SHARE PURCHASE AGREEMENT BY AND AMONG INNOVATIVE SOFTWARE TECHNOLOGIES, INC., XALLES LIMITED, AND MERIDIAN BAY LIMITED DATED OCTOBER 1, 2007
SHARE
PURCHASE AGREEMENT
BY
AND AMONG
INNOVATIVE
SOFTWARE TECHNOLOGIES, INC.,
XALLES
LIMITED,
AND
MERIDIAN
BAY LIMITED
DATED
OCTOBER
1, 2007
TABLE
OF CONTENTS
1.
|
PURCHASE
AND SALE OF SHARES
|
1
|
||||
2.
|
PURCHASE
PRICE - PAYMENT
|
1
|
||||
2.1
|
Purchase
Price
|
1
|
||||
2.2
|
Payment
of Purchase Price
|
1
|
||||
3.
|
JOINT
AND SEVERAL REPRESENTATIONS AND WARRANTIES OF COMPANY AND
SELLER
|
1
|
||||
3.1
|
Corporate
|
2
|
||||
3.2
|
Sellers
|
3
|
||||
3.3
|
No
Violation
|
3
|
||||
3.4
|
Financial
Statements
|
4
|
||||
3.5
|
Tax
Matters
|
4
|
||||
3.6
|
Accounts
Receivable
|
5
|
||||
3.7
|
Inventory
|
6
|
||||
3.8
|
Absence
of Certain Changes
|
6
|
||||
3.9
|
Absence
of Undisclosed Liabilities
|
7
|
||||
3.10
|
No
Litigation
|
7
|
||||
3.11
|
Compliance
With Laws and Orders
|
8
|
||||
3.12
|
Title
to and Condition of Properties
|
9
|
||||
3.13
|
Insurance
|
11
|
||||
3.14
|
Contracts
and Commitments
|
11
|
||||
3.15
|
Industrial
Matters
|
13
|
||||
3.16
|
Employees
Benefit Plans
|
13
|
||||
3.17
|
Employment
Compensation
|
13
|
||||
3.18
|
Trade
Rights
|
13
|
||||
3.19
|
Major
Customers and Suppliers
|
14
|
||||
3.20
|
Product
Warranty and Product Liability
|
15
|
||||
3.21
|
Bank
Accounts
|
15
|
||||
3.22
|
Affiliates’
Relationships to Company
|
16
|
||||
3.23
|
Assets
Necessary to Business
|
16
|
||||
3.24
|
No
Brokers or Finders
|
16
|
||||
3.25
|
Disclosure
|
16
|
||||
3.26
|
Investment
Intent
|
16
|
||||
4.
|
REPRESENTATIONS
AND WARRANTIES OF BUYER
|
16
|
||||
4.1
|
Corporate
|
17
|
||||
4.2
|
Authority
|
17
|
||||
4.3
|
No
Brokers or Finders
|
17
|
||||
4.4
|
Disclosure
|
17
|
||||
4.5
|
Investment
Intent
|
17
|
-ii-
5.
|
COVENANTS
|
18
|
||||
5.1
|
Noncompetition
Agreement
|
18
|
||||
5.2
|
Noncompetition;
Confidentiality
|
18
|
||||
5.3
|
General
Releases
|
19
|
||||
5.4
|
Access
to Information and Records
|
19
|
||||
5.5
|
Conduct
of Business Pending the Closing
|
20
|
||||
5.6
|
Consents
|
21
|
||||
5.7
|
Other
Action
|
21
|
||||
5.8
|
Disclosure
Schedule
|
21
|
||||
6.
|
CONDITIONS
PRECEDENT TO BUYER’S OBLIGATIONS
|
21
|
||||
6.1
|
Representations
and Warranties True of the Closing Date
|
21
|
||||
6.2
|
Compliance
With Agreement
|
22
|
||||
6.3
|
Absence
of Litigation
|
22
|
||||
6.4
|
Consents
and Approvals
|
22
|
||||
6.5
|
Due
Diligence
|
22
|
||||
6.6
|
Shareholder
Approval
|
22
|
||||
7.
|
CONDITIONS
PRECEDENT TO SELLER’S OBLIGATIONS
|
22
|
||||
7.1
|
Representations
and Warranties True on the Closing Date
|
22
|
||||
7.2
|
Compliance
With Agreement
|
22
|
||||
7.3
|
Absence
of Litigation
|
23
|
||||
7.4
|
Redomicile
of Buyer
|
23
|
||||
8.
|
INDEMNIFICATION
|
23
|
||||
8.1
|
By
Seller
|
23
|
||||
8.2
|
By
Buyer
|
23
|
||||
8.3
|
Indemnification
of Third-Party Claims
|
23
|
||||
8.4
|
Payment
|
24
|
||||
9.
|
CLOSING
|
25
|
||||
9.1
|
Documents
to be Delivered by Company and Seller
|
25
|
||||
9.2
|
Documents
to be Delivered by Buyer
|
26
|
||||
10.
|
TERMINATION
|
27
|
||||
10.1
|
Right
of Termination Without Breach
|
27
|
||||
10.2
|
Termination
for Breach
|
27
|
||||
11.
|
RESOLUTION
OF DISPUTES
|
28
|
||||
11.1
|
Jurisdiction
|
28
|
||||
11.2
|
Confidentiality
|
28
|
||||
11.3
|
Continued
Performance
|
28
|
||||
11.4
|
Tolling
|
28
|
||||
11.5
|
Escrow
Agent Unnecessary
|
28
|
-iii-
12.
|
MISCELLANEOUS
|
28
|
||||
12.1
|
Disclosure
Schedule
|
28
|
||||
12.2
|
Further
Assurance
|
29
|
||||
12.3
|
Disclosures
and Announcements
|
29
|
||||
12.4
|
Assignment;
Parties in Interest
|
29
|
||||
12.5
|
Law
Governing Agreement
|
29
|
||||
12.6
|
Amendment
and Modification
|
29
|
||||
12.7
|
Notice
|
30
|
||||
12.8
|
Expenses
|
31
|
||||
12.9
|
Entire
Agreement
|
32
|
||||
12.10
|
Counterparts
|
32
|
||||
12.11
|
Headings
|
32
|
||||
12.12
|
Glossary
of Terms
|
32
|
||||
13.
|
SIGNATURES
|
34
|
||||
14.
|
PAYMENT
OF PURCHASE PRICE
|
35
|
||||
14.1
|
PAYMENT
SCHEDULE
|
35
|
||||
14.2
|
MAKEUP
PROVISIONS
|
35
|
||||
14.3
|
DEFINITIONS
|
36
|
||||
14.4
|
TIMING
|
36
|
-iv-
Disclosure
Schedule
Schedule
3.1.(c)
|
-
|
Foreign
Corporation Qualification
|
Schedule
3.1.(d)
|
-
|
Subsidiaries
|
Schedule
3.1.(d)
|
-
|
Officers
and Directors
|
Schedule
3.1.(f)
|
-
|
Seller
List
|
Schedule
3.3
|
-
|
Violation,
Conflict, Default
|
Schedule
3.4
|
-
|
Financial
Statements
|
Schedule
3.5.(b)
|
-
|
Tax
Returns (Exceptions to Representations)
|
Schedule
3.5.(c)
|
-
|
Tax
Audits
|
Schedule
3.5.(d)
|
-
|
Consolidated
Tax Returns
|
Schedule
3.5.(e)
|
-
|
Tax,
Other
|
Schedule
3.6
|
-
|
Accounts
Receivable (Aged Schedule)
|
Schedule
3.7
|
-
|
Inventory
Off Premises
|
Schedule
3.8
|
-
|
Certain
Changes
|
Schedule
3.9
|
-
|
Off-Balance
Sheet Liabilities
|
Schedule
3.10
|
-
|
Litigation
Matters
|
Schedule
3.11.(a)
|
-
|
Non-Compliance
with Laws
|
Schedule
3.11.(a)(iii)
|
-
|
Licenses
and Permits
|
Schedule
3.11.(c)
|
-
|
Environmental
Matters (Exceptions to Representations)
|
Schedule
3.12
|
-
|
Liens
|
Schedule
3.12.(c)
|
-
|
Owned
Real Property
|
Schedule
3.13
|
-
|
Insurance
|
Schedule
3.14.(a)
|
-
|
Real
Property Leases
|
Schedule
3.14.(b)
|
-
|
Personal
Property Leases
|
Schedule
3.14.(f)
|
-
|
Collective
Bargaining Agreements
|
Schedule
3.14.(g)
|
-
|
Loan
Agreements, etc.
|
Schedule
3.14.(h)
|
-
|
Guarantees
|
Schedule
3.14.(k)
|
-
|
Material
Contracts
|
Schedule
3.15
|
-
|
Employment
Matters
|
Schedule
3.17
|
-
|
Employment
Compensation
|
Schedule
3.18
|
-
|
Trade
Rights
|
Schedule
3.19.(a)
|
-
|
Major
Customers
|
Schedule
3.19.(b)
|
-
|
Major
Suppliers
|
Schedule
3.19.(c)
|
-
|
Dealers
and Distributors
|
Schedule
3.20
|
-
|
Product
Warranty, Warranty Expense and Liability Claims
|
Schedule
3.21
|
-
|
Bank
Accounts
|
Schedule
3.22.(a)
|
-
|
Contracts
with Affiliates
|
Schedule
3.22.(c)
|
-
|
Obligations
of and to Affiliates
|
-v-
SHARE
PURCHASE AGREEMENT (this “Agreement”) dated October 1, 2007, BETWEEN Innovative
Software Technologies, Inc., a California corporation (“Buyer”, which expression
shall include its successors and permitted assigns) of the first part, Xalles
Limited, a company incorporated under the laws of Ireland and having its
registered office at 3rd Floor, Xxxxxxx Xxxxx, Xxxxx Xxxxxx, Xxxxxx 0, Xxxxxxx
with registration number 358935 (“Company”, which expression shall include its
successors and permitted assigns) of the second part, and Meridian Bay Limited,
a Hong Kong corporation (“Seller”, which expression shall include its successors
and permitted assigns) of the third part.
A. Company
is engaged in consulting (the “Business”). Seller owns all of the issued share
capital of Company (the “Ordinary Shares”).
B. Buyer
desires to purchase the Ordinary Shares from Seller and Seller desires to sell
the Ordinary Shares to Buyer, upon the terms and conditions herein set
forth.
1.
|
PURCHASE
AND SALE OF SHARES
|
Subject
to the terms and conditions of this Agreement, on the Closing Date (as
hereinafter defined) Seller shall sell to Buyer and Buyer shall purchase from
Seller all the Ordinary Shares.
2.
|
PURCHASE
PRICE - PAYMENT
|
2.1
|
Purchase
Price.
|
The
purchase price (the “Purchase Price”) payable for the Ordinary Shares shall be
up to Sixty million (60,000,000) shares of common stock of Buyer (“Buyer
Shares”). Buyer Shares shall not be registered and shall carry the usual
restrictive legend.
2.2
|
Payment
of Purchase Price.
|
The
Purchase Price shall be paid in accordance with Exhibit A.
3.
|
JOINT
AND SEVERAL REPRESENTATIONS AND WARRANTIES OF COMPANY AND
SELLER
|
Company
and Seller, jointly and severally, make the following representations and
warranties to Buyer, each of which is true and correct on the date hereof,
shall
remain true and correct to and including the Closing Date, shall be unaffected
by any investigation heretofore or hereafter made by Buyer, or any knowledge
of
Buyer other than as specifically disclosed in the Disclosure Schedule delivered
to Buyer at the time of the execution of this Agreement, and shall survive
the
Closing of the transactions provided for herein.
3.1
|
Corporate.
|
3.1.(a) Organization.
Company
is a company duly organized, validly existing and in good standing under the
laws of the Republic of Ireland.
3.1.(b) Corporate
Power.
Company
has all requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as and where such is now being
conducted.
3.1.(c) Qualification.
Company
is duly licensed or qualified to do business as a foreign corporation, and
is in
good standing, in each jurisdiction wherein the character of the properties
owned or leased by it, or the nature of its business, makes such licensing
or
qualification necessary. The states in which Company is licensed or qualified
to
do business are listed in Schedule 3.1.(c).
3.1.(d) Subsidiaries.
Company
does not own any interest in any corporation, partnership or other
entity.
3.1.(e) Corporate
Documents, etc.
The
copies of the Memorandum and Articles of Association of the Company, including
any amendments thereto, which have been delivered by Seller to Buyer are true,
correct and complete copies of such instruments as presently in effect. The
statutory books and share register of the Company which have been furnished
to
Buyer for inspection are true, correct and complete and accurately reflect
all
material corporate action taken by the Company. The directors and officers
of
the Company are listed in Schedule 3.1.(e).
3.1.(f) Capitalization
of the Company.
The
authorized share capital of the Company consists entirely of 100,000 Ordinary
Shares of €1.00 each. No such Ordinary Shares are issued or outstanding except
for one (1) Ordinary Share of the Company which is owned legally and
beneficially by the Seller in the respective numbers set forth in Schedule
3.1.(f). The said Ordinary Share of the Company is validly issued, fully paid
and non-assessable. There are no (a) securities convertible into or exchangeable
for any of the Company’s capital or other securities, (b) options, warrants or
other rights to purchase or subscribe to capital or other securities of the
Company or securities which are convertible into or exchangeable for capital
or
other securities of the Company, or (c) contracts, commitments, agreements,
understandings or arrangements of any kind relating to the issuance, sale or
transfer of any capital or other equity securities of the Company, any such
convertible or exchangeable securities or any such options, warrants or other
rights.
-2-
3.2
|
Sellers.
|
3.2.(a) Power.
Seller
has full power, legal right and authority to enter into, execute and deliver
this Agreement and the other agreements, instruments and documents contemplated
hereby (such other documents sometimes referred to herein as “Ancillary
Instruments”), and to carry out the transactions contemplated
hereby.
3.2.(b) Authorization.
The
execution and delivery of this Agreement and the Ancillary Instruments, and
full
performance thereunder, have been duly authorized by the respective boards
of
directors and the shareholders of Seller which is a corporation, and no other
or
further corporate act on the part of any such shareholders is necessary
therefor.
3.2.(c) Validity.
This
Agreement has been duly and validly executed and delivered by each Seller and
is, and when executed and delivered each Ancillary Instrument will be, the
legal, valid and binding obligation of such Seller, enforceable in accordance
with its terms, except as such may be limited by bankruptcy, insolvency,
reorganization or other laws affecting creditors’ rights generally, and by
general equitable principles.
3.2.(d) Title.
Each
Seller has, and at Closing Buyer will receive, good and marketable title to
the
Ordinary Shares to be sold by such Seller hereunder, free and clear of all
Liens
(as defined in Section 3.12) including, without limitation, voting trusts or
agreements, proxies, marital or community property interests.
3.3
|
No
Violation.
|
Except
as
set forth on Schedule 3.3, neither the execution and delivery of this Agreement
or the Ancillary Instruments nor the consummation by Company and Seller of
the
transactions contemplated hereby and thereby (a) will violate any statute,
law,
ordinance, rule or regulation (collectively, “Laws”) or any order, writ,
injunction, judgment, plan or decree (collectively, “Orders”) of any court,
arbitrator, department, commission, board, bureau, agency, authority,
instrumentality or other body, whether federal, state, national, municipal,
foreign or other (collectively, “Government Entities”), (b) except for
applicable requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of
1976 (the “HSR Act”) and/or the Xxxxxxxxxxx Xxx, 0000, will require any
authorization, consent, approval, exemption or other action by or notice to
any
Government Entity (including, without limitation, under any “plant-closing” or
similar law), or (c) subject to obtaining the consents referred to in Schedule
3.3, will violate or conflict with, or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default) under, or
will result in the termination of, or accelerate the performance required by,
or
result in the creation of any Lien upon any of the assets of Company (or the
Ordinary Shares) under, any term or provision of the Memorandum and Articles
of
Association of the Company or of any contract, commitment, understanding,
arrangement, agreement or restriction of any kind or character to which Company
or Seller is a party or by which Company or Seller or any of its or their assets
or properties may be bound or affected.
-3-
3.4
|
Financial
Statements.
|
Included
as Schedule 0
are true
and complete copies of the financial statements of Company consisting of
the
unaudited balance sheets of the Company as of December 31, 2005 and 2006,
and as
of August 31, 2007, (the “Recent Balance Sheet”) and the related statements of
income for the periods ended December 31, 2006 and August 31, 2007. All of
such
financial statements (including all notes and schedules contained therein
or
annexed thereto) are true, complete and accurate, have been prepared in
accordance with generally accepted accounting principles (except, in the
case of
unaudited statements, for the absence of footnote disclosure) applied on
a
consistent basis, have been prepared in accordance with the books and records
of
Company, and fairly present, in accordance with generally accepted accounting
principles, the assets, liabilities and financial position and the results
of
operations of the Company as of the dates and for the years and periods
indicated.
3.5
|
Tax
Matters.
|
3.5.(a) Provision
For Taxes.
The
provision made for taxes on the Recent Balance Sheet is sufficient for the
payment of all national, foreign, local and other income, VAT, excise, profits,
franchise, occupation, property, payroll, sales, use, gross receipts and other
taxes (and any interest and penalties) and assessments, whether or not disputed,
(collectively, "Taxes") at the date of the Recent Balance Sheet and for all
years and periods prior thereto. Since the date of the Recent Balance Sheet,
Company has not incurred any taxes other than taxes incurred in the ordinary
course of business consistent in type and amount with past practices of
Company.
3.5.(b) Tax
Returns Filed.
Except
as set forth on Schedule 3.5.(b), all notices, returns (including any land
transaction returns), reports, accounts, computations, statements, assessments
and registrations and any other necessary information submitted by the Company
to the Irish Revenue Commissioners and any other governmental or other authority
whatsoever competent to impose Taxes on Company ("Taxation Authority") for
the
purposes of Taxes have been made on a proper basis, were submitted within
applicable time limits, were accurate and complete when submitted and remain
accurate and complete in all material respects. None of the above is, or is
likely to be, the subject of any material dispute with any Taxation Authority.
All Taxes for which the Company has been liable to account have been duly paid
(insofar as such Taxes ought to have been paid). True and complete copies of
all
tax returns or reports filed by Company for each of its two most recent fiscal
years have been delivered to Buyer. Company has duly withheld and paid all
taxes
which it is required to withhold and pay relating to salaries and other
compensation heretofore paid to the employees of Company.
-4-
3.5.(c) Tax
Audits.
Company
is not involved in any dispute with any Taxation Authority and has not, within
the past 24 months, been subject to any visit, audit, investigation, discovery
or access order by any Taxation Authority. Seller is not aware of any
circumstances existing which make it likely that a visit, audit, investigation,
discovery or access order will be made in the next 12 months. The amount of
Taxes chargeable to Company during any accounting period ending on or within
the
six years before Closing has not, to any material extent, depended on any
concession, agreement or other formal or informal arrangement with any Taxation
Authority.
3.5.(d) Consolidated
Group.
Schedule 3.5.(d) lists every year Company was a member of a group of companies
or of an affiliated group of corporations that filed a consolidated tax return
on which the statute of limitations does not bar a federal tax assessment,
and
each corporation that has been part of such group. No affiliated group of
corporations of which Company has been a member has discontinued filing
consolidated returns during the past five years.
3.5.(e) Other.
Except
as set forth in Schedule 3.5.(e), since inception Company has not committed
any
act nor made any omission which might constitute an offence under Section 1078
of the Taxes Consolidation Xxx 0000 ("TCA"). The making of returns, payment
of
preliminary tax and all other requirements of Sections 950 to 959 of the TCA
have been complied with fully by Company. No surcharge under Section 1084 of
the
TCA has or will become payable in respect of any period ending prior to
Completion. No notice of attachment has been served on Company nor in relation
to any funds of the Company under Section 1002 of the TCA. The Company has
not
made a relevant investment within the meaning of Section 481 and Schedule 32,
Paragraph 22 of the TCA.
3.6
|
Accounts
Receivable.
|
All
accounts receivable of Company reflected on the Recent Balance Sheet, and
as
incurred in the normal course of business since the date thereof, represent
arm’s length sales actually made in the ordinary course of business; are
collectible (net of the reserve shown on the Recent Balance Sheet for doubtful
accounts) in the ordinary course of business without the necessity of commencing
legal proceedings; are subject to no counterclaim or setoff; and are not
in
dispute. Schedule 0
contains
an aged schedule of accounts receivable included in the Recent Balance
Sheet.
-5-
3.7
|
Inventory.
|
All
inventory of Company reflected on the Recent Balance Sheet consists of a quality
and quantity useable and saleable in the ordinary course of business, had a
commercial value at least equal to the value shown on such balance sheet and
is
valued in accordance with generally accepted accounting principles at the lower
of cost or market. All inventory purchased since the date of such balance sheet
consists of a quality and quantity useable and saleable in the ordinary course
of business. Except as set forth in Schedule 3.7, all inventory of Company
is
located on premises owned or leased by Company as reflected in this Agreement.
3.8
|
Absence
of Certain Changes.
|
Except
as
and to the extent set forth in Schedule 3.8, since the date of the Recent
Balance Sheet there have been:
3.8.(a) No
Adverse Change.
Any
adverse change in the financial condition, assets, liabilities, business,
prospects or operations of Company;
3.8.(b) No
Damage.
Any
loss, damage or destruction, whether covered by insurance or not, affecting
Company’s business or properties;
3.8.(c) No
Increase in Compensation.
Any
increase in the compensation, salaries or wages payable or to become payable
to
any employee or agent of Company (including, without limitation, any increase
or
change pursuant to any bonus, pension, profit sharing, retirement or other
plan
or commitment), or any bonus or other employee benefit granted, made or
accrued;
3.8.(d) No
Industrial Disputes.
Any
industrial dispute or disturbance, other than routine individual grievances
which are not material to the business, financial condition or results of
operations of Company.
3.8.(e) No
Commitments.
Any
commitment or transaction by Company (including, without limitation, any
borrowing or capital expenditure) other than in the ordinary course of business
consistent with past practice;
3.8.(f) No
Dividends.
Any
declaration, setting aside, or payment of any dividend or any other distribution
in respect of Company’s capital stock; any redemption, purchase or other
acquisition by Company of any capital stock of Company, or any security relating
thereto; or any other payment to any Seller of Company as such a
Seller;
3.8.(g) No
Disposition of Property.
Any
sale, lease or other transfer or disposition of any properties or assets of
Company, except for the sale of inventory items in the ordinary course of
business;
3.8.(h) No
Indebtedness.
Any
indebtedness for borrowed money incurred, assumed or guaranteed by
Company;
-6-
3.8.(i) No
Liens.
Any
mortgage, pledge, lien or encumbrance made on any of the properties or assets
of
Company;
3.8.(j) No
Amendment of Contracts.
Any
entering into, amendment or termination by Company of any contract, or any
waiver of material rights thereunder, other than in the ordinary course of
business;
3.8.(k) Loans
and Advances.
Any
loan or advance (other than advances to employees in the ordinary course of
business for travel and entertainment in accordance with past practice) to
any
person including, but not limited to, any Affiliate (for purposes of this
Agreement, the term “Affiliate” shall mean and include all Seller, directors and
officers of Company; the spouse of any such person; any person who would be
the
heir or descendant of any such person if he or she were not living; and any
entity in which any of the foregoing has a direct or indirect interest, except
through ownership of less than 5% of the outstanding shares of any entity whose
securities are listed on a national securities exchange or traded in the
national over-the-counter market);
3.8.(l) Credit.
Any
grant of credit to any customer or distributor on terms or in amounts more
favorable than those which have been extended to such customer or distributor
in
the past, any other change in the terms of any credit heretofore extended,
or
any other change of Company’s policies or practices with respect to the granting
of credit; or
3.8.(m) No
Unusual Events.
Any
other event or condition not in the ordinary course of business of
Company.
3.9
|
Absence
of Undisclosed Liabilities.
|
Except
as
and to the extent specifically disclosed in the Recent Balance Sheet, or in
Schedule 3.9, Company does not have any liabilities, commitments or obligations
(secured or unsecured, and whether accrued, absolute, contingent, direct,
indirect or otherwise), other than commercial liabilities and obligations
incurred since the date of the Recent Balance Sheet in the ordinary course
of
business and consistent with past practice and none of which has or will have
a
material adverse effect on the business, financial condition or results of
operations of Company. Except as and to the extent described in the Recent
Balance Sheet or in Schedule 3.9, neither Company nor any Seller has knowledge
of any basis for the assertion against Company of any liability and there are
no
circumstances, conditions, happenings, events or arrangements, contractual
or
otherwise, which may give rise to liabilities, except commercial liabilities
and
obligations incurred in the ordinary course of Company’s business and consistent
with past practice.
3.10
|
No
Litigation.
|
Except
as
set forth in Schedule 3.10 there is no action, suit, arbitration, proceeding,
investigation or inquiry, whether civil, criminal or administrative
(“Litigation”) pending or threatened against Company, its directors (in such
capacity), its business or any of its assets, nor does Company or Seller know,
or have grounds to know, of any basis for any Litigation. Schedule 3.10 also
identifies all Litigation to which Company or any of its directors (in such
capacity) have been parties since Inception. Except as set forth in Schedule
3.10, neither Company nor its business assets are subject to any Order of any
Government Entity.
-7-
3.11
|
Compliance
With Laws and Orders.
|
3.11.(a) Compliance.
Except
as set forth in Schedule 3.11.(a), Company (including each and all of its
operations, practices, properties and assets) is in compliance with all
applicable Laws and Orders, including, without limitation, those applicable
to
discrimination in employment, occupational safety and health, trade practices,
competition and pricing, product warranties, planning, building and sanitation,
employment, retirement and industrial relations, product advertising and the
Environmental Laws as hereinafter defined. Except as set forth in Schedule
3.11.(a), Company has not received notice of any violation or alleged violation
of, and is subject to no Liability for past or continuing violation of, any
Laws
or Orders. All reports and returns required to be filed by Company with any
Government Entity have been filed, and were accurate and complete when filed.
Without limiting the generality of the foregoing:
(i) The
operation of Company’s business as it is now conducted does not, nor does any
condition existing at any of the Facilities, in any manner constitute a nuisance
or other tortious interference with the rights of any person or persons in
such
a manner as to give rise to or constitute the grounds for a suit, action, claim
or demand by any such person or persons seeking compensation or damages or
seeking to restrain, enjoin or otherwise prohibit any aspect of the conduct
of
such business or the manner in which it is now conducted.
(ii) Company
has made all required payments to its unemployment compensation reserve accounts
with the appropriate governmental departments of the states where it is required
to maintain such accounts, and each of such accounts has a positive
balance.
(iii) Company
has delivered to Buyer copies of all reports of Company since Inception required
under the Safety, Health and Welfare at Work Xxx 0000 and under all other
applicable health and safety laws and regulations. The deficiencies, if any,
noted on such reports have been corrected.
3.11.(b) Licenses
and Permits.
Company
has all licenses, permits, approvals, authorizations and consents of all
Government Entities and all certification organizations required for the conduct
of the business (as presently conducted and as proposed to be conducted) and
operation of the Facilities. All such licenses, permits, approvals,
authorizations and consents are described in Schedule 3.11.(a)(iii), are in
full
force and effect and will not be affected or made subject to loss, limitation
or
any obligation to reapply as a result of the transactions contemplated hereby.
Except as set forth in Schedule 3.11.(a)(iii), Company (including its
operations, properties and assets) is and has been in compliance with all such
permits and licenses, approvals, authorizations and consents.
-8-
3.11.(c) Environmental
Matters.
The
applicable Laws relating to pollution or protection of the environment,
including Laws relating to emissions, discharges, generation, storage, releases
or threatened releases of pollutants, contaminants, chemicals or industrial,
toxic, hazardous or petroleum or petroleum-based substances or wastes (“Waste”)
into the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of (collectively, “Environmental Laws”). Without limiting
the generality of the foregoing provisions of this Section 3.11, Company is
in
full compliance with all limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained
in
the Environmental Laws or contained in any regulations, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder. Except as set forth in Schedule 3.11.(c),
there is Litigation nor any demand, claim, hearing or notice of violation
pending or threatened against Company relating in any way to the Environmental
Laws or any Order issued, entered, promulgated or approved thereunder. Except
as
set forth in Schedule 3.11.(c), there are no past or present (or, to the best
of
Company’s and Seller’s knowledge), future events, conditions, circumstances,
activities, practices, incidents, actions, omissions or plans which may
interfere with or prevent compliance or continued compliance with the
Environmental Laws or with any Order issued, entered, promulgated or approved
thereunder, or which may give rise to any liability, or otherwise form the
basis
of any Litigation, hearing, notice of violation, study or investigation, based
on or related to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, or the emission, discharge, release
or
threatened release into the environment, of any Waste.
3.12
|
Title
to and Condition of Properties.
|
3.12.(a) Marketable
Title.
Company
has good and marketable title to all of Company’s assets, business and
properties, including, without limitation, all such properties (tangible and
intangible) reflected in the Recent Balance Sheet, except for inventory disposed
of in the ordinary course of business since the date of such Recent Balance
Sheet, free and clear of all mortgages, liens, (statutory or otherwise) security
interests, claims, pledges, licenses, equities, options, conditional sales
contracts, assessments, levies, easements, covenants, reservations,
restrictions, rights-of-way, exceptions, limitations, charges or encumbrances
of
any nature whatsoever (collectively, “Liens”) except those described in Schedule
3.12 and, in the case of real property, Liens for taxes not yet due or which
are
being contested in good faith by appropriate proceedings (and which have been
sufficiently accrued or reserved against in the Recent Balance Sheet), municipal
and zoning ordinances and easements for public utilities, none of which
interfere with the use of the property as currently utilized. None of Company’s
assets, business or properties is subject to any restrictions with respect
to
the transferability thereof; and the Company’s title thereto will not be
affected in any way by the transactions contemplated hereby.
-9-
3.12.(b) Condition.
All
property and assets owned or utilized by Company are in good operating condition
and repair, free from any defects (except such minor defects as do not interfere
with the use thereof in the conduct of the normal operations of Company), have
been maintained consistent with the standards generally followed in the industry
and are sufficient to carry on the business of Company as conducted during
the
preceding 12 months. All buildings, plants and other structures owned or
otherwise utilized by Company are in good condition and repair and have no
structural defects or defects affecting the plumbing, electrical, sewerage,
or
heating, ventilating or air conditioning systems.
3.12.(c) Real
Property.
Schedule 3.12.(c) sets forth all real property owned, used or occupied by
Company (the “Real Property”), including a description of all land, and all
encumbrances, easements or rights of way of record (or, if not of record, of
which Company has notice or knowledge) granted on or appurtenant to or otherwise
affecting such Real Property, the zoning classification thereof, and all plants,
buildings or other structures located thereon. Schedule 3.12.(c) also sets
forth, with respect to each parcel of Real Property which is leased, the
material terms of such lease. There are now in full force and effect duly issued
certificates of occupancy permitting the Real Property and improvements located
thereon to be legally used and occupied as the same are now constituted. All
of
the Real Property has permanent rights of access to dedicated public highways.
No fact or condition exists which would prohibit or adversely affect the
ordinary rights of access to and from the Real Property from and to the existing
highways and roads and there is no pending or threatened restriction or denial,
governmental or otherwise, upon such ingress and egress. There is not (i) any
claim of adverse possession or prescriptive rights involving any of the Real
Property, (ii) any structure located on any Real Property which encroaches
on or
over the boundaries of neighboring or adjacent properties or (iii) any structure
of any other party which encroaches on or over the boundaries of any of such
Real Property. None of the Real Property is located in a flood plain, flood
hazard area, wetland or lakeshore erosion area within the meaning of any Law,
regulation or ordinance. No public improvements have been commenced and to
Company’s and Seller’s knowledge none are planned which in either case may
result in special assessments against or otherwise materially adversely affect
any Real Property. No portion of any of the Real Property has been used as
a
landfill or for storage or landfill of hazardous or toxic materials. Neither
Company nor any Seller has notice or knowledge of any (i) planned or proposed
increase in assessed valuations of any Real Property, (ii) Order requiring
repair, alteration, or correction of any existing condition affecting any Real
Property or the systems or improvements thereat, (iii) condition or defect
which
could give rise to an order of the sort referred to in “(ii)” above, (iv)
underground storage tanks, or any structural, mechanical, or other defects
of
material significance affecting any Real Property or the systems or improvements
thereat (including, but not limited to, inadequacy for normal use of mechanical
systems or disposal or water systems at or serving the Real Property), or (v)
work that has been done or labor or materials that has or have been furnished
to
any Real Property during the period of six (6) months immediately preceding
the
date of this Agreement for which liens could be filed against any of the Real
Property.
-10-
3.12.(d) No
Condemnation or Expropriation.
Neither
the whole nor any portion of the property or any other assets of Company is
subject to any Order to be sold or is being condemned, expropriated or otherwise
taken by any Government Entity with or without payment of compensation therefor,
nor to the best of Company’s and Seller’ knowledge has any such condemnation,
expropriation or taking been proposed.
3.13
|
Insurance.
|
Set
forth
in Schedule 3.13 is a complete and accurate list and description of all policies
of fire, liability, product liability, workers compensation, health and other
forms of insurance presently in effect with respect to the business and
properties of Company, true and correct copies of which have heretofore been
delivered to Buyer. Schedule 3.13 includes, without limitation, the carrier,
the
description of coverage, the limits of coverage, retention or deductible
amounts, amount of annual premiums, date of expiration and the date through
which premiums have been paid with respect to each such policy, and any pending
claims in excess of €5,000. All such policies are valid, outstanding and
enforceable policies and provide insurance coverage for the properties, assets
and operations of Company, of the kinds, in the amounts and against the risks
customarily maintained by organizations similarly situated; and no such policy
(nor any previous policy) provides for or is subject to any currently
enforceable retroactive rate or premium adjustment, loss sharing arrangement
or
other actual or contingent liability arising wholly or partially out of events
arising prior to the date hereof. Schedule 3.13 indicates each policy as to
which (a) the coverage limit has been reached or (b) the total incurred losses
to date equal 75% or more of the coverage limit. No notice of cancellation
or
termination has been received with respect to any such policy, and neither
Company nor any Seller has knowledge of any act or omission of Company which
could result in cancellation of any such policy prior to its scheduled
expiration date. Company has not been refused any insurance with respect to
any
aspect of the operations of the business nor has its coverage been limited
by
any insurance carrier to which it has applied for insurance or with which it
has
carried insurance during the last three years. Company has duly and timely
made
all claims it has been entitled to make under each policy of insurance. Since
Inception all products liability and general liability policies maintained
by or
for the benefit of Company have been “occurrence” policies and not “claims made”
policies. There is no claim by Company pending under any such policies as to
which coverage has been questioned, denied or disputed by the underwriters
of
such policies, and neither Company nor any of the Seller knows of any basis
for
denial of any claim under any such policy. Company has not received any written
notice from or on behalf of any insurance carrier issuing any such policy that
insurance rates therefor will hereafter be substantially increased (except
to
the extent that insurance rates may be increased for all similarly situated
risks) or that there will hereafter be a cancellation or an increase in a
deductible (or an increase in premiums in order to maintain an existing
deductible) or non-renewal of any such policy. Such policies are sufficient
in
all material respects for compliance by Company with all requirements of law
and
with the requirements of all material contracts to which Company is a
party.
3.14
|
Contracts
and Commitments.
|
3.14.(a) Real
Property Leases.
Except
as set forth in Schedule 3.12.(c), Company has no leases of real
property.
-11-
3.14.(b) Personal
Property Leases.
Except
as set forth in Schedule 3.14.(b), Company has no leases of personal property
involving consideration or other expenditure in excess of €5,000 or involving
performance over a period of more than twelve months.
3.14.(c) Purchase
Commitments.
Company
has no purchase commitments for inventory items or supplies that, together
with
amounts on hand, constitute in excess of three months normal usage, or which
are
at an excessive price.
3.14.(d) Contracts
With Affiliates and Certain Others.
Company
has no agreement, understanding, contract or commitment (written or oral) with
any Affiliate or any employee, agent, consultant, distributor, dealer or
franchisee that is not cancelable by Company on notice of not longer than 30
days without liability, penalty or premium of any nature or kind
whatsoever.
3.14.(e) Powers
of Attorney.
The
Company has not given a power of attorney, which is currently in effect, to any
person, firm or corporation for any purpose whatsoever.
3.14.(f) Collective
Bargaining Agreements.
Except
as set forth in Schedule 3.14.(f), Company is not a party to any collective
bargaining agreements with any unions, guilds, shop committees or other
collective bargaining groups. Copies of all such agreements have heretofore
been
delivered to Buyer.
3.14.(g) Loan
Agreements.
Except
as set forth in Schedule 3.14.(g), Company is not obligated under any loan
agreement, promissory note, letter of credit, or other evidence of indebtedness
as a signatory, guarantor or otherwise.
3.14.(h) Guarantees.
Except
as disclosed on Schedule 3.14.(h), Company has not guaranteed the payment or
performance of any person, firm or corporation, agreed to indemnify any person
or act as a surety, or otherwise agreed to be contingently or secondarily liable
for the obligations of any person.
3.14.(i) Contracts
Subject to Renegotiation.
Company
is not a party to any contract with any governmental body which is subject
to
renegotiation.
3.14.(j) Burdensome
or Restrictive Agreements.
Company
is not a party to nor is it bound by any agreement, deed, lease or other
instrument which is so burdensome as to materially affect or impair the
operation of Company. Without limiting the generality of the foregoing, Company
is not a party to nor is it bound by any agreement requiring Company to assign
any interest in any trade secret or proprietary information, or prohibiting
or
restricting Company from competing in any business or geographical area or
soliciting customers or otherwise restricting it from carrying on its business
anywhere in the world.
3.14.(k) Other
Material Contracts.
Company
has no lease, contract or commitment of any nature involving consideration
or
other expenditure in excess of €5,000, or involving performance over a period of
more than three months, or which is otherwise individually material to the
operations of Company, except as explicitly described in Schedule 3.14.(k)
or in
any other Schedule.
-12-
3.14.(l) No
Default.
Company
is not in default under any lease, contract or commitment, nor has any event
or
omission occurred which through the passage of time or the giving of notice,
or
both, would constitute a default thereunder or cause the acceleration of any
of
Company’s obligations or result in the creation of any Lien on any of the assets
owned, used or occupied by Company. No third party is in default under any
lease, contract or commitment to which Company is a party, nor has any event
or
omission occurred which, through the passage of time or the giving of notice,
or
both, would constitute a default thereunder or give rise to an automatic
termination, or the right of discretionary termination, thereof.
3.15
|
Industrial
Matters.
|
Except
as
set forth in Schedule 3.15, within the last five years Company has not
experienced any industrial disputes, union organization attempts or any work
stoppage due to industrial disagreements in connection with its business.
Company is in compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and is not engaged in any unfair employment practice; (b) there is no unfair
employment practice charge or complaint against Company pending or threatened;
(c) there is no industrial strike, dispute, request for representation, slowdown
or stoppage actually pending or threatened against or affecting Company nor
any
secondary boycott with respect to products of Company; (d) no question
concerning representation has been raised or is threatened respecting the
employees of Company; (e) no grievance which might have a material adverse
effect on Company, nor any arbitration proceeding arising out of or under
collective bargaining agreements, is pending and no such claim therefor exists;
and (f) there are no administrative charges or court complaints against Company
concerning alleged employment discrimination or other employment related matters
pending or threatened before the Labour Court, Employment Appeals Tribunal
or
any other Government Entity.
3.16
|
Employees
Benefit Plans.
|
Company
has never had any employees.
3.17
|
Employment
Compensation.
|
Schedule
3.17 contains a true and correct list of all employees to whom Company is paying
compensation, including bonuses and incentives, at an annual rate in excess
of
One hundred Thousand Dollars ($100,000) for services rendered or otherwise;
and
in the case of salaried employees such list identifies the current annual rate
of compensation for each employee and in the case of hourly or commission
employees identifies certain reasonable ranges of rates and the number of
employees falling within each such range.
3.18
|
Trade
Rights.
|
Schedule
3.18 lists all Trade Rights (as defined below) in which Company now has any
interest, specifying whether such Trade Rights are owned, controlled, used
or
held (under license or otherwise) by Company, and also indicating which of
such
Trade Rights are registered. All Trade Rights shown as registered in Schedule
3.18 have been properly registered, all pending registrations and applications
have been properly made and filed and all annuity, maintenance, renewal and
other fees relating to registrations or applications are current. In order
to
conduct the business of Company, as such is currently being conducted or
proposed to be conducted, Company does not require any Trade Rights that it
does
not already have. Company is not infringing and has not infringed any Trade
Rights of another in the operation of the business of Company, nor is any other
person infringing the Trade Rights of Company. Company has not granted any
license or made any assignment of any Trade Right listed on Schedule 3.18,
nor
does Company pay any royalties or other consideration for the right to use
any
Trade Rights of others. There is no Litigation pending or threatened to
challenge Company’s right, title and interest with respect to its continued use
and right to preclude others from using any Trade Rights of Company. All Trade
Rights of Company are valid, enforceable and in good standing, and there are
no
equitable defenses to enforcement based on any act or omission of Company.
The
consummation of the transactions contemplated hereby will not alter or impair
any Trade Rights owned or used by Company. As used herein, the term “Trade
Rights” shall mean and include: (i) all trademark rights, business identifiers,
trade dress, service marks, trade names and brand names, all registrations
thereof and applications therefor and all goodwill associated with the
foregoing; (ii) all copyrights, copyright registrations and copyright
applications, and all other rights associated with the foregoing and the
underlying works of authorship; (iii) all patents and patent applications,
and
all international proprietary rights associated therewith; (iv) all contracts
or
agreements granting any right, title, license or privilege under the
intellectual property rights of any third party; (v) all inventions, mask works
and mask work registrations, know-how, discoveries, improvements, designs,
trade
secrets, shop and royalty rights, employee covenants and agreements respecting
intellectual property and non-competition and all other types of intellectual
property; and (vi) all claims for infringement or breach of any of the
foregoing.
-13-
3.19
|
Major
Customers and Suppliers.
|
3.19.(a) Major
Customers.
Schedule 3.19.(a) contains a list of the two largest customers, including
distributors, of Company for each of the two (2) most recent fiscal years
(determined on the basis of the total dollar amount of net sales) showing the
total dollar amount of net sales to each such customer during each such year.
Neither Company nor Seller has any knowledge or information of any facts
indicating, nor any other reason to believe, that any of the customers listed
on
Schedule 3.19.(a) will not continue to be customers of the business of Company
after the Closing at substantially the same level of purchases as
heretofore.
3.19.(b) Major
Sub-Contractors.
Schedule 3.19.(b) contains a list of the two largest sub-contractors to Company
for each of the two (2) most recent fiscal years (determined on the basis of
the
total dollar amount of payments) showing the total dollar amount of payments
to
each such sub-contractor during each such year. Neither Company nor Seller
has
any knowledge or information of any facts indicating, nor any other reason
to
believe, that any of the sub-contractors listed on Schedule 3.19.(b) will not
continue to be sub-contractors to the business of Company after the Closing
and
will not continue to supply the business with substantially the same quantity
and quality of services at competitive prices.
-14-
3.19.(c) Dealers
and Distributors.
Schedule 3.19.(c) contains a list by product line of all sales representatives,
dealers, distributors and franchisees of Company, together with representative
copies of all sales representative, dealer, distributor and franchise contracts
and policy statements, and a description of all substantial modifications or
exceptions.
3.20
|
Product
Warranty and Product Liability.
|
Schedule
3.20 contains a true, correct and complete copy of Company’s standard warranty
or warranties for sales of Products (as defined below) and, except as stated
therein, there are no warranties, commitments or obligations with respect to
the
return, repair or replacement of Products. Schedule 3.20 sets forth the
estimated aggregate annual cost to Company of performing warranty obligations
for customers for each of the two (2) preceding fiscal years and the current
fiscal year to the date of the Recent Balance Sheet. Schedule 3.20 contains
a
description of all product liability claims and similar Litigation relating
to
products manufactured or sold, or services rendered, which are presently pending
or which to Company’s or any Seller’s knowledge are threatened, or which have
been asserted or commenced against Company within the last two (2) years, in
which a party thereto either requests injunctive relief or alleges damages
(whether or not covered by insurance). There are no defects in design,
construction or manufacture of Products which would adversely affect performance
or create an unusual risk of injury to persons or property. None of the Products
has been the subject of any replacement, field fix, retrofit, modification
or
recall campaign by Company and, to Company’s or any Seller’s knowledge, no facts
or conditions exist which could reasonably be expected to result in such a
recall campaign. The Products have been designed and manufactured so as to
meet
and comply with all governmental standards and specifications currently in
effect. Such products have received all governmental approvals necessary to
allow their sale and use. As used in this Section 3.20, the term “Products”
means any and all products currently or at any time previously manufactured,
distributed or sold by Company, or by any predecessor of Company under any
brand
name or xxxx under which products are or have been manufactured, distributed
or
sold by Company.
3.21
|
Bank
Accounts.
|
Schedule
3.21 sets forth the names and locations of all banks, trust companies, savings
and loan associations and other financial institutions at which the Company
maintains a safe deposit box, lock box or checking, savings, custodial or other
account of any nature, the type and number of each such account and the
signatories therefore, a description of any compensating balance arrangements,
and the names of all persons authorized to draw thereon, make withdrawals
therefrom or have access thereto.
-15-
3.22
|
Affiliates’
Relationships to Company.
|
3.22.(a) Contracts
With Affiliates.
All
leases, contracts, agreements or other arrangements between Company and any
Affiliate are described on Schedule 3.22.(a).
3.22.(b) No
Adverse Interests.
No
Affiliate has any direct or indirect interest in (i) any entity which does
business with Company or is competitive with Company’s business, or (ii) any
property, asset or right which is used by Company in the conduct of its
business.
3.22.(c) Obligations.
All
obligations of any Affiliate to Company, and all obligations of Company to
any
Affiliate, are listed on Schedule 3.22.(c).
3.23
|
Assets
Necessary to Business.
|
Company
presently has and at the Closing will have good, valid and marketable title
to
all property and assets, tangible and intangible, and all leases, licenses
and
other agreements, necessary to permit Buyer to carry on the business of Company
as presently conducted.
3.24
|
No
Brokers or Finders.
|
Neither
Company nor any of its directors, officers, employees, Seller or agents have
retained, employed or used any broker or finder in connection with the
transaction provided for herein or in connection with the negotiation
thereof.
3.25
|
Disclosure.
|
No
representation or warranty by Company and/or the Seller in this Agreement,
nor
any statement, certificate, schedule, document or exhibit hereto furnished
or to
be furnished by or on behalf of Company or Seller pursuant to this Agreement
or
in connection with transactions contemplated hereby, contains or shall contain
any untrue statement of material fact or omits or shall omit a material fact
necessary to make the statements contained therein not misleading. All
statements and information contained in any certificate, instrument, Disclosure
Schedule or document delivered by or on behalf of Company and/or Seller shall
be
deemed representations and warranties by the Company and the
Seller.
3.26
|
Investment
Intent.
|
The
Purchase Shares being acquired by Seller are for investment only and not with
the view to resale or other distribution.
4.
|
REPRESENTATIONS
AND WARRANTIES OF BUYER
|
Buyer
makes the following representations and warranties to the Seller, each of which
is true and correct on the date hereof, shall remain true and correct to and
including the Closing Date, shall be unaffected by any investigation heretofore
or hereafter made by Seller or any notice to Seller, and shall survive the
Closing of the transactions provided for herein.
-16-
4.1
|
Corporate.
|
4.1.(a) Organization.
Buyer
is a corporation duly organized, validly existing and in good standing under
the
laws of the State of California.
4.1.(b) Corporate
Power.
Buyer
has all requisite corporate power to enter into this Agreement and the other
documents and instruments to be executed and delivered by Buyer and to carry
out
the transactions contemplated hereby and thereby.
4.2
|
Authority.
|
The
execution and delivery of this Agreement and the other documents and instruments
to be executed and delivered by Buyer pursuant hereto and the consummation
of
the transactions contemplated hereby and thereby have been duly authorized
by
the Board of Directors of Buyer. No other corporate act or proceeding on the
part of Buyer or its Seller is necessary to authorize this Agreement or the
other documents and instruments to be executed and delivered by Buyer pursuant
hereto or the consummation of the transactions contemplated hereby and thereby.
This Agreement constitutes, and when executed and delivered, the other documents
and instruments to be executed and delivered by Buyer pursuant hereto will
constitute, valid and binding agreements of Buyer, enforceable in accordance
with their respective terms, except as such may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors’ rights generally,
and by general equitable principles.
4.3
|
No
Brokers or Finders.
|
Neither
Buyer nor any of its directors, officers, employees or agents have retained,
employed or used any broker or finder in connection with the transaction
provided for herein or in connection with the negotiation thereof.
4.4
|
Disclosure.
|
No
representation or warranty by Buyer in this Agreement, nor any statement,
certificate, schedule, document or exhibit hereto furnished or to be furnished
by or on behalf of Buyer pursuant to this Agreement or in connection with
transactions contemplated hereby, contains or shall contain any untrue statement
of material fact or omits or shall omit a material fact necessary to make the
statements contained therein not misleading.
4.5
|
Investment
Intent.
|
The
Ordinary Shares are being acquired by Buyer for investment only and not with
the
view to resale or other distribution.
-17-
5.
|
COVENANTS
|
5.1
|
Noncompetition
Agreement.
|
[INTENTIONALLY
LEFT BLANK]
5.2
|
Noncompetition;
Confidentiality.
|
For
purposes of this Agreement, Principal shall mean Xxxxxx X. Xxxx. Subject to
the
Closing, and as an inducement to Buyer to execute this Agreement and complete
the transactions contemplated hereby, and in order to preserve the goodwill
associated with the business of Company being acquired pursuant to this
Agreement, and in addition to and not in limitation of any covenants contained
in any agreement executed and delivered pursuant to Section 5.1 hereof, each
Seller hereby covenants and agrees as follows:
5.2.(a) Covenant
Not to Compete.
For a
period of two years from the Closing Date, neither Seller nor Principal of
the
Company will directly or indirectly:
(i) engage
in, continue in or carry on any business which competes with the Business or
is
substantially similar thereto, including owning or controlling any financial
interest in any corporation, partnership, firm or other form of business
organization which is so engaged;
(ii) consult
with, advise or assist in any way, whether or not for consideration, any
corporation, partnership, firm or other business organization which is now
or
becomes a competitor of Company or Buyer in any aspect with respect to the
Business, including, but not limited to, advertising or otherwise endorsing
the
products of any such competitor; soliciting customers or otherwise serving
as an
intermediary for any such competitor; loaning money or rendering any other
form
of financial assistance to or engaging in any form of business transaction
on
other than an arm’s length basis with any such competitor;
(iii) offer
employment to an employee of Company, without the prior written consent of
Buyer; or
(iv) engage
in
any practice the purpose of which is to evade the provisions of this covenant
not to compete or to commit any act which adversely affects the
Business;
provided,
however, that the foregoing shall not prohibit the ownership of securities
of
corporations which are listed on a national securities exchange or traded in
a
national over-the-counter market in an amount which shall not exceed 5% of
the
outstanding shares of any such corporation. The parties agree that the
geographic scope of this covenant not to compete shall be Canada and the United
States. The parties agree that Buyer may sell, assign or otherwise transfer
this
covenant not to compete, in whole or in part, to any person, corporation, firm
or entity that purchases all or part of the business of the Company. In the
event a court of competent jurisdiction determines that the provisions of this
covenant not to compete are excessively broad as to duration, geographical
scope
or activity, it is expressly agreed that this covenant not to compete shall
be
construed so that the remaining provisions shall not be affected, but shall
remain in full force and effect, and any such over broad provisions shall be
deemed, without further action on the part of any person, to be modified,
amended and/or limited, but only to the extent necessary to render the same
valid and enforceable in such jurisdiction.
-18-
5.2.(b) Covenant
of Confidentiality.
No
Seller shall at any time subsequent to the Closing, except as explicitly
requested by Buyer, (i) use for any purpose, (ii) disclose to any person, or
(iii) keep or make copies of documents, tapes, discs or programs containing,
any
confidential information concerning Company. For purposes hereof, “confidential
information” shall mean and include, without limitation, all Trade Rights in
which Company has an interest, all customer lists and customer information,
and
all other information concerning Company’s processes, apparatus, equipment,
packaging, products, marketing and distribution methods, not previously
disclosed to the public directly by Company.
5.2.(c) Equitable
Relief for Violations.
Each
Seller agrees that the provisions and restrictions contained in this Section
5.2
are necessary to protect the legitimate continuing interests of Buyer in
acquiring the Shares, and that any violation or breach of these provisions
will
result in irreparable injury to Buyer for which a remedy at law would be
inadequate and that, in addition to any relief at law which may be available
to
Buyer for such violation or breach and regardless of any other provision
contained in this Agreement, Buyer shall be entitled to injunctive and other
equitable relief as a court may grant after considering the intent of this
Section 5.2.
5.3
|
General
Releases.
|
At
the
Closing, Seller shall deliver general releases to Buyer, in form and substance
satisfactory to Buyer and its counsel, releasing Company and the directors,
officers, agents and employees of Company from all claims to the Closing Date,
except (i) as may be described in written contracts disclosed in the Disclosure
Schedule and expressly described and excepted from such releases, and (ii)
in
the case of persons who are employees of the Company, compensation for current
periods expressly described and excepted from such releases. Such releases
shall
also contain waivers of any right of contribution or other recourse against
Company with respect to representations, warranties or covenants made herein
by
Company.
5.4
|
Access
to Information and Records.
|
During
the period prior to the Closing, Seller shall cause Company to give Buyer,
its
counsel, accountants and other representatives (i) access during normal business
hours to all of the properties, books, records, contracts and documents of
Company for the purpose of such inspection, investigation and testing as Buyer
deems appropriate (and Company shall furnish or cause to be furnished to Buyer
and its representatives all information with respect to the business and affairs
of Company as Buyer may request); (ii) access to employees, agents and
representatives for the purposes of such meetings and communications as Buyer
reasonably desires; and (iii) with the prior consent of Company in each instance
(which consent shall not be unreasonably withheld), access to vendors,
customers, manufacturers of its machinery and equipment, and others having
business dealings with Company.
-19-
5.5
|
Conduct
of Business Pending the
Closing.
|
From
the
date hereof until the Closing, except as otherwise approved in writing by the
Buyer, Company covenants as follows, and Seller shall cause each of the
following to occur:
5.5.(a) No
Changes.
Company
will carry on its business diligently and in the same manner as heretofore
and
will not make or institute any changes in its methods of purchase, sale,
management, accounting or operation.
5.5.(b) Maintain
Organization.
Company
will take such action as may be necessary to maintain, preserve, renew and
keep
in favor and effect the existence, rights and franchises of Company and will
use
its best efforts to preserve the business organization of Company intact, to
keep available to Company the present officers and employees, and to preserve
for Company its present relationships with suppliers and customers and others
having business relationships with Company.
5.5.(c) No
Breach.
Company
and Seller will not do or omit any act, or permit any omission to act, which
may
cause a breach of any material contract, commitment or obligation, or any breach
of any representation, warranty, covenant or agreement made by Company and/or
the Seller herein, or which would have required disclosure on Schedule 3.8
had
it occurred after the date of the Recent Balance Sheet and prior to the date
of
this Agreement.
5.5.(d) No
Material Contracts.
No
contract or commitment will be entered into, and no purchase of raw materials
or
supplies and no sale of goods or services (real, personal, or mixed, tangible
or
intangible) will be made, by or on behalf of Company, except contracts,
commitments, purchases or sales which are in the ordinary course of business
and
consistent with past practice, are not material to the Company (individually
or
in the aggregate) and would not have been required to be disclosed in the
Disclosure Schedule had they been in existence on the date of this
Agreement.
5.5.(e) No
Corporate Changes.
Company
shall not amend its Memorandum and Articles of Association or make any changes
in authorized or issued share capital.
5.5.(f) Maintenance
of Insurance.
Company
shall maintain all of the insurance in effect as of the date hereof and shall
procure such additional insurance as shall be reasonably requested by
Buyer.
5.5.(g) Maintenance
of Property.
Company
shall use, operate, maintain and repair all property of Company in a normal
business manner.
5.5.(h) Interim
Financials.
Company
will provide Buyer with interim monthly financial statements and other
management reports as and when they are available.
-20-
5.5.(i) No
Negotiations.
Neither
Company nor any Seller will directly or indirectly (through a representative
or
otherwise) solicit or furnish any information to any prospective buyer,
commence, or conduct presently ongoing, negotiations with any other party or
enter into any agreement with any other party concerning the sale of Company,
Company’s assets or business or any part thereof or any equity securities of
Company (an “acquisition proposal”), and Company and Seller shall immediately
advise Buyer of the receipt of any acquisition proposal.
5.5.(j) No
Transfer of Shares.
No
Seller shall transfer or attempt to transfer any of the Shares except to Buyer
pursuant hereto; and Company shall refuse to accept any certificates for Shares
to be transferred or otherwise to allow such transfers to occur upon its
books.
5.6
|
Consents.
|
Company
and Seller will use their best efforts prior to Closing to obtain all consents
necessary for the consummation of the transactions contemplated
hereby.
5.7
|
Other
Action.
|
Company
and Seller shall use their best efforts to cause the fulfillment at the earliest
practicable date of all of the conditions to the parties’ obligations to
consummate the transactions contemplated in this Agreement.
5.8
|
Disclosure
Schedule.
|
Seller
and Company shall have a continuing obligation to promptly notify Buyer in
writing with respect to any matter hereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been required to
be
set forth or described in the Disclosure Schedule, but no such disclosure shall
cure any breach of any representation or warranty which is
inaccurate.
6.
|
CONDITIONS
PRECEDENT TO BUYER’S OBLIGATIONS
|
Each
and
every obligation of Buyer to be performed on the Closing Date shall be subject
to the satisfaction prior to or at the Closing of each of the following
conditions:
6.1
|
Representations
and Warranties True of the Closing
Date.
|
Each
of
the representations and warranties made by Seller and Company in this Agreement,
and the statements contained in the Disclosure Schedule or in any instrument,
list, certificate or writing delivered by Seller or Company pursuant to this
Agreement, shall be true and correct in all material respects when made and
shall be true and correct in all material respects at and as of the Closing
Date
as though such representations and warranties were made or given on and as
of
the Closing Date, except for any changes permitted by the terms of this
Agreement or consented to in writing by Buyer.
-21-
6.2
|
Compliance
With Agreement.
|
Seller
and Company shall have in all material respects performed and complied with
all
of their agreements and obligations under this Agreement which are to be
performed or complied with by them prior to or on the Closing Date, including
the delivery of the closing documents specified in Section 9.1.
6.3
|
Absence
of Litigation.
|
No
Litigation shall have been commenced or threatened, and no investigation by
any
Government Entity shall have been commenced, against Buyer, Company or any
of
the affiliates, officers or directors of any of them, with respect to the
transactions contemplated hereby.
6.4
|
Consents
and Approvals.
|
All
approvals, consents and waivers that are required to effect the transactions
contemplated hereby shall have been received, and executed counterparts thereof
shall have been delivered to Buyer not less than two business days prior to
the
Closing.
6.5
|
Due
Diligence.
|
The
results of Buyer’s due diligence shall be satisfactory to Buyer.
6.6
|
Shareholder
Approval.
|
Buyer
shall have obtained shareholder approval for this transaction.
7.
|
CONDITIONS
PRECEDENT TO SELLER’S OBLIGATIONS
|
Each
and
every obligation of Seller to be performed on the Closing Date shall be subject
to the satisfaction prior to or at the Closing of the following
conditions:
7.1
|
Representations
and Warranties True on the Closing
Date.
|
Each
of
the representations and warranties made by Buyer in this Agreement shall be
true
and correct in all material respects when made and shall be true and correct
in
all material respects at and as of the Closing Date as though such
representations and warranties were made or given on and as of the Closing
Date.
7.2
|
Compliance
With Agreement.
|
Buyer
shall have in all material respects performed and complied with all of Buyer’s
agreements and obligations under this Agreement which are to be performed or
complied with by Buyer prior to or on the Closing Date, including the delivery
of the closing documents specified in Section 9.2.
-22-
7.3
|
Absence
of Litigation.
|
No
Litigation shall have been commenced or threatened, and no investigation by
any
Government Entity shall have been commenced, against Buyer, Company or any
of
the affiliates, officers or directors of any of them, with respect to the
transactions contemplated herein.
7.4
|
Redomicile
of Buyer.
|
Buyer
shall have completed a migratory merger, the effect of which shall be that
Buyer
is a Delaware corporation.
8.
|
INDEMNIFICATION
|
8.1
|
By
Seller.
|
Subject
to the terms and conditions of this Article 8, Seller hereby agrees to
indemnify, defend and hold harmless Buyer, its directors, officers, employees
and controlled and controlling persons (hereinafter “Buyer’s Affiliates”) and
the Company from and against all Claims asserted against, resulting to, imposed
upon, or incurred by Buyer, Buyer’s Affiliates or the Company, directly or
indirectly, by reason of, arising out of or resulting from (a) the inaccuracy
or
breach of any representation or warranty of Seller or Company contained in
or
made pursuant to this Agreement (regardless of whether such breach is deemed
“material” for purpose of Section 6.1), or (b) the breach of any covenant of
Seller or the Company contained in this Agreement. As used in this Article
8,
the term “Claim” shall include (i) all debts, liabilities and obligations; (ii)
all losses, damages (including, without limitation, consequential damages),
judgments, awards, settlements, costs and expenses (including, without
limitation, interest (including prejudgment interest in any litigated matter),
penalties, court costs and attorneys fees and expenses); and (iii) all demands,
claims, suits, actions, costs of investigation, causes of action, proceedings
and assessments, whether or not ultimately determined to be valid.
8.2
|
Subject
to the terms and conditions of this Article 8, Buyer hereby agrees to indemnify,
defend and hold harmless each Seller from and against all Claims asserted
against, resulting to, imposed upon or incurred by any such person, directly
or
indirectly, by reason of or resulting from (a) the inaccuracy or breach of
any
representation or warranty of Buyer contained in or made pursuant to this
Agreement (regardless of whether such breach is deemed “material” for purposes
of Section 7.1), or (b) the breach of any covenant of Buyer contained in this
Agreement.
The
obligations and liabilities of any party to indemnify any other under this
Article 8 with respect to Claims relating to third parties shall be subject
to
the following terms and conditions:
-23-
8.3.(a) Notice
and Defense.
The
party or parties to be indemnified (whether one or more, the “Indemnified
Party”) will give the party from whom indemnification is sought (the
“Indemnifying Party”) prompt written notice of any such Claim, and the
Indemnifying Party will undertake the defense thereof by representatives chosen
by it. In all matters concerning the Seller by virtue of joint and several
liability, the Seller’s Agent shall give and receive notice and otherwise act in
all respects on their behalf. Failure to give such notice shall not affect
the
Indemnifying Party’s duty or obligations under this Article 8, except to
the extent the Indemnifying Party is prejudiced thereby. So long as the
Indemnifying Party is defending any such Claim actively and in good faith,
the
Indemnified Party shall not settle such Claim. The Indemnified Party shall
make
available to the Indemnifying Party or its representatives all records and
other
materials required by them and in the possession or under the control of the
Indemnified Party, for the use of the Indemnifying Party and its representatives
in defending any such Claim, and shall in other respects give reasonable
cooperation in such defense.
8.3.(b) Failure
to Defend.
If the
Indemnifying Party, within a reasonable time after notice of any such Claim,
fails to defend such Claim actively and in good faith, the Indemnified Party
will (upon further notice) have the right to undertake the defense, compromise
or settlement of such Claim or consent to the entry of a judgment with respect
to such Claim, on behalf of and for the account and risk of the Indemnifying
Party, and the Indemnifying Party shall thereafter have no right to challenge
the Indemnified Party’s defense, compromise, settlement or consent to judgment
therein.
8.3.(c) Indemnified
Party’s Rights.
Anything in this Section 8.3 to the contrary notwithstanding, (i) if there
is a
reasonable probability that a Claim may materially and adversely affect the
Indemnified Party other than as a result of money damages or other money
payments, the Indemnified Party shall have the right to defend, compromise
or
settle such Claim, and (ii) the Indemnifying Party shall not, without the
written consent of the Indemnified Party, settle or compromise any Claim or
consent to the entry of any judgment which does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to the Indemnified
Party of a release from all Liability in respect of such Claim.
8.4
|
The
Indemnifying Party shall promptly pay the Indemnified Party any amount due
under
this Article 8, which payment may be accomplished in whole or in part, at the
option of the Indemnified Party, by the Indemnified Party setting off any amount
owed to the Indemnifying Party by the Indemnified Party. To the extent set-off
is made by an Indemnified Party in satisfaction or partial satisfaction of
an
indemnity obligation under this Article 8 that is disputed by the Indemnifying
Party, upon a subsequent determination by final judgment not subject to appeal
that all or a portion of such indemnity obligation was not owed to the
Indemnified Party, the Indemnified Party shall pay the Indemnifying Party the
amount which was set off and not owed together with interest from the date
of
set-off until the date of such payment at an annual rate equal to the average
annual rate in effect as of the date of the set-off, on those three maturities
of United States Treasury obligations having a remaining life, as of such date,
closest to the period from the date of the set-off to the date of such judgment.
Upon judgment, determination, settlement or compromise of any third party Claim,
the Indemnifying Party shall pay promptly on behalf of the Indemnified Party,
and/or to the Indemnified Party in reimbursement of any amount theretofore
required to be paid by it, the amount so determined by judgment, determination,
settlement or compromise and all other Claims of the Indemnified Party with
respect thereto, unless in the case of a judgment an appeal is made from the
judgment. 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 such amounts, the Indemnifying Party shall succeed
to
the rights of such Indemnified Party, to the extent not waived in settlement,
against the third party who made such third party Claim.
-24-
9.
|
This
transaction is subject to the approval of the shareholders of the Buyer. As
such, this transaction will close on the business day following the filing
with
the Securities and Exchange Commission of Form DEF 14C.
At
the
Closing, Company and Seller shall deliver to Buyer the following documents,
in
each case duly executed or otherwise in proper form:
9.1.(a) Share
Certificate(s).
A share
certificate or certificates representing the Ordinary Shares, duly endorsed
for
transfer or with duly executed share powers attached.
9.1.(b) Compliance
Certificate.
A
certificate signed by Seller that each of the representations and warranties
made by Seller and the Company in this Agreement is true and correct in all
material respects on and as of the Closing Date with the same effect as though
such representations and warranties had been made or given on and as of the
Closing Date (except for any changes permitted by the terms of this Agreement
or
consented to in writing by Buyer), and that Company and Seller have performed
and complied with all of Company’s and Seller’ obligations under this Agreement
which are to be performed or complied with on or prior to the Closing
Date.
9.1.(c) [INTENTIONALLY
LEFT BLANK].
9.1.(d) Certified
Resolutions.
Certified copies of the resolutions of the Board of Directors of the Company
and
of the Seller authorizing and approving this Agreement and the consummation
of
the transactions contemplated by this Agreement.
9.1.(e) Memorandum
and Articles of Association of Company. A copy of the Memorandum and Articles
of
Association of Company, certified by the Company Secretary of
Company.
-25-
9.1.(f) Incumbency
Certificate.
Incumbency certificates relating to each person executing (as a corporate
officer or otherwise on behalf of another person) any document executed and
delivered to Buyer pursuant to the terms hereof.
9.1.(g) General
Releases.
The
General Releases referred to in Section 5.3, duly executed by the persons
referred to in such Section.
9.1.(h) Resignations.
The
resignation of Xxxxxx Xxxx as a director of the Company, effective as of the
Closing Date and in form satisfactory to Buyer’s counsel.
9.1.(i) Affidavit.
An
affidavit from Company in form and substance satisfactory to Buyer complying
with Section 1445(b)(3) of the Code.
9.1.(j) Other
Documents.
All
other documents, instruments or writings required to be delivered to Buyer
at or
prior to the Closing pursuant to this Agreement and such other certificates
of
authority and documents as Buyer may reasonably request.
At
the
Closing, Buyer shall deliver to Seller the following documents, in each case
duly executed or otherwise in proper form:
9.2.(a) Stock
Certificate(s).
A stock
certificate or certificates representing the Purchase Shares issued in the
name
of Seller.
9.2.(b) Compliance
Certificate.
A
certificate signed by the chief executive officer of Buyer that the
representations and warranties made by Buyer in this Agreement are true and
correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made or given on and as of the Closing
Date (except for any changes permitted by the terms of this Agreement or
consented to in writing by Seller), and that Buyer has performed and complied
with all of Buyer’s obligations under this Agreement which are to be performed
or complied with on or prior to the Closing Date.
9.2.(c) Certified
Resolutions.
A
certified copy of the resolutions of the Board of Directors of Buyer authorizing
and approving this Agreement and the consummation of the transactions
contemplated by this Agreement.
9.2.(d) Incumbency
Certificate.
Incumbency certificates relating to each person executing any document executed
and delivered to Company or Seller by Buyer pursuant to the terms
hereof.
9.2.(e) Other
Documents.
All
other documents, instruments or writings required to be delivered to Company
at
or prior to the Closing pursuant to this Agreement and such other certificates
of authority and documents as Company may reasonably request.
-26-
10.
|
10.1
|
Right
of Termination Without Breach.
|
This
Agreement may be terminated without further liability of any party at any time
prior to the Closing:
10.1.(a) by
mutual
written agreement of Buyer and Seller, or
10.1.(b) by
either
Buyer or Seller if the Closing shall not have occurred on or before December
31,
2007, provided the terminating party has not, through breach of a
representation, warranty or covenant, prevented the Closing from occurring
on or
before such date.
10.2
|
Termination
for Breach.
|
10.2.(a) Termination
by Buyer.
If (i)
there has been a material violation or breach by any Seller or Company of any
of
the agreements, representations or warranties contained in this Agreement which
has not been waived in writing by Buyer, or (ii) there has been a failure of
satisfaction of a condition to the obligations of Buyer which has not been
so
waived, or (iii) Company or Seller shall have attempted to terminate this
Agreement under this Article 10 or otherwise without grounds to do so, then
Buyer may, by written notice to Seller at any time prior to the Closing that
such violation, breach, failure or wrongful termination attempt is continuing,
terminate this Agreement with the effect set forth in Section 10.2.(c)
hereof.
10.2.(b) Termination
by Seller.
If (i)
there has been a material violation or breach by Buyer of any of the agreements,
representations or warranties contained in this Agreement which has not been
waived in writing by Seller, or (ii) there has been a failure of satisfaction
of
a condition to the obligations of Seller which has not been so waived, or (iii)
Buyer shall have attempted to terminate this Agreement under this Article 10
or
otherwise without grounds to do so, then Seller may, by written notice to Buyer
at any time prior to the Closing that such violation, breach, failure or
wrongful termination attempt is continuing, terminate this Agreement with the
effect set forth in Section 10.2.(c) hereof.
10.2.(c) Effect
of Termination.
Termination of this Agreement pursuant to this Section 10.2 shall not in any
way
terminate, limit or restrict the rights and remedies of any party hereto against
any other party which has violated, breached or failed to satisfy any of the
representations, warranties, covenants, agreements, conditions or other
provisions of this Agreement prior to termination hereof. In addition to the
right of any party under common law to redress for any such breach or violation,
each party whose breach or violation has occurred prior to termination shall
jointly and severally indemnify each other party for whose benefit such
representation, warranty, covenant, agreement or other provision was made
(“indemnified party”) from and against all losses, damages (including, without
limitation, consequential damages), costs and expenses (including, without
limitation, interest (including prejudgment interest in any litigated matter),
penalties, court costs, and attorneys fees and expenses) asserted against,
resulting to, imposed upon, or incurred by the indemnified party, directly
or
indirectly, by reason of, arising out of or resulting from such breach or
violation. Subject to the foregoing, the parties’ obligations under Section
12.8.(b) of this Agreement shall survive termination.
-27-
11.1
|
Jurisdiction.
|
The
parties irrevocably agree that the High Court of Ireland has non-exclusive
jurisdiction to settle any dispute or claim that arises out of or in connection
with this Agreement.Arbitration.
11.2
|
All
proceedings under this Article 11, and all evidence given or discovered pursuant
hereto, shall be maintained in confidence by all parties.
The
fact
that the dispute resolution procedures specified in this Article 11 shall have
been or may be invoked shall not excuse any party from performing its
obligations under this Agreement and during the pendency of any such procedure
all parties shall continue to perform their respective obligations in good
faith, subject to any rights to terminate this Agreement that may be available
to any party and to the right of setoff provided in Section 8.4
hereof.
11.4
|
All
applicable statutes of limitation shall be tolled while the procedures specified
in this Article 11 are pending. The parties will take such action, if any,
required to effectuate such tolling.
The
parties agree that the escrow agent under and as identified in any Escrow
Agreement is not a necessary party to and shall not be joined in or made party
to any arbitration proceeding commenced under this Article 11.
12.
|
12.1
|
The
Schedules have been compiled in a bound volume (the “Disclosure Schedule”),
executed by Seller and dated and delivered to Buyer on the date of this
Agreement. Information set forth in the Disclosure Schedule specifically refers
to the article and section of this Agreement to which such information is
responsive and such information shall not be deemed to have been disclosed
with
respect to any other article or section of this Agreement or for any other
purpose. The Disclosure Schedule includes a table of contents and/or index
to
all of the information and documents contained therein. The Disclosure Schedule
shall not vary, change or alter the language of the representations and
warranties contained in this Agreement and, to the extent the language in the
Disclosure Schedule does not conform in every respect to the language of such
representations and warranties, such language in the Disclosure Schedule shall
be disregarded and be of no force or effect.
-28-
12.2
|
From
time
to time, at Buyer’s request and without further consideration, Company and
Seller will execute and deliver to Buyer such documents and take such other
action as Buyer may reasonably request in order to consummate more effectively
the transactions contemplated hereby.
Announcements
concerning the transactions provided for in this Agreement by Buyer, Company
or
Seller shall be subject to the approval of the other parties in all essential
respects, except that approval of the Seller or Company shall not be required
as
to any statements and other information which Buyer may submit to the Securities
and Exchange Commission or Buyer’s stockholders or be required to make pursuant
to any rule or regulation of the Securities and Exchange Commission or any
stock
exchange, or otherwise required by law.
12.4.(a) Assignment.
Except
as expressly provided herein, the rights and obligations of a party hereunder
may not be assigned, transferred or encumbered without the prior written consent
of the other parties. Notwithstanding the foregoing, Buyer may, without consent
of any other party, cause one or more subsidiaries of Buyer to carry out all
or
part of the transactions contemplated hereby; provided, however, that Buyer
shall, nevertheless, remain liable for all of its obligations, and those of
any
such subsidiary, to Seller hereunder.
12.4.(b) Parties
in Interest.
This
Agreement shall be binding upon, inure to the benefit of, and be enforceable
by
the respective successors and permitted assigns of the parties hereto. Nothing
contained herein shall be deemed to confer upon any other person any right
or
remedy under or by reason of this Agreement.
This
Agreement and any disputes or claims arising out of or in connection with its
subject matter are governed by and construed in accordance with the law of
Ireland.
Buyer
and
Seller may amend, modify and supplement this Agreement in such manner as may
be
agreed upon in writing between Buyer and Seller.
-29-
12.7
|
All
notices, requests, demands and other communications hereunder shall be given
in
writing and shall be: (a) personally delivered; (b) sent by telecopier,
facsimile transmission or other electronic means of transmitting written
documents; or (c) sent to the parties at their respective addresses indicated
herein by registered or certified U.S. mail, return receipt requested and
postage prepaid, or by private overnight mail courier service. The respective
addresses to be used for all such notices, demands or requests are as
follows:
(a) If
to
Buyer, to:
Innovative
Software Technologies, Inc.
000
Xxxxx
Xxxx 000 Xxxxx, Xxxxx 000
Xxxxxx,
Xxxxx, 00000
Attention:
Xxxxxxxxxxx X. Xxxxx, CFO
Facsimile:
000-000-0000
with
a
copy to
Xxxxx
Xxxxxxx XX
000
Xxxxx
Xxxxx Xxxxxx, Xxxxx 0000
Xxxxx,
Xxxxxxx, 00000
Attention:
Xxxx X. Xxxxxx, Esq.
Facsimile:
000-000-0000
or
to
such other person or address as Buyer shall furnish to Seller in
writing.
(b) If
to
Seller or Company:
________________________
________________________
________________________
Attention:______________
Facsimile:______________
(with
a
copy to)
________________________
________________________
________________________
Facsimile:______________
In
addition, any notice to Company given prior to Closing shall also be given
in
the same manner to Seller; and any notice to Company given after Closing shall
also be given in the same manner to Buyer.
If
personally delivered, such communication shall be deemed delivered upon actual
receipt; if electronically transmitted pursuant to this paragraph, such
communication shall be deemed delivered the next business day after transmission
(and sender shall bear the burden of proof of delivery); if sent by overnight
courier pursuant to this paragraph, such communication shall be deemed delivered
upon receipt; and if sent by mail pursuant to this paragraph, such communication
shall be deemed delivered as of the date of delivery indicated on the receipt
issued by the relevant postal service, or, if the addressee fails or refuses
to
accept delivery, as of the date of such failure or refusal. Any party to this
Agreement may change its address for the purposes of this Agreement by giving
notice thereof in accordance with this Section.
-30-
12.8
|
Regardless
of whether or not the transactions contemplated hereby are
consummated:
12.8.(a) Brokerage.
Except
as to Aspen Capital Partners, LLC, which shall be compensated by Buyer, Seller
and Buyer each represent and warrant to each other that there is no broker
involved or in any way connected with the transfer provided for herein on their
behalf respectively (and Seller represent and warrant that there is no broker
involved on behalf of Company) and each agrees to hold the other harmless from
and against all other claims for brokerage commissions or finder’s fees in
connection with the execution of this Agreement or the transactions provided
for
herein.
12.8.(b) Expenses
to be Paid by Seller.
Seller
shall pay, and shall indemnify, defend and hold Buyer and Company harmless
from
and against, each of the following:
(i) Title
Insurance Premiums.
All
premiums for the issuance of the title insurance policies issued and the cost
of
surveys performed.
(ii) Environmental
Audit.
The
fees and other expenses relating to any environmental audits
performed.
(iii) Professional
Fees.
All
fees and expenses of its own and Company’s legal, accounting, investment banking
and other professional counsel in connection with the transactions contemplated
hereby.
12.8.(c) Other.
Except
as otherwise provided herein, each of the parties shall bear its own expenses
and the expenses of its counsel and other agents in connection with the
transactions contemplated hereby.
12.8.(d) Costs
of Litigation or Arbitration.
The
parties agree that the
prevailing party in any action brought with respect to or to enforce any right
or remedy under this Agreement shall be entitled to recover from the other
party
or parties all reasonable costs and expenses of any nature whatsoever incurred
by the prevailing party in connection with such action, including without
limitation attorneys’ fees and prejudgment interest.
-31-
12.9
|
This
instrument embodies the entire agreement between the parties hereto with respect
to the transactions contemplated herein, and there have been and are no
agreements, representations or warranties between the parties other than those
set forth or provided for herein.
12.10
|
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument.
12.11
|
The
headings in this Agreement are inserted for convenience only and shall not
constitute a part hereof.
12.12
|
The
following sets forth the location of definitions of capitalized terms defined
in
the body of this Agreement:
“Affiliate”
-
Section 3.8.(k)
“Ancillary
Instruments”
-
Section 3.2.(a)
“Buyer’s
Affiliates”
-
Section 8.1
“Claim”
-
Section 8.1
“Closing”
-
Preamble to Article 9
“Closing
Date”
-
Section 9
“Code”
-
Section 3.5.(e)
“Disclosure
Schedule”
-
Article 12
“Environmental
Laws”
-
Section 3.11.(c)
“Government
Entities”
-
Section 3.3
“HSR
Act”
-
Section 3.3
“Indemnified
Party”
-
Section 8.3.(a)
“Indemnifying
Party”
-
Section 8.3.(a)
“Laws”
-
Section 3.3
-32-
“Lien”
-
Section 3.12.(a)
“Litigation”
-
Section 3.10
“Orders”
-
Section 3.3
"Ordinary
Shares" - Recital A
“Products”
-
Section 3.20
“Purchase
Price”
-
Section 2.1
“Real
Property”
-
Section 3.12.(c)
“Recent
Balance Sheet”
-
Section 3.4
“Subsidiary”
-
Section 3.1.(d)
"Taxes"
-
Section 3.5(a)
"Taxation
Authority" - Section 3.5(b)
“Trade
Rights”
-
Section 3.18
“Waste”
-
Section 3.11.(c)
Where
any
group or category of items or matters is defined collectively in the plural
number, any item or matter within such definition may be referred to using
such
defined term in the singular number.
-33-
13.
|
BUYER
|
||
Innovative
Software Technologies, Inc.
|
||
|
|
|
/s/
Xxxxxx X. Xxxxxx
|
||
Xxxxxx
X. Xxxxxx
Chief
Executive Officer
|
SELLER
Meridian
Bay Limited
|
||
|
|
|
/s/
Xxxxxx X. Xxxx
|
||
Xxxxxx
X. Xxxx
Managing
director
|
COMPANY
Xalles
Limited
|
||
|
|
|
/s/
Xxxxxx X. Xxxx
|
||
Xxxxxx
X. Xxxx
President
|
-34-
EXHIBIT
A
14.
|
PAYMENT
OF PURCHASE PRICE
|
14.1
|
Buyer
and
Seller agree that the Purchase Price shall be paid in three installments.
Installment one shall be in the amount of 20,000,000 Buyer Shares and shall
be
paid at Closing. Installments two and three in the amount of 20,000,000 Buyer
Shares per installment shall be paid to Seller based on Principal’s ability to
drive Company’s performance in the 2008 and 2009 calendar years. The measure of
performance shall be the achievement by the Company of minimum NIBT (as defined
below) for years 2008 and 2009 as follows:
Buyer
Shares
|
Year
|
Minimum
NIBT
|
|||||
20,000,000
|
Upon
Closing
|
N/A
|
|||||
20,000,000
|
2008
|
$
|
1,000,000
|
||||
20,000,000
|
2009
|
$
|
1,600,000
|
||||
60,000,000
|
$
|
2,600,000
in total
|
Subject
to Section 14.2 below, no shares will be issued for 2008 if Company earns less
than $1,000,000 NIBT for 0000.Xx shares will be issued for 2009 if Company
earns
less than $1,600,000 NIBT for 2009.
14.2
|
If
Company has NIBT of less than $800,000 in 2008 then the 20,000,000 share
issuance scheduled for 2008 will be forfeited completely. However, if Company
has NIBT of $800,000 or more for 2008 and the Company’s NIBT for 2009 is greater
than $1,600,000, then the 20,000,000 Buyer Shares for 2008 shall be issued
to
Seller if the Company’s NIBT for 2009 exceeds $1,600,000 by an amount that is
equal to or greater than the amount by which $1,000,000 exceeds the Company’s
NIBT for 2008.
If
Company has NIBT of less than $1,280,000 in 2009 then the 20,000,000 share
issuance scheduled for 2009 will be forfeited completely. However, if Company
has NIBT of $1,280,000 or more for 2009 and the Company’s NIBT for 2008 is
greater than $1,000,000, then the 20,000,000 Buyer Shares for 2009 shall be
issued to Seller if the Company’s NIBT for 2008 exceeds $1,000,000 by an amount
that is equal to or greater than the amount by which $1,600,000 exceeds the
Company’s NIBT for 2009.
-35-
14.3
|
“NIBT”
means, for any year, the Company’s net income before tax expense for such year,
with “net income” and “tax expense” being calculated by Buyer in the Buyer’s
reasonable discretion in accordance with U.S. generally accepted accounting
principles.
“NIBT’
shall not include earnings derived from revenue from Buyer or revenue from
any
of its now existing or future subsidiaries except for those subsidiaries which,
prior to being acquired by Buyer, had service contracts with the
Company.
14.4
|
Shares
available for issuance under this agreement shall be issued within ten business
days of receipt by Buyer of a certified report from Buyer’s auditors identifying
the NIBT for Company for the period in question.
-36-
Schedule 3.1.(c) - Foreign
Corporation Qualification
Worldwide
qualifications with Government registration in Ireland and the United States.
Annual returns are filed in both countries.
Acquisition
of Xalles Limited Agreement Schedules
Page
1 of
37
Schedule
3.1.(d) - Subsidiaries
Not
applicable
Acquisition
of Xalles Limited Agreement Schedules
Page
2 of
37
Schedule
3.1.(d) - Officers
and Directors
Officers:
Xxxxxx X. Xxxx CEO
Corporate
Secretary
Directors:
Xxxxxx X. Xxxx, Xxxxxx X.X. Xxxx
Acquisition
of Xalles Limited Agreement Schedules
Page
3 of
37
Schedule
3.1.(f) - Seller
List
100%
of
issued shares in Xalles Limited are owned by Meridian Bay Limited.
Acquisition
of Xalles Limited Agreement Schedules
Page
4 of
37
Schedule
3.3
- Violation,
Conflict, Default
Not
applicable.
Acquisition
of Xalles Limited Agreement Schedules
Page
5 of
37
Schedule
3.4
- Financial
Statements
Balance
Sheets
|
||||||||||
As
of
|
As
of
|
As
of
|
||||||||
December
31, 2005
|
December
31,
2006
|
August
31,
2007
|
||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||||
ASSETS
|
||||||||||
Cash
|
3,580
|
24,560
|
234,782
|
|||||||
Accounts
receivable
|
161,384
|
1,654,251
|
478,432
|
|||||||
Deposits
|
-
|
2,700
|
-
|
|||||||
Total
current assets
|
164,964
|
1,681,511
|
713,214
|
|||||||
TOTAL
ASSETS
|
164,964
|
1,681,511
|
713,214
|
|||||||
LIABILITIES
AND EQUITY
|
||||||||||
Liabilities
|
||||||||||
Accounts
payable
|
284,686
|
917,212
|
604,311
|
|||||||
Total
current liabilities
|
284,686
|
917,212
|
604,311
|
|||||||
Total
Liabilities
|
284,686
|
917,212
|
604,311
|
|||||||
Equity
|
||||||||||
Opening
balance
|
3,580
|
3,580
|
3,580
|
|||||||
Retained
earnings
|
(123,303
|
)
|
760,719
|
105,323
|
||||||
Distributions
|
-
|
(153,887
|
)
|
(967,900
|
)
|
|||||
Total
Equity
|
(119,723
|
)
|
764,299
|
108,903
|
||||||
TOTAL
LIABILITIES AND EQUITY
|
164,964
|
1,681,511
|
713,214
|
Statements
of Operation
|
|||||||
For
the twelve
|
For
the eight
|
||||||
months
ended
|
months
ended
|
||||||
December
31,
2006
|
August
31,
2007
|
||||||
(Unaudited)
|
(Unaudited)
|
||||||
Revenue
|
$
|
4,146,731
|
$
|
2,187,286
|
|||
CGS
|
2,815,323
|
1,677,726
|
|||||
Gross
profit
|
1,331,408
|
509,560
|
|||||
Operating
expenses
|
293,995
|
198,529
|
|||||
Total
expenses
|
3,109,317
|
1,876,255
|
|||||
Operating
profit
|
1,037,414
|
311,031
|
|||||
Other
income
|
495
|
1,473
|
|||||
Net
income before tax
|
$
|
1,037,909
|
$
|
312,504
|
|||
Acquisition
of Xalles Limited Agreement Schedules
Page
6 of
37
Schedule
3.5.(b)
- Tax
Returns (Exceptions to Representations)
No
exceptions.
Acquisition
of Xalles Limited Agreement Schedules
Page
7 of
37
Schedule
3.5.(c) - Tax
Audits
No
exceptions or irregularities.
Acquisition
of Xalles Limited Agreement Schedules
Page
8 of
37
Schedule
3.5.(d) - Consolidated
Tax Returns
Not
applicable.
Acquisition
of Xalles Limited Agreement Schedules
Page
9 of
37
Schedule 3.5.(e) - Tax,
Other
Not
applicable.
Acquisition
of Xalles Limited Agreement Schedules
Page
10
of 37
Schedule
3.6 - Accounts
Receivable (Aged Schedule)
Accounts
Receivable Aging
|
|||||||||||||||||||
Current
|
0
- 30 days
|
31
- 60 days
|
61
- 90 days
|
>
90 days
|
TOTAL
|
||||||||||||||
Total
accounts receivable
|
238,832
|
239,600
|
-
|
-
|
-
|
$
|
478,432
|
Acquisition
of Xalles Limited Agreement Schedules
Page
11
of 37
Schedule
3.7
- Inventory
Off Premises
None
off
premises.
Acquisition
of Xalles Limited Agreement Schedules
Page
12
of 37
Schedule
3.8 - Certain
Changes
We
have
entered into a commitment to lease office space in Shenzhen, China for a 1
year
period starting September 1, 2007.
Acquisition
of Xalles Limited Agreement Schedules
Page
13
of 37
Schedule 3.9 - Off-Balance
Sheet Liabilities
Accumulated
AP to contractor Xxxxxx Xxxxxx for Period of April-August 2007 of approximately
$180,000 USD and end of year performance bonuses to Xxxxxx Xxxxxx and Xxxxxxx
Xxxxx that will total approximately $60,000 USD combined. Note that Disclosure
Schedule 3.4 - Financial Statements includes an accrual in the amount of
$228,323 for this item on the unaudited Balance Sheet as of August 31,
2007.
Acquisition
of Xalles Limited Agreement Schedules
Page
14
of 37
Schedule
3.10 - Litigation
Matters
Not
applicable.
Acquisition
of Xalles Limited Agreement Schedules
Page
15
of 37
Schedule
3.11.(a) - Non-Compliance
with Laws
Not
applicable.
Acquisition
of Xalles Limited Agreement Schedules
Page
16
of 37
Schedule
3.11.(a)(iii) - Licenses
and Permits
Not
applicable.
Acquisition
of Xalles Limited Agreement Schedules
Page
17
of 37
Schedule
3.11.(c)
- Environmental
Matters (Exceptions to Representations)
Not
applicable.
Acquisition
of Xalles Limited Agreement Schedules
Page
18
of 37
Schedule
3.12 - Liens
None.
Acquisition
of Xalles Limited Agreement Schedules
Page
19
of 37
Schedule
3.12.(c) - Real
Property
Not
applicable.
Acquisition
of Xalles Limited Agreement Schedules
Page
20
of 37
Schedule 3.13 - Insurance
Business
Liability Insurance (The Hartford) Policy #42SBARR4474
Policy
period June 30, 2007 - June 30, 2008
Includes
coverage of people working in corporate rental location and business personal
property ($26,900 limit), money and securities ($10,000 inside premises, $5,000
outside the premises), limited fungi, bacteria or virus coverage
($50,000)
No
claims
Professional
Liability Insurance (Continental Casualty Company) Policy#287045845
Policy
period July 13, 2007 - July 13, 2008
No
claims
Single
limit of liability of $2,000,000
Acquisition
of Xalles Limited Agreement Schedules
Page
21
of 37
Schedule
3.14.(a) - Real
Property Leases
Corporate
rental residential property at 00000 Xxxxx Xxxxx Xxxx Xxxxx, Xxxxxxx, XX 00000
is rented for 1 year beginning July 1, 2007 at a rate of $2050/month not
including utilities.
Acquisition
of Xalles Limited Agreement Schedules
Page
22
of 37
Schedule
3.14.(b)
- Personal
Property Leases
Not
applicable.
Acquisition
of Xalles Limited Agreement Schedules
Page
23
of 37
Schedule
3.14.(f) - Collective
Bargaining Agreements
Not
applicable.
Acquisition
of Xalles Limited Agreement Schedules
Page
24
of 37
Schedule
3.14.(g)
- Loan
Agreements, etc.
Not
applicable.
Acquisition
of Xalles Limited Agreement Schedules
Page
25
of 37
Schedule
3.14.(h) - Guarantees
Not
applicable.
Acquisition
of Xalles Limited Agreement Schedules
Page
26
of 37
Schedule
3.14.(k) - Material
Contracts
Not
applicable.
Acquisition
of Xalles Limited Agreement Schedules
Page
27
of 37
Schedule
3.15 - Employment
Matters
Not
applicable.
Acquisition
of Xalles Limited Agreement Schedules
Page
28
of 37
Schedule
3.17 - Employment
Compensation
Not
applicable.
Acquisition
of Xalles Limited Agreement Schedules
Page
29
of 37
Schedule
3.18 - Trade
Rights
Xalles
Limited™
The
Business Navigation Specialists™
Non-registered
trademarks used since 2002.
Acquisition
of Xalles Limited Agreement Schedules
Page
30
of 37
Schedule
3.19.(a) - Major
Customers
MasterCard
International
Acquisition
of Xalles Limited Agreement Schedules
Page
31
of 37
Schedule
3.19.(b) - Major
Suppliers
B2Gnow
Xxxxxx
Xxxxxx
Acquisition
of Xalles Limited Agreement Schedules
Page
32
of 37
Schedule
3.19.(c) - Dealers
and Distributors
Not
applicable.
Acquisition
of Xalles Limited Agreement Schedules
Page
33
of 37
Schedule
3.20 - Product
Warranty, Warranty Expense and Liability Claims
Not
applicable.
Acquisition
of Xalles Limited Agreement Schedules
Page
34
of 37
Schedule
3.21 - Bank Accounts
Xxxxxx
Xxxx is signatory on all 5 accounts below:
AIB
Bank
City
Branch
00
Xxxxxxx Xxxxxx/Xxxx Xxxxxx
Xxxx,
Xxxxxxx
Tel
x000
(0) 00 000 0000
Fax
x000
(0) 00 000 0000
Account
Name: Xalles Limited
No
1 Euro
deposit account XXXXXX - XXXX3001
No
2 Euro
deposit account XXXXXX - XXXX3191
No
1 USD
deposit account XXXX7281 (Principal)
No
2 USD
deposit account XXXX7364 (Agent)
U.S.
Bank
Xxxxxxxxx
Xxxxxx Xxxxxx
XX-XX-0000
000
Xxxxx
0xx
Xxxxxx
Xxxxx
000
Xxxxxxxxxxx,
XX, 00000
Tel:
000-000-0000
Fax:
000-000-0000
ABA:
000000000
Account#:
XXXX-XXXX7909
Acquisition
of Xalles Limited Agreement Schedules
Page
35
of 37
Schedule
3.22.(a) - Contracts
with Affiliates
General
marketing agreements (MoU’s) in place with the following:
Groupe
HN
(Paris, France)
Ghana
Cyber Group
Acquisition
of Xalles Limited Agreement Schedules
Page
36
of 37
Schedule
3.22.(c) - Obligations
of and to Affiliates
Not
applicable.
Acquisition
of Xalles Limited Agreement Schedules
Page
37
of 37