EXCHANGE AGREEMENT
BY AND AMONG
XXXXX.XXX, INC.,
VMDIRECT, LLC, AND
EACH MEMBER OF VMDIRECT, LLC
DATED AS OF MAY 23, 2006
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (the "Agreement") is made and entered into as of
May 23, 2006, by and among Xxxxx.xxx, Inc., a Florida corporation ("Qorus"),
VMdirect, LLC, a Nevada limited liability company ("VMdirect"), all of the
members of VMdirect listed under the caption "Members" on the signature page
hereof, and each person becoming a Member prior to the closing of the
transactions contemplated hereunder who shall execute a counterpart signature
page of this Agreement. The Members shall be referred to herein collectively as
the "Members" and individually as the "Member." The parties acknowledge that
this Agreement can be executed by a majority of the Members, subject to the
condition to Closing set forth in Section 7.3(m) hereof.
RECITALS
A. The Members own all of the Interests (as defined in Section 1.1) of
VMdirect.
X. Xxxxxxx Reverse Merger Fund, LLC, a Delaware limited liability company
("KRM Fund") owns the majority of the outstanding shares of common stock of
Qorus.
C. Qorus desires to acquire all of the Interests from the Members in
exchange for shares of Qorus' preferred stock, and the Members desire to
contribute all of the Interests to Qorus in exchange for shares of Qorus'
preferred stock, on the terms and conditions hereinafter set forth.
D. As a condition and inducement to the parties' willingness to enter into
this Agreement, at or prior to Closing (as defined in Section 1.2), KRM Fund and
VM Investors, LLC will enter into a voting agreement in substantially the form
attached hereto as Exhibit A (the "Voting Agreement").
E. The parties intend, by executing this Agreement, to implement a
tax-deferred exchange of property governed by Section 351 of the Internal
Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
EXCHANGE
1.1 Exchange. At the Closing and subject to and upon the terms and
conditions of this Agreement, the Members agree to contribute, transfer, assign
and deliver to Qorus, and Qorus agrees to acquire from the Members, all of the
outstanding membership interests of VMdirect ("Interests") owned by the Members
as specifically set forth on Schedule 1.1 hereto, which Schedule 1.1 gives
effect to the Interests to be issued by VMdirect immediately prior to Closing in
connection with the Financing (as defined in Section 1.3 hereof). As of Closing,
the Interests shall constitute all of the issued and outstanding Interests of
VMdirect. The exchange of Interests contemplated hereunder and the other
transactions contemplated hereunder shall be referred to herein as the
"Transaction."
1.2 Closing. Unless this Agreement shall have been terminated pursuant to
Article IX hereof, the closing of the Transaction (the "Closing") shall take
place at the offices of Xxxxxx Xxxxxxxx & Markiles, LLP, 00000 Xxxxxxx Xxxx.,
00xx Xxxxx Xxxxxxx Xxxx, XX 00000 at a time and date to be specified by the
parties, which shall be no later than the third business day after the
satisfaction or waiver of the conditions set forth in Article VII, or at such
other time, date and location as the parties hereto agree in writing (the
"Closing Date").
1.3 Exchange Consideration. In exchange for the Interests, Qorus shall
issue to the Members 1,000,000 shares of Series A Convertible Preferred Stock,
par value $0.01 per share, of Qorus ("Preferred Stock") in accordance with
Schedule 1.1 hereto. The aggregate shares of Preferred Stock to be issued to the
Members hereunder shall be convertible into 1,042,340,735 shares of Qorus'
common stock ("Conversion Shares"), subject to Stockholder Approval as defined
in Section 4.3(a) hereof. The Conversion Shares shall represent approximately
85.74% of the issued and outstanding shares of common stock of Qorus, on an as
converted basis and fully diluted basis immediately following the Closing. The
number of shares of Preferred Stock ("Preferred Shares") to be issued to Members
and the number of Conversion Shares as set forth in this Section 1.3 gives
effect to the issuance of 289,282 membership units by VMdirect for an aggregate
purchase price of $500,000, which is not conditioned on, but is intended to be
completed immediately prior to, the Closing ("Financing").
1.4 Delivery of Assignment of Interests. At Closing, VMdirect shall
deliver to Qorus a certificate duly executed and authorized by each of its
managers and/or managing members certifying to the ownership of the Interests by
each Member as set forth on Schedule 1.1 hereof, and each Member shall deliver
an assignment or other acceptable instrument of transfer of the Interests owned
by such Member, duly executed by the Member with (i) all such other documents as
may be reasonably requested to vest in Qorus good and marketable title to the
Interests free and clear of any and all Liens, and (ii) all necessary
documentary stamps. VMdirect shall record the transfer of the Interests
described in this Section 1.4 on its transfer books.
1.5 Issuance of Certificates Representing Qorus' Preferred Shares. At
Closing, Qorus will issue the shares of Preferred Stock to the Members as
provided in Schedule 1.1 hereto, as amended ("Preferred Shares"). The Preferred
Shares, when issued, shall be restricted shares and may not be sold, transferred
or otherwise disposed of by the Members without registration under the
Securities Act of 1933, as amended ("Securities Act") or an available exemption
from registration under the Securities Act. The certificates representing Qorus'
Preferred Shares will contain the appropriate restrictive legends.
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1.6 Assumption of Options and Warrants. At the Closing, each outstanding
option and warrant to purchase Interests of VMdirect (each, a "VMdirect Purchase
Right"), whether or not vested, shall be assumed by Qorus. Each VMdirect
Purchase Right so assumed by Qorus under this Agreement will continue to have,
and be subject to, the same terms and conditions of such VMdirect Purchase Right
immediately prior to the Closing (including, without limitation, any repurchase
rights or vesting provisions and provisions regarding the acceleration of
vesting on certain transactions, other than the transactions contemplated by
this Agreement), except that (i) each VMdirect Purchase Right will be
exercisable (or will become exercisable in accordance with its terms) for that
number of whole shares of common stock, par value $0.001 per share, of Qorus
("Qorus Common Stock") equal to the product of the number of membership units
that were issuable upon exercise of such VMdirect Purchase Right immediately
prior to the Closing multiplied by 210.130 ("Exchange Ratio"), rounded up to the
nearest whole number of shares of Qorus Common Stock, and (ii) the per share
exercise price for the shares of Qorus Common Stock issuable upon exercise of
such assumed VMdirect Purchase Right will be equal to the quotient determined by
dividing the exercise price per membership unit under the VMdirect Purchase
Right prior to the Closing by the Exchange Ratio, rounded down to the nearest
whole cent.
1.7 Tax Consequences. It is intended by the parties hereto that the
Members' contribution and transfer of the Interests, respectively, to Qorus in
exchange for Qorus' Preferred Shares constitutes a tax-deferred exchange within
the meaning of Section 351 of the Code.
1.8 Taking of Necessary Action; Further Action. If, at any time after the
Closing, any further action is necessary or desirable to carry out the purposes
of this Agreement, including qualifying the Transaction as a tax-deferred
exchange within the meaning of Section 351 of the Code, and to vest Qorus with
full right, title and possession to the Interests, the Members, VMdirect and
Qorus will take all such lawful and necessary action.
1.9 Transaction Deposit. Qorus and VMdirect hereby acknowledge VMdirect's
prior payment to Qorus of a $50,000 deposit ("Deposit").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF MEMBER
Each Member for himself only, and not with respect to any other Member,
hereby severally represents and warrants to, and covenants with, Qorus with
respect to such Member as follows:
2.1 Ownership of Interests. Each Member is both the record and beneficial
owner of the Interests set forth beside such Member's name on Schedule 1.1
hereto. Each Member is not the record or beneficial owner of any other
Interests. The information set forth on Schedule 1.1 with respect to each Member
is accurate and complete.
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2.2 Authority of Members. Each Member that is a natural person has full
power and authority and is competent to (i) execute, deliver and perform this
Agreement, and each ancillary document which each such Member has executed or
delivered or is to execute or deliver pursuant to this Agreement (including the
Voting Agreement), and (ii) carry out each such Member's obligations hereunder
and thereunder, without the need for any Governmental Action/Filing (as defined
herein). Each Member that is a corporate or other entity has obtained all due
authorization and has full power for the execution, delivery and performance of
this Agreement and each ancillary document which each such Member has executed
or delivered or is to execute or deliver pursuant to this Agreement (including
the Voting Agreement) and to carry out each such Member's obligations hereunder
and thereunder without the need for any Governmental Action/Filing. The
execution, delivery and performance by each Member of this Agreement and each
ancillary document does not and will not conflict with, result in a breach of,
or constitute a default or require a consent or action under, any agreement or
other instrument to or by which such Member is a party or is bound or to which
any of the Interests are subject, or, to such Member's knowledge, any Legal
Requirement (as defined herein) to which such Member is subject, or result in
the creation of any Lien (as defined in Section 2.3) on the Interests. This
Agreement, and each Member's ancillary documents to be executed and delivered by
such Member at the Closing, has been duly executed and delivered by such Member
(and each ancillary document to be executed and delivered by such Member at or
after the Closing will be duly executed and delivered by such Member), and this
Agreement constitutes, and each ancillary document, when executed and delivered
by such Member will constitute, and assuming the due authorization, execution
and delivery thereof by the other parties hereto and thereto, as applicable,
such Member's legal, valid and binding obligation, enforceable against such
Member in accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity and public
policy. For purposes of this Agreement, (x) the term "Governmental
Action/Filing" shall mean any franchise, license, certificate of compliance,
authorization, consent, order, permit, approval, consent or other action of, or
any filing, registration or qualification with, any federal, state, municipal,
foreign or other governmental, administrative or judicial body, agency or
authority, and (y) the term "Legal Requirements" means any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Entity (as defined
in Section 3.5(b)), and all requirements set forth in applicable Contracts (as
defined in Section 3.19(a)).
2.3 Title To Interests. Each Member has and shall transfer to Qorus at the
Closing, good and marketable title to the Interests shown as owned of record by
such Member on Schedule 1.1 to this Agreement, free and clear of all liens,
claims, charges, encumbrances, pledges, mortgages, security interests, options,
rights to acquire, proxies, voting trusts or similar agreements, restrictions on
transfer or adverse claims of any nature whatsoever ("Liens").
2.4 Pre-emptive and Conversion Rights. At Closing, no Member has any
pre-emptive rights or rights to acquire any Interests that have not been waived
or exercised.
2.5 Acquisition of Qorus' Preferred Shares for Investment.
(a) Each Member is acquiring Qorus' Preferred Shares for investment
for Member's own account and not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and each Member has no present
intention of selling, granting any participation in, or otherwise distributing
the same. Each Member further represents that he does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of
Qorus' Preferred Shares.
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(b) Each Member understands that Qorus' Preferred Shares are not
registered under the Securities Act, that the issuance of Qorus' Preferred
Shares is intended to be exempt from registration under the Securities Act
pursuant to Section 4(2) thereof, and that Qorus' reliance on such exemption is
predicated on the Member's representations set forth herein. Each Member
represents and warrants that: (i) he is an "accredited investor" as that term is
defined in Rule 501(a) of Regulation D under the Act, (ii) he can bear the
economic risk of his respective investments, and (iii) he possesses such
knowledge and experience in financial and business matters that he is capable of
evaluating the merits and risks of the investment in Qorus' Preferred Shares.
(c) Each Member acknowledges that neither the U.S. Securities and
Exchange Commission ("SEC"), nor the securities regulatory body of any state or
other jurisdiction, has received, considered or passed upon the accuracy or
adequacy of the information and representations made in this Agreement.
(d) Each Member acknowledges that he has carefully reviewed such
information as he has deemed necessary to evaluate an investment in Qorus'
Preferred Shares. To the full satisfaction of each Member, he has been furnished
all materials that he has requested relating to Qorus and the issuance of Qorus'
Preferred Shares hereunder, and each Member has been afforded the opportunity to
ask questions of Qorus' representatives to obtain any information necessary to
verify the accuracy of any representations or information made or given to the
Members. Notwithstanding the foregoing, nothing herein shall derogate from or
otherwise modify the representations and warranties of Qorus set forth in this
Agreement, on which each Member have relied in making an exchange of his
Interests for Qorus' Preferred Shares.
(e) Each Member understands that Qorus' Preferred Shares, and the
Conversion Shares in the event of conversion, may not be sold, transferred, or
otherwise disposed of without registration under the Securities Act or an
exemption therefrom, and that in the absence of an effective registration
statement covering Qorus' Preferred Shares, or the Conversion Shares in the
event of conversion, or any available exemption from registration under the
Securities Act, Qorus' Preferred Shares and the Conversion Shares may have to be
held indefinitely. Each Member further acknowledges that Qorus' Preferred
Shares, and the Conversion Shares in the event of conversion, may not be sold
pursuant to Rule 144 promulgated under the Securities Act unless all of the
conditions of Rule 144 are satisfied (including, without limitation, Qorus'
compliance with the reporting requirements under the Securities Exchange Act of
1934, as amended ("Exchange Act")).
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ARTICLE III
REPRESENTATIONS AND WARRANTIES BY VMDIRECT
Except as disclosed on the schedules prepared by VMdirect to be delivered
to Qorus in accordance with Section 7.3(j) (the "VMdirect Schedules"), VMdirect
hereby represents and warrants to, and covenants with, Qorus as follows:
3.1 Organization and Qualification.
(a) VMdirect is a limited liability company duly formed or
organized, validly existing and in good standing under the laws of the State of
Nevada and has the requisite power and authority to own, lease and operate its
assets and properties and to carry on its business as it is now being or
currently planned by VMdirect to be conducted. To its knowledge, VMdirect is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders ("Approvals") necessary
to own, lease and operate the properties it purports to own, operate or lease
and to carry on its business as it is now being conducted, except where the
failure to have such Approvals could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect (as defined in Section
11.2(b)) on VMdirect. Complete and correct copies of the articles of
organization and operating agreement (collectively referred to herein as
"VMdirect's Charter Documents") of VMdirect, as amended and currently in effect,
have been heretofore delivered to Qorus. VMdirect is not in violation of any of
the provisions of VMdirect's Charter Documents.
(b) VMdirect is duly qualified or licensed to do business as a
foreign company and is in good standing in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on VMdirect.
(c) The minute books or the equivalent of VMdirect to the extent of
their existence contain true and accurate records of meetings and true, complete
and accurate records of consents in lieu of meetings of its managers, managing
members, directors (and any committees thereof), similar governing bodies,
members and stockholders ("Corporate Records"), since the time of VMdirect's
organization. Copies of such Corporate Records have been heretofore delivered to
Qorus.
3.2 Subsidiaries. VMdirect has no subsidiaries.
3.3 Capitalization.
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(a) At the close of business on the business day prior to the date
hereof, Schedule 1.1 hereto contains all of the outstanding Interests of
VMdirect, including the Interests to be issued immediately prior to Closing in
connection with the Financing. All Interests on Schedule 1.1 have been validly
issued, fully paid and are nonassessable, or will be validly issued, fully paid
and are nonassessable, upon issuance in the case of the Interests to be issued
in the Financing. Except as set forth in Schedule 1.1 and Schedule 3.3, there
are no outstanding securities, convertible securities, options, warrants or
derivative securities of VMdirect, and there are no agreements or commitments
obligating VMdirect to issue or grant any of the foregoing, including any
pre-emptive or similar rights. All outstanding Interests, options, warrants and
other securities of VMdirect have been issued in compliance with (i) all
applicable securities laws and (in all material respects) other applicable laws
and regulations, and (ii) all requirements set forth in any applicable
contracts. Except as described in Schedule 3.3 hereto, there are no commitments
or agreements of any character to which VMdirect is bound obligating VMdirect to
accelerate the vesting of any options or warrants as a result of the
Transactions. VMdirect has heretofore delivered to Qorus true, complete and
accurate copies of all options, warrants and other securities of VMdirect, if
any, including any and all documents and agreements relating thereto.
(b) Except as set forth in Schedule 3.3 hereto, there are no
membership interests, equity securities or similar ownership interests of any
class of any membership interests or equity security of VMdirect, or any
securities exchangeable or convertible into or exercisable for such equity
securities, membership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except as set forth in Schedule 3.3
hereof, there are no subscriptions, options, warrants, equity securities,
membership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which VMdirect
is a party or by which it is bound obligating VMdirect to issue, deliver or
sell, or cause to be issued, delivered or sold, or repurchase, redeem or
otherwise acquire, or cause the repurchase, redemption or acquisition of, any
interests, shares of capital stock, membership interests or similar ownership
interests of VMdirect or obligating VMdirect to grant, extend, accelerate the
vesting of or enter into any such subscription, option, warrant, equity
security, call, right, commitment or agreement.
(c) Except as contemplated by this Agreement and except as set forth
in Schedule 3.3 hereto, there are no registration rights, and there is no voting
trust, proxy, rights plan, anti-takeover plan or other agreement or
understanding to which VMdirect is a party or by which VMdirect is bound with
respect to any interests, equity securities, membership interests or similar
ownership interests of any class of VMdirect, and there are no agreements to
which VMdirect is a party, or which VMdirect has knowledge of, which conflict
with this Agreement or the transactions contemplated herein or otherwise
prohibit the consummation of the transactions contemplated hereunder.
3.4 Authority Relative to this Agreement. VMdirect has all necessary power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder and, to consummate the transactions contemplated hereby
(including the Transaction). The execution and delivery of this Agreement and
the consummation by VMdirect of the transactions contemplated hereby (including
the Transaction) have been duly and validly authorized by all necessary action
on the part of VMdirect (including the approval by its managers, managing
members and members), and no other proceedings on the part of VMdirect are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by VMdirect and, assuming the due authorization, execution and
delivery thereof by the other parties hereto, constitutes the legal and binding
obligation of VMdirect, enforceable against VMdirect in accordance with its
terms, except as may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights generally and
by general principles of equity and public policy.
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3.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by VMdirect does
not, and the performance of this Agreement by VMdirect shall not, (i) conflict
with or violate VMdirect's Charter Documents, (ii) to its knowledge, conflict
with or violate any Legal Requirements, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or materially impair VMdirect's rights or alter
the rights or obligations of any third party under, or give to others any rights
of termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of VMdirect
pursuant to, any Material Contracts (as defined below), except, with respect to
clauses (ii) or (iii), for any such conflicts, violations, breaches, defaults or
other occurrences that would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on VMdirect.
(b) The execution and delivery of this Agreement by VMdirect does
not, and the performance of VMdirect's obligations hereunder will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any court, administrative agency, commission, governmental or
regulatory authority, domestic or foreign (a "Governmental Entity"), except (i)
for applicable requirements, if any, of the Securities Act, the Exchange Act,
state securities laws ("Blue Sky Laws"), and the rules and regulations
thereunder, and appropriate documents with the relevant authorities of other
jurisdictions in which VMdirect is qualified to do business, and (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on VMdirect or, after
the Closing, Qorus, or prevent consummation of the Transaction or otherwise
prevent the parties hereto from performing their obligations under this
Agreement.
3.6 Compliance. To the knowledge of VMdirect, it has complied with and is
not in violation of any Legal Requirements with respect to the conduct of its
business, or the ownership or operation of its business, except for failures to
comply or violations which, individually or in the aggregate, have not had and
are not reasonably likely to have a Material Adverse Effect on VMdirect. To
VMdirect's knowledge, the businesses and activities of VMdirect have not been
and are not being conducted in violation of any Legal Requirements. VMdirect is
in default or violation of any term, condition or provision of any applicable
Charter Documents or Contracts. Except as set forth on Schedule 3.6, to
VMdirect's knowledge, no written notice of non-compliance with any Legal
Requirements relating or with respect to the business of VMdirect has been
received by VMdirect (and VMdirect has no knowledge of any material such notice
delivered to any other Person). To VMdirect's knowledge, it is not in violation
of any material term of any contract or covenant relating to employment,
patents, proprietary information disclosure, non-competition or
non-solicitation.
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3.7 Financial Statements.
(a) The audited financial statements to be provided by VMdirect to
Qorus prior to the Closing shall be a complete copy of the audited financial
statements (including, in each case, any related notes thereto) of VMdirect for
the fiscal years ended December 31, 2004 and 2005, which statements will be
prepared in accordance with generally accepted accounting principles of the
United States ("U.S. GAAP") applied on a consistent basis throughout the period
involved (except as may be indicated in the notes thereto), will be audited in
accordance with the auditing standards of the Public Company Accounting
Oversight Board ("PCAOB") by an independent accountant registered with PCAOB,
and such statements will fairly present in all material respects the financial
position of VMdirect at the dates thereof and the results of its operations and
cash flows for the periods indicated, and will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) The unaudited financial statements to be provided by VMdirect to
Qorus prior to the Closing shall be a complete copy of the unaudited financial
statements (including, in each case, any related notes thereto) of VMdirect for
the three-month periods ended March 31, 2005 and 2006, which statements will be
prepared in accordance with U.S. GAAP applied on a consistent basis throughout
the period involved (except as may be indicated in the notes thereto), will be
reviewed by an independent accountant registered with PCAOB, and such statements
will fairly present in all material respects the financial position of each at
the dates thereof and the results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial statements will
be subject to normal adjustments which are not expected to have a Material
Adverse Effect on VMdirect. The audited financial statements described in
Section 3.7(a) and the unaudited financial statements described in this Section
3.7(b) are collectively referred to herein as the "U.S. GAAP Financial
Statements."
(c) To VMdirect's knowledge, the books of account and other
financial records of VMdirect have been maintained in accordance with good
business practice.
3.8 No Undisclosed Liabilities. Except as set forth in Schedule 3.8
hereto, VMdirect has no liabilities individually in excess of $50,000 and in the
aggregate in excess of $200,000 (absolute, accrued, contingent or otherwise) of
a nature required to be disclosed on a balance sheet or in the related notes to
the financial statements prepared in accordance with U.S. GAAP which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of VMdirect, except: (i) liabilities provided
for in or otherwise disclosed in the balance sheets of VMdirect as of March 31,
2006 prepared in accordance with U.S. GAAP, which will have been delivered to
Qorus prior to the Closing, and (ii) such liabilities arising in the ordinary
course of VMdirect's business since March 31, 2006, none of which would have a
Material Adverse Effect on VMdirect.
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3.9 Absence of Certain Changes or Events. Except as set forth in Schedule
3.9 hereto or in the interim balance sheets of VMdirect as of March 31, 2006,
since March 31, 2006, there has not been: (i) any Material Adverse Effect on
VMdirect, (ii) any declaration, setting aside or payment of any dividend on, or
other distribution (whether in cash, interests, securities or property) in
respect of, VMdirect's interests, equity or other securities, or any purchase,
redemption or other acquisition by VMdirect of any of interests, equity or other
securities or any options, warrants, calls or rights to acquire any such
interests, equity or other securities, (iii) any split, combination or
reclassification of VMdirect's capital, (iv) any granting by VMdirect of any
increase in compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past practice,
or any payment by VMdirect of any bonus, except for bonuses made in the ordinary
course of business consistent with past practice, or any granting by VMdirect of
any increase in severance or termination pay or any entry by VMdirect into any
currently effective employment, severance, termination or indemnification
agreement or any agreement the benefits of which are contingent or the terms of
which are materially altered upon the occurrence of a transaction involving
VMdirect of the nature contemplated hereby, (v) entry by VMdirect into any
licensing or other agreement with regard to the acquisition or disposition of
any Intellectual Property (as defined in Section 3.18 hereof) other than
licenses in the ordinary course of business consistent with past practice or any
amendment or consent with respect to any licensing agreement filed or required
to be filed by VMdirect with respect to any Governmental Entity, (vi) any
material change by VMdirect in its accounting methods, principles or practices,
(vii) any change in the auditors of VMdirect, (vii) any issuance of interests,
equity or other securities of VMdirect (other than the Interests to be issued in
connection with the Financing, or (viii) any revaluation by VMdirect of any of
their respective assets, including, without limitation, writing down the value
of capitalized inventory or writing off notes or accounts receivable or any sale
of assets of VMdirect other than in the ordinary course of business.
3.10 Litigation. Except as disclosed in Schedule 3.10 hereto, there are no
claims, suits, actions or proceedings pending, or to the knowledge of VMdirect
threatened against it before any court, governmental department, commission,
agency, instrumentality or authority, or any arbitrator that seeks to restrain
or enjoin the consummation of the transactions contemplated by this Agreement or
which could reasonably be expected, either individually or in the aggregate with
all such claims, actions or proceedings, to have a Material Adverse Effect on
VMdirect or have a Material Adverse Effect on the ability of the parties hereto
to consummate the Transaction.
3.11 Employee Benefit Plans. Except as disclosed in Schedule 3.11 hereto,
VMdirect has no written employee compensation, incentive, fringe or benefit
plans, programs, policies, commitments or other arrangements covering any active
or former employee, director or consultant of VMdirect, or any trade or business
(whether or not incorporated) which is under common control with VMdirect
(collectively, the "Plans").
3.12 Labor Matters. Except as disclosed in Schedule 3.12 hereto, VMdirect
is not a party to any collective bargaining agreement or other labor union
contract applicable to persons employed by VMdirect nor does VMdirect know of
any activities or proceedings of any labor union to organize any such employees.
3.13 Restrictions on Business Activities. Except as disclosed on Schedule
3.13 hereto, to VMdirect's knowledge, there is no agreement, commitment,
judgment, injunction, order or decree binding upon VMdirect or to which VMdirect
is a party which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of VMdirect, any
acquisition of property by VMdirect or the conduct of business by VMdirect as
currently conducted other than such effects, individually or in the aggregate,
which have not had and could not reasonably be expected to have a Material
Adverse Effect on VMdirect.
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3.14 Title to Property.
(a) VMdirect does not own any real property or any interests in any
real property. All leases of real property held by VMdirect and all personal
property and other property and assets of VMdirect (other than real property)
owned, used or held for use in connection with the business of VMdirect (the
"Personal Property") obligating VMdirect to make annual payments in excess of
$15,000 are shown or reflected on the balance sheets of VMdirect prepared in
accordance with U.S. GAAP or in Schedule 3.14. To VMdirect's knowledge, VMdirect
owns and has good and marketable title to the Personal Property, and all such
assets and properties are in each case held free and clear of all Liens, except
for Liens disclosed in the financial statements of VMdirect prepared in
accordance with U.S. GAAP or in Schedule 3.14 hereto, none of which Liens has or
will have, individually or in the aggregate, a Material Adverse Effect on such
property or on the present or contemplated use of such property in the
businesses of VMdirect.
(b) To VMdirect's knowledge, all leases pursuant to which VMdirect
leases from others material real or personal property are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing material default or event of default of VMdirect or, to
VMdirect's knowledge, any other party (or any event which with notice or lapse
of time, or both, would constitute a material default), except where the lack of
such validity and effectiveness or the existence of such default or event of
default could not reasonably be expected to have a Material Adverse Effect on
VMdirect.
3.15 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax"
or "Taxes" refers to any and all federal, state, local and foreign taxes,
including, without limitation, gross receipts, income, profits, sales, use,
occupation, value added, ad valorem, transfer, franchise, withholding, payroll,
recapture, employment, excise and property taxes, assessments, governmental
charges and duties together with all interest, penalties and additions imposed
with respect to any such amounts and any obligations under any agreements or
arrangements with any other person with respect to any such amounts and
including any liability of a predecessor entity for any such amounts.
(b) Tax Returns and Audits. Except as set forth in Schedule 3.15
hereto, to VMdirect's knowledge:
(i) VMdirect has timely filed all federal, state, local and
foreign returns, estimates, information statements and reports relating to Taxes
("Returns") required to be filed by VMdirect with any Tax authority prior to the
date hereof, except such Returns which are not material to VMdirect. All such
Returns are true, correct and complete in all material respects. VMdirect has
paid all Taxes shown to be due on such Returns.
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(ii) All Taxes that VMdirect is required by law to withhold or
collect have been duly withheld or collected, and have been timely paid over to
the proper governmental authorities to the extent due and payable.
(iii) No audit or other examination of any Return of VMdirect
by any Tax authority is presently in progress, nor has VMdirect been notified of
any request for such an audit or other examination.
(iv) VMdirect has not taken any action nor knows of any fact,
agreement, plan or other circumstance that is reasonably likely to prevent the
Transaction from qualifying as a tax-deferred exchange within the meaning of
Section 351 of the Code.
3.16 Environmental Matters. Except as disclosed in Schedule 3.16 hereto
and except for such matters that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect, to VMdirect's knowledge:
(i) VMdirect has complied with all applicable Environmental Laws; (ii) the
properties currently owned or operated by VMdirect (including soils,
groundwater, surface water, buildings or other structures) are not contaminated
with any Hazardous Substances; (iii) the properties formerly owned or operated
by VMdirect were not contaminated with Hazardous Substances during the period of
ownership or operation by VMdirect; (iv) VMdirect is not subject to liability
for any Hazardous Substance disposal or contamination on any third party
property; (v) VMdirect has not been associated with any release or threat of
release of any Hazardous Substance; (vi) VMdirect has not received any notice,
demand, letter, claim or request for information alleging that VMdirect may be
in violation of or liable under any Environmental Law; and (vii) VMdirect is not
subject to any orders, decrees, injunctions or other arrangements with any
Governmental Entity or subject to any indemnity or other agreement with any
third party relating to liability under any Environmental Law or relating to
Hazardous Substances.
As used in this Agreement, the term "Environmental Law" means any
federal, state, local or foreign law, regulation, order, decree, permit,
authorization, opinion, common law or agency requirement relating to: (A) the
protection, investigation or restoration of the environment, health and safety,
or natural resources; (B) the handling, use, presence, disposal, release or
threatened release of any Hazardous Substance or (C) noise, odor, wetlands,
pollution, contamination or any injury or threat of injury to persons or
property.
As used in this Agreement, the term "Hazardous Substance" means any
substance that is: (i) listed, classified or regulated pursuant to any
Environmental Law; (ii) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (iii) any other substance which is the
subject of regulatory action by any Governmental Entity pursuant to any
Environmental Law
3.17 Brokers; Third Party Expenses. Neither VMdirect nor, to VMdirect's
knowledge, any Member has incurred, nor will they incur, directly or indirectly,
any liability for brokerage, finders' fees, agent's commissions or any similar
charges in connection with this Agreement or any transactions contemplated
hereby (including the Financing). Except as disclosed on Schedule 3.17, no
membership interests, ownership interests, equity securities, convertible
securities, warrants, options, or other derivative securities of VMdirect or
Qorus are payable to any third party by VMdirect or any Member as a result of
this Transaction.
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3.18 Intellectual Property. For the purposes of this Agreement, the
following terms have the following definitions:
"Intellectual Property" shall mean any or all of the following: (i)
patents and applications therefor and all reissues, divisions, renewals,
extensions, provisionals, continuations and continuations-in-part thereof
("Patents") worldwide; (ii) inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information, know how,
technology, technical data and customer lists, and all documentation relating to
any of the foregoing; (iii) registered copyrights and applications therefor, and
all other rights corresponding thereto, worldwide; (iv) material domain names,
uniform resource locators ("URLs") and other names and locators associated with
the Internet ("Domain Names"); (v) registered industrial designs and
applications therefor, worldwide; (vi) registered trade names, logos, trademarks
and service marks, and any applications therefor (collectively, "Trademarks"),
worldwide; (vii) all databases and data collections and all rights therein; and
(viii) all moral and economic rights of authors and inventors, however
denominated.
"Company Intellectual Property" shall mean any Intellectual Property
that is owned by, or licensed to, VMdirect.
"Company Products" means all current versions of products or
services of VMdirect.
(a) Except as disclosed on Schedule 3.18, to VMdirect's knowledge,
the Company Intellectual Property and Company Products are not subject to any
material proceeding or outstanding decree, order, judgment, contract, license,
agreement or stipulation restricting in any manner the use, transfer or
licensing thereof by VMdirect, or which may affect the validity, use or
enforceability of such Company Intellectual Property or Company Products, which
in any such case could reasonably be expected to have a Material Adverse Effect
on VMdirect.
(b) Except as disclosed on Schedule 3.18 hereto, to VMdirect's
knowledge, VMdirect either owns and has good and marketable title to each
material item of Company Intellectual Property owned by it free and clear of any
Liens (excluding licenses and related restrictions granted in the ordinary
course) or has one or more licenses sufficient for VMdirect's use of Company
Intellectual Property; and VMdirect is the owner or licensee of all Trademarks
used in connection with the operation or conduct of the business of VMdirect
including the sale of any products by VMdirect.
(c) The operation of the business of VMdirect as such business
currently is conducted, including (i) the design, development, manufacture,
distribution, reproduction, marketing or sale of the products and services of
VMdirect (including Company Products) and (ii) VMdirect's use of any product,
services, device or process, to VMdirect's knowledge and except as could not
reasonably be expected to have a Material Adverse Effect, has not and does not
infringe or misappropriate the Intellectual Property of any third party or
constitute unfair competition or trade practices under the laws of any
jurisdiction.
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3.19 Agreements, Contracts and Commitments.
(a) Schedule 3.19 hereto sets forth a complete and accurate list of
all Material Contracts (as hereinafter defined), specifying the parties thereto.
For purposes of this Agreement, (i) the term "Contracts" shall mean all written
contracts, agreements, leases, mortgages, indentures, notes, bonds, liens,
licenses, arbitration awards, judgments, decrees, orders, documents,
instruments, understandings and commitments to which VMdirect is a party or by
or to which any of the properties or assets of VMdirect may be bound, subject or
affected (including without limitation notes or other instruments payable by or
to VMdirect), and (ii) the term "Material Contracts" shall mean (x) each
Contract (I) providing for payments (present or future) to VMdirect in excess of
$50,000 in the aggregate, or (II) under which or in respect of which VMdirect
presently has any liability or obligation of any nature whatsoever (absolute,
contingent or otherwise) in excess of $50,000, and (y) without limitation of
subclause (x), each of the following Contracts:
(i) any mortgage, indenture, note, installment obligation or
other instrument, agreement or arrangement for or relating to any borrowing of
money by or from VMdirect;
(ii) any guaranty, direct or indirect, by VMdirect or any
officer, director or 5% or more stockholder ("Insider") of VMdirect of any
obligation of VMdirect for borrowings, or otherwise, excluding endorsements made
for collection in the ordinary course of business;
(iii) any Contract made other than in the ordinary course of
business or (x) providing for the grant of any preferential rights to purchase
or lease any asset of VMdirect or (y) providing for any right (exclusive or
non-exclusive) to sell or distribute, or otherwise relating to the sale or
distribution of, any product or service of VMdirect;
(iv) any obligation to register any shares of the capital
stock or other securities of VMdirect with any Governmental Entity;
(v) any obligation to make payments, contingent or otherwise,
arising out of the prior acquisition of the business, assets or stock of other
Persons;
(vi) any collective bargaining agreement with any labor union;
(vii) any lease or similar arrangement for the use by VMdirect
of personal property;
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(viii) any Contract granting or purporting to grant, or
otherwise in any way relating to, any mineral rights or any other interest
(including, without limitation, a leasehold interest) in real property; and
(ix) any Contract with VMdirect to which any Insider of
VMdirect is a party.
(b) Each Material Contract was entered into at arms' length and in
the ordinary course, is in full force and effect and, to VMdirect's knowledge,
is valid and binding upon and enforceable against each of the parties thereto.
True, correct and complete copies of all Material Contracts have been heretofore
delivered to Qorus.
(c) Except as set forth in Schedule 3.19, neither VMdirect nor, to
VMdirect's knowledge, any other party thereto, is in breach of or in default
under, and no event has occurred which with notice or lapse of time or both
would become a breach of or default under, any Material Contract, which breach,
individually or in the aggregate, could be reasonably likely to have a Material
Adverse Effect on VMdirect, and no party to any Material Contract has given any
written notice of any claim of any such breach, default or event, which,
individually or in the aggregate, are reasonably likely to have a Material
Adverse Effect on VMdirect. Each Material Contract to which VMdirect is a party
or by which it is bound that has not expired by its terms is in full force and
effect, except where such failure to be in full force and effect is not
reasonably likely to have a Material Adverse Effect on VMdirect.
3.20 Insurance. VMdirect reasonably believes that its insurance policies
covering the assets, business, equipment, properties, operations, employees,
officers, directors, managers and managing members (collectively, the "Insurance
Policies") are adequate in amount and scope for the business in which it is
engaged3.Governmental Actions/Filings. To the knowledge of VMdirect, each
Company holds, and has made, all Governmental Actions/Filings reasonably
necessary to the conduct by VMdirect of its business (as presently conducted),
except with respect to any Governmental Actions/Filings the failure of which to
hold or make would not reasonably be likely to have a Material Adverse Effect on
VMdirect. For purposes of this Agreement, the term "Governmental Action/Filing"
shall mean any franchise, license, certificate of compliance, authorization,
consent, order, permit, approval, consent or other action of, or any filing,
registration or qualification with, any federal, state, municipal, foreign or
other governmental, administrative or judicial body, agency or authority.
3.21 Intentionally Omitted.
3.22 Interested Party Transactions. Except as set forth in the Schedule
3.22 hereto, during the period commencing two (2) years prior to the date of
this Agreement, no executive officer, director or Insider of VMdirect or a
member of his or her immediate family had or has a direct or indirect material
interest in any transaction or proposed transaction to which VMdirect was or is
to be a party, other than transactions involving (i) payment of salary for
services rendered, (ii) reimbursement for reasonable expenses incurred on behalf
of VMdirect, or (iii) employee benefits made generally available to all
employees. Except as set forth in Schedule 3.22, to VMdirect's knowledge, none
of such individuals has any direct or indirect ownership interest in any Person
with whom VMdirect is affiliated or with whom VMdirect has a contractual
relationship, or any Person that competes with VMdirect. Except as set forth in
Schedule 3.22, to the knowledge of VMdirect, no officer, director or Insider or
any member of their immediate families is, directly or indirectly, interested in
any material contract with VMdirect (other than such contracts as related to any
such individual or ownership of capital stock or other securities of VMdirect).
15
3.23 Manager Approval. The managers of VMdirect or similar governing body
(including any required committee or subgroup of thereof) has, as of the date of
this Agreement, unanimously approved, this Agreement and the transactions
contemplated hereby.
3.24 Management. During the past five year period, to VMdirect's
knowledge, no current or former manager, managing member, member, director,
executive officer or stockholder of VMdirect has been the subject of:
(a) a petition under the Federal bankruptcy laws or any other
insolvency or moratorium law or has a receiver, fiscal agent or similar officer
been appointed by a court for such person, or any partnership in which such
person was a general partner at or within two years before the time of such
filing, or any corporation or business association of which such person was an
executive officer at or within two years before the time of such filing;
(b) a conviction in a criminal proceeding or a named subject of a
pending criminal proceeding (excluding traffic violations that do not relate to
driving while intoxicated or driving under the influence);
(c) any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining any such person from, or otherwise limiting, the following
activities:
(i) Acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool operator, floor
broker, leverage transaction merchant, any other person regulated by
the United States Commodity Futures Trading Commission or an
associated person of any of the foregoing, or as an investment
adviser, underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any investment company,
bank, savings and loan association or insurance company, or engaging
in or continuing any conduct or practice in connection with such
activity;
(ii) Engaging in any type of business practice; or
(iii) Engaging in any activity in connection with the purchase
or sale of any security or commodity or in connection with any
violation of Federal, state or other securities laws or commodities
laws;
(d) any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any Federal, state or local authority barring,
suspending or otherwise limiting for more than 60 days the right of any such
person to engage in any activity described in the preceding sub-paragraph, or to
be associated with persons engaged in any such activity;
16
(e) a finding by a court of competent jurisdiction in a civil action
or by the U.S. Securities and Exchange Commission ("SEC") to have violated any
securities law, regulation or decree and the judgment in such civil action or
finding by the SEC has not been subsequently reversed, suspended or vacated; or
(f) a finding by a court of competent jurisdiction in a civil action
or by the Commodity Futures Trading Commission to have violated any federal
commodities law, and the judgment in such civil action or finding has not been
subsequently reversed, suspended or vacated.
3.25 Representations and Warranties Complete. The representations and
warranties of VMdirect included in this Agreement and any Schedule provided
pursuant to this Agreement, are true and complete in all material respects and
do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading, under the circumstance under which they were
made. Any disclosure on one schedule will be deemed notice of and disclosure by
VMdirect in respect of any other representation and warranty of VMdirect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF QORUS
Qorus represents and warrants to, and covenants with, VMdirect, as follows:
4.1 Organization and Qualification.
(a) Qorus is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Florida and has the requisite
corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being or currently planned
by Qorus to be conducted. To its knowledge, Qorus is in possession of all
Approvals necessary to own, lease and operate the properties it purports to own,
operate or lease and to carry on its business as it is now being or currently
planned by Qorus to be conducted, except where the failure to have such
Approvals could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Qorus. Complete and correct copies of the
Charter Documents of Qorus, as amended and currently in effect, have been
heretofore delivered to Company. Qorus is not in violation of any of the
provisions of Qorus' Charter Documents.
(b) Qorus is duly qualified or licensed to do business as a foreign
corporation and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary, except for such failures to be
so duly qualified or licensed and in good standing that could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
Qorus.
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4.2 Subsidiaries. Except for Qorus Acquisition, Inc. ("Qorus Acquisition")
which is a wholly-owned subsidiary of Qorus, Qorus has no Subsidiaries and does
not own, directly or indirectly, any ownership, equity, profits or voting
interest in any Person and, other than this Agreement, has no agreement or
commitment to purchase any such interest, and Qorus has not agreed and is not
obligated to make nor is bound by any written, oral or other agreement,
contract, subcontract, lease, binding understanding, instrument, note, option,
warranty, purchase order, license, sublicense, insurance policy, benefit plan,
commitment or undertaking of any nature, as of the date hereof or as may
hereafter be in effect under which it may become obligated to make, any future
investment in or capital contribution to any other entity.
4.3 Capitalization.
(a) The authorized capital stock of Qorus consists of: (i)
50,000,000 shares of common stock, par value $0.001 per share ("Qorus Common
Stock") and (ii) 5,000,000 shares of preferred stock, par value $0.01 per share
("Qorus Preferred Stock") of which 1,200,000 shares will be designated as Series
A Convertible Preferred Stock ("Series A Preferred Stock") pursuant to the
Certificate of Designations of Series A Preferred Stock ("Certificate of
Designations") to be adopted by the filing of Articles of Amendment in a form
attached hereto as Exhibit B ("Articles of Amendment"). As of the close of
business on the business day immediately prior to the date hereof, Qorus has:
(i) 46,174,800 shares of Qorus Common Stock issued and outstanding (which
excludes the currently issued 3,010,000 shares of Qorus Common Stock held in
treasury which will be cancelled prior to Closing), (ii) no shares of Qorus
Preferred Stock were issued and outstanding; (iii) 23,200 shares of Qorus Common
Stock were reserved for issuance upon the exercise of outstanding options and
warrants to purchase Qorus Common Stock ("Qorus Warrants"), of which 20,000
options are exercisable at $0.01 per share without expiration and 3,200 options
are exercisable at $5.00 per share expiring March 27, 2007; (iv) no shares of
Qorus Preferred Stock were reserved for issuance to any party (other than the
issuances contemplated under this Agreement); and (v) no shares of Qorus Common
Stock were reserved for issuance upon the conversion of Qorus Preferred Stock or
any outstanding convertible notes, debentures or securities ("Convertible
Securities"). All outstanding shares of Qorus Common Stock have been issued and
granted in compliance with (i) all applicable securities laws (in all material
respects), and (ii) all requirements set forth in any applicable Contracts.
Prior to Closing, upon filing of the Articles of Amendment, there will be an
aggregate of 1,200,000 shares of authorized but unissued shares of Series A
Preferred Stock, which, subject to the approval of Qorus' stockholders to effect
the Reverse Split, which in any case shall be required to have occurred
subsequent to the Closing ("Stockholder Approval"): (i) shall be convertible
into 1,250,808,882 shares of Qorus Common Stock on a pre-Reverse Split basis,
based on a conversion rate of 1,042.340735 shares of Qorus Common Stock on a
pre-Reverse Split basis for each share of Series A Preferred Stock, and (ii)
shall be convertible into 25,016,178 shares of Qorus Common Stock on a
post-Reverse Split basis. The term "Reverse Split" is defined in Section 5.14
hereof. Qorus has heretofore delivered to VMdirect true, complete and accurate
copies of the Qorus Warrants including any and all documents and agreements
relating thereto.
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(b) There are no equity securities, partnership interests or similar
ownership interests of any class of any equity security of Qorus, or any
securities exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except for this Agreement or as set forth
in Schedule 4.3, there are no subscriptions, options, warrants, equity
securities, partnership interests or similar ownership interests, calls, rights
(including preemptive rights), commitments or agreements of any character to
which Qorus is a party or by which it is bound obligating Qorus to issue,
deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem
or otherwise acquire, or cause the repurchase, redemption or acquisition of, any
shares of capital stock, partnership interests or similar ownership interests of
Qorus or obligating Qorus to grant, extend, accelerate the vesting of or enter
into any such subscription, option, warrant, equity security, call, right,
commitment or agreement. To Qorus' knowledge, there is no plan or arrangement to
issue Qorus Common Stock or Preferred Stock except as set forth in this
Agreement. Except as contemplated by this Agreement and except as set forth in
Schedule 4.3 hereto, there are no registration rights, and there is no voting
trust, proxy, rights plan, anti-takeover plan or other agreement or
understanding to which Qorus is a party or by which it is bound with respect to
any equity security of any class of Qorus.
4.4 Authority Relative to this Agreement. Qorus has full corporate power
and authority to: (i) execute, deliver and perform this Agreement, and each
ancillary document which Qorus has executed or delivered or is to execute or
deliver pursuant to this Agreement, and (ii) carry out Qorus' obligations
hereunder and thereunder and, to consummate the transactions contemplated hereby
(including the Transaction). The execution and delivery of this Agreement and
the consummation by Qorus of the transactions contemplated hereby (including the
Transaction) have been duly and validly authorized by all necessary corporate
action on the part of Qorus (including the approval by its Board of Directors),
and no other corporate proceedings on the part of Qorus are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Qorus and,
assuming the due authorization, execution and delivery thereof by the other
parties hereto, constitutes the legal and binding obligation of Qorus,
enforceable against Qorus in accordance with its terms, except as may be limited
by bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
and public policy. Upon the Stockholder Approval, which in any case shall be
required to have occurred subsequent to the Closing, the Series A Preferred
Stock will be convertible into duly authorized, validly issued, fully paid and
nonassessable shares of Qorus Common Stock.
4.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Qorus and the
execution and delivery of each ancillary document to be delivered by Qorus
hereunder do not, and the performance of this Agreement and each such ancillary
document by Qorus shall not: (i) conflict with or violate Qorus' Charter
Documents, (ii) conflict with or violate any Legal Requirements, or (iii) result
in any breach of or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or materially impair Qorus'
rights or alter the rights or obligations of any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or encumbrance on any of the properties or
assets of Qorus pursuant to, any Contracts, except, with respect to clauses (ii)
or (iii), for any such conflicts, violations, breaches, defaults or other
occurrences that would not, individually or in the aggregate, have a Material
Adverse Effect on Qorus.
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(b) Except for: (i) the filing of the Articles of Amendment with the
appropriate authorities and pursuant to the laws of the State of Florida, and
(ii) the requirement to obtain the Stockholder Approval which in any case shall
be required to have occurred subsequent to the Closing, the execution and
delivery of this Agreement by Qorus does not, and the performance of its
obligations hereunder will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Entity, except
(i) for applicable requirements, if any, of the Securities Act, the Exchange
Act, Blue Sky Laws, and the rules and regulations thereunder, and appropriate
documents with the relevant authorities of other jurisdictions in which Qorus is
qualified to do business, and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Qorus, or prevent consummation of the Transaction or
otherwise prevent the parties hereto from performing their obligations under
this Agreement.
4.6 Compliance. To Qorus' knowledge, Qorus has complied with, and is not
in violation of, any Legal Requirements with respect to the conduct of its
business, or the ownership or operation of its business, except for failures to
comply or violations which, individually or in the aggregate, have not had and
are not reasonably likely to have a Material Adverse Effect on Qorus. To Qorus'
knowledge, the businesses and activities of Qorus have not been and are not
being conducted in violation of any Legal Requirements. Qorus is not in default
or violation of any material term, condition or provision of its Charter
Documents. Except as set forth on Schedule 4.6, to Qorus' knowledge, no written
notice of non-compliance with any Legal Requirements has been received by Qorus.
4.7 SEC Filings; Financial Statements.
(a) Qorus has made available to VMdirect each report, registration
statement and definitive proxy statement filed by Qorus with the SEC for the 36
months prior to the date of this Agreement (the "Qorus SEC Reports"), which, to
Qorus' knowledge, are all the forms, reports, statements and documents required
to be filed by Qorus with the SEC for the 36 months prior to the date of this
Agreement. As of their respective dates (and with respect to Qorus SEC Reports
filed prior to June 30, 2004, to the knowledge of Qorus), the Qorus SEC Reports:
(i) were prepared in accordance and complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such Qorus SEC
Reports, and (ii) did not at the time they were filed (and if amended or
superseded by a filing prior to the date of this Agreement then on the date of
such filing and as so amended or superseded) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Except to the extent set forth in
the preceding sentence, Qorus makes no representation or warranty whatsoever
concerning the Qorus SEC Reports as of any time other than the time they were
filed.
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(b) Each set of financial statements (including, in each case, any
related notes thereto) contained in Qorus SEC Reports (and with respect to
financial statements (and notes thereto) contained in Qorus SEC Reports filed
prior to June 30, 2004, to the knowledge of Qorus), complied as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with U.S. GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto or, in the case of unaudited statements, do not contain
footnotes as permitted by Form 10-QSB of the Exchange Act) and each fairly
presents in all material respects the financial position of Qorus at the
respective dates thereof and the results of its operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
were or are subject to normal adjustments which were not or are not expected to
have a Material Adverse Effect on Qorus taken as a whole.
(c) Qorus has previously furnished to Company a complete and correct
copy of any amendments or modifications, which have not yet been filed with the
SEC but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Qorus with the SEC pursuant to
the Securities Act or the Exchange Act.
4.8 No Undisclosed Liabilities. Except as set forth in Schedule 4.8
hereto, Qorus has no liabilities (absolute, accrued, contingent or otherwise) of
a nature required to be disclosed on a balance sheet or in the related notes to
the financial statements prepared in accordance with U.S. GAAP which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of Qorus, except (i) liabilities provided for
in or otherwise disclosed in Qorus SEC Reports filed on or before the date
hereof, (ii) liabilities incurred since March 31, 2006 in the ordinary course of
business, none of which would have a Material Adverse Effect on Qorus, and (iii)
those liabilities and obligations specifically set forth in Section 6.11.
4.9 Absence of Certain Changes or Events. Except as set forth in Schedule
4.9 hereto or in Qorus SEC Reports filed prior to the date of this Agreement,
and except as contemplated by this Agreement, since March 31, 2006, there has
not been: (i) any Material Adverse Effect on Qorus, (ii) any declaration,
setting aside or payment of any dividend on, or other distribution (whether in
cash, stock or property) in respect of, any of Qorus' capital stock, or any
purchase, redemption or other acquisition by Qorus of any of Qorus' capital
stock or any other securities of Qorus or any options, warrants, calls or rights
to acquire any such shares or other securities, (iii) except for the designation
of the Series A Preferred Stock, any split, combination or reclassification of
any of Qorus' capital stock, (iv) any granting by Qorus of any increase in
compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past practice,
or any payment by Qorus of any bonus, except for bonuses made in the ordinary
course of business consistent with past practice, or any granting by Qorus of
any increase in severance or termination pay or any entry by Qorus into any
currently effective employment, severance, termination or indemnification
agreement or any agreement the benefits of which are contingent or the terms of
which are materially altered upon the occurrence of a transaction involving
Qorus of the nature contemplated hereby, (v) entry by Qorus into any licensing
or other agreement with regard to the acquisition or disposition of any
Intellectual Property other than licenses in the ordinary course of business
consistent with past practice or any amendment or consent with respect to any
licensing agreement filed or required to be filed by Qorus with respect to any
Governmental Entity, (vi) any material change by Qorus in its accounting
methods, principles or practices, except as required by concurrent changes in
U.S. GAAP, (vii) any change in the auditors of Qorus, (vii) any issuance of
capital stock of Qorus, or (viii) any revaluation by Qorus of any of their
respective assets, including, without limitation, writing down the value of, or
any sale of, assets of Qorus other than in the ordinary course of business.
21
4.10 Litigation. Except as set forth on Schedule 4.10 hereto or in Qorus
SEC Reports, there are no claims, suits, actions or proceedings pending or to
Qorus' knowledge, threatened against Qorus, before any court, governmental
department, commission, agency, instrumentality or authority, or any arbitrator
that seeks to restrain or enjoin the consummation of the transactions
contemplated by this Agreement or which could reasonably be expected, either
individually or in the aggregate with all such claims, actions or proceedings,
to have a Material Adverse Effect on Qorus or have a Material Adverse Effect on
the ability of the parties hereto to consummate the Transaction.
4.11 Employee Benefit Plans. Except as disclosed on Schedule 4.11 hereto,
Qorus does not maintain, and has no liability under, any Plan, and neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including
severance, unemployment compensation, golden parachute, bonus or otherwise)
becoming due to any stockholder, director or employee of Qorus, or (ii) result
in the acceleration of the time of payment or vesting of any such benefits.
4.12 Labor Matters. Qorus is not a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by Qorus,
nor does Qorus know of any activities or proceedings of any labor union to
organize any such employees.
4.13 Restrictions on Business Activities. To Qorus' knowledge, there is no
agreement, commitment, judgment, injunction, order or decree binding upon Qorus
or to which Qorus is a party which has or could reasonably be expected to have
the effect of prohibiting or materially impairing any business practice of
Qorus, any acquisition of property by Qorus or the conduct of business by Qorus
as currently conducted other than such effects, individually or in the
aggregate, which have not had and could not reasonably be expected to have, a
Material Adverse Effect on Qorus.
4.14 Title to Property. Qorus does not own or lease any Real Property or
Personal Property. There are no options or other contracts under which Qorus has
a right or obligation to acquire or lease any interest in Real Property or
Personal Property.
4.15 Taxes. Except as set forth in Schedule 4.15 hereto, to Qorus'
knowledge:
(a) Qorus has timely filed all Returns required to be filed by Qorus
with any Tax authority prior to the date hereof, except such Returns which are
not material to Qorus. All such Returns are true, correct and complete in all
material respects. Qorus has paid all Taxes shown to be due on such Returns.
22
(b) All Taxes that Qorus is required by law to withhold or collect
have been duly withheld or collected, and have been timely paid over to the
proper governmental authorities to the extent due and payable.
(c) Qorus has not been delinquent in the payment of any material Tax
nor is there any material Tax deficiency outstanding, proposed or assessed
against Qorus, nor has Qorus executed any unexpired waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax.
(d) No audit or other examination of any Return of Qorus by any Tax
authority is presently in progress, nor has Qorus been notified of any request
for such an audit or other examination.
(e) No adjustment relating to any Returns filed by Qorus has been
proposed in writing, formally or informally, by any Tax authority to Qorus or
any representative thereof.
(f) Qorus has no liability for any material unpaid Taxes which have
not been accrued for or reserved on Qorus' balance sheets included in the
audited financial statements for the most recent fiscal year ended, whether
asserted or unasserted, contingent or otherwise, other than any liability for
unpaid Taxes that may have accrued since the end of the most recent fiscal year
in connection with the operation of the business of Qorus in the ordinary course
of business.
(g) Qorus has not taken any action and does not know of any fact,
agreement, plan or other circumstance that is reasonably likely to prevent the
Transaction from qualifying as a tax-deferred exchange within the meaning of
Section 351 of the Code. Qorus is not an investment company within the meaning
of Section 351(e) of the Code.
4.16 Environmental Matters. Except as disclosed in Schedule 4.16 hereto
and except for such matters that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect, to Qorus' knowledge: (i)
Qorus has complied with all applicable Environmental Laws; (ii) the properties
currently owned or operated by Qorus (including soils, groundwater, surface
water, buildings or other structures) are not contaminated with any Hazardous
Substances; (iii) the properties formerly owned or operated by Qorus were not
contaminated with Hazardous Substances during the period of ownership or
operation by Qorus; (iv) Qorus is not subject to liability for any Hazardous
Substance disposal or contamination on any third party property; (v) Qorus has
not been associated with any release or threat of release of any Hazardous
Substance; (vi) Qorus has not received any notice, demand, letter, claim or
request for information alleging that Qorus may be in violation of or liable
under any Environmental Law; and (vii) Qorus is not subject to any orders,
decrees, injunctions or other arrangements with any Governmental Entity or
subject to any indemnity or other agreement with any third party relating to
liability under any Environmental Law or relating to Hazardous Substances.
4.17 Brokers. Except for Qorus' obligations under the Financial Advisory
Agreement (as defined in Section 6.11), Qorus has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agent's commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
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4.18 Intellectual Property. Qorus does not own, license or otherwise have
any right, title or interest in any Intellectual Property.
4.19 Agreements, Contracts and Commitments.
(a) Except for the Financial Advisory Agreement (as defined in
Section 6.11), any agreement with Florida Atlantic Stock Transfer, Inc.
("Transfer Agent"), the agreement with Vero Management, LLC which will be
terminated without liability to Qorus prior to Closing, or as set forth on
Schedule 4.19 or in Qorus SEC Reports, to Qorus' knowledge, there are no
contracts, agreements, leases, mortgages, indentures, note, bond, liens,
license, arbitration awards, judgments, decrees, orders, documents, instruments,
understandings and commitments, to which Qorus is a party or by or to which any
of the properties or assets of Qorus may be bound, subject or affected ("Qorus
Contracts").
(b) To Qorus' knowledge, each Qorus Contract was entered into at
arms' length and in the ordinary course, is in full force and effect and is
valid and binding upon and enforceable against each of the parties thereto.
True, correct and complete copies of all Qorus Contracts (or written summaries
in the case of oral Qorus Contracts) and of all outstanding offers or proposals
of Qorus have been heretofore delivered to Company.
(c) Neither Qorus nor, to the knowledge of Qorus, any other party
thereto is in breach of or in default under, and no event has occurred which
with notice or lapse of time or both would become a breach of or default under,
any Qorus Contract, and no party to any Qorus Contract has given any written
notice of any claim of any such breach, default or event, which, individually or
in the aggregate, are reasonably likely to have a Material Adverse Effect on
Qorus. Each agreement, contract or commitment to which Qorus is a party or by
which it is bound that has not expired by its terms is in full force and effect,
except where such failure to be in full force and effect is not reasonably
likely to have a Material Adverse Effect on Qorus.
4.20 Insurance. Qorus does not maintain any Insurance Policies.
4.21 Governmental Actions/Filings. To its knowledge, Qorus has been
granted and holds, and has made, all Governmental Actions/Filings necessary to
the conduct by Qorus of its businesses (as presently conducted) or used or held
for use by Qorus, all of which are listed in Schedule 4.21 hereto, and true,
complete and correct copies of which have heretofore been delivered to Company.
Each such Governmental Action/Filing is in full force and effect and, expect as
disclosed in Schedule 4.21 hereto, will not expire prior to December 31, 2006,
and Qorus is in compliance with all of its obligations with respect thereto. To
Qorus' knowledge, no event has occurred and is continuing which requires or
permits, or after notice or lapse of time or both would require or permit, and
consummation of the transactions contemplated by this Agreement or the ancillary
documents will not require or permit (with or without notice or lapse of time,
or both), any modification or termination of any such Governmental
Actions/Filings. Except as set forth in Schedule 4.21, to Qorus' knowledge, no
Governmental Action/Filing is necessary to be obtained, secured or made by Qorus
to enable it to continue to conduct its businesses and operations and use its
properties after the Closing in a manner which is consistent with current
practice.
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4.22 Interested Party Transactions. Except as set forth in the Schedule
4.22 hereto or in Qorus SEC Reports, no employee, officer, director or
stockholder of Qorus or a member of his or her immediate family is indebted to
Qorus, nor is Qorus indebted (or committed to make loans or extend or guarantee
credit) to any of them, other than (i) for payment of salary for services
rendered, (ii) reimbursement for reasonable expenses incurred on behalf of
Qorus, and (iii) for other employee benefits made generally available to all
employees. Except as set forth in Schedule 4.22, to Qorus' knowledge, none of
such individuals has any direct or indirect ownership interest in any Person
with whom Qorus is affiliated or with whom Qorus has a material contractual
relationship, or any Person that competes with Qorus, except that each employee,
stockholder, officer or director of Qorus and members of their respective
immediate families may own less than 5% of the outstanding stock in publicly
traded companies that may compete with Qorus. Except as set forth in Schedule
4.22, to Qorus' knowledge, no officer, director or stockholder or any member of
their immediate families is, directly or indirectly, interested in any material
contract with Qorus (other than such contracts as relate to any such individual
ownership of capital stock or other securities of Qorus).
4.23 Indebtedness; Qorus Assets. Except as set forth on Schedule 4.23,
Qorus has no indebtedness for borrowed money. Immediately prior to the Closing,
Qorus will have no assets, except for cash reserves earmarked for the payment of
the Accounts Payable (as defined in Section 6.11 hereof) which remain unpaid,
which Qorus shall be responsible for payment following the Closing pursuant to
Section 6.11 hereof ("Cash Reserve"). The Accounts Payable constitute all
outstanding unpaid accounts payable, accrued expenses and other liabilities of
Qorus arising out of or with respect to the period commencing July 1, 2004
through the Closing (including any costs and expenses incurred by Qorus in
connection with the Transaction).
4.24 Over-the-Counter Bulletin Board Quotation. Qorus Common Stock is
quoted on the Over-the-Counter Bulletin Board ("OTC BB"). There is no action or
proceeding pending or, to Qorus' knowledge, threatened against Qorus by NASDAQ
or NASD, Inc. ("NASD") with respect to any intention by such entities to
prohibit or terminate the quotation of Qorus Common Stock on the OTC BB.
4.25 Exchange Act Compliance. The Company is in compliance with, and
current in, all of the reporting, filing and other requirements under the
Exchange Act, the shares of the Company's common stock have been duly and
properly registered under Section 12(g) of the Exchange Act, and the Company is
in compliance with all of the requirements under, and imposed by, Section 12(g)
of the Exchange Act, except where a failure to so comply is not reasonably
likely to have a Material Adverse Effect on Qorus.
4.26 Board Approval. The Board of Directors of Qorus (including any
required committee or subgroup of the Board of Directors of Qorus) has, as of
the date of this Agreement, unanimously approved this Agreement and the
transactions contemplated hereby.
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4.27 Representations and Warranties Regarding Qorus Acquisition. Qorus
Acquisition is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. Complete and correct copies of
the certificate of incorporation and bylaws of Qorus Acquisition, as currently
in effect (the "Qorus Acquisition Charter Documents"), have been heretofore
delivered to the Company. Qorus Acquisition is not in violation of any of the
provisions of the Qorus Acquisition Charter Documents. Qorus Acquisition was
formed solely for the purpose of engaging in a business combination transaction,
and has engaged in no other business activities.
4.28 Representations and Warranties Complete. The representations and
warranties of Qorus included in this Agreement and any Schedule provided
pursuant to this Agreement or delivered hereunder, are true and complete in all
material respects and do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements contained therein not misleading, under the circumstance under
which they were made. Any disclosure on one schedule will be deemed notice of
and disclosure by Qorus in respect of any other representation and warranty of
Qorus.
ARTICLE V
CONDUCT PRIOR TO THE EFFECTIVE TIME
5.1 Conduct of Business by VMdirect and Qorus. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement pursuant to its terms or the Closing, VMdirect and Qorus shall,
except to the extent that the other party shall otherwise consent in writing,
carry on its business in the usual, regular and ordinary course consistent with
past practices, in substantially the same manner as heretofore conducted and in
compliance with all applicable laws and regulations (except where noncompliance
would not have a Material Adverse Effect), pay its debts and taxes when due
subject to good faith disputes over such debts or taxes, pay or perform other
material obligations when due, and use its commercially reasonable efforts
consistent with past practices and policies to (i) preserve substantially intact
its present business organization, (ii) keep available the services of its
present officers, managers and employees, and (iii) preserve its relationships
with customers, suppliers, distributors, licensors, licensees, and others with
which it has significant business dealings. In addition, except as permitted or
required by the terms of this Agreement or set forth on the Schedule 5.1 hereto,
without the prior written consent of the other party, during the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement pursuant to its terms or the Closing, VMdirect and Qorus shall
not do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or (except
as specifically provided for herein) change the period of exercisability of
options or restricted stock, or reprice options granted under any employee,
consultant, director or other stock plans or authorize cash payments in exchange
for any options granted under any of such plans;
(b) Grant any severance or termination pay to any officer, manager
or employee except pursuant to applicable law, written agreements outstanding,
or policies existing on the date hereof and as previously or concurrently
disclosed in writing or made available to the other party, or adopt any new
severance plan, or amend or modify or alter in any manner any severance plan,
agreement or arrangement existing on the date hereof;
26
(c) Transfer or license to any person or otherwise extend, amend or
modify any material rights to any Intellectual Property of VMdirect or Qorus, as
applicable, or enter into grants to transfer or license to any person future
patent rights, other than in the ordinary course of business consistent with
past practices provided that in no event shall VMdirect or Qorus license on an
exclusive basis or sell any Intellectual Property of VMdirect or Qorus, as
applicable;
(d) Except for employment agreements in the ordinary course or
otherwise scheduled or set forth in this Agreement, declare, set aside or pay
any dividends on or make any other distributions (whether in cash, stock, equity
securities or property) in respect of any capital stock, membership interests or
ownership interests, or split, combine or reclassify any capital stock,
membership interests or ownership interests, or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for any
capital stock, membership interests or ownership interests;
(e) Purchase, redeem or otherwise acquire, directly or indirectly,
any shares of capital stock, membership interests or ownership interests of
VMdirect or Qorus, as applicable, except repurchases of unvested shares,
membership interests or ownership interests at cost in connection with the
termination of the employment relationship with any employee pursuant to stock
option or purchase agreements in effect on the date hereof;
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber,
or agree to any of the foregoing with respect to, any shares of capital stock,
membership interests or ownership interests or any securities convertible into
or exchangeable for shares of capital stock, membership interests or ownership
interests, or subscriptions, rights, warrants or options to acquire any shares
of capital stock, membership interests or ownership interests or any securities
convertible into or exchangeable for shares of capital stock, membership
interests or ownership interests, or enter into other agreements or commitments
of any character obligating it to issue any such shares, membership interests,
ownership interests or convertible or exchangeable securities (except relating
to employment and similar agreements);
(g) Amend its Charter Documents, except for the filing of the
Articles of Amendment by Qorus;
(h) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to the
business of Qorus or VMdirect, as applicable, or enter into any joint ventures,
strategic partnerships or alliances or other arrangements that provide for
exclusivity of territory or otherwise restrict such party's ability to compete
or to offer or sell any products or services;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets, except sales of inventory in the ordinary course of
business consistent with past practice and, except for the sale, lease or
disposition (other than through licensing) of property or assets which are not
material, individually or in the aggregate, to the business of such party;
27
(j) Incur any indebtedness for borrowed money in excess of $100,000
in the aggregate or guarantee any such indebtedness of another person, issue or
sell any debt securities or options, warrants, calls or other rights to acquire
any debt securities of Qorus or VMdirect, as applicable, enter into any "keep
well" or other agreement to maintain any financial statement condition or enter
into any arrangement having the economic effect of any of the foregoing other
than purchase agreements relating to preparing for production, marketing and
selling products and services;
(k) Adopt or amend any employee benefit plan, policy or arrangement,
any employee stock purchase or employee stock option plan, or enter into any
employment contract or collective bargaining agreement (other than offer letters
and agreements entered into in the ordinary course of business consistent with
past practice), pay any special bonus or special remuneration to any director or
employee, or increase the salaries or wage rates or fringe benefits (including
rights to severance or indemnification) of its directors, officers, employees or
consultants, except in the ordinary course of business consistent with past
practices and other than for new hires in the ordinary course;
(l) Pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), or litigation (whether or not commenced prior to the date of this
Agreement) other than the payment, discharge, settlement or satisfaction, in the
ordinary course of business consistent with past practices or in accordance with
their terms, or liabilities recognized or disclosed in the most recent financial
statements (or the notes thereto) of VMdirect or of Qorus, as applicable, or
incurred since the date of such financial statements, or waive the benefits of,
agree to modify in any manner, terminate, release any person from or knowingly
fail to enforce any confidentiality or similar agreement to which VMdirect is a
party or of which VMdirect is a beneficiary or to which Qorus is a party or of
which Qorus is a beneficiary, as applicable;
(m) Except in the ordinary course of business consistent with past
practices, modify, amend or terminate any Material Contract of VMdirect or
Qorus, as applicable, or waive, delay the exercise of, release or assign any
material rights or claims thereunder;
(n) Except as required by U.S. GAAP, revalue any of its assets or
make any change in accounting methods, principles or practices;
(o) Incur or enter into any agreement, contract or commitment
requiring such party to pay in excess of $100,000 in any 12 month period, other
than in the ordinary course or otherwise provided in this Agreement and
employment agreements which may be entered into by VMdirect;
(p) Engage in any action that could reasonably be expected to cause
the Transaction to fail to qualify as a tax-deferred exchange under Section 351
of the Code;
(q) Settle any litigation;
28
(r) Make or rescind any Tax elections that, individually or in the
aggregate, could be reasonably likely to adversely affect in any material
respect the Tax liability or Tax attributes of such party, settle or compromise
any material income tax liability or, except as required by applicable law,
materially change any method of accounting for Tax purposes or prepare or file
any Return in a manner inconsistent with past practice;
(s) Form, establish or acquire any Subsidiary;
(t) Permit any Person to exercise any of its discretionary rights
under any Plan to provide for the automatic acceleration of any outstanding
options, the termination of any outstanding repurchase rights or the termination
of any cancellation rights issued pursuant to such plans; or
(u) Agree in writing or otherwise agree, commit or resolve to take
any of the actions described in Section 5.1 (a) through (t) above.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Board of Directors of Qorus. At Closing, the current board of
directors of Qorus shall deliver duly adopted resolutions to: (a) set the size
of Qorus' board of directors to between three (3) and five (5) members effective
as of the Closing, the actual number to be determined by resolution of Qorus'
board of directors and to initially equal three (3) members effective as of the
Closing; and (b) appoint the following persons to Qorus' board of directors
effective as of the Closing: (i) Xxxxx Xxxxxx ("Xxxxxx"); (ii) one member
designated by VM Investors, LLC, who shall be Xxxxx Xxxxxx, and (iii) one member
selected by KRM Fund, who shall be Xxxxx Xxxxxxx ("KRM Designated Member"); and
(c) accepting the resignations of the current officers and directors of Qorus
effective as of the Closing ("Resolutions"). At Closing, the current officers
and directors of Qorus shall deliver their resignations, as appropriate, as
officers and directors of Qorus to be effective upon the Closing (the
"Resignations"). Prior to Closing, VMdirect shall deliver or cause to be
delivered to Qorus completed and signed director and officer questionnaires
("Questionnaires") for the new directors and each officer to be appointed by
Qorus following Closing. The foregoing designations of the new directors (and
the officers to be appointed by Qorus following Closing) shall be subject to
Qorus' receipt of the completed and signed Questionnaires ("D&O Information").
VM Investors, LLC and KRM Fund shall execute and deliver at Closing the Voting
Agreement which shall provide, among other things, that VM Investors, LLC will
vote their Preferred Shares (or in the event of conversion, the Conversion
Shares) to elect the KRM Designated Member to Qorus' board of directors for a
period of one year following the Closing.
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6.2 Undertaking by VMdirect Accountant. On or before the Closing, VMdirect
shall obtain, and deliver to Qorus, an undertaking from Xxxxxxxx & Company P.A.
("Accountant"), in a form and substance satisfactory to Qorus, providing that:
(i) the Accountant has agreed to an engagement with Qorus to serve as its
certified public accountants following the Closing for purposes of auditing and
reviewing the financial statements of Qorus and VMdirect to comply with Qorus'
ongoing reporting requirements under the Exchange Act including, without
limitation, the filing of Forms 10-Q, 10-K, and 8-K, (ii) the transaction
contemplated hereunder will not disqualify or otherwise prohibit the Accountant
from rendering the foregoing engagement services or from undertaking such
services in a timely manner, (iii) the Accountant is duly registered with the
PCAOB, (iv) the Accountant shall provide its consent to the use of their audited
financial statements and accompanying reports for Qorus and VMdirect, as
applicable, in any regulatory filing by Qorus prior to or following the Closing,
and (v) consenting to the use of its name and the disclosure of its engagement
by Qorus in the Change of Accountant Form 8-K (as defined in Section 6.3)
("Accountant Undertaking"). A signed copy of the engagement letter between Qorus
and Accountant shall be attached to the Accountant Undertaking.
6.3 Change of Accountants. At Closing, Qorus shall prepare the Form 8-K
announcing the change in Qorus' certifying accountants from KBA Group LLP
("Qorus' Accountant") to the Accountant effective as of the Closing ("Change of
Accountant Form 8-K"), in a form acceptable to the VMdirect and in a format
acceptable for XXXXX filing. The Change of Accountant Form 8-K shall be filed
with the SEC at or within four (4) business days following Closing, and prior to
the filing thereof, Qorus' Accountant shall have issued its resignation letter
to Qorus resigning from the engagement and consenting to the use of its name and
the disclosure of its resignation in the Change of Accountant Form 8-K
("Resignation Letter").
6.4 Other Actions.
(a) Within four (4) business days following the execution hereof,
Qorus shall prepare and file the Form 8-K announcing the execution of this
Agreement, which shall include all information required by such form, which form
shall be in a form reasonably acceptable to VMdirect and in a format acceptable
for XXXXX filing.
(b) At least ten (10) days prior to Closing, Qorus shall prepare the
information statement required by Rule 14f-1 promulgated under the Exchange Act
("14f-1 Information Statement"), and Qorus shall file the 14f-1 Information
Statement with the SEC and mail the same to each of Qorus' record stockholders.
(c) At least five (5) days prior to Closing, VMdirect shall prepare
the Form 8-K announcing the Closing, which shall include all information
required by such form, including the information required by Form 10-SB with
respect to VMdirect, any other information required in connection with Qorus
ceasing to be a shell company as a result of the Transaction, the U.S. GAAP
Financial Statements and the Pro Forma Financial Statements (as defined below)
("Transaction Form 8-K"), which shall be in a form reasonably acceptable to
Qorus and in a format acceptable for XXXXX filing. Prior to Closing, VMdirect
shall prepare the press release announcing the consummation of the Transaction
hereunder ("Press Release").
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(d) At least five (5) days prior to the Closing, VMdirect shall
deliver to Qorus the U.S. GAAP Financial Statements and, to the extent required
by SEC rules as determined by the Accountant, the pro forma consolidated
financial statements for VMdirect, and pro forma consolidated financial
statements for VMdirect and Qorus giving effect to the Transaction, for such
periods as required by the SEC to be included in a Form 8-K or any other report
or form required to be filed with the SEC at or after Closing with respect to
the Transaction, all prepared in all material respects with the published rules
and regulations of the SEC and in accordance with U.S. GAAP applied on a
consistent basis throughout the periods involved (the "Pro Forma Financial
Statements"). The U.S. GAAP Financial Statements shall have been audited by the
Accountant and shall be in a format acceptable for inclusion on the Transaction
8-K. The Pro Forma Financial Statements shall have been reviewed by the
Accountant and shall be in a format acceptable for inclusion on the Transaction
8-K.
VMdirect and Qorus shall cooperate with each other and use their
respective commercially reasonable efforts to take or cause to be taken all
actions, and do or cause to be done all things, necessary, proper or advisable
on its part under this Agreement and applicable laws to consummate the
Transaction and the other transactions contemplated hereby as soon as
practicable, including preparing and filing as soon as practicable all
documentation to effect all necessary notices, reports and other filings and to
obtain as soon as practicable all consents, registrations, approvals, permits
and authorizations necessary or advisable to be obtained from any third party
and/or any Governmental Entity in order to consummate the Transaction or any of
the other transactions contemplated hereby. Subject to applicable laws relating
to the exchange of information and the preservation of any applicable
attorney-client privilege, work-product doctrine, self-audit privilege or other
similar privilege, VMdirect and Qorus shall have the right to review and comment
on in advance, and to the extent practicable each will consult the other on, all
the information relating to such party, that appear in any filing made with, or
written materials submitted to, any third party and/or any Governmental Entity
in connection with the Transaction and the other transactions contemplated
hereby. In exercising the foregoing right, VMdirect and Qorus shall act
reasonably and as promptly as practicable.
6.5 Required Information. In connection with the preparation of the
Transaction Form 8-K, 14f-1 Information Statement, and Press Release, and for
such other reasonable purposes, VMdirect and Qorus shall, upon request by the
other, furnish the other with all information concerning themselves, their
respective subsidiaries, directors, officers, managers, managing members,
stockholders and members (including the directors and officers of Qorus to be
elected effective as of the Closing pursuant to Section 6.1 hereof) and such
other matters as may be reasonably necessary or advisable in connection with the
Transaction, or any other statement, filing, notice or application made by or on
behalf of VMdirect and Qorus to any third party and/or any Governmental Entity
in connection with the Transaction and the other transactions contemplated
hereby. Each party warrants and represents to the other party that all such
information shall be true and correct in all material respects and will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
6.6 Confidentiality; Access to Information.
(a) Any confidentiality agreement or letter of intent previously
executed by the parties shall be superseded in its entirety by the provisions of
this Agreement. Each party agrees to maintain in confidence any non-public
information received from the other party, and to use such non-public
information only for purposes of consummating the transactions contemplated by
this Agreement. Such confidentiality obligations will not apply to (i)
information which was known to the one party or their respective agents prior to
receipt from the other party; (ii) information which is or becomes generally
known; (iii) information acquired by a party or their respective agents from a
third party who was not bound to an obligation of confidentiality; and (iv)
disclosure required by law. In the event this Agreement is terminated as
provided in Article IX hereof, each party will return or cause to be returned to
the other all documents and other material obtained from the other in connection
with the Transaction contemplated hereby.
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(b) Access to Information.
(i) VMdirect will afford Qorus and its financial advisors,
accountants, counsel and other representatives reasonable access during normal
business hours, upon reasonable notice, to the properties, books, records and
personnel of VMdirect during the period prior to the Closing to obtain all
information concerning the business, including the status of product development
efforts, properties, results of operations and personnel of VMdirect, as Qorus
may reasonably request. No information or knowledge obtained by Qorus in any
investigation pursuant to this Section 6.6 will affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Transaction.
(ii) Qorus will afford VMdirect and its financial advisors,
underwriters, accountants, counsel and other representatives reasonable access
during normal business hours, upon reasonable notice, to the properties, books,
records and personnel of Qorus during the period prior to the Closing to obtain
all information concerning the business, including the status of product
development efforts, properties, results of operations and personnel of Qorus,
as VMdirect may reasonably request. No information or knowledge obtained by
VMdirect in any investigation pursuant to this Section 6.6 will affect or be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Transaction.
6.7 No Solicitation. Other than with respect to the Transaction, VMdirect
and Qorus agree that neither of them nor any of their officers, directors,
managers, or managing members shall, and that they shall direct and use their
reasonable best efforts to cause their agents and other representatives
(including any investment banker, attorney or accountant retained by it) not to,
directly or indirectly, initiate, solicit, encourage or otherwise facilitate any
inquiries or the making of any proposal or offer with respect to (i) a merger,
reorganization, share exchange, consolidation or similar transaction involving
them, (ii) any sale, lease, exchange, mortgage, pledge, transfer or purchase of
all or substantially all of the assets or equity securities of them, taken as a
whole, in a single transaction or series of related transactions or (iii) any
tender offer or exchange offer for 20% or more of the outstanding shares of
Qorus Common Stock or VMdirect's Interests (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal"). VMdirect and Qorus
further agree that neither of them nor any of their officers, directors,
managers, or managing members shall, and that they shall direct and use their
reasonable best efforts to cause their agents and representatives not to,
directly or indirectly, engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal. VMdirect and Qorus agree
that they will immediately cease and cause to be terminated any existing
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal. VMdirect and Qorus agree that they will take the
necessary steps to promptly inform the individuals or entities referred to in
the first sentence hereof of the obligations undertaken in this Section 6.7.
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Notwithstanding anything contained in this Agreement to the contrary,
nothing contained in this Agreement shall prevent the board of directors of
Qorus, or their respective representatives from, prior to the Closing (A)
complying with Rule 14e-2 promulgated under the Exchange Act with regard to an
Acquisition Proposal, if applicable, or otherwise complying with the Exchange
Act; (B) providing information in response to a request therefore by a person
who has made a bona fide unsolicited Acquisition Proposal; (C) engaging in any
negotiations or discussions with any person who has made a bona fide unsolicited
Acquisition Proposal or otherwise facilitating any effort or attempt to
implement an Acquisition Proposal; or (D) withdrawing or modifying the approval
or recommendation by Qorus' board of directors of this Agreement, approving or
recommending any Acquisition Proposal or causing the applicable party to enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement relating to any Acquisition Proposal, if, and only to
the extent that in each such case referred to in clause (B), (C) or (D) above,
Qorus' board of directors determines in good faith, after consultation with
outside legal counsel that such action is necessary to act in a manner
consistent with the directors' fiduciary duties under applicable law and
determines in good faith after consultation with its financial advisors that the
person or group making such Acquisition Proposal has adequate sources of
financing to consummate such Acquisition Proposal and that such Acquisition
Proposal, if consummated as proposed, is materially more favorable to the
stockholders of Qorus from a financial point of view (any such more favorable
Acquisition Proposal being referred to as a "Superior Proposal") and determines
in good faith that such Superior Proposal is reasonably capable of being
consummated, taking into account legal, financial, regulatory and other aspects
of the proposal and the person making the proposal.
6.8 Public Disclosure. Except to the extent previously disclosed or to the
extent the parties believe that they are required by applicable law or
regulation to make disclosure, prior to Closing, no party shall issue any
statement or communication to the public regarding the Transaction without the
consent of the other party, which consent shall not be unreasonably withheld. To
the extent a party hereto believes it is required by law or regulation to make
disclosure regarding the Transaction, it shall, if possible, immediately notify
the other party prior to such disclosure. Notwithstanding the foregoing, the
parties hereto agree that Qorus will prepare and file a Current Report on Form
8-K pursuant to the Exchange Act reasonably acceptable to VMdirect to report the
execution of this Agreement and that any party hereto may file any reports as
required by the Exchange Act including, without limitation, any reports on
Schedule 13D.
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6.9 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use its commercially reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Transaction and the other transactions contemplated by
this Agreement, including using commercially reasonable efforts to accomplish
the following: (i) the taking of all reasonable acts necessary to cause the
conditions precedent set forth in Article VII to be satisfied, (ii) the
obtaining of all necessary actions or nonactions, waivers, consents, approvals,
orders and authorizations from Governmental Entities and the making of all
necessary registrations, declarations and filings (including registrations,
declarations and filings with Governmental Entities, if any) and the taking of
all reasonable steps as may be necessary to avoid any suit, claim, action,
investigation or proceeding by any Governmental Entity, (iii) the obtaining of
all consents, approvals or waivers from third parties required as a result of
the transactions contemplated in this Agreement, (iv) the defending of any
suits, claims, actions, investigations or proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (v) the execution or delivery of any additional
instruments reasonably necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement. In connection with and
without limiting the foregoing, Qorus and its board of directors and VMdirect
and its managers and members shall, if any state takeover statute or similar
statute or regulation is or becomes applicable to the Transaction, this
Agreement or any of the transactions contemplated by this Agreement, use their
commercially reasonable efforts to enable the Transaction and the other
transactions contemplated by this Agreement to be consummated as promptly as
practicable on the terms contemplated by this Agreement. Notwithstanding
anything herein to the contrary, nothing in this Agreement shall be deemed to
require Qorus or VMdirect to agree to any divestiture by itself or any of its
affiliates of shares of capital stock, membership interests or ownership
interest or of any business, assets or property, or the imposition of any
material limitation on the ability of any of them to conduct their business or
to own or exercise control of such assets, properties and stock.
(b) VMdirect and the Members shall give prompt notice to Qorus upon
becoming aware that any representation or warranty made by them contained in
this Agreement has become untrue or inaccurate, or of any failure of VMdirect or
the Members to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by them under this
Agreement, in each case, such that the conditions set forth in Article VII would
not be satisfied; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
(c) Qorus shall give prompt notice to VMdirect and the Members upon
becoming aware that any representation or warranty made by it contained in this
Agreement has become untrue or inaccurate, or of any failure of Qorus to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement, in each case, such
that the conditions set forth in Article VII would not be satisfied; provided,
however, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
6.10 Treatment as a Tax-Deferred Exchange. Qorus, VMdirect and the Members
shall not take any action prior to or following the Transaction that could
reasonably be expected to cause the Transaction to fail to qualify as a
tax-deferred exchange within the meaning of Section 351 of the Code. Each party
hereto agrees to report the Transaction as a tax-deferred exchange within the
meaning of section 351 of the Code for Federal income tax purposes.
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6.11 Absence of Material Liabilities. Immediately prior to Closing, Qorus
shall have no liabilities or obligations requiring the payment of monies, other
than obligations under or with respect to: (i) a certain Financial Advisory
Agreement, in the form attached hereto as Exhibit C ("Financial Advisory
Agreement"), (ii) any agreement with the Transfer Agent, (iii) Qorus Contracts
disclosed under Section 4.19 hereto, and (iv) unpaid accounts payable, accrued
expenses or other liabilities of Qorus arising out of or with respect to the
period commencing July 1, 2004 through the Closing (including any costs and
expenses incurred by Qorus in connection with the Transaction)("Accounts
Payable"), which shall be included on a schedule prepared by Qorus and delivered
to VMdirect not less than three (3) days prior to Closing. Qorus will establish
the Cash Reserve provided for in Section 4.23 in an amount equal to the Accounts
Payable. Upon Closing, to the extent not satisfied by Qorus prior to or at
Closing, the Accounts Payable shall be paid in full from the Cash Reserve.
Following the Closing, VMdirect shall pay and satisfy Qorus' obligations under
the agreement with the Transfer Agent, and the remaining Qorus Contracts shall
be terminated.
6.12 Cash Payments at Closing for Financial Advisory Agreement. At
Closing, VMdirect shall pay the reverse merger fees of $500,000 under the
Financial Advisory Agreement less the amount of the Deposit made under Section
1.9 (such sum being referred to herein, as the "VMdirect Closing Payment"). At
Closing, the Deposit made under Section 1.9 shall be paid to Xxxxxxx Securities,
LLC ("Xxxxxxx Securities") by Qorus in partial payment of the reverse merger
fees under the Financial Advisory Agreement ("Qorus Closing Payment").
6.13 Business Records. At Closing, Qorus shall cause to be delivered to
VMdirect all records and documents relating to Qorus, which Qorus possesses,
including, without limitation, books, records, government filings, Returns,
Charter Documents, Corporate Records, Stock Records, consent decrees, orders,
and correspondence, director and stockholder minutes and resolutions, stock
ownership records, financial information and records, electronic files
containing any financial information and records, and other documents used in or
associated with Qorus ("Business Records").
6.14 Information Statement. As soon as practicable after the Closing, but
not later than ten (10) business days after Closing, the stockholders of Qorus
may determine to approve and adopt the following matters (the "Stockholder
Matters"):
(a) To approve a 1 for 50 reverse stock split with special treatment
for certain of Qorus' stockholders to preserve round lot stockholders ("Reverse
Split");
(b) To approve the change of the name of Qorus to a name selected by
the Board;
(c) To amend Qorus' Articles of Incorporation to increase the number
of authorized shares of Qorus Common Stock from 50,000,000 shares to 100,000,000
shares;
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(d) To reincorporate in the State of Delaware;
(e) To approve the adoption of a stock incentive plan ("Stock Plan")
reserving not more than 2,500,000 shares of Qorus Common Stock for issuance
thereunder (on a post-Reverse Split basis), which number includes outstanding
VMdirect Purchase Rights (which are in the form of options) to be assumed by
Qorus (on a post-Reverse Split basis); and
(f) All such other actions as shall be necessary or desirable in
connection with or related to the foregoing actions in (a) through (e) above.
In connection with the foregoing, Qorus shall, upon receipt of the written
consent of a sufficient number of its stockholders to approve the Stockholder
Matters, prepare an information statement pursuant to Regulation 14C promulgated
under Section 14 of the Exchange Act (together with any amendments or
supplements thereto, the "Information Statement"). Following Closing, KRM Fund
shall reasonably cooperate with Qorus and provide such information available to
it as may be necessary or required, in the reasonable determination of counsel
to VMdirect and to Qorus, for Qorus to prepare the Information Statement.
The written consent of holders of the requisite number of voting
securities of Qorus approving the Stockholder Matters shall become effective
twenty (20) days following the filing of the definitive Information Statement
with the SEC. Upon receipt of such written consent, Qorus will file the
Information Statement with the SEC and shall cause such Information Statement to
become definitive and to be mailed to the holders of Qorus' securities entitled
to vote at a meeting of stockholders.
In the event the Information Statement is reviewed by the SEC, Qorus shall
respond promptly to any comments of the SEC or its staff with respect to the
Information Statement and use its reasonable best efforts to have the
Information Statement cleared by the SEC as soon as practicable after its
filing, provided, however, in the event that the substance of any review by the
SEC involves or inquires with respect to information, filings, reports,
financial statements or other circumstances of Qorus occurring, reported or
filed prior to the Closing (the "Pre-Closing Period"), KRM Fund shall, upon the
reasonable request of VMdirect or Qorus, use its reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with VMdirect and Qorus in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Information Statement, including, without limitation,
providing such information, addressing such comments, and otherwise resolving
such matters as may relate to the Pre-Closing Period and any SEC comments
relating thereto or any SEC inquiry thereof.
As a condition to the Closing, VM Investors, LLC and KRM Fund shall
execute and deliver a certain voting agreement ("Voting Agreement") in the form
attached hereto as Exhibit C which shall provide, among other things, that VM
Investors, LLC and KRM Funds will vote its Series A Preferred Stock (or in the
event of conversion, the Qorus Common Stock issuable upon conversion) or Qorus
Common Stock, as the case may be, to approve the Stockholder Matters.
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ARTICLE VII
CONDITIONS TO THE TRANSACTION
7.1 Conditions to Obligations of Each Party to Effect the Transaction. The
respective obligations of each party to this Agreement to effect the Transaction
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Transaction illegal or
otherwise prohibiting consummation of the Transaction, substantially on the
terms contemplated by this Agreement. All waiting periods, if any, under any law
in any jurisdiction in which VMdirect or Qorus has material operations relating
to the transactions contemplated hereby has expired or terminated early and all
material approvals required to be obtained prior to the Transaction in
connection with the transactions contemplated hereby shall have been obtained.
(b) Debt Holder Consents. The lenders under any credit facilities,
secured loans, mortgages and other indebtedness of VMdirect for borrowed money
shall have consented in writing to the Transaction (if such consent is required
in connection with this Transaction).
(c) Required Approvals. This Agreement and the Transaction have been
duly approved and adopted, by the requisite vote, if any, of the Members and
managers of VMdirect under the laws of the State of Nevada and the Charter
Documents, and by the requisite actions of the Board of Directors of Qorus under
the laws of the State of Florida and Qorus Charter Documents.
(d) Certificate of Designations. Prior to Closing, the Board of
Directors of Qorus shall have adopted, and Qorus shall have filed with, and had
accepted by, the Secretary of State of the State of Florida, the Articles of
Amendment in the form attached hereto as Exhibit B.
(e) 14f-1 Information Statement. At least ten (10) days prior to
Closing, Qorus shall have filed the 14f-1 Information Statement with the SEC,
and Qorus shall have mailed the 14f-1 Information Statement to each of the
record stockholders of Qorus, and Qorus shall have otherwise complied with all
of the provisions under Rule 14f-1 under the Exchange Act.
(f) Assumption of VMdirect Purchase Rights. VMdirect shall have
taken all necessary steps to effectuate the provisions of Section 1.6, including
obtaining all necessary consents and releases, if any, from the holders of
VMdirect Purchase Rights. VMdirect shall have obtained agreements terminating
all pre-emptive rights.
(g) Financial Statements; Transaction Form 8-K. At least five (5)
days prior to Closing, VMdirect shall have delivered to Qorus the U.S. GAAP
Financial Statements and the Pro Forma Financial Statements, each in a form
acceptable to Qorus, which acceptance shall not be unreasonably withheld. At
least five (5) days prior to Closing, VMdirect shall have delivered to Qorus the
Transaction Form 8-K in a form acceptable to Qorus, which acceptance shall not
be unreasonably withheld. Qorus shall have filed the Transaction Form 8-K with
the SEC at Closing.
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(h) Vero Termination Agreement. Qorus shall have terminated its
agreement with Vero Management, LLC, effective at Closing.
(i) Voting Agreement. KRM Fund and VM Investors, LLC shall have
executed and delivered the Voting Agreement, in the form attached hereto as
Exhibit A.
(j) Blue Sky Laws. The issuance of Qorus' Preferred Stock to be
issued under this Agreement shall be exempt from, or have been qualified under,
the Blue Sky Laws of each appropriate jurisdiction to the satisfaction of Qorus
and VMdirect and their respective counsels.
(k) Execution by all Members. At or prior to Closing, all Members
(including those acquiring an Interest in connection with the Financing) shall
have executed this Agreement or a counterpart signature page hereto.
7.2 Additional Conditions to Obligations of Members and VMdirect. The
obligations of VMdirect and the Members to consummate and effect the Transaction
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
and only by VMdirect:
(a) Representations and Warranties. Each representation and warranty
of Qorus contained in this Agreement (i) shall have been true and correct as of
the date of this Agreement and (ii) shall be true and correct on and as of the
Closing Date with the same force and effect as if made on the Closing Date.
VMdirect shall have received a certificate with respect to the foregoing signed
on behalf of Qorus by an authorized officer of Qorus ("Qorus Closing
Certificate").
(b) Agreements and Covenants. Qorus shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date.
(c) Director and Officer Resignations and Appointments. Qorus shall
have delivered to VMdirect the Resignations and Resolutions in a form
satisfactory to VMdirect, effective as of the Closing. Qorus shall also have
delivered to VMdirect evidence satisfactory to VMdirect of the appointment of
new directors of Qorus in accordance with Section 6.1 hereof.
(d) Consents. Qorus have obtained all consents, waivers and
approvals required in connection with the consummation of the transactions
contemplated hereby, other than consents, waivers and approvals the absence of
which, either alone or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on Qorus taken as a whole.
(e) Material Adverse Effect. No Material Adverse Effect with respect
to Qorus shall have occurred since the date of this Agreement.
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(f) No Financial Obligations. Immediately prior to the Closing,
Qorus shall have no liabilities or obligations, other than as set forth in
Section 6.11 hereof.
(g) SEC Compliance; OTC BB Quotation. Immediately prior to Closing,
Qorus shall be in compliance with the reporting requirements under the Exchange
Act, and Qorus' Common Stock shall be quoted on the OTC BB.
(h) Business Records; Resignation Letter. Qorus shall have delivered
to VMdirect the Business Records and the Resignation Letter from Qorus'
Accountants.
(i) Tax Opinion. Prior to the Closing, VMdirect shall have received
a written opinion from its tax counsel, in form and substance reasonably
satisfactory to VMdirect, to the effect that the Transaction will constitute a
tax-deferred exchange within the meaning of Section 351 of the Code and such
opinions shall not have been withdrawn prior to the implementation of the
Transaction. The parties to this Agreement agree to make such reasonable
representations as requested by such counsel for the purpose of rendering such
opinions.
(j) Other Deliveries. At Closing, Qorus shall have delivered to
VMdirect and the Members: (i) certificates representing Qorus' Preferred Shares
to the Members as set forth in Schedule 1.1 hereof and in accordance with
Section 1.5, (ii) copies of resolutions and actions taken by Qorus' board of
directors in connection with the approval of this Agreement and the transactions
contemplated hereunder, and (iii) such other documents or certificates as shall
reasonably be required by VMdirect and its counsel in order to consummate the
transactions contemplated hereunder.
7.3 Additional Conditions to the Obligations of Qorus. The obligations of
Qorus to consummate and effect the Transaction 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 Qorus:
(a) Representations and Warranties. Each representation and warranty
of VMdirect and the Members contained in this Agreement (i) shall have been true
and correct as of the date of this Agreement and (ii) shall be true and correct
on and as of the Closing Date with the same force and effect as if made on and
as of the Closing. Qorus shall have received a certificate with respect to the
foregoing signed on behalf of VMdirect by an authorized manager of VMdirect and
by the Members with respect to the foregoing ("Closing Certificate")
(b) Agreements and Covenants. VMdirect and the Members shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them at or prior
to the Closing Date.
(c) Consents. VMdirect shall have obtained all consents, waivers and
approvals required in connection with the consummation of the transactions
contemplated hereby, other than consents, waivers and approvals the absence of
which, either alone or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on VMdirect.
(d) Material Adverse Effect. No Material Adverse Effect with respect
to VMdirect shall have occurred since the date of this Agreement.
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(e) Accountant Undertaking. VMdirect shall have delivered to Qorus
in a timely manner the Accountant Undertaking, in a form satisfactory to Qorus.
(f) Closing Payments. VMdirect shall have made the VMdirect Closing
Payment required by Section 6.12, and Qorus shall have made the Qorus Closing
Payment required by Section 6.12 hereof.
(g) D&O Information. VMdirect shall have delivered the
Questionnaires in a timely manner, and the D&O Information shall be acceptable
to Qorus.
(h) Change of Accountant Form 8-K; Press Release. VMdirect shall
have delivered the Change of Accountant Form 8-K and Press Release to Qorus,
each in a form acceptable to Qorus.
(i) Financial Advisory Agreement. The Financial Advisory Agreement
between Qorus and Xxxxxxx Securities, LLC, in the form attached hereto as
Exhibit C, has been duly executed by the parties and authorized and approved by
Qorus' board of directors.
(j) Other Deliveries. At Closing, VMdirect and the Members shall
have delivered to Qorus: (i) documents evidencing the exchange of Interests
owned by Members, in accordance with Section 1.4, (ii) copies of resolutions and
actions taken VMdirect's managers and Members in connection with the approval of
this Agreement and the transactions contemplated hereunder, and (iii) such other
documents or certificates as shall reasonably be required by Qorus and its
counsel in order to consummate the transactions contemplated hereunder.
(k) Aftermarket Support Agreement. At Closing, Qorus shall have
entered into an agreement with Xxxxxxx Aftermarket Support, LLC ("KAMS") to
provide a comprehensive investors relations and after market support program for
a term not less than six months following the Closing, with KAMS being paid a
monthly fee of $7,500 during the term thereof ("Aftermarket Support Agreement").
(l) VMdirect Schedules. VMdirect shall have delivered the VMdirect
Schedules to this Agreement within five (5) days prior to Closing, which
schedules shall be acceptable to Qorus.
(m) Member Signatures. Each Member of VMdirect shall have executed
the signature page (or a counterpart thereof) to this Agreement.
ARTICLE VIII
SURVIVAL AND INDEMNIFICATION
8.1 Survival. Except as specifically set forth in Sections 6.1, 6.14, 8.2,
9.2, 9.3 and 10.1, and such other provisions contained herein which contemplates
the performance of any agreement or covenant by any party hereto after the
Closing, all representations, warranties, agreements and covenants contained in
or made pursuant to this Agreement by any party hereto or contained in any
Schedule hereto shall not survive the Closing, and no claims made by virtue of
such representations, warranties, agreements and covenants shall be made or
commenced by any party hereto from and after the Closing.
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8.2 Member Indemnification Obligation with Respect to Member
Representations. Each Member, for himself only, and not with respect to any
other Member, hereby indemnifies and holds harmless, and agrees to indemnify and
hold harmless, Qorus (from and after the Closing), and its respective directors,
officers, shareholders, members, managers, employees and agents (collectively,
the "Qorus Indemnified Parties") against (i) any and all liabilities,
obligations, losses, damages, claims, actions, Liens and deficiencies which
exist, or which may be imposed on, incurred by or asserted against any one or
more of the Qorus Indemnified Parties, (1) based upon, resulting from or arising
out of, or as to which there was, any breach or inaccuracy of any representation
or warranty contained in Article II of this Agreement, or any statement,
agreement or covenant made by such Member in or pursuant to this Agreement, any
Exhibit or Schedule hereto or thereto, or any certificate or document delivered
by such Member, as a Member, at the Closing, or (2) based upon, resulting from
or arising out of any present or future claim, action, suit or proceeding
brought or asserted against any Qorus Indemnified Party by or on behalf of any
Person who, at any time prior to the Closing, had (or purports to have had) any
interest in the Interests held by such Member, and (ii) any cost or expense
(including reasonable attorneys' fees and court costs) incurred by the Qorus
Indemnified Parties or any of them in connection with the foregoing (including,
without limitation, any cost or expense incurred by the Qorus Indemnified
Parties in enforcing their rights pursuant to this Section 8.2) (collectively,
the "Damages" for purposes of this Article VIII).
8.3 Satisfaction of Damages. No proceeding for indemnification of Damages
shall be brought against any Member by the Qorus Indemnified Parties hereunder
unless the amount of the Damages to which the Qorus Indemnified Parties are
entitled to indemnification hereunder exceeds $100,000, in the aggregate, in
which case such Member's indemnification obligations shall apply to the full
amount of such Damages and all Damages thereafter. Each Member's liability for
Damages hereunder shall in no event exceed the fair market value of the shares
of Preferred Stock (or any Conversion Shares issued upon the conversion of such
Preferred Stock) received by such Member pursuant to this Agreement on the date
that such Damages are determined. The limitations contained in this Section 8.3
shall not apply to Damages arising out of or relating to intentional or
fraudulent misrepresentations or actions by such Member.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time prior to the
Closing:
(a) by mutual written agreement of Qorus and VMdirect;
(b) by either Qorus or VMdirect if the Transaction shall not have
been consummated by June 15, 2006 for any reason; provided, however, that the
right to terminate this Agreement under this Section 9.1(b) shall not be
available to any party whose action or failure to act has been a principal cause
of or resulted in the failure of the Transaction to occur on or before such date
and such action or failure to act constitutes a breach of this Agreement;
41
(c) by either Qorus or VMdirect if a Governmental Entity shall have
issued an order, decree or ruling or taken any other action, in any case having
the effect of permanently restraining, enjoining or otherwise prohibiting the
Transaction, which order, decree, ruling or other action is final and
nonappealable;
(d) by VMdirect, upon a material breach of any representation,
warranty, covenant or agreement on the part of Qorus set forth in this
Agreement, or if any representation or warranty of Qorus shall have become
materially untrue, in either case such that the conditions set forth in Section
7.1 or Section 7.2 would not be satisfied as of the time of such breach or as of
the time such representation or warranty shall have become untrue, provided,
that if such inaccuracy in Qorus' representations and warranties or breach by
Qorus is curable by Qorus prior to the Closing Date, then VMdirect may not
terminate this Agreement under this Section 9.1(d) for thirty (30) days after
delivery of written notice from VMdirect to Qorus of such breach, provided Qorus
continues to exercise commercially reasonable efforts to cure such breach (it
being understood that VMdirect may not terminate this Agreement pursuant to this
Section 9.1(d) if it shall have materially breached this Agreement or if such
breach by Qorus is cured during such thirty (30)-day period); or
(e) by Qorus, upon a material breach of any representation,
warranty, covenant or agreement on the part of VMdirect or the Members set forth
in this Agreement, or if any representation or warranty of VMdirect or the
Members shall have become materially untrue, in either case such that the
conditions set forth in Section 7.1 or Section 7.3 would not be satisfied as of
the time of such breach or as of the time such representation or warranty shall
have become untrue, provided, that if such inaccuracy in such representations
and warranties or breach by VMdirect or the Members is curable by VMdirect or
the Members prior to the Closing Date, then Qorus may not terminate this
Agreement under this Section 9.1(e) for thirty (30) days after delivery of
written notice from Qorus to VMdirect and the Members of such breach, provided
VMdirect and the Members continue to exercise commercially reasonable efforts to
cure such breach (it being understood that Qorus may not terminate this
Agreement pursuant to this Section 9.1(e) if it shall have materially breached
this Agreement or if such breach by VMdirect or the Members is cured during such
thirty (30)-day period).
9.2 Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 9.1 above will be effective immediately upon (or, if the
termination is pursuant to Section 9.1(d) or Section 9.1(e) and the proviso
therein is applicable, thirty (30) days after) the delivery of written notice of
the terminating party to the other parties hereto. In the event of the
termination of this Agreement as provided in Section 9.1, this Agreement shall
be of no further force or effect and the Transaction shall be abandoned, except
(i) as set forth in this Section 9.2, Section 9.3 and Article XI (General
Provisions), each of which shall survive the termination of this Agreement, (ii)
if this Agreement is terminated by Qorus under Section 9.1(b), (c) or (e), the
Deposit made pursuant to Section 1.9 shall be retained by Qorus as liquidated
damages and as its sole source of damages for any breach or termination hereof,
and (iii) if this Agreement is terminated by VMdirect under Section 9.1(b), (c),
or (d), a portion of the Deposit made pursuant to Section 1.9, equal to Qorus'
expenses actually and reasonably incurred, up to a maximum of $15,000, shall be
retained by Qorus as liquidated damages and as its sole source of damages for
any breach or termination hereof, and the remaining portion of the Deposit
($35,000) shall be delivered by Qorus to VMdirect no later than ten (10) days
following the applicable termination date hereunder.
42
9.3 Fees and Expenses. Except as provided in Sections 6.11 and 6.12, all
fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses whether or not the Transaction is consummated. The parties further
agree that, whether or not the Transaction is consummated, VMdirect shall be
responsible for any and all costs and expenses incurred by it in connection with
the preparation and filing of the Transaction Form 8-K (including the U.S. GAAP
Financial Statements and the Pro Forma Financial Statements contained therein),
and the Information Statement.
9.4 Amendment. This Agreement may be amended by the parties hereto at any
time by execution of an instrument in writing signed on behalf of each of Qorus,
VMdirect and the Members.
9.5 Extension; Waiver. At any time prior to the Closing, any party hereto
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (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 set forth in an instrument in writing signed on
behalf of such party. Delay in exercising any right under this Agreement shall
not constitute a waiver of such right.
ARTICLE X
POST-CLOSING COVENANTS
10.1 VMdirect acknowledges that the agreements contained in this Section
10.1 are an integral part of the transactions contemplated by this Agreement and
that, without these agreements, Qorus would not enter into this Agreement. The
parties hereto acknowledge and agree that the failure by Qorus or VMdirect to
satisfy, perform and comply with the covenants set forth in this Section 10.1
("Post-Closing Covenants") following the Closing will have a material adverse
effect on Qorus and the investment of KRM Fund in Qorus. During the period
beginning upon the Closing and ending on the first anniversary of the Closing,
Qorus agrees to:
(a) Utilize its commercially reasonable efforts to, and VMdirect
agrees to utilize its commercially reasonable efforts to cause Qorus to, remain
a Section 12(g) reporting company in compliance with and current in its
reporting requirements under the Exchange Act, and to remain quoted on, at a
minimum, the OTC Bulletin Board; and
43
(b) (i) Certify in writing to any person holding restricted shares
of Qorus Common Stock as of the date of this Agreement that Qorus has filed all
of the reports required to be filed by it under the Exchange Act to enable such
person to sell such person's restricted stock under Rule 144 or 145, as may be
applicable in the circumstances, or inform such person in writing that it has
not filed any such report or reports, upon being informed in writing by such
person of its intent to sell any shares under Rule 144 or Rule 145 promulgated
under the Securities Act (including any rule adopted in substitution or
replacement thereof), (ii) if any certificate representing any restricted shares
of Qorus Common Stock is presented to Qorus' Transfer Agent for registration of
transfer in connection with any sale theretofore made or to be made under Rule
144 or 145, provided such certificate is duly endorsed for transfer by the
appropriate person(s) or accompanied by a separate stock power duly executed by
the appropriate person(s) in each case with reasonable assurances that such
endorsements are genuine and effective, and is accompanied by an opinion of
counsel satisfactory to Qorus and its counsel that such transfer has complied
with the requirements of Rule 144 or 145 ("Opinion"), as the case may be,
promptly instruct the Transfer Agent to register such transfer and to issue one
or more new certificates representing such shares to the transferee and, if
appropriate under the provisions of Rule 144 or 145, as the case may be, free of
any stop transfer order or restrictive legend, and (iii) in the event Qorus or
its counsel is unwilling or unable to accept an Opinion from counsel other than
Qorus' counsel, and in the event that Qorus' counsel is unwilling to issue an
Opinion regarding the same transfer, Qorus hereby agrees to accept, and shall
instruct its counsel to accept, an Opinion of Xxxxxxxx Xxxxxx (New York, New
York) or such other reasonable counsel selected by KRM Fund, which Opinion shall
expressly provide that Qorus may rely upon such Opinion, and Qorus and its
counsel shall hereby authorize the Transfer Agent to accept the opinion of
Xxxxxxxx Xxxxxx (or such other reasonable counsel selected by KRM Fund) for such
purposes ("Transfer Agent Authorization"), which Transfer Agent Authorization
shall be delivered to Transfer Agent prior to Closing, with a copy to KRM Fund;
and
(c) Comply with the terms and conditions of the Aftermarket Support
Agreement.
10.2 Other Provisions. Notwithstanding anything contained herein to the
contrary, the provisions of this Article X shall survive (and not be affected in
any respect by) the Closing.
ARTICLE XI
GENERAL PROVISIONS
11.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Qorus, to:
Xxxxx.xxx, Inc.
000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 00
Xxxx Xxxxx, XX XXX 00000
Attn: Xxxxx X. Xxxxxxx, President
(000) 000-0000 telephone
(000) 000-0000 telecopy
44
(b) if to VMdirect or the Members, to:
Xxxxx Xxxxxx
VMdirect, LLC
0000 Xxxx Xxxxxxx Xxxx, Xxxxx 0
Xxx Xxxxx, XX 00000
(000) 000-0000
(000) 000-0000 telecopy
with a copy to:
Xxxxxx Xxxxxxxx & Markiles, LLP
00000 Xxxxxxx Xxxx., 00xx Xxxxx
Xxxxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxxx, Esq.
(000) 000-0000 telephone
(000) 000-0000 telecopy
11.2 Interpretation.
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference shall be
to a Section of this Agreement. Unless otherwise indicated the words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. When reference is
made herein to "the business of" an entity, such reference shall be deemed to
include the business of all direct and indirect subsidiaries of such entity.
(b) For purposes of this Agreement, the term "Material Adverse
Effect" when used in connection with an entity means any change, event,
violation, inaccuracy, circumstance or effect, individually or when aggregated
with other changes, events, violations, inaccuracies, circumstances or effects,
that is materially adverse to the business, assets (including intangible
assets), revenues, financial condition or results of operations of such entity
and its Subsidiaries, if any, taken as a whole (it being understood that neither
of the following alone or in combination shall be deemed, in and of itself, to
constitute a Material Adverse Effect: (a) changes attributable to the public
announcement or pendency of the transactions contemplated hereby, (b) changes in
general national or regional economic conditions, (c) changes affecting the
industry generally in which VMdirect or Qorus operate, or (d) any SEC rulemaking
requiring enhanced disclosure of reverse merger transactions with a public
shell.
45
(c) For purposes of this Agreement, the term "Person" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity. (b) For purposes of this Agreement, all monetary amounts
set forth herein are referenced in United States dollars, unless otherwise
noted.
11.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart. Signatures by facsimile or by
electronic signature are deemed to constitute original signatures.
11.4 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Schedules hereto (a)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
it being understood that the Letter of Intent between Qorus and VMdirect dated
April 1, 2006 shall terminate upon the execution of this Agreement; and (b) are
not intended to confer upon any other person any rights or remedies hereunder
(except as specifically provided in this Agreement). KRM Fund is a third-party
beneficiary of the certain provisions contained herein to which KRM Fund derives
a benefit and, with respect to such provisions, KRM Fund has the right to
enforce them as if it were a signatory to this Agreement.
11.5 Severability. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
11.6 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
46
11.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, USA, regardless of the laws
that might otherwise govern under applicable principles of conflicts of law
thereof.
11.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
11.9 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Subject to the first sentence of this Section 11.9, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
11.10 Arbitration. Any disputes or claims arising under or in connection
with this Agreement or the transactions contemplated hereunder shall be resolved
by binding arbitration. Notice of a demand to arbitrate a dispute by either
party shall be given in writing to the other at their last known address.
Arbitration shall be commenced by the filing by a party of an arbitration demand
with the American Arbitration Association ("AAA") in its office in Los Angeles,
California USA. The arbitration and resolution of the dispute shall be resolved
by a single arbitrator appointed by the AAA pursuant to AAA rules. The
arbitration shall in all respects be governed and conducted by applicable AAA
rules, and any award and/or decision shall be conclusive and binding on the
parties. The arbitration shall be conducted in Los Angeles, California USA. The
arbitrator shall supply a written opinion supporting any award, and judgment may
be entered on the award in any court of competent jurisdiction. Each party shall
pay its own fees and expenses for the arbitration, except that any costs and
charges imposed by the AAA and any fees of the arbitrator for his services shall
be assessed against the losing party by the arbitrator. In the event that
preliminary or permanent injunctive relief is necessary or desirable in order to
prevent a party from acting contrary to this Agreement or to prevent irreparable
harm prior to a confirmation of an arbitration award, then either party is
authorized and entitled to commence a lawsuit solely to obtain equitable relief
against the other pending the completion of the arbitration in a court having
jurisdiction over the parties. All rights and remedies of the parties shall be
cumulative and in addition to any other rights and remedies obtainable from
arbitration.
[Remainder of this page intentionally left blank.]
47
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
XXXXX.XXX, INC.
By: /s/ Xxxxx X. Xxxxxxx
---------------------------
Xxxxx X. Xxxxxxx, President
VMDIRECT, LLC
By: /s/ Xxxxx Xxxxxx
---------------------
Xxxxx Xxxxxx, Manager
MEMBERS:
VM Investors, LLC
By: /s/ Xxxxx Xxxxxx
---------------------
Xxxxx Xxxxxx, Manager
By: /s/ Xxxxxxx Xxxx
---------------------
Xxxxxxx Xxxx, Manager
/s/ Xxxxx Xxxxxx
--------------------------
Xxxxx Xxxxxx, Individually
/s/ Xxxxx Xxxxxx
--------------------------
Xxxxx Xxxxxx, Individually
Woodman Management Corporation
By: /s/ Xxxxx Xxxxxx
---------------------
Xxxxx Xxxxxx, Manager
Xxxxxxx Venture Partners, LLC
By: /s/ Xxxxxxx Xxxxxxx
------------------------
Xxxxxxx Xxxxxxx, Manager
MEMBERS:
__________________
(PRINT LEGAL NAME)
___________
(SIGNATURE)
___________________________________
(IF AN ENTITY, PRINT NAME AND TITLE
OF PARTY SIGNING FOR ENTITY)
ACKNOWLEDGED AND AGREED
WITH RESPECT TO OBLIGATIONS
UNDER SECTION 6.14 HEREOF:
Xxxxxxx Reverse Merger Fund, LLC,
a Delaware limited liability company
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------
Xxxxxxx X. Xxxxxxx, Manager
2
INDEX OF EXHIBITS AND SCHEDULES
EXHIBITS
--------
EXHIBIT A - VOTING AGREEMENT
EXHIBIT B - ARTICLES OF AMENDMENT
EXHIBIT C - FINANCIAL ADVISORY AGREEMENT
SCHEDULES
---------
SCHEDULE 1.1 - MEMBERSHIP INTERESTS OWNERSHIP AND ALLOCATION
VMDIRECT DISCLOSURE SCHEDULES
QORUS DISCLOSURE SCHEDULES
