STOCK PURCHASE AGREEMENT
Exhibit
10.1
This
Stock Purchase Agreement (“Agreement”)
is made
as of October 16, 2006, by and among Vemics, Inc., a Nevada corporation
(“Buyer”);
NuScribe, Inc., a Texas corporation (the “Company”);
John
Mehmet Ulgar Dogru, Xxxxxx Xxxxxxx, C. Xxxxxx Xxxxxxxx Trust, Xxxx Xxx, Xxxx
Xxxxx, Xxxxxx Xxxxx, Xxxxxx Xxxxxxxx, Xxxxx Xxxxx and Xxxx Xxxxxxxxx
(individually a “Founding
Shareholder”,
and
together, the “Founding Shareholders”); and
the
other shareholders of NuScribe, Inc. who are signatories hereto and are
identified on the signature page hereof as the “Investor
Shareholders.”
The
Founding Shareholders and the Investor Shareholders are collectively referred
to
herein as, the “Sellers”).
RECITALS
Sellers
desire to sell, and Buyer desires to purchase, all of the issued and outstanding
shares of capital stock of the Company held by (i) the Founding Shareholders
(the “Founders
Shares”)
and (ii)
the Investor Shareholders (the “Investor
Shares”,
and
collectively with the Founders Shares, the “Shares”),
for
the consideration and on the terms set forth in this Agreement.
It
is
intended that the Contemplated Transactions qualify as a tax-free acquisition
within the meaning of Section 368(a) of the IRC.
AGREEMENT
The
parties, intending to be legally bound, agree as follows:
1. DEFINITIONS.
For
purposes of this Agreement, the following terms have the meanings specified
or
referred to in this Section
1:
“Adjustment
Amount” is
defined in Section
2.5.
“Adjustment
Shares”
is
defined in Section
2.5.
“Applicable
Contract”
means
any Contract (a) under which any Person has or may acquire any rights, (b)
under
which any Person has or may become subject to any obligation or liability,
or
(c) by which any Person or any of the assets owned or used by it is or may
become bound.
“Best
Efforts”
means
the efforts that a prudent Person desirous of achieving a result would use
in
similar circumstances to ensure that such result is achieved as expeditiously
as
possible; provided,
however,
that an
obligation to use Best Efforts under this Agreement does not require the
Person
subject to that obligation to take actions that would result in a materially
adverse change in the benefits to such Person of this Agreement and the
Contemplated Transactions.
“Breach”
—
A
“Breach” with respect to any representation, warranty, covenant, obligation, or
other provision of this Agreement or any instrument delivered pursuant to
this
Agreement will be deemed to have occurred if there is or has been (a) any
inaccuracy in or breach of or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision, or (b)
any
claim (by any Person) or other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation, or
other
provision, and the term “Breach” means any such inaccuracy, breach, failure,
claim, occurrence, or circumstance.
“Buyer”
is
defined in the first paragraph of this Agreement.
“Buyer
Copyrights”
is
defined in Section
4.22(a)(iii).
“Buyer
Financial Statements”
is
defined in Section
4.7.
“Buyer
Intellectual Property Assets”
is
defined in Section
4.22(a).
“Buyer
Marks”
is
defined in Section
4.22(a)(i).
“Buyer
Material Contract”
is
defined in Section
4.17(a).
“Buyer
Other Benefit Obligations”
means
all obligations, arrangements, or customary practices, whether or not legally
enforceable, to provide benefits, other than salary, as compensation for
services rendered, to present or former directors, employees, or agents,
other
than obligations, arrangements, and practices that are Buyer Plans. Buyer
Other
Benefit Obligations include consulting agreements under which the compensation
paid does not depend upon the amount of service rendered, sabbatical policies,
severance payment policies, and fringe benefits within the meaning of any
equivalent Legal Requirement.
“Buyer
Patents”
is
defined in Section
4.22(a)(ii).
“Buyer
Plan”
—
any
plan, fund, or program which was established, maintained or contributed to
by
Buyer, to the extent that such plan, fund, or program was established,
maintained or contributed to for the purpose of providing for employees of
Buyer
or their dependents (A) medical, surgical, or hospital care or benefits,
or
benefits in the event of sickness, accident, disability, death or unemployment,
or vacation benefits, apprenticeship or other training programs, or day care
centers, scholarship funds, or prepaid legal services, (B) provides retirement
income payments, supplemental retirement income payments or severance payment
arrangements to employees of Buyer, or (D) results in a deferral of income
by
employees for periods extending to the termination of covered employment
or
beyond. The term “Buyer
Plan”
shall
include all plans, funds, or programs described in the immediately preceding
sentence, whether qualified or unqualified, whether funded or unfunded, and
whether existing under any applicable Legal Requirement.
“Buyer
Premises”
is
defined in Section
4.19.
“Buyer
Shares”
is
defined in Section
2.2.
“Buyer
Trade Secrets”
is
defined in Section 4.22(iv).
“Buyer’s
Disclosure Schedule”
means
the disclosure schedule attached hereto as Schedule
A,
and
made a part hereof.
“Closing”
is
defined in Section
23.
“Closing
Date”
means
the date and time as of which the Closing actually takes place.
“Company”
is
defined in the first paragraph of this Agreement.
“Company
Breach”
is
defined in Section
7.5.
“Company
Other Benefit Obligations”
means
all obligations, arrangements, or customary practices, whether or not legally
enforceable, to provide benefits, other than salary, as compensation for
services rendered, to present or former directors, employees, or agents,
other
than obligations, arrangements, and practices that are Company Plans. Company
Other Benefit Obligations include consulting agreements under which the
compensation paid does not depend upon the amount of service rendered,
sabbatical policies, severance payment policies, and fringe benefits within
the
meaning of any equivalent Legal Requirement.
“Company
Plan”
any
plan, fund, or program which was established, maintained or contributed to
by
the Company, to the extent that such plan, fund, or program was established,
maintained or contributed to for the purpose of providing for employees of
the
Company or their dependents (A) medical, surgical, or hospital care or benefits,
or benefits in the event of sickness, accident, disability, death or
unemployment, or vacation benefits, apprenticeship or other training programs,
or day care centers, scholarship fluids, or prepaid legal services, (B) provides
retirement income payments, supplemental retirement income payments or severance
payment arrangements to employees of the Company, or (D) results in a deferral
of income by employees for periods extending to the termination of covered
employment or beyond. The term “Company
Plan”
shall
include all plans, funds, or programs described in the immediately preceding
sentence, whether qualified or unqualified, whether funded or unfunded, and
whether existing under any applicable Legal Requirement.
“Company
Records”
is
defined in Section
3.5.
“Consent”
means
any approval, consent, ratification, waiver, or other authorization (including
any Governmental Authorization).
“Consulting
Agreement”
is
defined in Section
2.4(a)(iv).
“Contemplated
Transactions”
means
all of the transactions contemplated by this Agreement, including:
(a) the
sale
of the Shares by Sellers to Buyer;
(b) the
execution, delivery, and performance of the Employment Agreements, the
Consulting Agreement, the Sellers’ Releases and the Stock Pledge
Agreement;
(c) the
performance by Buyer and Sellers of their respective covenants and obligations
under this Agreement; and
(d) Buyer’s
acquisition and ownership of the Shares and exercise of control over the
Company.
“Contract”
means
any agreement, contract, obligation, promise, or undertaking (whether written
or
oral and whether express or implied) that is legally binding.
“Copyrights”
is
defined in Section
3.20(a)(iii).
“Damages”
is
defined in Section
10.2.
“Employment
Agreements”
is
defined in Section
2.4(a)(iii).
“Encumbrance”
means
any charge, claim, community property interest, condition, equitable interest,
lien, option, pledge, security interest, right of first refusal, or restriction
of any kind, including any restriction on use, voting, transfer, receipt
of
income, or exercise of any other attribute of ownership.
“Environment”
means
soil, land surface or subsurface strata, surface waters (including navigable
waters, ocean waters, streams, ponds, drainage basins, and wetlands),
groundwaters, drinking water supply, stream sediments, ambient air (including
indoor air), plant and animal life, and any other environmental medium or
natural resource.
“Environmental
Law”
means
any Federal, state, local or foreign law, ordinance, rule, regulation, permit
or
authorization pertaining to the protection of human health or the
environment.
“ERISA”
means
the Employee Retirement Income Security Act of 1974 or any successor law,
and
regulations and rules issued pursuant to that Act or any successor
law.
“Exchange
Act”
means
the Securities Exchange Act of 1934 or any successor law, and regulations
and
rules issued pursuant to that Act or any successor law.
“GAAP”
means
generally accepted United States accounting principles, applied on a basis
consistent with the basis on which the Interim Balance Sheet and the other
financial statements referred to in Section
3.4
were
prepared.
“Governmental
Authorization”
means
any approval, consent, license, permit; waiver, or other authorization issued,
granted, given, or otherwise made available by or under the authority of
any
Governmental Body or pursuant to any Legal Requirement.
“Governmental
Body”
means
any:
(a) nation,
state, county, city, town, village, district, or other jurisdiction of any
nature;
(b) federal,
state, local, municipal, foreign, or other government;
(c) governmental
or quasi-governmental authority of any nature (including any governmental
agency, branch, department, official, or entity and any court or other
tribunal);
(d) multi-national
organization or body; or
(e) body
exercising, or entitled to exercise, any administrative, executive, judicial,
legislative, police, regulatory, or taxing authority or power of any
nature.
“Intellectual
Property Assets”
is
defined in Section
3.20.
“Interim
Balance Sheet”
is
defined in Section
3.4.
“IRC”
means
the Internal Revenue Code of 1986 or any successor law, and regulations issued
by the IRS pursuant to the Internal Revenue Code or any successor
law.
“IRS”
means
the United States Internal Revenue Service or any successor agency and, to
the
extent relevant, the United States Department of the Treasury.
“Knowledge”
—An
individual will be deemed to have “Knowledge” of a particular fact or other
matter if such individual is actually aware of such fact or other
matter.
“Knowledge
of the Buyer”
means
the Knowledge of Xxxx Xxxxx, Xxxxx Xxxxxx, Xxxx Xxxxxxxxx, Xxx Xxxxx, and
Xxxxx
Xxxxx as officers, directors and/or shareholders of Buyer.
“Knowledge
of the Company”
means
the Knowledge of Xxxxxx Xxxxxxx and John Mehmet Ulgar Dogru as officers,
directors and/or shareholders of the Company.
“Legal
Requirement”
means
any federal, state, local, municipal, foreign, international, multinational,
or
other administrative order, constitution, law, ordinance, principle of common
law, regulation, statute, or treaty.
“Marks”
is
defined in Section
3.20(a)(i).
“Material
Adverse Effect”
means
any event, circumstance or condition that has a material adverse effect on
the
business, assets (including intangible assets), liabilities, financial
condition, property or results of operations of the Company or Buyer, as
applicable.
“Order”
means
any award, decision, injunction, judgment, order, ruling, subpoena, or verdict
entered, issued, made, or rendered by any court, administrative agency, or
other
Governmental Body or by any arbitrator.
“Ordinary
Course of Business”
—
An
action taken by a Person will be deemed to have been taken in the “Ordinary
Course of Business” only if such action is consistent with the past practices of
such Person and is taken in the ordinary course of the normal day-to-day
operations of such Person.
“Organizational
Documents”‘,
where
applicable, means (a) the articles or certificate of incorporation and the
bylaws of a corporation; (b) the partnership agreement and any statement
of
partnership of a general partnership; (c) the limited partnership agreement
and
the certificate of limited partnership of a limited partnership; (d) the
articles or certificate of formation or organization, and operating agreement
of
any limited liability company, (e) any charter or similar document adopted
or
filed in connection with the creation, formation, or organization of a Person;
and (f) any amendment to any of the foregoing.
“Patents”
is
defined in Section
3.20(a)(ii).
“Permitted
Encumbrances”
means
(a) security interests shown on the Interim Balance Sheet (as with respect
to
the Company) or the Buyer Financial Statements (as with respect to Buyer)
as
securing specified liabilities or obligations, with respect to which no default
(or event that, with notice or lapse of time or both, would constitute a
default) exists, (b) security interests incurred in connection with the purchase
of property or assets after the date of the Interim Balance Sheet (as with
respect to the Company) or the Buyer Financial Statements (as with respect
to
Buyer (such security interests being limited to the property or assets so
acquired), with respect to which no default (or event that, with notice or
lapse
of time or both, would constitute a default) exists, (c) liens for current
taxes
or other assessments not yet due, (d) Encumbrances in favor of operators,
vendors, carriers, warehousemen, repairmen, mechanics, workmen and materialmen
and construction or similar Encumbrances arising by operation of law or in
the
Ordinary Course of Business in respect of obligations that are not yet due
or
that are being contested in good faith by appropriate proceedings, and (e)
workers’ or unemployment compensation Encumbrances arising in the Ordinary
Course of Business.
“Person”
means
any individual, corporation (including any non-profit corporation), general
or
limited partnership, limited liability company, joint venture, estate, trust,
association, organization, labor union, or other entity or Governmental
Body.
“Premises”
is
defined in Section
3.17.
“Pro
Rata Share”
means,
as to any Seller, the percentage obtained by dividing the number of Shares
owned
by such Seller by the total number of Shares.
“Proceeding”
means
any action, arbitration, audit, hearing, investigation, litigation, or suit
(whether civil, criminal, administrative, investigative, or informal) commenced,
brought, conducted, or heard by or before, or otherwise involving any
Governmental Body or arbitrator.
“Related
Person”
means,
with respect to a particular individual:
(a) each
other member of such individual’s Family;
(b) any
Person that is directly or indirectly controlled by such individual or one
or
more members of such individual’s Family; and
(c) any
Person with respect to which such individual or one or more members of such
individual’s Family serves as a director, officer, partner, executor, or trustee
(or in a similar capacity).
With
respect to a specified Person other than an individual, “Related Person”
means:
(a) any
Person that directly or indirectly controls, is directly or indirectly
controlled by, or is directly or indirectly under common control with such
specified Person;
(b) each
Person that serves as a director, officer, partner, executor, or trustee
of such
specified Person (or in a similar capacity); and
(c) any
Related Person of any individual described in clause (b) or (c).
For
purposes of this definition, the “Family”
of
an
individual includes (i) the individual, (ii) the individual’s spouse, and (iii)
any other natural person who is related to the individual or the individual’s
spouse within the second degree.
“Representative”
means,
with respect to a particular Person, any director, officer, employee, agent,
consultant, advisor, or other representative of such Person, including legal
counsel, accountants, and financial advisors.
“Securities
Act”
means
the Securities Act of 1933 or any successor law, and regulations and rules
issued pursuant to that Act or any successor law.
“Sellers
Breach”
is
defined in Section
7.5.
“Sellers”
is
defined in the first paragraph of this Agreement
“Sellers’
Disclosure Schedule”
means
the disclosure schedule attached hereto as Schedule B, and made a part
hereof
“Sellers’
Releases”
is
defined in Section
2.4(a)(ii).
“Sellers’
Representative”
is
defined in Section
11.16.
“Shares”
is
defined in the Recitals of this Agreement.
“Stock
Pledge Agreement”
is
defined in Section
2.4.
“Subsidiary”
means,
with respect to any Person (the “Owner”),
any
corporation or other Person of which securities or other interests having
the
power to elect a majority of that corporation’s or other Person’s board of
directors or similar governing body, or otherwise having the power to direct
the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, “Subsidiary”
means
a
Subsidiary of the Company.
“Tax
Return”
means
any return (including any information return), report, statement, schedule,
notice, form, or other document or information statement filed with or submitted
to, or required to be filed with or submitted to, any Governmental Body in
connection with the
determination,
assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any
Legal
Requirement relating to any Tax.
“Threatened”
means
that a claim, Proceeding, dispute, action, or other matter will be deemed
to
have been “Threatened” if any written demand or statement has been made or any
written notice has been given.
“Trade
Secrets”
is
defined in Section
3.20(a)(iv).
“Venus
Stock Price”
means
$0.90, as adjusted for stock splits, stock dividends, stock subdivisions
or
combinations and the like.
2. SALE
AND TRANSFER OF SHARES; CLOSING
2.1 SHARES.
Subject
to the terms and conditions of this Agreement, at the Closing, Sellers will
sell
and transfer the Shares to Buyer; and Buyer will purchase the Shares from
Sellers.
2.2 PURCHASE
PRICE.
The
purchase wire for the Shares will be $9,000,000 (the “Purchase Price”), payable
in the form of that number of shares of Buyer’s common stock, par value $0.01
per share calculated, by dividing $9,000,000 by the Venues Stock Price (the
“Buyer Shares”).
The
Purchase Price and the corresponding number of Buyer Shares to be delivered
to
Sellers shall be adjusted as provided in Sections
2.5
and
2.6
and
2.7(d).
2.3 CLOSING.
The
exchange of the Buyer Shares for the Shares (the “Closing”)
provided for in this Agreement will take place at the offices of Buyer’s counsel
at 00000 Xxxxxxxxx Xxxx, Xxxxx Xxxxx, Xxxxxxxxx, XX) 00000, at 10:00 a.m.
(local
time) on the later of (i) October 16, 2006, or (ii) at such other time and
place
as the parties may agree.
2.4 CLOSING
OBLIGATIONS.
At the
Closing:
(a) Sellers
will deliver to Buyer:
(i) certificates
representing the Shares, duly endorsed (or accompanied by duly executed stock
powers) for transfer to Buyer;
(ii) releases
in the form of Exhibit
2.4(a)(ii)
executed
by Sellers (collectively, “Sellers’ Releases”);
(iii) employment
agreements in the form of Exhibit
2.4(a)(iii),
executed by each of Xxx Xxxxxxx and Xxxx Xxxxx (together, the “Employment
Agreements”)
;
(iv) a
consulting agreement in the form of Exhibit
2.4(a)(iv),
executed by Xxxxx Xxxx (the “Consulting
Agreement”);
(v) an
opinion of Xxxxxxx Xxxxxx L.L.P., dated the Closing Date reasonably acceptable
to Buyer;
(vi) all
Consents necessary for the Company to consummate the Contemplated
Transactions;
(vii) access
to
the Company Records; and
(viii) such
other documents as Buyer may reasonably request for the purpose of (i) enabling
its counsel to provide the opinion referred to in Section
2.4(b)(v),
or (ii)
otherwise facilitating the consummation or performance of any of the
Contemplated Transactions.
(b) Buyer
will deliver to Sellers:
(i) 99.0%
of
the number of Buyer Shares, delivered to the Sellers in proportion to their
respective ownership of the Shares;
(ii) the
balance of the Buyer Shares (the “Holdback
Shares”)
shall
be delivered to the Sellers pursuant to Section
2.6(b);
(iv) an
opinion of Shulman, Rogers, Gandal, Pordy & Xxxxx, PA., dated the Closing
Date reasonably acceptable to the Seller Representative;
(v) the
Employment Agreements, executed by Buyer;
(vi) the
Consulting Agreement, executed by Buyer, and
(vii) all
Consents necessary for Buyer to consummate the Contemplated Transactions;
and
(viii) such
other documents as Sellers may reasonably request for the purpose of (i)
enabling its counsel to provide the opinion referred to in Section
2.4(a)(iv),
or (ii)
otherwise facilitating the consummation or performance of any of the
Contemplated Transactions.
(c) Buyer
and
the Founding Shareholders will enter into an stock pledge agreement in a
foam
mutually acceptable to Buyer and the Founding Shareholders (the “Stock Pledge
Agreement”),
whereby the Founding Shareholders will pledge 10% of their Buyer’s Shares for
one year as security for the indemnification obligations set forth in
Section
7.2.
2.5 ADJUSTMENT
AMOUNT.
The
Purchase Price and the corresponding number of Buyer Shares to be delivered
to
Sellers shall be decreased by the amount; if any, by which the accrued total
liabilities of the Company as of the Closing Date determined in accordance
with
GAAP is greater than $70,000, including Xxxxxx Xxxxxxx’x American Express credit
card debt incurred on behalf of the Company (the “Adjustment
Amount”);
provided, however, no adjustment will be so made to the extent that the
Adjustment Amount does not exceed $50,000 in either event the Adjustment
Amount
shall be converted into a number of Buyer Shares by dividing the Adjustment
Amount by the Vemics Closing Price (the “Adjustment
Shares”).
2.6 ADJUSTMENT
PROCEDURE.
(a) The
Sellers’ Representative will prepare and will cause Xxxx Xxxxxx, CPA, the
Company’s certified public accountant, to review (as the Company’s expense), a
balance sheet (“Closing
Balance Sheet”)
of the
Company as of the Closing Date and a calculation of the Adjustment Amount.
Sellers will deliver the Closing Balance Sheet to Buyer within thirty (30)
clays
after the Closing Date. Following the Closing, Buyer shall provide the Sellers’
Representative access to the records and employees of the Company to the
extent
necessary for the preparation of the Closing Balance Sheet and shall cooperate
and cause the Company and the employees of the Company to cooperate with
the
Sellers’ Representative, the accounting firm reviewing the Closing Balance Sheet
(the “Closing
Balance Sheet Accounting Firm”)
in
connection with its preparation and review of the Closing Balance Sheet,
which
cooperation shall include executing and delivery to the Closing Balance Sheet
Accounting Firm such management representation letters and engagement letters
as
may be requested by the Closing Balance Sheet Accounting Firm and taking
all
such reasonable actions necessary to permit completion of the review of the
Closing Balance Sheet. If within ten (10) days following delivery of the
Closing
Balance Sheet, Buyer has not given Sellers’ Representative notice of its
objection to Sellers’ Representative’s calculation of the Adjustment Amount
(such notice must contain a statement of the basis of Buyer’s objection), then
such Adjustment Amount will be deemed to be the final Adjustment Amount for
all
purposes hereunder. If Buyer gives such notice of objection, then, within
three
(3) business days of delivery of such notice of objection, the issues in
dispute
with respect to the calculation of the Adjustment Amount will be submitted
to
BDO Xxxxxxx, certified public accountants, or such other certified public
accountants as Buyer and the Sellers’ Representative may agree (the
“Accountants’’),
for
resolution, and (i) each party will furnish to the Accountants such workpapers
and other documents and information relating to the disputed issues as the
Accountants may request and are available to that party, and will be afforded
the opportunity to present to the Accountants any material relating to the
determination and to discuss the determination with the Accountants; (ii)
the
determination by the Accountants of the Adjustment Amount, as set forth in
a
notice delivered to both parties by the Accountants within twenty (20) days
of
the date such dispute is referred to the Accountants, will be binding and
conclusive on the parties; and (in) Buyer and Sellers will each bear 50%
of the
fees of the Accountants for such determination. The date on which the Adjustment
Amount is finally determined in accordance with this Section
2.6(a)
is
hereinafter referred to as the “Determination Date.”
(b) On
the
tenth (10th) business day following the (i) final acceptance of the calculation
of the Adjustment Amount or (ii) the Determination Date, Buyer shall deliver
to
Sellers the Holdback Shares, less the Adjustment Shares (if any), allocated
to
Sellers based upon their respective Pro Rata Shares.
2.7 RESTRICTIONS
AND RIGHTS AS TO BUYER SHARES.
The
following provisions shall apply to the Buyer Shares delivered to
Sellers:
(a) The
certificate or certificates evidencing the Buyer Shares delivered to all
Sellers
will bear a restrictive legend substantially in the following form as long
as
applicable:
“THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT
OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAW. THESE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR
RESALE,
AND MAY NOT BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT COVERING THESE SECURITIES UNDER
THE
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL IN
FORM
AND SUBSTANCE SATISFACTORY TO THE COMPANY THAT REGISTRATION OF THESE SECURITIES
IS NOT REQUIRED UNDER THE ACT OR UNDER APPLICABLE STATE SECURITIES
LAWS.”
The
certificate or certificates -evidencing the Buyer Shares delivered to the
Founding Shareholders will bear an additional restrictive legend substantially
in the following form as long as applicable:
THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CONTRACTUAL RESTRICTIONS
ON TRANSFER EXPIRING ON OCTOBER __, 2007, PURSUANT TO THAT CERTAIN STOCK
PURCHASE AGREEMENT DATED AS OF OCTOBER __, 2006 (THE “AGREEMENT’), BY AND AMONG
COMPANY AND CERTAIN OTHER PARTIES THERETO. PRIOR TO THE EXPIRATION OF SUCH
HOLDING PERIOD, SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED AND
THE
COMPANY SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, TRANSFER
OR.
ASSIGNMENT EXCEPT TO THE EXTENT SUCH SALE, TRANSFER OR ASSIGNMENT IS IN
COMPLIANCE WITH THE AGREEMENT. UPON THE WRITTEN REQUEST OF THE HOLDER OF
THIS
CERTIFICATE, THE COMPANY AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY
STOP
ORDER PLACED WITH THE TRANSFER AGENT) WHEN THE HOLDING PERIOD HAS
EXPIRED.”
(b) Except
with the consent of Buyer; the Founding Shareholders agree that they will
not,
directly or indirectly, offer, sell, contract to sell, pledge or otherwise
dispose of any of the Buyer Shares received as part of the Purchase Price
prior
to the first anniversary of the Closing (“Lock-Up
Period”).
Thereafter, these restrictions will expire on a monthly basis with respect
to
eight and 33/100 percent (8.33%) of the aggregate number of Buyer Shares
per
month for the twelve (12) months following the end of the Lock-Up Period,
subject to any applicable Legal Requirements.
(c) (i)
If,
at any time following the Closing, Buyer files a registration statement under
the Securities Act for purposes of a public offering of securities of the
Buyer
for its own account, it shall notify the prior holders of Investor Shares
(and
the prior holders of Founders Shares after the first anniversary of the date
hereof) in writing (the “Company Notice”).
Each
Seller entitled to receive a Company Notice shall have the right (the
“Piggyback
Right”),
subject to the limitations set forth in this Section
2.7(c),
to
include in any such registration statement all or any portion of the Buyer
Shares then held by such Seller. In order to exercise the Piggyback Right,
a
Seller shall give written notice to Buyer (the “Piggyback
Notice”)
no
later than fifteen (15) days following the date on which the Buyer gives
the
Company Notice. The Piggyback Notice shall set forth the number of Buyer
Shares
that such Seller desires to include in the registration statement. All expenses
of any such registration will be paid by the Buyer.
(ii)
If
the registration statement under which Buyer gives notice under this
Section
2.7(c)
is for
an underwritten offering, Buyer shall so advise the Sellers in the Company
Notice. In such event, the right of any Seller to be included in a registration
pursuant to this Section
2.7(c)
shall be
conditioned upon such holder’s participation in such underwritten offering and
the inclusion of such holder’s Buyer Shares in the underwritten offering to the
extent provided herein. All holders of Buyer Shares proposing to distribute
their shares by means of such underwritten offering shall-enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by Buyer. Notwithstanding any other provision
of
this Agreement, if the underwriter determines in good faith that marketing
factors require a limitation of the number of shares to be underwritten,
the
number of shares that may be included in the underwriting shall be allocated,
first, to Buyer; second, to the holders of Buyer Shares on a pro rate basis
based on the total number of Buyer Shares requested to be included in such
registration by the holders of Buyer Shares; and third, to any stockholder
of
the Company (other than a holder of Buyer Shares) on a pro rata basis. No
such
reduction shall reduce the securities being offered by Buyer for its own
account
to be included in the registration and underwriting. If any holder of Buyer
Shares disapproves of the terms of any such underwriting, such holder may
elect
to withdraw therefrom by written notice to Buyer and the underwriter, delivered
at least twenty (20) business days prior to the effective date of the
registration statement.
(iii)
Buyer shall have the right to terminate or withdraw any registration initiated
by it under this Section
2.7(c)
prior to
the effectiveness of such registration whether or not any holder of Buyer
Shares
has elected to include securities in such registration.
(d) Buyer
shall use its Best Efforts to have the Buyer listed as a reporting issuer
on the
Pink Sheets on or before December 31, 2006, and furthermore to be listed
as a
reporting bulletin board company no later than June 30, 2007. If Buyer fails
to
meet either of these deadlines, Buyer shall issue additional shares to Sellers
equal to five percent (5%) of the Buyers Shares for each missed deadline
up to a
total of ten percent (10%) of the Buyers Shares, such additional shares to
be
delivered within ten (10) business days of the date of such failure to meet
either such deadline and to be allocated to Sellers in proportion to their
respective Pro Rata Shares.
(e) With
a
view to making available to the Sellers the benefits of SEC Rule 144 and
any
other rule or regulation of the SEC that may at any time permit a Seller
to sell
securities of the Company to the public without registration, the Company
shall:
(i) make and keep available adequate current public information, as those
terms
are understood and defined in SEC Rule 144, at all times; (ii) use Best Efforts
to file with the SEC in a timely manner all reports and other documents required
of the Company under the Exchange Act (at any time after the Company has
become
subject to such reporting requirements); and (iii) furnish to any Seller,
so
long as the Seller owns any Buyers Shares, forthwith upon request (i) to
the
extent accurate, a written statement by the Company that it has complied
with
the reporting requirements of SEC Rule 144, the Securities Act, and the Exchange
Act, or that it qualifies as a registrant whose securities may be resold
pursuant to Xxxx X-0 (at any time after the Company so qualifies); (ii) a
copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company; and (iii) such other information
as may be reasonably requested in availing any Seller of any rule or regulation
of the SEC that permits the selling of any such securities without
registration.
3. REPRESENTATIONS
AND WARRANTIES OF SELLERS AND THE COMPANY.
Except
as set forth on the Sellers’ Disclosure Schedule, which exceptions shall be
deemed to be part of the representations and warranties made hereunder, the
Sellers (severally and not jointly) and the Company hereby represents and
warrant to Buyer as follows:
3.1 ORGANIZATION
AND GOOD STANDING.
(a) Section
3.1
of the
Sellers’ Disclosure Schedule contains a complete and accurate list for the
Company of its name, its jurisdiction of incorporation, other jurisdictions
in
which it is authorized to do business, and its capitalization (including
the
identity of each stockholder and the number of shares held by each). The
Company
is a corporation duly organized, validly existing, and in good standing under
the laws of its jurisdiction of incorporation, with full corporate power
and
authority to conduct its business as it is now being conducted, to own or
use
the properties and assets that it purports to own or use, and to perform
all its
obligations under Applicable Contracts. The Company is duly qualified to
do
business as a foreign corporation and is in good standing under the laws
of each
state or other jurisdiction in which the failure to so qualify would have
a
Material Adverse Effect.
(b) The
Company has delivered or made available to Buyer copies of the Organizational
Documents of the Company, as currently in effect.
3.2 AUTHORITY;
NO CONFLICT.
(a) This
Agreement constitutes the legal, valid, and binding obligation of Sellers,
enforceable against Sellers in accordance with its terms. As to any Seller
who
is a party thereto, upon the execution and delivery by such Seller of the
Employment Agreements, the Sellers’ Releases, the Consulting Agreement and the
Stock Pledge Agreement (collectively, the “Sellers’
Closing Documents”),
the
Sellers’ Closing Documents will, as to such Seller, constitute the legal, valid,
and binding obligations of such Seller, enforceable against such Seller in
accordance with their respective terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium; fraudulent conveyance,
or
other laws of general application relating to or affecting the enforcement
of
creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions and the
choice
of law provisions contained in the Sellers’ Closing Documents may be limited by
applicable laws. Sellers have the absolute and unrestricted right, power,
authority, and capacity to execute and deliver this Agreement and, as to
any
Seller who is a party thereto, the Sellers’ Closing Documents, and to perform
their obligations under this Agreement and the Sellers’ Closing
Documents.
(b) Neither
the execution and delivery of this Agreement nor the consummation or performance
of any of the Contemplated Transactions will, directly or indirectly (with
or
without notice or lapse of time):
(i) contravene,
conflict with, or result in a violation of (A) any material provision of
the
Organizational Documents of the Company, or (B) any resolution adopted by
the
board of directors or the stockholders of the Company;
(ii) contravene,
conflict with, or result in a violation of; or give any Governmental Body
or
other Person the right to challenge any of the Contemplated Transactions
or to
exercise any remedy or obtain any relief under, any material Legal Requirement
or any material Order to which the Company or any Seller, or any of the assets
owned or used by Company, maybe subject;
(iii) contravene,
conflict with, or result in a violation of any of the terms or requirements
of,
or give any Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate, or modify, any material Governmental Authorization that is held
by
the Company;
(iv) cause
Buyer or the Company to become subject to, or to become liable for the payment
of, any material amount of Tax;
(v)
cause
any of the assets owned by the Company to be reassessed or revalued by any
taxing authority or other Governmental Body;
(vi) contravene,
conflict with, or result in a violation or breach of any material provision
of
or give any Person the right to declare a default or exercise any remedy
under,
or to accelerate the maturity or performance of; or to cancel, terminate,
or
modify, any Seller Material Contract; or
(vii) result
in
the imposition or creation of any material Encumbrance upon or with respect
to
any of the assets owned or used by the Company.
Neither
the Sellers nor the Company is or will be required to give any notice to
or
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.
(c) Sellers
are acquiring the Buyer Shares for their own account and not with a view
to
their distribution within the meaning of Section 2(11) of the Securities
Act.
Each Seller is an “accredited investor” as such term is defined in Rule 501(a)
under the Securities Act.
(d) Each
Seller has had an opportunity to (1) ask questions of and receive answers
from
Buyer concerning the terms and conditions of the Contemplated Transactions,
(ii)
obtain any additional information which Buyer possesses or can acquire without
unreasonable effort or expense that is necessary to verify the accuracy of
the
information furnished, and (iii) consult and seek advice from an attorney
of
such Seller’s own choosing prior to entering into this Agreement. The Company
and each Seller acknowledge that, except as set forth herein, no representations
or warranties have been made to it, or to its Representatives, by Buyer or
others with respect to Buyer’s business and its financial condition and has
obtained, in its judgment, sufficient information from Buyer to evaluate
the
merits and risks of an investment in the Buyer Shares. Each Seller acknowledges
that it has received full and fair disclosure and carefully considered each
of
the following items in its entirety: (i) the Buyer’s Business Plan, dated March
2006 and all exhibits thereto; (ii) the audited financial statements of the
Buyer as of and for the year ended June 30, 2004 and 2005, and unaudited
interim
financial statements as of and for the twelve months ended June 30, 2006;
and
(iii) the Risk Factors attached hereto as Exhibit
3.2(d)(iii).
Each
Seller is aware of the risks inherent in an investment in the Buyer Shares
and
acknowledges that there can be no assurance of the future viability or
profitability of Buyer, nor can there be any assurance relating to the current
or future value of the Buyer Shares. The foregoing, however, does not limit
or
modify the representations and warranties of Buyer in Section
4
of this
Agreement or the right of Sellers to rely thereon.
(e) Each
Seller has such knowledge and experience in financial, investment and business
matters as to be capable of evaluating the merits and risk of an investment
in
the Buyer Shares. Each Seller represents and warrants that (i) the Seller’s
overall commitment to investments which are not readily marketable, including
the purchase of Buyer Shares, is reasonable in relation to the Seller’s net
worth; (ii) each Seller is acquiring the Buyer Shares for investment for
the
Seller’s own account, and not with a view towards the resale or distribution of
any or all such Buyer Shares; and (iii) the Seller can bear the economic
risk of
losing the Seller’s entire investment.
3.3 CAPITALIZATION
AND TITLE TO SHARES.
(a) The
authorized equity securities of the Company consist of 12,000,000 shares
of
common stock, par value $0.001 per share, and 2,000,000 shares of preferred
stock, par value $0.001 per share all of which have been designated as Series
A
Preferred Stock, of which 8,000,000 shares of common stock and 1,750,000
shares
of Series A Preferred Stock are issued and outstanding and constitute the
Shares. Sellers are, and will be on the Closing Date, the record owners and
holders of the Shares. No legend or other reference to any purported Encumbrance
appears upon any certificate representing equity securities of the Company
other
than restrictions under applicable securities laws. All of the outstanding
equity securities of the Company have been duly authorized and validly issued
and are fully paid and nonassessable. Other than the Sellers’ Closing Documents,
there are no Contracts relating to the issuance, sale, or transfer of any
equity
securities or other securities of the Company. None of the outstanding equity
securities or other securities of the Company was issued in violation of
the
Securities Act or any other Legal Requirement. The Company owns, or has any
Contract to acquire, any equity securities or other securities of any Person
or
any direct or indirect equity or ownership interest in any other
business.
(b) As
to
each Seller, such Seller is, and will be on the Closing Date, the record
and
beneficial owner and holder of the number of Shares listed next to such Seller’s
name in Section
3.3
of the
Sellers’ Disclosure Schedule, free and clear of all Encumbrances, except for any
restrictions existing under applicable securities laws and the restrictions
imposed in this Agreement.
(c) The
Company has no Subsidiaries.
3.4 FINANCIAL
STATEMENTS.
The
Company has delivered to Buyer. (a) unaudited balance sheets of the Company
as
at April 31, 2006, May 31, 2006, June 30, 2006 and July 31, 2006 (the
“Interim
Balance Sheet”),
and
the related unaudited statements of income, changes in stockholders’ equity, and
cash flow for each of the months them ended. Such financial statements and
notes
fairly present the financial condition and the results of operations, changes
in
stockholders’ equity, and cash flow of the Company as at the respective dates of
and for the periods-referred: to in such financial statements, all in accordance
with GAAP, subject, in the case of interim financial statements, to normal
reaming year-end adjustments and the absence of notes; the financial statements
referred to in this Section 3.4 reflect the consistent application of such
accounting principles throughout the periods involved, except as disclosed
in
the notes to such financial statements.
3.5 BOOKS
AND RECORDS.
The
looks of account, minute books, stock record books, and other records of
the
Company (the “Company Records”, all of which have been made available to Buyer,
are complete and correct in all material respects. The minute books of the
Company contain materially accurate and complete records of all meetings
held of
and corporate action taken by, the stockholders, the Board of Directors,
and
committer of the Board of Directors of the Company, and no meeting of any
such
stockholders, Board of Directors, or committee has been held for which minutes
have not been prepared and are not contained in such minute books. At the
Closing, all of those books and records will be in the possession of the
Company.
3.6 ENCUMBRANCES.
All
material properties and assets of the Company are free and clear of all
Encumbrances except for (i) Encumbrances reflected in the Interim Balance
Sheet,
(u) Encumbrances incurred in the Ordinary Course of Business since the date
of
the Interim Balance Sheet, and (iii) Permitted Encumbrances.
3.7 [Intentionally
omitted]
3.8 NO
UNDISCLOSED LIABILITIES.
To the
Knowledge of the Company, the Company has no material liabilities or obligations
of any nature except for liabilities or obligations reflected or reserved
against in the Interim Balance Sheet and current liabilities incurred in
the
Ordinary Course of Business.
3.9 TAXES.
(a) The
Company has filed or caused to be filed (on a timely basis since inception)
all
Tax Returns that are or were required to be filed by or with respect to any
of
than, either separately or as a member of a group of corporations, pursuant
to
applicable Legal Requirements. Sellers have delivered or made available to
Buyer
copies of, and Section
3.9
of the
Sellers’ Disclosure Schedule contains a complete and accurate list of, all such
Tax Returns filed since inception. The Company has paid, or made provision
for
the payment of, all Taxes that have or may have become due pursuant to those
Tax
Returns or otherwise, or pursuant to any assessment received by Sellers or
the
Company, except such Taxes, if any, as are listed in Section
3.9
of the
Sellers’ Disclosure Schedule and are being contested in good faith and as to
which adequate reserves (determined in accordance with GAAP) have been provided
in the Interim Balance Sheet.
(b) No
Tax
Return filed by or on behalf of the Company is currently being, or has been,
audited. There is no claim or assessment pending against the Company for
any
alleged deficiency in Taxes or for the failure to file any Tax Return. Neither
Seller nor the Company has given or been requested to give waivers or extensions
of any statute of limitations relating to the payment of Taxes of the
Company.
(c) All
Tax
Returns filed by the Company are true, correct, and complete in all material
respects. There is no tax sharing agreement that will require any payment
by the
Company after the date of this Agreement lining the consistency period (as
defined in Section 338(h)(4) of the IRC with respect to the sale of the Shares
to Buyer), neither the Company nor any target affiliate (as defined in Section
338(h)(6) of the IRC with respect to the sale of the Shares to Buyer) has
sold
or will sell any property or assets to Buyer or to any member of the affiliated
group (as defined in Section 338(h)(5) of the IRC) that includes
Buyer.
3.10 NO
MATERIAL ADVERSE CHANGE.
Since
the date of the Interim Balance Sheet, there has not been any material adverse
change in the business, operations, properties, prospects, assets, or condition
of the Company, and, to the Knowledge of the Company, no event has occurred
or
circumstance exists that may result in such a material adverse
change.
3.11 EMPLOYEE
BENEFITS.
(a) Schedule
3.11(a) of
the
Sellers’ Disclosure Schedule contains a complete and accurate list of all
Company Plans and Company Other Benefit Obligations.
(b) The
Company has delivered or made available to Buyer: (i) all documents that
set
forth the terms of each Company Plan and Company Other Benefit Obligation;
(ii)
all personnel, payroll, and employment manuals and policies; (iii) all contracts
with third party administrators, actuaries, investment managers, consultants,
and other independent contractors that relate to any Company Plan or Company
Other Benefit Obligation; (iv) all reports submitted within the four years
preceding the date of this Agreement by third party administrators, actuaries,
investment managers, consultants, or other independent contractors with respect
to any Company Plan or Company Other Benefit Obligation; (v) all notices
that
were given by the Company to any Governmental Body or any current or former
employee, participant or beneficiary, pursuant to statute, within the four
years
preceding the date of this Agreement; and (vi) all notices that were given
by
any Governmental Body to the Company within the four years preceding the
date of
this Agreement.
(c) Except
as
set forth in Schedule
3.11(c)
of the
Sellers’ Disclosure Schedule: (i) the Company has performed all of its
obligations under all Company Plans and Company Other Benefit Obligations,
including making all required contributions or payments with respect to any
Company Plans and Company Other. Benefit Obligations; (ii) the Company, with
respect to all Company Plans and Company Other Benefits Obligations, is,
and
each Company Plan and Company Other Benefit Obligation is, in full compliance
with all applicable Legal Requirements; (iii) the Company has made appropriate
entries in its financial records and statements for all obligations and
liabilities under such Company Plans and Company Other Benefit Obligations
that
have accrued but are not due to be paid in cash. The Company has no obligations
to any person or Governmental Body with respect to any Company Plans or Company
Other Benefit Obligations, except as set forth on the Interim Balance Sheet;
(iv) all filings required by any applicable Legal Requirement as to each
Company
Plan and Company Other Benefit Obligation has been timely filed, and all
notices
and disclosures to participants required by any Governmental Body have been
timely provided; (v) the Company has the right to modify and terminate each
Company Plan and Company Other Benefit Obligation; and (vi) the consummation
of
the Contemplated Transactions will not result in the payment, vesting, or
acceleration of any benefit or amount due under any Company Plan and Company
Other Benefit Obligation or otherwise.
|
3.12
|
COMPLIANCE
WITH LEGAL REOUIREMENTS; GOVERNMENTAL AUTHORIZATIONS.
|
(a) the
Company is, and at all times since inception, has been, in full compliance
with
each material Legal Requirement that is applicable to it;
(b) no
event
has occurred or circumstance exists that (with or without notice or lapse
of
time) may constitute or result in a violation by the Company of, or a failure
on
the part of the Company to comply with, any material Legal Requirement;
and
(c) the
Company has not received, at any time since inception, any written notice
from
any Governmental Body or any other Person regarding any actual or alleged
violation of; or failure to comply with, any material Legal
Requirement.
3.13 LEGAL
PROCEEDINGS; ORDERS.
(a) There
is
no pending Proceeding:
(i) that
has
been commenced by or against the Company; or
(ii) that
challenges, or that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the Contemplated
Transactions.
To
the
Knowledge of the Company, (1) no such Proceeding has been Threatened, and
(2) no
event has occurred or circumstance exists that may give rise to or serve
as a
basis for the commencement of any such Proceeding.
(b) There
is
no Order to which the Company, or any of the assets owned or used by the
Company, is subject.
3.14 ABSENCE
OF CERTAIN CHANGES AND EVENTS.
Since
the date of the Interim Balance Sheet, the Company has conducted its business
only in the Ordinary Course of Business and there has not been any:
(a) change
in
the Company’s authorized or issued capital stock; grant of any stock option or
right to purchase shares of capital stock of the Company; issuance of any
security convertible into such capital stock; grant of any registration rights;
purchase, redemption, retirement, or other acquisition by the Company of
any
shares of any such capital stock; or declaration or payment of any dividend
or
other distribution or payment in respect of shares of capital
stock;
(b) amendment
to the Organizational Documents of the Company;
(c) payment
or increase by the Company of any bonuses, salaries, or other compensation
to
any stockholder, director, officer, or employee (except in the Ordinary Course
of Business) or entry into any employment, severance, or similar Contract
with
any director, officer, or employee;
(d) adoption
o g or increase in the payments to or benefits under, any profit sharing,
bonus,
deferred compensation, savings, insurance, pension, retirement, or other
employee benefit plan for or with any employees of the Company;
(e) damage
to
or destruction or loss of any asset or property of the Company, whether or
not
covered by insurance, that would have a Material Adverse Effect on the
Company;
(f) entry
into, termination of, or receipt of notice of termination of (i) any license,
distributorship, dealer, sales representative, joint venture, credit, or
similar
agreement, or (ii) any Contract or transaction involving a total remaining
commitment by or to the Company of at least $25,000;
(g) sale,
lease (other than sales or leases of inventory in the Ordinary Course of
Business), or other disposition of any asset or property of the Company or
any
Encumbrance on any material asset or property of the Company, other than
Permitted Encumbrances;
(h) cancellation
or waiver of any claims or rights with a value to the Company in excess of
$25,000;
(i) material
change in the accounting methods used by the Company; or
(j) agreement,
whether oral or written, by the Company to do any of the foregoing.
3.15 CONTRACTS:
NO DEFAULTS.
(a) Section
3.15(a)
of the
Sellers’ Disclosure Schedule contains a complete and accurate list, and Sellers
have delivered or made available to Buyer true and complete copies, of (each,
a
“Company
Material Contract”):
(i) each
Applicable Contract that involves performance of services or delivery of
goods
or materials by or to the Company, or that was not entered into in the Ordinary
Course of Business, of an amount or value in excess of $20,000;
(ii) each
Applicable Contract affecting the ownership of, leasing of, title to, use
of, or
any leasehold or other interest in, any real or personal property (except
personal property leases and installment and conditional sales agreements
having
a value per item or aggregate payments of less than $10,000 and with terms
of
less than one year);
(iii) each
licensing agreement or other Applicable Contract with respect to patents,
trademarks, copyrights, or other intellectual property, including agreements
with current or former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Intellectual Property
Assets;
(iv) each
collective bargaining agreement and other Applicable Contract to or with
any
labor union or other employee representative of a group of
employees;
(v) each
joint venture, partnership, and other Applicable Contract (however named)
involving a sharing of profits, losses, costs, or liabilities by the Company
with any other Person;
(vi) each
Applicable Contract containing covenants that in any way purport to restrict
the
business activity of the Company or limit the freedom of the Company to engage
in any line of business or to compete with any Person;
(vii) each
Applicable Contract entered into other than in the Ordinary Course of Business
that contains or provides for an express undertaking by the Company to be
responsible for consequential damages;
(viii) each
written warranty, guaranty, and or other similar undertaking with respect
to
contractual performance extended by the Company other than in the Ordinary
Course of Business; and
(xiii) each
written amendment, supplement, and modification in respect of any of the
foregoing.
(b) Except
as
set forth in Section
3.15(b)
of the
Sellers’ Disclosure Schedule:
(i) no
Seller
(and no Related Person of any Seller) has or may acquire any rights under,
and
no Seller has or may become subject to any obligation or liability under,
any
Contract that relates to the business of, or any of the assets owned or used
by,
the Company; and
(ii) to
the
Knowledge of the Company, no officer, director, agent, employee, consultant;
or
contractor of the Company is bound by any Contract that purports to limit
the
ability of such officer, director, agent; employee, consultant, or contractor
to
(A) engage in or continue any conduct, activity, or practice relating to
the
business of the Company, or (B) assign to the Company or to any other Person
any
rights to any invention, improvement, or discovery.
(c) To
the
Knowledge of the Company, each Company Material Contract is in full force
and
effect and is valid and enforceable in accordance with its terms.
(d) To
the
Knowledge of the Company:
(i) the
Company is, and at all times since October 13, 2003 has been, in full compliance
with all applicable material terms and requirements of each Company Material
Contract;
(ii) each
other Person that has or had any obligation or liability under any Company
Material Contract under which the Company has or had any rights is, and at
all
times since inception has been, in full compliance with all material applicable
terms and requirements of such Company Material Contract; and
(iii) no
event
has occurred or circumstance exists that (with or without notice or lapse
of
time) may result in a violation or breach of any Company Material
Contract.
3.16 INSURANCE.
(a) The
Company has delivered or made available to Buyer true and complete copies
of all
policies of insurance to which the Company is a party or under which the
Company, or any director of the Company, is or has been covered at any time
within the two (2) years preceding the date of this Agreement.
(b) Section
3.16(b)
of the
Sellers’ Disclosure Schedule describes any self-insurance arrangement by or
affecting the Company, including any reserves established
thereunder:
(c) To
the
Knowledge of the Company all policies to which the Company is a party or
that
provide coverage to any Seller, the Company, or any director or officer of
the
Company:
(A) are
valid, outstanding, and enforceable; and
(B) taken
together, provide adequate insurance coverage for the assets and the operations
of the Company for all risks to which the Company is normally
exposed.
3.17 ENVIRONMENTAL
MATTERS.
The
Company, the operation of its business and any real property that the Company
owns or has owned, leased or has leased (the “Premises”)
are,
to the Knowledge of the Company, in compliance with all applicable Environmental
Laws and orders or directives of any governmental authorities having
jurisdiction under such Environmental Laws. The Company has not received
any
written citation, directive, letter or other communication, or any notice
of any
proceeding claim or lawsuit, from any person arising out of the ownership
or
occupation of the Premises, or the conduct of its operations, and the Company
is
not aware of any basis therefor. To the Knowledge of the Company, no material
expenditures are or will be required in order to comply with any Environmental
Laws.
3.18 EMPLOYEES.
(a) Section
3.18
of the
Sellers’ Disclosure Schedule contains a complete and accurate list of the
following information for each employee or director of the Company, including
each employee on leave of absence or layoff status: employer; name; job title;
current compensation paid or payable; vacation accrued; and service credited
for
purposes of vesting and eligibility to participate under any Company Plan
or
Company Other Benefit Obligation.
(b) To
the
Knowledge of the Company, no employee or director of the Company is a party
to,
or is otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, between
such
employee or director and any other Person (“Proprietary
Rights Agreement”)
that in
any way adversely affects or will affect (i) the performance of his duties
as an
employee or director of the Company, or (ii) the ability of the Company to
conduct its business, including any Proprietary Rights Agreement with Sellers
or
the Company by any such employee or director. To the Knowledge of the Company,
no director, officer, or other key employee of the Company intends to terminate
his employment with the Company.
3.19 LABOR
RELATIONS: COMPLIANCE.
The
Company is not a party to any collective bargaining or other labor Contract.
The
Company has complied in all respects with all material Legal Requirements
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 the Company, the Company is not liable for the
payment of any compensation, damages, taxes, fines, penalties, or other amounts,
however designated, for failure to comply with any of the foregoing Legal
Requirements.
3.20 INTELLECTUAL
PROPERTY.
(a) The
term
“Intellectual Property Assets” includes:
(i) the
name
“Nuscribe”, all fictional business names, trading names, registered and
unregistered trademarks, service marks, and applications (collectively,
“Marks”);
(ii) all
patents, patent applications, and inventions and discoveries that may be
patentable (collectively, “Patents”);
(iii) all
copyrights in both published works and unpublished works (collectively,
“Copyrights”);
and
(iv)
all
know-how, trade secrets, confidential information, customer lists, software,
technical information, data, process technology, plans, drawings, and blue
prints (collectively, “Trade
Secrets”);
in
each
case owned, used, or licensed by the Company as licensee or
licensor.
(b) Section
3.20(b)
of the
Sellers’ Disclosure Schedule contains a complete and accurate list and summary
description, including any royalties paid or received by the Company, of
all
Contracts relating to the Intellectual Property Assets to which the Company
is a
party or by which the Company is bound, except for any license implied by
the
sale of a product and perpetual, paid-up licenses for commonly available
software programs with a value of less than $1,000 under which the Company
is
the licensee. There are no outstanding and, to the Knowledge of the Company,
no
Threatened disputes or disagreements with respect to any such
agreement.
(c) Know-How
Necessary for the Business.
(i) The
Intellectual Property Assets are all those necessary for the operation of
the
Company’s business as they are currently conducted. The Company is the owner of
all right, title, and interest in and to each of the Intellectual Property
Assets, free and clear of all Encumbrances, other than Permitted Encumbrances,
and has the right to use without payment to a third party all of the
Intellectual Property Assets.
(ii) Except
as
set forth in Section
3.20(c)
of the
Sellers’ Disclosure Schedule, all former and current employees of the Company
has executed written Contracts with the Company that assign to the Company
all
rights to any inventions, improvements, discoveries, or information relating
to
the business of the Company. No employee of the Company has entered into
any
Contract that restricts or limits in any way the scope or type of work in
which
the employee may be engaged or requires the employee to transfer, assign,
or
disclose information concerning his work to anyone other than the
Company.
(d) Patents.
(i) Section
3.20(d)
of the
Sellers’ Disclosure Schedule contains a complete and accurate list and summary
description of all filed Patents. The Company is the owner of all right,
title,
and interest in and to each of the filed Patents, free and clear of all
Encumbrances, other than Permitted Encumbrances.
(ii) All
of
the issued Patents are currently in compliance with all material formal Legal
Requirements (including payment of filing, examination, and maintenance fees
and
proofs of working or use), are valid and enforceable, and are not subject
to any
maintenance fees or taxes or actions falling due within ninety days after
the
Closing Date.
(iii) No
Patent
has been or is now involved in any interference, reissue, reexamination,
or
opposition proceeding. To the Knowledge of the Company, there is no potentially
interfering patent or patent application of any third party.
None
of
the products manufactured and sold, nor any process or know-how used, by
the
Company infringes or is alleged to infringe any patent or other proprietary
right of any other Person.
(e) Trademarks.
(i) Section
3.20(e)
of
Sellers’ Disclosure Schedule contains a complete and accurate list and summary
description of all Marks. The Company is the owner of all right, title, and
interest in and to each of the Marks, free and clear of all Encumbrances,
other
than Permitted Encumbrances.
(ii) All
Marks
that have been registered with the United States Patent and Trademark Office
are
currently in compliance with all material formal legal requirements (including
the timely post registration filing of affidavits of use and incontestability
and renewal applications), are valid and enforceable, and are not subject
to any
maintenance fees or taxes or actions falling due within ninety days after
the
Closing Date.
(iii) No
Xxxx
has been or is now involved in any opposition, invalidation, or cancellation
and, to the Knowledge of the Company, no such action is Threatened with the
respect to any of the Marks.
(iv) To
the
Knowledge of the Company, there is no potentially interfering trademark or
trademark application of any third party.
(v) None
of
the Marks used by the Company infringes or is alleged to infringe any trade
name, trademark, or service xxxx of any third party.
(f) Copyrights.
(i) Section
3.20(f)
of the
Sellers’ Disclosure Schedule contains a complete and accurate list and summary
description of all Copyrights. The Company is the owner of all right, title,
and
interest in and to each of the Copyrights, free and clear of all Encumbrances,
other than Permitted Encumbrances.
(ii) All
the
Copyrights have been registered and are currently in compliance with material
formal legal requirements, are valid and enforceable, and are not subject
to any
maintenance fees, taxes, or actions falling due within ninety days after
the
date of Closing.
(iii)
None of the subject matter of any of the Copyrights infringes or is alleged
to
infringe any copyright of any third party or is a derivative work based on
the
work of a third party.
(g) Trade
Secrets.
(i) With
respect to each Trade Secret, the documentation relating to such Trade Secret
is
current, accurate, and sufficient in detail and content to identify and explain
it and to allow its full and proper use without reliance on the knowledge
or
memory of any individual.
(ii) The
Company has taken all reasonable precautions to protect the secrecy,
confidentiality, and value of the Trade Secrets.
(iii) The
Company has a right to use the Trade Secrets. The Trade Secrets are not part
of
the public knowledge or literature, and, to the Knowledge of the Company,
have
not been used, divulged, or appropriated either for the benefit of any Person
(other than the Company) or to the detriment of the Company.
3.21 CERTAIN
PAYMENTS.
Since
inception, neither the Company nor any director, officer, agent, or employee
of
the Company, or to Knowledge of the Company, any other Person associated
with or
acting for or on behalf of the Company, has directly or indirectly, in violation
of any Legal Requirement (a) made any contribution, gift, babe, rebate, payoff
influence payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, or (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of the Company or any Affiliate
of the Company, or (b) established or maintained any fiord or asset for such
purposes that has not been recorded in the books and records of the
Company.
3.22 DISCLOSURE.
No
representation or warranty of Sellers or the Company in this Agreement, and
no
statement in the Sellers’ Disclosure Schedule applicable to the Company, omits
to state a material fact necessary to make the statements herein or therein,
in
light of the circumstances in which they were made, not misleading.
3.23 RELATIONSHIPS
WITH RELATED PERSONS.
None of
the Sellers, or any Related Person of the Sellers or of the Company has,
or has
had, any interest in any property (whether real, personal, or mixed and whether
tangible or intangible), used in or pertaining to the Company’s business. No
Seller or any Related Person of Sellers or of the Company owns, or has owned
(of
record or as a beneficial owner) an equity interest or any other financial
or
profit interest in, a Person that has (i) had business dealings or a material
financial interest in any transaction with the Company other than business
dealings or transactions conducted in the Ordinary Course of Business with
the
Company at substantially prevailing market prices and on substantially
prevailing market terms, or (ii) engaged in competition with the Company
with
respect to any line of the products or services of the Company in any market
presently served by the Company. No Seller or any Related Person of Sellers
or
of the Company is a party to any Contract with, or has any claim or right
against, the Company.
3.24 BROKERS
OR FINDERS.
Sellers
and their agents have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders’ fees or agents’ commissions or other
similar payment in connection with this Agreement
4. REPRESENTATIONS
AND WARRANTIES OF BUYER.
Except
as set forth on the Buyer’s Disclosure Schedule, which exceptions shall be
deemed to be part of the representations and warranties made hereunder, Buyer
represents and warrants to Sellers as follows:
4.1 ORGANIZATION
AND GOOD STANDING.
Buyer
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Nevada, with full corporate power and authority
to
conduct its business as it is now being conducted, to own or use the properties
and assets that it purports to own or use, and to perform its obligations
under
Applicable Contracts. Buyer is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state or other
jurisdiction in which the failure to so qualify would have a Material Adverse
Effect.
4.2 AUTHORITY
NO CONFLICT.
(a) This
Agreement constitutes the legal, valid, and binding obligation of Xxxxx,
enforceable against Buyer in accordance with its teams. Upon the execution
and
delivery by Buyer of the Employment Agreements, the Sellers’ Releases, the
Consulting Agreement and the Stock Pledge Agreement (collectively, the
“Buyer’s
Closing Documents”),
the
Buyer’s Closing Documents will constitute the legal, valid, and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, or other laws of general
application relating to or affecting the enforcement of creditors’ rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to
the
extent the indemnification provisions and the choice of law provisions contained
in the Sellers’ Closing Documents may be limited by applicable laws. Buyer has
the absolute and unrestricted right power and authority to execute and deliver
this Agreement and the Buyer’s Closing Documents and to perform its obligations
under this Agreement and the Buyer’s Closing Documents.
(b) Neither
the execution and delivery of this Agreement by Buyer; nor the consummation
or
performance of any of the Contemplated Transactions by Buyer will, directly
or
indirectly (with or without notice or lapse of time):
(i) contravene,
conflict with, or result in a violation of (A) any material provision of
Buyer’s
Organizational Documents, or (B) any resolution adopted by the board of
directors or the stockholders of Buyer;
(ii) contravene,
conflict with, or result in a violation of or give any Governmental Body
or
other Person the right to challenge any of the Contemplated Transactions
or to
exercise any remedy or obtain any relief under, any material Legal Requirement
or any material Order to which the Buyer, or any of the assets owned or used
by
the Buyer, may be subject;
(iii) contravene,
conflict with, or result in a violation of any of the teens or requirements
of,
or give any Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate, or modify, any material Governmental Authorization that is held
by
Buyer;
(iv) cause
Buyer or the Company to become subject to, or to become liable for the payment
of, any material amount of Tax;
(iv) cause
any
of the assets owned by Buyer to be reassessed or revalued by any taxing
authority or other Governmental Body,
(v) contravene,
conflict with, or result in a violation or breach of any material provision
of,
or give any Person the right to declare a default or exercise any remedy
under,
or to accelerate the maturity or performance of or to cancel, terminate,
or
modify, any Buyer Material Contract; or
(vi) result
in
the imposition or creation of any material Encumbrance upon or with respect
to
any of the assets owned or used by Buyer.
Buyer
is
not and will not be required to give any notice to or obtain any Consent
from
any Person in connection with the execution and delivery of this Agreement
or
the consummation or performance of any of the Contemplated
Transactions.
(c) Buyer
has
had an opportunity to (i) ask questions of and receive answers from Sellers
and
the Company concerning the terms and conditions of the Contemplated
Transactions, (ii) obtain any additional information which Sellers of the
Company possesses or can acquire without unreasonable effort or expense that
is
necessary to verify the accuracy of the information furnished, and (iii)
consult
and seek advice from an attorney of Buyer’s own choosing prior to entering into
this Agreement. Buyer acknowledges that, except as set forth herein, no
representations or warranties have been made to it, or to its Representatives,
by any Seller or the Company or others with respect to the Company’s business
and its financial condition and has obtained, in its judgment, sufficient
information from Sellers and the Company to evaluate the merits and risks
of the
Contemplated Transactions. Buyer is aware of the risks inherent in the purchase
of the Shares and acknowledges that there can be no assurance of the future
viability or profitability of the Company, nor can there be any assurance
relating to the current or future value of the Shares. The foregoing; however,
does not limit or modify the representations and warranties of Sellers and
the
Company in Section
3
of this
Agreement or the right of Buyer to rely thereon.
4.3 INVESTMENT
INTENT.
Buyer
is acquiring the Shares for its own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities Act. Buyer
has had an opportunity to ask questions of and receive answers from each
Seller
concerning the terms and conditions of the Contemplated Transactions and
to
obtain any additional information, which the Sellers possess or can acquire
without unreasonable effort or expense that is necessary to verify the accuracy
of the information f unshed. The foregoing, however, does not limit or modify
the representations and warranties of the Company in Section 3 of this Agreement
or the right of Buyer to rely thereon.
4.4 CERTAIN
PROCEEDINGS.
There
is no pending Proceeding that has been commenced against Bayer and that
challenges, or may have the effect of preventing, delaying making illegal,
or
otherwise interfering with, any of the Contemplated Transactions. To Buyer’s
Knowledge, no such Proceeding has been Threatened.
4.5 BROKERS
OR FINDERS.
Buyer
and its officers and agents have incurred no obligation or liability, contingent
or otherwise, for brokerage or finders’ fees or agents’ commissions or other
similar payment in connection with this Agreement and will indemnify and
hold
Sellers harmless from any such payment alleged to be due by or through Buyer
as
a result of the action of Buyer or its officers or agents.
4.6 CAPITALIZATION;
BUYER SHARES.
The
authorized equity securities of Buyer consist of 75,000,000 shares of common
stock, par value $0.001 per share, of which 23,637,000 shares are issued
and
outstanding. The Buyer Shares when issued and delivered to Sellers pursuant
to
this Agreement will be duly authorized, validly issued, fully paid and
non-assessable shares of common stock of Buyer Upon delivery of the Buyer
Shares
to the Sellers, the Sellers will receive good title to the Buyer Shares,
free
and clear of all Encumbrances, except for any restrictions existing under
applicable securities laws and the restrictions imposed in this Agreement.
Buyer
has no subsidiaries other than Vemics, Inc, a Delaware corporation, which
is
wholly owned by Buyer.
4.7 FINANCIAL
STATEMENTS.
Buyer
has delivered to the Company the bran sited consolidated balance sheet of
Buyer
as at June 30, 2006, and the related unaudited consolidated statements of
income, changes in stockholders’ equity, and cash flow for each of the fiscal
year then ended (the “Buyer
Financial Statements”):
The
Buyer Financial Statements and notes fairly present the financial condition
and
the results of operations, changes in stockholders’ equity, and cash flow of
Buyer as at such date of and for the period referred to in therein, and reflect
the consistent application of sound accounting principles throughout the
periods
involved, except as disclosed in the notes to the Buyer Financial
Statements.
4.8 BOOKS
AND RECORDS.
The
books of account, minute books, stock record books, and other records of
Buyer,
all of which have been made available to Buyer, are complete and correct
and
have been maintained in accordance with sound business practices and the
requirements of Section 13(b)(2) of the Exchange Act (regardless of whether
or
not Buyer is subject to that Section), including the maintenance of an adequate
system of internal controls. The minute books of Buyer contain materially
accurate and complete records of all meetings held of, and corporate action
taken by, the stockholders, the Board of Directors, and committees of the
Board
of Directors of Buyer, and no meeting of any such stockholders, Board of
Directors, or committee has been held for which minutes have not been prepared
and are not contained in such minute books.
4.9 TAXES.
Buyer
has filed or caused to be filed (on a timely basis since inception) all Tax
Returns that are or were required to be filed by or with respect to Buyer,
either separately or as a member of a group of corporations, pursuant to
applicable Legal Requirements. Buyer has delivered or made available to Sellers
copies of, and Section
4.9
of
Buyer’s Disclosure Schedule contains a complete and accurate list of; all such
Tax Returns filed since inception. Buyer has paid, or made provision for
the
payment of; all Taxes that have or may have become due pursuant to those
Tax
Returns or otherwise, or pursuant to any assessment received by Buyer, except
such Taxes, if any, as are listed in Schedule
4.9
of
Buyer’s Disclosure Schedule and are being contested in good faith and as to
which adequate reserves (determined in accordance with GAAP) have been provided
in Buyer’s Financial Statements.
4.10 DISCLOSURE.
No
representation or warranty of Buyer in this Agreement, and no statement in
the
Buyer’s Disclosure Schedule applicable to Buyer, omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
4.11 ENCUMBRANCES.
All
material properties and assets of Buyer are free and clear of all Encumbrances
except for (i) Encumbrances reflected in the Buyer’s Financial Statements, (ii)
Encumbrances incurred in the Ordinary Course of Business since the date of
the
Buyer’s Financial Statements, and (iii) Permitted Encumbrances.
4.12 NO
MATERIAL ADVERSE CHANGE.
Since
the date of the Buyer Financial Statements, there has not been any material
adverse change in the business, operations, properties, prospects, assets,
or
condition of Buyer, and, to the Knowledge of Buyer, no event has occurred
or
circumstance exists that may result in such a material adverse
change.
4.13 EMPLOYEE
BENEITS.
(a) Schedule
4.13 (a)
of the
Buyer’s Disclosure Schedule contains a complete and accurate list of all Buyer
Plans and Buyer Other Benefit Obligations.
(b) Buyer
has
delivered or made available to Sellers: (i) all documents that set forth
the
terms of each Buyer Plan and Buyer Other Benefit Obligation; (ii) all personnel,
payroll, and employment manuals and policies; (iii) all contracts with third
party administrators, actuaries, investment managers, consultants, and other
independent contractors that relate to any Buyer Plan or Buyer Other Benefit
Obligation; (iv) all reports submitted within the four years preceding the
date
of this Agreement by third party administrators, actuaries, investment managers,
consultants, or other independent contractors with respect to any Buyer Plan
or
Buyer Other Benefit Obligation; (v) all notices that were given by Buyer
to any
Governmental Body or any entreat or former employee, participant or beneficiary,
pursuant to statute, within the four years preceding the date of this Agreement;
and (vi) all notices that were given by any Governmental Body to Buyer within
the four years preceding the data of this Agreement.
(c) Except
as
set forth in Schedule
4.13(c)
of
Buyer’s Disclosure Schedule: (i) Buyer has performed all of its obligations
under all Buyer Plans and Buyer Other Benefit Obligations, including making
all
required contributions or payments with respect to any Buyer Plans and Buyer
Other Benefit Obligations; (ii) the Company, with respect to all Buyer Plans
and
Buyer Other Benefits Obligations, is, and each Buyer Plan and Buyer Other
Benefit Obligation is, in full compliance with all applicable Legal
Requirements; (iii) the Company has made appropriate entries in its financial
records and statements for all obligations and liabilities under such Buyer
Plans and Buyer Other Benefit Obligations that have accrued but are not due
to
be paid in cash Buyer has no obligations to any person or Governmental Body
with
respect to any Buyer Plans or Buyer Other Benefit Obligations, except as
set
forth on the Buyer’s Financial Statements; (iv) all filings required by any
applicable Legal Requirement as to each Buyer Plan and Buyer Other Benefit
Obligation has been timely filed, and all notices and disclosures to
participants required by any Governmental Body have been timely provided;
(v)
Buyer has the right to modify and terminate each Buyer Plan and Buyer Other
Benefit Obligation; and (vi) the consummation of the Contemplated Transactions
will not result in the payment, vesting, or acceleration of any benefit or
amount due under any Buyer Plan and Buyer Other Benefit Obligation or
otherwise.
4.14 COMPLIANCE
WITH LEGAL REOUJREMENTS; GOVERNMENTAL AUTHORIZATIONS.
Except
as set forth on Section 4.14 of Buyer’s Disclosure Schedule:
(a) Buyer
is,
and at all times since inception has been, in full compliance with each material
Legal Requirement that is applicable to it;
(b) no
event
has occurred or circumstance exists that (with or without notice or lapse
of
time) may constitute or result in a violation by Buyer of, or a failure on
the
part of Buyer to comply with, any material Legal Requirement; and
(c) Buyer
has
not received, at any time since inception, any written notice from any
Governmental Body or any other Person regarding any actual or alleged violation
of; or failure to comply with, any Legal Requirement.
4.15 LEGAL
PROCEEDINGS: ORDERS.
(a) Except
as
set forth on Section
4.15(a)
of
Buyer’s Disclosure Schedule, there is no pending Proceeding:
(i) that
has
been commenced by or against Buyer, or
(ii) that
challenges, or that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the Contemplated
Transactions.
To
the
Knowledge of Buyer, (1) no such Proceeding has been Threatened, and (2) no
event
has occurred or circumstance exists that may give rise to or serve as a basis
for the commencement of any such Proceeding.
(b) Except
as
set forth on Section
4.15(b)
of
Buyer’s Disclosure Schedule, there is no Order to which Buyer; or any of the
assets owned or used by Buyer, is subject.
4.16 ABSENCE
OF CERTAIN CHANGES AND EVENTS.
Since
the date of the Buyer Financial Statements, Buyer has conducted its business
only in the Ordinary Course of Business and there has not been any:
(a) change
in
Buyer’s authorized or issued capital stock; grant of any stock option or right
to purchase shares of capital stock of Buyer, issuance of any security
convertible into such capital stock; grant of any registration rights; purchase,
redemption, retirement, or other acquisition by Buyer of any shares of any
such
capital stock; or declaration or payment of any dividend or other distribution
or payment in respect of shares of capital stock, except as set forth on
Section
4.16(a)
of
Buyer’s Disclosure Schedule;
(b) amendment
to the Organizational Documents of Buyer;
(c) payment
or increase by Buyer of any bonuses, salaries, or other compensation to any
stockholder, director, officer, or employee (except in the Ordinary Course
of
Business) or entry into any employment, severance, or similar Contract with
any
director, officer, or employee;
(d) adoption
of; or increase in the payments to or benefits under, any profit sharing,
bonus,
deferred compensation, savings, insurance, pension, retirement, or other
employee benefit plan for or with any employees of Buyer;
(e) damage
to
or destruction or loss of any asset or property of Buyer, whether or not
covered
by insurance, that would have a Material Adverse Effect on Buyer;
(f) entry
into, termination of, or receipt of notice of termination of (i) any license,
distributorship, dealer, sales representative, joint venture, credit, or
similar
agreement, or (ii) any Contract or transaction involving a total remaining
commitment by or to Buyer of at least $25,000;
(g) sale,
lease (other than sales or leases of inventory in the Ordinary Course of
Business), or other disposition of any asset or property of Buyer or any
Encumbrance on any material asset or property of Buyer, other than Permitted
Encumbrances;
(h) cancellation
or waiver of any claims or rights with a value to Buyer in
excess
of
$25,000;
(i) material
change in the accounting methods used by Buyer; or
(j) agreement,
whether oral or written, by Buyer to do any of the foregoing.
4.17 CONTRACTS;
NO DEFAULTS.
(a)
Section
4.17(a)
of
Buyer’s Disclosure Schedule contains a complete and accurate list, and Buyer has
delivered or made available to Sellers true and complete copies, of (each,
a
“Buyer
Material Contract”):
(i) each
Applicable Contract that involves performance of services or delivery of
goods
or materials by or to Buyer, or that was not entered into in the Ordinary
Course
of Business, of an amount or value in excess of $75,000;
(ii) each
Applicable Contract affecting the ownership of, leasing of, title to, use
of or
any leasehold or other interest in, any real or personal property (except
personal property leases and installment and conditional sales agreements
having
a value per item or aggregate payments of less than $50,000 and with terms
of
less than one year);
(iii) each
licensing agreement or other Applicable Contract with respect to patents,
trademarks, copyrights, or other intellectual property, including agreements
with current or former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Buyer Intellectual Property
Assets;
(iv) each
collective bargaining agreement and other Applicable Contract to or with
any
labor union or other employee representative of a group of
employees;
(v) each
joint venture, partnership, and other Applicable Contract (however named)
involving a sharing of profits, losses, costs, or liabilities by Buyer with
any
other Person;
(vi) each
Applicable Contract containing covenants that in any way purport to restrict
the
business activity of Buyer or limit the freedom of Buyer to engage in any
line
of business or to compete with any Person;
(vii) each
written warranty, guaranty, and or other similar undertaking with respect
to
contractual performance extended by Buyer other than in the Ordinary Course
of
Business; and
(viii) each
written amendment, supplement, and modification in respect of any of the
foregoing.
(b) Except
as
set forth in Section
4.17(b)
of
Buyer’s Disclosure Schedule:
(i) Buyer
(and no Related Person of Buyer) has not or may not acquire any rights under,
and Buyer has not or may not become subject to any obligation or liability
under; any Contract that relates to the business of, or any of the assets
owned
or used by, Buyer; and
(ii) to
the
Knowledge of Buyer, no officer, director, agent, employee, consultant, or
contractor of Buyer is bound by any Contract that purports to limit the ability
of such officer, director, agent, employee, consultant, or contractor to
(A)
engage in or continue any conduct, activity, or practice relating to the
business of Buyer, or (B) assign to Buyer or to any other Person any rights
to
any invention, improvement, or discovery.
(c) To
the
Knowledge of Buyer, each Buyer Material Contract is in full force and effect
and
is valid and enforceable in accordance with its terms.
(d) To
the
Knowledge of Buyer:
(i) Buyer
is,
and at all times since July 17, 2001 has been, in fail compliance with all
applicable material terms and requirements of each Buyer Material
Contract;
(ii) each
other Person that has or had any obligation or liability under any Buyer
Material Contract under which Buyer has or had any rights is, and at all
times
since inception has been, in full compliance with all material applicable
terms
and requirements of such Buyer Material Contract; and
(iii) no
event
has occurred or circumstance exists that (with or without notice or lapse
of
time) may result in a violation or breach of any Buyer Material
Contract.
4.18
INSURANCE.
(a) Buyer
has
delivered or made available Sellers true and complete copies of all policies
of
insurance to which Buyer is a party or under which Buyer, or any director
of the
Company, is or has been covered at any time within the two (2) years preceding
the date of this Agreement.
(b) Section
4.18(b)
of
Buyer’s Disclosure Schedule describes any self-
insurance
arrangement by or affecting Buyer, including any reserves established
thereunder.
(c) To
the
Knowledge of Buyer all policies to which Buyer is a party or that provide
coverage to Buyer, or any director or officer of Buyer:
(A)
are
valid, outstanding, and enforceable; and
(B)
taken
together, provide adequate insurance coverage for the assets and the operations
of Buyer for all risks to which Buyer is normally exposed.
4.19 ENVIRONMENTAL
MATTERS.
Buyer,
the operation of its business and any real property that Buyer owns or has
owned, leased or has leased (the “Buyer
Premises”)
are,
to the Knowledge of Buyer, in compliance with all applicable Environmental
Laws
and orders or directives of any governmental authorities having jurisdiction
under such Environmental Laws. Buyer has not received any written citation,
directive, letter or other communication, or any notice of any proceeding,
claim
or lawsuit, from any person arising out of the ownership or occupation of
the
Buyer Premises, or the conduct of its operations, and Buyer is not aware
of any
basis therefor. To the Knowledge of Buyer, no material expenditures are or
will
be required in order to comply with any Environmental Laws.
4.20 EMPLOYEES.
(a) Section
4.20
of the
Buyer’s Disclosure Schedule contains a complete and accurate list of the
following information for each employee or director of Buyer, including each
employee on leave of absence or layoff status: employer; name; job title;
current compensation paid or payable; vacation accrued; and service credited
for
purposes of vesting and eligibility to participate under Buyer Plan or Buyer
Other Benefit Obligation.
(b) To
the
Knowledge of Buyer, no employee or director of Buyer is a party to, or is
otherwise bound by, any Proprietary Rights Agreement between such employee
or
director and any other Person that in any way adversely affects or will affect
(i) the performance of his duties as an employee or director of Buyer, or
(ii)
the ability of Buyer to conduct its business, including any Proprietary Rights
Agreement with Buyer by any such employee or director. To the Knowledge of
Buyer, no director; officer, or other key employee of Buyer intends to terminate
his employment with Buyer.
4.21 LABOR
RELATIONS; COMPLIANCE.
Buyer
is not a party to any collective bargaining or other labor Contract. Buyer
has
complied in all respects with all material Legal Requirements 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 Buyer, Buyer is not liable for the payment of any compensation,
damages, taxes, fines, penalties, or other amounts, however designated, for
failure to comply with any of the foregoing Legal Requirements.
4.22 INTELLECTUAL
PROPERTY.
(a) The
term
“Buyer
Intellectual Property Assets”
includes:
(i) the
name
“Vemics”, all fictional business names, trading names, registered and
unregistered trademarks, service marks, and applications (collectively,
“Buyer
Marks”);
(ii) all
patents, patent applications, and inventions and discoveries that may be
patentable (collectively, “Buyer
Patents”);
(iii) all
copyrights in both published works and unpublished works (collectively,
“Buyer
Copyrights”);
and
(iv)
all
know-how, trade secrets, confidential information, customer lists, software,
technical information, data, process technology, plans, drawings, and blue
prints (collectively, “Buyer
Trade Secrets”);
in
each
case owned, used, or licensed by Buyer as licensee or licensor.
(b) Section
4.22(b)
of the
Buyer’s Disclosure Schedule contains a complete and accurate list and summary
description, including any royalties paid or received by the Company, of
all
Contracts relating to the Buyer Intellectual Property Assets to which Buyer
is a
party or by which Buyer is bound, except for any license implied by the sale
of
a product and perpetual, paid up licenses for commonly available software
programs with a value of less than $1,000 under which Buyer is the licensee.
There are no outstanding and, to the Knowledge of Buyer, no Threatened disputes
or disagreements with respect to any such agreement
(c) Know
How
Necessary for the Business.
(i) The
Buyer
Intellectual Property Assets are all those necessary for the operation of
Buyer’s business as they are currently conducted. Buyer is the owner of all
right, title, and interest in and to each of the Buyer Intellectual Property
Assets, free and clear of all Encumbrances, other than Permitted Encumbrances,
and has the right to use without payment to a third party all of the Buyer
Intellectual Property Assets.
(ii) Except
as
set forth in Section
4.22(b)
of the
Buyer’s Disclosure Schedule, all former and current employees of Buyer have
executed written Contracts with Buyer that assign to Buyer all rights to
any
inventions, improvements, discoveries, or information relating to the business
of Buyer. No employee of Buyer has entered into any Contract that restricts
or
limits in any way the scope or type of work in which the employee may be
engaged
or requires the employee to transfer, assign, or disclose information concerning
his work to anyone other than Buyer.
(d) Buyer
Patents.
(i) Section
4.22(d)
of the
Buyer’s Disclosure Schedule contains a complete and accurate list and summary
description of all filed Buyer Patents. Buyer is the owner of all right,
title,
and interest in and to each of the filed Buyer Patents, free and clear of
all
Encumbrances, other than Permitted Encumbrances.
(ii) All
of
the issued Patents are currently in compliance with all material formal Legal
Requirements (including payment of filing examination, and maintenance fees
and
proofs of working or use), are valid and enforceable, and are not subject
to any
maintenance fees or taxes or actions falling due within ninety days after
the
Closing Date.
(iii) No
Buyer
Patent has been or is now involved in any interference, reissue, reexamination,
or opposition proceeding. To the Knowledge of Buyer, there is no potentially
interfering patent or patent application of any third party.
None
of
the profits manufactured and sold, nor any process or expertise used, by
Buyer
infringes or is alleged to infringe any patent or other proprietary right
of any
other Person.
(e) Buyer
Trademarks.
(i) Section
4.22(f)
of
Buyer’s Disclosure Schedule contains a complete and accurate list and summary
description of all Buyer Marks. Buyer is the owner of all right, title, and
interest in and to each of the Buyer Marks, free and clear of all Encumbrances,
other than Permitted Encumbrances.
(ii) All
Buyer
Marks that have been registered with the United States Patent and Trademark
Office are currently in compliance with all material formal legal requirements
(including the timely post-registration filing of affidavits of use and
incontestability and renewal applications), are valid and enforceable, and
are
not subject to any maintenance fees or taxes or actions falling due within
ninety days after the Closing Date.
(iii) No
Buyer
Xxxx has been or is now involved in any opposition, invalidation, or
cancellation and, to the Knowledge of Buyer, no such action is Threatened
with
the respect to any of the Buyer Marks.
(iv) To
the
Knowledge of Buyer, there is no potentially interfering trademark or trademark
application of any third party.
(v)
None
of
the Buyer Marks used by Buyer infringes or is alleged to infringe any trade
name, trademark, or service xxxx of any third party.
(f) Buyer
Copyrights.
(i) Section
4.22(f)
of the
Buyer’s Disclosure Schedule contains a complete and accurate list and summary
description of all Buyer Copyrights. Buyer is the owner of all right, title,
and
interest in and to each of the Buyer Copyrights, free and clear of all
Encumbrances, other than Permitted Encumbrances.
(ii) All
the
Buyer Copyrights have been registered and are currently in compliance with
material formal legal requirements, are valid and enforceable, and are not
subject to any maintenance fees or taxes or actions falling due within ninety
days after the date of Closing.
(iii) None
of
the subject matter of any of the Buyer Copyrights infringes or is alleged
to
infringe any copyright of any third party or is a derivative work based on
the
work of a third party.
(g) Buyer
Trade Secrets.
(i) With
respect to each Buyer Trade Secret, the documentation relating to such Buyer
Trade Secret is current, accurate, and sufficient in detail and content to
identify and explain it and to allow its full and proper use without reliance
on
the knowledge or memory of any individual.
(ii) Buyer
has
taken all reasonable precautions to protect the secrecy, confidentiality,
and
value of the Buyer Trade Secrets.
(iii) Buyer
has
a right to use the Buyer Trade Secrets. The Buyer Trade Secrets are not part
of
the public knowledge or literature, and, to the Knowledge of Buyer, have
not
been used, divulged, or appropriated either for the benefit of any Person
(other
than Buyer) or to the detriment of Buyer.
4.23 CERTAIN
PAYMENTS.
Since
inception, neither Buyer nor any director, officer, agent, or employee of
Buyer;
or to Knowledge of Buyer, any other Person associated with or acting for
or on
behalf of Buyer, has directly or indirectly, in violation of any Legal
Requirement (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, or (iii) to obtain special concessions or for special -concessions
already obtained, for or in respect of Buyer or any Affiliate of Buyer, or
(b)
established or maintained any fund or asset for such purposes that has not
been
recorded in the books and records of Buyer.
4.24 RELATIONSHIPS
WITH RELATED PERSONS.
Neither
Buyer, nor any Related Person of Buyer, or has had, any interest in any property
(whether real, personal, or mixed and whether tangible or intangible), used
in
or pertaining to Buyer’s business. Neither Buyer, nor any Related Person of
Buyer owns, or has owned (of record or as a beneficial owner) an equity interest
or any other financial or profit interest in, a Person that has (i) had business
dealings or a material financial interest in any transaction with Buyer other
than business dealings or transactions conducted in the Ordinary Course of
Business with Buyer at substantially prevailing market prices and on
substantially prevailing market terms, or (ii) engaged in competition with
Buyer
with respect to any line of the products or services of Buyer in any market
presently served by Buyer. Neither Buyer nor any Related Person of Buyer
is a
party to any Contract with, or has any claim or right against,
Buyer.
5. ADDITIONAL
COVENANTS AND AGREEMENTS.
5.1
BOARD
OF DIRECTORS REPRESENTATION.
The
Board of Directors of Buyer shall initially consist of nine (9) members,
three
(3) of which shall have been designated by Sellers. At such time as the Board
of
Directors of Buyer consists of six (6) or less members, then Sellers shall
be
entitled to designate two (2) members.
5.2 TERMINATION
OF INVESTOR RIGHTS AND SHAREHOLDER AGREEMENT.
The
Company and certain of the Sellers are parties to an Investor Rights and
Shareholder Agreement dated February 28, 2006 (the “Investor
Rights Agreement”).
The
parties to the Investor Rights Agreement hereby agree that the Investor Rights
Agreement shall be terminated simultaneously with the consummation of Closing
hereunder and shall be of no further force or effect.
5.3 TERMINATION
OF FOUNDER’S STOCK RESTRICTION AGREEMENT.
Each of
the Founding Shareholders is a party to a Founder’s Stock Restriction Agreement
with the Company, each dated February 28, 2006 (the “Founders
Agreements”).
The
Company hereby waives its rights of first refusal under each of the Founders
Agreements with respect to the exchange of Shares pursuant to this Agreement.
The parties to each of the Founders Agreements hereby agree that each of
the
Founders Agreements shall be terminated simultaneously with the consummation
of
Closing hereunder, and shall be of no further force or effect.
5.4 RESIGNATION
OF COMPANY DIRECTORS.
Effective upon the consummation of Closing hereunder, Xxxxxx Xxxxxxx and
Xxxxx
Xxxx hereby resign as directors of the Company, and Xxxx Xxxxx and Xxxxx
Xxxxx
are hereby appointed in their place.
5.5
RESIGNATION
OF COMPANY OFFICERS.
Effective upon the consummation of Closing hereunder, Xxxxxx Xxxxxxx, C.
Xxxxxx
Xxxxxxx and Xxxx Xxxxx hereby resign as officers of the Company, and Xxxx
Xxxxx
is hereby appointed as Chairman of the Board of the Company, and Xxxxx Xxxxx
is
hereby appointed as Secretary of the Company.
6. TERMINATION.
This
Agreement may be terminated by the mutual consent of Buyer and the
Sellers.
7. INDEMNIFICATION;
REMEDIES.
7.1 SURVIVAL;
RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE.
All
representations, warranties, covenants, and obligations of the Sellers and
Buyer
in this Agreement, the Disclosure Schedules, and any other certificate or
document delivered pursuant to this Agreement will survive the Closing. All
representations, warranties, covenants, and obligations of the Company in
this
Agreement, the Disclosure Schedule, and any other certificate or document
delivered pursuant to this Agreement will terminate upon the consummation
of
Closing.
7.2
INDEMNIFICATION
AND PAYMENT OF DAMAGES BY SELLERS AND THE COMPANY.
The
Sellers, severally and not jointly, will indemnify and hold harmless Buyer
and
the Company, and their respective Representatives, stockholders, controlling
persons, and affiliates (collectively, the “Buyer
Indemnified Persons”)
for,
and will pay to the Buyer Indemnified Persons the amount of, any loss,
liability, claim, damage (but specifically excluding incidental and
consequential damages), expense (including costs of investigation and defense
and reasonable attorneys’ fees), whether or not involving a third party claim
(collectively, “Damages”),
arising, directly or indirectly, from or in connection with:
(a) any
Breach of any representation or warranty made by Sellers or the Company in
this
Agreement, the Sellers’ Disclosure Schedule, or any other certificate or
document delivered by Sellers or the Company pursuant to this
Agreement;
(b) any
Breach by any Seller or the Company of any covenant or obligation of such
Seller
in this Agreement; or
(c) any
claim
by any Person for brokerage or finder’s fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by any
such
Person with Sellers or the Company (or any Person acting on their behalf)
in
connection with any of the Contemplated Transactions.
7.3 INDEMNIFICATION
AND PAYMENT OF DAMAGES BY BUYER.
Buyer
will indemnify and hold harmless Sellers and each of their respective
Representatives, stockholders, controlling persons, affiliates, heirs,
successors and assigns (collectively, the “Seller
Indemnified Persons”)
for,
and will pay to the Seller Indemnified Persons the amount of any Damages
arising, directly or indirectly, from or in connection with:
(a) any
Breach of any representation or warranty made by Buyer in this Agreement,
the
Buyer’s Disclosure Schedule, or in any other certificate or document delivered
by Buyer pursuant to this Agreement;
(b) any
Breach by Buyer of any covenant or obligation of Buyer in this Agreement;
or
(c)
any
claim
by any Person for brokerage or finder’s fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
Person with Buyer (or any Person acting on its behalf) in connection with
any of
the Contemplated Transactions.
7.4 TIME
LIMITATIONS.
If the
Closing occurs, Sellers will have no liability (for indemnification or
otherwise) with respect to any representation or warranty (other than those
in
Sections
3.3,
3.9,
3.11,
and
3.17),
or
covenant or obligation to be performed and complied with prior to the Closing
Date unless on or before the first anniversary of the Closing Date, Buyer
notifies Sellers of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by Buyer; a claim with respect
to
Sections
3.3,
3.11,
or
3.17
may be
made at any time prior to the third anniversary of the Closing Date, and
a claim
with respect to Sections
3.3
may be
made at any time prior to the sixth anniversary of the Closing Date. If the
Closing occurs, Buyer will have no liability (for indemnification or otherwise)
with respect to any representation or warranty (other than those in Sections
4.6,
4.9,
4.13,
and
4.19),
or
covenant or obligation to be performed and complied with prior to the Closing
Date, unless on or before first anniversary of the Closing Date Sellers notify
Buyer of a claim specifying the factual basis of that claim in reasonable
detail
to the extent then known by Sellers; a claim with respect to Sections
4.9,
4.13,
or
4.19
may be
made at any tune prior to the third anniversary of the Closing Date, and
a claim
with respect to Section
4.6
may be
made at any time prior to the sixth anniversary of the Closing Date.
Notwithstanding anything in this Section
7.4
to the
contrary, any by any party based on fraud may be made at any time prior to
the
expiration of the applicable statute of limitations for fraud.
7.5 LIMITATIONS
ON SELLERS’ LIABILITY.
Sellers
will have no liability (for indemnification or otherwise) with respect to
the
matters described in clause (a), clause (b) and clause (c) of Section
7.2
until
the total of all Damages with respect to such matters exceeds $50,000, and
then
only for the amount by which such Damages exceed $ 50,000. However, first
sentence of this Section
7.5
will not
apply to any intentional Breach by Sellers or the Company of any covenant
or
obligation or to the breach of Section
3.3,
whether
intentional or not. The liability of each of Seller pursuant to Section
7.2,
shall
be limited to an amount equal to ten percent (10%) of the aggregate value
of the
Buyer’s Shares (based on the Vemics Stock Price) received by such Seller under
this Agreement, provided, however; that any liability arising out of fraud
of
any Seller shall be limited to the aggregate value of the Buyer’s Shares (based
on the Vemics Stock Price) received by such Seller under this Agreement.
Further, in the event of a breach by a Seller of a representation or warranty
of
such Seller set forth in Sections
3.2(a),
3.3(b),
3.l5(b)(i)
and/or
3.24
(a
“Seller
Breach”),
only
the Seller responsible for such Seller Breach shall be liable for any Damages
sustained or incurred as a result of such Seller Breach and the Buyer, on
behalf
of itself; its affiliates, Related Persons and all Buyer Indemnified Persons,
covenants and agrees not to seek any Damages or personal money judgment against
any Seller other than the Seller responsible for such Seller Breach for Damages
sustained or incurred by any Buyer Indemnified Party arising out of or in
connection with such Seller Breach. In addition, Buyer’s recourse against any
Seller for Damages shall be limited to the Buyer’s Shares received by such
Seller hereunder or, with respect to any of the Buyer’s Shares that are
subsequently sold, exchanged or otherwise disposed of by such Seller, the
proceeds from such sale, exchange or other disposition.
7.6 LIMITATIONS
ON BUYER’S LIABILITY.
Buyer
will have no liability (for indemnification or otherwise) with respect to
the
matters described in clause (a) or (b) of Section
7.3
until
the total of all Damages with respect to such matters exceeds $50,000, and
then
only for the amount by which such Damages exceed $50,000. However, this
Section
7.6
will not
apply to any Breach of any of Buyer’s representations and warranties of which
Buyer had Knowledge at any time prior to the date on which such representation
and warranty is made or any intentional Breach by Buyer of any covenant or
obligation, and Buyer will be liable for all Damages with respect to such
Breaches. The total liability of Buyer pursuant to Section
7.3
shall be
limited to an amount equal to $4,050,000.
7.7 NO
RIGHT OF CONTRIBUTION.
If
Closing occurs, none of the Sellers shall have any right of contribution,
indemnification or other claim against the Company in connection with any
matter
and, effective upon the consummation of Closing, the Sellers hereby release
the
Company from any such claims.
7.8 PROCEDURE
FOR INDEMNIFICATION-THIRD PARTY CLAIMS.
(a) Promptly
after receipt by an indemnified party under Sections
7.2,
or
7.3
of
notice of the commencement of any Proceeding against it, such indemnified
party
will, if a claim is to be made against an indemnifying party under such Section,
give notice to the indemnifying party of the commencement of such claim,
but the
failure to notify the indemnifying party will not relieve the indemnifying
party
of any liability that it may have to any indemnified party, except to the
extent
that the indemnifying party demonstrates that the defense of such action
is
prejudiced by the indemnifying party’s failure to give such notice.
(b) If
any
Proceeding referred to in Section
7.8(a)
is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such Proceeding the indemnifying party will,
unless
the claim involves Taxes, be entitled to participate in such Proceeding and,
to
the extent that it wishes (unless the indemnifying party is also a party
to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate), to assume the defense of such Proceeding
with counsel satisfactory to the indemnified party and, after notice from
the
indemnifying party to the indemnified party of its election to assume the
defense of such Proceeding the indemnifying party will not, as long as it
diligently conduct such defense, be liable to the indemnified party under
this
Section
7
for any
fees of other counsel or any other expenses with respect to the defense of
such
Proceeding in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding. If the indemnifying party
assumes the defense of a Proceeding, (i) no compromise or settlement of such
claims may be effected by the indemnifying party without the indemnified
party’s
consent (which shall not be unreasonably withheld) unless (A) there is no
finding or admission of any violation of Legal Requirements or any violation
of
the rights of any Person and no effect on any other claims that may be made
against the indemnified party, and (B) the sole relief provided is monetary
damages that are paid in fall by the indemnifying party; and (ii) the
indemnified party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given
to an
indemnifying party of the commencement of any Proceeding and the indemnifying
party does not, within ten days after the indemnified party’s notice is given,
give notice to the indemnified party of its election to assume the defense
of
such Proceeding, the indemnified party may, by notice to the indemnifying
party,
assume the exclusive light to defend, compromise, or settle such Proceeding,
but
the indemnifying party will not be bound by any determination made in such
Proceeding or any compromise or settlement effected by the indemnified party
without its consent (which may not be unreasonably withheld).
(c) Notwithstanding
the foregoing, if an indemnified party determines in good faith that there
is a
reasonable probability that a Proceeding may adversely affect it or its
affiliates other than as a result of monetary damages for which it would
be
entitled to indemnification under this Agreement, the indemnified party may,
by
notice to the indemnifying party, assume the exclusive right to defend,
compromise, or settle such Proceeding, but the indemnifying party will not
be
bound by any determination of a Proceeding so defended or any compromise
or
settlement effected without its consent (which may not be unreasonably
withheld).
(d) Sellers
hereby consent to the non-exclusive jurisdiction of any court in which a
Proceeding is brought against any Indemnified Person for purposes of any
claim
that an Indemnified Person may have under this Agreement with respect to
such
Proceeding or the matters alleged therein, and agree that process may be
served
on Sellers with respect to such a claim anywhere in the world.
7.9 PROCEDURE
FOR INDEMNIFICATION-OTHER CLAIMS.
A claim
for indemnification for any matter not involving a third-party claim may
be
asserted by notice to the party from whom indemnification is
sought.
7.10 EXCLUSIVE
REMEDY.
Except
in the event of fraud, if the Closing occurs, the remedies for indemnification
contained in this Section
7
shall be
the exclusive remedies of the parties hereto, and shall be deemed exclusive
of
any other remedy conferred by law or equity upon any party hereto, with respect
to any matter related to or arising out of this Agreement or any of the
Contemplated Transactions.
7.11 MITIGATION.
(a) The
parties shall use reasonable efforts to collect the proceeds of any insurance
which would have the effect of reducing Damages (in which case such proceeds
shall reduce such Damages) and, if indemnification payments shall have been
received by any indemnified person prior to the collection of such proceeds,
such indemnified person shall remit to the indemnifying party, the amount
of
such proceeds (net of the cost of collection thereof) to the extent of
indemnification payments received in respect of such Damages. To the extent
any
Damages of an indemnified person is reduced by receipt of payment (i) under
insurance policies, or (i) from third parties not affiliated with the
indemnified person, such payments (net of the expenses of the recovery thereof)
shall be credited against such Damages.
(b) The
amount of any Damages payable hereunder shall be net of any tax benefit actually
derived (or reasonably expected to be derived) by any indemnified person
on
account of such Damages.
(c) The
indemnifying party shall be subrogated to the indemnified person’s rights of
recovery to the extent of any Damages satisfied by the indemnifying party.
Such
indemnified person shall execute and deliver such instruments and papers
as are
necessary to assign such rights and assist in the exercise thereof.
8. GENERAL
PROVISIONS.
8.1 EXPENSES.
Except
as otherwise expressly provided in this Agreement, Buyer will bear all expenses
incurred by Buyer and the Company in connection with the preparation, execution,
and performance of this Agreement and the Contemplated Transactions, including
all fees and expenses of agents, representatives, counsel, and accountants
up to
an aggregate of $15,000 (but specifically excluding such expenses incurred
by
the Sellers).
8.2 PUBLIC
ANNOUNCEMENTS.
Any
public announcement or similar publicity with respect to this Agreement or
the
Contemplated Transactions will be issued, if at all, at such time and in
such
manner as mutually agreed to by the parties. Unless consented to by the parties
in advance or required by Legal Requirements, prior to the Closing the parties
shall keep this Agreement strictly confidential and may not make any disclosure
of this Agreement to any Person. Sellers and Buyer will consult with each
other
concerning the means by which the Company’s employees, customers, and suppliers
and others having dealings with the Company will be informed of the Contemplated
Transactions, and Buyer will have the right to be present for any such
communication.
8.3 CONFIDENTIALITY.
Between
the date of this Agreement and the Closing Date, Buyer, Sellers and the Company
will maintain in confidence, and will cause the directors, officers, employees,
agents, and advisors of Buyer and the Company to maintain in confidence,
and not
use to the detriment of another party or the Company any written, oral, or
other
information obtained in confidence from another party or the Company in.
connection with this Agreement or the Contemplated Transactions, unless (a)
such
information is already known to such party or to others not bound by a duty
of
confidentiality or such information becomes publicly available through no
fault
of such party, (b) the use of such information is necessary or appropriate
in
making any filing or obtaining any consent or approval required for the
consummation of the Contemplated Transactions, or (c) the famishing or use
of
such information is required by or necessary or appropriate in connection
with
legal proceedings.
8.4 NOTICES.
All
notices, consents, waivers, and other communications under this Agreement
must
be in writing and will be deemed to have been duly given when (a) delivered
by
hand (with written confirmation of receipt), (b) sent by telecopier (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if
sent
by a nationally recognized overnight delivery service (receipt requested),
in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate
by
notice to the other parties):
If
to
Sellers or the Company.
|
NuScribe,
Inc.
|
0000
Xxx
Xxxxx Xxxx
Xxxxx
000
Xxxxxx,
Xxxxx 00000
Attention:
Xxxxxx Xxxxxxx
Facsimile
No.: (000) 000-0000
With
a
copy to (which shall not constitute notice):
Xxxxxxx
Xxxxxx L.L.P.
000
Xxxxxxxx Xxxxxx
Xxxxx
0000
Xxxxxx,
Xxxxx 00000
Attention:
Xxxxxxxx X. Xxxx, Esq.
Facsimile
No.: (000) 000-0000
If
to
Buyer:
000
Xxxxxx Xxxxxxx Xxxxx
Xxxxxx,
Xxx Xxxx 00000
Attention:
Xxxx Xxxxx, Chairman
Facsimile
No.: (000) 000-0000
With
a
copy to (which shall not constitute notice):
Xxxxx
X.
Xxxxxxxxx, Esq.
29
Concordia Center
X.X.
Xxx
0000
Xxxxxx
Xxxxxxxx, XX 00000
Facsimile
No.: (000) 000-0000
8.5 JURISDICTION;
SERVICE OF PROCESS.
Any
action or proceeding seeking to enforce any provision of, or based on any
right
arising out of, this Agreement may be brought against any of the parties
in the
courts of New York, New York, or, if it has or can acquire jurisdiction,
in the
United States District Court for the Southern District of New York, and each
of
the parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection
to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the
world.
8.6 FURTHER
ASSURANCES.
The
parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents,
and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and
the
documents referred to in this Agreement.
8.7 WAIVER.
The
rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising
any
right, power, or privilege under this Agreement or the documents referred
to in
this Agreement will operate as a waiver of such right, power; or privilege,
and
no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege
or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless
in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given;
and
(c) no notice to or demand on one party will be deemed to be a waiver of
any
obligation of such party or of the right of the party giving such notice
or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
8.8 ENTIRE
AGREEMENT AND MODIFICATON.
This
Agreement supersedes all prior agreements between the parties with respect
to
its subject matter (including the Letter of Intent between Buyer and the
Company
dated August ___, 2006) and constitutes (along with the documents referred
to in
this Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may
not
be amended except by a written agreement executed by the party to be charged
with the amendment.
8.9 DISCLOSURE
SCHEDULE.
The
disclosures in Sellers’ and Buyer’s Disclosure Schedules shall be arranged in
sections corresponding to the numbered and lettered sections and subsections
contained in Section
3
or
4
as
applicable, and the disclosures in any section or subsection of Sellers’ and
Buyer’s Disclosure Schedule shall qualify other sections and subsections in
Section
3
or
4,
as
applicable, only to the extent it is readily apparent from a reading of the
disclosure that such disclosure is applicable to such other sections and
subsections.
8.10 ASSIGNMENTS,
SUCCESSORS, AND NO THIRD-PARTY RIGHTS.
Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties, except that Buyer may assign any of its rights
under this Agreement to any Subsidiary of Buyer. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon,
and
inure to the benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to give
any
Person other than the parties to this Agreement and the parties described
in
Section
7,
any
legal or equitable right, remedy, or claim under or with respect to this
Agreement or any provision of this Agreement. This Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the parties
to this Agreement and their successors and assigns.
8.11 SEVERABILITY.
If any
provision of this Agreement is held invalid or unenforceable by any court
of
competent jurisdiction, the other provisions of this Agreement will remain
in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect
to the
extent not held invalid or unenforceable.
8.12 SECTION
HEADINGS, CONSTRUCTION.
The
headings of Sections in this Agreement are provided for convenience only
and
will not affect its construction or interpretation. All references to “Section”
or “Sections” refer to the corresponding Section or Sections of this Agreement.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided,
the
word “including” does not limit the preceding words or terms.
8.13 TIME
OF ESSENCE.
With
regard to all dates and time periods set forth or referred to in this Agreement,
time is of the essence.
8.14 GOVERNING
LAW.
This
Agreement will be governed by the laws of the State of New York without regard
to conflicts of laws principles.
8.15 COUNTERPARTS;
FACSIMILE SIGNATURE.
This
Agreement may be executed in one or more counterparts, each of which will
be
deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement. The exchange
of copies of this Agreement and of signature pages by facsimile transmission
shall constitute effective execution and delivery of this Agreement as to
the
parties and may be used in lieu of the original Agreement for all purposes.
Signatures of the parties transmitted by facsimile shall be deemed to be
their
original signatures for all purposes.
8.16 SELLERS’
REPRESENTATIVE.
(a) Appointment
Authority.
Each of
the Sellers hereby appoints Xxxxxx Xxxxxxx as their representative (the
“Sellers’
Representative”),
as
the attorney-in-fact for and on behalf of each Seller, and the Sellers’
Representative shall be authorized hereby to take any and all actions and
make
any decisions on behalf of the Sellers required or permitted to be taken
by any
of the Sellers under this Agreement or any of the Sellers’ Closing Documents in
connection with the consummation of the Contemplated Transactions, including,
without limitation, the exercise of the power to (i) receive or give any
notice
on behalf of Sellers pursuant to this Agreement or any of the Sellers’ Closing
Documents, (ii) authorize delivery to Sellers of the Holdback Shares and
the
Adjustment Shares, if any, (iii) prepare the Closing Balance Sheet and deliver
the same to Buyer and otherwise represent Sellers in, and control the
disposition of, all matters related thereto, (iv) agree to, negotiate, enter
into settlements and compromises of, and comply with orders of courts with
respect to claims hereunder or under the Sellers’ Closing Documents, (v)
terminate this Agreement pursuant to Section
6,
and
(vi) take all actions necessary in the judgment of the Sellers’ Representative
for the accomplishment of the foregoing and all of the other terms, conditions
and limitations of this Agreement and the Sellers’ Closing Documents. Each of
the Sellers shall be bound by all actions taken by the Sellers’ Representative
in connection with this Agreement and the Sellers’ Closing Documents. Buyer and
the Company shall be entitled to rely on any action or decision of the Sellers’
Representative evidenced by a written document executed by the Sellers’
Representative as the action or decision of each of the Sellers, and Buyer
and
the Company shall be held harmless from and indemnified against any claim
of any
Seller in respect of this Section
8.16.
(b) Acceptance.
The
Seller Representative has executed this Agreement as acknowledgment and
acceptance of the provisions of this Section
8.16.
(c) Each
Seller covenants and agrees that it will not voluntarily revoke the power
of
attorney conferred in this Section
8.16.
(e) The
Sellers’ Representative may resign as the Sellers’ Representative for any reason
and at any time by written notice to the Buyer and each Seller. The Sellers
shall designate another Seller as its successor by a majority of the Pro
Rata
Shares as soon as practicable and shall notify the Buyer in writing of such
designation.
[SIGNATURE
PAGES TO FOLLOW]
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