ASSET PURCHASE AGREEMENT
Exhibit
99.2
This
ASSET PURCHASE AGREEMENT (the “Agreement”) is made and
entered into as of October 31, 2007 by and among Rapid Link
Corporation, a Delaware corporation (the “Buyer”) on
the one hand and Web Breeze Networks, LLC, a California limited liability
company (“WBN”) and Communications Advantage, LLC, a California
limited liability company (“CA” and together with WBN, the
“Seller”).
RECITALS
A. Seller
is engaged in the business of providing bandwidth and communication services
and
related products (the “Business”).
B. The
Boards of Directors, or an equivalent entity, of each of Seller and Buyer
believe it is in the best interests of each company and their respective
equity
holders that Buyer acquire the assets of, and assume certain of the liabilities
of Seller comprising the Business (the
“Acquisition”).
C. Buyer
intends to pay the Seller shares of common stock and cash as outlined below
(“Purchase Price”) and assume certain liabilities in
consideration of the acquisition of all of Seller’s assets, which Purchase Price
shall be paid in accordance with the terms of Section 1 of the
Agreement.
D. Each
of Buyer and Seller executed a binding Letter of Intent on September 5, 2007
to
summarize the general terms of the anticipated Acquisition (“Letter of
Intent”).
E. The
Buyer is a Delaware corporation whose common stock is registered under Section
12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
and is quoted publicly on the OTC Bulletin Board under the symbol
“RPID”.
NOW,
THEREFORE, in consideration of the covenants, promises and representations
set
forth herein, and for other good and valuable consideration, the sufficiency
and
receipt of which are hereby acknowledged, the parties agree as
follows:
ARTICLE
I
THE
ACQUISITION
1.1 Purchase
of Assets.
(a) Purchase
and Sale of Assets. On the terms and subject to the conditions
set forth in this Agreement, Seller will sell, convey, transfer, assign and
deliver to Buyer and Buyer will purchase and acquire from Seller on the Closing
Date (as defined below), all of Seller’s right, title and interest in and to the
assets and properties of Seller relating to the Business (collectively the
“Assets”), including without limitation, the assets
set forth on Schedule 1.1(a).
(b) Assumption
of Liabilities. At the Closing (as defined below), Buyer shall
assume those obligations and liabilities of Seller set forth on Schedule
1.1(b) hereto (collectively, the “Assumed
Liabilities”). Liabilities detailed on Schedule 1.1b do not exceed
$ 65,000, and carry payment terms which have been agreed to by Sellers vendors,
and approved prior to closing by Buyer. At the Closing, and in
conjunction with the assumption of the liabilities and payment terms detailed
on
Schedule 1.1b, Buyer will forgive the Sellers balance at closing due to Buyers
subsidiary, Telenational Communications, Inc., in its entirety for account
#
400240.
(c) No
Other Liabilities Assumed. Other than the Assumed Liabilities,
Buyer shall not assume, nor shall Buyer or any affiliate of Buyer be deemed
to
have assumed or guaranteed, any other liability or obligation of any nature
of
Seller, or claims of such liability or obligation, whether accrued, matured
or
unmatured, liquidated or unliquidated, fixed or contingent, known or unknown
arising out of (i) acts or occurrences related to any of the Assets, prior
to
the Closing Date, or (ii) any other liability or obligation of Seller which
is
not an Assumed Liability (collectively, the “Unassumed
Liabilities”). Seller will remain responsible for all
Unassumed Liabilities.
1.2. Purchase
Price. The aggregate price for the
purchase of the Assets (the “Purchase Price”) shall be
(i) 1,000,000 fully paid and nonassessable shares of Buyer Common Stock (the
“Shares”), subject to adjustment as set forth in
Section 1.3 below, and (ii) $125,000.00 (the “Cash”),
subject to the adjustment as set forth in Section 1.4 below, $75,000 of the
Cash
shall be payable at Closing and $50,000 shall be paid by issuance of a
Promissory Note to the Seller with a maturity date 180 days from the Closing
Date (the “Note”).
1.3 Adjustment
to Shares. Should the value of the
Shares at the time of transfer have a value of less than $100,000 then Buyer
will issue additional stock to Seller such that the total fair market value
at
the time of Closing shall be no less than $100,000, provided that,
notwithstanding the foregoing, in no instance shall Buyer issue more than
1,500,000 shares of common stock. The value of the Shares will be
determined by the closing price of the Buyer’s stock of the day prior to
Closing. No less than 1,000,000 Buyer shares will be issued
regardless of stock price on the day of transfer.
1.4 Adjustment
to Cash. Should the Net Revenues of
Seller for the one month period ending September 30, 2007 fall below $40,000.00,
then the Cash component of the Purchase Price will be decreased
proportionately. For example, if Seller’s Net Revenues for such
period were to be $32,000.00, then the Cash shall be reduced from $125,000
to
$100,000, with the amount at Closing being reduced from $75,000 to $60,000
and
with the Note being reduced from $50,000 to $40,000.
1.5 Earn-Out
Payments
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(i)
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First
Year Earn-Out. Buyer shall pay Seller 30% of the Net
Revenue (as defined below) increase for the 12-month period ending
12
months from the Closing Date (“First Earn-Out
Year”) compared with the Net Revenue for the prior 12
month
period ending on the Closing Date (“First
Earn-out”). The First Earn-out shall be paid to
Seller within 45 days of the period ending 12 months from the Closing
Date; provided that, Net Revenues grow above $240,000
(“Net Revenue” is defined as billed and
collected wireless, dial up, web hosting and VoIP revenues combined,
on
networks built or owned in Xxxxxx and Calaveras counties). If
First Earn-Out Year Net Revenues fall below $300,000 then no
First Earn-Out will be paid. The First Earn-Out will be paid in
cash or, at Seller’s election within five days after the end of the First
Earn-Out Year, in Buyer common stock which will be calculated at
90% of
the closing price quoted on the OTC Bulletin Board (or any other
applicable stock exchange) at the last date of the First Earn-Out
Year.
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2
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(ii)
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Second
Year Earn-Out. Buyer shall pay Seller 30% of the Net
Revenue increase for the 12-month period ending 24 months from
the Closing Date (“Second Earn-Out Year”)
compared with the Net Revenue for the First Earn-Out Year
(“Second Earn-Out”). The Second
Earn-Out shall be paid to Seller within 45 days of the end of the
Second
Earn-Out Year; provided that, Net Revenues for the Second
Earn-Out Year exceed the Net Revenues for the First Earn-Out
Year. If Second Earn-Out Year Net Revenues fall
below $400,000 then no Second Earn-Out will be paid. The Second
Earn-Out shall be paid in cash or, at Seller’s election within five days
after the end of the Second Earn-Out Year, in Buyer common stock
which
will be calculated at 90% of the closing price quoted on the OTC
Bulletin
Board (or any other applicable stock exchange) at the last date
of the
Second Earn-Out Year.
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(iii)
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Third
Year Earn-Out. Buyer shall pay Seller 30% of the Net
Revenue increase for the 12-month period ending 36 months from
the Closing Date (“Third Earn-Out Year”)
compared with the Net Revenue for the Second Earn-Out Year
(“Third Earn-Out”). The Third
Earn-Out shall be paid to Seller within 45 days of the end of the
Third
Earn-Out Year; provided that, Net Revenues for the Third Earn-Out
Year
exceed the Net Revenues for the Second Earn-Out Year.. If
Third Earn-Out Year Net Revenues fall below $600,000
then no Third Earn-Out will be paid. The Third Earn-Out shall
be paid in cash or, at Seller’s election within five days after the end of
the Third Earn-Out Year, in Buyer common stock which will be calculated
at
90% of the closing price quoted on the OTC Bulletin Board (or any
other
applicable stock exchange) at the last date of the Third Earn-Out
Year.
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3
1.6 Allocation
of Purchase Price. Within 45 days
following the Closing Buyer shall prepare and deliver to Seller, subject
to
Seller’s approval, an allocation of the Purchase Price plus any other
consideration properly allocable among the Assets (the
“Allocation”). The parties agree that all
tax returns and reports (including Internal Revenue Service
(“IRS”) Form 8594) and all financial statements shall
be prepared in a manner consistent with (and the parties shall not otherwise
take a position inconsistent with) the Allocation unless required by the
IRS or
state taxing authority. The Allocation shall be prepared in a manner
consistent with Section 1060 of the Internal Revenue Code of 1986, as amended
(the “Code”), and the income tax regulations
promulgated thereunder.
1.7 Transfer
Taxes. Buyer shall pay and promptly
discharge when due the entire amount of any and all sales and use tax
(“Sales Taxes”) imposed or levied by reason of the
sale of the Assets to Buyer. The parties shall cooperate with each
other to the extent reasonable requested and legally permitted to minimize
any
such Sales Taxes.
1.8 Transfer
of Customers.
(a) Transfer
of Customers.
(i) Intent. It
is the intent of parties hereto that Buyer shall acquire all of the Business
and
all of Seller’s backlog, if any, relating to the Assets. Accordingly,
all parties agree to facilitate the transfer of customers of Assets from
Seller
to Buyer following the Closing.
(ii) Purchase
Order Data. Seller shall make available to Buyer, upon request
(A) a list of all outstanding written customer orders, purchase orders and
other
customer commitments from the current customers of the Business (the
“Current Customers”), (B) the names of all Current
Customers, and (C) data regarding Seller’s standard cost of sales for the items
covered by such orders.
(iii) Transfer
of Orders. Prior to the Closing, Seller and Buyer agree to
cooperate with each other in conducting joint contracts with the Current
Customers (as appropriate) for the purpose of attempting to obtain such
customers’ consent to transfer orders from Seller to Buyer (if necessary, or to
issue new orders to Buyer for the same or similar items) and to assign Seller’s
rights and benefits under the contracts included in the Assets to Buyer as
of
the Closing.
(iv)
Assumption of Obligation. To the extent that an order is
transferred or assigned to Buyer or that Buyer accepts a new purchase order
from
a Current Customer, Buyer agrees to assume and perform all obligations
thereunder.
1.9 Non-Assignment
of Certain Items. Notwithstanding
anything to the contrary in this Agreement, to the extent that the assignment
or
license hereunder of any of the Assets shall require the consent of any other
party (or in the event that any of the Assets shall be non-assignable), neither
this Agreement nor any action taken pursuant to its provisions shall constitute
an assignment or license or an agreement to assign or license such Assets
if the
requisite consents are not obtained and such assignment or license or attempted
assignment or license would constitute a material breach or result in the
loss
or diminution thereof; provided, however, that Seller shall, at its own
expense, use reasonable commercial efforts to obtain all third party consents
necessary to assign or license the Assets to Buyer, and Seller hereby consents
to Buyer using such efforts as it deems necessary or appropriate to effect
the
same. In the event that notwithstanding the efforts of Seller and
Buyer all assignments or licenses needed to assign or license the Assets
to
Buyer cannot be provided to Buyer, Seller shall negotiate an alternative
assignment or license as to such Assets so as to afford Buyer, to the extent
practicable, the same or similar benefits and rights as if such assignment
or
license had occurred.
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1.10 Closing. Unless
this Agreement is earlier terminated pursuant to Article VII, the closing
of the
transactions contemplated by this Agreement (the
“Closing”) shall be held at the offices of Buyer at
10:00 a.m. on the date which is two business days following satisfaction
or
waiver of the last of the conditions to Closing as set forth in the Article
IV
hereof, or on such other time and/or date as the parties agree (the actual
date
on which the Closing occurs is referred to herein as the “Closing
Date”).
1.11 Delivery.
(a) At
the Closing:
(i) Buyer
shall deliver to Seller an instrument of assumption of liabilities by which
Buyer shall assume the Assumed Liabilities as of the Closing in the form
attached hereto as Exhibit “B”;
(ii) Seller
shall deliver to Buyer all bills of sale, including the form of Xxxx of Sale
in
the form attached hereby as Exhibit “C”, endorsements, assignments, consents to
assignments to the extent obtained and other instruments and documents as
Buyer
may reasonably request to sell, convey, assign, transfer and deliver to Buyer,
Seller’s title to all the Assets; and
(iii) Seller
and Buyer shall deliver or cause to be delivered to one another such other
instruments and documents necessary or appropriate to evidence the due
execution, delivery and performance of this Agreement.
(b) Within
five days of the Closing, Buyer shall deliver to Seller a certificate or
certificates representing the Shares.
1.12 Allocation
of Consideration between WBN and
CA. WBN and CA shall split the
Purchaser Price at 80% to WBN and 20% to CA, including the Cash and the
Earn-outs.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF SELLER
Except
as
described with reasonable particularity in the Seller Disclosure Schedule
(which
shall cross-reference to the particular section below to which such description
applies) delivered by Seller to Buyer simultaneously with the execution of
this
Agreement (the “Seller Disclosure Schedule”), Seller
represents and warrants, jointly and severally, to Buyer that:
5
2.1 Organization,
Standing and Power. Each of WBN and CA
(each a “Target”) is a limited liability company duly
organized, validly existing and in good standing under the laws of the State
of
California, and has all requisite corporate power and authority to own, operate
and lease its properties and to carry on its business as now being
conducted. Each Target is duly qualified as a foreign corporation and
is in good standing in each jurisdiction in which the failure to so qualify
reasonably would be expected to have a Material Adverse Effect on such
Target. As used in this Agreement, “Material Adverse
Effect” shall mean an individual or cumulative material adverse
change in, or material adverse effect upon, the Assets or the financial
condition of the Business as presently conducted which would materially impair
the value of the Assets; provided, however, that any change, effect or
impact on the condition of the Business or the Assets as a result of any
change
in the general economy of any jurisdiction or in any of the industries that
the
Business serves shall in no event constitute a Material Adverse
Effect. Each Target has made available to Buyer complete and correct
copies of the Articles of Organization and the Operating Agreement of such
Target, as amended to the date hereof.
2.2 Authority. Each
Target has all requisite organizational power and authority to enter into
this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement, the performance by such Target
of its
obligations hereunder and the consummation of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
on the part of such Target, and have been approved by the Board of Directors
or
the equivalent governing body of such Target. No other organizational
proceeding on the part of either Target is necessary to authorize the execution
and delivery of this Agreement by such Target or the performance of such
Target’s obligations hereunder or the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by each Target and constitutes a legal, valid and binding obligation
of such Target enforceable against such Target in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, or other
similar
laws affecting the enforcement of creditors’ rights generally and except that
the availability of equitable remedies is subject to the discretion of the
court
before which any proceeding therefor may be brought. Subject to
satisfaction or waiver of the conditions set forth in Article V the execution
of
this Agreement does not, and the consummation of the transactions contemplated
hereby will not, conflict with or resulting any violation of any statute,
law,
rule, regulation, judgment, order, decree, or ordinance applicable to such
Target, or its properties or assets that, individually or in the aggregate,
reasonably would be expected to have a Material Adverse Effect, or conflict
with
any provision of the Articles of Organization, Operating Agreement or other
similar certificate or agreement of such Target or result in any breach or
default (with or without notice or lapse of time, or both) under, or give
rise
to a right of termination, cancellation or acceleration of any obligation
or to
loss of a material benefit under, or result in the creation of a lien or
encumbrance on any of the properties or assets of such Target pursuant to
any
agreement, contract, note, mortgage, indenture, lease, instrument, permit,
concession, franchise or license to which such Target is a party or by which
such Target or its properties or assets may be bound that would reasonably
be
expected, either individually or in the aggregate, to have a Material Adverse
Effect. No consent, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency,
commission, regulatory authority or other governmental authority or
instrumentality, domestic or foreign (a “Governmental
Entity”), is required by or with respect to such Target in
connection with the execution and delivery of this Agreement or the consummation
by such Target of the transactions contemplated hereby except such consents,
approvals, orders, authorizations, registrations, declarations and filings
as
would not have a Material Adverse Effect on the ability of such Target to
transfer the Assets to Buyer at the Closing.
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2.3 Financial
Statements. Each Target has furnished Buyer with
unaudited financial information concerning the Business as of September 30,
2007
and December 31, 2006 and 2005, including without limitation, a balance sheet
as
of September 30, 2007 and December 31, 2006 and 2005, and a related statement
of
operations, stockholders’ equity and cash flows for the nine-month period and
12-month periods then ended, respectively, including the notes thereto, (the
foregoing financial information is referred to collectively as the
“Financial Information”). The Financial
Information has been prepared in accordance with generally accepted accounting
principles consistently applied (except as may be indicated in the notes
thereto) and fairly present, in all material aspects, the financial position
of
the Business as of the dates thereof and the results of operations for the
periods then ended. There has been no material change in either
Target’s accounting policies during such periods relating to the
Business.
2.4 Compliance
with Law. Each Target has conducted the
Business so as to comply in all material respects with all laws, rules, and
regulations, judgments, decrees or orders of any Governmental Entity applicable
to its operations except where the failure so to comply reasonably would
not be
expected to have a Material Adverse Effect. As of the date hereof,
there are no judgments or orders, injunctions, decrees, stipulations or awards
(whether rendered by a court or administrative agency or by arbitration)
against
such Target with any continuing effect that reasonably would be expected
to have
a Material Adverse Effect. To the knowledge of each Target, there is
no investigation by any Governmental Entity with respect to such Target pending
against such Target which is reasonably likely to have a Material Adverse
Effect
on the Business.
2.5 No
Defaults. To the knowledge of each
Target, each Target is not, nor has it received written notice that it would
be
with the passage of time, (i) in violation of any provision of its Articles
of
Organization or Operating Agreement or (ii) in default or violation of any
term,
condition or provision of (A) any judgment, decree, order, injunction or
stipulation applicable to the Business or (B) any agreement, note, mortgage,
indenture, contract, lease or instrument, permit, concession, franchise or
license to which such Target is a party (with respect to the Business) or
by
which the Business may be bound, in any such case in a manner that reasonably
would be expected to have a Material Adverse Effect.
2.6 Litigation. There
is no action, suit, proceeding, claim or governmental investigation pending
or,
to the knowledge of either Target, threatened, against such Target that
reasonably would be expected to have a Material Adverse Effect. There
is no action, suit, proceeding, claim or governmental investigation pending
against such Target as of the date hereof that in any manner challenges or
seeks
to prevent, enjoin, alter or materially delay any of the transactions
contemplated hereby.
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2.7 Absence
of Certain Changes. Since September 5,
2007, each Target has conducted the Business in the ordinary course and,
except
for the execution, delivery and performance of this Agreement or as required
hereby, there has not occurred: (a) any Material Adverse Effect; (b) any
entry
into any material commitment or transaction by such Target relating to the
Business, other than in the ordinary course of business; (c) any damage,
destruction or loss, whether covered by insurance or not, materially and
adversely affecting the Business; (d) any acquisition or disposition of a
material amount of property or assets of such Target relating to the Business
outside of the ordinary course of business; (e) any transfer or grant by
such
Target of a right under any Target Intellectual Property Rights (as defined
below), other than those transferred or granted in the ordinary course of
business.
2.8 Agreements. With
respect to the Business, neither Target is a party to, nor is the Business
subject to:
(a) Any
union contract or any employment contract or arrangement providing for future
compensation, written or oral, with any officer, consultant, director or
employee which is not cancelable by either Target on 30 days’ notice or less
without penalty or obligation to make payments related to such termination,
other than (A) (in the case of employees other than executive officers of
each
Target) such agreements as are not materially different from standard
arrangements offered to employees generally in the ordinary course of business
consistent with such Target’s past practices and (B) such agreements as may be
imposed or implied by law;
(b) Any
plan, contract, or arrangement, the obligations under which exceed $100,000,
written or oral, providing for bonuses, pensions, deferred compensation,
severance pay or benefits, retirement payments, profit-sharing, or the
like;
(c) As
of the date hereof, any existing OEM agreement, distribution agreement, volume
purchase agreement, or other similar agreement in which the annual amount
paid
or received by either Target during the 12-month period ended September 5,
2007
exceeded $10,000;
(d) Any
lease or month-to-month tenancy for real or personal property in which the
amount of payments which such Target is required to make on an annual basis
exceeds $50,000;
(e) Any
contract containing covenants purporting to limit such Target’s freedom to
compete in any line of business in any geographic area; or
(f) Any
license to a third party involving Target Intellectual Property Rights, source
or binary code which includes a right to sublicense such source or binary
code
without additional payment.
Each
agreement, contract, mortgage, indenture, plan, lease, instrument, permit,
concession, franchise, arrangement, license, and commitment listed in the
Target
Disclosure Schedule pursuant to this Section is valid and binding on each
Target, and is in full force and effect, and such Target has not breached
any
provision of, nor is it in default under the terms of, any such agreement,
contract, mortgage, indenture, plan, lease, instrument, permit, concession,
franchise, arrangement, license or commitment except for such failures to
be
valid and binding or in full force and effect and such breaches or defaults
as
reasonably would not be expected to have a Material Adverse
Effect.
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2.9 Tax
Returns and Reports.
(a) Definition
of Taxes. For the purposes of this Agreement,
“Tax” or “Taxes” refers to
any and all federal, state, local and foreign taxes, assessments and other
governmental charges, duties, impositions and liabilities relating to taxes,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes, together
with all interest, penalties and additions imposed with respect to such amounts
and any obligations under any agreements or arrangements with any other person
with respect to such amounts and including any liability for taxes of a
predecessor entity.
(b) Tax
Returns and Audits. Except as reasonably would not be expected to
have a Material Adverse Effect:
(i) Each
Target has timely filed all federal, state, local and foreign returns,
estimates, information statements and reports
(“Returns”) relating to Taxes required to be filed by
it, except such Returns which are not material to the Business, and has paid
all
Taxes shown to be due on such Returns or is contesting them in good
faith.
(ii) Each
Target has withheld with respect to its employees all federal and state income
taxes, FICA, FUTA and other Taxes required to be withheld.
(iii) Each
Target has not been delinquent in the payment of any Tax nor is there any
Tax
deficiency outstanding, proposed or assessed against either Target, nor has
either Target executed any waiver of any statute of limitations on or extending
the period for the assessment or collection of any Tax.
(iv) No
audit or other examination of any Return of each Target is presently in
progress, nor has either Target been notified of any request for such an
audit
or other examination.
(v) None
of the Assets are treated as “tax-exempt use property” within the meaning of
Section 168(h) of the Code.
(vi) Each
Target is not, and has not been at any time, a “United States real property
holding corporation” within the meaning of Section 897(c)(2) of the
Code.
2.10 Technology. To
the knowledge of each Target, as of the date hereof, both Targets collectively
own, co-own or is licensed or otherwise entitled to use rights to all patents,
trademarks, trade names, service marks, copyrights, mask work rights, trade
secret rights, and other intellectual property rights and any applications
therefor, and all mask works, net lists, schematics, technology, source code,
know-how, computer software programs and all other tangible information or
material, that are used in the Business as currently conducted (the
“Target Intellectual Property Rights”). The
Target Disclosure Schedule lists, as of the date hereof, (i) all patents,
registered copyrights, trademarks, service marks, mask work rights, and any
applications therefor, included in the Target Intellectual Property Rights;
(ii)
the jurisdictions in which each such Target Intellectual Property Right has
been
issued or registered or in which an application for such issuance and
registration has been filed, including the respective registration or
application numbers; and (iii) which, if any, of such products have been
registered for copyright protection with the United States Copyright Office
and
any foreign offices. The Target Disclosure Schedule also sets forth a
list of license agreements which, to each Target’s knowledge, constitutes all
license agreements under which each Target licenses as licensee the intellectual
property rights of third parties relating to technology or software which
is
incorporated in existing products of the Business for which products such
Target
has received revenues in excess of $50,000 in the 12-month period ended
September 30, 2007. To each Target’s knowledge, neither Target is in
material violation of any such license agreement. With respect to the
Business, neither Target is a party to nor is the Business subject to (i)
any
joint venture contract or arrangement or any other agreement that involves
a
sharing of profits with other persons other than the payment or receipt of
royalties by such Target; (ii) any agreement pursuant to which Each Target
was
obligated to make payment of royalties in the 12-month period ended September
30, 2007 of $25,000 or more; or (iii) any agreement pursuant to which either
Target utilizes the intellectual property rights of others in any products
currently marketed by such Target and which is either non-perpetual or
terminable by the licensor thereunder in the event of the Acquisition and
which,
if terminated, reasonably would be expected to have a Material Adverse
Effect. No claims with respect to the Target Intellectual Property
Rights have been communicated in writing to any Target (i) to the effect
that
the manufacture, sale or use of any product of the Business as now used or
offered by either Target infringes on any copyright, patent, trade secret
or
other intellectual property right of a third party or (ii) challenging the
ownership or validity of any of the Target Intellectual Property Rights,
any or
all of which claims reasonably would be expected to have a Material Adverse
Effect. To the knowledge of each Target, as of the date hereof, all
patents and registered trademarks, service marks and registered copyrights
held
by either Target in connection with the Business are valid and subsisting
except
for failures to be valid and subsisting that reasonably would not be expected
to
have a Material Adverse Effect. Neither Target knows of any
unauthorized use, infringement or misappropriation of any of the Target
Intellectual Property Rights by any third party that reasonably would be
expected to have a Material Adverse Effect.
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2.11 Title
to Properties; Absence of Liens and Encumbrances.
(a) The
Target Disclosure Schedule sets forth a list of all real property owned or,
as
of the date hereof, leased by either Target for use in connection with the
Business and the aggregate annual rental or mortgage payment or other fees
payable under any such lease or loan.
(b) The
Targets together have good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of the tangible
properties and assets, real, personal, and mixed, which are material to the
conduct of the Business, free and clear of any liens, charges, pledges, security
interests or other encumbrances, except for such of the foregoing as (A)
are
reflected in the Target Financial Statements, or (B) arise out of taxes or
general or special assessments not in default and payable without penalty
or
interest or the validity of which is being contested in good faith by
appropriate proceedings, or (C) such imperfections of title and encumbrances,
if
any, which are not substantial in character, amount or extent, and which
do not
materially detract from the value, or interfere with the present use, of
the
property subject thereto or affected thereby.
10
2.12 Governmental
Authorizations and Licenses. The
Targets are the holder of all licenses, authorizations, permits, concessions,
certificates and other franchises of any Governmental Entity required to
operate
the Business, the failure to hold which reasonably would be expected to have
a
Material Adverse Effect (collectively, the
“Licenses”). The Licenses are in full force
and effect. There is not now pending, or to the knowledge of either
Target is there threatened, any action, suit, investigation or proceeding
against any Target before any Governmental Entity with respect to the Licenses,
nor is there any issued or outstanding notice, order or complaint with respect
to the violation by either Target of the terms of any License or any rule
or
regulation applicable thereto, except in any such case as reasonably would
not
be expected to have a Material Adverse Effect.
2.13 Environmental
Matters. To both Target’s knowledge,
both Targets have at all relevant times with respect to the Business been
in
material compliance with all environmental laws, and has received no potentially
responsible party notices or functionally equivalent notices from any
governmental agencies or private parties concerning releases or threatened
releases of any “hazardous substance” as that term is defined under 42 U.S.C.
960(1)(14).
2.14 Investment
Intent. The purchase of the Shares,
and, if applicable, the Earn-Out Shares (collectively, the
“Securities”) pursuant to this Agreement is for the
account of each Target for the purpose of investment and not with a view
to or
for sale in connection with any “distribution” thereof within the meaning of the
Securities Act of 1933, as amended (the “Securities
Act”) and the rules and regulations promulgated thereunder, and
that neither Target has any present intention of selling, granting any
participation in, or otherwise distributing the same. By executing
this Agreement, each Target further represents that it does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Securities.
2.15 Reliance
Upon Each Target’s
Representations. Each Target
understands that the Securities are not registered under the Securities Act
on
the ground that the sale provided for in this Agreement and the issuance
of the
Securities hereunder is exempt from registration under the Securities Act
pursuant to Section 4(2) thereof, and that Buyer’s reliance on such exemption is
predicated on each Target’s representations set forth herein. Each
Target realizes that the basis for the exemption may not be present if,
notwithstanding such representations, such Target has in mind merely acquiring
the Securities for a fixed or determinable period in the future, or for a
market
rise, or for sale if the market does not rise. Each Target presently
does not have any such intention.
2.16 Receipt
of Information. Each Target believes it
has received all the information it considers necessary or appropriate for
deciding whether to purchase the Securities. Each Target further
represents that it has had an opportunity to ask questions and receive answers
from Buyer regarding the terms and conditions of the offering of the Securities
and the business, properties, prospects and financial condition of Buyer
and to
obtain additional information (to the extent Buyer possessed such information
or
could acquire it without unreasonable effort or expense) necessary to verify
the
accuracy of any information furnished to it or to which it had
access. The foregoing, however, does not limit or modify the
representations and warranties of the Buyer in Article III of this Agreement
or
the right of each Target to rely thereon.
11
2.17 Restricted
Securities. Each Target understands
that the Securities may not be sold, transferred, or otherwise disposed of
without registration under the Securities Act or an exception there from,
and
that in the absence of an effective registration statement covering the
Securities or an available exemption from registration under the Securities
Act,
the Securities must be held indefinitely. In particular, each Target
is aware that the Securities may not be sold pursuant to Rule 144 promulgated
under the Securities Act unless all of the conditions of that rule are
met.
2.18 Legends. To
the extent applicable each certificate or other document evidencing any of
the
Securities shall be endorsed with the legends set forth below, and such Target
covenants that, except to the extent such restrictions are waived by Buyer,
neither Target shall transfer the securities represented by any such certificate
without complying with the restrictions on transfer described in the legends
endorsed on such certificate:
|
(a)
|
The
following legend under the Securities
Act
|
“THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT
OF 1993, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED,
OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR
COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS THE COMPANY
HAS
RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL
THAT
SUCH REGISTRATION IS NOT REQUIRED.”
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF BUYER
Except
as
described with reasonable particularity in the Buyer Disclosure Schedule
(which
shall cross reference to the particular section below to which such description
applies) delivered by Buyer to Seller simultaneously with this Agreement
(the
“Buyer Disclosure Schedule”), and except as disclosed
in Buyer’s SEC Documents (as defined below), Buyer represents and warrants to
Seller that
3.1 Organization,
Standing and Power. Buyer is a
corporation duly organized, validly existing and in good standing under the
laws
of the State of Delaware, and has all requisite corporate power and authority
to
own, operate and lease its properties and to carry on its business as now
being
conducted. Buyer is duly qualified as a foreign corporation and is in
good standing in each jurisdiction in which the failure to so qualify would
reasonably be expected to have a Material Adverse Effect on
Buyer. Buyer has made available to Seller complete and correct copies
of the Certificate of Incorporation and Bylaws of Buyer, as amended to the
date
hereof.
12
3.2 Authority. Buyer
has all requisite corporate power and authority to enter into this Agreement
and, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement, the performance by Buyer of its
obligations hereunder and the consummation of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
on the part of Buyer, and have been approved by the Board of Directors of
Buyer. No other corporate proceeding on the part of Buyer is
necessary to authorize the execution and deliver of the Agreement by Buyer
or
the performance of Buyer’s obligations hereunder or the consummation of the
transactions contemplated hereby. This Agreement has been duly
executed and delivered by Buyer and constitutes a legal, valid and binding
obligation of Buyer enforceable against Buyer in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, or other
similar
laws affecting the enforcement of creditor’s rights generally and except that
the availability of equitable remedies is subject to the discretion of the
court
before which any preceding therefore may be brought. Subject to
satisfaction or waiver of the condition set forth in Article V, the execution
and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby will not conflict with or result in any
violation of any statute, law, rule, regulation, judgment, order, decree,
or
ordinance applicable to Buyer or its properties or assets that individually
or
in the aggregate, reasonably would be expected to have a Material Adverse
Effect
on Buyer, or conflict with any provision of the Certificate of Incorporation
or
Bylaws of Buyer or result in any breach or default (with or without notice
or
lapse of time, or both) under, or give rise to a right of termination,
cancellation, or acceleration of any obligation or to loss of a material
benefit
under, or result in the creation of a lien or encumbrance on any of the
properties or assets of Buyer pursuant to any agreement, contract, note,
mortgage, indenture, lease, instrument, permit, concession, franchise or
license
to which Buyer is a party or by which Buyer or its properties or assets may
be
bound that would reasonably be expected to have a Material Adverse Effect
on
Buyer. No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity is required
by
or with respect to Buyer in connection with the execution and delivery of
this
Agreement or the consummation by Buyer of the transactions contemplated hereby,
except for (i) filings following the Closing under federal and state securities
laws relating to issuance of the Securities; and (ii) such concerns, approvals,
adverse effect on the ability of Buyer to issue the Securities to Seller
and
assume the Assumed Liabilities at the Closing.
3.3 Capitalization. The
authorized capital stock of Buyer consists of 175,000,000 shares of Common
Stock
and 10,000,000 shares of preferred stock, $0.001 par value
(“Preferred Stock”), of which there were issued and
outstanding as of the close of business on July 31, 2007, 52,161,544 shares
of
Common Stock and 0 shares of Preferred Stock. There are no other
outstanding shares of capital stock or voting securities of Buyer other than
shares of Common Stock issued after July 31, 2007 upon the exercise of options
issued under the Buyer’s 2002 Stock Option Plan (the “Buyer Stock
Option Plan”). All outstanding shares of the Common
Stock of Buyer have been duly authorized, validly issued, fully paid and
are
non-assessable and free of any liens or encumbrances other than any liens
or
encumbrances created by or imposed upon the holders thereof. As of
the close of business on July 31, 2007, Buyer has reserved 4,000,000 shares
of
Common Stock for issuance to employees, directors and independent contractors
pursuant to the Buyer Stock Option Plan, of which 855,000 shares are subject
to
outstanding, unexercised options. Other than this Agreement, there
are no other options, warrants, calls, rights, commitments or agreements
of any
character to which Buyer is a party or by which it is bound obligating Buyer
to
issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold, repurchased or redeemed, any shares of the capital stock of Buyer,
or
obligating Buyer to grant, extend or enter into any such option, warrant,
call,
right, commitment or agreement. The shares of Buyer Common Stock to
be issued pursuant to this Agreement will be duly authorized, validly issued,
fully paid and non-assessable.
13
3.4 SEC
Documents; Buyer Financial
Statements. Buyer has made available to
Seller a true and complete copy of each statement, annual, quarterly and
other
report, and definitive proxy statement filed by Buyer with the SEC since
January
1, 2004 (the “Buyer SEC Documents”), which are all the
documents (other than preliminary material) that Buyer was required to file
with
the SEC since such date. As of their respective filing dates, the
Buyer SEC Documents complied in all material respects with the requirements
of
the Securities Exchange Act of 1934 (the “Exchange
Act”) or the Securities Act, as the case may be, and none of the
Buyer SEC Documents contained any untrue statement of a material fact or
omitted
to state a material fact required to be stated therein or necessary to make
the
statements made therein, in light of the circumstances in which they were
made,
not misleading. The financial statements of Buyer included in the
Buyer SEC Documents (the “Buyer Financial Statements”)
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles (except as may be indicated in the notes therein or,
in
the case of unaudited statements, as permitted by Form 10-QSB of the SEC)
and
fairly present the consolidated financial position of Buyer and its consolidated
subsidiaries at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case
of
unaudited statements, to normal, recurring audit adjustments). Since
September 15, 2007, there has been no material change in Buyer’s accounting
policies except as described in the notes to Buyer’s Financial
Statements.
3.5 Compliance
with Law. Buyer has conducted its
business so as to comply in all material respects with all laws, rules, and
regulations, judgments, decrees or orders of any Governmental Entity applicable
to its operations except where the failure so to comply reasonably would
not be
expected to have a Material Adverse Effect on Buyer. As of the date
hereof, there are no judgments or orders, injunctions, decrees, stipulations
or
awards (whether rendered by a court or administrative agency or by arbitration)
against Buyer with any continuing effect that reasonably would be expected
to
have a Material Adverse Effect on Buyer. To the knowledge of Buyer,
there is no investigation by any Governmental Entity with respect to Buyer
pending against Buyer which is reasonably likely to have a Material Adverse
Effect on Buyer.
3.6 No
Defaults. To the knowledge of the
Buyer, Buyer is not nor has received written notice that it would be with
the
passage of time, (i) in violation of any provision of its Certificate of
Incorporation or Bylaws or (ii) in default or violation of any term, condition
or provision of (A) any judgment, decree, order, injunction or stipulation
applicable to Buyer or (B) any agreement, note, mortgage, indenture, contract,
lease or instrument, permit, concession, franchise or license to which Buyer
is
a party or by which Buyer may be bound, in any such case in a manner that
reasonably would be expected to have a Material Adverse Effect on
Buyer.
14
3.7 Litigation. Except
as set forth in Schedule 3.7, there is no action, suit, proceeding, claim
or governmental investigation pending or, to the knowledge of the Buyer,
threatened, against Buyer which reasonably would be expected to have, a Material
Adverse Effect on Buyer. There is no action, suit, proceeding, claim
or governmental investigation pending against Buyer as of the date hereof
which
in any manner challenges or seeks to prevent, enjoin, alter or materially
delay
any of the transactions contemplated hereby.
3.8 Status
of Securities. When issued to Seller at
the Closing, the Securities will be duly authorized, validly issued, fully
paid
and non-assessable, free and clear of any and all liens and encumbrances
of any
kind, except as may be imposed by Seller.
3.9 No
Implied Representations. It is the
explicit intent of each party hereto that Buyer is not making any representation
or warranty whatsoever, express or implied, except those representations
and
warranties of Buyer contained in this Agreement or in the Buyer Disclosure
Schedule.
ARTICLE
IV
CERTAIN
COVENANTS
4.1 Conduct
of Business of Seller. During the
period from the date of this Agreement and continuing until the earlier of
the
termination of this Agreement and the Closing Date, Seller agrees (except
to the
extent that Buyer shall otherwise consent in writing), to carry on the Business
in the usual, regular and ordinary course in substantially the same manner
as
heretofore conducted, including sales of products and services in a manner
and
on terms consistent with past practices, to pay or perform other obligations
when due and use all reasonable efforts consistent with past practice and
policies to preserve intact the Business, keep available the services of
its
present officers and key employees and preserve their relationships with
customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it, all with the goal of preserving unimpaired the
Business at the Closing Date. Except as contemplated by this
Agreement, Seller shall not, with respect to the Business, without the prior
written consent of Buyer (which shall be given, or reasonably withheld, within
one business day after receipt of written request therefor) (a) enter into
any
commitment or transaction not in the ordinary course of business, or (b)
enter
into any strategic alliance or joint marketing arrangement or
agreement.
4.2 No
Solicitation. Until the earlier to
occur of (i) the Closing Date and (ii) the date of termination of the Agreement
pursuant to its terms, as the case may be, Seller will not (nor will Seller
permit any of Seller’s officers, directors, agents, representatives or
affiliates to) directly or indirectly, take any of the following actions
with
any party other than the Buyer and its designees: solicit, encourage, initiate
or participate in any negotiations or discussions with respect to, any offer
or
proposal to acquire all or any portion of the Business. Until the
earlier to occur of (i) the Closing Date and (ii) the date of termination
of the
Agreement pursuant to its term, as the case may be, and except to the extent
of
the Board of Directors of Buyer believes (after consultation with outside
legal
counsel) it necessary to comply with its fiduciary duties, Buyer will not
(nor
will Buyer permit any of Buyer’s officers, directors, agents, representatives or
affiliates to) directly or indirectly, take any of the following actions
with
any party other than the Seller and its designees: solicit, encourage, initiate
or participate in any negotiations or discussions with respect to, any offer
or
proposal to acquire all or any portion of the business of
Buyer.
15
4.3 Access
to Information. Seller and Buyer shall
each afford the other and its accountants, counsel and other representatives,
reasonable access during normal business hours during the period prior to
the
Closing Date to (a) all of its properties, books, contracts, commitments
and
records, and (b) all other information concerning the business, properties
and
personnel (subject to restrictions imposed by applicable law) of it as the
other
may reasonably request.
4.4 Confidentiality. Each
of the parties hereto hereby agrees to keep such information or knowledge
obtained in any investigation pursuant to Section 4.3 confidential; provided,
however, that the forgoing shall not apply to information or knowledge which
(a)
a party can demonstrate was already lawfully in its possession prior to the
disclosure thereof by the other party, (b) is generally known to the public
and
did not become so known through any violation of law or this Agreement, (c)
became known to the public through no fault of such party, (d) is later lawfully
acquired by such party from other sources, (e) is required to be disclosed
by
order of court or government agency with subpoena powers or (f) which is
disclosed in the course of any litigation between any of the parties
hereto.
4.5 Expenses. Whether
or not the Acquisition is consummated, all fees and expenses incurred in
connection with the Acquisition including without limitation, all legal,
accounting, financial advisory, consulting and all other fees and expenses
of
third parties (“Third Party Expenses”) incurred by a
party in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated thereby, shall
be
the obligation of the respective party incurring such fees and
expenses.
4.6 Public
Disclosure. Buyer and Seller shall
issue a joint press release with respect to the subject matter of this
Agreement. Buyer shall also file a Current Report on Form 8-K with
the SEC disclosing the execution of this Agreement.
4.7 Consents. Seller
shall use commercially reasonable efforts to obtain all necessary consents,
waivers, and approvals under any of the contracts of the Business as may
be
required in connection with the Acquisition so as to transfer to Buyer all
rights of Seller thereunder as of the Closing.
4.8 Commercially
Reasonable Efforts. Subject to the
terms and conditions provided in this Agreement, each of the parties hereto
shall use its commercially reasonable efforts to take promptly, or cause
to be
taken, all actions, and to do promptly, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations, to
consummate and make effective the transactions contemplated hereby, to obtain
all necessary registrations and filings, and to remove any injunctions or
other
impediments or delays, legal or otherwise, in order to consummate and make
effective the transactions contemplated by this Agreement.
16
4.9 Notification
of Certain Matters. Seller shall give
prompt notice to Buyer, and Buyer shall give notice to Seller, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence
of
which is likely to cause any representation or warranty of Seller or Buyer,
respectively, contained in this Agreement to be untrue or inaccurate on or
prior
to the Closing Date and (ii) any failure of Seller or Buyer, as the case
may be,
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided however that subject to Section
4.10, the delivery of any notice pursuant to this Section shall not limit
or
otherwise affect any remedies available to the party receiving such
notice.
4.10 Additional
Documents and Further Assurances. Each
party hereto, at the request of another party hereto, shall execute and deliver
such other instruments and do and perform such other acts and things as may
be
necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
4.11 Treatment
of Employees of the Business.
(a) Transferred
Employees. The employees of the Seller who shall be transferred to
and become employees of the Buyer are set forth on Schedule 4.11(a) (the
“Transferred Employees”).
(b) Following
the execution and delivery of this Agreement and prior to Closing, the person(s)
responsible for the hiring of Buyer’s personnel and the person(s) responsible
for the hiring of Seller’s personnel shall agree upon an employee benefit
package (the “Benefits Package”) which in their mutual
opinion shall be sufficiently enticing to attract and retain the Transferred
Employees. The Benefits Package shall credit the Transferred
Employees with all years of service accrued by such employee with Seller
or any
predecessor of Seller or the Business. Seller will use reasonable
commercial efforts to assist Buyer to encourage such employees to become
employees of Buyer and to support an orderly and successful
transition. Except as may be agreed between Buyer and Seller in
accordance with the preparation of the Benefits Package, Buyer shall not
be
required to assume any obligations of Seller with respect to liabilities
relating to such employees, including without limitation, obligations for
accrued vacation time, severance arrangements, workers’ compensation or any
liability for any insurance, medical or other welfare benefits. In
addition, all welfare or benefit claims relating to the period prior to midnight
on the Closing Date shall be the responsibility of Seller. Buyer
agrees to have completed all hiring of employees pursuant to this Section
4.11
prior to October 31, 2007. Seller’s employees shall continue to be
employees of Seller through the Closing and through the Closing Seller shall
continue in force all employee benefits and salaries in place as of the date
of
this Agreement, subject to such changes as may occur in the ordinary course
of
Seller’s business. Seller agrees to use its reasonable commercial
efforts to support the transition of the Business to Buyer, including without
limitation, cooperation between Seller’s sales and field service personnel to
help assure an orderly transition of customer accounts.
17
(c) Buyer
shall enter into an employment agreement with Xxxx Xxxxxxx substantially
in the
form attached to the Letter of Intent as Exhibit 2, which Exhibit is hereby
incorporated into this Agreement by reference.
4.12 Tax
Returns. Seller shall be responsible
for and pay when due (i) all of Seller’s Taxes attributable to or levied or
imposed upon the Assets relating or pertaining to the period (or that portion
of
any period) ending on or prior to the Closing Date, except for Sales Taxes,
if
any, which are the responsibility of Buyer pursuant to Section 1.7 hereof,
and
(ii) all Taxes attributable to, levied or imposed upon, or incurred in
connection with the Seller’s business operations, other than the Business,
following the Closing Date.
4.13 Bulk
Sales. Buyer hereby agrees to waive the
requirement, if any, that Seller comply with any bulk transfer law which
may be
applicable to the transactions contemplated by this Agreement; provided,
that
Seller agrees to indemnify and hold harmless Buyer with respect to any
noncompliance with such laws and Buyer’s waiver with respect
thereto.
4.14 Reviewed
Financials. The parties shall work
diligently together to prepare reviewed and audited financial statements
relating to the Assets as may be required for Buyer’s financial reporting
requirements under the federal securities laws. The costs associated
with preparation of any required audited financial statements shall be paid
by
the Seller.
4.15
Covenants. Rapid
Link will commit $300,000 of the $3 million dollars committed to Rapid Link
in
the financing completed by Westside Capital (per publicly filed Form 8K on
June
21, 2007), for the purpose of expansion and revenue growth into the Xxxxxx
and
Calaveras broadband internet markets.
ARTICLE
V
CONDITIONS
TO THE ACQUISITION
5.1 Conditions
to Obligations of Each Party to Effect the
Acquisition. The respective obligations
of each party to this Agreement to effect the Acquisition shall be subject
to
the satisfaction at or prior to the Closing Date of the following
condition:
(a) No
Injunctions or Restraints Illegally. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of
competent jurisdiction or other legal restraint or prohibition preventing
the
consummation of the Acquisition shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the foregoing
be pending, nor shall there be any action taken, or any statue, rule, regulation
or order enacted, entered, enforced or deemed applicable to the Acquisition,
which makes the consummation of the Acquisition illegal.
5.2 Additional
Conditions to Obligations of
Seller. The obligations of Seller to
consummate and effect this Agreement and the transactions contemplated hereby
shall be subject to the satisfaction at or prior to the Closing Date of each
of
the following conditions, any of which may be waived, in writing, exclusively
by
Seller.
18
(a) Representations,
Warranties and Covenants. The representations and warranties of
Buyer in this Agreement shall be true and correct in all material respects
on
and as of the Closing Date as though such representations and warranties
were
made on and as such time and Buyer shall have performed and complied with
all
covenants, obligations and conditions of this Agreement required to be preformed
and complied with by it in all material respects as of the Closing
Date.
(b) Certificate
of Buyer. Seller shall have been provided with a certificate duly
executed on behalf of Buyer to the effect that, as of the Closing
Date.
(i) all
representations and warranties made by the Buyer in this Agreement are true
and
complete in all material respects;
(ii) all
covenants, obligations and conditions of this Agreement to be performed by
Buyer
on or before such date have been so performed in all material respects;
and
(iii) there
are no pending negotiations with respect to any offer to acquire all or any
portion of the business of Buyer.
(c) Board
Approval. A written resolution of the Buyer’s Board of Directors
authorizing the acquisition of the Assets and the issuance of the Shares,
the
Earn-out Payments and employment contracts.
5.3 Additional
Conditions to the Obligations of
Buyer. The obligations of Buyer to
consummate and effect this Agreement and the transactions contemplated hereby
shall be subject to the satisfaction on or prior to the Closing Date of each
of
the following conditions, any one of which may be waived, in writing,
exclusively by Buyer:
(a) Representations,
Warranties and Covenants. The representations and warranties of
Seller in this Agreement shall be true and correct in all material respects
on
or as of such xxxx Xxxxxx shall have performed and complied with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by it as of the Closing Date in all material
respects.
(b) Certificate
of Seller. Buyer shall have been provided with a certificate
executed on behalf of Seller by its Chief Executive Officer to the effect
that,
as of the Closing Date:
(i) all
representations and warranties made by Seller in this Agreement are true
and
complete in all material respects, and
(ii) all
covenants, obligations and conditions of this Agreement to be performed by
Seller on or before such date have been performed in all material
respects.
19
(c) Legal
Opinion. Buyer shall have received a legal opinion from legal
counsel to Seller, in form and substance reasonably satisfactory to Buyer,
relating to due authority, execution, validity, and similar matters as set
forth
in Exhibit “D”.
(d) No
Material Adverse Changes. There shall not have occurred any
material adverse changes in the Business between the date of this Agreement
and
the Closing Date.
ARTICLE
VI
REGISTRATION
RIGHTS
6.1 Registration
Rights.
(a) Piggy-Back
Registration. If at any time, the Buyer shall determine to
register any of its securities for its own account (other than a registration
relating solely to employee stock option or purchase plans or relating solely
to
a Rule 145 transaction), Buyer will:
(i) promptly
give to Seller written notice thereof (which shall include a list of the
jurisdictions in which Buyer intends to attempt to qualify such securities
under
the applicable blue sky or other state securities laws); and
(ii) include
in such registration (and any related qualification under blue sky laws or
other
compliance), and in any underwriting involved therein, all or part of the
Registrable Securities, specified in a written request or requests, made
within
30 days after the date of such written notice from Buyer to Seller, except
as
set forth in Section 6.1(a).
(b) Expenses
of Registration.
(i) Subject
to Section 6.1(b)(ii), all expenses incurred in connection with any registration
pursuant to Section 6.1, including, without limitation, all registration,
filing
and qualification fees, printing expenses, fees and disbursements of counsel
for
Buyer, expenses of complying with state securities or blue sky laws (including
fees of counsel for Buyer and counsel for the underwriters), accountants’ fees
and expenses incident to or required by any such registration, expenses incident
to the listing of securities or any exchange in which the Registrable Securities
are to be listed, expenses of any special audits incidental to or required
by
such registration, shall be borne by Buyer.
(ii) Notwithstanding
anything to the contrary elsewhere in this Section 6.1(b), all underwriters’
discounts, commissions, or applicable stock transfer and documentary stamp
taxes
(if any) relating to the sale of Registrable Securities shall be borne by
the
Seller of the Registrable Securities in all cases.
20
(c) Registration
Procedures.
(i) In
the case of each registration effected by Buyer pursuant to Section 6.1,
Buyer
will keep Seller advised in writing as to the initiation of each registration
and as to the completion thereof. At its expense (except as otherwise
provided in Section 6.1(b) above) Buyer will: (A) keep such registration
effective for a period of six months or until Seller has completed the
distribution described in the registration statement relating thereto, whichever
first occurs; (B) furnish such number of prospectuses and other documents
incident thereto as Seller from time to time may reasonably request; and
(C)
notify Seller, (1) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and, with respect to the registration
statement or any post-effective amendment, when the same has become effective;
(2) of a request by the SEC or any other federal or state governmental authority
during the period of effectiveness of the registration statement for amendments
or supplements to the registration statement or related prospectus or for
additional information relating to the registration statement, (3) of the
issuance by the SEC or any other federal or state governmental authority
of any
stop order suspending the effectiveness of the registration statement or
the
initiation of any proceeding from that purpose, (4) of the receipt by Buyer
of
any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for sale
in
any jurisdiction or the initiation of any proceeding for such purpose; or
(5) of
the happening of any event which makes any statement made in the registration
statement or related prospectus or any document incorporated or deemed to
be
incorporated therein by reference untrue in any material respect or which
requires the making of changes in the registration statement or prospectus
so
that, in the case of the registration statement, it will not contain any
untrue
statement of a material fact or omit to state any material fact required
to be
stated therein or necessary to make the statements therein not misleading,
and
that in the case of the prospectus it will not contain any untrue statement
of a
material fact or omit to state any material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made not
misleading.
(d) Buyer
may, upon the happening of any event (x) of the kind described in clauses
(2),
(3), (4), or (5) of Section 6.1(c)(i)(C) or (y) that, in the judgment of
Buyer’s
Board of Directors, renders it advisable to suspend use of the prospectus
due to
pending corporate developments, public filings with the SEC or similar events,
suspend use of the prospectus on written notice to the Seller, in which case
Seller shall discontinue disposition of the Registrable Securities covered
by
the registration or prospectus until copies of a supplemented or amended
prospectus are distributed to Seller or until Seller is advised in writing
by
Buyer that the use of the applicable prospectus may be resumed. Buyer
shall use its reasonable efforts to ensure that the use of the prospectus
may be
resumed as soon as practicable. Buyer shall use every reasonable
effort to obtain the withdrawal of any order suspending the effectiveness
of the
registration statement, or the lifting of any suspension of the qualification
(or exemption from qualification) of any of the securities for sale in any
jurisdiction, at the earliest practicable moment. Buyer shall prepare
as soon as practicable a supplement or post-effective amendment to the
registration statement or a supplement to the released prospectus or any
document incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable Securities
being sold thereunder, such prospectus will not contain an untrue statement
of a
material fact or omit to state a material fact required to be stated therein
or
necessary to make the statements therein, in light of the circumstances under
which they were made not misleading.
21
(e) Indemnification.
(i) Buyer
will indemnify and hold harmless Seller, each of its officers and directors,
and
each person controlling Seller, with respect to which a registration has
been
effected pursuant to this Section 6.1 and each underwriter, if any, and each
person who controls any underwriter of the Registrable Securities held by
or
issuable to Seller, against all claims, losses, damages, costs, expenses
and
liabilities whatsoever (or actions in respect thereof) arising out of or
based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, preliminary or final prospectus
contained therein or any amendment or supplement thereto, or based on any
omission (or alleged omission) to state therein a material fact required
to be
stated therein or necessary to make the statements therein not misleading,
or
any violation by Buyer of the Securities Act or any state securities law
or of
any rule or regulation promulgated under the Securities Act or any state
securities law applicable to Buyer and relating to action or inaction required
of Buyer in connection with any such registration, and will reimburse Seller,
each of its officers and directors, and each person controlling Seller, each
such underwriter and each person who controls any such underwriter, for any
legal and any other expenses as reasonably incurred in connection with
investigating or defending any such claim, loss, damage, cost, expense,
liability or action, provided that Buyer will not be liable in any such case
to
the extent that any such claim, loss, damage, cost, expense, or liability
arises
out of or is based on any untrue statement or omission based upon written
information furnished to Buyer by an instrument duly executed by Seller or
any
underwriter and stated to be specifically for use therein.
(ii) Seller
will, if Registrable Securities held by or issuable to Seller are included
in
the securities as to which such registration is being effected, indemnify
and
hold harmless Buyer, each of its directors and officers who sign such
registration statement, each underwriter, if any, of Buyer’s securities covered
by such registration statement, each person who controls Buyer within the
meaning of the Securities Act against all claims, losses, damages, costs,
expenses and liabilities whatsoever (or actions in respect thereof) arising
out
of or based on any untrue statement of a material fact contained in any such
registration statement, preliminary or final prospectus contained therein
or any
amendment or supplement thereto, incident to any such registration, or based
on
any omission (or alleged omission) to state therein a material fact required
to
be stated therein or necessary to make the statements therein not misleading,
or
any violation by Seller of the Securities Act or of state securities laws
or any
rule or regulation promulgated under the Securities Act or any state securities
law applicable to Seller and relating to action or inaction required of Seller
in connection with any such registration and will reimburse Buyer, such
directors, officers, persons or underwriters for any legal or any other expenses
as reasonably incurred in connection with investigating or defending any
such
claim, loss, damage, cost, expense, liability or actions, in each case to
the
extent, but only to the extent, that such untrue statement or omission is
made
in such registration statement, prospectus, in reliance upon and in conformity
with written information furnished to Buyer by an instrument duly executed
by
Seller and stated to be specifically for use therein; provided,
however, that the foregoing indemnity agreement is subject to the condition
that, insofar as it relates to any such untrue statement or omission made
in the
preliminary prospectus but eliminated or remedied in the amended prospectus
on
file with the SEC at the time the registration statement becomes effective
or
the amended prospectus filed with the SEC pursuant to Rule 424(b) (the
“Final Prospectus”), such indemnity agreement shall
not inure to the benefit of Buyer, or any underwriter, if there is no
underwriter, if a copy of the Final Prospectus was not furnished to the person
or entity asserting the loss, liability, claim or damage at or prior to the
time
such action is required by the Securities Act.
22
(iii) Each
party entitled to indemnification under this Section 6.1(e) (the
“Indemnified Party”) shall give notice to the party
required to provide indemnification (the “Indemnifying
Party”) promptly after such Indemnified Party has actual knowledge
of any claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom, provided that counsel for the Indemnifying Party, who
shall
conduct the defense of such claim or litigation, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be withheld), and
the
Indemnified Party may participate in such defense at such party’s
expense. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent
to
entry of any judgment or enter into any settlement which does not include
as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim
or
litigation. If any such Indemnified Party shall have been advised by
counsel chosen by it that there may be one or more legal defenses available
to
such Indemnified Party which are different from or additional to those available
to the Indemnifying Party, the Indemnifying Party shall not have the right
to
assume the defense of such action on behalf of such Indemnified Party and
will
promptly reimburse such Indemnified Party and any person controlling such
Indemnified Party for the reasonable fees and expenses of any counsel retained
by the Indemnified Party, it being understood that the Indemnifying Party
shall
not, in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations
or
circumstances, be liable for the reasonable fees and expenses of more than
one
separate firm of attorneys for such Indemnified Party or controlling person,
which firm shall be designated in writing by the Indemnified Party to the
Indemnifying Party.
(f) Contribution. If
the indemnification provided for in Section 6.1(e) is unavailable or
insufficient to hold harmless an Indemnified Party thereunder, then each
Indemnifying Party thereunder shall contribute to the account paid or payable
by
such Indemnified Party as a result of the losses, claims, damages, costs,
expenses, liabilities or actions referred to in Section 6.1(e)(i) or (ii),
as
the case may be in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party on the one hand and the Indemnified Party
on the
other in connection with statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault shall be determined by reference
in, among other things, whether the untrue or alleged untrue statement of
a
material fact relates to information supplied by the Indemnifying Party or
the
Indemnified Party and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statements
or
omission. The parties hereto agree that it would not be just and
equitable if contributions pursuant to this Section 6.1(f) were to be determined
by pro rata or per capita allocation or by any other method of allocation
which
does not take account of the equitable considerations referred to in the
first
sentence of this Section 6.1(f). The amount paid by an Indemnified
Party as a result of the losses, claims, damages or liabilities referred
to in
the first sentence of this Section 6.1(f) shall be deemed to include any
legal
or other expenses reasonably incurred by such Indemnified Party in connection
with investigating or defending any action or claim which is the subject
of this
Section 6.1(f). Promptly after receipt by an Indemnified Party of
notice of the commencement of any action against such party in respect of
which
a claim for contribution may be made against an Indemnifying Party under
this
Section 6.1(f), such Indemnified Party shall notify the Indemnifying Party
in
writing of the commencement thereof if the notice specified in Section
6.1(e)(iii) has not been given with respect to such action; provided that
the
omission so to notify the Indemnifying Party shall not relieve the Indemnifying
Party from any liability which it may have to any Indemnified Party otherwise
under this Section 6.1(f), except to the extent that the Indemnifying Party
is
actually prejudiced by such failure to give notice. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not
guilty of such fraudulent misrepresentation.
23
(h) Information
by Seller. Seller shall furnish to Buyer such information
regarding Seller and the distribution proposed by Seller as Buyer may reasonably
request in writing and as shall be required in connection with any registration
referred to in this Section 6.1.
(i) Rule
144 Reporting. With a view to making available to Seller the
benefits of certain rules and regulations of SEC which may permit the sale
of
Registrable Securities to the public without registration, Buyer agrees
to:
(i) make
and keep public information available, as those terms are understood and
defined
in Rule 144 under the Securities Act, at all times after 90 days after the
effective date of the first registration filed by Buyer which involves a
sale of
securities of Buyer to the general public;
(ii) file
with the SEC in a timely manner all reports and other documents required
of
Buyer under the Securities Act and the Exchange Act; and
(iii) furnish
or make available to Seller so long as it owns any Registrable Securities
forthwith upon request a written statement by Buyer that it has complied
with
the reporting requirements of said Rule 144 (at any time after 90 days after
the
effective date of said first registration statement filed by Buyer), and
of the
Securities Act and the Exchange Act (at any time after it has become subject
to
such reporting requirements), a copy of the most recent annual or quarterly
report of Buyer, and such other reports and documents so filed by Buyer as
may
be reasonably requested in availing Seller of any rule or regulation of the
SEC
permitting the selling of any such securities without registration.
(j) Transfer
of Registration Rights. Any registration rights granted by Buyer
under this Section 6.1 may not be assigned by Seller; except that registration
rights may be transferred to Seller’s members in connection with a distribution
of assets from Seller to its members, so long as registration rights granted
this Section 6.1 may not then be subsequently assigned by such members to
any
third parties.
24
(k) Termination
of Registration Rights. All registration rights provided
hereunder shall terminate upon the earlier to occur of (a) the third anniversary
of the Closing and (b) such time as Seller is able to sell all of its
Registrable Securities under Rule 144 during any two successive, three-month
periods.
ARTICLE
VII
TERMINATION,
AMENDMENT AND WAIVER
7.1 Termination. Except
as provided by Section 7.2 below, this Agreement may be terminated and the
Acquisition abandoned at any time prior to the Closing Date:
(a) by
mutual consent of Seller and Buyer;
(b) by
Buyer or Seller if (i) the Closing has not occurred by October 31, 2007;
(ii)
there shall be a final non-appealable order by a federal or state court in
effect preventing consummation of the Acquisition; or (iii) there shall be
any
statute, rule, regulation or order enacted, promulgated or issued or decreed
applicable to the Acquisition by any Governmental Entity that would make
consummation of the Acquisition illegal;
(c) by
Buyer if it is not in material breach of this Agreement and there has been
a
material breach of any representation, warranty, covenant or agreement contained
in this Agreement on the part of Seller and such breach has not been cured
within ten days after written notice to Seller (provided that, no cure period
shall be required for a breach which by its nature cannot be
cured);
(d) by
Buyer at any time prior to October 31, 2007, if as a result of its due diligence
review of the Business subsequent to the date of this Agreement it discovers
a
fact or condition existing on the date of this Agreement and not disclosed
to
Buyer prior to or on the date of this Agreement that Buyer reasonably determines
has a Material Adverse Effect on Seller;
(e) by
Seller if it is not in material breach of this Agreement and there has been
a
material breach of any representation, warrant, covenant or agreement contained
in this Agreement on the part of Buyer and such breach has not been cured
within
ten days after written notice to Buyer (provided that, no cure period shall
be
required for a breach which by its nature cannot be cured).
7.2 Effect
of Termination. In the event of
termination of this Agreement as provided in Section 7.1, this Agreement
shall
forthwith become void and there shall be no liability or obligation on the
part
of Buyer or Seller, or their respective officers, directory or shareholders,
provided that each party shall remain liable for any breaches of this Agreement
prior to its termination.
7.3 Amendment. This
Agreement may be amended by the parties herein at any time by execution of
an
instrument in writing signed on behalf of each of the parties
hereto.
25
7.4 Extension;
Waiver. At any time prior to the
Closing Date, Buyer on the one hand, and Seller, on the other, may, to the
extent legally allowed, (i) extend the time for the performance of any of
the
obligations of the other party herein, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in
any
document delivered pursuant hereto, and (iii) waive compliance with any of
the
agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if sat forth in an instrument in
writing
signed on behalf of such party.
ARTICLE
VIII
INDEMNIFICATION
8.1 Indemnification
Given By Seller. Seller and its
successors and permitted assigns, subject to the limitations set forth in
this
Article VIII, shall indemnify Purchaser and its successors and permitted
assigns
from and against any and all losses, claims, liabilities, actions, suits,
proceedings, fines, expenses, penalties and damages including reasonable
legal
fees and costs, whether or not involving a third-party claim (collectively,
“Losses”) arising from or in connection
with:
(a) Any
breach of any representation or warranty made by Seller in Article II of
this
Agreement;
(b) Any
breach of any covenant or obligation of Seller in this Agreement, including
without limitation, indemnification obligations regarding bulk sales
laws;
(c) Any
assessment, claim or other liability (including interest and penalties) for
Taxes assessed against the Assets or relating to the operation of the Business
in any jurisdiction, in either case for any period commencing prior to the
Closing Date;
(d) Any
failure of Seller to pay or perform any of its liabilities that are not Assumed
Liabilities; and
(e) The
performance or non-performance by Seller under any of the Business Contracts
or
the provision by Seller of any service or sale of any product relating to
the
Business, in either case at any time prior to the Closing Date.
8.2 Indemnification
Given by Buyer. Buyer and its
successors and permitted assigns, subject to the limitations set forth in
this
Article VIII, shall indemnify Seller and its successors and permitted assigns
from and against any and all Losses arising from or in connection
with:
(a) Any
breach of any representation or warranty made by Buyer in Article III this
Agreement;
(b) Any
breach of any covenant or obligation of Buyer in this
Agreement;
26
(c) Any
assessment, claim or other liability (including interest and penalties) for
Taxes assessed against the Assets or relating to the operation of the Business
in any jurisdiction, in either case for any period commencing on or after
the
Closing Date; and
(d) Any
failure of Buyer to pay or perform any of the Assumed Liabilities from and
after
the Closing Date.
8.3 Satisfaction
of Indemnification Claims against
Seller. All claims for indemnification
against Seller and its successors and permitted assigns shall be satisfied
initially by the return of Securities delivered to Seller pursuant to Section
1.3 and not by cash payment; provided, however, that to the extent that
any such claim cannot be satisfied by the return of Securities, then Buyer
shall
be entitled to payment in cash from Seller in respect of such
claim. The value of the Common Stock to be returned in connection
with the satisfaction of any such claim for indemnification shall be determined
based on the per share price as of the date on which the indemnification
claim
is satisfied. Notwithstanding any cash payment required pursuant to
this Section, the maximum aggregate liability of Seller and its successors
and
permitted assigns for indemnification pursuant to this Article VIII shall
be
limited to the aggregate value of the Common Stock as of the date on which
the
indemnification claim is satisfied.
8.4 Satisfaction
of Indemnification Claims against
Buyer. All claims for indemnification
against Buyer and its successors and permitted assigns shall be satisfied
by
cash payment or by the delivery of additional shares of Common Stock, determined
as provided in Section 8.3 above, at Buyer’s sole discretion. The
maximum aggregate liability of Buyer and its successors and permitted assigns
for indemnification pursuant to this Article VIII shall be limited to the
aggregate value of the Common Stock as of the date on which the indemnification
claim is satisfied, determined based on the per share price as of the date
on
which the indemnification claim is satisfied.
8.5 Survival. All
representations, warranties and covenants made in this Agreement shall survive,
and shall not be extinguished by, the Closing; provided, however, no
party shall be entitled to indemnification or payment from the other party
pursuant to this Article VIII, unless the Indemnified Party (as defined below)
shall have provided the Indemnifying Party (as defined below) with notice
of its
claim to indemnification pursuant to Section 8.7 or 8.8 (as applicable) within
one year after the Closing Date.
8.6 Limitations
on Losses. Anything in this Agreement
or otherwise to the contrary notwithstanding:
(a) No
party shall be entitled to indemnification for the amount of any Losses in
excess of the amount of such Losses which would have been incurred, but for
the
failure of such party to take reasonable action to mitigate such Losses upon
becoming aware of any claim.
(b) No
party shall be entitled to indemnification for the amount of any Losses in
excess of the amount of such Losses which would have been incurred, but for:
(a)
the unlawful conduct of such party; or (b) the breach or default by such
party
of any representation, warranty, covenant, obligation or agreement under
this
Agreement.
27
(c) In
determining the amount of any claim for which an Indemnified Party is entitled
to indemnification pursuant to this Article VIII, the parties shall make
appropriate adjustments for tax benefits.
(d) No
party shall be entitled to indemnification under this Agreement for any
incidental, indirect, special, collateral, consequential, exemplary or punitive
damages.
(e) All
indemnification payments under this Article VIII shall be deemed adjustments
to
the Purchase Price.
8.7 Procedure
for Indemnification - Defense of Third-Party
Claims. If any third party shall notify
a party hereto (the “Indemnified Party”) with respect
to any matter (a “Third Party Claim”) which may give
rise to a claim for indemnification against the other party hereto (the
“Indemnifying Party”) under this Article VIII, then
the Indemnified Party shall promptly after receiving notice of the Third
Party
Claim notify the Indemnifying Party thereof in writing describing in reasonable
detail the facts constituting the basis for the Third Party Claim; provided,
however, that the failure of the Indemnified Party to so notify the
Indemnifying Party of such Third Party Claim shall not affect the Indemnified
Party’s right to indemnification hereunder, except to the extent that (a) the
resolution of such claim is materially prejudiced by the Indemnified Party’s
failure to give such notice in such a timely fashion or (b) the Indemnifying
Party is required to pay a materially greater amount or accrue material
additional expenses with respect to such claim. The Indemnifying
Party shall have the right at any time to participate in the defense of any
Third Party Claim and, to the extent it wishes, to assume and thereafter
conduct
the defense of any Third Party Claim using legal counsel reasonably satisfactory
to the Indemnified Party; provided, however, that the Indemnifying
Party shall not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party, which consent shall not be unreasonably
withheld. Unless and until the Indemnifying Party assumes the defense
of the Third Party Claim as provided in this Section 8.7, the Indemnified
Party
may defend against the Third Party Claim in any manner it reasonably may
deem
appropriate. In no event shall the Indemnified Party consent to the
entry of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnifying Party,
which
consent shall not be unreasonably withheld. If the Indemnifying Party
assumes the defense of the Third Party Claim the Indemnified Party agrees,
if
requested by the Indemnifying Party, to cooperate with the Indemnifying Party
and its counsel in contesting the Third Party Claim, or, if appropriate and
related to the Third Party Claim in question, in making any counterclaim
against
the Person asserting the Third Party Claim or any cross-complaint against
any
Person. After assumption of the defense by the Indemnifying Party,
the Indemnified Party shall have the right to employ its own counsel in such
matter, but the fees and expenses of the Indemnified Party’s counsel shall be at
the Indemnified Party’s expense. Buyer and Seller consent to the
non-exclusive jurisdiction of any court in which a proceeding is brought
against
the other party by a third party for purposes of any claim that Buyer or
Seller
may have under this Agreement with respect to such proceeding or the matters
alleged therein. Buyer and Seller agree that process may be served on
them with respect to such a claim anywhere in the world.
28
8.8 Procedure
for Indemnification - Other Claims. A
claim for indemnification for any matter not involving a Third Party Claim
shall
be asserted by the Indemnified Party by notice to the Indemnifying Party
in
writing, promptly and in any case within 20 days, after discovery of the
facts
supporting the claim; provided, however, that the failure of the
Indemnified Party to promptly notify the other or to give notice of a claim
within such 20-day period shall not affect the Indemnified Party’s right to
indemnification hereunder, except to the extent that (a) the resolution of
such
claim is materially prejudiced by the Indemnified Party’s failure to give such
notice in such a timely fashion or (b) the Indemnifying Party is required
to pay
a materially greater amount or accrue material additional expenses with respect
to such claim. Such notice shall describe the facts constituting the
basis for the claim of indemnification in reasonable detail.
8.9 Offset;Indemnification
Legend. In furtherance of the
objectives of Section 8.3, one-half of the Shares issued to Seller shall
bear an
additional legend that
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS SET FORTH IN THE ASSET PURCHASE AGREEMENT, DATED AS OF October
17,
2007 COPIES OF WHICH MAY BE OBTAINED FROM THE ISSUER. NO TRANSFER OF
SUCH SECURITIES WILL BE MADE ON THE BOOKS OF THE ISSUER UNLESS ACCOMPANIED
BY
EVIDENCE OF COMPLIANCE WITH THE TERMS OF SUCH AGREEMENT. THE COMPANY
ACKNOWLEDGES THAT THIS LEGEND (BUT THIS LEGEND ONLY) RELATING TO THE ASSET
PURCHASE AGREEMENT MAY BE REMOVED AT ANY TIME AFTER [ONE YEAR ANNIVERSARY
OF
CLOSING].”
ARTICLE
IX
GENERAL
PROVISIONS
9.1 Construction. The
headings of Articles and Sections of this Agreement are inserted for convenience
only and shall not affect the construction or interpretation of this
Agreement. All references to “Section” or “Sections” refer to the
corresponding Section or Sections of this Agreement. Whenever this
Agreement refers to a number of days, such number shall refer to calendar
days
unless specified otherwise. Whenever in this Agreement “or” is used,
it is used in the inclusive sense of “and/or.” As used in this
Agreement, the word “including” (and with correlative meaning “include”) means
including without limiting the generality of any description preceding such
term. This Agreement and the Exhibits and other documents delivered
pursuant to this Agreement are being entered into by and among competent
and
sophisticated parties who are experienced in business matters and represented
by
counsel and other advisors, and have been reviewed by the parties and their
counsel and other advisors. Therefore, any ambiguous language in this
Agreement or any agreements, documents, instruments, schedules, exhibits
and
certificates delivered pursuant hereto will not be construed against any
particular party as the drafter of the language.
29
9.2 Notices. All
notices, consents, waivers and other communication under this Agreement must
be
in writing and shall be deemed given to a party when: (a) delivered to the
appropriate address by hand or by nationally recognized overnight courier
service (costs prepaid), (b) sent by confirmed facsimile if sent during normal
business hours of the recipient, if not, then on the next day, or (c) received
or rejected by the addressee if sent certified mail, return receipt requested,
in each case to the following address or facsimile number and marked to the
attention of the individual (by name or title) designated below (or to such
other address, facsimile number or individual as a party may designate by
notice
to the other parties):
If
to
Seller:
Web
Breeze Networks, LLC
Communications
Advantage, LLC
00
Xxxx
Xxxxxx
Xxxxxx
Xxxxx, XX 00000
Attn:
Xxxx Xxxxxxx
with
a
copy to:
If
to
Buyer:
Rapid
Link, Inc.
0000
Xx.
00xx
Xxxxxx
Xxxxx,
XX 00000
Attn:
Xxxxx Xxxxxxxx
with
a
copy to:
XXXXXXXXXX
& XXXXX LLP
00000
Xxxxxxxx Xxxx., Xxxxx 000
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn:
Xxxx Xxxx
9.3 Benefit
and Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto, and their
respective successors, permitted assigns, heirs and legal
representatives. Neither Seller nor Buyer shall assign or attempt to
assign this Agreement without the prior written consent of the other
party. Neither this Agreement nor any provisions hereof is intended
to, or shall, create any rights in or confer any benefits to any Person other
than the parties hereto.
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9.4 Entire
Agreement. This Agreement supersedes
all prior agreements and communication between the parties with respect to
its
subject matter (including the letter of intent from Buyer to Seller dated
September 5, 2007) and constitutes (along with the Exhibits and other documents
delivered pursuant to this Agreement) a complete and exclusive statement
of the
terms of the agreement between the parties with respect to its subject
matter.
9.5 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 shall operate as a waiver of such right, power,
or
privilege, and no single or partial exercise of any such right, power, or
privilege shall 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 waiver that may be
given
by a party shall be applicable except in the specific instance for which
it is
given; and (b) no notice to or demand on one party shall 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.
9.6 Severability. If
any provision of this Agreement is held invalid or unenforceable by any court
of
competent jurisdiction, the other provisions of this Agreement shall remain
in
full force and effect. Any provision of this Agreement held invalid
or unenforceable only in part or degree shall remain in full force and effect
to
the extent not held invalid or unenforceable.
9.7 Governing
Law. This Agreement shall be governed,
construed and enforced in accordance with the laws of the State of California
without regard to conflict of laws principles that would require the application
of any other law.
9.8 Counterparts. This
Agreement may be executed in one or more counterparts and by facsimile, each
of
which shall be deemed to be an original copy of this Agreement and all of
which,
when taken together, shall be deemed to constitute one and the same
agreement.
[Signature
page follows]
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IN
WITNESS WHEREOF, the parties hereto have caused this Asset Purchase Agreement
to
be executed on the day and year first above written.
PURCHASER:
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||
Rapid
Link, Incorporated
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||
By:
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||
Xxxx
Xxxxxxx, Chief Executive Officer
|
||
SELLER:
|
||
Web
Breeze Networks, LLC
|
||
By:
|
||
Xxxx
Xxxxxxx, Managing Director, Owner
|
||
Communications
Advantage, LLC
|
||
By:
|
||
Xxxx
Xxxxxxx, Managing Director, Owner
|
32