EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
XSVOICE, INC.
AND
UPSNAP, INC.
DATED AS OF JANUARY 6, 2006
TABLE OF CONTENTS
Page
ARTICLE I. PURCHASE OF ASSETS...............................................1
1.1 Purchase and Sale of Assets......................................1
1.2 Excluded Assets..................................................2
1.3 Nonassignable Contracts..........................................3
ARTICLE II. ASSUMPTION OF LIABILITIES........................................4
2.1 Assumed Liabilities..............................................4
2.2 Retained Liabilities.............................................4
ARTICLE III. PURCHASE PRICE...................................................5
3.1 Purchase Price...................................................5
3.2 Resale and Registration of Shares................................6
3.3 Tax Free Reorganization..........................................7
3.4 Guaranty of Revenues.............................................7
ARTICLE IV. THE CLOSING......................................................8
4.1 Date of Closing..................................................8
ARTICLE V. REPRESENTATIONS AND WARRANTIES...................................9
5.1 Representations and Warranties of Seller.........................9
5.2 Representations and Warranties of Purchaser.....................14
ARTICLE VI. DOCUMENTS TO BE DELIVERED AT THE CLOSING........................16
6.1 Documents to be Delivered by the Seller.........................16
6.2 Documents to be Delivered by Purchaser..........................17
ARTICLE VII. POST-CLOSING COVENANTS..........................................18
7.1 Discharge of Business Obligations...............................18
7.2 Maintenance of Books and Records................................18
7.3 Payments Received...............................................18
7.4 Use of Name.....................................................19
7.5 UCC Matters.....................................................19
7.6 Financial Statements............................................19
7.7 Post-Closing Notifications......................................19
7.8 Certain Tax Matters.............................................19
7.9 Insurance.......................................................20
7.10 SEC Filings.....................................................20
ARTICLE VIII. SURVIVAL AND INDEMNIFICATION....................................20
8.1 Survival of Representations, Warranties, and Covenants..........20
8.2 Limitations on Liability........................................20
8.3 Indemnification.................................................21
8.4 Defense of Claims...............................................21
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ARTICLE IX. MISCELLANEOUS PROVISIONS........................................22
9.1 Arbitration.....................................................22
9.2 Specific Performance............................................23
9.3 Notices.........................................................23
9.4 Expenses........................................................24
9.5 Successors and Assigns..........................................24
9.6 Waiver..........................................................24
9.7 Entire Agreement................................................25
9.8 Amendments and Supplements......................................25
9.9 Rights of the Parties...........................................25
9.10 Brokers.........................................................25
9.11 Further Assurances..............................................25
9.12 Governing Law...................................................25
9.13 Severability....................................................25
9.14 Counterparts....................................................26
9.15 Titles and Headings.............................................26
9.16 Passage of Title and Risk of Loss...............................26
9.17 Certain Interpretive Matters and Definitions....................26
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EXHIBIT AND DISCLOSURE SCHEDULE LIST
------------------------------------
Exhibits
--------
Exhibit A Escrow Agreement
Schedules
---------
Receivables Schedule
Contracts Schedule
Personal Property Schedule
Intellectual Property Schedule
Prepaid Items Schedule
Insurance Schedule
Claims Schedule
Required Consents Schedule
iii
ASSET PURCHASE AGREEMENT
------------------------
This Asset Purchase Agreement (the "Agreement") is made and entered into as
of the 6th day of January, 2006, by and between UPSNAP, INC., a Nevada
corporation ("Purchaser"), and XSVOICE, INC., a Tennessee corporation
("Seller"). Buyer and Seller are also referred to collectively herein as the
"Parties" and individually herein as a "Party."
RECITALS:
---------
WHEREAS, Seller has engaged in the business of developing and delivering
wireless platforms and applications (the "Business");
WHEREAS, Seller, through its Board of Directors and stockholders, has
determined that it is in its best interests to sell the Business and
substantially all of the Seller's assets to Buyer;
WHEREAS, on the terms and subject to the conditions contained in this
Agreement, Seller desires to sell, transfer, and assign to Purchaser, and
Purchaser desires to purchase from Seller, all of the Purchased Assets (as
hereinafter defined),
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby mutually
acknowledged, the Parties hereby covenant and agree as follows:
ARTICLE I.
PURCHASE OF ASSETS
------------------
1.1 Purchase and Sale of Assets. On the terms and subject to the
conditions hereof, at the Closing (as hereinafter defined), Seller will sell,
transfer, convey, assign, and deliver to Purchaser, and Purchaser will purchase
and accept, all right, title, and interest of Seller, in and to all rights,
properties, and assets of Seller of every kind, character, and description used
or useful in connection with the conduct of the Business or otherwise arising
out of the conduct of the Business, in each case free and clear of all
mortgages, liens, pledges, security interests, charges, claims, restrictions,
and encumbrances of any nature (collectively, "Liens") except Permitted Liens
(as hereinafter defined), including the rights, properties, and assets described
in this Section 1.1 (collectively, the "Purchased Assets"):
1.1.1 Accounts Receivable. All accounts or notes receivable of, and
any other amounts due to, Seller arising out of the operation of the Business,
including such of the foregoing as are listed on the Accounts Receivable
Schedule attached hereto (the "Receivables Schedule");
1.1.2 Contract Rights. All rights and incidents of interest as of the
date hereof in and to all contracts, agreements, leases, licenses, joint
ventures, purchase orders (as vendor or purchaser), commitments, and other
agreements and arrangements, whether oral or written of Seller used or useful in
the Business (individually a "Contract" and collectively, "Contracts"),
including such of the foregoing as are described on the Contracts Schedule
attached hereto (the "Contracts Schedule");
1.1.3 Tangible Personal Property. All machinery and equipment,
maintenance parts, furniture, fixtures, vehicles, leasehold improvements, and
all other tangible personal property, wherever located (collectively, the
"Tangible Personal Property"), including the tangible personal property listed
on the Tangible Personal Property Schedule attached hereto (the "Personal
Property Schedule");
1.1.4 Manufacturers' and Vendors' Warranties. All rights under
manufacturers' and vendors' warranties relating to items included in the
Purchased Assets and all similar rights against third persons relating to items
included in the Purchased Assets;
1.1.5 Intellectual Property. All right, title, and interest in and to
all domestic and foreign letters patent, patents, patent applications, patent
licenses, software licenses, know-how licenses, trade names, trademarks,
registered copyrights, service marks, trademark registrations and applications,
service xxxx registrations and applications, all Seller's rights to the name
XSVoice, and any derivatives thereof and copyright registrations and
applications, owned or used by Seller in the operation of the Business,
including those listed or described on the Intellectual Property Schedule
attached hereto (the "Intellectual Property Schedule"), and all trade secrets,
technical knowledge, know-how, and other confidential proprietary information
and related ownership, use, and other rights of Seller (collectively, the
"Intellectual Property");
1.1.6 Books and Records. All the books and records of Seller,
including all books and records relating to employees, the purchase of
materials, supplies, and services, financial, accounting, operations matters,
product, research and development, manufacture and sale of products, and all
customer and vendor lists relating to the operation of the Business and all
files and documents (including credit information) relating to customers and
vendors of the Business (provided that Seller may keep duplicate copies of any
records required to be retained by Seller under applicable Law);
1.1.7 Prepaid Items. All prepaid items, deposits, costs, and fees
("Prepaid Items") including such of the foregoing as are listed on the Prepaid
Items Schedule attached hereto (the "Prepaid Items Schedule"); and
1.1.8 Insurance. All contracts of insurance of Seller ("Insurance
Contracts") including the Insurance Contracts listed on the Insurance Contracts
Schedule (the "Insurance Schedule").
1.1.9 The Mobile Broadcast Network. All assets and rights in or
relating to the Mobile Broadcast Network (the "MBN").
1.2 Excluded Assets. Notwithstanding anything contained in this Agreement
to the contrary, the following rights, properties, and assets (collectively, the
"Excluded Assets") will not be included in the Purchased Assets:
1.2.1 Corporate Documents. Seller's corporate seal, minute books,
charter documents, corporate stock record books, and such other books and
records as pertain to the organization, existence, or share capitalization of
Seller and duplicate copies of such records included in the Purchased Assets as
are necessary to enable Seller to file its tax returns and reports or as are
otherwise required to be retained by Seller under applicable Law, and any other
2
records or materials relating to Seller generally and not involving or relating
to the Purchased Assets or the operation or operations of the Business;
1.2.2 Employee Benefit Plans. Each and every Employee Benefit Plan (as
hereinafter defined) and any and all assets and related trusts thereof;
1.2.3 Tax Refunds. Seller's rights to receive any refund attributable
to, or right of offset against, any Taxes (as hereinafter defined) with respect
to the Business attributable to periods ending on or prior to the Closing Date
or to the pre-Closing portion of any taxable period that includes but does not
end on the Closing Date;
1.2.4 Rights under this Agreement. Seller's rights arising out of or
relating to this Agreement or the transactions contemplated hereby;
1.2.5 Cash; Cash and Stock Consideration; Other Excluded Assets. All
of the Seller's cash and cash equivalents on hand and/or in banks ("Cash"), the
Cash Consideration and Stock Consideration and the November 2005 account
receivable from Nextel Communications ("Nextel") in the amount of $59,136.43.
1.3 Nonassignable Contracts
1.3.1 Nonassignability. Without limiting or otherwise affecting the
rights of Purchaser pursuant to Article VIII, to the extent that any Contract or
Insurance Contract to be assigned pursuant to the terms of Section 1.1 is not
capable of being assigned (each, a "Nonassignable Contract"), without the
consent, approval, or waiver of any Person (including a Governmental Entity), or
if such assignment or attempted assignment would constitute a breach thereof or
a violation of any applicable foreign or United States federal, state, or local
law, statute, ordinance, regulation, order, writ, injunction, or decree ("Law"),
nothing in this Agreement will constitute an assignment or require the
assignment thereof prior to the time at which all consents, approvals, and
waivers necessary for such assignment shall have been obtained.
1.3.2 Seller to Use Best Efforts. Notwithstanding anything contained
in this Agreement to the contrary, Seller will not be obligated to assign to
Purchaser, any of its rights or obligations in, to, or under any of the
Nonassignable Contracts without first having obtained all consents, approvals,
and waivers necessary for such assignment; provided, however, that Seller shall
use its best efforts to obtain all such consents, approvals, and waivers prior
to and after the Closing Date; and provided, further, that Seller shall not be
required to make any payments in connection with any such assignment (other than
in respect of obligations then due under any such Contract).
1.3.3 If Waivers or Consents Cannot Be Obtained. To the extent and for
so long as all consents, approvals, and waivers required for the assignment of
any Nonassignable Contracts shall not have been obtained by Seller, Seller shall
use its best efforts to, (a) provide to Purchaser the financial and business
benefits of any such Nonassignable Contract and (b) enforce, at the request of
Purchaser, for the account of Purchaser, any rights of Seller arising from any
such Nonassignable Contract (including the right to elect to terminate in
accordance with the terms thereof upon the advice of Purchaser). Following the
3
Closing, Seller shall not terminate, modify, or amend any Nonassignable Contract
without Purchaser's prior written consent.
ARTICLE II.
ASSUMPTION OF LIABILITIES
-------------------------
2.1 Assumed Liabilities. Except as specifically set forth herein, no
liabilities will be assumed by Purchaser. Purchaser will assume the following
liabilities (the "Assumed Liabilities"):
2.1.1 all executory obligations of Seller in respect of the Contracts
described in the Contracts Schedule except that Purchaser shall not assume or
agree to pay, discharge, or perform any:
(a) liabilities and obligations under any Nonassignable Contract,
Insurance Contract or Permit, except to the extent Purchaser has realized
the corresponding financial and business benefits and other rights
thereunder as contemplated by Section 1.3.3; or
(b) liabilities or obligations arising out of any breach by Seller of
any provision of any contract referred to in this Section 2.1.1(b),
including liabilities or obligations arising out of Seller's failure to
perform any contract in accordance with its terms prior to the Closing.
2.1.2 all liabilities and obligations of Seller pursuant to and under
those certain promissory notes dated _________, (the "Notes") issued by the
Seller to Nextel; provided, however, that in no event shall the Purchaser be
liable to repay an amount exceeding $113,500 in the aggregate under the Notes;
and provided, further, that it is understood that Purchaser will seek to
negotiate terms with Nextel.
2.2 Retained Liabilities. Notwithstanding anything contained in this
Agreement to the contrary, Purchaser will not assume or agree to pay, satisfy,
discharge, or perform, and will not be deemed by virtue of the execution and
delivery of this Agreement or any document delivered at the Closing pursuant to
this Agreement, or as a result of the consummation of the transactions
contemplated by this Agreement, to have assumed, or to have agreed to pay,
satisfy, discharge, or perform, any liability, obligation, or indebtedness of
Seller, whether primary or secondary, direct or indirect, other than the Assumed
Liabilities. Seller will retain and pay, satisfy, discharge, and perform in
accordance with the terms thereof, all liabilities and obligations other than
the Assumed Liabilities to the extent specifically provided in Section 2.1,
including those set forth below (such liabilities and obligations retained by
Seller being referred to herein as the "Retained Liabilities"):
2.2.1 all liabilities or obligations of Seller or any predecessor or
Affiliate thereof which relate to any of the Excluded Assets;
2.2.2 all liabilities or obligations of Seller or any predecessor or
Affiliate thereof for or relating to Taxes, whether relating to or arising out
of the Business, the Purchased Assets or otherwise, fixed or contingent,
disclosed or undisclosed, and with respect to any Transfer Tax (as hereinafter
4
defined) arising from or in connection with the transfer or the sale of the
Business, Purchased Assets or the Assumed Liabilities;
2.2.3 all liabilities or obligations of Seller arising out of or
relating to this Agreement or the transactions contemplated hereby (including
any prior efforts to sell or otherwise dispose of the Purchased Assets or the
Business or any portion thereof), and all liabilities or obligations for any
legal, accounting, investment banking, brokerage, or similar fees or expenses
incurred by Seller in connection with, resulting from, or attributable to, the
transactions contemplated by this Agreement;
2.2.4 subject to Section 2.1 all liabilities or obligations for any
indebtedness for borrowed money incurred with respect to the Business prior to
the Closing Date;
2.2.5 all liabilities and obligations of Seller or any predecessor or
Affiliate of Seller resulting from, caused by, or arising out of, directly or
indirectly, the conduct of the Business or ownership or lease of any of the
Purchased Assets or any properties or assets previously used in the Business at
any time prior to or on the Closing Date as constitute, may constitute, or are
alleged to constitute a tort, breach of contract, or violation or requirement of
any Law, or which relate to, result in, or arise out of, the existence or
imposition of any liability or obligation to remediate or contribute or
otherwise pay any amount under or in respect of any environmental, superfund, or
other environmental cleanup or remedial Laws, occupational safety and health
Laws, or other Laws;
2.2.6 all claims for severance, other employee benefits (including
benefits mandated by Law), or other compensation or damages by or on behalf of
any employees (present or former), agents, or independent contractors of Seller
or by or on behalf of any Governmental Entity in respect of employees (present
or former), agents, or independent contractors of Seller involving any alleged
employment loss, violation of any Law, or termination of employment actually or
constructively (by operation of Law or pre-existing contract, including any
liability for severance), all liabilities and obligations of Seller or any
predecessor or Affiliate of Seller with respect to employees (present or
former), agents, or independent contractors of Seller under any Employee Benefit
Plan, or in respect of payments for unemployment compensation or unemployment
insurance, all liabilities and obligations with respect to physical, mental, or
other health conditions of employees (present or former), agents, or independent
contractors of Seller existing prior to or at the Closing and all other
obligations in respect of employees (present or former), agents, or independent
contractors of Seller relating to periods of employment ending on or prior to
the Closing Date;
2.2.7 all liabilities and obligations with respect to any and all
accrued and unpaid Tennessee personal property or other tax, and any interest
and penalty payments thereon, owed by Seller to the appropriate taxing authority
in the State of Tennessee.
ARTICLE III.
PURCHASE PRICE
--------------
3.1 Purchase Price. In addition to assuming the Assumed Liabilities,
Purchaser will pay for the Purchased Assets an aggregate purchase price
consisting of (i) $198,828.81 in cash, which shall be paid to Seller on the
Closing Date by wire transfer or certified check of immediately available funds
5
to such account as shall have been designated by Seller to Purchaser prior to
the Closing (the "Closing Payment"); (ii) an additional $500,000 to be delivered
to Seller if and when a majority of Purchaser's Series A Warrants are exercised
or at least $3,200,000 of additional equity capital has been raised by Purchaser
within 12 months from Closing (the "Warrant Payment" and collectively with the
Closing Payment the "Cash Consideration"). Amounts received in respect to the
Warrant Payment will be placed in an escrow account pursuant to the terms of the
Escrow Agreement (as hereinafter defined); (iii) 2,258,470 unregistered shares
of Purchaser's common stock (the "Stock Consideration") to be delivered to
Seller promptly after the Closing, (at the Closing Purchaser shall deliver to
Seller an acknowledgement from Purchaser's transfer agent of instructions to
deliver certificates representing the shares), valued at $5,735,000 based on a
share price (the "Share Price") determined by the average closing price over the
15 trading days preceding Closing, 590,710 of these shares to be held by
Xxxxxxxx, Xxxxxxx & Xxxxxxxxxx, PLLC (the "Escrow Agent") pursuant to the terms
of the Escrow Agreement to be executed by and among Seller, Purchaser, and the
Escrow Agent in the form of Exhibit A attached hereto (the "Escrow Agreement");
3.2 Resale and Registration of Shares. All shares part of the Stock
Consideration shall be "restricted," as such term is used in Rule 144,
promulgated under the United States Securities Act of 1933, as amended (the
"1933 Act") and the certificates representing the same shall contain the
following legend:
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE
SHARES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION
OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SHARES TO THE EFFECT
THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT AND SUCH STATE
SECURITIES LAWS."
It is understood that "stop transfer" orders will be placed with the transfer
agent with respect to the Stock Consideration in accordance with normal
practices for restricted shares.
If at any time or times, the Purchaser shall determine to register any of
its shares of common stock (the "Common Stock") that are held by Xxxxxxx Xxxxx
or Xxxx Xxxxxxx, under the 1933 Act and other than on Forms S-4 or S-8 or any
successor forms, the Purchaser will give prompt written notice thereof to all
holders who own Registrable Shares (the "Holders"). For purposes of this
Agreement, "Registrable Shares" means all shares of Purchaser's Common Stock
that are being issued pursuant to the Agreement. Upon the written request of any
Holders, given within fifteen (15) days after receipt of any such notice, the
Purchaser will use its reasonable best efforts to afford such Holders the
opportunity to include that amount of Registrable Securities which such Holder
has requested to be registered to be included in the Purchaser's registration
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statement ("Registration Statement"), all to the extent requisite to permit the
sale or other disposition of such Registrable Securities; provided, however,
that if the Purchaser proposes to register less than all of the shares owned by
Xxxxxxx Xxxxx and Xxxx Xxxxxxx, then the Purchaser shall be obligated to include
only the same percentage of Registrable Shares as the percentage of shares held
by Xxxxxxx Xxxxx and Xxxx Xxxxxxx as are being registered. In addition, the
Holders acknowledge that, subject to the treatment of the Xxxxxxx Xxxxx and Xxxx
Xxxxxxx shares on the same basis, the Purchaser, in its discretion, may elect
not to file the Registration Statement or may elect to withdraw the Registration
Statement after it has been filed. In connection with any such registration, the
undertakings, indemnification and expense shares shall be upon the same terms as
are typical of selling shareholders in a secondary registration and as may be
required of Xxxxxxx Xxxxx and Xxxx Xxxxxxx as a condition of such registration.
It is understood that the Seller and or its shareholders will be able to
resell their shares of Common Stock in accordance with and subject to Rule 144,
promulgated under the 1933 Act after a holding period of two years, computed in
accordance with such rule, without limit as permitted under Rule 144(k).
3.3 Tax Free Reorganization. It is the intent of both Purchaser and Seller
to effectuate a type-C tax free reorganization pursuant to Section 368(a)(1)(C)
of the Internal Revenue Code (the "Code").
3.4 Guaranty of Revenues . The assets held in escrow pursuant to Section
3.1 of the Agreement shall be released to the Seller as the cumulative or
year-to-date revenues of the Business conducted with the Purchased Assets
("Revenues") achieve target levels or tiers of revenue. "Revenues" shall be
defined as the gross revenue, meaning revenues generated, directly or
indirectly, from any and all sources, uses or exploitation of the Purchased
Assets and/or Business, including, without limitation, subscription revenue,
advertising revenue or licensing revenue, less carrier share, transaction fees,
refunds, and write-off or chargebacks, but shall not include any amounts
received where there is an obligation to reimburse or otherwise credit customers
for such amounts. The target levels of Revenues that must be achieved (in the
aggregate) in order for the assets to be released are set forth in the following
table (the "Target Revenue Table"):
-------- ------------------------------ --------------------------------
LOWER THRESHOLD OF REVENUES UPPER THRESHOLD OF REVENUES
(YEAR-TO-DATE) (YEAR-TO-DATE)
-------- ------------------------------ --------------------------------
Tier #1 $ 140,000.00 $ 165,000.00
-------- ------------------------------ --------------------------------
Tier #2 $ 692,500.00 $ 805,000.00
-------- ------------------------------ --------------------------------
Tier #3 $1,492,500.00 $1,730,000.00
-------- ------------------------------ --------------------------------
Tier #4 $2,517,500.00 $2,905,000.00
-------- ------------------------------ --------------------------------
The assets to be released upon the achievement of the target Revenues is set
forth in the following table (the "Released Assets Table"):
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-------- ---------------------------------- -----------------------------------
ASSETS TO BE RELEASED AS LOWER ASSETS TO BE RELEASED AS UPPER
THRESHOLD OF REVENUES IS ACHIEVED THRESHOLD OF REVENUES IS ACHIEVED
-------- ---------------------------------- -----------------------------------
Tier #1 15% of Initial Shares(1) 15% of Initial Shares
-------- ---------------------------------- -----------------------------------
Tier #2 15% of Initial Shares 15% of Initial Shares
-------- ---------------------------------- -----------------------------------
Tier #3 15% of Initial Shares plus 15% of Initial Shares plus
$100,000 from Warrant Payment $100,000 from Warrant Payment
-------- ---------------------------------- -----------------------------------
Tier #4 5% of Initial Shares plus Balance of shares plus balance of
$150,000 from Warrant Payment cash held in escrow
-------- ---------------------------------- -----------------------------------
--------------------
1 Initial Shares shall mean shares of stock used to fund the escrow plus
any additions thereto via stock dividends, stock splits or otherwise.
As each tier amount is achieved, the applicable number of shares and cash, if
applicable, shall be distributed accordingly at that time. There will be no
proration based on achieving any amounts other than the specific targeted
amounts set forth in the Target Revenue Table. In the event that the Revenues
have not reached the target of revenues for a tier by the end of the year, then
the lesser of (i) remaining assets in escrow or (ii) assets having a value of
$1.5 million (plus sums deposited in escrow from the Warrant Payment), LESS a
sum equal to the number of shares distributed to Seller out of the escrow
multiplied by $2.54 per share (plus cash sums from Warrant Payment distributed
to Seller) shall be transferred to Purchaser and the balance, if any, shall be
released to Seller. The escrow shall expire at the earlier of when all assets
held in escrow have been distributed or on the one year anniversary of the
Closing Date.
Upon a change of control (as defined hereinafter), the Warrant Payment and the
shares held in escrow pursuant to Section 3.1 of the Agreement shall be
immediately released to the Seller. A "change of control" shall be deemed to
have occurred if there is a sale by Purchaser of substantially all of its assets
or if any person or persons acting in concert, other than Xxxxxxx Xxxxx, Xxxx
Xxxxxxx and/or members of their Families ("Family" means the heirs, legatees,
descendants and blood relatives to the third degree of consanguinity of such
individual), together with persons controlled by or under common control of the
aforementioned individuals, directly or indirectly acquires, in the aggregate,
more than 50% (by number of shares) of the issued and outstanding voting stock
of the Purchaser and take effective control over the Purchaser. A change of
control shall be deemed to have occurred only if the transaction values the
Purchaser at $50,000,000 or more (if a stock transaction for 100% of the stock
of Purchaser or its proportionate amount if a lesser percentage of the stock is
acquired).
ARTICLE IV.
THE CLOSING
-----------
4.1 Date of Closing. The consummation of the purchase and sale of the
Purchased Assets contemplated hereby (the "Closing") shall take place on or
before January 6, 2006, at the offices of Xxxxxxxx, Xxxxxxx & Xxxxxxxxxx, XXXX,
0000 One Nashville Place, 000 Xxxxxx Xxxxxx, Xxxxx, Xxxxxxxxx, Xxxxxxxxx
00000-0000. The date on which the Closing is effected is referred to in this
8
Agreement as the "Closing Date." At the Closing, the parties shall execute and
deliver the documents referred to in Article VI.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
------------------------------
5.1 Representations and Warranties of Seller. Seller makes the following
representations and warranties to Purchaser, each of which is true and correct
as of the date hereof and shall be unaffected by any investigation heretofore or
hereafter made by Purchaser.
5.1.1 Organization. Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Tennessee. Seller
has the requisite corporate power and authority to own, lease, or otherwise hold
the Purchased Assets owned, leased, or otherwise held by it and to carry on the
Business as presently conducted by it.
5.1.2 Good Standing. Seller is in good standing and duly qualified to
conduct business as a foreign corporation in every state of the United States in
which its ownership or lease of property or conduct of its business activities
makes such qualification necessary, except where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect. For
the purposes of this Agreement, "Material Adverse Effect" shall mean any event,
circumstance, condition, fact, effect, or other matter which has had or could
reasonably be expected to have a material adverse effect (i) on the Purchased
Assets or on the financial condition, prospects, financial projections, or
results of operations of the Business taken as a whole or (ii) on the ability of
Seller to perform on a timely basis any material obligation under this Agreement
or to consummate the transactions contemplated hereby.
5.1.3 Authorization and Effect of Agreement. Seller has the requisite
corporate power to execute and deliver this Agreement and the other agreements
to be entered into by it pursuant to this Agreement (the "Seller Ancillary
Documents") and to perform the transactions contemplated hereby and thereby to
be performed by it. The execution and delivery by Seller of this Agreement and
the Seller Ancillary Documents and the performance by it of the transactions
contemplated hereby and thereby to be performed by it have been duly authorized
by all necessary corporate and shareholder action on the part of Seller. This
Agreement and each Seller Ancillary Document have been duly executed and
delivered by duly authorized officers of Seller and, assuming the due execution
and delivery of this Agreement and, as applicable, any Seller Ancillary
Document, by Purchaser, constitutes a valid and binding obligation of Seller
enforceable against it in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
affecting the enforcement of creditors' rights in general and subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
5.1.4 No Restrictions Against Sale of the Purchased Assets; Required
Consents. The execution and delivery of this Agreement and each Seller Ancillary
Document by Seller does not and the performance by Seller of the transactions
contemplated hereby or thereby to be performed by any of them will not (a)
conflict with or violate any provision of the articles or certificate of
incorporation or by-laws (or other organizational documents) of Seller, (b)
except as set forth on the Required Consents Schedule (the "Required Consents
Schedule"), conflict with, or result in any violation of, or constitute a
default (with or without notice or lapse of time, or both) under, or give rise
9
to a right of termination, cancellation, or acceleration of any obligation or to
loss of a benefit under, any provision of any Contract or Permit to which Seller
is a party or by which it or any of its properties are bound, (c) constitute a
violation of any Law applicable to any of Seller or the Purchased Assets, or (d)
result in the creation of any Lien (other than any Permitted Lien) upon any of
the Purchased Assets, except in the case of clauses (b) or (c) above, for such
conflicts, violations, breaches, defaults, accelerations, terminations,
modifications, or cancellations that would not, individually or in the
aggregate, have a Material Adverse Effect. No consent, approval, order, or
authorization of, or registration, declaration, or filing with, any Governmental
Entity is required to be obtained or made by or with respect to Seller in
connection with the execution and delivery of this Agreement or any Seller
Ancillary Document by Seller or the performance by Seller of the transactions
contemplated hereby to be performed by it.
5.1.5 No Third Party Options. There are no existing agreements with,
options, or rights of, or commitments to, any person to acquire any of the
Purchased Assets or any interest therein, except for those contracts entered
into in the normal course of business consistent with past practice with respect
to the provision of services by Seller.
5.1.6 Financial Statements. Intentionally omitted.
5.1.7 Accounts Receivable. The accounts receivable of Seller listed in
the Receivables Schedule are valid and genuine; have arisen solely out of bona
fide sales and deliveries of goods, performance of services, and other business
transactions in the ordinary course of business consistent with past practice;
and, to the knowledge of the Seller, are not subject to valid defenses,
set-offs, or counterclaims.
5.1.8 Books of Account. The books, records, and accounts of Seller
maintained with respect to the Business accurately and fairly reflect, in
reasonable detail, the transactions and the assets and liabilities of Seller
with respect to the Business. To its knowledge, Seller has not engaged in any
transaction with respect to the Business, maintained any bank account for the
Business, or used any of the funds of Seller in the conduct of the Business
except for transactions, bank accounts, and funds which have been and are
reflected in the normally maintained books and records of the Business.
5.1.9 Contracts and Commitments.
(a) Except as described on the Contracts Schedule, Seller is not a
party to any written or oral:
(i) employment or consulting Contract with an employee or former
employee, director, agent, consultant, or similar representative;
(ii) Contract for the future purchase of, or payment for,
supplies or products, or for the performance of services by a third
person which supplies services to the Seller;
(iii) Contract to sell or supply products or to perform services;
10
(iv) Contract granting to any Person a first-refusal,
first-offer, or similar preferential right to purchase or acquire any
of the Purchased Assets;
(v) any indenture, mortgage, loan, letter of credit, or other
credit Contract under which the Seller has borrowed or is entitled to
borrow any money or issued any note, bond, indenture, or other
evidence of indebtedness for borrowed money, or any indemnity,
guarantee, or other contingent liability in respect of any
indebtedness or obligation of any other Person;
(vi) Contract with any manufacturer's representative,
distributor, or other sales agent;
(vii) Contract under which Seller is (A) a lessee of, or holds or
uses, any material machinery, equipment, vehicle, or other tangible
personal property owned by any other Person or (B) a lessor of, or
makes available for use by any other Person, any material tangible
personal property owned by any Seller.
(viii) management service, investment advisory, investment
banking, or other similar Contract;
(ix) Contract limiting the freedom of Seller to sell any products
or services of any other Person, engage in any line of business, or to
compete with or obtain products from any other Person;
(x) Contract pursuant to which Seller has agreed to indemnify or
hold harmless any Person;
(xi) Contract with any officer, director, Affiliate, or
stockholder of Seller or with any holder of any securities convertible
into or exchangeable or exercisable for any shares of capital stock of
Seller;
(xii) license, franchise, distributorship, or other Contract
which relates in whole or in part to any Intellectual Property of or
used by Seller in the conduct of the Business; or
(xiii) material Contract relating to the Business not made in the
ordinary course of business.
(b) Each of the agreements, contracts, and other instruments,
documents, and undertakings listed or required to be listed on the
Contracts Schedule, under which Purchaser is to acquire rights or
obligations hereunder is valid and enforceable in accordance with its
terms; Seller is, and to the Seller's knowledge all other parties thereto
are, in compliance with the provisions thereof; Seller is not, and to the
Seller's knowledge no other party thereto is, in default in the
performance, observance or fulfillment of any obligation, covenant, or
condition contained therein; and no event has occurred which with or
without the giving of notice or lapse of time, or both, would constitute a
default thereunder. Furthermore, no such agreement, contract, instrument,
document, or undertaking, in the reasonable opinion of Seller, contains any
contractual requirement with which there is a reasonable likelihood Seller
or any other party thereto will be unable to comply. Except as listed on
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the Contracts Schedule no written or oral agreement, contract, or
commitment described or required to be described on the Contracts Schedule
the consent of any party to its assignment in connection with the
transactions contemplated hereby.
5.1.10 Title to Assets. Following the Closing, Purchaser will have,
good, valid, and marketable title to the Purchased Assets free and clear of all
Liens, other than (a) Liens for Taxes, assessments, and other governmental
charges which are not due and payable or which may thereafter be paid without
penalty, and (b) mechanics', carriers', workmen's, repairmen's, and other like
Liens arising or incurred in the ordinary course of business consistent with
past practice. The items referred to in clauses (a) and (b) of the immediately
preceding sentence are hereinafter referred to as "Permitted Liens."
5.1.11 Intellectual Property. The Intellectual Property includes all
of the intellectual property rights owned or licensed by Seller and/or used in
the operation of the Business. Seller has good, marketable, and exclusive title
to, and the valid and enforceable power and unqualified right to use, the
Intellectual Property, free and clear of all Liens, and to transfer the same to
Purchaser and no Person other than Seller has any right or interest of any kind
or nature in or with respect to the Intellectual Property or any portion thereof
or any rights to use, market, or exploit the Intellectual Property or any
portion thereof. There are no pending, or to the knowledge of the Seller,
threatened actions of any nature affecting the Intellectual Property. Except as
set forth on the Claims Schedule (as defined in Section 5.1.13), and to the
knowledge of the Seller, there exists no reasonable basis upon which any claim
may be asserted against Seller for infringement or misappropriation of any
domestic or foreign letters patent, patents, patent applications, patent
licenses, software licenses, know-how licenses, trade names, trademark
registrations and applications, trademarks, service marks, copyrights, copyright
registrations or applications, trade secrets, technical knowledge, know-how, or
other confidential proprietary information held or owned by another Person. All
letters patent, registrations, and certificates issued by any Governmental
Entity relating to any of the Intellectual Property and all licenses and other
Contracts pursuant to which Seller uses any of the Intellectual Property, are
valid and subsisting, have been properly maintained. Neither Seller (nor to the
knowledge of the Seller, any other Person), is in default or violation
thereunder.
5.1.12 Sufficiency and Condition of Assets. The Purchased Assets
constitute all of the rights, properties, and assets of every kind, character,
and description, wherever located and whether tangible or intangible, real or
personal, or fixed or contingent, that are reasonably necessary to operate the
business as currently conducted by Seller. All the Purchased Assets are in
reasonably good operating condition and repair, subject to normal wear and
maintenance, are usable in the regular and ordinary course of business. No
person other than Seller owns any equipment or other tangible assets or
properties situated on the premises of Seller or reasonably necessary to the
operation of the Business, and no Affiliates of Seller are engaged in the
conduct of the Business as now conducted.
5.1.13 Litigation; Decrees. There are no judicial or administrative
actions, proceedings, or investigations pending or, to the Seller's knowledge,
threatened that question the validity of this Agreement or any action taken or
to be taken by Seller in connection with this Agreement. Except as listed or
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described on the Claims Schedule, attached hereto (the "Claims Schedule"), there
are no (i) lawsuits, claims, administrative, or other proceedings or
investigations relating to the conduct of the Business pending or, to the
Seller's knowledge, threatened by, against, or affecting Seller, or any of the
Purchased Assets or (ii) judgments, orders, or decrees of any Governmental
Entity binding on the Seller, or any of the Purchased Assets.
5.1.14 Compliance With Law. To its knowledge, Seller has complied in
all material respects with each Law to which Seller or its business, operations,
assets, or properties is subject and is not currently in violation in any
material respects of any of the foregoing.
5.1.15 Taxes.
(a) All Tax Returns (as hereinafter defined) that are required to be
filed on or before the date hereof by Seller have been duly filed on a
timely basis with the appropriate federal, state, local, and foreign
governments or foreign agencies. All such Tax Returns were complete and
accurate in all material respects. All Taxes owed by Seller have been paid
by it, whether or not such Taxes are disputed. Seller has not executed or
filed with the IRS or any other taxing authority any agreement extending
the period for filing any Tax Return.
(b) No claim for assessment or collection of Taxes has been asserted
against Seller. Seller is not a party to any pending action, proceeding,
audit, or investigation by any Governmental Entity for the assessment or
collection of Taxes nor does the Seller have knowledge of any such
threatened action, proceeding, or investigation.
(c) Seller has withheld and paid all Taxes required to be withheld in
connection with any amounts paid or owing to any employee, creditor,
independent contractor, or other third Person.
(d) For purposes of this Agreement, the terms "Tax" and "Taxes" shall
mean all federal, state, local, or foreign income, payroll, withholding,
unemployment insurance, social security, sales, use, service, service use,
leasing, leasing use, excise, custom duties, franchise, gross receipts,
value added, alternative or add-on minimum, estimated, occupation, real and
personal property, ad valorem stamp, transfer, workers' compensation,
severance, windfall profits, environmental (including taxes under Section
59A of the Code), or other tax of the same or of a similar nature,
including any interest, penalty, fine or addition thereto, whether disputed
or not and shall include any transferee or successor liability in respect
of Taxes, any liability under a tax sharing arrangement or tax indemnity
agreement, or otherwise. The term "Tax Return" means any return,
declaration, report, claim for refund, or separate election information
return or statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
5.1.16 Disclosure. No representation or warranty by the Seller
contained in this Agreement, and no statement contained in any document, list,
certificate, or other instrument furnished or to be furnished by or on behalf of
the Seller to Purchaser or any of its representatives in connection with the
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transactions contemplated hereby, contains or will contain any untrue statement
of a material fact, or omits or will omit to state any material fact necessary,
in light of the circumstances under which it was or will be made, in order to
make the statements herein or therein not misleading or necessary in order fully
and fairly to provide the information required to be provided in any such
document, list, certificate, or other instrument.
5.1.17 Acquisition of Shares. Seller is acquiring an interest in the
Stock Consideration acquired or to be acquired under the terms of this Agreement
for investment for its own account and not with a view to, or for sale in
connection with, any distribution thereof, except a distribution to shareholders
of Seller in accordance with a plan of reorganization under applicable laws of
the State of Tennessee and with the criteria for a type-C reorganization
pursuant to Section 368(a)(1)(C) of the Code. Seller (either alone or together
with its advisors) has sufficient knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of its
investment in the Stock Consideration and is capable of bearing the economic
risks of such investment. Seller acknowledges and agrees that prior to the date
hereof each such party has carefully reviewed Purchaser's Annual Report on Form
10-KSB for the period ended September 30, 2005, as amended by the amendment
filed on December 29, 2005 (the "SEC Reports"). Seller had reasonable time and
opportunity to ask questions and receive answers concerning the terms and
conditions of this Agreement and the transactions contemplated hereby and to
obtain any additional information from the Purchaser. Seller acknowledges and
agrees that the Stock Consideration acquired or to be acquired under the terms
of this Agreement has not been registered under the 1933 Act or any applicable
state securities or "blue sky" laws and that such shares of Stock Consideration
must be held indefinitely unless subsequently registered under the 1993 Act and
all applicable state securities and "blue sky" laws or unless an exemption from
such registration is available. Seller's distribution of Shares is conditioned
on the distribution of shares satisfying the terms of Section 3.1 of the
Agreement.
5.1.18 Commissions and Finders Fees. Neither the Seller nor any Person
acting on the behalf of the Seller has agreed to pay a commission, finder's fee,
or similar payment in connection with this Agreement or any matter related
hereto to any Person.
5.2 Representations and Warranties of Purchaser. Purchaser makes the
following representations and warranties to the Seller each of which is true and
correct as of the date hereof and shall be unaffected by any investigation
heretofore or hereafter made by the Seller.
5.2.1 Corporate Organization. Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Nevada and has the requisite corporate power and authority to own, lease, or
otherwise hold its properties and assets and to carry on its business as
presently conducted.
5.2.2 Authorization and Effect of Agreement. Purchaser has the
requisite corporate power to execute and deliver this Agreement and the other
agreements to be entered into by it pursuant to the terms of this Agreement (the
"Purchaser Ancillary Documents") and to perform the transactions contemplated
hereby and thereby to be performed by it. The execution and delivery by
Purchaser of this Agreement and the Purchaser Ancillary Documents and the
performance by it of the transactions contemplated hereby and thereby to be
performed by it have been duly authorized by all necessary corporate action on
the part of Purchaser. This Agreement and each Purchaser Ancillary Document have
14
been duly executed and delivered by duly authorized officers of Purchaser and,
assuming the due execution and delivery of this Agreement and, as applicable,
any Purchaser Ancillary Document, by the Seller, constitutes a valid and binding
obligation of Purchaser enforceable against it in accordance with its terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium,
or other similar Laws affecting the enforcement of creditors' rights in general
and subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
5.2.3 No Restrictions Against Purchase of the Assets. The execution
and delivery of this Agreement and each Purchaser Ancillary Document by
Purchaser does not, and the performance by Purchaser of the transactions
contemplated hereby or thereby to be performed by it will not, (a) conflict with
or violate the certificate or articles of incorporation (or other organizational
documents) or by-laws of Purchaser, (b) conflict with, or result in any
violation of, or constitute a default (with or without notice or lapse of time,
or both) under, any provision of any contract or permit to which Purchaser is a
party or by which it is bound, or (c) constitute a violation of any Law, except
in the case of clauses (b) or (c) above, for such conflicts, violations,
breaches, or defaults that would not, individually or in the aggregate, (i)
materially impair the ability of Purchaser to perform its obligations hereunder
or (ii) prevent or materially delay the consummation of the purchase and sale of
the Purchased Assets contemplated hereby. No consent, approval, order, or
authorization of, or registration, declaration, or filing with, any Governmental
Entity is required to be obtained or made by or with respect to Purchaser in
connection with the execution and delivery of this Agreement by Purchaser or the
performance by Purchaser of the transactions contemplated hereby to be performed
by it.
5.2.4 Authorization of Shares. The issuance, sale and delivery of the
Stock Consideration to Seller has been duly authorized by all requisite
corporate action by Purchaser and the Stock Consideration to be issued to
Seller, when issued and delivered in accordance with the terms of this
Agreement, will be validly issued and outstanding, fully paid and nonassessable,
free and clear of any Liens and not subject to preemptive or other similar
rights of the shareholders of Purchaser.
5.2.5 Compliance With Law; Permits. Purchaser has complied in all
material respects with each Law to which Purchaser or its business, operations,
assets, or properties is subject and is not currently in violation in any
material respects of any of the foregoing.
5.2.6 Litigation; Decrees. There are no judicial or administrative
actions, proceedings, or investigations pending or, to Purchaser's knowledge,
threatened that question the validity of this Agreement or any action taken or
to be taken by Purchaser in connection with this Agreement. Except as may be
disclosed in the SEC Reports there are no (i) lawsuits, claims, administrative,
or other proceedings or investigations relating to the conduct of Purchaser's
business pending or, to Purchaser's knowledge, threatened by, against, or
affecting Purchaser or (ii) judgments, orders, or decrees of any Governmental
Entity binding on Purchaser.
5.2.7 Capitalization. As set forth in the SEC Reports.
15
5.2.8 SEC Reports; Disclosure. Purchaser has provided to Seller a copy
of the SEC Reports.
5.2.9 Financial Statements. The financial statements of Purchaser
contained in the SEC Reports (collectively, the "Purchaser Financial
Statements") have been prepared in accordance with GAAP consistently applied
throughout the periods involved and such Purchaser Financial Statements,
including the related notes, fairly present the financial position, assets, and
liabilities (whether accrued, absolute, contingent, or otherwise) of Purchaser
and its consolidated subsidiaries as of the dates and for the periods indicated;
provided, however, that the unaudited interim financial statements included in
the Purchaser Financial Statements are subject to normal year-end adjustments
(all of which are of a recurring nature and none of which individually or in the
aggregate would have a Purchaser Material Adverse Effect. For the purposes of
this Agreement, "Purchaser Material Adverse Effect" shall mean any event,
circumstance, condition, fact, effect, or other matter which has had or could
reasonably be expected to have a material adverse effect on Purchaser's
financial condition, prospects, financial projections, or results of operations
taken as a whole or (ii) on the ability of Purchaser to perform on a timely
basis any material obligation under this Agreement or to consummate the
transactions contemplated hereby).
5.2.10 Absence of Changes. Except as disclosed in the SEC Reports,
since September 30, 2005 there has not been any change in the assets,
liabilities, financial condition or operating results of Purchaser from that
reflected in the Purchaser Financial Statements, except changes in the ordinary
course of business that have not created, in the aggregate, a Purchaser Material
Adverse Effect.
5.2.11 Commissions and Finders Fees. Except for Xxxxxxx & Associates,
neither Purchaser, nor any Person acting on the behalf of Purchaser has agreed
to pay a commission, finder's fee, or similar payment in connection with this
Agreement or any matter related hereto to any Person.
ARTICLE VI.
DOCUMENTS TO BE DELIVERED AT THE CLOSING
----------------------------------------
6.1 Documents to be Delivered by the Seller. At the Closing, the Seller
will deliver or cause to be delivered to Purchaser, the following, at the
expense of the Seller and in proper form for recording where appropriate:
6.1.1 Transfer Documents. Such bills of sale, assignments, general
warranty deeds, and other good and sufficient instruments of transfer as
Purchaser may reasonably request conveying and transferring to Purchaser title
to the Purchased Assets free and clear of all liens and encumbrances except
Permitted Liens which shall be in form and substance reasonably satisfactory to
Purchaser, on the one hand, and the Seller, on the other hand.
6.1.2 Certified Resolutions. Certified resolutions of the Boards of
Directors or any Shareholders of Seller approving the execution and delivery of
this Agreement and the Seller Ancillary Documents and authorizing the
consummation of the transactions contemplated hereby and thereby.
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6.1.3 Employment/Consultancy Agreements. Contracts in the form as
mutually agreed upon prior to the Closing by all parties, including the
applicable individual, will be offered to: (i) Xxxx Xxxxxxxx, (ii) Xxx Xxxxx,
(iii) Xxxx Xxxxx, (iv) Xxx Xxxxxxx, (v) Xxxxx Xxxxxx and (vi) Xxxx Xxxxxxxxx.
6.1.4 Escrow Agreement. Executed Escrow Agreement between Seller,
Purchaser and the Escrow Agent pursuant to which shares of Purchaser stock will
be held by the Escrow Agent as part of the Stock Consideration according to the
terms of Section 3.1 of the Agreement.
6.1.5 Good Standing Certificates. Governmental certificates showing
that Seller is duly incorporated and in good standing in the state or
jurisdiction of its incorporation as applicable, certified as of a date not more
than ten days before the Closing Date.
6.1.6 Lien Searches. Lien Searches for federal and state tax liens,
judgment liens, and other liens on standard form of Request for Information
(Uniform Commercial Code Form UCC-11) for entries in the name of the Seller
(including under any assumed names) completed and certified by the Secretary of
State of the State of Tennessee dated no earlier than 20 days prior to Closing
Date and showing the absence of any such liens on the Assets (other than
Permitted Liens). If any such liens do exist, Seller must provide proof of
release of such liens of record.
6.1.7 Tax Certificates. Any clearance certificates or similar
documents that are required by any taxing authority in order to relieve
Purchaser of any obligation to withhold any portion of the payments to the
Seller pursuant to this Agreement.
6.1.8 Other Documents. Such additional information and materials as
Purchaser shall reasonably request.
6.2 Documents to be Delivered by Purchaser. At the Closing, Purchaser will
deliver to Seller at the expense of Purchaser:
6.2.1 Purchase Price. A wire transfer to Seller of immediately
available funds in the amount of the Cash Consideration as provided in Section
3.1 and an acknowledgement from Purchaser's stock transfer agent of instructions
to issue the Stock Consideration.
6.2.2 Assumption Agreement. Such assumption agreements as Seller may
reasonably request relating to Purchaser's assumption of the Assumed
Liabilities.
6.2.3 Certified Resolutions. Certified resolutions of the Board of
Directors of Purchaser approving the execution and delivery of this Agreement
and the Purchaser Ancillary Documents and authorizing the consummation of the
transactions contemplated hereby and thereby.
6.2.4 Good Standing Certificates. Governmental certificates showing
that Purchaser is duly incorporated and in good standing in the State of Nevada,
certified as of a date not more than ten days before the Closing Date.
17
6.2.5 Employment/Consultancy Agreements. Purchaser will offer to enter
into contracts in the form as mutually agreed upon prior to the Closing by all
parties, including the applicable individual, with: (i) Xxxx Xxxxxxxx, (ii) Xxx
Xxxxx, (iii) Xxxx Xxxxx, (iv) Xxx Xxxxxxx, (v) Xxxxx Xxxxxx and (vi) Xxxx
Xxxxxxxxx.
6.2.6 Release from Xxxxxxx & Associates.
6.2.7 Approval of Budget.
6.2.8 Other Documents. Such additional information and materials as
Seller shall reasonably request.
ARTICLE VII.
POST-CLOSING COVENANTS
----------------------
7.1 Discharge of Business Obligations. From and after the Closing Date,
Seller shall pay and discharge, in accordance with past practice but not less
than on a timely basis, all obligations and liabilities incurred prior to the
Closing Date in respect of the Business, its operations, or the assets and
properties used therein (except for the Assumed Liabilities).
7.2 Maintenance of Books and Records. Seller and Purchaser shall, preserve
until the tenth anniversary of the Closing Date all records possessed or to be
possessed by such party relating to any of the assets or liabilities of the
Business, or the operation of the Business, prior to the Closing Date. At the
end of such period, such records may then be destroyed no earlier than the 30th
day after such notice is given unless another party objects to the destruction,
in which case the party seeking to destroy the records shall either agree to
retain such records or deliver such records to the objecting party at the
objecting party's cost. After the Closing Date, where there is a legitimate
purpose, such party shall provide the other parties with access, upon prior
reasonable written request specifying the need therefor, during regular business
hours, to (a) the officers and employees of such party and (b) the books of
account and records of such party, but, in each case, only to the extent
relating to the assets, liabilities or business of the Business prior to the
Closing Date, and the other parties and their representatives shall have the
right to make copies of such books and records; provided, however, that the
foregoing right of access shall not be exercisable in such a manner as to
interfere unreasonably with the normal operations and business of such party;
and provided, further that, as to so much of such information as constitutes
trade secrets or confidential business information of such party, the requesting
party and its officers, directors, and representatives will use due care to not
disclose such information except to the extent such information (a) is required
to be disclosed pursuant to an order or request of a judicial authority or
Governmental Entity having competent jurisdiction (provided the party seeking to
disclose such information, if not prohibited by such authority or Governmental
Entity or applicable Law, provides the other party or parties with reasonable
prior notice thereof) or (b) which can be shown to have been generally available
to the public other than as a result of a breach of this Section 7.2.
7.3 Payments Received. After the Closing, Seller and Purchaser will hold
and promptly transfer and deliver to the other, from time to time as and when
received by them, any cash, checks with appropriate endorsements (using their
best efforts not to convert such checks into cash), or other property that they
may receive on or after the Closing which properly belongs to the other party,
18
including any insurance proceeds, and will account to the other for all such
receipts. From and after the Closing, Purchaser shall have the right and
authority to endorse without recourse the name of Seller on any check or any
other evidences of indebtedness received by Purchaser on account of the Business
and the Purchased Assets transferred to Purchaser hereunder.
7.4 Use of Name. From and after the Closing Date, Seller will sign such
consents and take such other action as Purchaser shall reasonably request in
order to permit Purchaser to use the name XSVoice, Inc. and variants thereof.
From and after the Closing Date, Seller will not itself, and will cause its
Subsidiaries not to, use the name XSVoice or any names similar thereto or
variants thereof other than for the purpose of conducting the liquidation of its
business. Seller is authorized use of the name XSVoice for the sole purpose of
liquidation for a period of 120 days. After such time has expired, Seller shall
promptly amend its charter or other organizational documents to remove such
reference to the name XSVoice.
7.5 UCC Matters. From and after the Closing Date, Seller will promptly
refer all inquiries with respect to ownership of the Purchased Assets or the
Business to Purchaser. In addition, Seller will execute such documents and
financing and termination statements as Purchaser may request from time to time
to evidence transfer of the Purchased Assets to Purchaser and the release of any
Liens therefrom.
7.6 Financial Statements. Seller shall cooperate fully with Purchaser in
compiling and providing Purchaser, as promptly as practicable, with such
financial statements relating to the Business as may be required by Item 310 of
Regulation S-B promulgated under the 1933 Act and the United States Securities
Exchange Act of 1934, as amended (the "1934 Act"), in connection with the
preparation and filing of any registration statement or periodic report by
Purchaser pursuant to the 1933 Act or the 1934 Act, including unqualified
opinions thereon of independent public accountants and consents thereof as
required by the 1933 Act or the 1934 Act or the rules and regulations
thereunder. All audit costs shall be at the expense of Purchaser.
7.7 Post-Closing Notifications. Purchaser will, and the Seller will comply
with any post-Closing notification or other requirements, to the extent then
applicable to such party, of any antitrust, trade competition, investment,
control, export, or other Law of any Governmental Entity having jurisdiction
over Purchaser or Seller, as applicable.
7.8 Certain Tax Matters. All sales, use, transfer, stamp, conveyance,
value added or other similar taxes, duties, excises or governmental charges
imposed by any taxing jurisdiction, domestic or foreign ("Transfer Tax"), and
all recording or filing fees, notarial fees, and other similar costs of Closing
with respect to the transfer of the Purchased Assets or otherwise on account of
this Agreement or the transactions contemplated hereby will be borne by the
Seller. Seller shall be liable for and pay, and shall indemnify Purchaser
against any liability, direct or indirect for, any Taxes imposed on Purchaser or
with respect to the Purchased Assets that are attributable to any taxable
periods ending on or prior to the Closing Date or with respect to the allocable
portion of any taxable period that includes but does not end on the Closing
Date. With respect to any non-income Tax imposed on a periodic basis that
relates to a taxable period straddling the Closing Date, such Tax shall be
prorated to the Closing Date, and the portion allocable prior to the Closing
19
Date shall be promptly paid or reimbursed by Seller and the portion allocable to
the period after the Closing shall be promptly paid or reimbursed by the
Purchaser.
7.9 Insurance. With respect to any loss, liability, or damage relating to,
resulting from, or arising out of, the conduct of the Business on or prior to
the Closing Date which constitutes an Assumed Liability and for which Seller
would be entitled to assert, or cause any Affiliate or other Person to assert, a
claim for recovery under any policy of insurance maintained by or for the
benefit of Seller or Affiliate thereof in respect of the Business or the
Purchased Assets, at the request of Purchaser, Seller will use reasonable
efforts to assert, or to assist Purchaser to assert, one or more claims under
such insurance covering such loss, liability, or damage if Purchaser is not
itself entitled to assert such claim but Seller is so entitled. In the case of
any damage to or destruction of the Purchased Assets occurring prior to Closing
that is covered by insurance maintained by Seller or Affiliate, Seller shall
deliver all insurance proceeds realized therefrom to Purchaser at Closing or as
soon thereafter as collected by Seller or such Subsidiary or Affiliate.
7.10 SEC Filings. The Seller shall file, or cause the filing of, or
cooperate with the Purchaser to file, as the case may be, any and all forms,
schedules, certificates and/or other documents required under any federal or
state securities laws, including, but not limited to, Schedule 13D, Schedule
13G, Forms 3 and Forms 4, as the case may be.
ARTICLE VIII.
SURVIVAL AND INDEMNIFICATION
----------------------------
8.1 Survival of Representations, Warranties, and Covenants. The
representations and warranties of Seller and of Purchaser contained in this
Agreement shall survive for twelve months from the Closing Date. Any claim for
indemnification with respect to any of such matters which is not asserted by
notice given as herein provided relating thereto within such specified period of
survival may not be pursued and is hereby irrevocably waived after such time.
Any claim for an Indemnifiable Loss (as hereinafter defined) asserted within
such period of survival as herein provided will be timely made for purposes
hereof.
8.2 Limitations on Liability.
8.2.1 For purposes of this Agreement, (i) "Indemnity Payment" means
any amount of Indemnifiable Losses required to be paid pursuant to this
Agreement, (ii) "Indemnitee" means any Person entitled to indemnification under
this Agreement, (iii) "Indemnifying Party" means any Person required to provide
indemnification under this Agreement, (iv) "Indemnifiable Losses" means any and
all damages, losses, liabilities, obligations, costs, and expenses, and any and
all claims, demands, or suits (by any Person, including any Governmental
Entity), including the costs and expenses of any and all actions, suits,
proceedings, demands, assessments, judgments, settlements, and compromises
relating thereto and including reasonable attorneys' fees and expenses in
connection therewith, and (v) "Third Party Claim" means any claim, action, or
proceeding made or brought by any Person who or which is not a party to this
Agreement or an Affiliate of a party to this Agreement.
8.2.2 Notwithstanding any other provision hereof or of any applicable
Law, no Indemnitee will be entitled to make a claim against an Indemnifying
Party in respect of any breach of a representation or warranty under Sections
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8.3.1(a) or 8.3.2(a), unless and until the aggregate amount of claims in respect
of breaches of representations and warranties asserted for Indemnifiable Losses
under 8.3.1(a)or 8.3.2(a), as applicable, exceeds $10,000, in which event the
Indemnitee will be entitled to make a claim against the Indemnifying Party to
the extent of the full amount of Indemnifiable Losses. Seller shall not be
liable for Indemnifiable Losses pursuant hereto to the extent (but only to the
extent) that the aggregate amount thereof exceeds $5,000,000. For purposes of
satisfying any Indemnifiable Losses of Purchaser, shares of Stock Consideration
in the Escrow Deposit shall have a deemed value determined by the average
closing price over the 15 trading days preceding the date of the payment.
Indemnity Payments may be paid in cash or in shares held in escrow pursuant to
Section 3.1 of the Agreement.
8.3 Indemnification.
8.3.1 Subject to Sections 8.1 and 8.2, Seller agrees to indemnify,
defend, and hold harmless Purchaser and their respective Affiliates and
directors, officers, partners, employees, agents, and representatives from and
against any and all Indemnifiable Losses to the extent relating to, resulting
from, or arising out of:
(a) any breach of representation or warranty of Seller under the terms
of this Agreement and any certificate or other document delivered pursuant
hereto;
(b) any breach or nonfulfillment of any agreement or covenant of
Seller under the terms of this Agreement;
(c) any Retained Liabilities;
(d) the conduct of the Business or any portion thereof or the use or
ownership of any of the Purchased Assets prior to or on the Closing Date,
other than the Assumed Liabilities.
8.3.2 Subject to Section 8.1 and 8.2, Purchaser agrees to indemnify,
defend, and hold harmless the Seller and their respect Affiliates and directors,
officers, partners, employees, agents, and representatives from and against any
and all Indemnifiable Losses to the extent relating to, resulting from, or
arising out of:
(a) any breach of representation or warranty of Purchaser under the
terms of this Agreement and any certificate or other document delivered
pursuant hereto;
(b) any breach or nonfulfillment of any agreement or covenant of
Purchaser under the terms of this Agreement;
(c) any Assumed Liabilities; and
(d) the conduct of the Business or any portion thereof or use or
ownership of any of the Purchased Assets after the Closing Date or the
other activities of the Purchaser.
8.4 Defense of Claims.
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8.4.1 If any Indemnitee receives notice of assertion or commencement
of any Third Party Claim against such Indemnitee with respect to which an
Indemnifying Party is obligated to provide indemnification under this Agreement,
the Indemnitee will give such Indemnifying Party reasonably prompt written
notice thereof, but in any event not later than 20 calendar days after receipt
of such notice of such Third Party Claim. Such notice will describe the Third
Party Claim in reasonable detail, will include copies of all material written
evidence thereof, and will indicate the estimated amount, if reasonably
practicable, of the Indemnifiable Loss that has been or may be sustained by the
Indemnitee. The Indemnifying Party will have the right to participate in, or, by
giving written notice to the Indemnitee, to assume, the defense of any Third
Party Claim at such Indemnifying Party's own expense and by such Indemnifying
Party's own counsel (reasonably satisfactory to the Indemnitee), and the
Indemnitee will cooperate in good faith in such defense.
8.4.2 If, within ten calendar days after giving notice of a Third
Party Claim to an Indemnifying Party pursuant to Section 8.4.1, an Indemnitee
receives written notice from the Indemnifying Party that the Indemnifying Party
has elected to assume the defense of such Third Party Claim as provided in the
last sentence of Section 8.4.1, the Indemnifying Party will not be liable for
any legal expenses subsequently incurred by the Indemnitee in connection with
the defense thereof; provided, however, that if the Indemnifying Party fails to
take reasonable steps necessary to defend diligently such Third Party Claim
within ten calendar days after receiving written notice from the Indemnitee that
the Indemnitee believes the Indemnifying Party has failed to take such steps or
if the Indemnifying Party has not undertaken fully to indemnify the Indemnitee
in respect of all Indemnifiable Losses relating to the matter, the Indemnitee
may assume its own defense, and the Indemnifying Party will be liable for all
reasonable costs or expenses paid or incurred in connection therewith. Without
the prior written consent of the Indemnitee, the Indemnifying Party will not
enter into any settlement of any Third Party Claim which would lead to liability
or create any financial or other obligation on the part of the Indemnitee for
which the Indemnitee is not entitled to indemnification hereunder. A failure to
give timely notice or to include any specified information in any notice as
provided in Sections 8.4.1 or 8.4.2 will not affect the rights or obligations of
any party hereunder except and only to the extent that, as a result of such
failure, any party which was entitled to receive such notice was deprived of its
right to recover any payment under its applicable insurance coverage or was
actually and materially prejudiced in its defense of such claim by the failure
to receive timely notice.
8.4.3 The Indemnifying Party will have 30 calendar days within which
to respond in writing to any claim by an Indemnitee on account of an
Indemnifiable Loss which does not result from a Third Party Claim (a "Direct
Claim"). If the Indemnifying Party does not so respond within such 30 calendar
day period, the Indemnifying Party will be deemed to have rejected such claim,
in which event the Indemnitee will be free to pursue such remedies as may be
available to the Indemnitee on the terms and subject to the provisions of this
Article VIII.
ARTICLE IX.
MISCELLANEOUS PROVISIONS
------------------------
9.1 Arbitration. Any dispute, controversy or claim arising out of,
relating to, or in connection with this Agreement, or the breach, termination or
validity thereof, shall be finally determined by arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration Association. The
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seat of the arbitration shall be Charlotte, North Carolina. The arbitration
shall be administered by the American Arbitration Association.
9.2 Specific Performance. The parties recognize that if the Seller refuses
to perform under the provisions of this Agreement, monetary damages alone will
not be adequate to compensate Purchaser for its injuries. Purchaser shall
therefore be entitled, in addition to any other remedies that may be available,
to obtain specific performance of the terms of this Agreement. If any action is
brought by Purchaser to enforce this Agreement, Seller shall waive the defense
that there is an adequate remedy at law. In the event of a default by Seller
which results in the filing of a lawsuit for damages, specific performance, or
other remedies, Purchaser shall be entitled to reimbursement by Seller of
reasonable legal fees and expenses incurred by it.
9.3 Notices. All notices and other communications required or permitted
hereunder will be in writing and, unless otherwise provided in this Agreement,
will be deemed to have been duly given when delivered in person or when
dispatched by electronic facsimile or one business day after having been
dispatched by a nationally recognized overnight courier service to the
appropriate party at the address or facsimile number specified below:
(a) If to Seller, to:
XSVoice, Inc.
00 Xxxxxxx Xxxxxxxxx, #000
Xxxxxxxxx, XX 00000
Facsimile No.: _____________
Attention: Xxx Xxxxxxx Title: Chairman
with a copy to, which shall not constitute notice:
Xxxxxxxx, Xxxxxxx & Xxxxxxxxxx, PLLC
1850 One Nashville Place
000 Xxxxxx Xxxxxx, Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Facsimile No.:(000) 000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
(b) If to Purchaser, to:
UpSnap, Inc.
000 Xxxxxxx Xxxxxx, Xxxxx 000
X.X. Xxx 0000
Xxxxxxxx, Xxxxx Xxxxxxxx 00000
Tel. No.: (000) 000-0000
Facsimile No.: _________________
Attention: Xxxx Xxxxxxxx
Title: Chief Executive Officer
23
with a copy to, which shall not constitute notice:
Xxxxxx Xxxx & Priest LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: 212.603.2001
Attention: Xxxxxxx Xxxx, Esq.
or to such other address or facsimile number as any such party may from
time to time designate as to itself by like notice.
9.4 Expenses. Except as otherwise expressly provided herein, the Seller
will pay any expenses incurred by them incident to this Agreement and in
preparing to consummate and consummating the transactions provided for herein.
Purchaser will pay any expenses incurred by it incident to this Agreement and in
preparing to consummate and consummating the transactions provided for herein.
In any action to enforce any of the terms of this Agreement, the prevailing
party in such action shall be entitled to recover its attorneys' fees and costs.
9.5 Successors and Assigns. This Agreement will be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns, but will not be assignable or delegable by any party without
the prior written consent of the other party which shall not be unreasonably
withheld; provided, however, that (a) nothing in this Agreement is intended to
limit Purchaser's ability to sell or to transfer any or all of the Purchased
Assets following the Closing Date, (b) Purchaser may assign or delegate to any
direct or indirect wholly-owned subsidiary of Purchaser the right to acquire
part or all of the Purchased Assets and its obligation to assume any Assumed
Liabilities in connection therewith, and (c) Purchaser may make a collateral
assignment of its rights under this Agreement to any lender who provides funds
to Purchaser for the acquisition of the Purchased Assets. Seller shall execute
acknowledgements of such assignment(s) and collateral assignments in such forms
as Purchaser or Purchaser's lender(s) may from time to time reasonably request.
In the event of such a proposed assignment by Purchaser, the provisions of this
Agreement shall inure to the benefit of and be binding upon Purchaser's assigns.
9.6 Waiver. Purchaser and Seller by written notice to the other may (a)
extend the time for performance of any of the obligations of the other under
this Agreement, (b) waive any inaccuracies in the representations or warranties
of the other contained in this Agreement or in any document delivered in
connection herewith, (c) waive compliance with any of the conditions or
covenants of the other contained in this Agreement, or (d) waive or modify
performance of any of the obligations of the other under this Agreement;
provided, however, that no such party may, without the prior written consent of
the other party, make or grant such extension of time, waiver of inaccuracies,
or compliance or waiver or modification of performance with respect to its (or
any of its Affiliates) representations, warranties, conditions, or covenants
hereunder. Except as provided in the immediately preceding sentence, no action
taken pursuant to this Agreement will be deemed to constitute a waiver of
compliance with any representations, warranties, conditions, or covenants
contained in this Agreement and will not operate or be construed as a waiver of
any subsequent breach, whether of a similar or dissimilar nature.
24
9.7 Entire Agreement. This Agreement (including the Exhibits and Schedules
hereto and any other documents and instruments delivered pursuant hereto)
supersedes any other agreement, whether written or oral, that may have been made
or entered into by any party or any of their respective Affiliates (or by any
director, officer, or representative thereof) relating to the matters
contemplated hereby. This Agreement (together with the Exhibits and Schedules
hereto and any other documents and instruments delivered pursuant hereto)
constitutes the entire agreement by and among the parties hereto and there are
no agreements or commitments by or among such parties or their Affiliates or any
other person with respect to the subject matter of this Agreement except as
expressly set forth herein. Each party hereby acknowledges that no other party
or any other person or entity has made any promises, warranties, understandings
or representations whatsoever, express or implied, not contained in this
Agreement and acknowledges that it has not executed this Agreement in reliance
upon any such promises, representations, understandings or warranties not
contained herein. There are no promises, covenants or undertakings other than
those expressly set forth or provided for in this Agreement.
9.8 Amendments and Supplements. This Agreement may be amended or
supplemented at any time by additional written agreements signed by the parties
hereto.
9.9 Rights of the Parties. Except as provided in Articles II and VIII or
in Section 9.4, nothing expressed or implied in this Agreement is intended or
will be construed to confer upon or give any Person other than the parties
hereto and their respective Affiliates any rights or remedies under or by reason
of this Agreement or any transaction contemplated hereby.
9.10 Brokers. Purchaser shall indemnify and hold harmless the Seller, and
Seller shall indemnify and hold harmless Purchaser, from and against any
liability, claim, loss, damage, or expense incurred by Purchaser or by the
Seller, respectively, relating to any fees or commissions owed to any broker,
finder, or financial advisor as a result of actions taken by Purchaser or by the
Seller, respectively, in connection with this Agreement or the transactions
contemplated hereby.
9.11 Further Assurances. From time to time, as and when requested by either
party, the other party will execute and deliver, or cause to be executed and
delivered, all such documents and instruments as may be reasonably necessary to
consummate the transactions contemplated by this Agreement.
9.12 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Tennessee applicable to contracts made
and to be performed entirely in the State of Tennessee, regardless of the laws
that might otherwise govern under applicable principles of conflict of laws.
9.13 Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable Law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction to the greatest extent
possible to carry out the intentions of the parties hereto.
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9.14 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same agreement.
9.15 Titles and Headings. Titles and headings to articles and sections
herein are inserted for convenience of reference only, and are not intended to
be a part of or to affect the meaning or interpretation of this Agreement.
9.16 Passage of Title and Risk of Loss. Legal title, equitable title, and
risk of loss with respect to the Purchased Assets will not pass to Purchaser
until such Purchased Assets are transferred at the Closing, which transfer, once
it has occurred, will be deemed effective for tax, accounting, and other
computational purposes as of 11:59 P.M. (Nashville, TN Time) on the Closing
Date.
9.17 Certain Interpretive Matters and Definitions.
9.17.1 Unless the context otherwise requires, (i) all references to
Sections, Articles, Schedules, or Exhibits are to Sections, Articles, Schedules,
or Exhibits of or to this Agreement, (ii) each term defined in this Agreement
has the meaning assigned to it, (iii) each accounting term not otherwise defined
in this Agreement has the meaning assigned to it in accordance with GAAP, (iv)
"or" shall mean "and/or," (v) words in the singular include the plural and vice
versa, (vi) "affiliate" or "Affiliate" has the meaning given to such term in
Rule 12b-2 of Regulation 12B under the 1934 Act, (vii) words of any gender shall
include each other gender, (viii) "include," "including," and their derivatives
shall mean "including without limitation," and (ix) "person" or "Person" shall
mean any individual, corporation, partnership, limited liability company, joint
venture, trust, unincorporated organization, or other form of business or legal
entity or Governmental Entity. All references to "$" or dollar amounts will be
to lawful currency of the United States of America.
9.17.2 No provision of this Agreement will be interpreted in favor of,
or against, either of the parties hereto by reason of the extent to which either
such party or its counsel participated in the drafting thereof or by reason of
the extent to which any such provision is inconsistent with any prior draft
hereof or thereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
XSVOICE, INC.
By: /s/ Xxxx Xxxxxxxx
--------------------------------
Name: Xxxx Xxxxxxxx
Title: Chief Executive Officer
UPSNAP, INC.
By: /s/ Xxxx Xxxxxxx
--------------------------------
Name: Xxxx Xxxxxxx
Title: Chief Executive Officer
