STOCK PURCHASE AND SALE AGREEMENT BY AND AMONG RED MILE ENTERTAINMENT, INC., RED MILE ENTERTAINMENT PTY LTD IR GURUS PTY LTD, and NATHAN ERIC MURPHY, MICHAEL THOMAS FEGAN, ANDREW GEOFFREY NIERE, CRAIG PHILIP LAUGHTON, BEN BYRON PALMER and IAN GEORGE...
BY
AND
AMONG
RED
MILE
ENTERTAINMENT, INC.,
RED
MILE
ENTERTAINMENT PTY LTD
IR
GURUS
PTY LTD,
and
XXXXXX
XXXX XXXXXX,
XXXXXXX
XXXXXX XXXXX,
XXXXXX
XXXXXXXX XXXXX,
XXXXX
XXXXXX XXXXXXXX,
XXX
XXXXX
XXXXXX and
XXX
XXXXXX XXXXXXXX
and
VOTRAINT
NO. 651 PTY LTD
August
24, 2007
TABLE
OF CONTENTS
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1.
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DEFINITIONS
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2
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1.1
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Definitions.
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2
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1.2
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Other
Defined Terms.
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5
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1.3
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Construction.
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5
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2.
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PURCHASE
AND SALE
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6
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2.1
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Purchase
and Sale.
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6
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2.2
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Purchase
Price.
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6
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2.3
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Stage
1 of the Contemplated Transaction.
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6
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2.4
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Stage
2 of the Contemplated Transaction.
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7
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2.5
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Stage
3 of the Contemplated Transaction.
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9
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2.6
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Option
to convert Second Cash Payment and/or Third Cash Payment to
Stock
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10
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2.7
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The
proportions of cash and Parent Common Stock.
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11
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The
proportions of the Purchase Price in cash and shares of Parent
Common
Stock which are to be paid to each of the Sellers is as
follows:
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11
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2.8
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Value
of Parent Common Stock.
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12
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2.9
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Consequence
of failure by Buyer or Parent
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13
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2.1
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Consequences
of failure by Sellers or Company
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13
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2.11
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Resignations
of Directors; Appointment of New Board of the Company
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14
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2.12
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No
Assignees
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14
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3.
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LOAN
FROM THE COMPANY TO BUYER
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15
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4.
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COMMERCIAL
RATES FOR DEVELOPMENT
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15
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5.
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DISCLAIMER
OF PREVIOUS REPRESENTATIONS ETC.
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16
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6.
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REPRESENTATIONS
AND WARRANTIES OF SELLERS
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16
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6.1
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Organization.
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17
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6.2
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Capitalization.
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17
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6.3
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Ownership.
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18
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6.4
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Authority.
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18
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6.5
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Consents
and Approvals.
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18
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6.6
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Non-contravention.
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19
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6.7
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Financial
Statements.
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19
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6.8
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No
Undisclosed Liabilities.
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20
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6.9
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Absence
of Certain Changes.
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20
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6.1
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Contracts.
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22
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6.11
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Intellectual
Property.
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23
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6.12
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Employee
Matters.
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28
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6.13
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Compliance.
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29
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6.14
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Legal
Proceedings.
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30
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6.15
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Title
to Property.
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30
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6.16
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Tax
Matters.
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30
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6.17
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Insurance.
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30
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7.
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REPRESENTATIONS
AND WARRANTIES OF BUYER AND PARENT
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31
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7.1
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Organization.
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31
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7.2
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Capitalization.
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31
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7.3
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Authority.
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32
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7.4
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Consents
and Approvals.
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32
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7.5
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Non-contravention.
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32
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|
i
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7.6
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Financial
Statements.
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33
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7.7
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No
Undisclosed Liabilities.
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33
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7.8
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Absence
of Certain Changes.
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33
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7.9
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Contracts.
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35
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7.1
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Intellectual
Property.
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36
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7.11
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Employee
Matters.
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36
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7.12
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Compliance.
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36
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7.13
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Legal
Proceedings.
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36
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7.14
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Title
to Property.
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36
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7.15
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Tax
Matters.
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37
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7.16
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Insurance.
|
37
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8.
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COVENANTS
OF SELLERS BEFORE CLOSURE
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38
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8.1
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Operation
of the Business of the Company.
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38
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8.2
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Access.
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38
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8.3
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Notice
of Certain Events.
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39
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9.
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COVENANTS
OF BUYER AND PARENT BEFORE CLOSURE
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45
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9.1
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Operation
of the Business of the Buyer and Parent.
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45
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9.2
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Notice
of Certain Events.
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46
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10.
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COVENANTS
OF SELLERS, PARENT AND BUYER
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46
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10.1
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Reasonable
Best Efforts; Further Assurances.
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46
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10.2
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Certain
Filings.
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47
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10.3
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Public
Announcements.
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47
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10.4
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Confidentiality.
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47
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11.
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INDEMNIFICATION;
REMEDIES
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51
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11.1
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Survival
of Representations, Warranties and Covenants.
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51
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11.2
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Indemnification
by Sellers.
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51
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11.2
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Indemnification
by Buyer and Parent.
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52
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11.3
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Procedure
for Claims.
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52
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11.4
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Procedure
for Indemnification - Defense of Third-party Claims.
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52
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11.5
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Limitations
on Amount and Time.
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52
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12.
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TAX
MATTERS
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53
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12.1
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Cooperation
and Exchange of Information.
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53
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12.2
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Survival.
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54
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12.3
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Expenses.
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54
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12.4
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Notices.
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54
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12.5
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Incorporation
of Schedules and Exhibits.
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55
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12.6
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Entire
Agreement and Modification.
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55
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12.7
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Severability.
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56
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12.8
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Assignments,
Successors, and No Third Party Rights.
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56
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12.9
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Waiver.
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56
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12.1
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Governing
Law and Jurisdiction.
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56
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12.11
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Counterparts;
Language.
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57
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13.
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TERMINATION
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57
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Schedule
1 – Company Financials (see Section 6.7)
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|||
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Schedule
2 – No Undisclosed Liabilituies (see Section 6.8)
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|||
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Schedule
3 - Absence of Certain Changes by the Company (see Section
6.9)
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|||
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Schedule
3.1 – Third Party Work (see Section 3.1)
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|||
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Schedule
5 – Retention plan and severance payments (see Section
6.12(h))
|
|||
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Seller’s
Disclosure Schedule (see Section 6)
|
|||
ii
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Schedule
6.3 – Material Contracts of the Company and Contracts which require
approval of third parties to this transaction or which may be terminated
due to this transaction (see Section 6.10)
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Schedule
6.11(a) – Company Products (see Section 6.11(a))
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Scehdule
6.11(b) - List of Company Intellectual Property Rights (see Section
6.11(b))
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Schedule
6.11(c) - Actions to be taken to protect Company IP (see Section
6.11(c))
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Schedule
6.11(i) - IP Licenses (see Section 6.11(i))
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Schedule
6.11(j) - IP used by Company not developed/owned by Company (see
Section
6.11(j))
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Schedule
6.11(k) – Third Party Licenses (see Section 6.11(k))
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Schedule
6.11(l) – Third Party Platform or unowned IP (see Section
6.11(l))
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Schedule
6.11(n) – IP Licenses (see Section 6.11(n))
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Schedule
6.11(o) – Open source or public software (see Section
6.11(o))
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Schedule
6.11(s)(i) – Inbound IP Licenses (see Section
6.11(s)(i))
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Schedule
6.11(s)(ii) – Outbound IP Licenses (see Section
6.11(s)(ii))
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Schedule
6.11(s)(iii) – IP Licenses for each Company Product (see Section
6.11(s)(iii))
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Schedule
6.11(u) – IP Licenses with warranties, reimbursements, etc..(see Section
6.11(u))
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Schedule
6.12(e) – Company contracts with employee obligations (see Section
6.12(e))
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Schedule
6.12(f) – Company Benefit Plans (see Section 6.12(f))
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Schedule
6 - Company’s Property Encumbrances (see Section 6.15)
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Schedule
7 - Tangible and intangible assets and properties (including business
software) of the Company (see Section 6.15)
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Schedule
6.17 – Insurance policies (see Section 6.17)
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Schedule
6.18 – No other subsidiaries (see Section 6.18)
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Schedule
7.2 – Capitalization of Parent (see Section 7.2)
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Schedule
7.8 – No undisclosed liabilities of Parent (see Section
7.8)
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Schedule
7.9 – Absence of Certain Changes in Parent (see Section
7.9)
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Schedule
7.15 – Encumbracnes on Parent propeties (see Section
7.15)
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Schedule
8.3(h) – Company insurance to be maintained (see Section
8.3(h))
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Schedule
8.3(i) – Exclusivity (see Section 8.3(i))
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Schedule
8.3(j) – Termination of Company Benefit Plans (see Section
8.3(j))
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Sellers’
Disclosure Schedules
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Exhibit
A - List of Company Shares owned by each Seller (Section
2.12)
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Exhibit
B - Existing Contracts between Company and Parent (Section
4)
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Exhibit
C - Investor Representation Letter (Section 8.6 and
10.5(e))
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Exhibit
D - Release (Section 10.5(g)
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Exhibit
E - Form of Key Employee Employment Agreement
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Exhibit
F - At-Cost Contracts with detailed costs and xxxxxxxx attached
(Section 13(d))
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iii
This
STOCK PURCHASE AND SALE AGREEMENT, dated as of August 24, 2007 is made and
entered into by and between RED MILE ENTERTAINMENT, INC., a Delaware corporation
(“Parent”), RED MILE ENTERTAINMENT PTY LTD,
a corporation formed under the laws of Australia
(“Buyer”), IR GURUS PTY LTD, a corporation formed under
the laws of Australia (the “Company”), and XXXXXX XXXX
XXXXXX, XXXXXXX XXXXXX XXXXX, XXXXXX XXXXXXXX XXXXX, XXXXX XXXXXX XXXXXXXX,
XXX
XXXXX XXXXXX, XXX XXXXXX XXXXXXXX and VOTRAINT NO. 651 PTY LTD
(“Votraint”), stockholders of the Company (each a
“Seller” and collectively, the
“Sellers”).
RECITALS
|
A.
|
The
Company has a total of 117 issued and outstanding shares of common
stock,
being the Company’s only issued and outstanding securities, of which the
Sellers are the sole record and sole beneficial owners of 96 of such
shares of common stock (the “Shares”) of the Company and
of which the Parent is the sole record and sole beneficial owner
of
remaining 21 of such shares of common stock of the
Company.
|
|
B.
|
Company
is the sole record and sole beneficial owner of all of the issued
shares
of the following two subsidiaries: (i) Interactive Entertainment
(AUST)
PTY LTD and (ii) IR Gurus Interactive Pty Ltd. For purposes of
this Agreement, the term “the Company” shall be deemed to include the
Company and all of its
subsidiaries.
|
|
X.
|
Xxxxxxx
propose to sell and transfer the Shares to Buyer, and Buyer proposes
to
purchase the Shares from Sellers, upon the terms and subject to the
conditions set forth in this
Agreement.
|
|
D.
|
Parent
and the Company wish to confirm certain financial arrangements between
themselves.
|
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual premises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto intending to be legally bound do
hereby agree as follows:
|
1.
|
DEFINITIONS
|
|
Definitions.
|
The
following terms, as used in this Agreement, have the following
meanings:
“Adjusted
Minimum Working Capital” shall have the meaning set forth in Section
3.1 of this Agreement.
“Affiliate”
of a specified person or entity means any person or entity who directly, or
indirectly through one or more intermediaries, controls, is controlled by,
or is
under common control with, such specified person or entity.
“Balance
Sheet Date” shall refer to the unaudited balance sheet of the Company
at June 30, 2007.
“Business
Day” means any day that is not a Saturday, Sunday or public holiday in
the State of California, United States of America.
“Capital
Raising Transaction” has the meaning set forth in Section 2.3 of this
Agreement.
“ClosingDate”
means the date on which Stage 1 of the Contemplated Transaction actually takes
place.
“Closure”
means the date on which the Contemplated Transactions have been
completed.
“Consent”
means any approval, consent, ratification, waiver or other
authorization.
|
|
“Contemplated
Transactions” means the transactions comprised by Stage 1 of the
Contemplated Transaction, Stage 2 of the Contemplated Transaction
and
Stage 3 of the Contemplated
Transaction.
|
“Contract”
means any contract, agreement, commitment, understanding, lease, license,
franchise, warranty, guarantee, mortgage, note, bond or other instrument or
consensual obligation (whether written or oral and whether express or implied)
that is legally binding.
“Database”
means all files and documents, including methodology documents and project
deliverables stored on the Company file server.
“Default”
means (a) a breach, default or violation, (b) the occurrence of an event or
existence of a condition that with or without the passage of time or the giving
of notice, or both, would constitute a breach, default or violation, or (c)
with
respect to any Contract, the occurrence of an event or existence of a condition
that with or without the passage of time or the giving of notice, or both,
would
give rise to a breach or right of termination, renegotiation or acceleration
or
a right to receive Damages or a payment of penalties.
“First
Cash Payment” has the meaning set forth in Section 2.3 of this
Agreement.
“Governmental
Authorization” means any Consent, license, permit or registration
issued, granted, given or otherwise made available by or under the authority
of
any Governmental Body or pursuant to any Law.
“Governmental
Body” means any (a) nation, region, state, county, prefecture, city,
town, village, district or other jurisdiction; (b) national, local, municipal,
foreign or other government; (c) governmental or quasi-governmental authority
of
any nature (including any governmental agency, branch, department or other
entity and any court or other tribunal); (d) multinational organization; (e)
body exercising, or entitled to exercise, any administrative, executive,
judicial, legislative, policy, regulatory or taxing authority or governmental
power of any nature; or (f) official of any of the foregoing.
“Governing
Document” means any charter, articles, bylaws, certificate, statement,
statutes or similar document adopted, filed or registered in connection with
the
creation, formation or organization of an entity, and any Contract among all
shareholders, partners or members of an entity.
“Intellectual
Property Rights” means all patents, utility models, trademarks, service
marks, trade dress, logos, trade names, copyrights (and all registrations,
applications and associated goodwill for each of the foregoing), trade secrets,
know-how, Databases, and all other intellectual property rights (in whatever
form or medium).
“Knowledge”
means, with respect to each Seller, the best knowledge and belief possessed
by,
or reasonably expected to be possessed by, such Seller after due and reasonable
inquiry and investigation, and in the case when a Seller is also an officer,
director and/or employee of the Company, then the Knowledge of such Seller
shall
also include the best knowledge and belief possessed by, or reasonably expected
to be possessed by the Company, and/or its officers, directors and/or employees,
after due and reasonable inquiry and investigation.
“Law”
means any constitution, law, statute, treaty, rule, regulation, ordinance,
binding case law or principle of common law, notice, approval or Order of any
Governmental Body, and any Contract with any Governmental Body relating to
compliance with any of the foregoing.
“Liabilities”
includes liabilities or obligations of any nature, whether known or unknown,
whether absolute, accrued, contingent, xxxxxx, inchoate or otherwise, whether
due or to become due, and whether or not required to be reflected or disclosed
on an audited or un-audited balance sheet and/or the notes thereto prepared
in
accordance with US GAAP.
“Material
Adverse Effect” means any change in, or effect on, the Company or the
Shares that is materially adverse to the operations, senior management,
business, financial condition, results of operations, assets or Shares of the
Company and/or that would reasonably be expected to lead to the incurrence
by
the Company of Damages and/or Liabilities or be materially adverse to the
Shares.
“Order”
means any order, injunction, judgment, decree, ruling, assessment or arbitration
award of any Governmental Body or arbitrator.
“Parent
Common Stock” means unregistered, privately issued shares of common
stock of Parent.
“Proceeding”
means any action, arbitration, audit, examination, investigation, hearing,
litigation, mediation or suit (whether civil, criminal, administrative, judicial
or investigative, whether formal or informal, and whether public or private)
commenced, brought, conducted, or heard by or before, or otherwise involving,
any Governmental Body or arbitrator.
“Representative”
means, with respect to a particular person, any director, officer, employee,
agent, consultant, advisor, legal counsel, accountant or other representative
of
that person.
“SEC”
means the United States Securities and Exchange Commission.
“Second
Cash Payment” has the meaning set forth in Section 2.4 of this
Agreement.
“Sellers’
Disclosure Schedules” means Schedule 3 attached to and incorporated
into this Agreement.
“Stage
1 of Contemplated Transaction” means the transactions
described in Section 2.3 of this Agreement.
“Stage
2 of Contemplated Transaction” means the transactions
described in Section 2.4 of this Agreement.
“Stage
3 of Contemplated Transaction” means the transactions
described in Section 2.5 of this Agreement.
“Stock
Payment” has the meaning set forth in Section 2.3 of this
Agreement.
“Tax” means
any national, State, municipal or foreign income, license, payroll, employment,
occupation, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, social insurance (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, consumption, alternative or
add-on minimum, estimated or other tax of any kind whatsoever, including any
interest, penalty or addition thereto.
“Tax
Return” means any return, declaration,
report or statement required to be filed in respect of Taxes, including any
schedule or attachment thereto, and including any amendment
thereof.
“Third
Cash Payment” has the meaning set forth in Section 2.5 of this
Agreement.
“USGAAP”
means United States generally accepted accounting principles, consistently
applied throughout the specified period and in the immediately prior comparable
period.
“$”
means United States Dollars. All monetary amounts stated in this
Agreement mean United States Dollars.
|
Other
Defined Terms.
|
For
purposes of this Agreement, the following capitalized terms have the meanings
given to them respectively below:
|
Term
|
Reference
|
|
Buyer
|
Preamble
|
|
Company
|
Preamble
|
|
Company
Intellectual Property
|
Section
6.11(b)
|
|
Confidential
Information
|
Section
10.4
|
|
Damages
|
Section
11.2
|
|
Encumbrances
|
Section
6.2
|
|
Financial
Statements
|
Section
6.7
|
|
Indemnified
Party
|
Section
11.3
|
|
Indemnifying
Party
|
Section
11.3
|
|
Indemnification
Claim Notice
|
Section
11.3
|
|
Key
Employees and Consultants
|
Section
10.5(k)
|
|
Material
Contracts
|
Section
6.10
|
|
Parent
|
Preamble
|
|
Purchase
Price
|
Section
2.1
|
|
Monthly
Pro-Forma Cash Flow Statement
|
Section
6.7
|
|
Sellers
|
Preamble
|
|
Shares
|
Recital
A
|
|
Construction.
|
|
(a)
|
Any
reference in this Agreement to a “Clause,” “Section” or “Schedule” refers
to the corresponding Clause, Section or Schedule of or to this Agreement,
unless the context indicates
otherwise.
|
|
(b)
|
The
headings of Clauses and Sections are provided for convenience only
and do
not affect the construction or interpretation of this
Agreement.
|
|
(c)
|
All
words used in this Agreement shall be construed to be of such gender
or
number as the circumstances
require.
|
|
(d)
|
The
terms “include” and “including” indicate examples of a foregoing general
statement and not a limitation on that general
statement.
|
|
(e)
|
Any
reference to a statute refers to the statute, any amendments or successor
legislation, and all regulations promulgated under or implementing
the
statute, as in effect at the relevant
time.
|
|
(f)
|
Any
reference to a Contract or other document as of a given date means
the
Contract or other document as amended, supplemented and modified
from time
to time up to and including such
date.
|
|
2.
|
PURCHASE
AND SALE
|
|
Purchase
and Sale; Purchase Price.
|
Subject
to all other terms and conditions of this Agreement, Sellers agree to sell
and
to transfer the Shares to Buyer, and Buyer agrees to purchase the Shares from
Sellers for the aggregate total purchase price for the Shares (“Purchase
Price”) will be $5.5 million.
|
[INTENTIONALLY
OMITTED]
|
|
Stage
1 of the Contemplated
Transaction.
|
(a) Unless
the parties
agree otherwise in writing, Stage 1 of the Contemplated Transaction will be
consummated and completed at the Parent’s head office as set forth in Section
12.4 of this Agreement at 10:00 A.M., local time, on or before December 30,
2007
(with Parent to give the Company and the Sellers written notice of the actual
closing date at least ten (10) days in advance) by the delivery and satisfaction
by the Sellers and the Company of all items required to be delivered and
satisfied by the Sellers and the Company, including but not limited to the
transfer to the Buyer of all the Shares from all the Sellers, free and clear
of
any encumbrances, impairments or Liabilities of any kind whatsoever as provided
in Section 2.3(b) below, after which the Parent and Buyer shall cause the
following to occur: (i) a cash payment to the Sellers in the aggregate amount
of
$1,375,000 (“the First Cash Payment”) and the issuance to the
Sellers of unregistered shares of Parent Common Stock with a value of
$1,412,500, free and clear of any encumbrances, impairments or Liabilities
of
any kind whatsoever (“the Stock Payment”); provided, however,
that notwithstanding anything contained in this Agreement to the contrary,
Stage
1 of the Contemplated Transaction shall be subject to the prior satisfaction
of
the condition precedents of (i) no uncured breach of this Agreement by the
Sellers or the Company for which any of the Sellers or the Company have been
issued a notice by the Buyer, the Parent or any third-party, (ii) all material
terms and conditions of this Agreement to be satisfied by the Company and/or
the
Sellers having been satisfied, (iii) the Parent Common Stock having been
registered under the U.S. Securities and Exchange Act of 1934, qualified for
listing or quotation on a nationally recognized stock exchange or over the
counter market in the United States of America, and the commencement of the
trading and quotation thereof on such stock exchange or over the counter market,
and (iv) the completion on or before December 30, 2007 of the capital raising
transaction by the Parent with net proceeds in an amount equal to at least
Fifteen Million United States Dollars ($15,000,000.00) (the
“Capital Raising Transaction.”), with the Parent having the
right to waive any or all of the foregoing conditions precedent as described
in
clause (i), (ii) or (iv) above.
(b) At Stage 1 of the Contemplated Transaction, the Parent and Buyer
shall first cause the First Cash Payment and the Stock Payment to be delivered
to and held in an interest bearing escrow account by Davies Xxxxxxxx Cave
Solicitors , for the benefit of the Sellers, with such First Cash Payment and
the Stock Payment to be released by Davies Xxxxxxxx Cave Solicitors to the
Sellers upon the Sellers delivering evidence to Davies Xxxxxxxx Cave Solicitors
that the Sellers have caused all the Shares, together with the additional 21
shares of common stock of the Company owned by the Parent, to be delivered
to
and registered in the name of Buyer under Australian law, including but not
limited to being registered with the Australian Securities and Investment
Commission, free and clear of any encumbrances, impairments or Liabilities
of
any kind whatsoever.
|
Stage
2 of the Contemplated
Transaction.
|
(a) Unless
the parties agree
otherwise in writing, Stage 2 of the Contemplated Transaction will commence
at
the same time as Stage 1 of the Contemplated Transaction, 2007, subject to
the
prior closing of the Capital Raising Transaction and the simultaneous occurrence
of Stage 1 of the Contemplated Transaction, with Stage 2 of the Contemplated
Transaction consisting of the cash payment to the Sellers of an aggregate amount
of $1,412,500 (“the Second Cash Payment”), payable on a pro
rata basis to each Seller until the full amount of the Second Cash Payment
has
been made to the Sellers; provided, however, that notwithstanding anything
contained in this Agreement to the contrary, Stage 2 of the Contemplated
Transaction shall be subject to the prior satisfaction of the condition
precedents of (i) no uncured breach of this Agreement by the Sellers or the
Company for which any of the Sellers or the Company have been issued a notice
by
the Buyer, the Parent or any third-party, and (ii) all material terms and
conditions of this Agreement to be satisfied by the Company and/or the Sellers
having been satisfied. At the same time as the delivery the Buyer and
Parent of the First Cash Payment and the Stock Payment into escrow with Xxxxxx
Xx Xxxx, Esquire, the Parent and Buyer shall also cause the Second Cash Payment
to be delivered to and held in an interest bearing escrow account by Xxxxxx
Xx
Xxxx, Esquire, for the benefit of the Sellers, with such Second Cash Payment
to
be released by Xxxxxx Xx Xxxx, Esquire to the Sellers at the same time as the
release of the payments in Stage 1 of the Contemplated transaction.
(b) The
amount of the
payments to be made to the Sellers in Stage 2 of the Contemplated Transaction
shall be reduced by an amount equal to one dollar for each dollar that Buyer
or
Parent loans to the Company due to the actual cash needs of the Company for
its
normal and customary business operations, together with an annualized interest
at the rate of 8.5 percent (8.5%) (adjusted for any amounts as is required
to be
in compliance with any taxing authorities in the United States or Australia),
between the date of this Agreement and the completion of Stage 2 of the
Contemplated Transaction; provided, however, that in the event the Company
repays all
such
loans to the Parent or Buyer prior to the due date for the first payment
pursuant to Stage 2 of the Contemplated Transaction and the Company does not
need to reborrow funds from Parent or Buyer for one hundred twenty (120) days
after the completion of the payments pursuant to Stage 2 of the Contemplated
Transaction, then the temporary existence of such interim loan(s) between the
date of this Agreement and the completion of Stage 2 of the Contemplated
Transaction, which are repaid and not reborrowed as described above, will not
be
used to reduce the amount to be paid pursuant to Stage 2 of the Contemplated
Transaction. In the event the payments to be made to Sellers in Stage
2 of the Contemplated Transaction are reduced by the amount of loans from the
Buyer or Parent to the Company under this Section 2.4(b), then in the event
the
Company’s need for such loans were due to a breach of this Agreement by the
Sellers, then the Parent and Buyer shall not also pursue the Sellers for such
breach unless the damages to be incurred by Parent and/or Buyer as a result
of
such breach by the Sellers exceeds the amount of such loans from the Buyer
or
Parent to the Company, in which case the liability of the Sellers shall be
for
the amount in excess of such reduction of the payments to be made to Sellers
in
Stage 2 of the Contemplated Transaction. Parent shall not
intentionally breach any development contracts that Parent has with the Company
in order to cause an artificial need by the Company for a loan from the Parent,
nor shall Parent or Buyer make unnecessary loans to the Company nor shall Parent
or Buyer manipulate the financial situation of the Company in order to cause
an
artificial loan requirement, so that Parent can reduce the amount of the
payments to be made to the Sellers in Stage 2 of the Contemplated
Transaction. The Company shall operate in the ordinary course of
business and not delay making any payments in a timely manner nor delay in
entering into contracts which would result in expenditures, in any case which
would have the effect of delaying the need of the Company for cash
loans. The amount of the payments made or to be made to the Sellers
in Stage 2 of the Contemplated Transaction shall be further reduced by an amount
equal to twenty-five percent (25%) of the Purchase Price in the event only
sixty-five percent (65%) or less of the current employees of the Company as
of
the date of this Agreement as listed in Schedule 6.12(f) hereto are still
employed by the Company on April 1, 2008 (the “Employee Retention
Deduction”). Parent and Buyer shall not manipulate the
Company and its employees to cause an artificial need to terminate employees
so
that Parent can reduce the amount of the payments to be made to the Sellers
in
Stage 2 of the Contemplated Transaction due to the Employee Retention
Deduction.
|
Stage
3 of the Contemplated
Transaction.
|
(a) Unless
the parties agree
otherwise in writing, Stage 3 of the Contemplated Transaction will be
consummated and completed on the date which is thirty (30) days after the
satisfaction of the last to occur of each of the following: (i) no uncured
breach of this Agreement by the Sellers or the Company for which any of the
Sellers or the Company have been issued a notice by the Buyer, the Parent or
any
third-party, (ii) all material terms and conditions of this Agreement to be
satisfied by the Company and/or the Sellers having been satisfied, (iii) the
prior consummation and completion of each of Stage 1 of the Contemplated
Transaction and Stage 2 of the Contemplated Transaction, and
(iv)
the
Company meeting certain net profit requirements from third-party work which
result in the Company receiving excess net profit from such third-party work
in
the amount of at least $1,300,000, all as described in greater detail in Section
3 of this Agreement, and the Company thereafter making the loan of $1,300,000
to
the Buyer or Parent from the Company as described in greater detail in Section
3.1 of this Agreement, which loan from the Company to the Buyer or Parent must
occur on or before the deadline date set forth in Schedule 3.1 of this Agreement
and which loan shall be used by the Buyer or Parent to make a cash payment
to
the Sellers of such excess net profit from such third-party work up to
$1,300,000 as provided in Section 3 of this Agreement (“the Third Cash
Payment”). In the event the Company does not receive a
sufficient amount of excess net profit from such third-party work as provided
in
Schedule 3.1 in the amount of at least $1,300,000 on or before the deadline
date
set forth in Schedule 3.1, then the Parent shall issue to the Sellers
unregistered shares of Parent Common Stock, free and clear of any encumbrances,
impairments or Liabilities of any kind whatsoever, with the value of such shares
of Parent Common Stock being equal to the difference between the amount of
the
Third Cash Payment and the lesser amount of actual excess net profit received
by
the Company from such third-party work on or before the deadline date of
December 31, 2008 as set forth in Schedule 3.1.
(b) The
amount of the payments to be made by Buyer to the Sellers in Stage 3 of the
Contemplated Transaction shall be reduced by an amount equal to one dollar
for
each dollar that Buyer or Parent loans to the Company due to the actual cash
needs of the Company for its normal and customary business operations, together
with an annualized interest at the rate of 8.5 percent (8.5%) (adjusted for
any
amounts as is required to be in compliance with any taxing authorities in the
United States or Australia), between Stage 1 of the Contemplated Transaction
and
Stage 3 of the Contemplated Transaction, except to the extent, if any, that
such
loan amount has already reduced the payments to be made in Stage 2 of the
Contemplated Transaction; provided, however, that in the event the Company
repays all such loans to the Parent or Buyer prior to the due date for the
payment to be made pursuant to Stage 3 of the Contemplated Transaction and
the
Company does not need to reborrow funds from Parent or Buyer for one hundred
twenty (120) days after the completion of the payments pursuant to Stage 3
of
the Contemplated Transaction, then the temporary existence of such interim
loan(s) between Stage 1 of the Contemplated Transaction and the completion
of
Stage 3 of the Contemplated Transaction, which are repaid and not reborrowed
as
described above, will not be used to reduce the amount to be paid pursuant
to
Stage 3 of the Contemplated Transaction. In the event the payments to
be made to Sellers in Stage 3 of the Contemplated Transaction are reduced by
the
amount of loans from the Buyer or Parent to the Company under this Section
2.5(b), then in the event the Company’s need for such loans were due to a breach
of this Agreement by the Sellers, then the Parent and Buyer shall not also
pursue the Sellers for such breach unless the damages to be incurred by Parent
and/or Buyer as a result of such breach by the Sellers exceeds the amount of
such loans from the Buyer or Parent to the Company, in which case the liability
of the Sellers shall be for the amount in excess of such reduction of the
payments to be made to Sellers in Stage 3 of the Contemplated
Transaction. Parent shall not intentionally breach any development
contracts that Parent has with the Company in order to cause an artificial
need
by the Company for a loan from the Parent, nor shall Parent or Buyer make
unnecessary loans to the Company nor shall Parent or Buyer manipulate the
financial situation of the Company in order to cause an artificial loan
requirement, so that Parent can reduce the amount of the payments to be made
to
the Sellers in Stage 3 of the Contemplated Transaction.
The
Company shall operate in the ordinary course of business and not delay making
any payments in a timely manner nor delay in entering into contracts which
would
result in expenditures, in any case which would have the effect of delaying
the
need of the Company for cash loans. The amount of the payments to be
made to the Sellers in Stage 3 of the Contemplated Transaction shall be further
reduced by an amount equal to the amount of reduction applicable under the
Employee Retention Deduction, with the Sellers agreeing to repay to the Parent,
within thirty (30) days after Parent delivers a notice to the Sellers, any
remaining amount of the Employee Retention Deduction that is not satisfied
by
such reduction of the payments to be made to the Sellers in Stage 3 of the
Contemplated Transaction. In the event the payments under Stage 3 of
the Contemplated Transaction will be released to the Sellers prior to such
Employee Retention Reduction, if any, being known, the Sellers agree to repay
to
the Parent the amount of the Employee Retention Deduction within thirty (30)
days after Parent delivers a notice to the Sellers regarding the amount of
the
Employee Retention Deduction. Parent and Buyer shall not manipulate
the Company and its employees to cause an artificial need to terminate employees
so that Parent can reduce the amount of the payments to be made to the Sellers
in Stage 3 of the Contemplated Transaction due to the Employee Retention
Deduction.
|
Option
to convert Second Cash Payment and/or Third Cash Payment to
Stock
|
|
|
(a)
|
At
any time prior to the Second Cash Payment having been made in full,
each
Seller shall have the right to notify Buyer and Parent in writing
that it
elects to receive the remaining portion of the Second Cash Payment
by a
further issuance of unregistered shares of Parent Common Stock in
lieu of
the remaining portion of such Second Cash Payment. Upon receiving
such
written notice, Parent shall no later than the following Business
Day
cause to be issued unregistered shares of Parent Common Stock to
such
Seller, of a value equal to the remaining portion of the Second Cash
Payment.
|
|
|
(b)
|
In
the event the Company makes the full amount of the loan to the Buyer
in a
timely manner as required under Section 3 of this Agreement and the
Third
Cash Payment is thereafter required to be made to the Sellers, then
at any
time prior to the Third Cash Payment having been made in full, each
Seller
shall have the right to notify Buyer and Parent in writing that it
elects
to receive the remaining portion of the Third Cash Payment by a further
issuance of unregistered shares of Parent Common Stock in lieu of
the
remaining portion of such Third Cash Payment. Upon receiving
such written notice, Parent shall no later than the following Business
Day
cause to be issued unregistered shares of Parent Common Stock to
such
Seller, of a value equal to the remaining portion of the Third Cash
Payment.
|
|
|
(c)
|
The
issuance of Parent Common Stock pursuant to this Section 2.6 shall
be in
full satisfaction of the converted portion of the Purchase Price
relating
to the Sellers that elected to receive such shares of Parent Common
Stock
in lieu of such converted portion of the Purchase
Price.
|
|
|
(d)
|
Notwithstanding
anything contained in this Agreement to the contrary, in the event
the
provisions of this Section 2.6 and any other portions of this Agreement
relating to offer by the Parent to allow the Sellers to convert a
portion
of the Second Cash Payment and/or the Third Cash Payment into shares
of
Parent Common Stock is deemed by the SEC and/or its rules and regulations
promulgated under the federal securities laws to have an affect of
barring, delaying and/or adversely affecting the filing, processing
and/or
timing of effectiveness of any registration statement filed or to
be filed
with the SEC relating to the securities of Parent issued or to be
issued
in the Capital Raising Transaction, then the provisions of this Section
2.6 and any other related portions of this Agreement shall be deemed
to be
null, void and as if such provisions were never part of this
Agreement.
|
|
The
proportions of cash and Parent Common
Stock.
|
Subject
to the other provisions of this Agreement, the Purchase Price in cash and shares
of Parent Common Stock which are to be paid to each of the Sellers shall be
paid
in the following proportions; provided, however, that notwithstanding anything
contained in this Agreement or any exhibit hereto to the contrary, in the event
that the provisions of Section 10.5(l) of this Agreement are not fully satisfied
prior to the time that the First Cash Payment, Stock Payment and Second Cash
Payment are delivered by the Parent and Buyer to Davies Xxxxxxxx Cave
Solicitors as the escrow agent under this Agreement, then the Parent or
buyer may instruct such escrow agent to deduct from such cash portions of the
Purchase Price an amount in cash equal to the total amount needed bring about
the full satisfaction of all provisions and conditions set out in Section
10.5(l) of this Agreement, including but not limited to the full vesting of
all
Intellectual Property Rights in respect of "Heroes Of The Pacific" in the
Company as set out in Section 10.5(l), and after the provisions of Section
10.5(l) have been fully satisfied, then the escrow agent shall pay to the
Sellers their proportionate share of the amount of the First Cash Payment,
Stock
Payment and Second Cash Payment remaining after the deduction made by the escrow
agent pursuant to this Section 2.7:
|
Name
|
First
cash
Payment
$
|
Stock
Payment
$
|
Second
cash
Payment
$
|
Third
cash
Payment
$
|
Total
$
|
|||||||||||||||
|
Xxxxxx
Xxxxxx
|
251,475
|
197,050
|
251,475
|
216,666.67
|
916,666.67
|
|||||||||||||||
|
Xxxxxxx
Xxxxx
|
184,550
|
312,150
|
203,300
|
216,666.67
|
916,667.67
|
|||||||||||||||
|
Xxxxxx
Xxxxx
|
251,475
|
197,050
|
251,475
|
216,666.67
|
916,667.67
|
|||||||||||||||
|
Xxxxx
Xxxxxxxx
|
251,475
|
197,050
|
251,475
|
216,666.67
|
916,667.67
|
|||||||||||||||
|
Xxx
Xxxxxx
|
184,550
|
312,150
|
203,300
|
216,666.67
|
916,666.67
|
|||||||||||||||
|
Xxx
Xxxxxxxx
|
98,525
|
125,737.50
|
108,333.33
|
458,333.33
|
||||||||||||||||
|
Votraint
|
125,737.50
|
98,525
|
125,737.50
|
108,333.33
|
458,333.33
|
|||||||||||||||
|
Total
|
$ |
1,375,000
|
$ |
1,412,500
|
$ |
1,412,500
|
$ |
1,300,000
|
$ |
5,500,000
|
||||||||||
(These
figures assume no cash reduction in the amounts by the escrow agent as
contemplated by this Section 2.7)
|
Value
of Parent Common Stock.
|
|
|
For
purposes of calculating the number of shares of Parent Common Stock
to be
issued as part of the Purchase Price, the value of each share of
Parent
Common Stock to be issued to the Sellers under the terms of this
Agreement
(“Value per Share”) shall be deemed to be the lower of
$3.75 per share (which gives effect to the reverse 3:1 split of the
Parent
Common Stock which occurred on February 8, 2007), adjusted proportionately
for any stock splits or stock dividends (but excluding other changes
in
capitalization resulting from the issuance of additional shares of
Parent
in financing transactions) of Parent occurring prior to the date
of
issuance of any such shares, and the weighted average closing price
per
share of the Parent Common Stock in the principal market on which
such
shares are listed for trading, for the ten trading days immediately
preceding the date on which such shares are issued to the Sellers;
provided, however, that in the event the Company receives excess
net
profit from third-party work in an amount which is less than $1,300,000
as
described in Section 2.5 of this Agreement, then the value of any
shares
of Parent Common Stock issued or to be issued to the Sellers pursuant
to
Stage 3 of the Contemplated Transaction shall be equal to an amount
which
results in the total Purchase Price being equal to $5.5 million,
after
giving effect to all other consideration previously issued or issuable
to
the Sellers.
|
|
Consequence
of failure by Buyer or Parent
|
|
(a)
|
Failure
to make Stock Payment
|
Subject
to all other terms and conditions of this Agreement, if Parent does not issue
to
the Sellers the unregistered shares of Parent Common Stock pursuant to Section
2.3 hereof in satisfaction of the Stock Payment, the Sellers collectively shall
have the right to elect to terminate this Agreement. Any such
election to terminate shall be subject to the unanimous written consent of
all
the Sellers and thereafter promptly communicated in writing to Buyer and
Parent. Until and unless such election is so communicated to Buyer
and Parent by all the Sellers, this Agreement shall remain in full force and
effect in all other respects and Parent shall be obliged to place itself in
a
position to make the Stock Payment, and shall make the Stock Payment, at the
earliest possible time, subject to all other terms and conditions contained
in
this Agreement.
|
|
(b)
|
Failure
to make First Cash Payment, the Second Cash Payment or the Third
Cash
Payment
|
Subject
to all other terms and conditions of this Agreement, if Buyer or Parent fails
to
make the First Cash Payment, the Second Cash Payment or the Third Cash Payment
as required by this Agreement, the Sellers collectively shall have the right
to
elect to terminate this Agreement as provided in Section 13(d). Any
such election to terminate shall be subject to the unanimous written consent
of
all the Sellers and thereafter promptly communicated in writing to Buyer and
Parent. Until and unless such election is so communicated to Buyer and Parent
by
all the Sellers, this Agreement shall remain in full force and effect in all
other respects and Buyer and Parent shall be obliged to make the First Cash
Payment, the Second Cash Payment and the Third Cash Payment at the earliest
possible time, subject to all other terms and conditions contained in this
Agreement.
|
|
(c)
|
Termination
by Sellers
|
In
the
event of the termination of this Agreement by the Sellers pursuant to Section
2.9(a) or (b) above, then the provisions of Section 13(d) shall
apply.
|
Consequences
of failure by Sellers or
Company
|
|
|
Subject
to all other terms and conditions of this Agreement, if after the
Parent
and Buyer first cause the First Cash Payment, the Stock Payment and
the
Second Cash Payment to be delivered to and held in escrow by Xxxxxx
Xx
Xxxx, Esquire, for the benefit of the Sellers pursuant to Section
2.3(b),
the Sellers do not thereafter deliver all the Shares to Buyer and
cause
all the Shares, together with the additional 21 shares of common
stock of
the Company owned by the Parent, to be registered in the name of
the Buyer
under Australian law, including but not limited to being registered
with
the Australian Securities and Investment Commission, then Buyer and
Parent
shall have the right to elect to terminate this Agreement and/or
specifically enforce the terms of this Agreement against the Sellers
in a
court of competent jurisdiction. Any such election to terminate
or specifically enforce this Agreement shall be promptly communicated
in
writing to the Sellers. Until and unless the Buyer or Parent
elects to terminate this Agreement and such election is so communicated
to
the Sellers by the Buyer or Parent, this Agreement shall remain in
full
force and effect in all other respects and the Sellers shall be obliged
to
place themselves in a position to transfer the Shares to the Buyer
and
cause the Shares, together with the additional 21 shares of common
stock
of the Company owned by the Parent, to be registered in the name
of the
Buyer, subject to all other terms and conditions contained in this
Agreement.
|
|
Resignations
of Directors; Appointment of New Board of the
Company
|
At
the
time of the commencement of Stage 1 of the Contemplated Transaction, Sellers
will deliver or cause to be delivered to Buyer written notices of resignation
of
all directors and statutory auditors of the Company, all of whom shall have
resigned as of that date and Buyer and Parent shall promptly thereafter cause
to
be elected the following persons to constitute the new Board of Directors of
the
Company, with each such person to serve as a director of the Company until
the
earlier of either their resignation or the occurrence of Stage 3 of the
Contemplated Transaction: (i) Xxx Xxxxxx, (ii) Xxxxxxx Xxxxx, (iii) Xxxxxx
Xxxxx, and (iv) five additional persons to be appointed by the Parent and the
Buyer.
|
No
Assignees
|
Each
of
the Sellers represents and warrants that he, she or it owns the number of Shares
set forth in Exhibit A of this Agreement, subject to no other rights, interests
or Encumbrances (as defined in Section 6.2) whatsoever and each of the Sellers
agrees that upon the execution of this Agreement, they shall not sell, transfer,
assign, pledge, encumber in any way or otherwise transmit or alienate any of
their Shares other than to Buyer except on terms expressly agreed to in writing
by Buyer and Parent in their sole discretion, in which case as such successor
in
interest to such Shares will be bound by all terms and conditions of this
Agreement in all respects as if they stood in the shoes of the transferring
Seller, with any such successor being required to execute any documents required
by Buyer and/or Parent to evidence the agreement by such successor to be bound
by the terms and conditions of this Agreement. This term is intended
to refer to and to bind any permitted successor, heir, executor or personal
representative of a Seller.
|
3.
|
LOAN
FROM THE COMPANY TO BUYER
|
|
3.1
|
At
any time after the completion of Stage 1 of the Contemplated Transaction
and prior to the deadline date shown in Schedule 3.1 of this Agreement,
in
the event the Company completes the work and projects for third-parties
unaffiliated with the Company or the Sellers as shown in Schedule
3.1 of
this Agreement in accordance with the milestone delivery dates, gross
revenue amounts and total net profit amounts of at least $1.3 million
as
shown on Schedule 3.1 hereto, then the net profit amount actually
received
by the Company with respect to such third-party work, as confirmed
by an
independent third-party auditor, shall be loaned by the Company to
the
Buyer and/or the Parent, after which such loaned amount actually
received
by the Buyer and/or Parent up to a maximum amount of $1.3 million
shall be
used to satisfy Stage 3 of the Contemplated Transaction. At the
time the Company is able to make such loan to the Buyer pursuant
to this
Section 3, the Company shall make such loan amount to the Buyer and/or
the
Parent, after which the Buyer or the Parent shall thereafter utilize
such
loan to make the Third Cash Payment to the Sellers, with the Third
Cash
Payment being in an amount equal to the amount of such loan from
the
Company to the Buyer and/or the Parent. If the Company does not
have sufficient funds to satisfy the terms of this Section 3 and
make such
loan to Buyer and/or the Parent before the deadline time set forth
in
Schedule 3.1 hereto, then Buyer and Parent shall no longer be obligated
to
make the Third Cash Payment, but in lieu thereof the Parent shall
issue to
the Sellers unregistered shares of Parent Common Stock as provided
in
Section 2.5(a). Notwithstanding anything contained in this
Agreement to the contrary, the Company must pay off in full immediately
prior to Stage 1 of the Contemplated Transaction each of the following
pre-closing “deal costs” of the Company: all attorneys’ fees, all
accounting fees, all other professional fees, and all other costs
related
to this Agreement and the Contemplated Transactions. These
costs exclude costs of the Parent and
Buyer.
|
|
3.2
|
The
purpose of such loan shall be to enable Buyer and/or the Parent to
pay the
Third Cash Payment, and any amounts received by Buyer and/or the
Parent
from the Company pursuant to such loan shall, within five (5) business
days after receipt of such loan monies by the Buyer and/or the Parent
from
the Company, be applied by Buyer and/or the Parent for that
purpose. Notwithstanding any lack of privity in such loan
agreement, any Seller may enforce the terms of such loan agreement
against
Buyer and/or the Parent to the extent that such loan funds have been
received by Buyer and/or the Parent and applied otherwise than in
payment
of the Third Cash Payment.
|
|
4.
|
COMMERCIAL
RATES FOR DEVELOPMENT
|
|
|
In
consideration of the Company’s participation in this Agreement, from
January 1, 2007 until the Purchase Price is paid in full, Buyer,
Parent
and Company shall in good faith negotiate an arms-length price for
all
work performed by the Company. Notwithstanding anything
contained in this Agreement to the contrary, (i) all agreements between
the Company and Parent prior to the date of this Agreement, including
but
not limited to those agreements listed on Exhibit B hereto, shall
remain
in place and be unaffected in any way whatsoever by this Agreement
and/or
its existence or non-existence, except in the case of the uncured
breach
of this Agreement by the Sellers, and (ii) the Company shall pay
to the
Parent a management fee equal to the difference between (A) the amount
to
be paid by the Buyer and/or Parent to the Company under each arms-length
price contract minus (B) the actual cost of the Company to perform
each
such contract on an at-cost basis.
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|
5.
|
DISCLAIMER
OF PREVIOUS REPRESENTATIONS
ETC.
|
This
Agreement replaces all former agreements, discussions and representations,
if
any, concerning the sale or possible sale of the Shares by the parties to one
another, and each party releases the other in respect thereof.
|
6.
|
REPRESENTATIONS
AND WARRANTIES OF SELLERS
|
Each
Seller represents and warrants to Buyer and Parent that, except as set forth
in
Sellers’ Disclosure Schedules (as defined below) or in any other provision of
this Agreement, to the Knowledge of each such Seller the statements in this
Section 6are all true and correct as of the date of this Agreement and as
of the closing of Stage 1 of the Contemplated Transaction, except as otherwise
set forth in the Sellers’ Disclosure Schedules. The Buyer and Parent
shall have twelve (12) months from the date of the completion of Stage 1 of
the
Contemplated Transaction to claim any breach of the representations and/or
warranties of the Sellers.
At
least
fifteen (15) Business Days prior to the date of this Agreement, each Seller
shall deliver to Buyer and Parent a written disclosure schedule (collectively,
the “Sellers’ Disclosure Schedules”), signed by each of the Sellers, in which
the Sellers shall set forth in detail all exceptions to any and all provisions
of this Agreement, with such Sellers’ Disclosure Schedules to be updated by the
Sellers and delivered to Buyer and Parent as of the date of Stage 1 of the
Contemplated Transaction. Buyer and Parent shall not be obligated to
perform any of its or their obligations under this Agreement in the event Buyer
and Parent have not received an updated, true and correct Sellers’ Disclosure
Schedules as of each of the preceding dates contained in the immediately
preceding sentence.
In
the
event any such Sellers’ Disclosure Schedules contains information which Buyer
and Parent deem has or will have a Materially Adverse Effect on the Sellers,
the
Company, its subsidiaries, their business, and/or the Shares, then Buyer and/or
Parent shall issue to the last known address of each Seller a written notice
(the “Buyer/Parent Notice”) of such determination by Buyer and
Parent. The Sellers shall have ten (10) Business Days after the
issuance of any such Buyer/Parent Notice to mutually resolve such matter between
the Sellers, Buyer and Parent or otherwise for the parties to mutually execute
all necessary amendments to this Agreement and any other necessary documents
to
reflect the mutual agreement of the Sellers, Parent and Buyer to a mutually
acceptable decrease to the Purchase Price.
In
the
event the Sellers, Parent and Buyer have not mutually agreed upon an appropriate
decrease to the Purchase Price within such ten (10) Business Days from the
date
of any such Buyer/Parent Notice, then if such Buyer/Parent Notice is issued
prior to the closing under Stage 1 of the Contemplated Transaction, then the
parties shall either mutually agree to terminate this Agreement or resolve
their
dispute in accordance with Section 12.10 of this Agreement. In the
event such Buyer/Parent Notice is issued after the closing under Stage 1 of
the
Contemplated Transaction, then Xxxxxx Xx Xxxx, Esq. shall continue to hold
in
escrow the portion of the Purchase Price equal to the damages claimed as being
or to be suffered by the Parent and/or Buyer in such matter, after which the
parties shall use their good faith efforts to attempt to resolve any dispute
pursuant to Section 12.10 of this Agreement.
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Organization.
|
Company
is the sole record and beneficial owner of all of the issued shares of the
following two subsidiaries, being the only subsidiaries of the Company: (i)
Interactive Entertainment (AUST) Pty Ltd. and (ii) IR Gurus Interactive Pty
Ltd. Sellers, the Company and each of the Company’s subsidiaries are
each duly organized, validly existing and, where applicable, in good standing
under the Laws of the jurisdiction of its organization.
Each
of
Sellers, the Company and each of the Company’s subsidiaries each also have all
requisite power and authority to own its assets and carry on business as
presently conducted by it. The Company and each of its subsidiaries
have delivered to Buyer and Parent true, correct and complete copies of all
Governing Documents of each of the Company and such subsidiaries, each as
amended up through the date of delivery thereof to Buyer and Parent, with no
other changes thereto being made from and after the delivery thereof to Buyer
and Parent. Sellers, the Company and each of the Company’s
subsidiaries represents and warrant that the Company and its subsidiaries are
not in violation of any provision of any of their respective Governing
Documents, nor any other operational or business agreements to which the Company
or its subsidiaries are a party, nor any agreements to which any Seller is
a
party which has or could have an adverse affect on the Shares.
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Capitalization.
|
The
Company has a total of 117 issued and outstanding shares of common stock, being
the only class of securities issued by the Company, of which the Sellers are
the
sole record and sole beneficial owners of 96 of such shares and of which the
Parent is the sole record and sole beneficial owner of the remaining 21 of
such
shares. All such issued and outstanding shares of the Company and
each of its subsidiaries have been duly authorized and validly issued and are
fully paid and non-assessable, free and clear of all liens, charges, security
interests, pledges, assessments, defects of title, options, encumbrances and
other restrictions and/or third party rights of any kind (collectively,
“Encumbrances”).
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Ownership.
|
Sellers
are the current sole record and sole beneficial owner of all 96 of the Shares,
free and clear of any Encumbrance, and will transfer and deliver to Buyer at
Stage 1 of the Contemplated Transaction valid title to all the Shares free
and
clear of any and all Encumbrances whatsoever. Sellers represent and
warrant that, except for the 117 issued and outstanding shares of common stock
of the Company, being the only class of securities issued by the Company, no
other types of stock, securities or other obligations of the Company exist,
including without limitation, any convertible bond and/or preferred
shares. Sellers further confirm that Parent is the sole record owner
of the remaining 21 issued and outstanding shares of common stock of the
Company.
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Authority.
|
Sellers
and the Company have all necessary corporate power and authority and have taken
all actions necessary to enter into this Agreement and to carry out the
Contemplated Transactions. The boards of directors of the Company and
Votraint have taken all action required by Law and the Company’s Governing
Documents and otherwise to be taken by the Company and Votraint to authorize
(a)
the execution, delivery and performance of this Agreement and (b) the
consummation of the Contemplated Transactions in accordance with the terms
and
conditions of this Agreement, and no shareholder action is required by Sellers
with respect to clause (a) or (b) above. This Agreement has been duly
and validly executed and delivered by Sellers and the Company and, when executed
and delivered, will constitute a legal, valid and binding obligation of
Sellers and the Company enforceable against it and them in accordance with
its terms, except as such enforceability may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or similar Laws relating to or affecting
generally the enforcement of creditors’ rights and (ii) available
remedies.
|
Consents
and Approvals.
|
Neither
the Sellers nor the Company is nor will be required to give any notice to any
person or obtain any Consent or Governmental Authorization in connection with
the execution and delivery of this Agreement, or the consummation or performance
of any of the Contemplated Transactions, except for those notices, Consents
or
Governmental Authorizations which the failure to give or obtain would not have
a
Material Adverse Effect, but with all such notices, Consents or Governmental
Authorizations of any type being set forth in the Sellers’ Disclosure
Schedules.
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6.6
|
No
Conflicts. The execution and delivery by the Sellers and
the Company of this Agreement and the performance by the Sellers
and the
Company of their respective obligations under this Agreement and
the
consummation of the Contemplated Transactions will not: (a) conflict
with
or result in a violation or breach of the Governing Documents of
the
Sellers, the Company and/or its subsidiaries; (b) conflict with or
result
in a violation or breach of any Law or Order applicable to the Sellers,
the Shares, the Company, its subsidiaries and/or any of their respective
assets and properties; or (c) (i) conflict with or result in a violation
or breach of, (ii) constitute (with or without notice or lapse of
time or
both) a default under, (iii) require the Sellers, the Company and/or
its
subsidiaries to obtain any consent, approval or action of, make any
filing
with or give any notice to any person as a result or under the terms
of,
(iv) result in or give to any person or entity any right of termination,
cancellation, acceleration or modification in or with respect to,
or (v)
result in the creation or imposition of any Encumbrance upon Sellers,
the
Shares, the Company, its subsidiaries and/or any of their respective
assets and properties under any agreement to which the Sellers, the
Shares, the Company, and/or its subsidiaries is a party or by which
any of
their respective assets or properties is
bound.
|
|
Non-contravention.
|
Neither
the entry into this Agreement nor its execution will directly or indirectly
(with or without notice or lapse of time):
|
|
(a)
|
contravene
any provision of the Governing Documents of the Sellers, the Company
and/or its subsidiaries;
|
|
|
(b)
|
contravene
any Governmental Authorization, Law or Order to which Sellers, the
Company
or its subsidiaries may be subject, except as would not have a Material
Adverse Effect, but with the Sellers being required to disclose all
such
matters in the Sellers’ Disclosure Letters to
Buyer;
|
|
|
(c)
|
conflict
with or result in a Default under any of the Company’s Material Contract
(as defined in Section 6.10), except as would not have a Material
Adverse
Effect.
|
|
Financial
Statements.
|
Sellers
have delivered to Buyer and Parent audited balance sheets of the Company for
the
fiscal years ended June 30, 2006 and 2005, and an unaudited balance sheet for
the period ended June 30, 2007, and the related audited statements of income,
statements of cash flows, and changes in shareholders’ equity for each of the
fiscal years then ended and the period ended December 31, 2006 (the
“Company’s Financial Statements”). The Company’s
Financial Statements were prepared in accordance with Australian generally
accepted accounting principles consistently applied, and fairly present, in
all material respects, the financial position, results of operations of the
Company as of the respective dates and for the respective periods indicated
therein.
Schedule
1 of this Agreement details: (a) the Company’s current balance
sheet as at June 30, 2006 (Audited) and (b) an unaudited balance sheet
as of June 30, 2007; and (c) a monthly “pro forma” cash flow
statement for the Company for each month commencing from and after February
1, 2007 (“Company’s Monthly Pro-Forma
Cash Flow Statement”). The Company’s
Monthly Pro-Forma Cash Flow Statements shall include all amounts of cash
received and all amounts of cash paid by the Company during each month covered
by each such statement. The information detailed in Schedule 1
fairly presents, in all material respects, the respective actual and
expected financial position, results of operations and cash flows of the Company
as of the respective dates and for the respective periods indicated
therein. The Company shall continue to provide Buyer and Parent,
within ten (10) Business Days after the end of each month from the date of
this
Agreement through to the completion of all the Contemplated Transactions, a
balance sheet, statements of income, statements of cash flows, and changes
in
shareholders’ equity for the Company and each of its subsidiaries for such each
calendar month then ended.
|
No
Undisclosed Liabilities.
|
Except
as
disclosed in the Company’s Financial Statements and Schedule 2 hereto,
the Company has no liability (current or contingent) or obligation, except
for liabilities and obligations incurred in the ordinary course of business
since the Balance Sheet Date, but with all liabilities and obligations incurred
in the ordinary course of business nevertheless being set forth in Schedule
2 hereto. Except as disclosed in Schedule 2, there
is no planned or expected undisclosed future cash expenditures, other than
in
the ordinary course of business, such as but not limited to any loan by the
Company to any of the Sellers, which may affect Company’s cash flow or financial
condition.
|
Absence
of Certain Changes.
|
Except
as
disclosed in Schedule 3 or as contemplated by this Agreement, since the
Balance Sheet Date, the Company has not:
|
(a)
|
declared,
set aside or paid any dividend or other distribution with respect
to any
shares of its capital stock, or otherwise made any payment to Sellers
or
any Affiliate of the Company or
Sellers;
|
|
(b)
|
taken
any other actions except in the ordinary course of
business;
|
|
(c)
|
accelerated
the collection of accounts receivable, delayed the payment of accounts
payable or otherwise changed its treasury management practices, in
each
case in any material respect; or
|
|
(d)
|
made
any change in its accounting policies or procedures, in any material
respect.
|
In
addition to the foregoing, since the date of the Company’s Financial
Statements:
(e)
the
Company and is subsidiaries have not (i) amended, or agreed to amend, their
Governing Documents, (ii) merged with or into or consolidated with, or agreed
to
merge with or into or consolidate with, any other person or entity, or (iii)
except as reasonably required in connection with the transactions contemplated
by this Agreement or as described elsewhere in this Agreement, changed, or
agreed to change, in any material manner the character of its
business;
(f)
the
Company and is subsidiaries have conducted their business only in the usual
and
ordinary course and in accordance with past practices;
(g)
there
has been no material change (or series of changes, casualty or otherwise) in
the
business, condition (financial or otherwise), results of operations, assets,
Liabilities or earnings of the Company and is subsidiaries, other than changes
arising in the ordinary course of business consistent with past practice and
experience, none of which changes, individually or in the aggregate, has had
or
reasonably could be expected to have a Material Adverse Effect on the Company,
its subsidiaries or the Shares;
(h)
the
Company and is subsidiaries have not made or promised to make any increase
in
any salaries, rates of pay or other compensation or benefits of any business
of
its employees, nor has the Company or its subsidiaries made any accrual for
or
commitment or agreement to make or pay the same, nor any payment or commitment
to pay any severance or termination pay to any of the business of its employees,
and no employees are covered by any collective bargaining
agreements;
(i)
the
Company and is subsidiaries have not suffered any strike or other labor trouble,
and the Company and is subsidiaries have not entered into any material agreement
or material negotiation with any labor union or other collective bargaining
representative of any business of its employees;
(j)
to
the best Knowledge and belief of the Sellers, the Company and its subsidiaries,
there has been no change or, any threat of any change, in any of the Company’s
or its subsidiaries’ relations with, or any loss of or, to the Knowledge of the
Sellers, the Company and/or its subsidiaries, threat of loss of, any of the
suppliers, distributors or customers of its respective business, or any material
decrease or limitation, of any such supplier’s provision of services, supplies
or materials to the Company or any of its subsidiaries or any such customer’s
usage or purchase of services or products of the Company or any of its
subsidiaries that has had or reasonably could be expected to have a Material
Adverse Effect on the Company or its subsidiaries;
(k)
there
has been no change in the method of accounting or keeping of books of account
or
accounting practices with respect to the Company and/or its
subsidiaries;
(l)
the
Sellers, the Company and its subsidiaries have not waived, or agreed to waive,
any right of material value with respect to the Company, its subsidiaries or
any
of its respective assets or properties;
(m)
the
Company and its subsidiaries have not changed, or agreed to change, any of
its
respective business policies or practices, including advertising, marketing,
pricing, purchasing, personnel, sales, returns or budget policies or practices,
which changes would have a Material Adverse Effect on the Company and/or its
subsidiaries;
(n)
except in the ordinary course of business or as otherwise permitted or required
by this Agreement, the Company and its subsidiaries have not (i) entered into,
or agreed to enter into, any lease (as lessor or lessee) or any license (as
licensee or licensor) on behalf of the Company or its subsidiaries, (ii) sold,
abandoned or made, or agreed to sell, abandon or make, any other disposition
of
any of the assets or properties of the Company or its subsidiaries; or (iii)
waived or relinquished any other rights of material value;
(o)
neither the Sellers nor the Company or its subsidiaries have granted or
suffered, or agreed to grant or suffer, any Encumbrance on any assets or stock
of the Company or its subsidiaries;
(p)
except as provided herein, the Company and/or its subsidiaries have not entered
into or amended, or agreed to enter into or amend, any contract or other
agreement by or to which the Company and/or its subsidiaries is bound or
subject, pursuant to which it agrees to indemnify any party on behalf of the
Company or its subsidiaries or pursuant to which it agrees to refrain from
competing with any party;
(q)
the
Company and its subsidiaries have not, except in the ordinary course of
business, incurred or assumed, or agreed to incur or assume, any material
Liability (whether or not currently due and payable);
(r)
the
Company and its subsidiaries have not terminated, or agreed to terminate, or
failed to renew or received any oral or written threat (that was not
subsequently withdrawn) to terminate or fail to renew, any Contract, license
or
Permit and/or Approval, where any such termination or failure to renew could
reasonably be expected to have a Material Adverse Effect on the Company and/or
its subsidiaries; and
(s)
the
Sellers, the Company and/or its subsidiaries have not entered into, or agreed
to
enter into, any transaction where the same has or could reasonably be expected
to have a Material Adverse Effect on the Company and/or its
subsidiaries.
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Contracts.
|
Each
Contract to which the Company and/or its subsidiaries is a party that is
material to the Company and/or its subsidiaries or is otherwise material to
the
operation of the Company’s business and/or its subsidiaries’ business as
presently conducted (collectively, the “Company’s
Material Contracts”) is in full force and effect,
constitutes a legal, valid and binding agreement of the Company and/or its
subsidiaries, respectively, and is enforceable in accordance with its terms
as
to the Company and/or its subsidiaries, respectively, except as such
enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting generally
the enforcement of creditors’ rights and (b) the availability of
remedies. To the Knowledge of the Sellers, the Company and its
subsidiaries, the Company and its subsidiaries are not in violation or breach
of
or Default under any Material Contract. Schedule 6.3 lists
all Material Contracts (where the value of aggregate payments or receipts is
$45,000 or greater) of the Company and/or its subsidiaries. True and correct
copies of all Material Contracts have been provided to Buyer.
Sellers
have not provided any guarantee on behalf of the Company and/or any of its
subsidiaries in respect of any Material Contract.
Sellers,
the Company and its subsidiaries will each take any and all steps reasonably
requested by the Buyer which are necessary to ensure that the Material Contracts
are not terminated or any services or revenues contemplated thereunder reduced
in any way as a result of the transactions contemplated by this Agreement
(including, but not limited to, executing any transfer and/or assignment
agreements and effecting any measures associated therewith). Contracts which
require approval of third parties to this transaction or which may be terminated
due to this transaction are listed on Schedule 6.2.
|
Intellectual
Property.
|
(a)
Schedule 6.11(a) of this Agreement contains a complete and accurate list (by
name and version number) of all products, internet properties, software and/or
service offerings of the Company and/or its subsidiaries (collectively,
“Company Products”) (i) that have been operated, sold, licensed,
distributed or otherwise provided in the three (3)-year period
immediately preceding the date hereof, (ii) for which the Company and/or any
its
subsidiaries has any obligation or liability related thereto, or (iii) which
the
Company and/or its subsidiaries intends to sell, distribute, operate, license
or
otherwise provide in the future, including any Company Products under
development.
(b)
Schedule 6.11(b) of this Agreement lists all Intellectual Property Rights
owned by, filed in the name of, or applied for, by any of the Sellers, the
Company and/or its subsidiaries which are applicable to the business or
operations of the Company and/or its subsidiaries (the “Company Registered
Intellectual Property Rights”) and lists any proceedings or actions before
any court, tribunal (including but not limited to the United States Patent
and
Trademark Office (the “PTO”), or equivalent authority anywhere in the
world, related to any of the Company Registered Intellectual Property Rights
or
any other intellectual property of any type (“Intellectual Property”) owned,
licensed and/or used by or in the business or products of the Company and/or
its
subsidiaries (collectively, the “Company Intellectual Property”). The
Company and the Sellers represent and warrant that the Company Intellectual
Property includes, but is not limited to, all rights of all types relating
to
“Heroes Of The Pacific” intellectual property.
(c)
Each
item of Company Registered Intellectual Property Right is currently in
compliance with all necessary formal legal requirements (including payment
of
filing, examination and maintenance fees and proofs of use) and is valid and
subsisting. All necessary documents and certificates in connection
with such Company Registered Intellectual Property Rights have been filed with
the relevant patent, copyright, trademark, Internet, or other authorities in
the
United States and all applicable foreign jurisdictions, as the case may be,
for
the purposes of applying for, perfecting, prosecuting and maintaining each
such
Company Registered Intellectual Property Right. Except as set forth
on Schedule 6.11(c) of this Agreement, there are no actions that must be
taken by the Sellers, the Company and/or its subsidiaries within two (2) years
of the date hereof, including but not limited to the payment of any
registration, maintenance or renewal fees or the filing of any responses to
PTO
(or other comparable entities elsewhere in the world) office actions, documents,
applications or certificates for the purposes of obtaining, maintaining,
perfecting or preserving or renewing any Company Registered Intellectual
Property Rights. The Sellers, the Company and/or its subsidiaries
have not claimed any small business status in the application for or
registration of any Company Registered Intellectual Property Rights that would
not be applicable following the consummation of the Contemplated
Transactions.
(d)
The
Company’s and/or its subsidiaries use or distribution of any data, information,
content or other works (including data, information content or works belonging
to third parties) does not, has not, and following the transactions contemplated
by this Agreement will not: (i) infringe or violate the rights (including
Intellectual Property Rights or rights under contract or policy) of any person
or entity or (ii) violate any law or regulation of any country or jurisdiction,
and the Sellers, the Company and/or its subsidiaries have not received any
notice of any infringement or violation with respect thereto.
(e)
In
each case in which the Company and/or its subsidiaries has acquired any
Intellectual Property or Intellectual Property Right from any person or entity,
including the Company’s acquisition of all Intellectual Property Rights with
respect to the “Heroes Of The Pacific,” including but not limited to all rights
thereto from Ben Xxxxx Xxxxxx, the Company and its subsidiaries, as applicable,
have obtained a valid and enforceable assignment sufficient to irrevocably
transfer all rights in and to all such Intellectual Property and the associated
Intellectual Property Rights (including the right to seek damages with respect
thereto) to the Company. To the maximum extent required by, and in
accordance with, applicable laws and regulations, the Company and its
subsidiaries, if applicable, have recorded each such assignment of a Registered
Intellectual Property Right assigned to the Company and/or its subsidiaries
with
the relevant Governmental Body or regulatory authority.
(f)
To
the best Knowledge and belief of the Sellers, the Company and its subsidiaries,
there are no facts or circumstances that would render any Company Intellectual
Property invalid or unenforceable, nor have the Sellers, the Company or its
subsidiaries taken, or failed to take, any action in the application for or
prosecution of any Company Intellectual Property that would render such Company
Intellectual Property invalid or unenforceable.
(g)
Each
item of Company Intellectual Property is free and clear of any liens or
encumbrances, except for non-exclusive licenses granted to end-user customers
in
the ordinary course of business, consistent with past practice, the forms of
which have been provided to Buyer and Parent.
(h)
The
Company is the exclusive owner or exclusive licensee of all Company Intellectual
Property, including but not limited to the Company being the exclusive owner
of
“Heroes Of The Pacific,” with no obligations (financial or otherwise) to any
other person or entity with respect to such ownership or
license. Without limiting the generality of the foregoing, (i) the
Company is the exclusive owner of all trademarks and internet properties used
in
connection with the operation or conduct of the businesses of the Company and/or
its subsidiaries, including the sale, distribution or provision of any Company
Products and the operation of any web sites by the Company and/or its
subsidiaries, (ii) the Company owns exclusively, and has good title to, all
copyrighted works that are included or incorporated into Company Products or
which the Company and/or its subsidiaries otherwise purports to own, and (iii)
to the extent that any patent would be infringed by any Company Product, the
Company is the exclusive owner of such patent.
(i)
Schedule 6.11(i) of this Agreement lists all Intellectual Property
licenses (“IP Licenses”) pursuant to which the Company or its subsidiaries
created or developed any Intellectual Property for or on behalf of any third
party and granted such third party any exclusive rights to or joint ownership
of
such Intellectual Property or related Intellectual Property
Rights. Except as otherwise provided in Schedule 6.11(i) of
this Agreement, the Company has not (i) transferred ownership of, or granted
any
exclusive license of or right to use, or authorized the retention of any
exclusive rights to use or joint ownership of, any Intellectual Property or
Intellectual Property Right that is or was Company Intellectual Property, to
any
other person or entity, or (ii) permitted Company’s rights in such Company
Intellectual Property to lapse or enter the public domain.
(j)
Except as set forth on Schedule 6.11(j) of this Agreement, all
Intellectual Property used in or necessary to the conduct of Company’s
businesses (including its subsidiaries) as presently conducted or used at any
time in the conduct of Company’s businesses (including its subsidiaries) as
currently contemplated by the Company and its subsidiaries to be conducted,
was
written and created solely by either (i) employees of the Company acting within
the scope of their employment, with all such employees having executed all
necessary assignments of inventions, discoveries and intellectual property
rights to the Company, (ii) third parties who have validly and irrevocably
assigned all of their rights, including all Intellectual Property Rights
therein, to the Company, or (iii) third parties who have entered into an
agreement with the Company pursuant to which any Intellectual Property authored
or created by such third party would be considered a work made for hire pursuant
to Australian intellectual property laws which inure solely to the benefit,
right and ownership of the Company and no third party owns or has any rights
to
any such Intellectual Property. The Company and the Sellers represent
and warrant that the Intellectual Property of the Company includes, but is
not
limited to, all rights of all types relating to “Heroes Of The Pacific”
intellectual property.
(k)
To
the extent that any Intellectual Property or Intellectual Property Rights have
been developed or created by a third party for the Company or its subsidiaries
or is incorporated into any of the Company Products, the Company has a written
agreement with such third party with respect thereto and the Company thereby
has
obtained, pursuant to an IP License listed on Schedule 6.11(k) of this
Agreement, a perpetual, non-terminable, full-paid, world-wide license
(sufficient for the conduct of the Company’s businesses as currently conducted
and as proposed to be conducted) to, all such third party’s Intellectual
Property and Intellectual Property Rights, and in each case such rights and
licenses shall survive the transactions contemplated by this
Agreement.
(l)
Schedule 6.11(l) of this Agreement sets forth, for each Company
Product, (i) whether use or operation of such Company Product by any customer
or
end-user on any third party hardware or software platform (a “Third Party
Platform”) requires such customer or end-user to enter into an agreement or
license with the manufacturer of such Third Party Platform, and (ii) all IP
Licenses entered into with such manufacturer of such Third Party
Platform. Except as set forth on Schedule 6.11(l), the Company
Intellectual Property constitutes all the Intellectual Property and Intellectual
Property Rights used in or necessary to the conduct of the businesses of the
Company and its subsidiaries, and as it is currently planned or contemplated
to
be conducted by the Company and/or its subsidiaries, including, without
limitation, the operation, design, development, manufacture, use, import,
distribution and sale of Company Products.
(m)
No
person who has licensed any Intellectual Property or Intellectual Property
Rights to the Company or its subsidiaries has ownership rights or license rights
to improvements made by or for the Company and/or its subsidiaries in such
Intellectual Property or Intellectual Property Rights, and all such licenses
provide that all such ownership rights or license rights to improvements made
by
or for the Company and/or its subsidiaries in such Intellectual Property or
Intellectual Property Rights shall inure to solely the Company and/or its
subsidiaries.
(n)
Company has the right to use, pursuant to valid licenses which are listed on
Schedule 6.11(n) of this Agreement, all data (including personal data of
third parties), all software development tools, library functions, operating
systems, data bases, compilers and all other third-party software that are
used
in the business and/or operation of the Company and/or its subsidiaries or
that
are required to create, modify, compile, operate or support any software that
is
Company Intellectual Property or is incorporated into any Company
Product.
(o)
Except as set forth on Schedule 6.11(o) of this Agreement, no open source
or public library software, including without limitation, any version of any
software licensed pursuant to any public license, was used in the development
or
modification of any software that is or was Company Intellectual Property or
is
incorporated into any Company Product.
(p)
No
governmental entity, university, college, other educational institution or
research center or third parties have any rights whatsoever in any Company
Intellectual Property.
No
current or former employee, consultant or independent contractor of the Company
or any of its subsidiaries, who was involved in, or who contributed to, the
creation or development of any Company Intellectual Property, has performed
services for the government, university, college, or other educational
institution or research center during a period of time during which such
employee, consultant or independent contractor was also performing services
for
the Company or any of its subsidiaries.
(q)
The
operation of the businesses of the Company and its subsidiaries as it is
currently conducted, or is contemplated to be conducted, by the Company and
its
subsidiaries, including but not limited to the design, development, use, import,
branding, advertising, promotion, marketing, operation, manufacture and sale
of
Company Products, does not and will not after the transactions contemplated
by
this Agreement infringe or misappropriate any and Intellectual Property and/or
any Intellectual Property Right of any person or entity, violate any right
of
any person or entity (including any right to privacy or publicity), or
constitute unfair competition or trade practices under the laws of any
jurisdiction, and the Sellers, the Company and/or its subsidiaries have not
received notice from any person or entity claiming that such operation or any
act, product, technology or service (including products, technology or services
currently under development) of the Company or its subsidiaries infringes or
misappropriates any Intellectual Property Right of any person or entity or
constitutes unfair competition or trade practices under the laws of any
jurisdiction (nor do the Sellers, the Company and/or its subsidiaries have
any
Knowledge of any basis therefor).
(r)
No
Company Intellectual Property or Company Product is subject to any proceeding
or
outstanding decree, order, judgment or settlement agreement or stipulation
that
restricts in any manner the use, transfer or licensing thereof by the Company
or
that may affect the validity, use or enforceability of such Company Intellectual
Property.
(s)
Schedule 6.11(s)(i) of this Agreement lists all inbound IP Licenses
(including without limitation all non-negotiated IP Licenses such as free
downloads, shrink-wrap and click-through agreements and open source licenses
and
agreements), Schedule 6.11(s)(ii) of this Agreement lists all material
outbound IP Licenses, and Schedule 6.11(s)(iii) of this Agreement lists,
for each Company Product, all Intellectual Property or Intellectual Property
Rights of a third party used in such Company Product and the IP License pursuant
to which Company acquired the right to use such Intellectual Property or
Intellectual Property Rights.
(t)
All
IP Licenses are in full force and effect. The Company and/or its
subsidiaries are not in breach of nor has it/they failed to perform under,
and
the Sellers, the Company and/or its subsidiaries have not received any notice
of
any breach or failure to perform under, any of the IP Licenses and, to the
Knowledge of the Sellers, the Company and/or its subsidiaries, no other party
to
any such contract, license or agreement is in breach thereof or has failed
to
perform thereunder. The consummation of the transactions contemplated
by this Agreement will neither violate nor result in the breach, modification,
diminution, reduction, cancellation, termination or suspension of any IP
Licenses or entitle the other party or parties to such IP Licenses to terminate
such IP Licenses. The transactions contemplated by this Agreement
will not result in any third party being granted any rights to any Company
Intellectual Property Rights that are in addition to, or greater than, such
third party currently has under such IP Licenses, including any access to or
release of any source code owned by or licensed to the Company.
(u)
Schedule 6.11(u) of this Agreement lists all IP Licenses between the
Company and any other person or entity wherein or whereby the Company or any
of
its subsidiaries has agreed to, or assumed, any obligation or duty to warrant,
indemnify, reimburse, hold harmless, guaranty or otherwise assume or incur
any
obligation or liability or provide a right of rescission with respect to the
infringement or misappropriation by the Company or its subsidiaries or such
other person or entity of the Intellectual Property Rights of any person or
entity other than the Company.
(v)
There
are no contracts, licenses or agreements between the Company and/or its
subsidiaries and any other person or entity with respect to Company Intellectual
Property under which there is any dispute regarding the scope of such agreement,
or performance under such agreement, including with respect to any payments
to
be made or received by the Company or its subsidiaries thereunder.
(w)
To
the Knowledge of the Sellers, the Company and/or its subsidiaries, no person
is
infringing or misappropriating any Company Intellectual Property
Right.
(x)
The
Company has taken all steps that are reasonably required to protect the
Company’s rights and its subsidiaries’ rights in confidential information and
trade secrets of the Company and/or is subsidiaries or provided by any other
person or entity to the Company and/or its subsidiaries.
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Employee
Matters.
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(a)
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There
is not presently pending or existing, and to the Knowledge of
Sellers, the Company and/or its subsidiaries, there is not threatened,
any
strike, slowdown, picketing, employee grievance process or other
work
stoppage or labor dispute involving the Companyand/or its subsidiaries
and
no event has occurred or circumstance exists that may provide the
basis
for any such work stoppage or labor
dispute.
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(b)
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The
Company and its subsidiaries are not obligated to grant stock
options or other similar rights or make any retirement payment to any
person or entity except for the retention plan and severance payments
as
provided under Schedule 5 of this
Agreement.
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(c)
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To
the Knowledge of Sellers, the Company and/or its subsidiaries, there
is not pending or threatened, any Proceeding against or affecting
the
Company and/or its subsidiaries relating to the alleged violation
of any
Law pertaining to labor relations or employment
matters
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|
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(d)
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Sellers
have not, prior to the date of this Agreement, and Sellers will not
from
and after the execution of this Agreement and for an additional period
of
at least two (2) years immediately after Stage 1 of the Contemplated
Transaction solicit, directly or indirectly, any of the Company’s
employees or any of its subsidiaries’ employees to resign from or
otherwise cease employment with the Company or its
subsidiaries.
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(e)
|
Schedule
6.12(e) of this Agreement lists all Contracts providing for a
commitment of employment, consulting or independent contractor
services
(and provides a description of all oral agreements related thereto)
to
which the Company or its subsidiaries is a party which either (i)
contain
severance, bonus or other provisions that may be triggered by the
Contemplated Transactions or (ii) contain obligations continuing
beyond
the consummation of the Contemplated Transactions, and true, correct
and
complete copies of all such written agreements have been delivered
to
Buyer and Parent. In addition, Schedule
6.12(e) of this Agreement identifies all current
employees, consultants and independent contractors of the Company
and/or
its subsidiaries, including, without limitation, all officers of
the
Company and/or its subsidiaries, and describes the job title of
and
compensation (including, without limitation, salary, bonuses and
perks)
payable to, each such individual. None of such employees has
indicated to the Company or is subsidiaries a present intention
to resign
or retire, and the Company does not have a present intention to
terminate
the employment of any of them. No employee of the Company is in
violation of any material term of any employment contract (whether
written
or oral), patent disclosure agreement or any other contract or
agreement
relating to the relationship of any such employee with the Company
or is
subsidiaries or any other person or entity (including prior employers)
because of the nature of the business now conducted or now proposed
to be
conducted by the Company and/or its
subsidiaries.
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(f)
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Company
Employee Benefit Plans.Schedule 6.12(f) of this Agreement contains a
list of all employee benefit plans in which employees of the
Company
and/or its subsidiaries participate as of the date of this
Agreement
and/or at any time thereafter (the “Benefit
Plans”). Sellers and the Company have delivered to Buyer
and Parent true, correct and complete copies of all documents
(including
the most recent plan document incorporating all plan amendments,
the most
recent summary plan description and, if applicable, the most
recent
governmental determination letter) embodying the Benefit
Plans. To the Knowledge of the Sellers, the Company and its
subsidiaries, each of the Benefit Plans is and has at all times
been in
compliance in all material respects with applicable provisions
of
Victorian and the Federal Government of Australia laws and
regulations and
all other applicable laws and regulations . With respect to
each Benefit Plan, no action, suit, proceeding, hearing, or
investigation
with respect to the administration or the investment of the
assets of any
such Benefit Plan (other than routine claims for benefits)
is
pending.
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Compliance.
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|
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Sellers,
the Company and its subsidiaries represent and warrant that the Company
and its subsidiaries conduct its/their business in accordance with
all
applicable Laws, including any applicable Laws relating to
anti-competition, anti-trust, tax, commercial law, corporate law
and
anti-monopoly and the regulation
thereof.
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|
Legal
Proceedings.
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|
|
The
Sellers, the Company and its subsidiaries represent and warrant that
there
are no Proceedings pending against, or threatened against or affecting
(a)
the Company and/or its subsidiaries, (b) any asset of the Company
and/or
its subsidiaries, or (c) the Company Intellectual Property
Rights. Neither the Company, its subsidiaries nor Sellers is
subject to any Order that has or could reasonably be expected to
have a
Material Adverse Effect or that could be reasonably expected to materially
impair the business or prospects of the Company and/or its subsidiaries
or
materially impair or delay the ability of Sellers to consummate the
Contemplated Transactions.
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Title
to Property.
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The
Company has good title to, or in the case of leased property and assets, has
valid leasehold interests in all property and assets utilized by the Company
and/or its subsidiaries without Encumbrances of any kind (whether real,
personal, tangible or intangible) reflected on the Company’s balance sheet or
acquired after the Balance Sheet Date, except for (i) any Encumbrances as
described in Schedule 6 (ii) nor have any properties and assets been sold
or disposed of since the Balance Sheet Date except in the ordinary course of
business consistent with past practices. Schedule 7 contains a
true, correct and complete list of all tangible and intangible assets and
properties (including business software) of the Company, all of which shall
be
transferred with the Company. The Company has the right to
commercially exploit the Intellectual Property in the Database included herein.
True, correct and complete copies of all titles and leases have been provided
to
Buyer.
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Tax
Matters.
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(a)
|
All
Tax Returns required by Law to be filed by or on behalf of the Company
have been filed. All Taxes owed by the Company (whether or not
shown as due on its Tax Returns) and due have been
paid.
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(b)
|
No
audits or other Proceedings exist with respect to any Taxes or Tax
Returns
of the Company (including its subsidiaries). The Company and/or
its subsidiaries do not currently have any Tax deficiency proposed
or
assessed against it in writing by any Governmental
Authority.
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Insurance.
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The
Company has at all times maintained all insurances: (a) necessary for the proper
conduct of the business of the Company and its subsidiaries, in the ordinary
course including insurance for the actions of and injury to employees; and
(b)
against all risks normally insured against by persons or entities carrying
on
the same type of business as the Company. There is no claim
outstanding under any insurance policy or insurance contract exceeding $10,000
and to the Knowledge of the Sellers, the Company and/or its
subsidiaries, there are no circumstances likely to give rise to a
claim. No claim has been made under any insurance contract during the
12 months before the date of this Agreement. The Company has never
had an insurance claim refused or been refused insurance
coverage. Schedule 6.17 of this Agreement lists all insurance
policies and contracts covering the Company, its subsidiaries and/or their
respective employees, properties, assets, liabilities and/or risks.
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6.18
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Subsidiaries. The
Company has no other subsidiaries except for only (i) Interactive
Entertainment (AUST) PTY LTD and (ii) IR Gurus Interactive Pty
Ltd. Except as set forth on Schedule 6.18 of this
Agreement, the Company does not directly or indirectly own any equity
or
similar interest in, or any interest convertible or exchangeable
or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or
entity.
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6.19
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Brokers;
Finders. No broker, investment bank, financial advisor or
other person or entity is entitled to any broker’s, finder’s, financial
advisor’s or other similar fee or commission in connection with the
Contemplated Transactions based upon any arrangements made by or
on behalf
of the Sellers or the Company and/or its
subsidiaries.
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|
7.
|
REPRESENTATIONS
AND WARRANTIES OF BUYER AND
PARENT
|
Buyer
and
Parent each represents and warrants to Sellers that the statements in this
Section 7 are all true and correct as
of the date of this Agreement:
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Organization.
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|
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Parent
is duly organized, validly existing and, if applicable, in good standing,
under the Laws of Delaware and has all requisite power and authority
to
own its assets and carry on business as presently conducted by
it. Buyer is duly organized, validly existing and, if
applicable, in good standing, under the Laws of Australia and has
all
requisite power and authority to own its assets and carry on business
as
presently conducted by it. Parent and Buyer have delivered to
the Company true, correct and complete copies of all Governing Documents
of each of the Parent and Buyer, each as amended up through the date
of
delivery thereof to the Company, with no other changes thereto being
made
from and after the delivery thereof to the Company. Parent and
Buyer represent and warrant that the Parent and Buyer are not in
violation
of any provision of any of their respective Governing Documents,
nor any
other operational or business agreements to which the Parent and
Buyer are
a party.
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|
Capitalization.
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|
|
The
capitalization of Parent is set forth in Schedule 7.2
hereto.
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Authority.
|
Buyer
and
Parent each have all necessary power and authority and has taken all actions
necessary to enter into this Agreement and to carry out the Contemplated
Transactions.
The
respective boards of directors of Buyer and Parent have taken all action
required by Law and their respective Governing Documents or otherwise to be
taken by Buyer and/or Parent to authorize the execution and delivery of this
Agreement by Buyer and Parent and the consummation of the Contemplated
Transactions, subject to the terms and conditions contained in this
Agreement. This Agreement has been duly and validly executed and
delivered by Buyer and Parent and, when executed and delivered by Sellers,
will
constitute a legal, valid and binding obligation of Buyer and Parent enforceable
against them in accordance with their terms, except as such enforceability
may
be limited by (a) bankruptcy, insolvency, reorganization, moratorium or
similar Laws relating to or affecting generally the enforcement of creditors’
rights and (b) available remedies. The shares of Parent Common
Stock to be issued to the Sellers as the Stock Payment shall have been duly
authorized and validly issued to the Sellers and deposited into escrow as
provided in this Agreement.
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Consents
and Approvals.
|
Buyer
and
Parent are not nor will be required to give any notice to any person or obtain
any Consent or Governmental Authorization in connection with the execution
and
delivery of this Agreement, or the consummation or performance of any of the
Contemplated Transactions, except for those notices, Consents or Governmental
Authorizations generally referred to elsewhere herein.
|
No
Conflicts.
|
|
|
The
execution and delivery by the Parent and the Buyer of this Agreement
and
the performance by the Parent and the Buyer of their respective
obligations under this Agreement and the consummation of the Contemplated
Transactions will not: (a) conflict with or result in a violation
or
breach of the Governing Documents of the Parent or the Buyer; (b)
conflict
with or result in a violation or breach of any Law or Order applicable
to
the Parent or the Buyer and/or any of their respective assets and
properties; or (c) (i) conflict with or result in a violation or
breach
of, (ii) constitute (with or without notice or lapse of time or both)
a
default under, (iii) require the Parent or the Buyer to obtain any
consent, approval or action of, make any filing with or give any
notice to
any person as a result or under the terms of, (iv) result in or give
to
any person or entity any right of termination, cancellation, acceleration
or modification in or with respect to, or (v) result in the creation
or
imposition of any Encumbrance upon Parent or the Buyer and/or any
of their
respective assets and properties under any agreement to which the
Parent
or the Buyer is a party or by which any of their respective assets
or
properties is bound.
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Non-contravention.
|
Neither
entry into this Agreement nor its execution will directly or indirectly (with
or
without notice or lapse of time):
|
|
(a)
|
contravene
any provision of the governing documents of Buyer or
Parent;
|
|
|
(b)
|
contravene
any Governmental Authorization, Law or Order to which Buyer or Parent
may
be subject;
|
|
|
(c)
|
conflict
with or result in a Default under any Material Contract of Buyer
or
Parent.
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Financial
Statements.
|
Parent
has delivered to Sellers un-audited financial statements of the Parent as of
December 31, 2006. Parent has also delivered its audited financial
statements for each of the financial years ending on March 31, 2005 and March
31, 2006 (the “Parent’sFinancial
Statements”), The Parent’s Financial Statements were
prepared in accordance with US GAAP, and fairly present, in all material
respects, the financial position, results of operations of the Buyer as of
the
respective dates and for the respective periods indicated therein.
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No
Undisclosed Liabilities.
|
Except
as
disclosed in the Parent’s Financial Statements and the Parent’s Balance Sheet
and Schedule 7.8 of this Agreement, the Parent has
no liability (current or contingent) or obligation, except for liabilities
and obligations incurred in the ordinary course of business since the Parent’s
Balance Sheet Date. Except as disclosed in Schedule 7.8, there
is no planned or expected undisclosed future cash expenditures, other than
in
the ordinary course of business, such as but not limited to any loan by the
Buyer, which may adversely affect Parent’s or Buyer’s cash flow or financial
condition.
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Absence
of Certain Changes.
|
Except
as
disclosed in Schedule 7.9 or as contemplated by this Agreement, since the
Parent’s Balance Sheet Date, the Parent has not:
(a)
declared, set aside or paid any dividend or other distribution with respect
to
any shares of its capital stock, or otherwise made any payment to Sellers or
any
Affiliate of the Parent;
(b)
taken
any other actions except in the ordinary course of business;
(c)
accelerated the collection of accounts receivable, delayed the payment of
accounts payable or otherwise changed its treasury management practices, in
each
case in a material respect; or
(d)
made
any change in its accounting policies or procedures, in any material
respect.
In
addition to the foregoing, since the date of the Parent’s Financial
Statements:
(e)
Parent and Buyer have not (i) amended, or agreed to amend, their Governing
Documents, (ii) merged with or into or consolidated with, or agreed to merge
with or into or consolidate with, any other person or entity, or (iii) except
as
reasonably required in connection with the transactions contemplated by this
Agreement or as described elsewhere in this Agreement, changed, or agreed to
change, in any material manner the character of its business;
(f)
Parent and Buyer have conducted their business only in the usual and ordinary
course and in accordance with past practices;
(g)
there
has been no material change (or series of changes, casualty or otherwise) in
the
business, condition (financial or otherwise), results of operations, assets,
Liabilities or earnings of the Parent and Buyer, other than changes arising
in
the ordinary course of business consistent with past practice and experience,
none of which changes, individually or in the aggregate, has had or reasonably
could be expected to have a material adverse effect on the Parent and
Buyer;
(h)
Parent and Buyer have not made or promised to make any material increase in
any
salaries, rates of pay or other compensation or benefits of any business of
its
employees, nor has Parent and Buyer made any accrual for or commitment or
agreement to make or pay the same, nor any payment or commitment to pay any
severance or termination pay to any of the business of its employees, and no
employees are covered by any collective bargaining agreements;
(i)
Parent and Buyer have not suffered any strike or other labor trouble, and Parent
and Buyer have not entered into any material agreement or material negotiation
with any labor union or other collective bargaining representative of any
business of its employees;
(j)
to
the best Knowledge and belief of the Parent and Buyer, there has been no change
or, any threat of any change, in any of the Parent’s or Buyer’s relations with,
or any loss of or, to the Knowledge of the Parent or buyer, threat of loss
of,
any of the suppliers, distributors or customers of its respective business,
or
any material decrease or limitation, of any such supplier’s provision of
services, supplies or materials to the Parent or Buyer or any such customer’s
usage or purchase of services or products of Parent or Buyer that has had or
reasonably could be expected to have a material adverse effect on the Parent
and
Buyer;
(k)
there
has been no change in the method of accounting or keeping of books of account
or
accounting practices with respect to the Parent and Buyer;
(l)
Parent and Buyer have not waived, or agreed to waive, any right of material
value with respect to the Parent and Buyer or any of its respective assets
or
properties;
(m)
Parent and Buyer have not changed, or agreed to change, any of its respective
business policies or practices, including advertising, marketing, pricing,
purchasing, personnel, sales, returns or budget policies or practices, which
changes would have a material adverse effect on the Parent and/or
Buyer;
(n)
except in the ordinary course of business or as otherwise permitted or required
by this Agreement, the Parent and Buyer have not (i) entered into, or agreed
to
enter into, any lease (as lessor or lessee) or any license (as licensee or
licensor) on behalf of the Parent or Buyer, (ii) sold, abandoned or made, or
agreed to sell, abandon or make, any other disposition of any of the assets
or
properties of the Parent or Buyer; or (iii) waived or relinquished any other
rights of material value;
(o)
neither the Parent or Buyer have granted or suffered, or agreed to grant or
suffer, any Encumbrance on any assets or stock of the Parent or
Buyer;
(p)
except as provided herein, the Parent and/or Buyer have not entered into or
amended, or agreed to enter into or amend, any contract or other agreement
by or
to which the Parent and/or Buyer is bound or subject, pursuant to which it
agrees to indemnify any party on behalf of the Parent and/or Buyer or pursuant
to which it agrees to refrain from competing with any party;
(q)
Parent and Buyer have not, except in the ordinary course of business, incurred
or assumed, or agreed to incur or assume, any material Liability (whether or
not
currently due and payable);
(r)
Parent and Buyer have not terminated, or agreed to terminate, or failed to
renew
or received any oral or written threat (that was not subsequently withdrawn)
to
terminate or fail to renew, any Contract, license or Permit and/or Approval,
where any such termination or failure to renew could reasonably be expected
to
have a material adverse effect on the Parent and/or Buyer; and
(s)
Parent and/or Buyer have not entered into, or agreed to enter into, any
transaction where the same has or could reasonably be expected to have a
material adverse effect on Parent and/or Buyer.
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Contracts.
|
Each
Contract to which the Parent is a party that is material to the Parent or is
otherwise material to the operation of the Parent’s business as presently
conducted (collectively, the
“Parent’s Material
Contracts”) is in full force and effect, constitutes a legal, valid and
binding Agreement of the Parent and is enforceable in accordance with its
terms as to the Parent, except as such enforceability may be limited by
(a) bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting generally the enforcement of creditors’ rights and
(b) the availability of remedies. To Parent’s Knowledge, the
Parent is not in violation or breach of or Default under any of Parent’s
Material Contracts.
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Intellectual
Property.
|
Parent
is
the legal owner or licensee of all intellectual property of the
Parent.
|
Employee
Matters.
|
|
|
(a)
|
There
is not presently pending or existing, and to the Knowledge of Parent
or
the Buyer, there is not threatened, any strike, slowdown, picketing,
employee grievance process or other work stoppage or labor dispute
involving the parent or the Buyer and no event has occurred or
circumstance exists that may provide the basis for any such work
stoppage
or labor dispute.
|
|
|
(b)
|
To
the Knowledge of the Parent and the Buyer, there is not pending or
threatened, any Proceeding against or affecting the parent or the
Buyer
relating to the alleged violation of any Law pertaining to labor
relations
or employment matters
|
|
Compliance.
|
|
|
Buyer
and Parent represent and warrant that the Buyer and the Parent conduct
their respective business in accordance with all applicable Laws,
including any applicable Laws relating to anti-competition, anti-trust,
tax, commercial law, corporate law and anti-monopoly and the regulation
thereof.
|
|
Legal
Proceedings.
|
|
|
The
Buyer and Parent represent and warrant that there is no Proceeding
pending
against threatened against the Buyer or Parent, or relating to, affecting
or arising in connection with it. Neither Buyer nor Parent are
subject to any Order that could be reasonably expected to materially
impair the business or prospects of the Parent and/or its
subsidiaries.
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|
Title
to Property.
|
The
Parent has good title to, or in the case of leased property and assets, has
valid leasehold interests in all property and assets utilized by the Parent
without Encumbrances (whether real, personal, tangible or intangible) reflected
on the Parent’s Balance Sheet or thereafter acquired, except for (i) any
Encumbrances as described in Schedule 7.15 and/or (ii) properties and
assets sold or disposed of since the Parent’s Balance Sheet Date in the ordinary
course of business consistent with past practices.
|
Tax
Matters.
|
|
|
(a)
|
All
material Tax Returns required by Law to be filed by or on behalf
of the
Buyer and Parent have been filed. All Taxes owed by the Buyer
or Parent (whether or not shown as due on its Tax Returns) and due
have
been paid, except to the extent that a reserve for such Taxes has
been
reflected on the Financial Statements in accordance with US
GAAP.
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(b)
|
No
audits or other Proceedings exist with respect to any Taxes or Tax
Returns
of the Buyer or the Parent. Neither the Buyer nor the Parent
currently have any Tax deficiency proposed or assessed against it
in
writing by any Governmental
Authority.
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Insurance.
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The
Buyer
and the Parent have at all times maintained all insurances: (a) necessary for
the proper conduct of the business of the Buyer and the Parent, in the ordinary
course including insurance for the actions of and injury to employees; and
(b)
against all risks normally insured against by persons carrying on the same
type
of business as the Buyer and the Parent. There is no claim
outstanding under any insurance contract exceeding $10,000 and to the Knowledge
of Buyer or Parent, there are no circumstances likely to give rise to a claim.
No claim has been made under any insurance contract during the 12 months before
the date of this Agreement. The Buyer and the Parent have never had
an insurance claim refused or been refused insurance coverage.
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Subsidiaries.
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The
Parent has no other subsidiaries except for only the Buyer, 2WG Media,
Inc. and Roveractive Ltd. The Parent does not directly or indirectly
own
any other equity or similar interest in, or any interest convertible
or
exchangeable or exercisable for, any equity or similar interest in,
any
corporation, partnership, joint venture or other business association
or
entity, other than the 21 shares of the Company which are owned by
the
Parent.
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Brokers;
Finders.
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No
broker, investment bank, financial advisor or other person or entity
is
entitled to any broker’s, finder’s, financial advisor’s or other similar
fee or commission in connection with the Contemplated Transactions
based
upon any arrangements made by or on behalf of the Parent or the
Buyer.
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8.
|
COVENANTS
OF SELLERS BEFORE CLOSURE
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Operation
of the Business of the Company.
|
Between
the date of this Agreement and the subsequent date that Buyer and Parent take
control of the Company’s Board of Directors pursuant to Section 2.11 of this
Agreement after the closing of Stage 1 of the Contemplated Transaction, except
as otherwise specifically provided in this Agreement, Sellers will
ensure that the Company will:
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(a)
|
conduct
the business of the Company only in the ordinary course of
business;
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(b)
|
use
all reasonable efforts to preserve intact the current business
organization of the Company, keep available the services of the current
officers, employees and agents of the Company, and maintain relations
and
goodwill with suppliers, customers, landlords, employees, agents
and
others having business relationships with the Company;
and
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(c
)
|
will
not knowingly or intentionally be in breach or default of any obligation,
duty or other matter and, in the event of any breach or default of
any
obligation, duty or other matter, the Sellers shall use all reasonable
efforts to cure each and every such breach or
default.
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Access.
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(a)
|
From
the date of this Agreement until the completion of Stage 1 of the
Contemplated Transaction, Sellers will (i) permit Buyer, Parent and
their
authorized Representatives reasonable access to the offices, properties,
books and records of the Company and its subsidiaries, and (ii) furnish,
and cause the Company to furnish, to Buyer, Parent and their authorized
Representatives such financial and operating data and other information
relating to the Company and its subsidiaries as such persons may
reasonably request; provided, however, that any such access will be
during regular business hours and upon reasonable advance
notice. Sellers will instruct its employees, counsel and
financial advisors to provide reasonable cooperation to Buyer, Parent
and
their authorized Representatives in its investigation of the Company
and
its subsidiaries. Buyer and Parent will also have access to all
personnel records of the Company and its subsidiaries, including
records
relating to information which in Sellers’ good faith opinion is sensitive
or the disclosure of which could expose the Company and/or its
subsidiaries to risk of liability.
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(b)
|
On
and after the execution hereof, Sellers will promptly afford to Buyer,
Parent and their Representatives reasonable access to books of account,
financial and other records, information, employees and auditors
to the
extent necessary in connection with any audit, investigation, dispute
or
litigation or any other reasonable business purpose relating to the
Company and its subsidiaries; provided that any such access by
Buyer, Parent and their Representatives will not unreasonably interfere
with the conduct of the business of the Company.
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Notice
of Certain Events.
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Sellers
and the Company shall comply with each of the following provisions of this
Section 8.3 and Sellers will promptly notify Buyer and Parent in writing
of:
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(a)
|
any
notice or other communication for any person or entity alleging that
the
Consent of such person or entity is or may be required in connection
with
the Contemplated Transactions;
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(b)
|
any
notice or other communication for any Governmental Body that is or
may be
required in connection with the Contemplated Transactions;
and
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(c)
|
any
Proceedings relating to the Sellers, the Company and/or its subsidiaries
or any Order relating to Sellers or the Company and/or its subsidiaries
that, if pending on the date of this Agreement, would have been required
to have been disclosed pursuant to this
Agreement.
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(d)
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Regulatory
and Other Approvals.
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Between
the date of this Agreement and the subsequent date that Buyer and Parent take
control of the Company’s Board of Directors pursuant to Section 2.11 of this
Agreement after the closing of Stage 1 of the Contemplated Transaction, Sellers
will, and will cause the Company and its subsidiaries to, (a) proceed
diligently, expeditiously and in good faith as promptly as practicable to obtain
all consents, approvals or actions of, to make all filings with and to give
all
notices to Governmental Bodies or Regulatory Authorities or any other person
or
entity required of Sellers, the Company and the subsidiaries to consummate
the
transactions contemplated hereby, (b) provide such other information and
communications to such Governmental Bodies or Regulatory Authorities or other
persons as such Governmental Bodies or Regulatory Authorities or other persons
may reasonably request in connection therewith, and (c) cooperate with Buyer
and
Parent in obtaining all consents, approvals or actions of, making all filings
with and giving all notices to Governmental Bodies or Regulatory Authorities
or
other persons or entities required of Buyer and/or Parent to consummate the
Contemplated Transactions.
Sellers
will provide prompt notification to Buyer and Parent when any such consent,
approval, action, filing or notice referred to in clause (a) above is obtained,
taken, made or given, as applicable, and will advise Buyer and Parent in writing
of any communications (and, unless precluded by law, provide copies of any
such
communications that are in writing) with any Governmental Bodies or Regulatory
Authority or other person or entity regarding any of the Contemplated
Transactions. Buyer and Parent will proceed diligently, expeditiously
and in good faith to endeavor to obtain as promptly as practicable all consents,
approvals or actions of, to make all filings with and to give all notices to
Governmental Bodies or Regulatory Authorities or any other person required
of
Buyer and/or Parent to consummate the transactions contemplated hereby, provide
such other information and communications to such Governmental Bodies or
Regulatory Authorities or other persons or entities as such Governmental Bodies
or Regulatory Authorities or other persons or entities may reasonably request
in
connection therewith, and provide reasonable cooperation to Seller and the
Company in obtaining all consents, approvals or actions of, making all filings
with and giving all notices to Governmental Bodies or Regulatory Authorities
or
other persons required of Seller, the Company and/or its subsidiaries to
consummate the Contemplated Transactions. Buyer and/or Parent will
provide prompt notification to one Representative of all the Sellers, as
designated in writing to Buyer by all the Sellers prior to the date of this
Agreement (the “Sellers’ Notification Representative”), when any such consent,
approval, action, filing or notice referred to in clause (a) above is obtained,
taken, made or given, as applicable, and will advise Sellers’ Notification
Representative of any communications (and, unless precluded by law, provide
copies of any such communications that are in writing) with any Governmental
Bodies or Regulatory Authority or other person or entity regarding any of the
Contemplated Transactions.
(e) Conduct
of Business. Between the date of this Agreement and the
subsequent date that Buyer and Parent take control of the Company’s Board of
Directors pursuant to Section 2.11 of this Agreement after the closing of Stage
1 of the Contemplated Transaction, Sellers will cause the Company and its
subsidiaries to conduct business only in the ordinary course. Without limiting
the generality of the foregoing, Sellers will cause the Company and its
subsidiaries to (a) preserve intact the present business organization and
reputation of the Company and its subsidiaries in all material respects, (b)
use
their best efforts to keep available and retain the services of all employees
of
the Company and its subsidiaries and to encourage such employees to continue
in
the employment of the Company and/or its subsidiaries, (c) maintain the assets
and properties of the Company and its subsidiaries in good working order and
condition, subject to ordinary wear and tear, (d) maintain the good will of
key
customers, suppliers and lenders and other persons with whom the Company and/or
its subsidiaries otherwise has significant business relationships, and (e)
maintain the Company Intellectual Property and preserve all protections thereof,
including but not limited to responding appropriately and in a timely manner
to
any office action issued by the United States Patent and Trademark Office and
any similar entity in Australia and any other jurisdiction in which the Company
and/or its subsidiaries conducts business or to any other inquiry by any other
governmental or regulatory agency or any third party regarding the Company
Intellectual Property.
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(f)
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Certain
Restrictions. Except as otherwise specifically provided in
this Agreement, between the date of this Agreement and the subsequent
date
that Buyer and Parent take control of the Company’s Board of Directors
pursuant to Section 2.11 of this Agreement after the closing of Stage
1 of
the Contemplated Transaction, Sellers will cause the Company and
its
subsidiaries to refrain from the
following:
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(i)
amending its articles of incorporation or bylaws (or other comparable corporate
charter documents) or taking any action with respect to any such amendment
or
any recapitalization, reorganization, liquidation or dissolution of any such
corporation;
(ii)
authorizing, issuing, selling or otherwise disposing of any shares of capital
stock of or any option, warrant or other right with respect to the capital
stock
of the Company or its subsidiaries, or modifying or amending any right of any
holder of outstanding shares of capital stock of or options with respect to
the
Company and/or its subsidiaries;
(iii)
except for with respect to transfers to and from the Company’s central cash
account made in the ordinary course of business, the Company and its
subsidiaries shall not declare, set aside or pay any dividend or other
distribution, directly or indirectly, nor directly or indirectly redeem,
purchase or otherwise acquire any capital stock of or any option with respect
to
the Company or any of its subsidiaries;
(iv)
other than in the ordinary course of business, acquiring or disposing of, or
incurring any Encumbrance on, any assets and properties;
(v)
entering into, amending, modifying, terminating (partially or completely),
granting any waiver under or giving any consent with respect to any Contracts
or
IP Licenses that exceed ten thousand dollars (US$10,000) individually, or
twenty-five thousand dollars (US$25,000) in the aggregate, or have a term
exceeding six months, except for revenue related IP Licenses and other Contracts
entered into in the ordinary course of business; provided, however, that the
Buyer or Parent must approve in writing of each such Contract and/or IP License
prior to the Company entering into such Contract and/or IP License;
(vi)
incurring or obtaining a draw on any indebtedness (including any indebtedness
from Film Victoria) or (ii) other than as contemplated by this Agreement,
purchasing, canceling, prepaying or otherwise providing for a complete or
partial discharge in advance of a scheduled payment date with respect to, or
waiving any right under, any indebtedness;
(vii)
engaging with any person or entity in any merger or other business combination
or sale of assets ;or incurrence of any Encumbrances;
(viii)
making capital expenditures or commitments for additions to property, plant
or
equipment constituting capital assets or entering into any operating lease
or
other obligation in the aggregate in excess of ten thousand dollars
(US$10,000);
(ix)
except to the extent required by applicable law, making any material change
in
(A) any pricing, investment, accounting, financial reporting, inventory, credit,
allowance or Tax practice or policy, or (B) any method of calculating any bad
debt, contingency or other reserve for accounting, financial reporting or Tax
purposes;
(x)
except to the extent required by applicable law, adopting, entering into or
becoming bound by any material Benefit Plan, employment-related Contract or
collective bargaining agreement, or amending, modifying or terminating
(partially or completely) any such Benefit Plan, employment-related Contract
or
collective bargaining agreement;
(xi)
making any change in its fiscal year;
(xii)
causing or committing the damage, destruction, or loss of (whether or not
covered by insurance) any property other than dispositions of property in the
ordinary course of business;
(xiii)
making any loan or cash advance to, any director, officer, or
employee;
(xiv)
granting any increase in the base compensation of any employee, officer,
consultant or director;
(xv)
making any other change in employment terms that will be in force on the date
of
this Agreement or any time thereafter for any director, officer, employee or
consultant;
(xvi)
initiating any lawsuit or similar grievance except in the ordinary course of
business; or
(xvii)
entering into any Contract to do or engage in any of the foregoing.
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(g)
|
Litigation. From
the date hereof through the subsequent date that Buyer and Parent
take
control of the Company’s Board of Directors pursuant to Section 2.11 of
this Agreement after the closing of Stage 1 of the Contemplated
Transaction, Sellers shall promptly notify Buyer and Parent of any
investigations of which any Seller has Knowledge or any lawsuits,
claims,
notices of violation or proceedings that after the date hereof are
commenced or, to the Knowledge of the Sellers, the Company and/or
its
subsidiaries threatened, against the Company and/or its
subsidiaries.
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|
(h)
|
Insurance. From
the date hereof through subsequent date that Buyer and Parent take
control
of the Company’s Board of Directors pursuant to Section 2.11 of this
Agreement after the closing of Stage 1 of the Contemplated Transaction,
Sellers shall maintain in force (including necessary renewals thereof)
any
insurance policies listed on Schedule 8.3(h) of this Agreement,
except to the extent that they may be replaced with policies or
self-insurance determinations appropriate to insure that the assets,
properties and business of the Company to the same extent as currently
insured.
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(i)
|
Exclusivity. Neither
Sellers nor any of their respective Affiliates, agents, or representatives
will (and Sellers will not cause or permit the Company or its subsidiaries
to) up through the completion of Stage 1 of the Contemplated Transaction
and the transfer of all shares of the Company to the Buyer or Parent
(i)
solicit, initiate, or encourage the submission of any proposal or
offer
from any person or entity relating to the acquisition of any capital
stock
or other voting securities of the Company or its subsidiaries (other
than
pursuant to director and employee stock options and contractual
obligations disclosed in Schedule 8.3(i) of this Agreement), or any
substantial portion of the assets, of the Company or its subsidiaries
(including any acquisition structured as a merger, consolidation,
or share
exchange) or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate
in, or facilitate in any other manner any effort or attempt by any
person
to do or seek any of the foregoing. In addition, Sellers will
not (i) transfer, sell, give, pledge or otherwise encumber any of
the
Shares or (ii) vote any of the Shares in favor of any such acquisition
structured as a merger, consolidation, or share exchange, except
only with
the Buyer and Parent. In the event this Agreement is terminated
by the Sellers as provided herein, then this Section 8.3(i) shall
be void
at that time.
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|
(j)
|
Termination
of Benefits Plans. Schedule 8.3(j) lists all Company
Benefit Plans, with full and complete copies of all such plans being
attached thereto and with the material provisions of each such plan
being
set forth in such Schedule. The Company, effective immediately prior
to
the date of Stage 1 of the Contemplated Transaction, shall by all
necessary and appropriate action terminate all Company Benefit Plans
(relating to the Company and/or its subsidiaries), except the Company's
vacation and health plans, which shall be terminated as soon as coverage
begins under Buyer's vacation and health plans, and shall terminate
all
administrative agreements, trust agreements, contracts and/or policies
associated with all Company Benefit Plans, and shall commence all
administrative actions as are necessary properly and legally to terminate
such Company Benefit Plans, as demonstrated by documents or other
evidence
reasonably satisfactory to Buyer and
Parent.
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8.4 Agreement
Not to Solicit. For the period beginning on the date of this
Agreement and ending two (2) years after Closure, Sellers will not, without
the
prior written consent of each of Buyer and Parent (which consent may be withheld
in the sole discretion of Buyer or Parent), solicit for employment any employee
of the Company and/or any of its subsidiaries; for purposes of this paragraph,
the term “solicit” shall be deemed not to include advertisements or other
generalized employment searches, including advertisements in various media
(including trade media) or any job posting system of Sellers, not specifically
directed to employees of the Company and/or any of its subsidiaries and shall
not include any action by Sellers following any response by any person to such
advertisements or generalized searches.
8.5 Non-Compete.
(a)
From the date of this Agreement and
continuing for a period of two (2) years immediately following the Closure,
Sellers covenant and agree that they will not: (i) either themselves
or through any Affiliate or representative or agent, engage, directly or
indirectly, in any business or investment activity relating to entertainment
software for computer and/or gaming consoles and/or the video game industry
or
(ii) directly or indirectly solicit any customer or supplier of the Company
or
its subsidiaries to cease doing business with such entity.
(b)
The restrictions set forth in
paragraph (a) above shall be effective within all cities, counties, states,
provinces and territories of the United States, Australia and all other
countries in which either the Company, its subsidiaries and/or the Buyer and/or
Parent has engaged in licensing or sales activities or otherwise conducted
business or selling or licensing efforts during the two (2) years prior to
the
Closure, or currently has plans to begin such activities within the period
ending two (2) years from the Closure.
(c)
Sellers agree that the terms and
time period provided for, and the geographical area encompassed by, the
covenants contained in paragraphs (a) and (b) above are necessary and reasonable
in order to protect Buyer and Parent in the conduct of the business of the
Company and its subsidiaries acquired by virtue of this Agreement. If
any court having jurisdiction at any time hereafter shall hold any provision
or
clause of this Section 8.5 to be unreasonable as to its scope, territory or
term, and if such court in its judgment or decree shall declare or determine
that scope, territory or term which such court deems to be reasonable, then
such
scope, territory or term, as the case may be, shall be deemed automatically
to
have been reduced or modified to conform to that declared or determined by
such
court to be reasonable. In the event such court shall not determine
the scope, territory or term which such court deems to be reasonable, then
the
scope, territory or term of this Section 8.5 shall be deemed to be the maximum
amount permitted under the laws of the country that are most favorable to
interpreting such scope, territory or term to be as broad as
possible. In the event of any conflict of the Laws of Australia and
any state in the United States, then the Laws of any state in the United States
that are most favorable to interpreting such broadest scope, territory or term
shall be deemed to apply to this non-compete provisions contemplated by this
Section 8.5.
(d)
It is expressly agreed that
monetary damages would be inadequate to compensate Buyer and/or Parent for
any
breach by any Seller of Sellers’ covenants as set forth in this Section 8.5 and,
accordingly, that in the event of any breach or threatened breach by any Seller
of any such covenant, Buyer and Parent will be entitled to seek and obtain
preliminary and permanent injunctive relief in any court of competent
jurisdiction located in any state in the United States selected by Buyer or
Parent, in addition to any other remedies at law or in equity to which Buyer
and/or Parent may be entitled, and each Seller hereby agrees to personal
jurisdiction and venue in such court of competent jurisdiction selected by
Buyer
or Parent.
8.6 Investor
Representation Statement. The parties hereto acknowledge and
agree that the portion of the Purchase Price consisting of shares of Parent
Common Stock issuable to the Sellers shall constitute “restricted securities”
within the meaning of the Securities Act of 1933, as amended, and the rules
and
regulations promulgated thereunder (collectively, the “Securities
Act”). The certificates of Parent Common Stock evidencing the
Stock Payment portion of the Purchase Price shall bear the legends set forth
in
Section 8.7 below. Each Seller will execute and deliver to Parent an
Investor Representation Statement in the form attached hereto as Exhibit
C. It is acknowledged and understood that Parent is relying on
the written representations made by each Seller in the Investor Representation
Statements.
8.7 Certificate
Legends. The Stock Payment portion of the Purchase Price to be
issued by Parent to the Sellers pursuant to this Agreement shall not have been
registered and shall be characterized as “restricted securities” under the
federal securities laws of the United States of America, including the
Securities Act,, and under such laws such shares may be resold without
registration under the Securities Act only in certain limited
circumstances. Each certificate evidencing shares of Parent Common
Stock issued as all or any portion of the Stock Payment portion of the Purchase
Price shall bear the following legend and any additional legends required under
any and all applicable laws:
“THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
PURPOSES ONLY, WITHOUT ANY VIEW TOWARDS RESALE AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION WITHOUT AN EXEMPTION
UNDER THE SECURITIES ACT OR AN OPINION OF LEGAL COUNSEL REASONABLY ACCEPTABLE
TO
THE RED MILE ENTERTAINMENT, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.”
8.8 Compliance
with U.S. Securities Laws. The Sellers each and all agree to
comply with all requirements of the federal securities laws of the United
States, including but not limited to Regulation FD, xxxxxxx xxxxxxx rules,
and
the requirements under Rule 144.
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9.
|
COVENANTS
OF BUYER AND PARENT BEFORE
CLOSURE
|
|
Operation
of the Business of the Buyer and
Parent.
|
Between
the date of this Agreement and the completion of Stage 1 of the Contemplated
Transaction, Buyer and Parent will ensure that the Buyer and the Parent
will:
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|
(a)
|
conduct
the business of the Buyer, the Parent and its subsidiaries only in
the
ordinary course of business and conduct the business of the Company
and
its subsidiaries after completion of Stage 1 of the Contemplated
Transaction only in the ordinary course of
business;
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|
|
(b)
|
use
all reasonable efforts to preserve intact the business organization
of
Buyer, Parent and its subsidiaries, keep available the services of
the
current officers, employees and agents, and maintain relations and
goodwill with suppliers, customers, landlords, employees, agents
and
others having business relationships with the Buyer and the Parent,
and
after the completion of Stage 1 of the Contemplated Transaction,
to use
reasonable efforts to achieve the same results for the Company and
its
subsidiaries; and
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|
|
(c)
|
not
knowingly or intentionally be in breach or default of any obligation,
duty
or other matter and, in the event of any breach or default of any
obligation, duty or other matter, the Buyer and/or Parent shall use
all
reasonable efforts to cure each and every such breach or
default.
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|
Notice
of Certain Events.
|
Buyer
and
Parent shall comply with each of the following provisions of this Section 9.2
and will promptly notify Sellers of:
(a)
any
notice or other communication for any person or entity alleging that the Consent
of such person or entity is or may be required in connection with the
Contemplated Transactions;
(b)
any
notice or other communication for any Governmental Body that is or may be
required in connection with the Contemplated Transactions;
(c)
any
Proceedings relating to the Buyer and/or Parent or any Order relating to Buyer
and/or Parent that, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to this Agreement; and
(d)
any
regulatory approvals relating to the Contemplated Transactions.
Buyer
and
Parent will make all reasonable efforts in good faith to obtain all necessary
regulatory consent and approvals regarding the Contemplated Transactions and
will keep Sellers informed of all such efforts.
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(e)
|
Litigation. From
the date hereof through to Stage 3 of the Contemplated Transactions,
Buyer
and Parent shall promptly notify Sellers of any investigations of
which
any Buyer or Parent has Knowledge or any lawsuits, claims, notices
of
violation or proceedings that after the date hereof are commenced
or, to
the Knowledge of the Buyer or Parent and/or its subsidiaries threatened,
against the Buyer or Parent.
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|
(f)
|
Insurance. From
the date hereof through to Stage 3 of the Contemplated Transactions,
Buyer
and/or Parent shall maintain in force (including necessary renewals
thereof) all insurance policies referred to in Section 7.17, except
to the
extent that they may be replaced with policies or self-insurance
determinations appropriate to insure that the assets, properties
and
business of the Company to the same extent as currently
insured.
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|
10.
|
COVENANTS
OF SELLERS, PARENT AND
BUYER
|
Sellers,
Parent and Buyer agree that:
|
Reasonable
Best Efforts; Further
Assurances.
|
Subject
to the terms and conditions of this Agreement, Sellers, Parent, Buyer and the
Company will use their respective reasonable best efforts and act in good faith
to take, or cause to be taken, all actions and to do, or cause to be done,
all
things necessary or desirable under applicable Laws to consummate the
Contemplated Transactions.
Without
limiting the generality of the preceding sentence, after the completion of
Stage
1 of the Contemplated Transactions, Buyer will cause the Company to appoint
such
directors and statutory auditors as may be necessary to ensure that the Company
complies at all times with the Company’s obligation under applicable Laws and
the Company’s Governing Documents to elect a minimum number of directors and
statutory auditors and will promptly take such action as is necessary to have
the Company’s registration records updated to reflect any resignations delivered
in accordance with Section 2.11.
|
Certain
Filings.
|
Sellers,
Parent, Buyer and the Company will cooperate with each other (a) in determining
whether any action by or in respect of, or filing with, any Governmental Body
is
required, or any Consents are required in connection with the consummation
of
the Contemplated Transactions, and (b) in taking such actions or making any
such
filings, furnishing information required in connection with obtaining such
Consents and seeking timely to obtain such Consents.
|
Public
Announcements.
|
Sellers, Parent
Buyer and the Company agree to consult with each other before issuing any press
release or making any public statement with respect to this Agreement and will
not issue any such press release prior to such consultation; provided,
however, that, Sellers and the Company shall not issue any public
announcement or press release prior to any press release or filing under the
federal securities laws by Parent which may be required as a result of the
parties entering into this Agreement and/or the performance by Parent of the
Contemplated Transactions; and provided, further that with respect to any press
releases or public announcements the making of which may be required by any
applicable Law, or SEC regulation or any listing agreement with any national
securities exchange, then reasonable prior written notice to the other party
will suffice.
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Confidentiality.
|
Between
the date of this Agreement and until such time as the party providing any
confidential, non-public information under this Agreement makes such information
public after Closure, the Sellers, Parent, Buyer and the
Company will maintain in confidence, and will cause their
Representatives to maintain in confidence, and not use to the detriment of
any
party any information furnished by a party in connection with this Agreement
(such information being “Confidential Information”), unless (a)
such information is already legally known to such party other than as a result
of disclosure thereof under this Agreement or already legally known to others
not bound by a duty of confidentiality or such information becomes publicly
available through no fault of such party, (b) the use of such information is
necessary or appropriate as determined by the formal written opinion of the
independent legal counsel for the party seeking such use and disclosure in
making any filing or obtaining any Consent required for the consummation of
the
Contemplated Transactions, in which case the party desiring to use such
information in such manner shall first consult with the party that provided
such
Confidential Information and allow such party to either publicly disclose such
Confidential Information prior to its use in making any filing or obtaining
any
Consent required for the consummation of the Contemplated Transactions or to
legally oppose such disclosure in a court of competent jurisdiction or (c)
the
furnishing or use of such information is required by or necessary or appropriate
in connection with any Proceeding; provided, however, that prior to the use
of
disclosure of such Confidential Information in any such Proceeding, the party
seeking to make sure disclosure shall give written notice to and provide a
reasonable opportunity to the party’s seeking to protect its Confidential
Information to legally oppose such disclosure in such Proceedings. If
the Contemplated Transaction is not consummated, each party will return or
destroy as much Confidential Information as the other party may reasonably
request.
10.5 Obligations
of Buyer and Parent.
The
obligations of Buyer and Parent pursuant to this Agreement are subject to the
fulfillment, at or before each of the date of this Agreement and for a
continuous period of twelve (12) months from the date of completion of Stage
1
of the Contemplated Transaction, unless Stage 3 of the Contemplated Transaction
occurs on a date which is after such 12-month period, in which case such
obligations shall continue until the completion of Stage 3 of the Contemplated
Transaction ( “Fulfillment Period”), of each of the following conditions (all or
any of which may be waived in whole or in part by Buyer and Parent in their
sole
discretion):
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a.
|
Representations
and Warranties. The representations and warranties made by
the Company and Sellers in this Agreement and all the disclosure
Schedules, shall be true and correct as of the date of this Agreement
and
as of the closing of Stage 1 of the Contemplated Transaction or,
in the
case of representations and warranties made as of a specified date
earlier
than the date of this Agreement, then on and as of such earlier date,
except where the failure of such representations and warranties to
be true
and correct could not reasonably be expected to have a Material Adverse
Effect on the Company or the
Shares.
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b.
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Performance. The
Company and the Sellers in all material respects shall have performed
and
complied with, the agreements, covenants and obligations required
by this
Agreement to be so performed or complied with by the Company or Sellers
at, before and as of the closing of Stage 1 of the Contemplated
Transaction.
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c.
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Confirmation
Certificates. On the date of this Agreement and on the date
of Stage 1 of the Contemplated Transaction, the Company and the Sellers
shall have delivered to Buyer and Parent: (i) a certificate, dated
on each
such date and executed by the Sellers and an executive officer of
the
Company, certifying to the satisfaction of the conditions set forth
in
Sections 10.5(a) and 10.5(b) above and (ii) a certificate, dated
on each
such date and executed by the Secretary or any Assistant Secretary
of the
Company, certifying as to the truth and accuracy of, and attaching
copies
of the certificate or articles of incorporation, bylaws and all board
resolutions adopted in connection with this Agreement, of the Company
and
its subsidiaries, in each case in a form reasonably satisfactory
to Buyer
and Parent.
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d.
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Third
Party Consents and Releases. The consents (or in lieu
thereof waivers), including, but not limited to, any releases relating
to
intellectual property, real estate or otherwise, as listed in any
disclosure Schedules provided under this Agreement, shall have been
obtained and shall be in full force and
effect.
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e.
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Investor
Representation Statement. Each Seller shall have delivered
to Parent a signed Investor Representation Statement in substantially
the
form attached hereto as Exhibit C and each such Investor
Representation Statement shall be and remain in full force and
effect.
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f.
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Financial
Statements. Buyer and Parent shall have received a true and
complete copies of: (i) the Company Financial Statements, (ii) the
Company
Balance Sheet, together with such notes as would be necessary for
such
reader to understand such balance sheet; and (iii) the unaudited
balance
sheet and income statement of the Company as of June 30, 2007, and
each
month thereafter until the date that Buyer and Parent take control
of the
Company’s Board of Directors pursuant to Section 2.11 of this Agreement
after the closing of Stage 1 of the Contemplated
Transaction. All due diligence and audits of the Company and
the Sellers shall not contain any materially adverse information
relating
to the Company and/or the Shares occurring at any time prior to the
date
that Buyer and Parent take control of the Company’s Board of Directors
pursuant to Section 2.11 of this Agreement after the closing of Stage
1 of
the Contemplated Transaction.
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g.
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General
Release. Each Seller and each director, officer and key
employee of the Company and its subsidiaries as required by Buyer
and
Parent shall have executed and delivered a general release, substantially
in the form attached hereto as Exhibit D, of any claims against the
Company (except as any claim relates to indemnification or employment
arrangements between the Company and such individual) in a form reasonably
satisfactory to Buyer and Parent.
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h.
|
Resignations. The
directors of the Company and its subsidiaries shall have resigned
from
such positions, subject to the provisions of Section 2.11 whereby
the
Parent and the Buyer shall reappoint certain of the directors of
the
Company to continue to serve on the Board of Directors of the Company
after the Closing.
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i.
|
Stockholder
Approval. Parent shall have received any required approval
by its stockholders of this Agreement and the transactions contemplated
hereby.
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j.
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Repayment
of Indebtedness.
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All
notes
or other debt payable to any Seller which are outstanding on the date hereof
shall be paid in full by the Company prior to the commencement of Stage 1 of
the
Contemplated Transaction. All outstanding obligations to That Game
shall be paid in full prior to the commencement of Stage 1 of the Contemplated
Transaction. On or prior to the commencement of Stage 1 of the
Contemplated Transaction, all notes or other debt payable to the Xxxxxxx Family
Trust (if applicable) which are outstanding on the date hereof and thereof
shall
be paid in full.
k. Key
Employees and Consultants. All employees and consultants of the
Company and its subsidiaries that are designated by Buyer and Parent to be
key
employees and/or key consultants of the Company and/or its subsidiaries shall
have entered into agreements with the Buyer and Parent in the form attached
hereto as Exhibit E to remain employed with or retained by the Company and/or
its subsidiaries on such terms and conditions as the Buyer and Parent shall
determine.
l. Assignment
of all Rights to Heroes of the Pacific. Prior to Stage 1 of the
Contemplated Transaction, the Company and Ben Xxxxx Xxxxxx shall have caused
the
Company to be the sole and exclusive owner of all Intellectual Property Rights,
including but not limited to all software codes, trademarks and tradenames,
with
respect to “Heroes Of The Pacific” with no obligations (financial or otherwise)
being due or owing as a result thereof to any person or entity. Ben
Xxxxx Xxxxxx and That Game shall have first provided to the Parent with all
written evidence of the completed transfer to the Company prior to Stage 1
of
the Contemplated Transactions of all Intellectual Property Rights, including
but
not limited to all software codes, trademarks and tradenames, with respect
to
“Heroes Of The Pacific” with no other obligations (financial or otherwise) being
due or owing as a result thereof to any person or entity
whatsoever. The foregoing actions of Ben Xxxxx Xxxxxx and That Game
shall include but not be limited to the following: (i) the License Agreement
between That Game and IRGI, dated October 2003, shall be terminated prior to
Stage 1 of the Contemplated Transaction, (ii) the “Relationship Deed between
IRGI and That Game,” dated February 6, 2004, shall be terminated prior to Stage
1 of the Contemplated Transaction and no amounts shall be due or owning under
that agreement, (iii) the License Agreement between That Game and IRGI, dated
February 6 2004, shall be terminated prior to Stage 1 of the Contemplated
Transaction, and (iv) Ben Xxxxx Xxxxxx and That Game shall execute a written
release of the Company from any and all claims under the aforementioned
agreements to confirm that no obligations remain thereunder prior to Stage
1 of
the Contemplated Transaction.
m. Governmental
Grant. Any funds received or to be received by the Company from
any entity affiliated with the Australian government and/or any agency thereof
shall be a non-recourse grant, which amount has no repayment or interest
obligations relating thereto.
10.6 Obligations
of Sellers. The obligations of Sellers pursuant to this Agreement
are subject to the fulfillment, at or before the Closing, of each of the
following conditions (all or any of which may be waived in whole or in part
by
Sellers in the sole discretion of the Sellers’ Representative):
(a)
Representations and Warranties. The representations and
warranties made by Buyer and Parent in this Agreement, shall be true and correct
on and as of the date of this Agreement, the date of Stage 1 of the Contemplated
Transactions, the date of Stage 2 of the Contemplated Transactions and the
date
of Stage 3 of the Contemplated Transactions or, in the case of representations
and warranties made as of a specified date earlier than the date of this
Agreement, on and as of such earlier date, except where the failure of such
representations and warranties to be true and correct could not reasonably
be
expected to have a material adverse effect on the Buyer or Parent.
(b)
Performance. Buyer and Parent in all material respects shall have
performed and complied with, the agreements, covenants and obligations required
by this Agreement to be so performed or complied with by Buyer and parent at
or
before the Closure.
(c)
Officers’ Certificates. Buyer and Parent shall have delivered to
Sellers a certificate, dated the date of Stage 1 of the Contemplated Transaction
and executed by any proper officer of each of Buyer and Parent, certifying
as to
the satisfaction of the conditions set forth in Sections 10.6(a) and 10.6(b)
above.
10.7 Fulfillment
of Conditions. Each part will use its best efforts to satisfy
each condition to the obligations contained in this Agreement and will not
take
or fail to take any action that could reasonably be expected to result in the
nonfulfillment of any such condition. Each party shall give prompt
written notice to each other party of any event, condition or circumstance
occurring from the date hereof through the Closure that would cause the
representations and warranties contained in this Agreement to become untrue
in
any material respect or that would constitute a material violation or breach
of
this Agreement. Any disclosure made pursuant to this Section 10.7
shall not be deemed to amend or supplement this Agreement or any of the
disclosure Schedules hereto, nor to prejudice any right of a party to a claim
for indemnity under this Agreement and/or to pursue all legal remedies against
the other parties, nor to prevent or cure any misrepresentation or breach of
this Agreement. Notwithstanding the foregoing, the delivery of any
written notice pursuant to this Agreement shall not (a) constitute an admission
that such an event has occurred or (b) limit or otherwise effect any remedies
or
defenses available to the parties to this Agreement.
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11.
|
INDEMNIFICATION;
REMEDIES
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Survival
of Representations, Warranties and
Covenants.
|
|
|
|
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The
representations and warranties of Sellers, Parent or Buyer contained
in
this Agreement will survive Stage 1 of the Contemplated Transaction
and
consummation of the Contemplated Transactions, subject to the limitations
contained in this Section 11 and Section
12.
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11.2 Indemnification
by the Parties.
Subject
to the provisions of this Section, Sellers will indemnify and hold harmless
Buyer, Parent and each of their respective Affiliates (including for this
purpose the Company) and their respective officers, directors, employees,
agents, successors and assigns from and against any and all Liabilities, costs,
losses, damages, fines, penalties, Taxes, judgments, amounts paid in settlement,
lawsuits, deficiencies, claims and expenses (including reasonable fees and
disbursements of attorneys and other professionals, including third-party
consultants and, to the extent allowable at Law, medical monitoring costs and
expenses) of every kind and nature (collectively, “Damages”)
incurred in connection with, arising out of, resulting from or incident to
any
breach of a representation, warranty, covenant or agreement of
Sellers and/or the Company and/or its subsidiaries made in or under
this Agreement. Subject to the provisions of this Section, Buyer and
Parent will indemnify, defend and hold harmless Sellers and their respective
successors and assigns from and against any and all Damages incurred in
connection with, arising out of, resulting from or incident to any breach of
a
representation, warranty, covenant or agreement made by Buyer and/or Parent
in
or under this Agreement.
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[INTENTIONALLY
OMITTED].
|
|
Procedure
for Claims.
|
A
party
entitled to indemnification under this Section (an “Indemnified
Party”) must give the person obligated to indemnify under such Section
(an “Indemnifying Party”) prompt written
notice (an “Indemnification Claim Notice”) of any Damages or
discovery of fact upon which such Indemnified Party intends to base a request
for indemnification under this Section.
Failure
to give any such Indemnification Claim Notice will not constitute a waiver
of
any right to indemnification or reduce in any way the indemnification available
hereunder, except to the extent such failure to notify directly increases the
amount to be indemnified hereunder. Each Indemnification Claim Notice
must contain a description of the claim and the nature and amount of such
Damages (to the extent that the nature and amount of such Damages are known
at
such time). The Indemnified Party must furnish promptly to the
Indemnifying Party copies of all papers and official documents received in
respect of any Damages.
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Procedure
for Indemnification - Defense of Third-party
Claims.
|
|
|
Promptly
after receipt by an Indemnified Party of notice of the assertion
of a
third-party claim, including any Governmental Body claim, against
it, the
Indemnified Party will, if a claim is to be made against an Indemnifying
Party, give notice to the Indemnifying Party of the assertion of
such
claim. The Indemnifying Party will have 15 days after receipt
of the notice to elect to defend the claim with the Indemnified Party’s
cooperation, and if the Indemnifying Party so elects, the Indemnified
Party will undertake, through counsel chosen in consultation with
the
Indemnifying Party and at the expense of the Indemnifying Party,
the
settlement or defense thereof; provided, however, that any
such settlement will be subject to the consent of the Indemnifying
Party,
which consent will not be unreasonably withheld. If the
Indemnifying Party does not notify the Indemnified Party within 15
days
after receipt of the Indemnified Party’s notice of a claim of indemnity
hereunder that the Indemnifying Party elects to defend the claim
with the
Indemnified Party’s cooperation, or the Indemnifying Party ceases to
reasonably contest such claim in good faith, the Indemnified Party
will
have the right to contest, settle or compromise the claim in its
exclusive
discretion at the expense of the Indemnifying Party. Nothing
contained in this Section 11.5 will be construed as a limitation of
the right of any party to indemnification under this
Agreement.
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Limitations
on Amount and Time.
|
Neither
Sellers, Parent nor Buyer will be liable for any Damages pursuant to claims
arising under this Agreement based upon the breach or violation of any
representation or warranty or any covenant or Agreement until the aggregate
amount of such Damages exceeds $50,000 and then only for the amount by
which the aggregate amount of such Damages exceeds $50,000; provided, however,
that no party shall be liable to the other parties for any Damages which exceed
the Purchase Price amount of $5,500,000.00; and provided, further, that (i)
in
the event of a breach of this Agreement by the Company or the Sellers in which
the Parent or Buyer terminates this Agreement, then each Seller shall only
be
liable to repay to the Parent and the Buyer the amount of the Purchase Price
consideration that each Seller has received under this Agreement as of the
date
of such termination of this Agreement; and (ii) in the event of a breach of
this
Agreement by the Company or the Sellers in which the Parent or Buyer does not
terminate this Agreement, then each Seller shall only be liable up to the
portion of the Purchase Price which such Seller is entitled to receive under
this Agreement, with each Seller being obligated to repay to the Parent and
the
Buyer the sum of (A) the amount of the Purchase Price consideration that each
Seller has received under this Agreement and (B) the waiver by each Seller
or
any other portions of the Purchase Price which each Seller is entitled to
receive under this Agreement.
Any
right
for indemnification shall be exercised not later than the first anniversary
of
the completion of Stage 3 of the Contemplated Transaction Date; provided,
however, that with respect to any proceedings related to any Taxes or any matter
which can be shown to have resulted from the willful or knowing failure of
a
party to make any required disclosure required under this Agreement which could
have resulted in the avoidance, in whole or substantial part, of such Damages,
then the right of indemnification under this Section 11 and Section 12.2 shall
be exercisable throughout the statute of limitations period relating thereto
by
the party that reasonably believes it will incur Damages as a result
thereof. Sellers will not be liable for any Damages (A) pursuant to
claims arising under this Agreement if the breach or violation of the
representation or warranty giving rise to the claim is disclosed in writing
to
the Buyer and Parent in reasonable detail in a Schedule attached to this
Agreement, (B) caused by any action of Buyer or Parent, or (C) arising from
or
in connection with any change of any Law.
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12.
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TAX
MATTERS
|
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Cooperation
and Exchange of Information.
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(a)
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Buyer,
Parent and Sellers and their respective Affiliates will reasonably
cooperate in the preparation of all Tax Returns or amendments thereto
and
any audit, or other examination, or any judicial or administrative
Proceeding relating to Taxes.
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(b)
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Prior
to Closure, Sellers will provide or cause the Company to provide
timely
notice to Buyer and Parent in writing of any pending or proposed
audit or
assessment with respect to Taxes. Prior to Closure, Sellers
will extend reasonable efforts to procure that Buyer and Parent are
given
reasonable opportunity to take part in all Tax audits and all meetings
with any Taxing authority in the context of Tax audits, disputes
and Tax
assessments, and to present its position to any Taxing authority
in
writing. The Company will furnish Buyer and Parent with copies of
all
relevant correspondence received from any Taxing authority in connection
with any Tax audit
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Survival.
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The
covenants and agreements of the parties contained in this Section and the
representations and warranties contained in this Agreement will remain in full
force and effect notwithstanding Closure.
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Expenses.
|
Each
party will bear its respective expenses incurred in connection with the
preparation, execution and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of its attorneys, accountants
and
Representatives.
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Notices.
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All
notices, consents, waivers and other communications under this Agreement will
be
in writing and will be deemed given to a party when (a) delivered to the
appropriate address by hand or by nationally recognized overnight courier
service (costs prepaid); (b) sent by facsimile or e-mail with confirmation
of
transmission by the transmitting equipment; or (c) received or rejected by
the
addressee, if sent by certified mail, return receipt requested; in each case
to
the following addresses, facsimile numbers or e-mail addresses and marked to
the
attention of the individual (by name or title) designated below (or to such
other address, facsimile number, e-mail address or individual as a party may
designate by notice to the other party in conformity with this
Section):
If
to
Buyer and/or Parent:
Attention:
Xxx Xxxxx
Address: Red
Mile Entertainment, Inc.
0000
Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx,
Xxxxxxxxxx 00000
Tel:
000-000-0000
Fax:
000-000-0000
If
to
Sellers:
Xxxxxx
Xxxx Xxxxxx
Address:
Xxxx 0, 00 Xxxxxxx Xxxxx
Xxxxxx
Xxxx, Xxxxxxxx Xxxxxxxxx 0000
Tel: 000
0000 0000
Fax: N/A
Email:
xxxxxxx@xxxxxxxxxxxx.xxx
Xxxxxxx
Xxxxxx Xxxxx
Address:
0 Xxxxxxxx Xxxxxx Xxxxx,
Xxxxx
Xxxxx Xxxxxxxx, Xxxxxxxxx0000
Tel:
x000 0000 0000
Fax:
N/A
Email:
xxxx@xxxxxxxxx.xxx
Xxxxxx
Xxxxxxxx Xxxxx
Address:
00 Xxxxxxx Xxxxxx
Xxxx
Xxxxxxxxx, Xxxxxxxx Xxxxxxxxx 0000
Tel: x000
0000 0000
Fax: N/A
Email:
xxxxxxxxxxx@xxxxxxxx.xxx.xx
Xxxxx
Xxxxxx Xxxxxxxx
Address:
0/000 Xxxxxx Xxx
Xxxxxxxx
Xxxx, Xxxxxxxx Xxxxxxxxx 0000
Tel: x000
0000 0000
Fax: N/A
Email:
xxxxxxxxx@xxxxxx.xxx
Ben
Xxxxx
Xxxxxx
Address:
0 Xxxxxxxx Xxxxxx, Xxxxxxxxx
Xxxxxxxx,
Xxxxxxxxx 0000
Tel: x000
0000 0000
Email:
xxxx@xxxxxxxx.xxx
Ian
Xxxxxx Xxxxxxxx
Address:
000 Xxxxxxx Xxxxxx
Xxxxxxx,
Xxxxxxxx, Xxxxxxxxx 0000
Tel: x000
0000 0000
Email: xxx.xxxxxxxx@xxxxxx.xxx.xx
Votraint
No. 651 PTY LTD.
Address:
000 Xxxxxxx Xxxxxx
Xxxxxxx,
Xxxxxxxx, Xxxxxxxxx
0000
Tel: x000
0000 0000
Email: xxx.xxxxxxxx@xxxxxx.xxx.xx
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Incorporation
of Schedules and Exhibits.
|
The
Schedules and Exhibits identified in this Agreement are incorporated herein
by
reference and made a part of this Agreement.
|
Entire
Agreement and Modification.
|
|
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This
Agreement supersedes all prior agreements among the parties with
respect
to its subject matter (including the Non-disclosure Agreement between
Parent and Sellers dated 19 April 2006 as may be amended or extended)
and
constitutes (along with the documents delivered pursuant to this
Agreement) a complete and exclusive statement of the terms of the
Agreement between the parties with respect to its subject
matter. This Agreement may not be amended, supplemented or
otherwise modified except in a written document executed by the party
against whose interest the modification will
operate.
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Severability.
|
If
a
court of competent jurisdiction holds any provision of this Agreement invalid
or
unenforceable, the other provisions of this Agreement will remain in full force
and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to
the
extent not held invalid or unenforceable.
|
Assignments,
Successors, and No Third Party
Rights.
|
No
party
may assign any of its rights or delegate any of its obligations under this
Agreement without the prior written consent of the other
party. Nothing expressed or referred to in this Agreement will be
construed to give any person or entity, other than the parties to this
Agreement, any legal right, remedy or claim under or with respect to this
Agreement or any provision of this Agreement except such rights as may inure
to
a successor or permitted assignee pursuant to this Section 12.8.
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Waiver.
|
Neither
any failure nor any delay by a party in exercising any right, power or privilege
under this Agreement or any of the documents referred to in this Agreement
will
operate as a waiver of such right, power or privilege, and no single or partial
exercise of any such right, power or privilege will preclude any other or
further exercise of such right, power or privilege or the exercise of any other
right, power or privilege.
|
Governing
Law and Jurisdiction; Non-Binding Arbitration or
Mediation.
|
This
Agreement will be governed by and construed under the laws of the State of
Delaware, United States of America, without regard to conflicts of laws
principles that would require the application of any other law, with all
proceedings of any type under this Agreement being conducted in a court of
competent jurisdiction located in the State of California, United States of
America, with all the parties to this Agreement agreeing to personal
jurisdiction and venue in such court. Prior to any party to this
Agreement filing for any legal action in a court of law as provided in the
preceding sentence, the parties agree to use their good faith efforts to attempt
to resolve any dispute between them by engaging in non-binding arbitration
or
mediation at the Law Institute of Victoria located in Australia. In
the event the parties nevertheless thereafter engage in litigation in a court
of
competent jurisdiction located in the State of California, United States of
America, then the non-prevailing party in such litigation shall reimburse the
prevailing party for all costs and expenses incurred by the prevailing party
in
such litigation, including reasonable attorneys fees.
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Counterparts;
Language.
|
This
Agreement may be executed in one or more counterparts. All matters
and proceedings under this Agreement shall be conducted in the English
language.
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13.
|
TERMINATION
|
This
Agreement may be terminated, and the transactions contemplated hereby may be
abandoned:
(a) at
any time before Stage 1 of the Contemplated Transaction, by Sellers, Parent
or
Buyer, in the event that any Order or law becomes effective restraining,
enjoining or otherwise prohibiting or making illegal the consummation of any
of
the transactions contemplated by this Agreement, upon notice to the
non-terminating party by the terminating party;
(b) at
any time before the completion of Stage 1 of the Contemplated Transaction,
by
Sellers, by notice to Buyer and Parent, in the event of a breach of this
Agreement by Buyer or Parent which if uncured would cause one or more of the
conditions to Closure set forth in this Agreement not to be satisfied and which
remains uncured for ten (10) Business Days after written notice thereof is
given
to Buyer and Parent by the Sellers; or
(c) at
any time before the completion of Stage 1 of the Contemplated Transaction,
by
Buyer or Parent, by notice to Sellers, in the event of a breach of this
Agreement by Sellers or the Company or its subsidiaries which if uncured would
cause one or more of the conditions to Closure set forth in this Agreement
not
to be satisfied and which remains uncured for ten (10) Business Days after
notice thereof is given to Sellers by Buyer or Parent.
(d) In
the event this Agreement is terminated by the Sellers due to a breach by the
Buyer and/or the Parent to make the First Cash Payment, the Stock Payment,
the
Second Cash Payment and/or the Third Cash Payment pursuant to the terms of
this
Agreement, and in the event such breach is not cured by the Buyer and/or the
Parent within ten (10) Business Days of the date of receipt by Buyer and Parent
of written notice thereof from the Sellers, then the Sellers shall have the
option (the “Option”) to repurchase all of the Shares of the Company from the
Parent and the Buyer for a purchase price in United States Dollars equal to
the
result of (i) all amounts loaned by the Parent or the Buyer to the Company,
(ii)
the value of the shares of Parent Common Stock issued to the Sellers under
this
Agreement; (iii) all amounts paid by the Parent and/or the Buyer to
the Sellers under this Agreement in respect of the First Cash Payment, Second
Cash Payment or Third Cash Payment, minus a liquidated damages amount of Two
Hundred Thousand United States Dollars ($200,000), with such resulting Option
exercise amount being paid by the Sellers to Parent in cash by wire transfer
of
immediately available funds within sixty (60) calendar days after the expiration
of such cure period. In the event such Option exercise price is not
paid in full by the Sellers to the Parent within such sixty (60) calendar day
exercise period, then the Option shall become null and void. In the
event the Sellers exercise the Option in full and in a timely manner, then
the
parties further agree for the current contracts between Parent and the Company
as listed in Exhibit F hereto for which the Company has performed all
work at cost with no profit for the benefit of Parent or Buyer as shown in
detail by the costs and xxxxxxxx attached to Exhibit F hereto, which
costs and xxxxxxxx shall be subject to audit and confirmation by an
independent third-party auditor (the “At-Cost Contracts”), the Parent
or the Buyer shall pay to the Company an amount equal to (i) the lowest profit
margin charged during that same period of time by the Company to third-parties
other than the Parent multiplied by xxxxxxxx attached to Exhibit F hereto
for the At-Cost Contracts minus (ii) a credit in the amount of US$200,000.00
from the Company to the Parent to be applied by the Parent against any amounts
due in the immediately preceding clause (i), with the amount of such credit
being equal to the prior payments by Parent to the Company for the 21 shares
of
common stock of the Company owned by Parent prior to the date of this
Agreement.
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14.
|
GOVERNMENTAL
CLAUSES.
|
The
Sellers have represented to the Buyer and the Parent that the following
provisions are required to be contained in this Agreement and adhered to by
the
parties in order for the Company to be eligible to receive a grant from
governmental agencies in Australia, and as a result thereof, the parties hereby
agree to the following provisions, subject to all other provisions of this
Agreement; provided, however, that in the event any or all of the following
clauses are not required by governmental agencies to be contained in this
Agreement nor adhered to by the parties, then each such clause shall be deemed
to be null, void and as if such provisions were never part of this Agreement,
without any further action by any of the parties:
(a) The
Company shall own any IP it develops and be able to exploit this IP to its
own
benefit;
(b) The
Company shall be able to license games or its technology to other
developers;
(c) The
Company shall be able to bid for its own contracts to build games for
Parent;
(d) The
Company shall be able to bid for its own contracts to build games for all other
global publishers;
(e) The
Company shall be self sustaining and be able to fund its own activities as
well
as grow its operations;
(f) The
Company shall be able to undertake sales and marketing activities regarding
its
expertise globally;
(g) The
Company shall be able to undertake sales and marketing activities on behalf
of
the Parent for the Asia Pacific region;
(h) The
Company shall work together with Parent where possible to achieve growth of
the
consolidated group consisting of the Company and Parent;
(i) The
Company shall maintain a management structure in Australia;
(j) The
Company shall maintain employment of personnel in Australia; and
(k) The
Company shall operate independently and employ additional people as
required.
[Remainder
of this page intentionally left blank; signature page
follows.]
IN
WITNESS OF THIS AGREEMENT, the parties have executed this Agreement by their
duly authorized officers as of the date first above written.
RED
MILE ENTERTAINMENT, INC.,
a
Delaware corporation
By:
_______________________________
Name:
_______________________________
Title:
_______________________________
RED
MILE ENTERTAINMENT PTY LTD
an
Australian corporation
By:
_______________________________
Name:
_______________________________
Title:
_______________________________
IR
GURUS PTY LTD
By:
_______________________________
Name:
_______________________________
Title:
_______________________________
SELLERS:
/s/
XXXXX XXXXXX XXXXXXXX
XXXXX XXXXXX XXXXXXXX
/s/
XXXXXX
XXXX XXXXXX
/s/
XXXXXXX
XXXXXX XXXXX
/s/
XXXXXX
XXXXXXXX
/s/
BEN
XXXXX
XXXXXX
/s/
IAN
XXXXXX XXXXXXXX
/s/
VOTRAINT
No 651 PTY LTD
