EXECUTION COPY
EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
BETWEEN
INNUITY, INC.
AND
CREDITDISCOVERY, LLC
NOVEMBER 8, 2006
EXECUTION COPY
TABLE OF CONTENTS
PAGE
----
1. Definitions .......................................................... 1
2. Basic Transaction .................................................... 5
2.1 Purchase and Sale of Assets ..................................... 5
2.2 No Assumption of Liabilities .................................... 5
2.3 Purchase Price .................................................. 5
2.4 The Closing ..................................................... 5
2.5 Allocation ...................................................... 5
3. Representations and Warranties of the Seller ......................... 5
3.1 Organization, Qualification and Power ........................... 6
3.2 Authorization of Transaction .................................... 6
3.3 Noncontravention ................................................ 6
3.4 Brokers' Fees ................................................... 6
3.5 Title to Assets ................................................. 6
3.6 Members; Subsidiaries ........................................... 7
3.7 Financial Statements ............................................ 7
3.8 Events Subsequent to Most Recent Fiscal Year End ................ 7
3.9 Undisclosed Liabilities ......................................... 7
3.10 Tax Matters ..................................................... 7
3.11 Real Property ................................................... 8
3.12 Intellectual Property ........................................... 8
3.13 Tangible Assets ................................................. 11
3.14 Contracts ....................................................... 11
3.15 Insurance ....................................................... 12
3.16 Legal Compliance; Litigation .................................... 12
3.17 Employment Matters .............................................. 13
3.18 Employee Benefits ............................................... 13
3.19 Environmental ................................................... 13
3.20 Certain Business Relationships with the Seller .................. 13
3.21 Securities Representations ...................................... 13
3.22 Other Information ............................................... 15
4. Representations and Warranties of the Buyer .......................... 15
4.1 Organization of the Buyer ....................................... 15
4.2 Authorization of Transaction .................................... 16
4.3 SEC Documents ................................................... 16
5. Covenants ............................................................ 16
5.1 General ......................................................... 16
5.2 Notices and Consents ............................................ 16
5.3 Litigation Support .............................................. 16
5.4 Transition ...................................................... 17
5.5 Confidentiality ................................................. 17
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5.6 Covenant Not to Compete ......................................... 17
5.7 Nonsolicitation; Non-Hire and Noninterference ................... 18
6. Conditions to Obligations to Close ................................... 18
6.1 Conditions to Obligations of the Buyer .......................... 18
6.2 Conditions to Obligation of the Seller .......................... 20
7. Remedies for Breaches of this Agreement .............................. 21
7.1 Survival of Representations, Warranties and Covenants ........... 21
7.2 Indemnification Provisions for Benefit of the Buyer ............. 21
7.3 Indemnification Provisions for Benefit of the Seller ............ 22
7.4 Matters Involving Third Parties ................................. 22
7.5 Adjustment to Purchase Price .................................... 24
7.6 Recoupment Against Innuity Stock ................................ 24
7.7 Other Indemnification Provisions ................................ 24
8. Termination .......................................................... 24
8.1 Termination of Agreement ........................................ 24
8.2 Effect of Termination ........................................... 25
9. Miscellaneous ........................................................ 25
9.1 Press Releases and Public Announcements ......................... 25
9.2 No Third-Party Beneficiaries .................................... 25
9.3 Entire Agreement ................................................ 25
9.4 Succession and Assignment ....................................... 26
9.5 Counterparts and Facsimile Signatures ........................... 26
9.6 Governing Law ................................................... 26
9.7 Amendments and Waivers .......................................... 26
9.8 Severability .................................................... 26
9.9 Expenses ........................................................ 26
9.10 Construction .................................................... 26
9.11 Incorporation of Exhibits and Schedules ......................... 27
9.12 Notices ......................................................... 27
9.13 Specific Performance ............................................ 28
9.14 Submission to Jurisdiction ...................................... 28
9.15 Special Meeting; Agreement to Vote Membership Interests; Proxy .. 28
EXHIBITS
Exhibit A - Registration Rights Agreement
SCHEDULES
Schedule 1(a) -Acquired Assets
Seller's Disclosure Schedule
Buyer's Disclosure Schedule
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "AGREEMENT") between Innuity, Inc., a
Utah corporation (the "BUYER") and Creditdiscovery, LLC, a Nevada limited
liability company (the "SELLER") and each of Xxxxxxx X. Xxxxxxx and Xxxxx X.
Xxxxx with respect to Sections 9.1 and 9.15 of this Agreement (each, a "MEMBER,"
and collectively, the "MEMBERS"), takes effect on November 8, 2006. The Buyer
and the Seller are each individually referred to as a "PARTY," and collectively
as the "PARTIES."
RECITAL
The Seller desires to sell, transfer and otherwise convey, and the Buyer
desires to purchase and assume, all of the assets of the Seller, on the terms
and subject to the conditions of this Agreement.
AGREEMENT
In consideration of the above recital and the promises set forth in this
Agreement, the Parties agree as follows:
1. DEFINITIONS.
"ACQUIRED ASSETS" means all right, title and interest in, to and under all
of the assets of the Seller (other than the Excluded Assets), including
those assets of the Seller set forth on SCHEDULE 1(A) of this Agreement.
The Acquired Assets include all of the assets necessary to conduct the
businesses of the Seller as currently conducted and as currently proposed
to be conducted, including all of the following types of assets: (a)
tangible personal property, including equipment, furniture, computer
hardware, data center hardware and related inventories of supplies and
spare parts; (b) Intellectual Property, associated goodwill, licenses and
sublicenses (including all software licenses and sublicenses), remedies
against infringements, and rights to protection of interests under any Law,
including the Software and the rights to the use of the name
"Creditdiscovery," and any other trade names used by the Seller or any
derivations thereof; (c) agreements, including all customer, service and
partnership contracts and other third party agreements, instruments,
Security Interests, guaranties and other similar arrangements; (d) claims,
deposits, prepayments, refunds, causes of action, choses in action, rights
of recovery, rights of set off and rights of recoupment; (e) permits; (f)
books, records, ledgers, files, documents, correspondence, lists, drawings
and specifications, creative materials, advertising and promotional
materials, studies, reports and other printed or written materials; (g)
current telephone and facsimile numbers, e-mail addresses, uniform resource
locators, domain names and websites and the listings for each; and (h) all
goodwill and general intangibles associated with the Seller and its
business as conducted and as currently proposed to be conducted.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines,
costs, amounts paid in settlement, Liabilities, obligations,
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Taxes, liens, losses, expenses and fees, including court costs and
reasonable attorneys' fees and expenses.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"ASSUMED LIABILITIES" means any Liabilities of the Seller assumed by the
Buyer between September 6, 2006 and the date of this Agreement under that
certain term sheet executed by the Buyer, the Seller and Acquirint, LLC
dated September 6, 2006.
"BUYER PARTIES" means the Buyer and its officers, directors, employees,
stockholders, agents and Affiliates.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means any information concerning the business
and affairs of the Seller that is not already generally available to the
public.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCLUDED ASSETS" means each of the following of the Seller: (a) the
limited liability company organizational documents, qualifications to
conduct business as a foreign limited liability company, arrangements with
registered agents relating to foreign qualifications, taxpayer and other
identification numbers, seals, minute books, membership interest transfer
books and other documents relating to the organization, maintenance and
existence of the Seller as a limited liability company, post-office boxes;
(b) any of the rights of the Seller under this Agreement (or under any side
agreement between the Seller and the Buyer entered into on or after the
date of this Agreement); and (c) the cash of the Seller.
"GOVERNMENTAL AUTHORITY" means (a) any federal, state, local or foreign
governmental, administrative or regulatory authority, court, agency or
body, or any division or subdivision, or (b) any arbitration board,
tribunal or mediator.
"INNUITY STOCK" means the common stock of the Buyer.
"INTELLECTUAL PROPERTY" means: (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements, and
all patents, patent applications and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions
and reexaminations; (b) all trademarks, service marks, trade dress, logos,
trade names and corporate names, together with all translations,
adaptations, derivations and combinations and including all associated
goodwill, and all applications, registrations and renewals; (c) all
copyrightable works, all copyrights and all applications, registrations and
renewals; (d) all mask works and all applications, registrations and
renewals in connection therewith; (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and
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cost information, and business and marketing plans and proposals); (f) all
computer software (including data and related documentation); (g) all other
proprietary rights; and (h) all copies and tangible embodiments (in
whatever form or medium).
"KNOWLEDGE" means actual knowledge after reasonable investigation and
knowledge that could have been obtained through reasonable inquiry.
"LAW" means any federal, state, local or foreign constitution, law, code,
plan, statute, rule, regulation, ordinance, order, writ, injunction,
ruling, judgment, decree, charge, restriction or Permit of any Governmental
Authority, each as amended and in effect, now or in the future.
"LIABILITY" means any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"MATERIAL ADVERSE EFFECT" means any adverse financial or business
consequence (or any development that could reasonably be expected to have
an adverse financial or business consequence) on the Business, the Acquired
Assets, the condition (financial or otherwise), the results of operations
or prospects of the Business or on the ability of the Seller to satisfy its
obligations under this Agreement, other than consequences relating to or
arising from (i) a mutually agreed to public announcement of the existence
(but not the terms or provisions) of this Agreement, (ii) economic
conditions generally, or (iii) events or circumstances that affect the
Business in the same manner and to the same extent as other businesses in
the industry generally.
"MOST RECENT BALANCE SHEET" means the balance sheet contained within the
Most Recent Financial Statements.
"OPERATING AGREEMENT" means the operating agreement of the Seller
originally executed on October 31, 2001, as amended.
"ORDINARY COURSE OF BUSINESS" means the conduct of business in a manner
consistent with the past custom and practice of the Seller and its
Affiliates (including with respect to quantity and frequency).
"PERMITS" means any permits, authorizations, approvals, decisions, zoning
orders, franchises, registrations, licenses, filings, certificates,
variances or similar rights granted by or obtained from any Governmental
Authority.
"PERSON" means an individual, a partnership, a limited liability company, a
corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a Governmental Authority.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
between the Buyer and the Seller to be executed at the Closing, the form of
which is set forth on Exhibit A of this Agreement.
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"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance, charge
or other security interest, other than: (a) mechanic's, materialmen's and
similar liens that are being contested in good faith and for which the
particular entity has provided adequate reserves; (b) liens for Taxes not
yet due and payable or for Taxes that the taxpayer is contesting in good
faith through appropriate proceedings and for which the taxpayer has
provided adequate reserves; (c) purchase money liens and liens securing
rental payments under capital lease arrangements; and (d) other liens
arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money.
"SOFTWARE" means the Seller's proprietary software technology, products and
associated documentation, as further described on SCHEDULE 1(A) of this
Agreement.
"SPECIAL MEETINGS" has the meaning set forth in Section 9.15 of this
Agreement.
"TAX" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition, whether disputed
or not.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule,
attachment or amendment.
"TRANSACTION DOCUMENTS" means all documents and agreements to be entered
into by one or more of the Parties in connection with the transactions
contemplated by this Agreement.
Additionally, the following terms will have the meanings defined for such
terms in the corresponding Sections of this Agreement as set forth below:
TERM SECTION
---- -------
"AGREEMENT" Preface
"BUYER" Preface
"BUYER SEC DOCUMENTS" 3.21(g)
"BUYER'S DISCLOSURE SCHEDULE" 4
"CLOSING" 2.3
"CLOSING DATE" 2.3
"FINANCIAL STATEMENTS" 3.7
"HIRED EMPLOYEE" 5.6
"INDEMNIFIED PARTY" 7.4
"INDEMNIFYING PARTY" 7.4
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TERM SECTION
---- -------
"MOST RECENT FINANCIAL STATEMENTS" 3.7
"MOST RECENT FISCAL MONTH END" 3.7
"MOST RECENT FISCAL YEAR END" 3.7
"NON-COMPETITION AGREEMENTS" 6.1
"PARTY" and "PARTIES" Preface
"PURCHASE PRICE" 2.3
"SELLER" Preface
"SELLER'S DISCLOSURE SCHEDULE" 3
"THIRD PARTY CLAIM" 7.4
"TRANSFER" 3.21
2. BASIC TRANSACTION.
2.1 PURCHASE AND SALE OF ASSETS. On the terms and subject to the
conditions of this Agreement, on the Closing Date the Buyer will
purchase from the Seller, and the Seller will sell, transfer, convey
and deliver to the Buyer, the Acquired Assets, free and clear of all
Security Interests, in exchange for the Purchase Price.
2.2 NO ASSUMPTION OF LIABILITIES. Except for the Assumed Liabilities, the
Buyer will not assume or otherwise become responsible for any
Liabilities of the Seller at the Closing.
2.3 PURCHASE PRICE. On the Closing Date, the Buyer will deliver 429,000
shares of Innuity Stock to the Seller (the "PURCHASE PRICE").
2.4 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") will take place at the offices of Xxxx,
Plant, Xxxxx, Xxxxx & Xxxxxxx, P.A., in Minneapolis, Minnesota, at
9:00 a.m., on the second business day after the respective Parties
have satisfied or waived all conditions to the obligations of the
Parties to consummate the transactions contemplated by this Agreement
(other than actions the Parties will take at the Closing itself) or
any other time and date as the Parties may agree (the "CLOSING DATE").
2.5 ALLOCATION. The Parties will allocate the Purchase Price and all other
capitalizable costs among the Acquired Assets for all purposes,
including financial accounting and tax purposes, in accordance with
the allocation schedule to be determined by the Parties at the
Closing.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller, jointly and
severally, represents and warrants to the Buyer that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date, except
as set forth in the attached disclosure schedule accompanying this
Agreement (the "SELLER'S DISCLOSURE SCHEDULE"). The Seller's Disclosure
Schedule will be arranged in paragraphs corresponding to the sections
contained in this Section 3.
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3.1 ORGANIZATION, QUALIFICATION AND POWER. The Seller is a limited
liability company duly organized, validly existing and in good
standing under the laws of the State of Nevada. The Seller is duly
authorized to conduct business and are in good standing under the Laws
of each jurisdiction where such qualification is required. The Seller
has full corporate power and authority and all Permits necessary to
carry on the businesses in which it is engaged and in which it
presently propose to engage, and to own and use the properties owned
and used by it.
3.2 AUTHORIZATION OF TRANSACTION. The Seller has full power and authority
(including full limited liability company power and authority) to
enter into and perform its obligations under this Agreement and the
Transaction Documents to which it is a party. The managing member of
the Seller has duly authorized the execution, delivery and performance
of this Agreement and the Transaction Documents to which the Seller is
a party. This Agreement and the Transaction Documents to which the
Seller is a party constitute valid and legally binding obligations of
the Seller, as applicable, enforceable in accordance with their
respective terms and conditions.
3.3 NONCONTRAVENTION. Except as set forth on Section 3.3 of the Seller's
Disclosure Schedule, neither the execution and the delivery of this
Agreement or the Transaction Documents to which the Seller is a party,
nor the consummation of the contemplated transactions: (a) will
violate any Law to which the Seller is subject; (b) will violate any
provision of the articles or certificate of organization, limited
liability company agreement, member control agreement, operating
agreement or other organizational documents of the Seller; (c) will
conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice or
consent under any agreement, contract, lease, license, instrument or
other arrangement to which the Seller is a party or by which he or it
is bound or to which any of his or its assets are subject (or result
in the imposition of any Security Interest upon any of his or its
assets); (d) requires the Seller to give any notice to, make any
filing with, or obtain any authorization, consent or approval of any
Governmental Authority in order for the Parties to consummate the
transactions contemplated by this Agreement and the Transaction
Documents; or (e) will result in the cancellation, forfeiture,
revocation, suspension or adverse modification of any Permit owned or
held by the Seller.
3.4 BROKERS' FEES. Seller has no Liability or obligation to pay any fees
or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could
become liable or obligated.
3.5 TITLE TO ASSETS. The properties and assets used by the Seller, located
on his or its premises, or shown on the Most Recent Balance Sheet or
acquired after the date of the Most Recent Balance Sheet are free and
clear of all Security Interests, except for properties and assets
disposed of in the Ordinary Course of Business
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since the date of the Most Recent Balance Sheet. The Seller has good
and marketable title to or a valid leasehold interest in such
properties and assets, including the Acquired Assets, free and clear
of any Security Interest or other restriction on transfer.
3.6 MEMBERS; SUBSIDIARIES. The membership interests of the Seller are held
by the owners of record set forth on Section 3.6 of the Seller's
Disclosure Schedule. The Seller does not have any subsidiaries and
does not otherwise control, own directly or indirectly, or have any
equity participation directly or indirectly in any Person.
3.7 FINANCIAL STATEMENTS. Attached to Section 3.7 of the Seller's
Disclosure Schedule is the following financial information related to
the operations of the Seller's (the "FINANCIAL STATEMENTS"): (a)
unaudited balance sheets and statements of income as of and for the
fiscal year ended December 31, 2005 (the "MOST RECENT FISCAL YEAR
END"); and (b) unaudited balance sheets and statements of income (the
"MOST RECENT FINANCIAL STATEMENTS") for the five months ended June 30,
2006, (the "MOST RECENT FISCAL MONTH END") for the Seller. The
Financial Statements are true, complete and correct. No Material
Adverse Effect has occurred to the businesses of the Seller since the
Most Recent Financial Statements. Further, Section 3.7 of the Seller's
Disclosure Schedule lists all Liabilities of the Seller that are not
otherwise set forth on the Financial Statements.
3.8 EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since the Most
Recent Fiscal Year End, there have been no changes in the assets,
business, financial condition, operations, results of operations, or
future prospects of the Seller that individually or in the aggregate
would have a Material Adverse Effect on the Seller.
3.9 UNDISCLOSED LIABILITIES. Except as set forth on Section 3.9 of the
Seller's Disclosure Schedule, the Seller does not have any Liability
(and there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand
against it giving rise to any Liability), except for: (a) Liabilities
set forth on the Most Recent Balance Sheet (rather than in its notes);
and (b) Liabilities that have arisen after the Most Recent Fiscal
Month End in the Ordinary Course of Business (none of which results
from, arises out of, relates to, is in the nature of or was caused by
any breach of contract, breach of warranty, tort, infringement or
violation of Law).
3.10 TAX MATTERS. The Seller has filed all required Tax Returns. The Seller
is treated as a partnership for Tax purposes, including federal and
state income Tax purposes. All such Tax Returns were correct and
complete in all respects. All Taxes owed by the Seller (whether or not
shown on any Tax Return) have been paid. Except as set forth in
Section 3.10 of the Seller's Disclosure Schedule, the Seller is not
currently the beneficiary of any extension of time within which to
file any Tax Return. No claim has ever been made that the Seller is or
may be subject to taxation by a jurisdiction where it does not file
Tax Returns. No assets of the
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Seller have a Security Interest that arose in connection with any
failure (or alleged failure) to pay any Tax.
3.11 REAL PROPERTY. The Seller does not own any real property. Section 3.12
of the Seller's Disclosure Schedule lists and describes briefly all
real property leased or subleased to the Seller. The Seller has
delivered to the Buyer correct and complete copies of the leases and
subleases listed in Section 3.12 of the Seller's Disclosure Schedule.
Except as set forth on Schedule 3.12 of the Seller's Disclosure
Schedule, (a) the lease or sublease is legal, valid, binding,
enforceable and in full force and effect; (b) the lease or sublease
will continue to be legal, valid, binding, enforceable and in full
force and effect on identical terms following the consummation of the
contemplated transactions; (c) no party to the lease or sublease is in
breach or default, and no event has occurred that, with notice or
lapse of time, would constitute a breach or default or permit
termination, modification or acceleration; (d) the Seller has not
assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in the leasehold or subleasehold; (e) all
facilities leased or subleased have received all required approvals of
governmental authorities (including Permits) and have been operated
and maintained in accordance with applicable Laws; and (f) all
facilities leased or subleased are supplied with utilities and other
services necessary for the operation of the facilities.
3.12 INTELLECTUAL PROPERTY.
(a) The Seller owns or has the right to use pursuant to license,
sublicense, agreement or permission all Intellectual Property
necessary for the operation of the businesses of the Seller as
presently conducted and as presently proposed to be conducted.
Each item of Intellectual Property owned or used by the Seller
immediately before the Closing will be owned or available for use
by the Buyer on identical terms and conditions immediately after
the Closing. The Seller has taken all necessary action to
maintain and protect each item of Intellectual Property that it
owns or uses.
(b) The Seller has not interfered with, infringed upon,
misappropriated or otherwise come into conflict with any
Intellectual Property rights of third parties. The Seller has
never received any charge, complaint, claim, demand or notice
alleging any such interference, infringement, misappropriation or
violation (including any claim that the Seller must license or
refrain from using any Intellectual Property rights of any third
party). As of the Closing Date no third party has interfered
with, infringed upon, misappropriated or otherwise come into
conflict with any Intellectual Property rights of the Seller.
(c) Section 3.12(c) of the Seller's Disclosure Schedule identifies
the following: (i) each patent or registration that has been
issued to the Seller for any Intellectual Property; (ii) each
pending patent application or
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application for registration that the Seller has made for any of
its Intellectual Property; (iii) each license, agreement or other
permission that the Seller has granted to any third party with
respect to Intellectual Property (together with any exceptions);
and (iv) each trade name or unregistered trademark used by the
Seller in connection with any of its businesses.
(d) The Seller has delivered to the Buyer correct and complete copies
of all such patents, registrations, applications, licenses,
agreements and permissions (as amended to date) listed in Section
3.12(c) of the Seller's Disclosure Schedule and have made
available to the Buyer correct and complete copies of all other
written documentation evidencing ownership and prosecution (if
applicable) of each item. With respect to each item of
Intellectual Property required to be identified in Section
3.12(c) of the Seller's Disclosure Schedule: (i) a Seller
possesses all right, title and interest in and to the item, free
and clear of any Security Interest, license or other restriction;
(ii) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling or charge; (iii) no action, suit,
proceeding, hearing, investigation, charge, complaint, claim or
demand is pending or, to the Knowledge of either of the managers,
members and employees with responsibility for Intellectual
Property matters of the Seller, is threatened that challenges the
legality, validity, enforceability, use or ownership of the item;
and (iv) the Seller has never agreed to indemnify any Person for
or against any interference, infringement, misappropriation or
other conflict with respect to the item.
(e) Section 3.12(e) of the Seller's Disclosure Schedule identifies
each item of Intellectual Property that any third party owns and
that the Seller uses pursuant to license, sublicense, agreement
or permission. The Seller has delivered to the Buyer correct and
complete copies of all such licenses, sublicenses, agreements and
permissions (as amended to date).
(f) With respect to each item of Intellectual Property required to be
identified in Section 3.12(e) of the Seller's Disclosure
Schedule: (i) the license, sublicense, agreement or permission
covering the item is legal, valid, binding, enforceable and in
full force and effect; (ii) the license, sublicense, agreement or
permission will continue to be legal, valid, binding, enforceable
and in full force and effect on identical terms following the
consummation of the contemplated transactions; (iii) no party to
the license, sublicense, agreement or permission is in breach or
default, and no event has occurred that, with notice or lapse of
time, would constitute a breach or default or permit termination,
modification or acceleration; (iv) no party to the license,
sublicense, agreement or permission has repudiated any provision
thereof; (v) for each sublicense, the representations and
warranties set forth in subsections (i) through (iv) above are
true and correct for the underlying license; (vi) the underlying
item of Intellectual Property is not subject to any outstanding
injunction,
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judgment, order, decree, ruling or charge; (vii) no action, suit,
proceeding, hearing, investigation, charge, complaint, claim or
demand is pending or, to the Knowledge of either of the managers,
members and employees with responsibility for Intellectual
Property matters of the Seller, is threatened that challenges the
legality, validity or enforceability of the underlying item of
Intellectual Property; and (viii) the Seller has never granted
any sublicense or similar right with respect to the license,
sublicense, agreement or permission.
(g) To the Knowledge of any of the managers, members and employees
with responsibility for Intellectual Property matters of the
Seller, the Seller will not interfere with, infringe upon,
misappropriate or otherwise come into conflict with, any
Intellectual Property rights of third parties as a result of the
continued operation of their businesses as presently conducted
and as presently proposed to be conducted.
(h) None of the managers, members and employees with responsibility
for Intellectual Property matters of the Seller has any Knowledge
of any new products, inventions, procedures or methods of
manufacturing or processing that any competitors or other Persons
have developed that reasonably could be expected to supersede or
make obsolete any product or process of the Seller.
(i) Except as set forth on Section 3.14(i) of the Seller's Disclosure
Schedule, the Seller owns all components included in the Software
and the Software contains no freeware, shareware or other open
source free or public domain software. Section 3.14(i) of the
Seller's Disclosure Schedule identifies all ancillary software
necessary to use the Software. The Seller has no obligation to
make any payment with respect to the use of the freeware
identified on Section 3.14(i) of the Seller's Disclosure
Schedule. The Seller owns, possesses and controls all source
code, object code, documentation, benchmark tests, programmer
level documentation, user level documentation, specifications and
other materials necessary for the use of the Software. Except as
set forth on Section 3.14(i) of the Seller's Disclosure Schedule,
no copies of the Software's source code, object code, programmer
level documentation, user level documentation, benchmark tests or
any other documentation relating to the Software have been
provided to any third parties. The Software is free of any remote
or automatic disabling or recapture devices, passwords, master
access keys, security devices, trap doors or computer viruses.
The Software fully complies in all respects with the associated
documentation, including the description and documents attached
as SCHEDULE 1(A) to this Agreement, and such description and
documentation accurately and completely describes the operation
and use of the Software.
(j) Section 3.14(j) of the Seller's Disclosure Schedule sets forth
the name of all Persons involved in the testing and development
of the Software and all
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Persons who have intellectual property assignment agreements,
whether with the Seller relating to the Software.
(k) All former and current employees, consultants, contractors and
other Persons who have ever been involved in any aspect of the
design or creation of any of the Seller's Intellectual Property,
including the Software, have executed valid and enforceable
written agreements that cause ownership to accrue to or that
assign to the Seller any and all rights to all Intellectual
Property, including inventions, improvements or discoveries,
whether patentable or not, made by them during their service to
the Seller. Correct and complete copies of all such written
agreements have been provided to the Buyer by the Seller prior to
the date of this Agreement. No former or current employee,
consultant, contractor or other Person who has ever been involved
in any aspect of the design or creation of any of the Seller's
Intellectual Property, including the Software, designed or
created any of the Seller's Intellectual Property, including the
Software, on his or her own time or without the use of any
equipment, supplies, facilities or trade secret information of
the Seller.
(l) The Seller has taken all steps necessary and appropriate to
protect and preserve the confidentiality of all Confidential
Information. All former and current employees, consultants,
contractors and other Persons who have ever had access to any
Confidential Information have executed valid and enforceable
written confidentiality agreements. All use, disclosure or
appropriation of Confidential Information to or by any third
party has been pursuant to the terms of a valid and enforceable
written confidentiality agreement between the Seller and such
third party. Correct and complete copies of all such written
confidentiality agreements have been provided to the Buyer by the
Seller prior to the date of this Agreement.
(m) Except as specifically set forth in this Section 3.12, the Seller
makes no representations and warranties with respect to the
Software or the Seller's Intellectual Property, including implied
warranties of merchantability and fitness for a particular
purpose. The Software and the Intellectual Property are being
purchased by the Buyer from the Seller on an "as is," "where is"
basis.
3.13 TANGIBLE ASSETS. The Seller owns or leases all buildings, machinery,
equipment and other tangible assets necessary for the conduct of their
businesses as presently conducted and as presently proposed to be
conducted. Each such tangible asset is free from defects (patent and
latent), has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal
wear and tear), and is suitable for the purposes for which it
presently is used and presently is proposed to be used.
3.14 CONTRACTS. Section 3.14 of the Seller's Disclosure Schedule lists all
contracts and other agreements, whether written or oral, to which the
Seller is a party that provide for payments to the Seller, or that
require the Seller to make payments to
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a third party, in excess of $5,000 per year. The Seller has delivered
to the Buyer a correct and complete copy of each written agreement
listed in Section 3.14 of the Seller's Disclosure Schedule (as amended
to date) and a written summary setting forth the terms and conditions
of each oral agreement referred to in Section 3.14 of the Seller's
Disclosure Schedule. With respect to each such agreement (a) the
agreement is legal, valid, binding, enforceable and in full force and
effect, (b) the agreement will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby, (c) no party
is in breach or default, (d) no event has occurred that, with notice
or lapse of time, would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement; and
(e) no party has repudiated any provision of the agreement.
3.15 INSURANCE.
(a) Section 3.15 of the Seller's Disclosure Schedule sets forth the
following information with respect to each insurance policy
(including without limitation policies providing property,
casualty, liability and workers' compensation coverage and bond
and surety arrangements but excluding policies related to the
employee benefit plans maintained by the Seller) to which the
Seller is a party, a named insured or otherwise the beneficiary
of coverage as of the Closing Date: (i) the name, address and
telephone number of the agent; (ii) the name of the insurer, the
name of the policyholder, and the name of each covered insured;
and (iii) the policy number and the period of coverage.
(b) With respect to each insurance policy required to be identified
in Section 3.15 of the Seller's Disclosure Schedule: (i) the
policy is legal, valid, binding, enforceable and in full force
and effect; (ii) the Seller nor any other party to the policy is
in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred
that, with notice or the lapse of time, would constitute a breach
or default, or permit termination, modification or acceleration,
under the policy; and (iii) no party to the policy has repudiated
any provision of such policy.
3.16 LEGAL COMPLIANCE; LITIGATION. Except as set forth on Section 3.16 of
the Seller's Disclosure Schedule, the Seller has complied with all
applicable laws related to his or its business in all respects, and no
action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand or notice has been filed, commenced or, to the Knowledge
of the Seller, alleged against it. Except as set forth on Section 3.16
of the Seller's Disclosure Schedule, there are no pending or to the
Seller's knowledge any threatened claims, actions, suits, proceedings,
hearings or investigations affecting the Acquired Assets or the
business of the Seller. Except as set forth on Section 3.16 of the
Seller's Disclosure Schedule, the Seller is not operating under or
subject to, or in default with respect to, any order, writ, injunction
or decree of any court or Governmental Authority. There
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are no Permits or licenses necessary for the Buyer's operation of the
businesses of the Seller as presently conducted and as presently
proposed to be conducted.
3.17 EMPLOYMENT MATTERS. The Seller has complied in all respects with all
Laws relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and similar Taxes,
occupational safety and health, and plant closing. To the Knowledge of
any of the managers, members and employees with responsibility for
employment matters of the Seller, no executive, key employee or group
of employees has any plans to terminate employment with the Seller.
3.18 EMPLOYEE BENEFITS. Section 3.18 of the Seller's Disclosure Schedule
contains a list of all employee benefit plans maintained, or
contributed to, by the Seller. The Seller is not and has not been in
violation in form and in operation of any provision of ERISA or any
other Law or regulation relating to any employee benefit plan.
3.19 ENVIRONMENTAL. The Seller has complied and are in compliance with all
environmental laws and there are no pending or threatened
environmental claims, administrative orders, determinations and
regulations concerning public health and safety, workers health and
safety, and pollution or protection of the environment which are in
any way related to the businesses of the Seller.
3.20 CERTAIN BUSINESS RELATIONSHIPS WITH THE SELLER. None of the members of
the Seller or its Affiliates, have been involved in any business
arrangement or relationship with the Seller within the past 12 months.
None of the members of the Seller or its Affiliates own any asset,
tangible or intangible, that is used in the business of the Seller,
including the Intellectual Property used in the businesses of the
Seller.
3.21 SECURITIES REPRESENTATIONS.
(a) The Seller has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and
risks of the acquisition of Innuity Stock and, by reason of the
Seller's financial and business experience, has the capacity to
protect the Seller's interests in connection with the acquisition
of Innuity Stock. The Seller is financially able to bear the
economic risk of the acquisition of Innuity Stock contemplated by
this Agreement, including the total loss thereof. The Seller was
not organized for the specific purpose of acquiring the Innuity
Stock.
(b) The Seller has received and reviewed all information it considers
necessary or appropriate for deciding whether to acquire the
Innuity Stock for the account of the Seller. The Seller further
represents that it has had an opportunity to ask questions and
receive answers from the Buyer and its officers and employees
regarding the terms and conditions of purchase of the Innuity
Stock and regarding the business, financial affairs and other
aspects
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of the Buyer and has further had the opportunity to obtain any
information (to the extent the Buyer possesses or can acquire
such information without unreasonable effort or expense) which
the Seller deems necessary to evaluate the investment and to
verify the accuracy of information otherwise provided to the
Seller.
(c) The Seller acknowledges that the Innuity Stock has not been
registered under the Securities Act, or qualified under
applicable blue sky laws or any other applicable blue sky laws in
reliance, in part, on the representations and warranties herein.
The Innuity Stock is being acquired by the Seller for investment
purposes for the Seller's own account only and not for sale or
with a view to distribution of all or any part of the Innuity
Stock.
(d) The Seller understands that unless the shares of Innuity Stock
become registered under the Securities Act pursuant to the
Registration Rights Agreement, the shares of Innuity Stock are
"restricted securities" under the federal securities laws in that
such securities will be acquired from the Buyer in a transaction
not involving a public offering, and that under such laws and
applicable regulations such securities may be resold only upon
registration or without registration under the Act only in
certain limited circumstances in each case in compliance with
applicable securities laws and that otherwise such securities
must be held indefinitely. The Seller understands that each
certificate representing Innuity Stock will bear a transfer
restriction substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES OR
"BLUE-SKY" LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.
(e) The Seller understands that unless the shares of Innuity Stock
become registered under the Securities Act pursuant to the
Registration Rights Agreement, the shares of Innuity Stock, and
any securities issued as a dividend or otherwise distributed
thereon, will not be sold, transferred, assigned, pledged,
encumbered or otherwise disposed of (each a "TRANSFER") except
upon the conditions specified in this Agreement, which conditions
are intended to insure compliance with the provisions of the
Securities Act. The Seller will observe and comply with the
Securities Act and the rules and regulations promulgated by the
Securities and Exchange Commission thereunder as no in effect or
hereafter enacted or promulgated in connection with any Transfer
of shares of Innuity Stock beneficially owned by the Seller of
the Selling Members If the shares of the Innuity Stock become
registered,
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any Transfers of such shares will be governed by the terms and
conditions of Securities Exchange Act, the registration statement
for such shares and the Registration Rights Agreement.
(f) No shares of Innuity Stock acquired pursuant to this Agreement
may be transferred except (i) upon written notice to the Buyer
prior to any Transfer and (ii) if accompanied by the written
opinion of counsel to the Buyer stating that in the opinion of
such counsel such proposed Transfer does not involve a
transaction requiring registration or qualification of such
shares of Innuity Stock under the Securities Act or the
securities or "blue-sky" laws of any relevant state of the United
States. The Seller understands and agrees that the Buyer, at its
discretion, may cause stop transfer orders to be placed with its
transfer agent with respect to certificates for the Innuity Stock
in the event of a proposed Transfer in violation or breach of
this Agreement or that is or may otherwise be unlawful.
Notwithstanding the foregoing, the Buyer will not prohibit the
Transfer of Innuity Stock to the extent that such a Transfer is
in compliance with (a) the Securities Act (including Rule 144
promulgated under the Securities Act), the Securities Exchange
Act and any applicable state securities or "blue-sky" laws, and
(b) if the shares of Innuity Stock are registered, the applicable
registration statement and the Registration Rights Agreement.
(g) The Seller has read and reviewed all of the Buyer's
registrations, reports, proxy statements, schedules, forms,
statements and other documents filed with the SEC under either of
the Act or the Securities Exchange Act, since September 30, 2006
(the "BUYER SEC DOCUMENTS").
3.22 OTHER INFORMATION. The information concerning the Seller set forth in
this Agreement and the Schedules and Exhibits attached to this
Agreement and any statement or certificate of the Seller furnished or
to be furnished to the Buyer pursuant to this Agreement, does not and
will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated herein or therein or
necessary to make the statements and facts contained herein or
therein, in light of the circumstances in which they are made, not
false or misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and
warrants to the Seller that the statements contained in this Section 4 are
correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date, except as set forth in the disclosure
schedule of the Buyer accompanying this Agreement (the "BUYER'S DISCLOSURE
SCHEDULE"). The Buyer's Disclosure Schedule will be arranged in paragraphs
corresponding to the numbered paragraphs contained in this Section 4.
4.1 ORGANIZATION OF THE BUYER. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Utah. The Buyer is duly authorized to conduct business and is in good
standing under the Laws of each jurisdiction where such qualification
is required. The Buyer has full
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corporate power and authority and all Permits necessary to carry on
the businesses in which it is engaged and in which it presently
proposes to engage, and to own and use the properties owned and used
by it.
4.2 AUTHORIZATION OF TRANSACTION. The Buyer has full power and authority
(including full corporate power and authority) to enter into and
perform its obligations under this Agreement and the Transaction
Documents to which it is a party. This Agreement and the Transaction
Documents to which it is a party constitute valid and legally binding
obligations of the Buyer, enforceable in accordance with their
respective terms and conditions.
4.3 SEC DOCUMENTS. As of their respective filing dates, the Buyer SEC
Documents complied in all material respects with the requirements of
the Securities Act and the Securities Exchange Act, and none of the
Buyer SEC Documents contained any untrue statement of a material fact
or omitted to stated a material fact required to be state therein or
necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the
extent corrected by a subsequently filed Buyer SEC Document.
5. COVENANTS.
5.1 GENERAL. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement,
the Transaction Documents and the contemplated transactions, each of
the Parties will take such further action (including the execution and
delivery of further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the
requesting Party (unless the requesting Party is entitled to
indemnification therefor under Section 7). The Seller acknowledges and
agrees that from and after the Closing the Buyer will be entitled to
copies of all documents, books, records (including Tax records),
agreements and financial data of any sort relating to the Seller.
5.2 NOTICES AND CONSENTS. Each of the Parties will give any notices to,
make any filings with and use its reasonable best efforts to obtain
any authorizations, consents and approvals of any Governmental
Authority necessary in connection with the transactions contemplated
by this Agreement.
5.3 LITIGATION SUPPORT. In the event and for so long as any Party is
actively contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in
connection with (a) any transaction contemplated under this Agreement,
or (b) any fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act or
transaction on or prior to the Closing Date involving the Seller, each
of the other Parties will cooperate with the contesting or defending
Party and his, her or its counsel in the contest or defense, make
available his, her or its personnel, and provide such testimony and
access to his, her or its books and records as will be necessary in
connection with the contest or
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defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled
to indemnification therefor under Section 7).
5.4 TRANSITION. Neither the Seller or its Affiliates will take any action
that is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier or other business associate of
any of the Seller from maintaining the same business relationships
with the Buyer and its Affiliates after the Closing as it maintained
with the Seller prior to the Closing. The Seller will refer all
customer inquiries relating to the businesses of the Seller to the
Buyer from and after the Closing.
5.5 CONFIDENTIALITY. The Seller will treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver
promptly to the Buyer or destroy, at the request and option of the
Buyer, all tangible embodiments (and all copies) of the Confidential
Information that are in his possession. In the event that a Seller
Member is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand or similar process) to disclose
any Confidential Information, the applicable Seller Member will notify
the Buyer promptly of the request or requirement so that the Buyer may
seek an appropriate protective order or waive compliance with the
provisions of this Section 5.5. If, in the absence of a protective
order or the receipt of a waiver, the Seller Member is, on the advice
of counsel, compelled to disclose any Confidential Information to the
tribunal or else stand liable for contempt, the Seller Member may
disclose the Confidential Information to the tribunal. The disclosing
party must use his reasonable best efforts to obtain, at the
reasonable request of the Buyer, an order or other assurance that
confidential treatment will be accorded to such portion of the
Confidential Information required to be disclosed as the Buyer will
designate.
5.6 COVENANT NOT TO COMPETE. For a period of five years from and after the
Closing Date, the Seller will not engage directly or indirectly
(except having less than 1% ownership of the outstanding stock in any
publicly-traded corporation) in any business that the Seller conducts
as of the Closing Date in any geographic area in which the Seller
conducts that business as of the Closing Date. If the final judgment
of a court of competent jurisdiction declares that any term or
provision of this Section 5.6 is invalid or unenforceable, the Parties
agree that the court making the determination of invalidity or
unenforceability will have the power to reduce the scope, duration, or
area of the term or provision, to delete specific words or phrases, or
to replace any invalid or unenforceable term or provision with a term
or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or
provision, and this Agreement will be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
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5.7 NONSOLICITATION; NON-HIRE AND NONINTERFERENCE. For a period of five
years from and after the Closing Date, the Seller will not directly or
indirectly (a) induce or attempt to induce any Person hired by the
Buyer or its Affiliates (each, a "HIRED EMPLOYEE") to leave the employ
of the Buyer and its Affiliates, or in any way interfere adversely
with the relationship between any Hired Employee and the Buyer and its
Affiliates, (b) induce or attempt to induce any Hired Employee to work
for, render services or provide advice to or supply confidential
business information or trade secrets of the Buyer and its Affiliates
to any Person, (c) employ, or otherwise pay for services rendered by,
any Hired Employee in any business enterprise with which the Seller
and its Affiliates may be associated, connected or affiliated, or (d)
induce or attempt to induce any customer, supplier, licensee, licensor
or other Person having a business relationship with the Seller or its
Affiliates to cease doing business with the Buyer and its Affiliates,
or in any way interfere with the relationship between any such
customer, supplier, licensee, licensor or other such Person and the
Buyer and its Affiliates. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this
Section 5.7 is invalid or unenforceable, the Parties agree that the
court making the determination of invalidity or unenforceability will
have the power to reduce the scope, duration, or area of the term or
provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision
that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this
Agreement will be enforceable as so modified after the expiration of
the time within which the judgment may be appealed.
6. CONDITIONS TO OBLIGATIONS TO CLOSE.
6.1 CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligation of the Buyer to
consummate the transactions to be performed by it in connection with
the Closing are subject to satisfaction of the following conditions:
(a) the representations and warranties set forth in Section 3 will be
true and correct in all respects at and as of the Closing Date;
(b) the Seller will have performed and complied with all its
covenants contained in this Agreement in all respects through the
Closing;
(c) no action, suit or proceeding will be pending or threatened
before any Governmental Authority in which an unfavorable
injunction, judgment, order, decree, ruling or charge would: (i)
prevent consummation of any of the transactions contemplated by
this Agreement; (ii) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation; or
(iii) affect adversely the right of the Buyer to own the Acquired
Assets or to operate the former businesses of the Seller;
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(d) the Seller will have executed and delivered to the Buyer a
certificate to the effect that each of the conditions specified
in this Section 6.1(a) to (c) is satisfied in all respects;
(e) members of the Seller holding at least 70% of the Seller's
membership units will have approved this Agreement and the
Transaction Documents and the transactions contemplated by this
Agreement and the Transaction Documents at the Special Meeting or
by a written consent circulated to the members in accordance with
Section 5.4 of the Operating Agreement;
(f) the Seller will have delivered to the Buyer a list of Liabilities
of the Seller current as of the Closing Date, certified by a
manager of each of the Seller;
(g) the Seller will have procured all of the necessary third party
consents, authorizations and approvals, all of which must be
final and non-appealable for the contracts and agreements
described on Section 3.14 of the Seller's Disclosure Schedule;
(h) there will not have occurred any material adverse change in the
condition (financial or otherwise), properties, business
operations, results of operations or prospects of the Seller or
the Acquired Assets, individually or in the aggregate;
(i) the Buyer will have completed its business, legal, accounting and
Intellectual Property due diligence on the businesses of the
Seller to its sole satisfaction;
(j) the Seller will have delivered to the Buyer non-competition
agreements between the Buyer and each of the Persons that are
Affiliates or employees of the Seller designated by the Buyer in
its sole and absolute discretion, in form and substance
acceptable to the Buyer (collectively, the "NON-COMPETITION
AGREEMENTS");
(k) the Seller will have delivered to the Buyer a xxxx of sale,
executed by the Seller, in a form acceptable to the Buyer;
(l) the Seller will have delivered an assignment and assumption
agreement whereby the Buyer will accept and assume the agreements
described on Section 3.14 of the Seller's Disclosure Schedule, in
a form and substance agreeable to the Buyer;
(m) the Seller will have delivered intellectual property assignment
agreement(s) whereby each of the Persons that are Affiliates or
employees of the Seller designated by the Buyer in its sole and
absolute discretion, will have delivered his, her or its rights
to the Intellectual Property of the Seller to the Seller prior to
the Closing Date;
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(n) the Seller will have delivered a certificate of incumbency, dated
as of the Closing Date, as to the managers and other personnel of
the Seller executing this Agreement and any certificate,
instrument or document to be delivered by the Seller at the
Closing; and
(o) the Seller will have delivered a certified copy of limited
liability company resolutions authorizing the execution and
delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement;
(p) the Seller will have delivered to the Buyer such other documents
and instruments as are reasonably necessary or appropriate to
effect the consummation of the contemplated transactions or that
may be required under any Laws; and
(q) all actions to be taken by the Seller in connection with
consummation of the contemplated transactions and all
certificates, instruments and other documents required to effect
these transactions will be reasonably satisfactory in form and
substance to the Buyer.
6.2 CONDITIONS TO OBLIGATION OF THE SELLER. The obligation of the Seller
to consummate the transactions to be performed by them in connection
with the Closing are subject to satisfaction of the following
conditions:
(a) the representations and warranties set forth in Section 4 will be
true and correct in all respects at and as of the Closing Date;
(b) the Buyer will have performed and complied with all its covenants
contained in this Agreement in all respects through the Closing;
(c) no action, suit or proceeding will be pending or threatened
before any Governmental Authority in which an unfavorable
injunction, judgment, order, decree, ruling or charge would: (i)
prevent consummation of any of the transactions contemplated by
this Agreement; (ii) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation; or
(iii) affect adversely the right of the Buyer to own the Acquired
Assets or to operate the former businesses of the Seller;
(d) the Buyer will have executed and delivered to the Buyer a
certificate to the effect that each of the conditions specified
in this Section 6.2(a) to (c) is satisfied in all respects;
(e) members of the Seller holding at least 70% of the Seller's
membership units will have approved this Agreement and the
Transaction Documents and the transactions contemplated by this
Agreement and the Transaction Documents at the Special Meeting or
by a written consent circulated to the members in accordance with
Section 5.4 of the Operating Agreement;
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(f) the Buyer will have delivered the Purchase Price to the Seller in
accordance with Section 2 of this Agreement;
(g) the Buyer will have delivered the Registration Rights Agreement
to the Seller, executed by the Buyer;
(h) the Buyer will have delivered a certificate of incumbency, dated
as of the Closing Date, as to the officers and other personnel of
the Buyer executing this Agreement and any certificate,
instrument or document to be delivered by the Buyer at the
Closing; and
(i) the Buyer will have delivered a certified copy of corporate
resolutions authorizing the execution and delivery of this
Agreement and the consummation of the transactions contemplated
by this Agreement.
7. REMEDIES FOR BREACHES OF THIS AGREEMENT.
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. Notwithstanding
any investigation made by or on behalf of any of the Parties or the
results of any investigation, and notwithstanding the participation of
any Party in the Closing, (a) the representations and warranties found
in Sections 3.5, 3.6 and 3.12 (the "FUNDAMENTAL REPRESENTATIONS") and
the covenants found in this Agreement will continue in full force and
effect indefinitely (subject to applicable statutes of limitation, and
(b) the remainder of the representations and warranties contained in
this Agreement will continue in full force and effect for a period of
three years following the Closing, unless a shorter period of survival
is specifically set forth in this Agreement.
7.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
(a) If the Seller breaches (or in the event any third party alleges
facts that, if true, would mean the Seller has breached) any
representations, warranties or covenants contained in this
Agreement, provided that the Buyer makes a written claim for
indemnification against the Seller, then the Seller will
indemnify the Buyer Parties from and against the entirety of any
Adverse Consequences any of the Buyer Parties may suffer through
and after the date of the claim for indemnification (including
any Adverse Consequences the Buyer Parties may suffer after the
end of any applicable survival period) resulting from, arising
out of, relating to, in the nature of, or caused by such breach
(or alleged breach).
(b) The Seller will indemnify the Buyer Parties from and against the
entirety of any Adverse Consequences any of the Buyer Parties may
suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the Buyer
Parties may suffer after the end of any applicable survival
period) resulting from, arising out of, relating to, in the
nature of, or caused by any Liability of the Seller (including
any Liability of the Seller that becomes a Liability of the Buyer
under any bulk transfer law of
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any jurisdiction, under any common law doctrine of de facto
merger or successor liability, or otherwise by operation of Law)
that is not an Assumed Liability.
(c) The obligation to indemnify the Buyer following the Closing from
and against any Adverse Consequences resulting from, arising out
of, relating to, in the nature of or caused by the breach (or
alleged breach) under this Section 7.2 will be subject to each of
the following:
(i) The Buyer Parties may not assert a claim for indemnification
against the Seller until the Buyer has suffered Adverse
Consequences by reason of all such breaches (or alleged
breaches) in excess of an aggregate threshold equal to
$10,000, after which point the Buyer Parties will be
indemnified by the Seller only from and against Adverse
Consequences from the first dollar of such Adverse
Consequences (the "BASKET"). Notwithstanding the foregoing,
the Basket will not apply to any claims for indemnification
of the Buyer Parties related to Adverse Consequences arising
from breaches of the Fundamental Representations or under
Section 7.2(b) of this Agreement.
(ii) The Seller will have no Liability for indemnification under
this Section 7 in excess of an aggregate amount equal to per
share value of the Innuity Stock at the Closing, multiplied
by 425,000 (the "CAP"). Notwithstanding the foregoing, the
Cap will not apply to any claims for indemnification of the
Buyer Parties related to Adverse Consequences arising from
breaches of the Fundamental Representations or under Section
7.2(b) of this Agreement.
7.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER. If the Buyer
breaches (or in the event any third party alleges facts that, if true,
would mean the Buyer has breached) any representations, warranties or
covenants contained in this Agreement, provided that the Seller makes
a written claim for indemnification against the Buyer, then the Buyer
will indemnify the Seller, as applicable, from and against the
entirety of any Adverse Consequences the Seller may suffer through and
after the date of the claim for indemnification (including any Adverse
Consequences the Seller may suffer after the end of any applicable
survival period) resulting from, arising out of, relating to, in the
nature of or caused by such breach (or alleged breach).
7.4 MATTERS INVOLVING THIRD PARTIES.
(a) If any third party will notify any Party (the "INDEMNIFIED
PARTY") with respect to any matter (a "THIRD PARTY CLAIM") that
may give rise to a claim for indemnification against any other
Party (the "INDEMNIFYING PARTY") under this Section 7, then the
Indemnified Party will promptly
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notify each Indemnifying Party in writing. Delay on the part of
the Indemnified Party in notifying any Indemnifying Party will
not relieve the Indemnifying Party from their obligation unless
(and then solely to the extent) the Indemnifying Party is
prejudiced.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of
its choice reasonably satisfactory to the Indemnified Party so
long as (i) the Indemnifying Party notifies the Indemnified Party
in writing within 15 days after the Indemnified Party has given
notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Party from and against the entirety of
any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of or
caused by the Third Party Claim, (ii) the Indemnifying Party
provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party
will have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations, (iii)
the Third Party Claim involves only money damages and does not
seek an injunction or other equitable relief, (iv) settlement of,
or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party, likely
to establish a precedential custom or practice materially adverse
to the continuing business interests of the Indemnified Party,
and (v) the Indemnifying Party conducts the defense of the Third
Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 7.4(b), (i) the
Indemnified Party may retain separate co-counsel at its sole cost
and expense and participate in the defense of the Third Party
Claim, (ii) the Indemnified Party will not consent to the entry
of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (iii)
the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified
Party (not to be withheld unreasonably).
(d) If any of the conditions in Section 7.4(b) is not or is no longer
satisfied, (i) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it
reasonably may deem appropriate (and the Indemnified Party need
not consult with, or obtain any consent from, any Indemnifying
Party), (ii) the Indemnifying Parties will reimburse the
Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable
attorneys' fees and expenses), and (iii) the Indemnifying Parties
will remain responsible for any Adverse Consequences the
Indemnified Party may suffer resulting
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from, arising out of, relating to, in the nature of, or caused by
the Third Party Claim to the fullest extent provided in this
Section 8.
7.5 ADJUSTMENT TO PURCHASE PRICE. All indemnification payments under this
Section 7 will be deemed adjustments to the Purchase Price.
7.6 RECOUPMENT AGAINST INNUITY STOCK. Any indemnification to which the
Buyer Parties are entitled under this Agreement as a result of any
Adverse Consequences it may suffer arising out of the breach (or
alleged breach) of any Adverse Consequences it may suffer will be
satisfied by the Seller through the return of Innuity Stock held by
the Seller with a value at the time such Adverse Consequences arose
equal to the amount of such Adverse Consequences. The Buyer's right to
recoup Adverse Consequences in exchange for a return of Innuity Stock
under this Section 7.6 will not otherwise limit any rights of the
Buyer Parties to recover under this Section 7.
7.7 OTHER INDEMNIFICATION PROVISIONS. The above indemnification provisions
are in addition to, and not in derogation of, any statutory, equitable
or common law remedy any Party may have with respect to the
transactions contemplated by this Agreement. The Seller agrees that it
will not make any claim for indemnification against any of the Buyer
Parties by reason of the fact that he, she or it was a director,
officer, employee, shareholder or agent of the Seller or was serving
at the request of the entity as a partner, trustee, director, officer,
employee or agent of another entity (whether the claim is for
judgments, damages, penalties, fines, costs, amounts paid in
settlement, losses, expenses or otherwise and whether the claim is
pursuant to any statute, charter document, bylaw, agreement or
otherwise) with respect to any action, suit, proceeding, complaint,
claim or demand brought by any of the Buyer Parties against the Seller
(whether the action, suit, proceeding, complaint, claim or demand is
pursuant to this Agreement, applicable Law or otherwise).
8. TERMINATION.
8.1 TERMINATION OF AGREEMENT. The Parties may terminate this Agreement as
provided below:
(a) the Buyer and the Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing; and
(b) The Buyer may terminate this Agreement by giving written notice
to the Seller at any time prior to the Closing (i) in the event
the Seller has materially breached any representation, warranty
or covenant contained in this Agreement and not qualified by
materiality, or breached any representation, warranty or covenant
contained in this Agreement that is qualified by materiality, and
the Buyer has notified the Seller of the breach, the breach
cannot be cured or has continued without cure or written waiver
by the Parent for a period of 10 days after the notice of
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breach, or (ii) if the Closing does not occur on or before
December 31, 2006, by reason of the failure of any condition
precedent under Section 6.1 of this Agreement (unless the failure
results primarily from the Buyer itself breaching any
representation, warranty or covenant contained in this
Agreement), subject to extension by mutual agreement of the
Parties;
(c) The Seller may terminate this Agreement by giving written notice
to the Buyer at any time prior to the Closing (i) in the event
the Buyer has materially breached any representation, warranty or
covenant contained in this Agreement and not qualified by
materiality, or breached any representation, warranty or covenant
contained in this Agreement that is qualified by materiality, and
the Seller has notified the Buyer of the breach, and the breach
cannot be cured or has continued without cure or written waiver
by the Seller for a period of 10 days after the notice of breach,
or (ii) if the Closing does not occur on or before December 31,
2006, by reason of the failure of any condition precedent under
Section 6.2 of this Agreement (unless the failure results
primarily from the Seller itself breaching any representation,
warranty or covenant contained in this Agreement), subject to
extension by mutual agreement of the Parties;
(d) the Buyer may terminate this Agreement by giving written notice
to the Seller on or before the 30th day following the date of
this Agreement if the Buyer is not reasonably satisfied with the
results of its continuing business, legal and accounting due
diligence regarding the Seller; and
(e) Either Party may terminate this Agreement for any reason if the
Closing has not occurred by December 31, 2006.
8.2 EFFECT OF TERMINATION. If any Party terminates this Agreement pursuant
to Section 8.1, all rights and obligations of the Parties under this
Agreement will terminate without any Liability of any Party to any
other Party (except for any Liability of any Party then in breach).
9. MISCELLANEOUS.
9.1 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. The Seller will not make any
public announcement regarding this Agreement following the Closing
without the prior written consent of the Buyer. The Buyer will issue a
press release following the Closing and will offer the Seller an
opportunity to review the press release before it is distributed.
9.2 NO THIRD-PARTY BENEFICIARIES. This Agreement will not confer any
rights or remedies upon any Person (including without limitation
employees of the Seller) other than the Parties and their respective
successors and permitted assigns.
9.3 ENTIRE AGREEMENT. This Agreement (including the documents referred to
in this Agreement) and the Transaction Documents constitute the entire
agreement
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between the Parties and supersede any prior understandings, agreements
or representations by or between the Parties, written or oral, to the
extent they related in any way to the subject matter of this
Agreement.
9.4 SUCCESSION AND ASSIGNMENT. This Agreement will be binding upon and
inure to the benefit of the Parties and their respective successors
and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests or obligations under this Agreement
without the prior written approval of the other Party. The Buyer,
however, may (a) assign any or all of its rights and interests
hereunder to one or more of its Affiliates, and (b) designate one or
more of its Affiliates to perform its obligations under this Agreement
(in any or all of which cases the Buyer nonetheless will remain
responsible for the performance of all of its obligations).
9.5 COUNTERPARTS AND FACSIMILE SIGNATURES. This Agreement may be executed
in one or more counterparts, each of which will be deemed an original
but all of which together will constitute one and the same instrument,
and by facsimile.
9.6 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the domestic laws of the State of Washington without
giving effect to any choice or conflict of law provision or rule
(whether of the State of Washington or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than
the State of Washington.
9.7 AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement will be valid unless the same is in writing and signed by
the Buyer and the Seller. No waiver by any Party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, will be deemed to extend to any prior or
subsequent default, misrepresentation or breach of warranty or
covenant under this Agreement or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
9.8 SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction will not affect
the validity or enforceability of the remaining terms and provisions
of this Agreement or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction.
9.9 EXPENSES. The Buyer and the Seller will bear their own costs and
expenses (including legal fees and expenses) incurred in connection
with this Agreement and the contemplated transactions.
9.10 CONSTRUCTION. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question
of intent or interpretation arises, this Agreement will be construed
as if drafted jointly by the Parties and no presumption or burden of
proof will arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement.
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Nothing in either the Seller's Disclosure Schedule or the Buyer's
Disclosure Schedule will be deemed adequate to disclose an exception
to a representation or warranty made unless such disclosure schedule
identifies the exception with reasonable particularity and describes
the relevant facts in reasonable detail. Without limiting the
foregoing, the mere listing (or inclusion of a copy) of a document or
other item is not adequate to disclose an exception to a
representation or warranty (unless the representation or warranty has
to do with the existence of the document or other item itself). The
Parties intend that each representation, warranty and covenant have
independent significance. If any Party has breached any
representation, warranty or covenant in any respect, the fact that
there exists another representation, warranty or covenant relating to
the same subject matter (regardless of the relative levels of
specificity) that the Party has not breached does not detract from or
mitigate the fact that the Party is in breach of the first
representation, warranty or covenant.
9.11 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules
identified in this Agreement are incorporated by reference and are
made a part of this Agreement.
9.12 NOTICES. All notices, requests, demands, claims and other
communications under this Agreement will be in writing. Any notice,
request, demand, claim or other communication under this Agreement
will be deemed duly given two business days after it is sent by
registered or certified mail, return receipt requested, postage
prepaid and addressed to the intended recipient as set forth below:
If to the Seller:
Creditdiscovery, LLC
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx Xxxxx, Xxxxxxx
Attn: Xxxxx X. Xxxxx
Facsimile: (000) 000-0000
Email: xxxxx@xxxxxxxxxxxxxxx.xxx
If to the Buyer: Copy to:
Innuity, Inc. Xxxx, Plant, Xxxxx,
0000 000xx Xxxxxx X.X. Xxxxx & Xxxxxxx, P.A.
Xxxxxxx, Xxxxxxxxxx 00000 000 XXX Xxxxxx
Xxxx, Xxxx 00000 00 Xxxxx Xxxxxx Xxxxxx
Attn: Mr. Xxxx Xxxxxx Attn: XX Xxxxxxxx, Esq.
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Email: xxxxxxxxx@xxxxxxxxx.xxx Email: xx.xxxxxxxx@xxxxxx.xxx
Any Party may send any notice, request, demand, claim or other
communication to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier,
messenger service, telecopy,
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telex, ordinary mail or electronic mail), but no such notice, request,
demand, claim or other communication will be deemed to have been duly
given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices,
requests, demands, claims and other communications hereunder are to be
delivered by giving the other Party notice in the manner set forth in
this Agreement.
9.13 SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees that
the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of
the Parties agrees that the other Party is entitled to an injunction
or injunctions to prevent breaches of the provisions of this Agreement
and to enforce specifically this Agreement in any action instituted in
any court of the United States or any state having jurisdiction over
the Parties and the matter (subject to the provisions set forth in
Section 9.14 below), in addition to any other remedy to which it may
be entitled, at law or in equity.
9.14 SUBMISSION TO JURISDICTION. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in the State of
Washington, in any action or proceeding arising out of or relating to
this Agreement and agrees that all claims in respect of the action or
proceeding may be heard and determined there. Each Party also agrees
not to bring any action or proceeding arising out of or relating to
this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or
proceeding so brought and waives any bond, surety or other security
that might be required of any other Party. Each Party agrees that a
final judgment in any action or proceeding so brought will be
conclusive and may be enforced by suit on the judgment or in any other
manner provided by law or in equity.
9.15 SPECIAL MEETING; AGREEMENT TO VOTE MEMBERSHIP INTERESTS; PROXY. The
Members will do the following in connection with this Agreement:
(a) SPECIAL MEETING. The Members, in their capacity as managers of
the Seller and collectively as the holders of a majority of the
membership interests in the Seller and in accordance with the
respective operating agreements of the Seller and the Laws of the
State of Nevada, will either (i) call a special meeting of the
members of the Seller to be held as soon as practicable following
the date of this Agreement in order for the members of the Seller
to consider and vote upon this Agreement and the transactions
contemplated thereby (the "SPECIAL MEETING"), or (ii) circulate a
written consent to the members in accordance with Section 5.4 of
the Operating Agreement.
(b) AGREEMENT TO VOTE MEMBERSHIP INTERESTS. At every meeting of the
members of the Seller called with respect to any of the following
(including the Special Meeting), and on every action or approval
by
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written consent of the members of the Seller held on or before
the Closing or the termination of this Agreement, the Members
will vote their membership interests in the Seller in accordance
with the following: (i) in favor of approval of the this
Agreement and the transactions contemplated by this Agreement,
and any matter that could reasonably be expected to facilitate
the transactions contemplated by this Agreement; (ii) against
approval of any proposal made in opposition to or competition
with consummation of this Agreement and the transactions
contemplated by this Agreement; (iii) against any merger,
consolidation, sale of assets, reorganization or
recapitalization, with any Person other than with the Buyer and
its Affiliates; and (iv) against any liquidation or winding up of
the Seller (each of Sections 8.15(b)(ii), (iii) and (iv), an
"OPPOSING PROPOSAL"). The Members will not, directly or
indirectly, solicit or encourage any offer from any Person
concerning an Opposing Proposal or the possible disposition of
all or any substantial portion of the Seller's business, assets
or membership interests.
(c) PROXY. To secure the Members obligation to vote their membership
interests in the Seller in accordance with the provisions of
Section 9.15(b) of this Agreement, each Member does hereby
irrevocably constitute and appoint the Buyer, or any nominee of
the Buyer, with full power of substitution, from the date of this
Agreement until the Closing Date or the termination of this
Agreement in accordance with Section 8 of this Agreement, as his
true and lawful proxy, for and in his name, place and xxxxx,
including the right to sign his name to any consent, certificate
or other document relating to the Seller that the laws of the
State of Nevada may permit or require, to cause the Member's
membership interests of the Seller to be voted in the manner
contemplated by Section 9.15(b) of this Agreement. Each Member
hereby revokes all other proxies and powers of attorney with
respect to the membership interests of the Seller that such
Member holders as may have appointed or granted. Each Member will
not give a subsequent proxy or power of attorney (and if given,
will not be effective) or enter into any other voting agreement
with respect to the membership interests of the Seller.
[THE REMAINDER OF THIS PAGE IS BLANK. SIGNATURE PAGE FOLLOWS.]
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The Parties have executed this Asset Purchase Agreement to be made
effective as of the date first above written.
BUYER:
INNUITY, INC.
----------------------------------------
Name:
----------------------------------
Title:
---------------------------------
SELLER:
CREDITDISCOVERY, LLC
----------------------------------------
Name:
----------------------------------
Title:
---------------------------------
MEMBERS:
----------------------------------------
Xxxxxxx X. Xxxxxxx, individually with
respect to Sections 9.1 and 9.15
----------------------------------------
Xxxxx X. Xxxxx, individually with
respect to Sections 9.1 and 9.15
[SIGNATURE PAGE TO INNUITY, INC./CREDITDISCOVERY, LLC ASSET PURCHASE AGREEMENT]
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