parties’ execution of this Agreement, which date shall not be later than
January 16, 2009 (the “Agreement Date”), Seller/Newco will be granted an
exclusive license to use, including the right to sublicense the Modavox Patents
with respect to the business of providing mobile interactive services, including
SMS, MMS, targeted mobile ad delivery and 2D/QR barcode publishing and
management directly to Internet and Mobile Internet destinations.
c. The
share price of Modavox common stock used to calculate the number of shares
required for the Majority Equity (“Acquisition Share Price”) will be the lesser
of (i) $1.50 per share, or (ii) the closing price of Modavox stock on the
Agreement Date, or (iii) the average closing price of Modavox stock during the
30-day period preceding Agreement Date. The number of Modavox shares included in
the Majority Equity will be $2,900,000 divided by the Acquisition Share Price.
(For example, if Acquisition Share Price remains $1.50 per share, the number of
shares that comprise the Majority Equity would be 1,933,333
shares.)
d.
Modavox has or will issue to Seller Modavox Common Stock shares, as evidenced by
two (2) Common Stock Certificates, as follows: (i) a 200,000 shares certificate
(the “First Certificate”); and (ii) a shares certificate for the number of
shares necessary to reach the Majority Equity when combined with the First
Certificate (e.g., 1,733,333 shares if the Acquisition Share Price remains $1.50
per share) (the “Second Certificate”). The First Certificate was issued to
Seller following the Parties’ execution of a Letter of Intent to enter into the
transaction contemplated hereunder. Upon the Agreement Date, a
lawyers trust (or lawyers trusts) will be established (i) to hold the Second
Certificate until the Closing Date, at which time the Second Certificate will be
delivered to Seller; and (ii) to hold a share certificate representing 60% of
the common stock of Newco until the Closing Date, at which time such share
certificate will be delivered to Modavox.
2
e. As
commitment to the success of Newco, Seller Management (i) will contract to
provide services for a period of at least twelve (12) months after the
Transaction Date; and (ii) will not sell any interest in Newco for a period of
one year after the Closing Date.
f. Except
with respect to Modavox shares evidenced by the First Certificate, all shares of
Modavox common stock transferred under this Agreement will have a restricted
legend limiting resale, and the restrictions will not be lifted for twelve (12)
months after the Closing Date, unless a change in control or acquisition of
Modavox occurs in which case the restriction is void.
g. If for
any reason Modavox is unable by March 31, 2009 (or, as extended by written
agreement of both Parties), to secure appropriate financing (whether by
investment, acquisition and/or settlement with infringing entities in connection
with pending patent and validity litigation) or otherwise fails to provide to
Newco the Majority Cash Second Installment as
described in Section 2.4(a), or, in the event Modavox is acquired on or before
March 31 (or as mutually extended) as described in Section 2.4(i), Modavox fails
to pay the consideration described in Section 2.4(i), then both parties agree
that the purchase described in Section 2.2 (or, if applicable, in Section
2.4(i)) will not occur (and shares of Modavox and Newco held in trust as
described in Section 2.4(d) above will be returned to Modavox and Seller
respectively); provided, however, that the parties further agree
that:
(i)
Seller will retain ownership of the Modavox Common Stock evidenced and conveyed
by the First Certificate;
(ii)
Buyer will receive Seller common stock with a value equal to the Majority Cash
First Installment ($25,000) based on a valuation of Seller at $5,500,000;
and
(iii)
Seller will retain its rights to the Modavox Licenses as described in
Section 2.4(b) provided that Seller pays to Modavox the transaction-based
/“click-through”-based license fees (“Per Transaction License Fees”) described
below related to Seller’s (and Seller’s clients’) use of the Modavox
Patents. Such Per Transaction License Fees will be equal to five
percent (5%) of the click-through/transaction fees collected by Seller from
Seller’s clients or end users related to use of the Modavox
Patents. For purposes of this paragraph, a Transaction occurs any
time a consumer accesses content or information through Seller’s mobile
interactive systems and services (or through a Seller sub-licensee) which
information is customized for the consumer due to Seller’s use of the Modavox
Patents.
3
h. At any
time after the Closing Date, if (i) Modavox discontinues its current business
operations, declares bankruptcy or experiences a liquidation event, then Seller
will be granted an option to re-acquire a portion of Majority Interest (“Buy
Back Option”). The Buy Back Option is defined as follows:
1. Seller
will have a 30-day option to re-acquire from Modavox 44.62% of Newco in exchange
for Seller returning to Modavox the number of Modavox shares issued to Seller as
Majority Equity;
2.
Modavox will retain 15.38% ownership interest in Newco, which is consideration
for the Majority Cash as an equity investment in Newco at a pre-money value of
$5,500,000;
3.
Continuation of Newco’s exclusive license to Modavox patents will be subject to
terms defined by Modavox and accepted by Newco; and
4.
Modavox will relinquish its seat on the Newco Board of Directors and lose rights
to the corresponding majority governance Control Provisions but shall gain any
and all rights and privileges available to the next round of Newco equity
investors, anticipated to be Series A Preferred Rights.
i. If
Modavox is acquired on or before the Closing Date, the transactions described
herein (including both the Basic Transaction to purchase 60% of Seller as
described in Section 2 and the Option to buy the remaining 40% of Seller as
described in Section 5) shall accelerate and the Closing Date for purposes of
this Agreement shall mean the day before the date on which Modavox is so
acquired. In such event, (i) the purchase price to be paid on the
Closing Date will be the sum of the consideration described in Section 2.4
(excluding the Majority Cash) and the consideration described in Section 5.2,
and (ii) upon receipt of such consideration, Seller will have sold 100% of Newco
and will not have the management rights described in Section 3 or the buy-back
rights described in Section 2.4(h).
2.
|
Section
15.8 of the Agreement (“Notices”) is amended to replace Seller’s primary
business address with the following new primary business
address:
|
|
New
Aug, LLC
|
|
000
Xxxx 00xx
Xxxxxx
|
|
0xx
Xxxxx
|
|
Xxx
Xxxx, XX 00000
|
3.
|
Except
as set forth above, the Agreement shall remain in full force and effect in
accordance with its terms.
|
4
IN WITNESS WHEREOF, the
parties hereto, intending to be legally bound, have caused this Amendment to
Plan of Reorganization and Stock Purchase Agreement to be executed by their duly
authorized representatives as of the Amendment Effective Date.
BUYER:
MODAVOX,
INC.
By:_____________________________________
Name:___________________________________
Tile:____________________________________
|
SELLER:
NEW
AUG, LLC
By:_____________________________________
Name:___________________________________
Tile:____________________________________
|
NEWCO:
NEW
AUG, LLC (AS OWNER OF NEWCO)
By:_____________________________________
Name:___________________________________
Tile:____________________________________
5
AMENDMENT
NO. 2 TO
PLAN
OF REORGANIZATION
AND
This
Amendment No. 2 to the Plan of Reorganization and Stock Purchase
Agreement entered into by and among Modavox, Inc. (“Buyer”), a Delaware
corporation, New Aug, LLC, a Delaware limited liability company (“Seller”) and
Augme Mobile, Inc. (“Newco”) as of January 16, 2009 (the “Agreement”), is
approved and entered into as of March 31, 2009 (“Amendment Effective
Date”). Capitalized terms used but not defined herein have the
meanings assigned to them in the Agreement.
Recitals
WHEREAS, Buyer, Seller and Newco
previously entered into the Agreement;
WHEREAS, under the Agreement, Seller
agreed to transfer all of the assets and operations of the Business and
substantially all of the assets of Seller to Newco, and Buyer agreed to acquire,
at Closing, a majority interest in Newco totalling 60% of the stock of
Newco;
WHEREAS, under the Agreement, the
Purchase Price to be paid by Buyer at Closing includes (but is not limited to)
transferring to Newco one million dollars ($1,000,000) in operating cash
(“Majority Cash”);
WHEREAS, Section 15.10 of the Agreement
(“Amendment & Waivers”) permits the amendment of the Agreement by mutual
written agreement;
WHEREAS,
in order to assist Seller with certain cash flow needs prior to Closing, which
Closing was required under the Agreement to occur no later than March 31, 2009,
Buyer and Seller previously executed an Amendment to the Plan of Reorganization
and Stock Purchase Agreement, effective as of March 3, 2009, pursuant to which
Buyer transferred to Seller twenty five thousand dollars ($25,000) as an advance
on the Majority Cash (“Amendment No. 1”);
WHEREAS,
the parties have determined that the conditions required to Close the
Transaction, including the Majority Cash requirement, will not be satisfied on
or before the Closing Date (to be no later than March 31, 2009);
and
WHEREAS,
the parties remain interested in pursuing the business purpose of the Agreement
under modified terms that are agreeable to both parties, which terms are
described below.
Agreement
The Parties hereto consent and agree as
follows:
1.
|
Section
2.4 of the Agreement (“Purchase Price”), as previously amended by
Amendment No. 1, is hereby further amended to read, in its entirety, as
follows:
|
2.4 Purchase
Price. The total purchase price (the “Purchase Price”) will
be (i) $1,000,000 in operating cash (”Majority Cash”) transferred by Buyer (or
an escrow account controlled by Buyer), to Augme, with respect to
twenty five thousand dollars ($25,000) per Amendment No. 1 to the Agreement (the
“Majority Cash First Installment”), and two hundred fifty thousand dollars
($250,000) per Amendment No. 2 to the Agreement (the “Majority Cash Second
Installment”), and to Newco, with respect to
seven hundred and twenty five thousand dollars ($725,000) (the “Majority Cash
Third Installment”)
as described in Section 2.4(a) below; (ii) issuance to Seller of shares of
Buyer’s common stock (MDVX: Modavox “Commons Stock”) as defined in Section
2.4(c) below (“Majority Equity”); and (iii) grant to Newco of an
exclusive, fully paid, perpetual and irrevocable license to use, Modavox Patent
No. 6,594,691 and Patent No. 7,269,636 (the “Modavox Patents”) with respect to
the business of providing mobile interactive services, including SMS, MMS,
targeted mobile ad delivery and 2D/QR barcode publishing and management directly
to Internet and Mobile Internet Destinations (the “Modavox
Licenses”).
a. The
Majority Cash will be transferred to Augme and Newco as follows: (i) with
respect to the Majority Cash First Installment, to the account of Augme on or
before March 8, 2009, to be used for Augme operational requirements prior to the
Closing Date; (ii) with respect to the Majority Cash Second Installment, to the
account of Augme on or before April 2, 2009, to be used for Augme operational
requirements for the period commencing April 1, 2009 and ending June 30, 2009;
and (iii) with respect to the Majority Cash Third Installment, to the
account of Newco on the Closing Date, which shall be no later than June 30,
2009, to
be used for Newco operational requirements and the continued development of
Newco business strategies, sales infrastructure, product development, and
product deployment.
b. Upon
the Parties’ execution of this Agreement, which date shall not be later than
January 16, 2009 (the “Agreement Date”), Seller/Newco will be granted an
exclusive license to use, the Modavox Patents with respect to the business of
providing mobile interactive services, including SMS, MMS, targeted mobile ad
delivery and 2D/QR barcode publishing and management directly to Internet and
Mobile Internet destinations.
c. The
share price of Modavox common stock used to calculate the number of shares
required for the Majority Equity (“Acquisition Share Price”) will be the lesser
of (i) $1.50 per share, or (ii) the closing price of Modavox stock on the
Agreement Date, or (iii) the average closing price of Modavox stock during the
30-day period preceding Agreement Date. The number of Modavox shares included in
the Majority Equity will be $2,900,000 divided by the Acquisition Share Price.
(For example, if Acquisition Share Price remains $1.50 per share, the number of
shares that comprise the Majority Equity would be 1,933,333
shares.)
2
d.
Modavox has or will issue to Seller Modavox Common Stock shares, as evidenced by
two (2) Common Stock Certificates, as follows: (i) a 200,000 shares certificate
(the “First Certificate”); and (ii) a shares certificate for the number of
shares necessary to reach the Majority Equity when combined with the First
Certificate (e.g., 1,733,333 shares if the Acquisition Share Price remains $1.50
per share) (the “Second Certificate”). The First Certificate was issued to
Seller following the Parties’ execution of a Letter of Intent to enter into the
transaction contemplated hereunder. Upon the Agreement Date, a
lawyers trust (or lawyers trusts) will be established (i) to hold the Second
Certificate until the Closing Date, at which time the Second Certificate will be
delivered to Seller; and (ii) to hold a share certificate representing 60% of
the common stock of Newco until the Closing Date, at which time such share
certificate will be delivered to Modavox.
e. As
commitment to the success of Newco, Seller Management (i) will contract to
provide services for a period of at least twelve (12) months after the
Transaction Date; and (ii) will not sell any interest in Newco for a period of
one year after the Closing Date.
f. Except
with respect to Modavox shares evidenced by the First Certificate, all shares of
Modavox common stock transferred under this Agreement will have a restricted
legend limiting resale, and the restrictions will not be lifted for twelve (12)
months after the Closing Date, unless a change in control or acquisition of
Modavox occurs in which case the restriction is void.
g. If for
any reason Modavox is unable by June 30, 2009 (or,
as extended by written agreement of both Parties), to secure appropriate
financing (whether by investment, acquisition and/or settlement with infringing
entities in connection with pending patent and validity litigation) or otherwise
fails to provide to Newco the Majority Cash Second Installment as
described in Section 2.4(a), or, in the event Modavox is acquired on or before
June 30, 2009 (or as mutually extended) as described in Section 2.4(i), Modavox
fails to pay the consideration described in Section 2.4(i), then both parties
agree that the purchase described in Section 2.2 (or, if applicable, in Section
2.4(i)) will not occur (and shares of Modavox and Newco held in trust as
described in Section 2.4(d) above will be returned to Modavox and Seller
respectively); provided, however, that the parties further agree
that:
(i)
Seller will retain ownership of the Modavox Common Stock evidenced and conveyed
by the First Certificate;
(ii)
Buyer will receive Seller common stock with a value equal to the Majority Cash
First Installment ($25,000) based on a valuation of Seller at
$5,500,000;
3
(iii)
Buyer will receive Seller common stock with a value equal to the Majority Cash
Second Installment ($250,000) based on a valuation of Seller at
$5,500,000;
(iv)
Seller will retain its rights to the Modavox Licenses as described in Section
2.4(b) provided that Seller pays to Modavox the transaction-based
/“click-through”-based license fees (“Per Transaction License Fees”) described
below related to Seller’s (and Seller’s clients’) use of the Modavox
Patents. Such Per Transaction License Fees will be equal to five
percent (5%) of the click-through/transaction fees collected by Seller from
Seller’s clients or end users related to use of the Modavox
Patents. For purposes of this paragraph, a Transaction occurs any
time a consumer accesses content or information through Seller’s mobile
interactive systems and services (or through a Seller sub-licensee) which
information is customized for the consumer due to Seller’s use of the Modavox
Patents.
h. At any
time after the Closing Date, if (i) Modavox discontinues its current business
operations, declares bankruptcy or experiences a liquidation event, then Seller
will be granted an option to re-acquire a portion of Majority Interest (“Buy
Back Option”). The Buy Back Option is defined as follows:
1. Seller
will have a 30-day option to re-acquire from Modavox 44.62% of Newco in exchange
for Seller returning to Modavox the number of Modavox shares issued to Seller as
Majority Equity;
2.
Modavox will retain 15.38% ownership interest in Newco, which is consideration
for the Majority Cash as an equity investment in Newco at a pre-money value of
$5,500,000;
3.
Continuation of Newco’s exclusive license to Modavox patents will be subject to
terms defined by Modavox and accepted by Newco; and
4.
Modavox will relinquish its seat on the Newco Board of Directors and lose rights
to the corresponding majority governance Control Provisions but shall gain any
and all rights and privileges available to the next round of Newco equity
investors, anticipated to be Series A Preferred Rights.
i. If
Modavox is acquired on or before the Closing Date, the transactions described
herein (including both the Basic Transaction to purchase 60% of Seller as
described in Section 2 and the Option to buy the remaining 40% of Seller as
described in Section 5) shall accelerate and the Closing Date for purposes of
this Agreement shall mean the day before the date on which Modavox is so
acquired. In such event, (i) the purchase price to be paid on the
Closing Date will be the sum of the consideration described in Section 2.4
(excluding the Majority Cash) and the consideration described in Section 5.2,
and (ii) upon receipt of such consideration, Seller will have sold 100% of Newco
and will not have the management rights described in Section 3 or the buy-back
rights described in Section 2.4(h).
4
2.
|
Section
2.6 of the Agreement (“Closing”) is hereby amended to read, in its
entirety, as follows:
|
2.6 Closing. The
closing of the transactions contemplated by this Agreement (the “Closing”) shall
take place on the business day following the satisfaction or waiver of all
conditions to the obligations of the parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing itself) or such other date as the
parties may mutually determine (the “Closing Date”); provided, however, that the
Closing Date shall be no later than June 30, 2009.
3.
|
Except
as set forth above, the Agreement shall remain in full force and effect in
accordance with its terms.
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
5
IN WITNESS WHEREOF, the
parties hereto, intending to be legally bound, have caused this Amendment to
Plan of Reorganization and Stock Purchase Agreement to be executed by their duly
authorized representatives as of the Amendment Effective Date.
BUYER:
MODAVOX,
INC.
By:___________________________________
Name:_________________________________
Tile:__________________________________
|
SELLER:
NEW
AUG, LLC
By:___________________________________
Name:_________________________________
Tile:__________________________________
|
NEWCO:
NEW
AUG, LLC (AS OWNER OF NEWCO)
By:___________________________________
Name:_________________________________
Tile:__________________________________
6
AMENDMENT
NO. 3 TO
PLAN
OF REORGANIZATION
AND
STOCK
PURCHASE AGREEMENT
This
Amendment to the Plan of Reorganization and Stock Purchase Agreement entered
into by and among Modavox, Inc. (“Buyer”), a Delaware corporation, New Aug, LLC,
a Delaware limited liability company (“Seller”) and Augme Mobile, Inc. (“Newco”)
as of January 16, 2009, and as previously amended as of March 3, 2009
(“Amendment No. 1”) and March 31, 2009 (“Amendment No. 2”) (the “Agreement”), is
approved and entered into as of June 4, 2009 (“Amendment Effective
Date”). Capitalized terms used but not defined herein have the
meanings assigned to them in the Agreement.
Recitals
WHEREAS, Buyer, Seller and Newco
previously entered into the Agreement;
WHEREAS, under the Agreement, Seller
agreed to transfer all of the assets and operations of the Business and
substantially all of the assets of Seller to Newco, and Buyer agreed to acquire,
at Closing, a majority interest in Newco totalling 60% of the stock of
Newco;
WHEREAS, under the Agreement, the
Purchase Price to be paid by Buyer at Closing includes (but is not limited to)
transferring to Newco one million dollars ($1,000,000) in operating cash
(“Majority Cash”);
WHEREAS, Section 15.10 of the Agreement
(“Amendment & Waivers”) permits the amendment of the Agreement by mutual
written agreement; and
WHEREAS, in order to assist Seller with
certain cash flow needs prior to Closing, Buyer desires to transfer to Seller as
described below fifty thousand dollars ($50,000) as an advance on the Majority
Cash.
Agreement
The Parties hereto consent and agree as
follows:
1.
|
Section
2.4 of the Agreement (“Purchase Price”) is hereby amended to read, in its
entirety, as follows:
|
2.4 Purchase
Price. The total purchase price (the “Purchase Price”) will
be (i) $1,000,000 in operating cash (”Majority Cash”) transferred by Buyer to
Augme, with respect to twenty five thousand dollars ($25,000) per Amendment No.
1 to the Agreement (the “Majority Cash First Installment”), two hundred and
fifty thousand dollars ($250,000) per Amendment No. 2 to the Agreement (the
“Majority Cash Second Installment”), and fifty thousand dollars ($50,000) per
Amendment No. 3 to the Agreement (the “Majority Cash Third Installment”), and
to Newco,
with respect to six hundred and seventy five thousand dollars ($675,000) (the
“Majority Cash Fourth Installment”) as described in Section 2.4(a) below; (ii)
issuance to Seller of shares of Buyer’s common stock (MDVX: Modavox “Commons
Stock”) as defined in Section 2.4(c) below (“Majority Equity”); and
(iii) grant to Newco of an exclusive, fully paid, perpetual and irrevocable
license to use, including the rights to sublicense, Modavox Patent No. 6,594,691
and Patent No. 7,269,636 (the “Modavox Patents”) with respect to the business of
providing mobile interactive services, including SMS, MMS, targeted mobile ad
delivery and 2D/QR barcode publishing and management directly to Internet and
Mobile Internet Destinations (the “Modavox Licenses”).
a. The
Majority Cash will be transferred to Augme and Newco as follows: (i) with
respect to the Majority Cash First Installment, to the account of Augme on or
before March 8, 2009, to be used for Augme operational requirements prior to the
Closing Date; (ii) with respect to the Majority Cash Second Installment, to the
account of Augme on or before April 2, 2009, to be used for Augme operational
requirements for the period commencing April 1, 2009, and ending June 30, 2009,
(iii) with respect to the Majority Cash Third Installment, to the
account of Augme on or before June 4, 2009, to be used for Augme operational
requirements for the period commencing June 4, 2009, and ending June 30, 2009,
and (ii) with respect to the Majority Cash Fourth Installment, to the account of
Newco on the Closing Date, which shall be no later than June 30, 2009, to be
used for Newco operational requirements and the continued development of Newco
business strategies, sales infrastructure, product development, and product
deployment.
b. Upon
the Parties’ execution of this Agreement, which date shall not be later than
January 16, 2009 (the “Agreement Date”), Seller/Newco will be granted an
exclusive license to use, including the right to sublicense the Modavox Patents
with respect to the business of providing mobile interactive services, including
SMS, MMS, targeted mobile ad delivery and 2D/QR barcode publishing and
management directly to Internet and Mobile Internet destinations.
c. The
share price of Modavox common stock used to calculate the number of shares
required for the Majority Equity (“Acquisition Share Price”) will be the lesser
of (i) $1.50 per share, or (ii) the closing price of Modavox stock on the
Agreement Date, or (iii) the average closing price of Modavox stock during the
30-day period preceding Agreement Date. The number of Modavox shares included in
the Majority Equity will be $2,900,000 divided by the Acquisition Share Price.
(For example, if Acquisition Share Price remains $1.50 per share, the number of
shares that comprise the Majority Equity would be 1,933,333
shares.)
d.
Modavox has or will issue to Seller Modavox Common Stock shares, as evidenced by
two (2) Common Stock Certificates, as follows: (i) a 200,000 shares certificate
(the “First Certificate”); and (ii) a shares certificate for the number of
shares necessary to reach the Majority Equity when combined with the First
Certificate (e.g., 1,733,333 shares if the Acquisition Share Price remains $1.50
per share) (the “Second Certificate”). The First Certificate was issued to
Seller following the Parties’ execution of a Letter of Intent to enter into the
transaction contemplated hereunder. Upon the Agreement Date, a
lawyers trust (or lawyers trusts) will be established (i) to hold the Second
Certificate until the Closing Date, at which time the Second Certificate will be
delivered to Seller; and (ii) to hold a share certificate representing 60% of
the common stock of Newco until the Closing Date, at which time such share
certificate will be delivered to Modavox.
2
e. As
commitment to the success of Newco, Seller Management (i) will contract to
provide services for a period of at least twelve (12) months after the
Transaction Date; and (ii) will not sell any interest in Newco for a period of
one year after the Closing Date.
f. Except
with respect to Modavox shares evidenced by the First Certificate, all shares of
Modavox common stock transferred under this Agreement will have a restricted
legend limiting resale, and the restrictions will not be lifted for twelve (12)
months after the Closing Date, unless a change in control or acquisition of
Modavox occurs in which case the restriction is void.
g. If for
any reason Modavox is unable by June 30, 2009 (or, as extended by written
agreement of both Parties), to secure appropriate financing (whether by
investment, acquisition and/or settlement with infringing entities in connection
with pending patent and validity litigation) or otherwise fails to provide to
Newco the Majority Cash Fourth Installment as
described in Section 2.4(a), or, in the event Modavox is acquired on or before
March 31 (or as mutually extended) as described in Section 2.4(i), Modavox fails
to pay the consideration described in Section 2.4(i), then both parties agree
that the purchase described in Section 2.2 (or, if applicable, in Section
2.4(i)) will not occur (and shares of Modavox and Newco held in trust as
described in Section 2.4(d) above will be returned to Modavox and Seller
respectively); provided, however, that the parties further agree
that:
(i)
Seller will retain ownership of the Modavox Common Stock evidenced and conveyed
by the First Certificate;
(ii)
Buyer will receive Seller common stock with a value equal to the Majority Cash
First Installment ($25,000) based on a “pre-money” valuation of Seller at
$5,500,000;
(iii)
Buyer will receive Seller common stock with a value equal to the Majority Cash
Second Installment ($250,000) based on a “pre-money” valuation of Seller at
$5,500,000;
3
(iv)
Buyer will receive Seller common stock with a value equal to the Majority Cash
Third Installment ($50,000) based on a “pre-money” valuation of Seller at
$5,500,000; and
(v)
Seller will retain its rights to the Modavox Licenses as described in
Section 2.4(b) provided that Seller pays to Modavox the transaction-based
/“click-through”-based license fees (“Per Transaction License Fees”) described
below related to Seller’s (and Seller’s clients’) use of the Modavox
Patents. Such Per Transaction License Fees will be equal to five
percent (5%) of the click-through/transaction fees collected by Seller from
Seller’s clients or end users related to use of the Modavox
Patents. For purposes of this paragraph, a Transaction occurs any
time a consumer accesses content or information through Seller’s mobile
interactive systems and services (or through a Seller sub-licensee) which
information is customized for the consumer due to Seller’s use of the Modavox
Patents.
h. At any
time after the Closing Date, if (i) Modavox discontinues its current business
operations, declares bankruptcy or experiences a liquidation event, then Seller
will be granted an option to re-acquire a portion of Majority Interest (“Buy
Back Option”). The Buy Back Option is defined as follows:
1. Seller
will have a 30-day option to re-acquire from Modavox 44.62% of Newco in exchange
for Seller returning to Modavox the number of Modavox shares issued to Seller as
Majority Equity;
2.
Modavox will retain 15.38% ownership interest in Newco, which is consideration
for the Majority Cash as an equity investment in Newco at a pre-money value of
$5,500,000;
3.
Continuation of Newco’s exclusive license to Modavox patents will be subject to
terms defined by Modavox and accepted by Newco; and
4.
Modavox will relinquish its seat on the Newco Board of Directors and lose rights
to the corresponding majority governance Control Provisions but shall gain any
and all rights and privileges available to the next round of Newco equity
investors, anticipated to be Series A Preferred Rights.
i. If
Modavox is acquired on or before the Closing Date, the transactions described
herein (including both the Basic Transaction to purchase 60% of Seller as
described in Section 2 and the Option to buy the remaining 40% of Seller as
described in Section 5) shall accelerate and the Closing Date for purposes of
this Agreement shall mean the day before the date on which Modavox is so
acquired. In such event, (i) the purchase price to be paid on the
Closing Date will be the sum of the consideration described in Section 2.4
(excluding the Majority Cash) and the consideration described in Section 5.2,
and (ii) upon receipt of such consideration, Seller will have sold 100% of Newco
and will not have the management rights described in Section 3 or the buy-back
rights described in Section 2.4(h).
4
2.
|
Except
as set forth above, the Agreement shall remain in full force and effect in
accordance with its terms.
|
IN WITNESS WHEREOF, the
parties hereto, intending to be legally bound, have caused this Amendment to
Plan of Reorganization and Stock Purchase Agreement to be executed by their duly
authorized representatives as of the Amendment Effective Date.
BUYER:
MODAVOX,
INC.
By:_________________________________________
Name:_______________________________________
Tile:________________________________________
|
SELLER:
NEW
AUG, LLC
By:_________________________________________
Name:_______________________________________
Tile:________________________________________
|
NEWCO:
NEW
AUG, LLC (AS OWNER OF NEWCO)
By:_________________________________________
Name:_______________________________________
Tile:________________________________________
5
AMENDMENT
NO. 4 TO
PLAN
OF REORGANIZATION
AND
STOCK
PURCHASE AGREEMENT
This
Amendment No. 4 to the Plan of Reorganization and Stock Purchase Agreement
entered into by and among Modavox, Inc. (“Buyer”), a Delaware corporation, New
Aug, LLC, a Delaware limited liability company (“Seller”) and Augme Mobile, Inc.
(“Newco”) as of January 16, 2009 (the “Agreement”), is approved and entered into
as of June 30, 2009 (“Amendment Effective Date”). Capitalized terms
used but not defined herein have the meanings assigned to them in the
Agreement.
Recitals
WHEREAS, Buyer, Seller and Newco
previously entered into the Agreement;
WHEREAS, Section 15.10 of the Agreement
(“Amendment & Waivers”) permits the amendment of the Agreement by mutual
written agreement; and
WHEREAS, in order to assist Seller and
Buyer in satisfying their obligations prior to Closing, the Parties desire to
amend/extend the Closing Date by ten (10) days as defined below.
Agreement
The Parties hereto consent and agree as
follows:
1. Section
2.6 (“Closing Date”) is hereby amended to read in its entirety as
follows:
2.6 Closing. The
closing of the transactions contemplated by this Agreement (the “Closing”) shall
take place on the business day following the satisfaction or waiver of all
conditions to the obligations of the parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing itself) or such other date as the
parties may mutually determine (the “Closing Date”); provided, however, that the
Closing Date shall be no later than July 10, 2009.
2.
|
Except
as set forth above, the Agreement shall remain in full force and effect in
accordance with its terms.
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the
parties hereto, intending to be legally bound, have caused this Amendment to
Plan of Reorganization and Stock Purchase Agreement to be executed by their duly
authorized representatives as of the Amendment Effective Date.
BUYER:
MODAVOX,
INC.
By:_______________________________
Name:_____________________________
Tile:______________________________
|
SELLER:
NEW
AUG, LLC
By:_______________________________
Name:_____________________________
Tile:______________________________
|
NEWCO:
NEW
AUG, LLC (AS OWNER OF NEWCO)
By:_______________________________
Name:_____________________________
Tile:______________________________
2