EXHIBIT 10.1
This REORGANIZATION AND STOCK PURCHASE AGREEMENT dated as of January 29,
2004 (this "Agreement") is by and by and among nReach, Inc., a Colorado
corporation with an address at 0000 Xxxxxxxxxx Xxxxxx Xxxxx 000, Xxxxxx, XX
00000 ("nReach") and SmartServ Online, Inc., a Delaware corporation with an
address at 0000 Xxxxxx Xxxx, Xxxxx 000, Xxxxxxxx Xxxxxxx, XX 00000 ("SmartServ"
or the "Company") and the shareholders of nReach listed on Schedule A hereto
(the "nReach Shareholders"), including the address of each such shareholder.
RECITALS
A. WHEREAS, SmartServ desires to acquire directly or indirectly 100% of the
equity of nReach;
B. WHEREAS, the nReach Shareholders desire to acquire equity in SmartServ in
connection with the proposed acquisition;
C. WHEREAS, the parties hereto intend that the transaction contemplated hereby
shall be completed as a tax-free exchange of stock interests for purposes of
Federal tax laws.
NOW, THEREFORE, in consideration of the respective representations and
warranties hereinafter set forth and of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:
ARTICLE I
CLOSING
1.1 Closing Conditions of nReach. As conditions to the Closing (as defined
below) as set forth herein, SmartServ shall undertake the following actions:
(a) The Board of Directors of SmartServ shall duly approve and deliver to
nReach resolutions with respect to approving the transactions set forth herein.
(b) Subject to adjustment as provided for herein, the purchase price to be
paid to the nReach Shareholders for their common stock of nReach shall be equal
to 500,000 shares (the "SmartServ Shares") of common stock, par value $.01 per
share, of the Company ("Common Stock") (the "Purchase Price"). The Purchase
Price shall be paid to the nReach Shareholders by delivery of the SmartServ
Shares at the Closing in the percentages set forth opposite such nReach
Shareholder's name on Schedule A annexed hereto (the "Pro Rata Percentage").
(c) From the date hereof until the Closing Date, there shall not have been
any material adverse change in the business of SmartServ, including a decrease
in the closing price of the Common Stock to an amount less than $1.00 per share
(subject to adjustment for forward or reverse stock splits, recapitalization and
the like), other than changes in the ordinary course of business or due to
general economic, industry or political conditions.
1.2 Closing Conditions of Company. As conditions to the Closing as set
forth herein,
nReach shall undertake the following actions:
(a) The Board of Directors of nReach shall execute and deliver to SmartServ
resolutions unanimously approving the transactions set forth herein.
(b) The nReach Shareholders shall execute and deliver to SmartServ
resolutions approving the transactions contemplated hereby.
(c) The shareholders of nReach shall deliver to SmartServ at Closing (i)
certificates representing 1,200,665 shares of common and preferred stock of
nReach, duly endorsed for transfer, representing 100% of the issued and
outstanding fully-diluted equity of nReach, in the individual amounts set forth
on Schedule A annexed hereto (the "nReach Shares") and (ii) an instrument, in
the form annexed hereto as Exhibit A, including a representation that the
SmartServ Shares being acquired as a result of the transactions contemplated by
this Agreement are being acquired for investment purposes only and not with a
view to, or sale in connection with, any distribution within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). SmartServ understands
that no nReach Shareholder is an "Accredited Investor" as such term is defined
in the Securities Act.
(d) All third party consents to the transactions contemplated herein
required to be obtained by nReach shall have been obtained.
(e) Upon execution hereof, SmartServ shall prepare and deliver such
business and financial information and financial statements to the nReach
Shareholders as may be required to comply with all applicable federal and state
securities laws, rules and regulations.
1.3 Additional Conditions to Closing and Other Covenants.
The parties' obligation to close the transactions set forth herein will be
subject to additional specified conditions precedent as follows:
(a) The representations and warranties of SmartServ as set forth in Article
3 herein shall remain accurate as of the Closing Date (as defined below).
(b) The representations and warranties of nReach and the nReach
Shareholders as set forth in Article 2 herein shall remain accurate as of the
Closing Date.
(c) All the documents necessary to be filed with local, state and federal
authorities (including the SEC) by SmartServ, are prepared and appropriately
filed with such authorities by SmartServ and all approvals required from such
authorities are granted.
(d) Upon execution hereof and up through the Closing, nReach shall
cooperate with SmartServ, including the preparation and delivery to SmartServ
and its professional advisors of all business and financial information, and
financial statements currently in nReach's possession which
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SmartServ requires to be included in filings with the US Securities and Exchange
Commission ("SEC"). SmartServ agrees that nReach may incur and pay immediately
after the Closing up to $25,000 (the "Fee Cap") in the aggregate legal,
accounting and other fees and expenses associated with the transactions
contemplated hereby. All legal, accounting and other expenses and fees of nReach
and the nReach Shareholders in excess of the Fee Cap shall be paid by the nReach
Shareholders. Such costs and expenses up to the Fee Cap shall be included in
nReach's operating budget for fiscal year 2004 which budget and fees shall be
provided to nReach at and after the Closing.
(e) SmartServ shall have received an opinion of counsel to nReach in form
and substance satisfactory to SmartServ and its counsel with regard to the
transaction and other matters contemplated herein.
(f) None of the properties or assets of nReach shall have been sold or
otherwise disposed of other than in the ordinary course of business from the
date hereof through the Closing Date, except with the written consent of
SmartServ. nReach shall not have suffered a loss on account of fire, flood,
accident or other calamity of such a character as to interfere materially with
the continuous operation of its business or materially affect adversely its
condition, financial or otherwise (each a "Material Adverse Event"). Except as
disclosed in this Agreement or in the schedules annexed hereto, no material
adverse change in the aggregate shall have occurred in the financial condition,
business, properties, assets, liabilities, results of operations or prospects of
nReach since the date of this Agreement.
(g) Between the date of this Agreement and the Closing Date, nReach will
afford SmartServ and its authorized representatives reasonable access to all of
their respective sites, properties, books and records during normal business
hours and will furnish such additional financial and operating data and other
information as to nReach's business and properties as may from time to time be
reasonably requested. nReach will cooperate in the preparation of any documents
or other material which may be reasonably required in connection with any
documents or materials required by this Agreement or otherwise necessary to
effect the Closing. All documents and/or materials provided by nReach to
SmartServ prior to, in contemplation of or pursuant to this Agreement is
Confidential Information as described in Article IV below.
(h) nReach shall not, nor shall any agent, officer, director, trustee or
any representative of nReach, during the period commencing on the date of this
Agreement and ending with the earlier to occur of the Closing Date or the
termination of this Agreement in accordance with its terms, directly or
indirectly, (i) solicit or initiate the submission of proposals or offers from
any person for, (ii) participate in any discussions pertaining to, or (iii)
furnish any information to any person other than the other party or their
respective authorized agents relating to, any acquisition or purchase of all or
a material amount of the assets of, or any equity interest in nReach or a
consolidation or business combination of or with nReach.
(i) nReach shall, and shall cause each of its subsidiaries, if any, to,
terminate any stockholders agreements, voting agreements, voting trusts,
options, warrants and employment
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agreements with any employee on or prior to the Closing Date. Such terminations
shall be delivered at the Closing.
(j) As and when requested by SmartServ, or by any of its successors or
assigns, nReach and the nReach Shareholders shall execute and deliver, or cause
to be executed and delivered, all such deeds and instruments and will take or
cause to be taken all such further action as SmartServ may deem necessary or
desirable in order to vest in and confirm to SmartServ title to and possession
of the property acquired by SmartServ by reason or as a result of the
transactions contemplated hereby, and otherwise to carry out the intent and
purposes hereof, and the officers, directors of SmartServ are fully authorized
in the name of nReach or otherwise to take any and all such action.
(k) The nReach Shareholders shall have "piggy-back" registration rights
entitling the holders thereof to have the SmartServ Shares issuable hereunder to
be included in the registration statement filed by SmartServ in connection with
the Financing (as defined below) on the same terms and conditions as are granted
to the investors in the Financing.
(l) At the Closing, each nReach Shareholder shall execute and deliver a
lock-up letter with respect to the SmartServ Shares issued hereunder in the form
annexed hereto as Exhibit B.
(m) At the Closing, Xxxx Xxxxxxx ("Xxxxxxx") and SmartServ shall each have
executed and delivered Xxxxxxx'x employment agreement with SmartServ, in form
and substance satisfactory to each of SmartServ and Xxxxxxx; and SmartServ shall
have entered into severance agreements with each of Xxxxx Xxxxxxx, Xxxxx Xxxxxxx
and Xxxxx Xxxxxxx providing for three months severance pay in the event their
employment with nReach is terminated without cause.
(n) SmartServ shall be satisfied with its due diligence review of nReach.
(o) SmartServ shall have closed upon a private offering of its securities
and received gross proceeds of at least $2,500,000 (the "Financing").
(p) SmartServ agrees to contribute to nReach at and after the Closing (as
part of its 2004 operating budget) an amount up to $25,000 (the "Fee Cap") in
the aggregate for nReach's and the nReach Shareholders' legal and auditor and
other fees and expenses associated with the transactions contemplated hereby.
All legal, accounting and other expenses and fees of nReach and the nReach
Shareholders in excess of the Fee Cap shall be paid by the nReach Shareholders.
(q) SmartServ hereby agrees to extend the maturity date of the promissory
note of nReach dated November, 2003, in the original principal amount of $15,000
until February 29, 2004 (the "nReach Note"). At the Closing, SmartServ also
agrees to pay nReach, through the cancellation of such nReach Note, for
marketing and consulting services rendered prior to the Closing.
(r) nReach and each nReach Shareholder, together with their respective
affiliates, successors and assigns, hereby represent, warrant and agree,
severally and not jointly, that they have not and will not enter into any short
sales of SmartServ's Common Stock from the period
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commencing on the date hereof and ending on September 30, 2004.
(s) The parties acknowledge that the schedules of nReach to this Agreement
have not been prepared or are incomplete as of the date hereof (such unprepared
or incomplete schedules being the "nReach Incomplete Schedules"). nReach shall
deliver to SmartServ and its counsel for their review a complete and accurate
version of the nReach's Incomplete Schedules (as so revised, the "Final Proposed
Schedules") not later than 10 business days after the date of this Agreement.
nReach shall also provide SmartServ with copies of any supporting documents and
such access to those officers and other employees of nReach and other
representatives as may be reasonably requested by SmartServ and its legal
counsel in connection with their review of the Final Proposed Schedules.
Notwithstanding anything herein to the contrary, SmartServ shall have the right
to terminate this Agreement by written notice to nReach in the event that
SmartServ, in its sole discretion, is not satisfied with the Final Proposed
Schedules. Not later than 10 business days after the Final Proposed Schedules,
certified by an officer of nReach, and all such supporting documents and access
shall have been provided to and acknowledged by SmartServ in writing, SmartServ
shall either (i) advise nReach that the Final Proposed Schedules are acceptable
to SmartServ, whereupon the Final Proposed Schedules shall become the schedules
hereto, or (ii) advise nReach that it has determined to terminate this Agreement
pursuant to the provisions of this Section 1.3(s), provided, however, that if
SmartServ does not respond within the aforementioned 10 business day period,
then SmartServ shall be deemed to have accepted the Final Proposed Schedules.
1.4 At the Closing.
(a) At the Closing, SmartServ shall issue the SmartServ Shares to the
nReach Shareholders in accordance with their Pro Rata Percentages.
(b) At the Closing, all equity securities of nReach, duly endorsed for
transfer, and the executed investor representation letter for each nReach
Shareholder in the form annexed hereto as Exhibit A shall be delivered to
SmartServ.
(c) At the Closing, SmartServ and nReach each shall be in compliance with
its representations, warranties and covenants contained herein in all material
respects, and each shall receive from the other certificates to such effect from
the President of such party as of the Closing Date, except with respect to
nReach, as set forth in a schedule of exceptions attached to such certificate
and acceptable to SmartServ.
(d) At the Closing, SmartServ shall have received (i) certificates, dated
the Closing Date and signed by the secretary of nReach, certifying the truth and
correctness of attached copy of nReach's articles of incorporation (including
amendments thereto) and such other matters as may reasonably be requested by
SmartServ (including certification of the identity of the names and titles and
the signatures of the officers of nReach individually authorized to execute and
deliver this Agreement and other documents to be executed and delivered by the
nReach in connection therewith); and by-laws (including amendments thereto), and
(ii) a certificate of good standing for nReach in the State of Colorado.
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(e) At the Closing, the nReach Shareholders shall have received
certificates, dated the Closing Date and signed by the secretary of SmartServ,
certifying the truth and correctness of attached copy of SmartServ's certificate
of incorporation (including amendments thereto) and such other matters as may
reasonably be requested by the nReach Shareholders (including certification of
the identity of the names and titles and the signatures of the officers of
SmartServ individually authorized to execute and deliver this Agreement and
other documents to be executed and delivered by the SmartServ officers in
connection therewith); and by-laws (including amendments thereto).
(e) At the Closing, evidence of all applicable filings and regulatory
approvals required to be made or obtained by the parties shall be delivered.
(f) There shall have been full compliance with the applicable securities or
"blue sky" laws and regulations of any state or other governmental body having
jurisdiction over the transactions contemplated hereby
(g) In addition to the documents expressly required herein, at the Closing
each party hereto shall deliver such further instruments and take such further
action as may reasonably be requested by any other party hereto in order to
carry out the intent and purposes of this Agreement.
1.5 Timing of Closing. The consummation of the transactions set forth
herein (the "Closing") shall occur upon the satisfaction of the conditions set
forth in this Agreement. The date of Closing (the "Closing Date") shall occur on
or before February 29, 2004 (the "Outside Closing Date").
1.6 Post-Closing Adjustments to the Purchase Price.
(a) Advance Earnout.
(i) In the event that on June 1, 2004, the value of the original five
hundred thousand (500,000) SmartServ Shares issued hereunder is less than
$900,000 (i.e. five hundred thousand (500,000) multiplied by $1.80)
(hereinafter, the "Threshold Value"), SmartServ shall issue additional
shares of Common Stock to the nReach Shareholders in accordance with this
Section 1.6(a) (such shares, the "Advance Earnout Shares").
(ii) If the average of the closing sale price of the Common Stock on
the five trading days immediately prior to June 1, 2004 (the "Closing
Price") is less than $1.80 per share (in each case, subject to adjustment
in connection with any forward or reverse stock split, stock dividend,
merger, reorganization or similar event), then SmartServ shall issue
Advance Earnout Shares to the nReach Shareholders such that on June 1, 2004
the SmartServ Shares together with such Advance Earnout Shares multiplied
by $1.80 equals the Threshold Value. By way of an example, in the event
that the Closing Price equals $1.50, one hundred thousand (100,000) Advance
Earnout Shares would be issued to the nReach Shareholders on a pro-rata
basis (the 500,000 SmartServ Shares x $1.50= $750,000 plus the
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100,000 Advance Earnout Shares x $1.50= $150,000, for an aggregate value of
$900,000).
(iii) In no event will the amount of Advance Earnout Shares to be
issued be more than 229,167.
(iv) The Advance Earnout Shares issuable to the nReach Shareholders,
if any, shall be issued to such shareholders in accordance with their Pro
Rata Percentages on or before July 15, 2004. The Advance Earnout Shares to
be issued pursuant to this Section 1.6(a), if any, shall be deducted from
the Earnout Shares (as defined below), if any, to be issued pursuant to
Section 1.6(b).
(b) Earnout. In addition to the SmartServ Shares to be delivered at the
Closing, the nReach Shareholders may receive additional shares of Common Stock
(the "Earnout Shares") in accordance with the terms of this paragraph. The
number of Earnout Shares which may be issuable to the nReach Shareholders
pursuant to the Earnout shall be determined based on the gross revenue of
SmartServ (the "SmartServ Revenue") during the first five full fiscal quarters
following the Closing Date (the "Earnout Period"). SmartServ shall issue to the
nReach Shareholders (on a pro-rata basis in their Pro Rata Percentages) one
share of Common Stock for every one dollar of SmartServ Revenue in excess of
$7,200,000 (the "Earnout Trigger") during the Earnout Period. In the event that
SmartServ does not consummate its contemplated acquisition of Mobile Airwaves,
Inc. by March 31, 2004, the Earnout Trigger shall be reduced by $4,500,000 to
$2,700,000. The maximum number of Earnout Shares issuable pursuant to the
Earnout shall be 916,667 less any Advance Earnout Shares issued pursuant to
Section 1.6(a). The Earnout Shares issuable to the nReach Shareholders, if any,
shall be issued to such shareholders in accordance with their Pro Rata
Percentages on or before sixty days after the last day of the fifth full fiscal
quarter following the Closing Date.
(c) If at any time following the issuance of the Earnout Shares or Advance
Earnout Shares, if any, the Company shall determine to prepare and file with the
SEC a registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with the stock option or other employee
benefit plans, then the Company shall send to each such nReach Shareholder that
is issued Earnout Shares or Advance Earnout Shares, as applicable, a written
notice of such determination and, if within fifteen days after the date of such
notice, any such nReach Shareholder shall so request in writing, the Company
shall include in such registration statement all or any part of the Earnout
Shares or Advance Earnout Shares issuable hereunder to such nReach Shareholder
requests to be registered, subject to customary underwriter cutbacks applicable
to all holders of registration rights, to the extent such Earnout Shares or
Advance Earnout Shares are not eligible for resale pursuant to Rule 144 under
the Securities Act.
(d) During the two year period following the Closing Date, with a view to
making available the benefits of certain rules and regulations of the SEC which
may permit the sale of the
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"restricted securities" to the public without registration, the Company agrees
to make and keep public information available, as those terms are understood and
defined in Rule 144 under the Securities Act.
ARTICLE II
NREACH'S REPRESENTATIONS AND WARRANTIES
nReach and each nReach Shareholder hereby jointly and severally represents
and warrants to, and agrees with, SmartServ as follows, except as set forth on
the schedule of exceptions annexed hereto and made a part hereof:
2.1 Organization; Capitalization. nReach is, and on the Closing Date will
be, a duly organized and a validly existing corporation in good standing under
the laws of its state of formation. There are issued and outstanding, and on the
Closing Date there will be issued and outstanding, only the nReach Shares, all
of which are, and on the Closing Date will be, duly authorized and validly
issued. There are, and on the Closing Date there will be, no outstanding rights,
options or warrants to purchase any equity interest in nReach, and there will be
no other or any other issued or outstanding securities of any nature convertible
into or exercisable or exchangeable for equity of nReach. No person has any
right of first refusal, right of participation, or any similar right with
respect to dispositions of the nReach Shares.
2.2 Authority. nReach and each nReach Shareholder has, and on the Closing
Date will have, full power and authority to enter into this Agreement and, to
consummate the transactions contemplated hereby. This Agreement and the
transactions contemplated hereby have been duly approved by the Board of
Directors of nReach and, prior to the Closing, by all stockholders of nReach
whose consent is required under applicable law.
2.3 Binding Agreement. This Agreement has been duly executed and delivered
by nReach and each nReach Shareholder and constitutes the legal, valid and
binding obligation of nReach and each nReach Shareholder, enforceable against
each of them in accordance with the terms hereof, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application relating to or affecting the enforcement of rights hereunder or
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
2.4 No Conflicts. The execution and delivery by nReach and each nReach
Shareholder of this Agreement, the consummation and performance of the
transactions herein contemplated, and compliance with the terms of this
Agreement by nReach and each nReach Shareholder will not conflict with, result
in a breach of or constitute or give rise to a default under (i) any indenture,
mortgage, deed of trust or other agreement, instrument or contract to which
nReach or any nReach Shareholder is now a party or by which it or any of its
assets or properties are bound; (ii) nReach's articles of incorporation and
bylaws, in each case as amended; or (iii) any law, order, rule, regulation,
writ, injunction, judgment or decree of any government, governmental
instrumentality or court, domestic or foreign, having jurisdiction over nReach,
or any of its business or properties wherein
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such breach could have a material adverse effect on nReach or any of its
business or properties.
2.5 Subsidiaries. nReach does not have, and on the Closing Date will not
have, any subsidiaries, nor does it own any direct or indirect interest in any
other business entity.
2.6 Foreign Qualifications. nReach is, and on the Closing Date will be,
qualified or licensed as a foreign corporation in all jurisdictions where its
business or ownership of assets so requires, except where the failure to be
qualified or licensed would not be reasonably expected to have a material
adverse effect on the business of nReach. The business of nReach does not
require it to be registered as an investment company or investment adviser, as
such terms are defined under the Investment Company Act of 1940 and the
Investment Advisers Act of 1940, each as amended.
2.7 Financial Statements. All financial statements of nReach previously
delivered to SmartServ, and attached hereto as Schedule 2.7 (the "Financial
Statements") fairly present in all material respects the financial position,
results of operations and other information purported to be shown therein of
nReach, at the dates and for the respective periods to which they apply. The
Financial Statements have not been prepared in accordance with generally
accepted accounting principles for any of the periods involved, but have been
prepared in accordance with sound business practices consistently for the
periods indicated.
2.8 No Adverse Events. Since the date of the Financial Statements,
otherwise as set forth therein:
(a) there has not been any material adverse change in the financial
position or condition of nReach, its liabilities, assets or any damage,
loss or other change in circumstances materially affecting nReach, its
business or assets or nReach's right to carry on its business, other than
changes in the ordinary course of business or due to general economic,
industry or political conditions;
(b) there has not been any damage, destruction, loss or other event
(whether or not covered by insurance) materially and adversely affecting
nReach, its business or assets;
(c) there has not been any material increase in the compensation
payable or to become payable by nReach to any of nReach's officers,
employees or agents or any bonus, payment or arrangement made to or with
any of them;
(d) nReach's business has been and continues to be carried on in the
ordinary course;
(e) nReach has not discharged or satisfied or paid any lien or
encumbrance or obligation or liability other than current liabilities in
the ordinary course of business; and
(f) no capital expenditures in excess of $10,000 individually or
$50,000 in total have been authorized or made.
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2.9 Ordinary Course of Business. Except for transactions occurring in the
ordinary course of business, there has not been, and on the Closing Date there
will not have been, any transactions involving nReach since November 30, 2003 in
an amount in excess of $25,000.
2.10 Liabilities; Claims. There are, and on the Closing Date will be, no
liabilities (including, but not limited to, tax liabilities) or claims against
nReach (whether such liabilities or claims are contingent or absolute, direct or
indirect, matured or unmatured) not appearing on the Financial Statements, other
than (i) liabilities incurred in the ordinary course of business since November,
30, 2003 in an amount not exceeding $25,000, (ii) taxes accrued on earnings
since December 31, 2002 which are not yet due or payable, ), (iii) amounts
incurred to accountants and attorneys in connection with this transaction up to
the Fee Cap and (iv) short term borrowings from Xxxx Xxxxxx which do not exceed
$75,000 in the aggregate.
2.11 Tax Returns. All federal, state, county and local income, excise,
property and other tax returns required to be filed by nReach are true and
correct in all material respects and have been timely filed, and all required
taxes, fees or assessments have been paid or an adequate reserve therefor has
been established in the Financial Statements. The federal income tax returns and
state and foreign income tax returns of nReach have not been audited by the
Internal Revenue Service ("IRS") or any other taxing authority within the past
five (5) years. Neither the IRS nor any state, local or other taxing authority
has proposed any additional taxes, interest or penalties with respect to nReach
or any of its operations or businesses. There are no pending, or to the
knowledge of nReach, threatened, tax claims or assessments, and there are no
pending, or to the knowledge of nReach, threatened, tax examinations by any
taxing authorities. nReach has not given any waivers of rights (which are
currently in effect) under applicable statutes of limitations with respect to
the federal income tax returns of nReach for any year.
2.12 Title to Assets. Except as provided for in the Financial Statements,
nReach, has, and on the Closing Date will have, good and marketable title to all
of its furniture, fixtures, equipment and other assets owned by nReach, and such
assets are owned free and clear of all security interests, pledges, liens,
restrictions and encumbrances of every kind and nature. nReach is the owner of
its inventory as set forth in the Financial Statements and has good and
marketable title thereto. Except as provided in the Financial Statements,
nReach's assets comprise all of the property and assets of its business, and no
other person or entity owns any assets used by nReach in operating the business
of nReach, whether under a lease, rental agreement or other arrangement. At
Closing, nReach will provide a list of all its assets and inventory as of a date
not more than two days prior to Closing.
2.13 Accounts Receivable. The accounts receivable as set forth in the
Financial Statements represent amounts due for goods sold or services rendered
by nReach in the ordinary course of business and, except as reserved for in the
Financial Statements, nReach believes are collectable in the ordinary course of
business, without any claims by the obligor for set-off or counter-claims.
2.14 Material Contracts. A copy (or summary if oral) of all agreements,
contracts,
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arrangements, understandings and commitments, whether written or oral, to which
nReach is or on the Closing Date will be, a party (each, an "nReach Contract")
that (i) represents an nReach contract upon which nReach is substantially
dependent or (ii) represents an nReach Contract pursuant to which nReach will
receive substantial benefits or (iii) represents an nReach Contact, the absence
of which would have a material adverse effect on the business of nReach prior to
and following the transactions contemplated, have been or will be delivered
prior to Closing, to SmartServ or its counsel, unless nReach has been advised
that such contracts are not required to be delivered. Any nReach Contracts
entered into between the date hereof and the Closing Date will be delivered to
SmartServ or its counsel prior to Closing. The validity and enforceability of,
and rights of nReach contained in, each nReach Contract shall not be adversely
effected by the transactions contemplated hereby or any actions taken in
furtherance hereof. To its knowledge, nReach is not in material default under
any nReach Contract.
2.15 Legal Proceedings. Except as set forth in Schedule 2.15, there are,
and on the Closing Date there will be, no legal, administrative, arbitral or
other proceedings, claims, actions or governmental investigations of any nature
pending, or to nReach's knowledge, threatened, involving nReach, or challenging
the validity or propriety of the transactions contemplated by this Agreement.
nReach is not a party to any order, judgment or decree which will, or might
reasonably be expected to, materially adversely affect the business, operations,
properties, assets or financial condition of nReach.
2.16 Certain Transactions. Since November 30, 2003 there have been, and
through the Closing Date there will be (i) no bonuses or extraordinary
compensation to any of the officers or directors of nReach, (ii) no loans made
to or any other transactions with any of the officers or directors of nReach or
their families and (iii) no dividends or other distributions declared or paid by
nReach.
2.17 Insurance. nReach has, and on the Closing Date will have, maintained
casualty and liability policies and other insurance policies with respect to its
business which are appropriate and customary for businesses similar in size,
industry and risk profile. Copies of all of the policies of insurance and bonds
presently in force with respect to nReach, including without limitation those
covering properties, buildings, machinery, equipment, worker's compensation,
officers and directors and public liability, will be delivered to SmartServ
prior to Closing. All such insurance is outstanding and in full force and
effect, with all premiums thereon duly paid, and nReach has not received any
notice of cancellation of any such policies.
2.18 Intellectual Property. Section 2.18 of the schedule of exceptions
lists all patents, patent applications, trademarks, trade names (whether
registered or unregistered), copyrights, patent licenses, service marks, logos,
commercial symbols, industrial designs, inventions, licenses, trade secrets,
patterns, drawings, software (other than standard, off-the-shelf commercially
available programs), formulae, technical information, research, data, concepts,
methods, "know-how," and all other intellectual property owned by, licensed to,
or used by, nReach, presently held, owned or used by nReach (the "IP Rights").
Except for the IP Rights, no other intellectual property rights are required for
nReach to conduct its business in the ordinary course consistent with past
practice. All
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of the IP Rights are valid and in good standing and none of them infringes (nor
has any claim been made that any of them infringes) the patents, trademarks or
other rights of others. There is no agreement to which nReach is a party or is
legally bound and, to nReach's knowledge, no restriction or liens, materially
and adversely affecting the use by nReach and, after the Closing Date, the use
by SmartServ, of any of the IP Rights. There is no litigation or other legal
action pending or, to nReach's knowledge, threatened with respect to any of the
IP Rights, and no order, holding, decision or judgment has been rendered by any
authority, and no agreement, consent or stipulation exists to which nReach is a
party or of which nReach has knowledge, which would prevent nReach, or after the
Closing Date, SmartServ, from using any of the IP Rights. Except as set forth on
Schedule 2.18, nReach has not received any notice or inquiry indicating, or
claiming, that the design, manufacture, sale or use of any products now or
heretofore manufactured, sold or used by nReach infringes the patent or other
intellectual property rights of any other person or entity. To its knowledge,
nReach has not infringed upon any third party's intellectual property.
2.19 Compliance with Laws. nReach has, and on the Closing Date will have,
in all material respects operated its business and conducted its affairs in
compliance with all applicable laws, rules and regulations, except where the
failure to so comply did not have or would not be expected to have a material
adverse effect on its business or property.
2.20 Related Party Contracts. On the Closing Date there will be, no loans,
leases or other nReach Contracts or arrangements or understandings outstanding
between nReach and any of its officers, directors or any person related to or
affiliated with any such officers or directors.
2.21 Officer and Director Information. During the past five year period
neither nReach, nor any of its officers or directors, has been the subject of:
(a) a petition under the Federal bankruptcy laws or any other
insolvency or moratorium law or has a receiver, fiscal agent or similar
officer been appointed by a court for the business or property of nReach or
such person, or any partnership in which nReach or any such person was a
general partner at or within two years before the time of such filing, or
any corporation or business association of which nReach or any such person
was an executive officer at or within two years before the time of such
filing;
(b) a conviction in a criminal proceeding or a named subject of a
pending criminal proceeding (excluding traffic violations which do not
relate to driving while intoxicated or driving under the influence);
(c) any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining nReach or any such person from, or otherwise
limiting, the following activities:
(i) Acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the
United States
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Commodity Futures Trading Commission or an associated person of any of
the foregoing, or as an investment adviser, underwriter, broker or
dealer in securities, or as an affiliated person, director or employee
of any investment company, bank, savings and loan association or
insurance company, or engaging in or continuing any conduct or
practice in connection with such activity;
(ii) Engaging in any type of business practice; or
(iii) Engaging in any activity in connection with the purchase or
sale of any security or commodity or in connection with any violation
of Federal, state or other securities laws or commodities laws;
(d) any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any Federal, state or local authority barring,
suspending or otherwise limiting for more than 60 days the right of nReach
or any such person to engage in any activity described in the preceding
sub-paragraph, or to be associated with persons engaged in any such
activity;
(e) a finding by a court of competent jurisdiction in a civil action
or by the SEC to have violated any securities law, regulation or decree and
the judgment in such civil action or finding by the SEC has not been
subsequently reversed, suspended or vacated; or
(f) a finding by a court of competent jurisdiction in a civil action
or by the Commodity Futures Trading Commission to have violated any federal
commodities law, and the judgment in such civil action or finding has not
been subsequently reversed, suspended or vacated.
2.22 Benefit Plans. nReach does not have any pension plan, profit sharing,
option or similar employee benefit plan. Evidence of the cancellation of any
such plan has been previously delivered to SmartServ.
2.23 Consents and Approvals. Except for the consent and approval of the
nReach Shareholders, no consents or approvals of, or filings or registrations
with, any third party or any public body or authority are necessary in
connection with (i) the execution and delivery by nReach of this Agreement and
(ii) the consummation by nReach of the transactions contemplated hereby.
2.24 Finder's Fees. nReach has taken no action which would give rise to any
claim by any person for brokerage commissions, finders' fees or the like against
SmartServ relating to this Agreement or the transactions contemplated hereby.
2.25 Employee Matters. No employees of nReach are on strike or to the best
of nReach's knowledge threatening any strike or work stoppage. nReach does not
have any obligations under any collective bargaining or labor union agreements,
nor is nReach involved in any material controversy
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with any of its employees or any organization representing any of its employees.
nReach believes its relationships with its employees are good.
2.26 Disclosure. None of the information supplied or to be supplied by or
about nReach herein or for inclusion or incorporation by reference in any
information to be supplied to holders of SmartServ Common Stock concerning this
Agreement and transactions contemplated hereby contains any untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
2.27 Actions Prior to Closing. From the date hereof through the Closing,
nReach shall not, other than in the ordinary course of business, consistent with
past practice, without due consent of SmartServ:
(i) sell, lease, assign, transfer or otherwise dispose of any
material assets;
(ii) agree to assume or assume, guarantee, endorse or otherwise
in any way be or become responsible or liable for, directly or
indirectly, any material contingent obligation;
(iii) participate or engage in any discussions or negotiations
with any person regarding, or enter into any transaction concerning, a
merger, stock exchange or consolidation, other than with the other
parties hereto, or liquidate or dissolve itself (or suffer any
liquidation or dissolution) or convey, sell, lease, transfer or
otherwise dispose of, in one transaction or a series of related
transactions, all or a substantial part of its property, business,
assets or, capital stock or securities convertible into equity, or
make any material change in the present method of conducting business;
(iv) make any amendment to its certificate of incorporation or
bylaws;
(v) enter into or amend any employment agreements or increase the
salary or bonus of any existing employee;
(vi) create, incur, assume or suffer to exist, any mortgage,
pledge, lien, charge, security interest or encumbrance of any kind
upon any of its property, assets, income or profits, whether now owned
or hereafter acquired;
(vii) declare or authorize any dividends or distributions on any
shares of capital stock of nReach.
2.28 Charter Documents. The charter documents of nReach have not been
altered since its incorporation, except as filed in the record books of nReach
and delivered to SmartServ.
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2.29 Corporate Minute Books. The corporate minute books of nReach are
complete and the minutes and consents contained therein accurately reflect the
actions that were taken at a duly called and held meeting or by consent without
a meeting. All actions by nReach which required director or shareholder approval
are reflected on the corporate minute books of nReach. nReach is not in
violation or breach of, or in default with respect to, any term of its
Certificate of Incorporation (or other charter documents) or by-laws.
2.30 Environmental Matters. nReach has, in all material respects, complied
with and are in compliance with all material Federal, state, local and, so far
as it is required, foreign statutes, laws, ordinances, regulations, rules,
notices, permits, judgments, orders and decrees applicable to it or any of its
respective properties, assets, operations and businesses relating to
environmental protection (collectively "Environmental Laws"). nReach does not
have any actual or contingent liability in connection with any Environmental
Laws which would have a material adverse effect on its business or assets.
2.31 Real Property. Except as set forth in Section 2.31 of the schedule of
exceptions, nReach does not own or lease any real property. Except as set forth
in Section 2.31 of the disclosure schedule, nReach does not have any
obligations, directly or indirectly, pursuant to any lease or other agreement
related to real property. Copies of all lease agreements binding on nReach are
in writing and have been delivered to SmartServ.
ARTICLE III
SMARTSERV'S REPRESENTATIONS AND WARRANTIES
SmartServ hereby represents and warrants to, and agrees with, the nReach as
follows:
3.1 Corporate Existence; Validity of Transaction. SmartServ is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power to carry on all business
conducted by it, and is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted, except
where the failure to be so authorized or qualified would not have a material
adverse effect on the business or operations of nReach. The execution and
delivery of this Agreement by SmartServ and the performance of the transactions
contemplated herein have been duly and validly authorized by the Board of
Directors of SmartServ. This Agreement has been duly and validly authorized by
all necessary corporate action and is a legal, valid and binding obligation of
SmartServ, enforceable in accordance with its terms, except as the same may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws relating to or affecting the enforcement of creditors' rights
generally, now or hereafter in effect and subject to the application of
equitable principles and the availability of equitable remedies.
3.2 Authorization, Etc. SmartServ has full corporate power and authority to
enter into
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this Agreement and all ancillary documents to which it is a party and to carry
out the transactions contemplated hereby and thereby and no other corporate
proceedings on the part of SmartServ are necessary to authorize this Agreement,
such ancillary documents and the transactions contemplated hereby and thereby.
The Board of Directors of SmartServ or the appropriate committee thereof has or,
prior to Closing will have, duly authorized the execution, delivery and
performance of this Agreement, the ancillary documents to which it is a party
and the transactions contemplated hereby and thereby. Upon execution and
delivery of this Agreement and the ancillary documents by the parties hereto and
thereto, this Agreement and the ancillary documents to which SmartServ is a
party shall constitute the legal, valid and binding obligation of SmartServ,
enforceable against it in accordance with their respective terms.
3.3 Governmental Authorities. SmartServ has complied in all material
respects with all applicable laws, rules, regulations and orders in connection
with its execution, delivery and performance of this Agreement, the ancillary
documents to which it is a party and the transactions contemplated hereby and
thereby. Except as otherwise expressly disclosed herein, SmartServ is not
required to submit any notice, report, or other filing with any governmental
authority in connection with its execution or delivery of this Agreement, the
ancillary documents to which it is a party or the consummation of the
transactions contemplated hereby and thereby. Except as otherwise expressly
provided for herein, no authorization, consent, approval, exemption or notice is
required to be obtained by SmartServ in connection with the execution, delivery,
and performance of this Agreement, the ancillary documents to which it is a
party and the transactions contemplated hereby and thereby. SmartServ will
comply in all material respects with all applicable regulations and orders in
connection with its execution, delivery and performance of this Agreement and
the transactions contemplated hereby.
3.4 Legal Proceedings. Except as disclosed in its filings with the SEC: (i)
there are, and on the Closing Date there will be, no legal, administrative,
arbitral or other proceedings, claims, actions or governmental investigations
pending against SmartServ or challenging the validity or propriety of the
transactions contemplated by this Agreement and (ii) SmartServ is not a party to
any order, judgment or decree, in either case which might reasonably be likely
to have a material adverse effect on the business, financial condition or
results of operation of SmartServ.
3.5 SmartServ Shares. The shares of SmartServ Common Stock to be issued
hereunder to the nReach Shareholders constitute valid and legally issued shares
of the common stock of SmartServ, and upon issuance in accordance with the terms
hereof, will be fully paid and nonassessable.
3.6 Finder's Fees. SmartServ has taken no action which would give rise to
any claim by any person for brokerage commissions, finders' fees or the like
against nReach or any nReach Shareholder relating to this Agreement or the
transactions contemplated hereby.
3.7 No Violation. The execution, delivery and performance by SmartServ of
this Agreement and the ancillary documents to which it is a party, and the
fulfillment of and compliance with the respective terms hereof and thereof by
SmartServ do not and will not (a) conflict with or
16
result in a material breach of the terms, conditions or provisions of, (b)
constitute a default or event of default under (with due notice, lapse of time
or both), (c) give any third party the right to accelerate any obligation under,
(d) result in a violation of, or (e) require any authorization, consent,
approval, exemption or other action by or notice to any individual or entity
pursuant to, the certificate of incorporation or bylaws of SmartServ, or any
law, rule, or regulation applicable to which SmartServ is subject, or any
material contract or order to which SmartServ or its properties are subject.
SmartServ will comply with all applicable regulations and orders in connection
with its execution, delivery and performance of this Agreement and the
transactions contemplated hereby.
3.8 SEC Reports. SmartServ has filed with the SEC, and has made available
to nReach, complete and correct copies of all forms, reports, schedules,
statements and other documents required to be filed by SmartServ under the
Securities Act and the Exchange Act (as such documents have been amended or
supplemented since the time of their filing) (collectively, the "SEC Reports").
As of their respective dates, the SEC Reports (including without limitation, any
financial statements or schedules included therein) (a) did not contain any
untrue statement of a material fact required to be stated therein or necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading, and (b) complied in all material
respects with the applicable requirements of the Securities Act and Exchange Act
(as the case may be) and all applicable rules and regulations of the SEC
promulgated thereunder.
ARTICLE IV
CONFIDENTIALITY
4.1 Confidentiality. "Confidential Information" means any information
disclosed by any party hereto to any other party, in writing, or by inspection
of tangible objects, which is designated as "Confidential," "Proprietary" or
some similar designation or any information (specifically including via e-mail
communications and due diligence materials provided to the other party, whether
or not such communications and materials are marked "Confidential" or
"Proprietary), which by the circumstances of disclosure, or the nature of the
information itself, should reasonably be understood to be proprietary and
confidential. Confidential Information is explicitly understood to include,
without limitation, any concepts, business models, marketing plans, proposals,
business plans, financial data, customer and prospect lists and information,
personnel data, contract information, properties, methods of operation, recipes,
software, trade secrets, inventions, discoveries, and know-how, of the
disclosing party. Confidential Information shall not, however, include any
information which (a) was publicly known and made generally available in the
public domain prior to the time of disclosure by the disclosing party; (b)
becomes publicly known and made generally available after disclosure by the
disclosing party to the receiving party through no action or inaction of the
receiving party; (c) is already in the possession of the receiving party at the
time of disclosure by the disclosing party as shown by the receiving party's
files and records immediately prior to the time of disclosure; (d) is obtained
by the receiving party from a third party without a breach of such third party's
obligations of confidentiality; (e) is independently developed by the receiving
party without use of or reference to the disclosing party's Confidential
Information, as shown by documents and other competent evidence in the receiving
party's possession; or (f) is required by law to be disclosed by the receiving
party; provided, that the receiving party gives the disclosing party prompt
written notice
17
of such legal requirement prior to such disclosure and provides assistance in
obtaining an order protecting the information from public disclosure.
4.2 Non-use and Non-disclosure. Each party agrees not to use any
Confidential Information of the other party for any purpose except to evaluate
and engage in discussions concerning a potential business relationship between
the parties, and each party agrees to hold and continue to hold all disclosed
Confidential Information in trust and in confidence. Each party agrees not to
disclose any Confidential Information of the other party to third parties or
such party's employees or agents without prior written consent to such party's
employees, except to those employees and agents of the receiving party who are
required to have the information in order to evaluate or engage in discussions
concerning the contemplated business relationship. Neither party shall reverse
engineer, disassemble or decompile any prototypes, software or other tangible
objects which embody the other party's Confidential Information and which are
provided to the party hereunder. Each party agrees to notify the other party in
writing of any misuse or misappropriation of Confidential Information of the
other party that comes to its attention.
4.3 Maintenance of Confidentiality. Each party agrees that it shall take
reasonable measures to protect the secrecy of and avoid disclosure and
unauthorized use of the Confidential Information of the other party. Without
limiting the foregoing, each party shall take at least those measures that it
takes to protect its own most highly confidential information and shall take the
necessary steps to inform and make all of its employees who have access to
Confidential Information aware of their duty of confidentiality.
4.2 Injunctive Relief. Because of the difficulty of measuring economic
losses to the disclosing party as a result of a breach of the foregoing
covenants in this Article IV, and because of the immediate and irreparable
damage that could be caused to the disclosing party for which it would have no
other adequate remedy, each and every receiving party, on behalf of itself and
its employees, directors, shareholders, consultants, contractors and advisors,
agrees that the foregoing covenants may be enforced by the disclosing party in
the event of breach by it or them, by injunctions and restraining orders.
Nothing herein shall be construed as prohibiting the disclosing party from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
4.5 Survival. The obligations of the parties under this Section shall
survive the termination of this Agreement.
ARTICLE V
TERMINATION AND ABANDONMENT
5.1 Methods of Termination. This Agreement may be terminated and the
transactions herein contemplated may be abandoned at any time, upon written
notice:
(a) by mutual consent of nReach and SmartServ; or
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(b) by nReach or SmartServ if Closing has not occurred on or before
February 29, 2004; provided that the party seeking to terminate this
Agreement pursuant to the preceding sentence shall not be, on the date of
such termination, in material breach of its representations, warranties or
covenants under this Agreement; or
(c) by SmartServ if, as of the Closing Date (including any
extensions), any of the conditions specified in this Agreement as
requirements to be completed by nReach shall not have been satisfied or if
nReach or any nReach Shareholder is otherwise in default under this
Agreement; or
(d) by SmartServ if it is not satisfied with the results of its due
diligence investigation of nReach; or
(e) by nReach or the nReach Shareholders if, as of the Closing Date
(including any extensions), any of the conditions specified in this
Agreement as requirements to be completed by SmartServ shall not have been
satisfied or if SmartServ is otherwise in default under this Agreement.
5.2 Procedure Upon Termination. In the event of termination and abandonment
pursuant to Section 5.1 hereof, and subject to the proviso contained in this
Section 5.2, this Agreement shall terminate and shall be abandoned, without
further action by any of the parties hereto. If this Agreement is terminated as
provided herein each party shall redeliver all documents and other material of
any other party relating to the transactions contemplated hereby, whether
obtained before or after the execution hereof, to the party furnishing the same;
ARTICLE VI
SURVIVAL OF TERMS; INDEMNIFICATION
6.1 Survival; Knowledge.
(a) Each representation, warranty, covenant and agreement of nReach or any
nReach Shareholder contained herein or in any instrument or document furnished
in connection with this Agreement or the transactions contemplated hereby, shall
survive the execution and delivery of this Agreement and the Closing and any
investigation at any time made by or on behalf of SmartServ for a period of time
equal to the greater of two years or until the expiration of the applicable
statute of limitation, including any extensions thereof.
(b) The right to indemnification, payment of damages or other remedy based
on such representations, warranties, covenants, and obligations will not be
affected by any investigation conducted with respect to, or any knowledge
acquired (or capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date, with respect to
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the
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right to indemnification, payment of damages, or other remedy based on such
representations, warranties, covenants, and obligations.
6.2 Indemnification by nReach Shareholders. (a) Subject to this Article VI,
each of Xxxxxxx and Xxxxx Xxxxxxx (each, an "nReach Indemnifying Party") shall,
jointly and severally, indemnify, defend and hold harmless each of SmartServ and
its officers, directors, employees, stockholders, members, attorneys,
accountants, partners, representatives, agents, successors and assigns of each
of the foregoing (each a "SmartServ Indemnified Party" and collectively, the
"SmartServ Indemnified Parties"), at all times after the date of this Agreement,
against and in respect of any and all losses, costs, claims, damages,
liabilities, expenses (including, without limitation, the reasonable legal fees
and expenses), directly or indirectly, solely to the extent arising out of or
relating to any of the following: (a) any intentional material (i)
misrepresentation, (ii) breach of warranty, or (iii) nonfulfillment of any
covenant or other obligation on the part of nReach or any nReach Shareholder
under this Agreement or any of the ancillary documents; (b) any conduct, action,
inaction of nReach or any nReach Shareholder arising from or relating to the
operation, management or ownership of nReach before the Closing Date
constituting gross negligence or willful misconduct; and (c) all demands,
assessments, judgments, costs and reasonable legal and other expenses arising
from, or in connection with any claim incident to any of the foregoing.
(b) Indemnification by SmartServ. Subject to this Article VI, SmartServ
shall indemnify and hold harmless the nReach Shareholders (collectively, the
"nReach Indemnified Parties"), from and against all losses, costs, claims,
damages, liabilities, expenses (including reasonable attorneys' and accountant's
fees, costs of suit and costs of appeal), fines and penalties incurred by any
nReach Indemnified Party, directly or indirectly, solely to the extent arising
out of or relating to any of the following: (a) any intentional material (i)
misrepresentation, (ii) breach of warranty, or (iii) nonfulfillment of any
covenant or other obligation on the part of SmartServ under this Agreement or
any of the ancillary documents; and (b) all demands, assessments, judgments,
costs and reasonable legal and other expenses arising from, or in connection
with any claim incident to any of the foregoing.
6.3 If any party (the "Indemnified Party") receives notice of any claim or
other commencement of any action or proceeding with respect to which any other
party (or parties) (the "Indemnifying Party") is obligated to provide
indemnification pursuant to this Article VI, the Indemnified Party shall
promptly give the Indemnifying Party written notice thereof which notice shall
specify, if known, the amount or an estimate of the amount of the liability
arising therefrom and all known facts associated with such claim, action or
proceeding. The failure of a party to give notice under this Section 6.3 shall
not relieve any party from liability, unless and to the extent the other party
has been materially prejudiced thereby. The Indemnified Party shall not settle
or compromise any claim by a third party for which it is entitled to
indemnification hereunder, without the prior written consent of the Indemnifying
Party (which shall not be unreasonably withheld, conditioned, or delayed) unless
a suit shall have been instituted against it and the Indemnifying Party either
(i) shall not have undertaken the defense of such suit after notification
thereof as provided in Section 6.4 or (ii) is demonstrably unable to undertake
the defense of such suit or satisfy the claims arising thereunder.
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6.4 Defense by Indemnifying Party.
(a) In connection with any claim giving rise to indemnity hereunder
resulting from or arising out of any claim or legal proceeding by a person who
is not a party to this Agreement, the Indemnifying Party at its sole cost and
expense may, upon written notice to the Indemnified Party, assume the defense of
any such claim or legal proceeding using counsel of its choice (subject to the
approval of the Indemnified Party, which approval may not be unreasonably
withheld, conditioned or delayed). The Indemnifying Party shall have the right
to settle any claim against it or as to which it has assumed the defense,
subject to the prior written approval of the Indemnified Party, which approval
shall not be unreasonably withheld, conditioned or delayed, provided that such
settlement involves only the payment of a fixed sum which the Indemnified Party
is obligated to pay and does not include any admission of liability or other
such similar admissions by or related to the Indemnified Party with respect to
such claim. An Indemnified Party shall have the right to employ its own counsel
in any case, but the fees and expenses of such counsel shall be at the expense
of the Indemnified Party unless (i) the employment of such counsel shall have
been authorized in writing by the Indemnifying Party in connection with the
defense of such action or claim, (ii) the Indemnified Party shall have
reasonably concluded that there may be defenses available to it which are
contrary to, or inconsistent with, those available to the Indemnifying Party, in
any of which events such reasonable fees and expenses of not more than one
additional counsel for the Indemnified Party shall be borne by the Indemnifying
Party. In the event that the Indemnifying Party shall assume or participate in
the defense of such audit, assessment or other proceeding as provided herein,
the Indemnified Party shall make available to the Indemnifying Party all
relevant records and sign such documents as are necessary to defend such audit,
assessment or other proceeding in a timely manner
(b) If the Indemnifying Party does not assume the defense of any such claim
or litigation resulting therefrom, the Indemnified Party may settle or defend
against such claim or litigation, after giving notice of the same to the
Indemnifying Party, on such terms as the Indemnified Party may deem appropriate,
and the Indemnifying Party shall be entitled to participate in (but not control)
the defense of such action, with its counsel and at its own expense. If the
Indemnifying Party thereafter seeks to question the manner in which the
Indemnified Party defended such third-party claim or the amount or nature of any
such settlement, the Indemnifying Party shall have the burden to prove by a
preponderance of the evidence that the Indemnified Party did not defend or
settle such third-party claim in a reasonably prudent manner. Notwithstanding
the foregoing, however, SmartServ shall in all cases be entitled to control of
the defense of any such action if it (i) may result in injunctions or other
equitable remedies in respect of SmartServ or its business; (ii) may result in
liabilities which, taken with other then-existing claims by SmartServ under this
Article VI, would not be fully indemnified hereunder; or (iii) may have an
adverse impact on the business or the financial condition of SmartServ including
an effect on the tax liabilities, earnings or ongoing business relationships of
SmartServ even if nReach or any nReach Shareholder satisfies all indemnification
amounts in full. If the Indemnifying Party desires to appeal from an adverse
judgment, then the Indemnifying Party shall post and pay the cost of the
security or bond to stay execution of the judgment pending appeal. Upon the
payment in full by the Indemnifying Party of
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such amounts, the Indemnifying Party shall succeed to the rights of the
Indemnified Party, to the extent not waived in settlement, against the third
party who made such third party claim.
6.5 Limitation on Indemnification.
(a) None of the SmartServ Indemnified Parties shall assert any
Indemnification claim hereunder against any nReach Indemnifying Party until such
time as, and solely to the extent that, the aggregate of all such claims which
such parties may have against such nReach Indemnifying Parties shall exceed
$7,500.
(b) None of the nReach Indemnified Parties shall assert any Indemnification
claim hereunder against SmartServ until such time as, and solely to the extent
that, the aggregate of all such claims which the nReach Shareholders have
against SmartServ shall exceed $7,500.
(c) Notwithstanding any other term of this Agreement, the nReach
Indemnifying Parties shall not, in the aggregate, be liable under this Article
VI (or otherwise) for an amount which exceeds $750,000.
(d) At its sole option, in addition to all other rights and remedies that
it may have, SmartServ shall have the right to set off, in whole or in part,
amounts owed under this Article VI to SmartServ by any nReach Indemnifying
Party, against the Earnout Shares to be issued to such nReach Indemnifying
Parties hereunder, if any.
(e) The parties have negotiated the indemnification rights,
responsibilities and obligations set forth in this Article VI with the intention
that this Article VI shall constitute each of their sole and exclusive remedy
with respect to any and all losses, costs, claims, damages, liabilities,
expenses (including, without limitation, the reasonable legal fees and
expenses), directly or indirectly, arising out of or relating to any of the
following: (a) any misrepresentation, (ii) breach of warranty, or (iii)
nonfulfillment of any covenant or other obligation; or (b) any conduct, action,
inaction of any nReach Shareholder arising from or relating to the operation,
management or ownership of nReach before the Closing Date, and in no event shall
any nReach Shareholder (other than an nReach Shareholder who is also an nReach
Indemnifying Party) have any liability to the SmartServ Indemnified Parties
pursuant to this Article VI, or otherwise.
ARTICLE VII
MISCELLANEOUS
7.1 Limitation of Liability. The representations and warranties made by any
party to this Agreement are intended to be relied upon only by the other parties
to this Agreement and by no other person. Nothing contained in this Agreement
shall be deemed to confer upon any person not a party to this Agreement any
third party beneficiary rights or any other rights of any nature whatsoever.
7.2 Further Instruments and Actions. Each party shall deliver such further
instruments and take such further action as may be reasonably requested by any
other in order to carry out the
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intent and purposes of this Agreement.
7.3 Governing Law. This Agreement is being delivered and is intended to be
performed in the State of Delaware, and shall be construed and enforced in
accordance with the laws of such state, without regard to conflicts of laws
thereof. If either party shall commence an action or proceeding to enforce any
provisions of this Agreement, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its reasonable attorneys
fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.
7.4 Notices. All notices or other communications to be sent by any party to
this Agreement to any other party to this Agreement shall be sent by certified
mail, personal delivery or nationwide overnight courier to the addresses
hereinbefore designated, or such other addresses as may hereafter be designated
in writing by a party. Notice shall be deemed given and received on the date of
actual delivery to the address specified thereon.
7.5 Binding Agreement. This Agreement and the ancillary documents expressly
contemplated hereby executed by the parties in connection herewith as of the
date hereof represent the entire agreement among the parties hereto with respect
to the matters described herein and is binding upon and shall inure to the
benefit of the parties hereto and their legal representatives, successors and
permitted assigns. This Agreement may not be assigned and, except as stated
herein, may not be altered or amended except in writing executed by all of the
parties hereto.
7.6 Counterparts. This Agreement may be executed in counterparts, all of
which, when taken together, shall constitute the entire Agreement.
7.7 Severability. The provisions of this Agreement shall be severable, so
that the unenforceability, validity or legality of any one provision shall not
affect the enforceability, validity or legality of the remaining provisions
hereof.
7.8 Joint Drafting. This Agreement shall be deemed to have been drafted
jointly by the parties hereto, and no inference or interpretation against any
party shall be made solely by virtue of such party allegedly having been the
draftsperson of this Agreement.
7.9 Reliance on Certificates. In rendering any opinion referred to herein,
counsel for the parties hereto may rely, as to any factual matters involved in
their respective opinions, on certificates of public officials and of corporate
and company officers, and on such other evidence as such counsel may reasonably
deem appropriate and, as to the matters governed by the laws of jurisdictions
other than the United States or the State of Delaware, an opinion of local
counsel in such other jurisdiction(s), which counsel shall be satisfactory to
the other parties in the exercise of their reasonable discretion.
7.10 Public Announcements. All parties hereto agree that any public
announcement, press release or other public disclosure of the signing of this
Agreement shall be made jointly and only
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after all parties hereto have reviewed and approved the language and timing of
such disclosure, except as such disclosure may be required pursuant to any legal
obligation or order of any court having proper jurisdiction over any of the
parties hereto. The parties hereby acknowledge and agree that SmartServ shall
file a Current Report on Form 8-K following the consummation of this
transaction, disclosing the transactions contemplated hereby and making such
other filings and notices in the manner and time required by the SEC.
7.11 Consent. Whenever consent is required to be given by any of the
Companies to any of the other Companies hereunder in connection with any matter
contemplated hereby, such consent shall not be unreasonably withheld, delayed or
conditioned.
7.12 Expenses. Except as otherwise provided for herein, each party shall
pay its own expenses incident to the preparation and consummation of this
Agreement, although SmartServ acknowledges and agrees that the fees and expenses
of nReach and the nReach Shareholders in an amount up to the Fee Cap is being
accrued by nReach prior to the Closing and will be paid by nReach out of its
operations after Closing up to such Fee Cap.
7.13 Effectiveness. This Agreement shall be deemed to be effective upon
execution and delivery by nReach, SmartServ, Xxxxxxx Xxxxxxx and Xxxxx Xxxxxxx.
If for any reason all other nReach Shareholders have not delivered signature
pages hereto to SmartServ within 10 business days following the date hereof,
SmartServ may terminate this Agreement upon written notice to nReach.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
the day and date first above written.
NREACH, INC.
By: /s/ Xxxx Xxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxx
Title: CEO
SMARTSERV ONLINE, INC.
By: /s/ Xxxxxx X. Xxxx
-------------------------------------
Name: Xxxxxx X. Xxxx
Title: President & CEO
NREACH SHAREHOLDERS:
/s/ Xxxx Xxxxxxx /s/ Xxxxx Xxxxxxx
------------------------------- ----------------------------------------
Xxxx Xxxxxxx Xxxxx Xxxxxxx
/s/ Xxxx Xxxxx /s/ Xxxxx Xxxxxxx
------------------------------- ----------------------------------------
Xxxx Xxxxx Xxxxx Xxxxxxx
/s/ Xxxxx Xxxxxxx /s/ Xxx Xxxxxx
------------------------------- ----------------------------------------
Xxxxx Xxxxxxx Xxx Xxxxxx
/s/ C. Xxxxxx Xxxxx /s/ E. Xxx Xxxxxxxx, Member
------------------------------- ----------------------------------------
C. Xxxxxx Xxxxx JAWLER Investments, LLC
/s/ Xxxx Xxxxxxx /s/ Xxxxxx and Xxxxxxxx Xxxxxx
------------------------------- ----------------------------------------
Xxxx Xxxxxxx Xxxxxx and Xxxxxxxx Xxxxxx
/s/ Xxxxxx Xxxxxx
-------------------------------
Fuzion Ventures, LLC
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