SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the "Agreement") is entered into
as of October 1, 2002, by and among CBL Acquisition Corp., a Utah
corporation ("Acquirer") and the individual listed on Annex A hereto
("Shareholder").
RECITALS:
A. Shareholder is the record and/or beneficial owner of all of the
issued and outstanding capital stock of Competency Based Learning, Pty.
Ltd. ACN 084 763 780, a registered company under the Corporations Xxx 0000
(Cwth.) (the "Company").
B. Shareholder wishes to sell to Acquirer, and Acquirer wishes to
purchase from Shareholder, all of the issued and outstanding capital stock
of the Company set forth opposite such Shareholder's name on Annex A (the
"Shares") upon the terms and subject to the conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions
hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
1. PURCHASE AND SALE OF SECURITIES
1.1 Sale and Delivery. Shareholder agrees to sell and
deliver to Acquirer, and Acquirer agrees to purchase and accept
from Shareholder, free and clear of all Liens, on the terms and
subject to the conditions set forth in this Agreement, and for
the purchase price described in Section 1.2, good and marketable
title to the Shares. The Shares to be sold and purchased
pursuant to this Agreement will, as of the Closing Date,
constitute in the aggregate all of the outstanding capital stock
of the Company.
1.2 Purchase Price. The aggregate purchase price (the
"Purchase Price") for all of the Shares shall be:
(a) 1,545,000 shares of the Common Stock of Trinity Companies,
Inc., the parent corporation of Acquirer ("Parent" and such shares referred
to herein as the "Parent Shares"); and
(b) A Convertible Promissory Note in the aggregate amount of
Five Hundred Thousand U.S. Dollars ($515,000.00), to be delivered to the
Shareholder at the Closing, in the form set forth on Exhibit B (the
"Convertible Note").
1.3 Escrow Agreement. Pursuant to an Escrow Agreement to
be entered into on or before the Closing Date (as defined in
Section 8.1) in the form attached as Exhibit 1.3 (the "Escrow
Agreement"), among Acquirer, Shareholder, Xxxxxx Xxxxxxx Xxxxxxxx
(pursuant to a separate Agreement and Plan of Reorganization
dated as of an even date herewith) and Heritage Bank of Commerce
(the "Escrow Agent"), Acquirer will withhold from the Parent
Shares and deposit into escrow an aggregate of at least 500,000
shares of the Parent Shares (the "Escrow Shares"). From the
Parent Shares that would otherwise be distributable at Closing to
Shareholder ("Closing Distributable Shares"), Escrow Shares shall
be withheld and deposited into escrow. Promptly after the
Closing Date, Acquirer will deposit or cause to be deposited in
escrow pursuant to the Escrow Agreement, the Escrow Shares. The
Escrow Shares will be held in escrow as collateral for the
indemnification obligations of Shareholder under Section 12.2
below and will be released from escrow pursuant to the Escrow
Agreement.
2. REPRESENTATIONS AND WARRANTIES CONCERNING SHAREHOLDER
For purposes of the representations and warranties of Shareholder
contained herein, disclosure in any section of the Shareholder Disclosure
Letter (defined below) shall be deemed to be adequate response and
disclosure of such facts or circumstances with respect to all
representations or warranties by Shareholder which would reasonably call
for disclosure of such information, whether or not such disclosure is
specifically associated with or purports to respond to one or more or all
of such representations or warranties; provided such disclosure is fair and
accurate. The inclusion of any information in any section of the
Shareholder Disclosure Letter or other document delivered by Shareholder
pursuant to this Agreement shall not be deemed to be an admission or
evidence of the materiality of such item, nor shall it establish a standard
of materiality for any purpose whatsoever. Shareholder hereby represents
and warrant that, except as disclosed in the Shareholder disclosure letter
(the "Shareholder Disclosure Letter") delivered by Shareholder to Acquirer
herewith as amended from time to time prior to Closing:
Shareholder hereby represents and warrants to, and covenants and agrees
with, Acquirer that:
2.1 Ownership of Shares. Shareholder owns, or as of the Closing Date
will own, of record and beneficially the Shares, and has, and at all times
prior to and as of the Closing Shareholder will have, good and marketable
title to such Shares free and clear of all liens.
2.2 Delivery of Good Title. Upon delivery of the Shares to be sold
by such Shareholder hereunder, Acquirer will have good and marketable title
to the Shares, free and clear of all liens.
2.3 Execution and Delivery. All consents, approvals, authorizations
and orders necessary for the execution, delivery and performance by
Shareholder of this Agreement (including, without limitation, the transfer
and sale of the Shares to be sold by Shareholder to Acquirer) have been
duly and lawfully obtained, and Shareholder has, and at the Closing will
have, full right, power, authority and capacity to execute, deliver and
perform this Agreement. This Agreement has been duly executed and
delivered by Shareholder and constitutes a legal, valid and binding
agreement of Shareholder enforceable against Shareholder in accordance with
its terms, except as limited by (i) applicable bankruptcy, insolvency, and
other laws of general application affecting enforcement of creditors'
rights generally, and (ii) general principles of equity, including
limitations on the availability of specific performance, injunctive relief
or other equitable remedies.
2.4 No Conflicts. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will
not conflict with or result in a breach or violation of any term or
provision of, or (with or without notice or passage of time, or both)
constitute a default under, any indenture, mortgage, deed of trust, trust
(constructive and other), loan agreement or other agreement or instrument
to which Shareholder is a party or by which Shareholder or the Shares are
bound, or violate any Legal Requirement applicable to or binding upon such
Shareholder.
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2.5 No Brokers. No broker, finder or similar agent has been employed
by or on behalf of Shareholder in connection with this Agreement or the
transactions contemplated hereby, and Shareholder has not entered into any
agreement or understanding of any kind with any person or entity for the
payment of any brokerage commission, finder's fee or any similar
compensation in connection with this Agreement or the transactions
contemplated hereby.
2.6 Investment Intent.
(a) Purchase Entirely for Own Account. Shareholder is acquiring
the Parent Shares for investment purposes only, for its own account, and
not as a nominee or agent of any other Person, and not with a view to or
for resale in connection with any distribution thereof within the meaning
of the Securities Act, and such Shareholder has no present intention of
selling, granting any participation in, or otherwise distributing the same.
Except as set forth on Item 2.6, Shareholder further represents that it
does not presently have any contract, undertaking, agreement or arrangement
with any Person to sell, transfer or grant participations to such person or
to any third person, with respect to any of the Parent Shares.
(b) Disclosure of Information. Shareholder has had an
opportunity to discuss the business, management, financial affairs of
Acquirer and Parent and the terms and conditions of the offering of the
Parent Shares with the management of Acquirer and Parent. Shareholder
understands that such discussions, as well as the written information
provided to such Shareholder by Acquirer and Parent, were intended to
describe the aspects of Parent's business and financial condition which it
believes to be material.
(c) Restricted Securities. Shareholder understands that the
Parent Shares have not been, and will not be, registered under the
Securities Act, by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things,
the bona fide nature of the investment intent and the accuracy of
Shareholder's representations as expressed herein. Shareholder understands
that the Parent Shares are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from Parent
in a transaction not involving a public offering and that under such laws
and applicable regulations such the Parent Shares may be resold without
registration under the Securities Act only in certain limited
circumstances.
(d) Legends. Shareholder understands that the Parent Shares,
and any securities issued in respect thereof or exchange therefor, may bear
one or all of the following legends:
(i) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT 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 COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED."
(ii) Any legend required by the securities laws of any
state to the extent such laws are applicable to the shares
represented by the certificate so legended.
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3. REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
Shareholder hereby represents and warrants that, except as disclosed
in the relevant item of the Shareholder disclosure letter (the "Shareholder
Disclosure Letter") delivered by Shareholder to Acquirer herewith as
amended from time to time prior to Closing:
3.1 Organization and Good Standing. Except as disclosed in Item
3.1, the Company is a corporation duly organized, validly existing and in
good standing under the Corporations Law of South Australia, has the
corporate power and authority to own, operate and lease its properties and
to carry on its business as now conducted and is qualified as a foreign
corporation in each jurisdiction where the nature of its business or
location of its properties requires such qualification except where the
failure to so qualify would not result in a Material Adverse Effect (as
defined in Section 13.13.4 below) on the Company.
3.2 Capitalization.
(a) Authorized/Outstanding Capital Stock. As of the date
hereof, 200 shares of the Company's capital stock are issued and
outstanding. All issued and outstanding shares of the Company capital
stock have been duly authorized and validly issued, are fully paid and
nonassessable, are not subject to any right of rescission and have been
offered, issued, sold and delivered by the Company in compliance with all
registration or qualification requirements (or applicable exemptions
therefrom) of applicable federal and state securities laws, except where
the failure to so qualify would not result in a Material Adverse Effect on
the Company. A list of all holders of the Company's capital stock, and
the number of shares and options held by each, in each case as of the date
hereof, has been delivered by Shareholder to Acquirer herewith as Item 3.2.
As of the date hereof, Shareholder is the sole shareholder of the Company.
(b) Options/Rights. Except as disclosed in Section 3.2(a)
or on Item 3.2, there are no options, warrants, calls, commitments,
conversion privileges or preemptive or other rights or agreements
outstanding to purchase any of the Company's authorized but unissued
capital stock or any securities convertible into or exchangeable for shares
of the Company's capital stock or obligating the Company to grant, extend,
or enter into any such option, warrant, call, right, commitment, conversion
privilege or other right or agreement, and there is no liability for
dividends accrued but unpaid. Except as described in Item 3.2, there are
no voting agreements, rights of first refusal or other restrictions (other
than normal restrictions on transfer under applicable federal and state
securities laws) applicable to any of the Company's outstanding securities.
Except as described in Item 3.2, the Company is not under any obligation to
register under the Securities Act any of its presently outstanding
securities or any securities that may be subsequently issued.
3.3 Subsidiaries and Guaranties. Except as disclosed in Item
3.3 of the Disclosure Letter, the Company does not have any subsidiaries or
any interest, direct or indirect, in any corporation, partnership, joint
venture or other business entity. The Company is not a guarantor of any
obligation of a third party, whether or not such third party is related to
or affiliated with the Company.
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3.4 No Violation of Existing Agreements or Laws. Except as
disclosed in Item 3.4, neither the execution and delivery of this Agreement
or any of the Ancillary Agreements, nor the consummation of the
transactions provided for herein or therein, will conflict with, or (with
or without notice or lapse of time, or both) result in a termination,
breach or violation of (a) any provision of the Articles of Incorporation
or Bylaws of the Company, as currently in effect, (b) any instrument or
contract to which the Company or Shareholder is a party or by which the
Company or Shareholder is bound or (c) any federal, state, local or foreign
judgment, writ, decree, order, statute, rule or regulation applicable to
Shareholder, the Company or any Subsidiary or their respective assets or
properties, other than, with respect to (a), (b) and (c), any such
conflict, termination, breach or violation that would not have a Material
Adverse Effect on the Company. The consummation of the transactions
contemplated herein and succession by Acquirer as the sole shareholder of
the Company will not require the consent of any third party, except as
disclosed in Item 3.4.
3.5 Litigation. Except as disclosed in Item 3.5, there is no
action, proceeding or claim or investigation pending against the Company
before any court or administrative agency nor is there any basis therefor,
nor has any party threatened the same. Except as disclosed in Item 3.5,
there is no basis for any shareholder or former shareholder of the Company,
or any other person, firm, corporation or entity to assert a claim against
Shareholder, the Company, or Acquirer based upon: (a) ownership or rights
to ownership of any shares of the Company Stock or other securities, (b)
any rights as a the Company securities holder, including, without
limitation, any option or other right to acquire any the Company
securities, any preemptive rights or any rights to notice or to vote or (c)
any rights under any agreement between the Company and any the Company
securities holder or former the Company securities holder in such holder's
capacity as such. There is no action, suit, proceeding, claim, arbitration
or investigation pending or as to which Shareholder has received any notice
of assertion against Shareholder or the Company, which in any manner
challenges or seeks to prevent, enjoin, materially alter or materially
delay any of the transactions contemplated by this Agreement.
3.6 The Company Financial Statements. Shareholder has delivered
to Acquirer in Item 3.6(a) the Company's balance sheet as of June 30, 2001
(respectively, the "Company Balance Sheet" and the "Balance Sheet Date")
and the Company's income statements from the date of inception to June 30,
2001 and unaudited income statement for the 5 months ended May 23, 2002
(collectively, the "Company Financial Statements"). Except as provided in
Item 3.6(b), the Company Financial Statements (a) are in accordance with
the books and records of the Company, and (b) fairly and accurately
represent the financial condition of the Company at the respective dates
specified therein and the results of operations for the respective periods
specified therein. Except as disclosed in Item 3.6, the Company has no
debt, liability or obligation of any nature, whether accrued, absolute or
contingent, and whether due or to become due, that would be required under
generally accepted accounting principles ("GAAP") to be reflected on the
liabilities column of a balance sheet, prepared as of the date hereof in
accordance with GAAP and is not reflected, reserved against or disclosed in
the Company Financial Statements, except for those that may have been
incurred after the Balance Sheet Date in the ordinary course of business
consistent with past practice ("Ordinary Course").
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3.7 Taxes.
(a) For purposes of this Agreement, the following terms
have the following meanings: "Tax" (and, with correlative meaning, "Taxes"
and "Taxable") means any and all taxes, including without limitation
(i) any income, profits, alternative or add-on minimum tax, gross receipts,
sales, use, value-added, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation, net
worth, premium, property, environmental or windfall profit tax, custom,
duty or other tax governmental fee or assessment or charge of any kind
whatsoever, together with any interest or any penalty, addition to tax or
additional amount imposed by any governmental entity responsible for the
imposition of any such tax (domestic or foreign) (a "Taxing Authority"),
(ii) any liability for the payment of any amounts of the type described in
clause (i) above as a result of being a member of an affiliated,
consolidated, combined or unitary group for any Taxable period or as the
result of being a transferee or successor thereof and (iii) any liability
for the payment of any amounts of the type described in clause (i) or (ii)
above as a result of any express or implied obligation to indemnify any
other person.
(b) Except as disclosed in Item 3.7(b), all Tax returns,
statements, reports and forms (including estimated Tax returns and reports
and information returns and reports) required to be filed with any Taxing
Authority on or before the Effective Time, by or on behalf of the Company
and each of its Subsidiaries (collectively, the "Company Returns"), have
been or will be filed when due (including any extensions of such due date),
and all amounts shown to be due thereon on or before the Effective Time
have been or will be paid on or before such date. The Company Financial
Statements fully accrue all actual liabilities for Taxes with respect to
all periods through the dates thereof and to the knowledge of Shareholder,
the Company does not have any contingent liabilities for Taxes except as
disclosed in Item 3.7. The Company Balance Sheet fully accrues consistent
with past practices all actual liabilities for Taxes (i) with respect to
all periods through the Balance Sheet Date, and (ii) with respect to all
transactions and events occurring on or prior to such date. Except as
disclosed in Item 3.7(b), all information set forth in the notes to the
Company Financial Statements relating to Tax matters is true, complete and
accurate in all material respects.
(c) No Tax liability since June 30, 2001 has been incurred
other than in the ordinary course of business, and adequate provision has
been made for all Taxes since that date in accordance with past practices
on a timely basis. Except as disclosed in Item 3.7(c), the Company has
timely withheld and paid to the applicable financial institution or Taxing
Authority all amounts required to be withheld. Except as disclosed in Item
3.7(c), none of the Company Returns have been audited. Except as disclosed
in Item 3.7(c), the Company has not granted any extension or waiver of the
limitation period applicable to any the Company Returns.
(d) There is no claim, audit, action, suit, proceeding, or
investigation now pending or, to the knowledge of Shareholder, threatened
against or with respect to the Shares, the Company or any Subsidiary in
respect of any Tax, nor to the knowledge of Shareholder is there any basis
therefor. There are no liabilities for Taxes with respect to any notice of
deficiency or similar document of any Tax Authority received by the Company
or any Subsidiary which have not been satisfied in full (including
liabilities for interest, additions to tax and penalties thereon and
related expenses). Neither the Company nor any Subsidiary nor any person
on behalf of the Company has entered into or will enter into any agreement
or consent pursuant to Section 341(f) of the Code or any comparable
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provision under state or foreign Tax laws. There are no liens for taxes
upon the assets of the Company or any Subsidiary except liens for current
Taxes not yet due. Except as disclosed in Item 3.7(d), the Company has not
been and will not be required to include any adjustment in Taxable income
for any Tax period (or portion thereof) pursuant to Section 481 or 263A of
the Code or any comparable provision under state or foreign Tax laws as a
result of transactions, events or accounting methods employed prior to the
Closing.
(e) There is no contract, agreement, plan or arrangement,
including without limitation the provisions of this Agreement and the
Employment Agreements, covering any employee, director or independent
contractor or former employee, director or independent contractor of the
Company that, individually or collectively, could give rise to the payment
of any amount that would not be an allowable deduction from the income of
the Company pursuant to the provisions of the Income Tax Assessment Xxx
0000 (Cwth). Other than pursuant to this Agreement, the Company or any
Subsidiary is not a party to or bound by (or will prior to the Effective
Date become a party to or bound by) any tax indemnity, tax sharing or tax
allocation agreement. The Company has previously provided or made
available to Acquirer true and correct copies of all the Company Returns,
and, as reasonably requested by Acquirer, prior to or following the date
hereof, presently existing information statements, reports, work papers,
Tax opinions and memoranda and other Tax data and documents.
The Company has not been at any time within the past five
years, and will not be prior to the Effective Time, a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of
the Code.
3.8 Title to Properties. Except as disclosed in Item 3.8,
the Company has good and marketable title to all of its material assets and
properties (including but not limited to those shown on the balance sheet
as of the Balance Sheet Date included in the Company Financial Statements),
free and clear of all liens, charges or encumbrances (other than ( i )
liens for taxes not yet due and payable; (ii) liens or obligations
reflected or disclosed on the Balance Sheet as of the Balance Sheet Date;
(iii) liens which are not material in character, amount or extent, and
which do not materially detract from the value or materially interfere with
the use of the property subject thereto or affected thereby; and (iv)
contractor's liens and liens with respect to taxes that are not yet due and
payable (the foregoing (i), (ii), (iii) and (iv), "Permitted Liens"). The
machinery and equipment included in such assets are in good condition and
repair, normal wear and tear excepted, and all leases of real or personal
property to which the Company or any Subsidiary is a party are fully
effective and afford the Company or the Subsidiary peaceful and undisturbed
possession of the subject matter of the lease. Neither the Company nor any
Subsidiary is in violation of any zoning, building, safety or environmental
ordinance, regulation or requirement or other law or regulation applicable
to the operation of owned or leased real property which would have a
Material Adverse Effect on the Company, and neither the Company nor any
Subsidiary has received any notice of such violation with which it has not
complied or had waived.
3.9 Absence of Certain Changes. Since the Balance Sheet
Date, the Company has carried on its business in the Ordinary Course
substantially in accordance with the procedures and practices in effect on
the Balance Sheet Date. Except as disclosed in Item 3.9 or in connection
with the transactions contemplated by this Agreement and the Company
Ancillary Agreements, since the Balance Sheet Date there has not been with
respect to the Company:
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(a) any change in the financial condition, properties,
assets, liabilities, business, material rights relating to Intellectual
Property (as defined below), results of operations, which change by itself
or in conjunction with all other such changes, whether or not arising in
the Ordinary Course, have had or is reasonably likely to have a Material
Adverse Effect on the Company;
(b) any contingent liability incurred thereby as guarantor
or surety with respect to the obligations of others;
(c) any mortgage, encumbrance or lien placed on any of the
assets or properties thereof (other than Permitted Liens);
(d) any obligation or liability incurred thereby other than
in the Ordinary Course, which obligations or liabilities do not exceed in
the aggregate $10,000;
(e) any purchase, license, sale or other disposition, or
any agreement or other arrangement for the purchase, license, sale or other
disposition, of any of the properties, assets or goodwill of the Company
other than in the Ordinary Course;
(f) any damage, destruction or loss, whether or not covered
by insurance, that has had a Material Adverse Effect on the Company;
(g) any declaration, setting aside or payment of any
dividend on, or the making of any other distribution in respect of, the
capital stock thereof, any split, stock dividend, combination or
recapitalization of the capital stock thereof, any direct or indirect
redemption, purchase or other acquisition of the capital stock thereof;
(h) any labor dispute or claim of unfair labor practices,
any change in the compensation payable or to become payable to any of its
officers, employees or agents (other than pursuant to existing agreements
set out on Item 3.9(h) or, in the case of non-officers, in the Ordinary
Course), or any bonus payment or arrangement made to or with any of such
officers, employees or agents other than amounts paid pursuant to Employee
Plans, as that term is defined in Section 3.14.3, disclosed in Item 3.14.3
or bonuses in an aggregate amount not to exceed $10,000 for all persons to
whom bonuses are paid;
(i) any loss of key executive, management or development
personnel thereof;
(j) any payment or discharge of a lien or liability
thereof, which lien or liability was not either (i) shown on the balance
sheet as of the Balance Sheet Date included in the Company Financial
Statements or (ii) incurred in the Ordinary Course after the Balance Sheet
Date;
(k) any obligation or liability incurred thereby to any of
its officers, directors, shareholders or affiliates, or any loans or
advances made thereby to any of its officers, directors, shareholders or
affiliates, except normal compensation and expense allowances payable to
officers and employees;
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(l) any loss on or prior to the date of this Agreement of
one or more Material Customers (as defined in Section 3.22) or such number
of customers which together represent a material amount of business or any
indication that such a loss is, or losses are, reasonably likely;
(m) any amendment or change in the Constitution of the
Company;
(n) any issuance or sale of any debt or equity securities
(including but not limited to stock) thereby or of any options or other
rights to acquire from the Company, directly or indirectly, any debt or
equity securities (including but not limited to stock) thereof; or
(o) any termination, or any extension, amendment,
relinquishment, expiration or non-renewal that to Shareholder's knowledge
resulted from third party dissatisfaction with the Company's services or
contract performance, of any contract to which the Company is a party, or
any written request received by the Company for or to effect any of the
foregoing, other than, in each such case, where any such action or
requested action would not have a Material Adverse Effect on the Company.
3.10 Agreements and Commitments. As of the date hereof, except
as disclosed in Item 3.10 delivered by Shareholder to Acquirer herewith, or
as disclosed in Item 3.11, Item 3.14.3 or Item 3.14.6 as required by
Section 3.11, Section 3.14.3 or Section 3.14.6, as the case may be, on the
date of this Agreement the Company is not a party or subject to any oral or
written executory contract or, to the extent expressly enumerated in
paragraphs below, commitment, that is material to the Company, its
financial condition, business or prospects, including but not limited to
the following:
(a) Any contract, commitment, letter agreement or purchase
order providing for payments by or to the Company in an aggregate amount of
(i) $10,000 or more in the Ordinary Course or (ii) $5,000 or more not in
the Ordinary Course;
(b) Any license agreement under which the Company is
licensor (except for any nonexclusive software license granted by the
Company to customers in the Ordinary Course); or under which the Company is
licensee (except for standard "shrink wrap" licenses for off-the-shelf
software products with a license fee or purchase price of under $5,000 per
copy or seat);
(c) Any material agreement by the Company to encumber,
transfer or sell rights in or with respect to any material item of the
Company Intellectual Property (as defined in Section 3.11 hereof),
excluding non-exclusive software licenses;
(d) Any agreement for the sale or lease of real or tangible
personal property involving more than $10,000 per year;
(e) Any dealer, distributor, sales representative, original
equipment manufacturer, value-added remarketer or other agreement for the
distribution of the Company's products;
(f) Any franchise agreement;
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(g) Any stock redemption or agreement obligating the
Company to purchase its capital stock;
(h) Any joint venture contract or arrangement or any other
agreement that involves a sharing of profits with other persons or the
payment of royalties to any other person, excluding non-exclusive software
licenses;
(i) Any instrument evidencing indebtedness for borrowed
money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee or otherwise, except for trade
indebtedness or any advance to any employee of the Company incurred or made
in the Ordinary Course, and except as disclosed in the Company Financial
Statements;
(j) Any contract containing covenants purporting to limit
the Company's freedom to compete in any line of business, market or
industry and/or in any geographic area; or
(k) Any contract for the employment of any officer,
employee or consultant of the Company or any other type of contract or
commitment with any officer, employee or consultant of the Company that is
not immediately terminable by the Company without cost or other liability.
Except as noted in Item 3.4, all agreements, obligations and commitments
disclosed in Item 3.10, Item 3.11, Item 3.14.3 or Item 3.14.6 as required
by Section 3.10, Section 3.11, Section 3.14.3 or Section 3.14.6, as the
case may be, are valid and in full force and effect, except where the
failure to be such would not have a Material Adverse Effect on the Company.
Except as noted on Item 3.10, neither the Company nor to Shareholder's
knowledge any other party is in breach of or default under any material
term of any such agreement, obligation or commitment nor has such other
party threatened such a breach or default. The Company is not a party to
any contract or arrangement that Shareholder believes will have a Material
Adverse Effect on the Company. The Company does not have liability for
renegotiation of government contracts or subcontracts that can reasonably
be expected to have a Material Adverse Effect on the Company.
3.11 Intellectual Property.
(a) For purposes of this Agreement, "Intellectual Property" means:
(i) all issued patents, reissued or reexamined patents,
revivals of patents, utility models, certificates of invention,
registrations of patents and extensions thereof, regardless of country or
formal name (collectively, "Issued Patents");
(ii) all published or unpublished nonprovisional and
provisional patent applications, reexamination proceedings, invention
disclosures and records of invention (collectively "Patent Applications"
and, with the Issued Patents, the "Patents");
(iii) all copyrights, copyrightable works, semiconductor
topography and mask work rights, including all rights of authorship, use,
publication, reproduction, distribution, performance, transformation, moral
rights and rights of ownership of copyrightable works, semiconductor
topography works and mask works, and all rights to register and obtain
renewals and extensions of registrations, together with all other interests
accruing by reason of international copyright, semiconductor topography and
mask work conventions (collectively, "Copyrights");
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(iv) trademarks, registered trademarks, applications for
registration of trademarks, service marks, registered service marks,
applications for registration of service marks, trade names, registered
trade names and applications for registrations of trade names
(collectively, "Trademarks");
(v) all technology, ideas, inventions, designs, proprietary
information, manufacturing and operating specifications, know-how,
formulae, trade secrets, technical data and proprietary processes;
(vi) all databases and all collected data and all
rights therein throughout the world;
(vii) all computer software, including all source code,
object code firmware, development tools, files, records and data and all
media on which any of the foregoing is recorded; and
(viii) all Web addresses, rights and domain names and all
rights under all Web cross-linking agreements.
(b) With respect to each item of Intellectual Property
incorporated into any product of the Company or used in connection with any
service offered or provided by the Company or otherwise used in the
business of the Company and in each case owned by the Company or licensed
to the Company (except "off the shelf" or other software widely available
through regular commercial distribution channels at a cost not exceeding
$5,000 per copy or seat or CPU on standard, non-negotiated terms and
conditions) ("Company Intellectual Property"), the Shareholder Disclosure
Letter lists as of the date of this Agreement at Item 3.11:
(i) all Patents, all registered Trademarks, and all
registered Copyrights, including the jurisdictions in which each such
Intellectual Property has been issued or registered or in which any such
application for such issuance and registration has been filed.
(ii) the following agreements relating to the products or
service offerings or capabilities of the Company, including products or
service offerings or capabilities currently under development (collectively
the "Company Services") or other Company Intellectual Property: all
(A) agreements granting any right to distribute or sublicense any of the
Company Services on any exclusive basis, (B) any exclusive licenses of
Intellectual Property to or from the Company, (C) projects under agreements
pursuant to which the amounts actually paid or payable individually under
firm commitments to or by the Company are $10,000 or more, (D) joint
development agreements, (E) any agreement by which the Company grants any
ownership right to any Intellectual Property owned by the Company other
than nonexclusive software licenses entered into with customers in the
Ordinary Course, (F) any option relating to any Company Intellectual
Property, and (G) agreements pursuant to which any party is granted any
rights to access source code or to use source code to create derivative
works of Company Intellectual Property.
(c) the Shareholder Disclosure Letter contains an accurate list
as of the date of this Agreement of all licenses, sublicenses and other
agreements to which the Company is a party and pursuant to which the
Company is authorized to use any Intellectual Property owned by any third
party (except "off the shelf" or other software widely available through
regular commercial distribution channels at a cost not exceeding $5,000 per
copy or seat or CPU on standard non-negotiated terms and conditions and any
rights implied by law) ("Third Party Intellectual Property").
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(d) To the best of Shareholder's knowledge, there is no
unauthorized use, disclosure, infringement or misappropriation of any
Company Intellectual Property, including any Third Party Intellectual
Property, by any employee of the Company and the Company has not received
actual notice that any former employee or any other third party has made
any unauthorized use, disclosure, infringement or misappropriation of any
Company Intellectual Property, including any Third Party Intellectual
Property. The Company has not entered into any agreement to indemnify any
other person against any charge of infringement of any Intellectual
Property, other than indemnification provisions contained in sales or
services agreements arising in the ordinary course of business, copies of
which have been delivered to Acquirer or its counsel. There are no
royalties, fees or other payments payable by the Company to any Person,
under any written or oral contract or understanding or otherwise, by reason
of the ownership, use, sale or disposition of any Intellectual Property.
(e) The Company is not in breach of any license, sublicense or
other agreement relating to Company Intellectual Property or Third Party
Intellectual Property Rights. Except as disclosed in Item 3.11(e), neither
the execution, delivery or performance of this Agreement or any ancillary
agreement contemplated hereby nor the consummation of any of the
transactions contemplated by this Agreement will contravene, conflict with
or result in any violation of Acquirer's right to own or use any Company
Intellectual Property, including any Third Party Intellectual Property.
(f) All registered Trademarks and registered service marks held
by the Company are valid and subsisting. Except for such as are not past
due, all maintenance and annual fees have been fully paid and all fees paid
during prosecution and after issuance of any patent comprising or relating
to such item have been paid in the correct entity status amounts. The
Company has not infringed, misappropriated or made unlawful use of, is not
currently infringing, misappropriating or making unlawful use of, and has
not received any written notice or written communication alleging or
relating to any actual, alleged, possible or potential infringement,
misappropriation or unlawful use of, any Intellectual Property or other
proprietary right or asset owned or used by any third party. Without
limiting the foregoing, the offering and sale of the Company Services by
the Company does not, and the offering and sale of the Company Services
immediately after the Effective Time will not, and the business of the
Company as conducted as of the date hereof does not, and the Company's use
of Intellectual Property as of the date hereof does not, to Shareholder's
knowledge, infringe or violate any Intellectual Property of any other
person. There is no proceeding pending or threatened, nor has any written
claim or demand been made, which challenges the legality, validity,
enforceability or ownership of any item of Company Intellectual Property or
Third Party Intellectual Property. The Company has not brought a
proceeding alleging infringement of Company Intellectual Property or breach
of any license or agreement involving Intellectual Property against any
third party.
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(g) Except as disclosed in Item 3.11(g), all current and former
officers and managerial and technical employees and employees engaged in
development of the Company have executed and delivered to the Company an
agreement (containing no exceptions or exclusions from the scope of its
coverage other than as set forth in the standard form supplied to Acquirer)
regarding the protection of proprietary information and the assignment to
the Company of any Intellectual Property arising from services performed
for the Company by such persons, the form of which has been supplied to
Acquirer. Except as disclosed in Item 3.11(g), all current and former
consultants and independent contractors to the Company involved in the
development, modification, marketing and servicing of the Company's
products, and/or Company Intellectual Property have executed and delivered
to the Company an agreement (containing no exceptions or exclusions from
the scope of its coverage other than as set forth in the standard form)
regarding the protection of proprietary information and the assignment to
the Company of any Intellectual Property arising from services performed
for the Company by such persons except where the failure to obtain such
agreements from former employees and independent contractors would not have
a Material Adverse Effect on the Company. To the knowledge of Shareholder,
no employee or independent contractor of the Company is in violation of any
term relating to Intellectual Property of any patent disclosure agreement
or employment contract or any other contract or agreement relating to the
relationship of any such employee or independent contractor with the
Company or of any other term of any such agreements or contracts. Other
than with respect to Third Party Intellectual Property that is not used in
connection with the Company Services, no current or former officer,
director, shareholder, employee, consultant or independent contractor has
any right, claim or interest in or with respect to any Company Intellectual
Property. To the best knowledge of Shareholder, the Company is not using
any trade secrets, and to the knowledge of Shareholder, the Company is not
using any other confidential information, of any former employer of any
past or present employees.
(h) Shareholder has disclosed in Item 3.11(h) all measures and
precautions taken to protect and maintain the confidentiality of all
Company Intellectual Property. Except as disclosed in Item 3.11(h), the
Company has taken all commercially reasonable and customary measures and
precautions necessary to maintain and protect the full value of all
Intellectual Property it owns except where such failure to protect and
maintain would not have a Material Adverse Effect on the Company. All use,
disclosure or appropriation of confidential and proprietary information of
any third party ("Confidential Information") has, to Shareholder's
knowledge, been pursuant to the terms of a written agreement between the
Company and the owner of such Confidential Information, or is otherwise
lawful.
(i) No product liability claims have been communicated in
writing to or, to Shareholder's knowledge, threatened against the Company.
(j) A complete list of each of the principal the Company
Services, together with a brief description of each, is set forth in Item
3.11(j). The Company Services, including the performance and results
thereof, conform in all material respects with any published specification,
published documentation or written performance standard provided with
respect thereto by the Company.
(k) The Company is not subject to any proceeding or outstanding
decree, order, judgment, or stipulation which may affect the validity, use
or enforceability of any Company Intellectual Property or restricting in
any manner the use, transfer, or licensing thereof by the Company. The
Company is not subject to any agreement which restricts in any material
respect the use, transfer, or licensing by the Company of Company
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Intellectual Property or the Company Services, excluding agreements
relating to Third Party Intellectual Property.
(l) The Company owns all right, title and interest in, or has
the right to use, all Intellectual Property that is material to or
reasonably necessary to the conduct of its business as presently conducted
("Material Company Intellectual Property"). Shareholder is not aware of
any loss, cancellation, termination or expiration of any Patent or Patent
Application, registered Trademark, or registered Copyright relating to any
Company Intellectual Property. Copies of all forms of nondisclosure or
confidentiality agreements currently utilized by the Company to protect
Company Intellectual Property have been provided to Acquirer. Except as set
out in Item 3.11, the Company has not granted any reseller, distributor,
sales representative, original equipment manufacturer, value added reseller
or other third party any right to reproduce, manufacture, sell, license,
furnish or distribute any the Company Services in any market segment or
geographic location.
3.12 Compliance with Laws. Except for noncompliance that would
not result in a Material Adverse Effect on the Company, the Company has
complied, or prior to the Closing Date (as defined in Section 8.1 hereof)
will have complied, and is or will be at the Closing Date in full
compliance, in all material respects, with all applicable laws, ordinances,
regulations and rules, and all orders, writs, injunctions, awards,
judgments and decrees, applicable to the Company or to the assets,
properties and business thereof, including, without limitation: (a) all
applicable federal and state securities laws and regulations except as
disclosed in Item 3.2, (b) all applicable federal, state and local laws,
ordinances and regulations, and all orders, writs, injunctions, awards,
judgments and decrees, pertaining to (i) the sale, licensing, leasing,
ownership or management of owned, leased or licensed real or personal
property, products or technical data, (ii) employment or employment
practices, terms and conditions of employment, or wages and hours and (iii)
safety, health, fire prevention, environmental protection (including toxic
waste disposal and related matters described in Section 3.20 hereof),
building standards, zoning or other similar matters, (c) the Export
Administration Act and regulations promulgated thereunder and other laws,
regulations, rules, orders, writs, injunctions, judgments or decrees
applicable to the export or re-export of controlled commodities or
technical data, (d) the Immigration Reform and Control Act and (e) all
governmental and nongovernmental regulations related to the operation and
use of the Internet. Except as disclosed in Item 3.4, the Company has
received all permits and approvals from, and has made all filings with,
third parties, including government agencies and authorities, that are
necessary to the conduct of its business as presently conducted except
where the failure to receive such permit or approval or make such filing
would not have a Material Adverse Effect on the Company.
3.13 Certain Transactions and Agreements. No person who is an
officer of the Company nor any member of their immediate families, has any
direct or indirect ownership interest in or any employment or consulting
agreement with any firm or corporation that competes with the Company
(except with respect to any interest in less than 1% of the outstanding
voting shares of any corporation whose stock is publicly traded). Except
as disclosed in Item 3.13, none of said officers or any directors of the
Company or any member of their immediate families, is directly or
indirectly interested in any contract with the Company, including, but not
limited to, any loan agreements (excluding travel advances), except for
normal compensation for services as an officer (disclosed in Item 3.14.3),
director or employee of the Company and except for the normal rights of a
shareholder, warrantholder or optionholder. Except as disclosed in Item
-14-
3.13, none of such officers or directors or family members has, except for
the normal rights of a shareholder or an option holder, any interest in any
(a) Company Intellectual Property or (b) any interest in any property
(other than Company Intellectual Property) used in the business of the
Company, whether such property is real or personal, tangible or intangible.
3.14 Employees.
3.14.1 Except as disclosed in Item 3.14.1, the Company does
not have any employment contract or consulting agreement currently in
effect that is not terminable at will without penalty or payment of
compensation by the Company (other than agreements with the purpose of
providing for the confidentiality of proprietary information or assignment
of inventions).
3.14.2 The Company (a) has not ever been or is now subject
to a union organizing effort, (b) is not subject to any collective
bargaining agreement with respect to any of its employees, (c) is not
subject to any other material contract, written or oral, with any trade or
labor union, employees' association or similar organization or (d) does not
have has any current labor dispute. The Company has good labor relations,
and Shareholder has no knowledge of any facts indicating that the
consummation of the transactions provided for herein (other than any
contemplated reductions in force associated therewith) will have a Material
Adverse Effect on the Company and has no knowledge that any of the
Company's key development or other employees intends to leave its employ
where such departure would reasonably be expected to have a Material
Adverse Effect on the Company.
3.14.3 Item 3.14.3 delivered by Shareholder to Acquirer
herewith contains a list of all severance agreements, pension,
superanuation, retirement, disability, medical, dental or other health
plans, life insurance or other death benefit plans, profit sharing,
deferred compensation agreements, stock, option, bonus or other incentive
plans, vacation, long service, sick, holiday or other paid leave plans,
severance plans or other similar employee benefit plans maintained by the
Company or any trade or business which is treated as a single employer with
the Company or in which any employees of the Company participate (the
"Employee Plans"), as well as all employment and consulting agreements to
which the Company is a party. Except as disclosed in Item 3.14.3, each of
the Employee Plans, and its operation and administration, is in compliance
in all material respects with each of the respective Employee Plans' terms
and with all applicable, federal, state, local and other governmental laws
and ordinances, orders, rules and regulations. Shareholder has delivered
to Acquirer a true and complete copy of, to the extent applicable, (a) all
Employee Plans as well as all employment and consulting agreements to which
the Company is a party as amended, (b) the Company's three most recent
annual reports (Form 5500s), (c) each trust agreement related to such
Employee Plans, (d) most recent summary plan description for each Employee
Plan for which a description is required, (e) any material contract
regarding the funding arrangement for any Employee Plan. Except as set
forth in Item 3.14.3, no Employee Plans will be subject to any surrender
fees or service fees upon termination other than the normal and reasonable
administrative fees associated with the termination of benefit plans.
Except as disclosed in Item 3.14.3, no employee of the Company or any
Subsidiary and no person subject to any Company or any Subsidiary health
plan has made medical claims through such health plan during the twelve
months preceding the date hereof for more than $5,000 in the aggregate.
-15-
3.14.4 To the knowledge of Shareholder, no employee of the
Company is in violation of any term of any employment contract, patent or
trade secret disclosure agreement or noncompetition agreement or any other
contract or agreement, or any restrictive covenant, relating to the right
of any such employee to be employed by the Company or to use trade secrets
or proprietary information of others, and the employment of any employee of
the Company does not subject the Company to any material liability to any
third party.
3.14.5 Except as disclosed in Item 3.14.3, the Company is
not a party to any (a) agreement with any employee of the Company (i) the
benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction involving the Company in the
nature of any of the transactions contemplated by this Agreement (ii)
providing any term of employment or compensation guarantee or
(iii) providing severance benefits or other benefits after the termination
of employment of such employee regardless of the reason for such
termination of employment other than as required by law, or (b) agreement
or plan, including, without limitation, any stock option plan, stock
appreciation rights plan or stock purchase plan, any of the benefits of
which will be materially increased, or the vesting of benefits of which
will be materially accelerated, by the occurrence of any of the
transactions contemplated by this Agreement.
3.14.6 A list of all employees of the Company and their
current base compensation as of the date of this Agreement is disclosed on
Item 3.14.6. Copies of all offer letters and other documents reflecting
bonus arrangements of any Company officer, director or employee have been
delivered to Acquirer.
3.14.7 All contributions due from the Company with respect
to any of the Employee Plans through the Balance Sheet Date have been made
or accrued on the Company's financial statements.
3.15 Corporate Documents. Shareholder has made available to
Acquirer for examination all documents and information disclosed in Items
3.1 through 3.25 or other exhibits called for by this Agreement which have
been reasonably requested by Acquirer' legal counsel, including, without
limitation, the following: (a) copies of the Company's Certificate of
Registration and Constitution as currently in effect; (b) the Company's
minute book containing all records of all proceedings, consents, actions
and meetings of the Company's directors and shareholders; (c) the Company's
stock ledger, journal and other records reflecting all stock issuances and
transfers; and (d) all permits, orders and consents issued by any
regulatory agency with respect to the Company, or any securities of the
Company, and all applications for such permits, orders and consents.
3.16 No Brokers. Except as disclosed in Item 3.16, neither
Shareholder nor the Company is obligated for the payment of fees or
expenses of any investment banker, broker or finder in connection with the
origin, negotiation or execution of this Agreement or in connection with
any transaction provided for herein or therein.
3.17 Books and Records. The books, records and accounts of
the Company (a) are in all material respects true and complete, and (b)
have been maintained in accordance with reasonable business practices
except where failure to maintain such books, records and accounts in
accordance with reasonable business practices will not have a Material
Adverse Effect on anyone relying on such books, record and accounts.
3.18 Environmental Matters.
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3.18.1 To Shareholder's knowledge, during the period that
the Company has leased or owned its properties or leased, owned or operated
any facilities, there have been no disposals, releases or threatened
releases of Hazardous Materials (as defined below) on, from or under any
such properties or facilities that would have a Material Adverse Effect on
the Company. Shareholder has no knowledge of any presence, disposals,
releases or threatened releases of Hazardous Materials on, from or under
any of such properties or facilities, which may have occurred prior to the
Company or any Subsidiary having taken possession of any of such properties
or facilities which might reasonably be expected to have a Material Adverse
Effect on the Company. For purposes of this Agreement, the terms
"disposal," "release," and "threatened release" have the definitions
assigned thereto by the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as amended
("CERCLA"). For the purposes of this Section 3.18, "Hazardous Materials"
mean any hazardous or toxic substance, material or waste which is or
becomes prior to the Closing Date, regulated under, or defined as a
"hazardous substance," "pollutant," "contaminant," "toxic chemical,"
"hazardous material," "toxic substance" or "hazardous chemical"; under any
applicable federal, state or local statute, ordinance, rule or regulation
that has a scope or purpose similar to (i) CERCLA; (ii) the Emergency
Planning and Community Right-to-Know Act, 42 U.S.C. Section 11001 et seq.;
(iii) the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801,
et seq.; (iv) the Toxic Substances Control Act, 15 U.S.C. Section 2601 et
seq.; (v) the Occupational Safety and Health Act of 1970, 29 U.S.C. Section
651 et seq.; or (vi) regulations promulgated under any of the above
statutes.
3.18.2 To Shareholder's knowledge, none of the properties
or facilities currently leased or owned by the Company or any properties or
facilities previously leased or owned by the Company is in violation of any
federal, state or local law, ordinance, regulation or order relating to
industrial hygiene or to the environmental conditions on, under or about
such properties or facilities, including, but not limited to, soil and
ground water condition which violation would have a Material Adverse Effect
on the Company.
3.18.3 During the Company's occupancy of any properties or
facilities owned or leased at any time by the Company, neither the Company,
nor to Shareholder's knowledge, any third party, has used, generated,
manufactured, released or stored on, under or about such properties and
facilities or transported to or from such properties and facilities any
Hazardous Materials that would have or is reasonably likely to have a
Material Adverse Effect on the Company.
3.18.4 During the time that the Company has owned or leased
the properties and facilities currently occupied by it or any properties
and facilities previously occupied by the Company, there has been no
material litigation, proceeding or administrative action brought or
threatened against the Company, or any material settlement reached by the
Company with, any party or parties alleging the presence, disposal, release
or threatened release of any Hazardous Materials on, from or under any of
such properties or facilities.
-17-
3.19 Government Contracts. All representations, certifications
and disclosures made by the Company to any Government Contract Party (as
defined below) have been in all material respects current, complete and
accurate at the times they were made. There have been no acts, omissions
or noncompliance with regard to any applicable public contracting statute,
regulation or contract requirement (whether express or incorporated by
reference) relating to any of the Company's contracts with any Government
Contract Party in either case that have led to or is reasonably likely to
lead to, either before or after the Closing Date, (a) any material claim or
dispute involving the Company, and/or Acquirer as successor in interest to
Shareholder and any Government Contract Party or (b) any suspension,
debarment or contract termination, or proceeding related thereto. There
has been no act or omission that relates to the marketing, licensing or
selling to any Government Contract Party of any of the Company's technical
data, computer software, products and services and that has led to or is
reasonably likely to lead to, either before or after the Closing Date, any
cloud on any of the Company's rights in and to its technical data, computer
software, products and services. There is currently no dispute between the
Company and any Government Contract Party. For purposes of this Section
3.19, the term "Government Contract Party" means any independent or
executive agency, division, subdivision, audit group or procuring office of
the federal, state, territorial, provincial, county, local or municipal
government, including any prime contractor of the federal government and
any higher level subcontractor of a prime contractor of the federal
government, and including any employees or agents thereof, in each case
acting in such capacity.
3.20 Warranties, Guarantees and Indemnities. Except as disclosed
in Item 3.20 or in the agreements or contract listed herein, the Company
has not provided to its customers or any third parties (i) any warranties
or guarantees regarding the Company Services; (ii) any rights to obtain
refunds with respect to the Company Services or (iii) any indemnities with
respect to intellectual property infringement.
3.21 No Shareholder Claims. No shareholder of the Company has
claimed in writing any interest in any additional shares of the Company's
capital stock, or any options, warrants or other securities of the Company,
except for the number of shares of the Company Stock which such person is
shown to be the owner of on Item 3.2, and no third party who is not
disclosed on Item 3.2 has made in writing, any claim of entitlement to
receive any shares of the capital stock of the Company, any warrants or
other rights to acquire any capital stock of the Company or any other
securities of the Company, and to Shareholder's knowledge no such claim has
been made orally.
3.22 Customer Relationships. The Company has good commercial
working relationships with its customers. Except as disclosed in Item
3.22, no customer accounting for more than 5% of the Company's revenues in
any month during the last twelve (12) calendar months (a "Material
Customer") has canceled or otherwise terminated its relationship with the
Company, decreased or limited materially the amount of product or services
ordered from the Company or threatened in writing (or to Shareholder's
knowledge orally) to take any such action.
3.23. Product and Service Quality. All services provided by the
Company to customers on or prior to the Closing Date conform to applicable
contractual commitments, implied warranties not disclaimed, express
warranties, product specifications and quality standards published by the
Company in all material respects, and the Company does not have any
material liability (and the Company is not aware of any basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
-18-
complaint, claim or demand against the Company giving rise to any
liability) for replacement or repair thereof, or for the taking of any
remedial action with respect thereto or other damages in connection
therewith. All material complaints received since January, 2001 from
customers regarding the Company's services are set out in Item 3.23 in
detail reasonably sufficient to understand the nature of the complaint and
the resolution or lack of resolution thereof.
3.24 Insurance. The Company maintains the insurance coverage
disclosed on Item 3.24. Item 3.24 sets forth all claims made under such
insurance policies since the Company's inception and the premiums that
apply with respect to such insurance policies as of the date of this
Agreement.
3.25 Disclosure. The Company has not failed to disclose any
information known to it that is material to a decision to consummate the
transactions contemplated herein. This Agreement (including Schedules and
Exhibits) and the certificates and instruments delivered pursuant to this
Agreement at the Closing by or on behalf of Shareholder, to Shareholder's
knowledge, do not contain any untrue statement of material fact or omit to
state a material fact necessary to make the statements contained herein and
therein not misleading in light of the circumstances under which they were
made.
4. REPRESENTATIONS AND WARRANTIES OF ACQUIRER
Acquirer hereby represents and warrants, that, except as
disclosed on the Acquirer disclosure letter delivered to Shareholder
herewith as amended from time to time in non-material respects prior to
Closing:
4.1 Organization and Good Standing. Acquirer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Utah, and Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Utah. Each of Acquirer
and Parent has the corporate power and authority to own, operate and lease
its properties and to carry on its business as now conducted and as
proposed to be conducted.
4.2 Power, Authorization and Validity; Adverse Changes.
4.2.1 Acquirer has the corporate right, power, legal
capacity and authority to enter into and perform its obligations under this
Agreement, and under the Escrow Agreement and each other agreement to be
entered by Acquirer in connection (the "Acquirer Ancillary Agreements").
This Agreement has been duly executed and delivered by Acquirer and the
Acquirer Ancillary Agreements have been or will be duly executed and
delivered by Acquirer (as applicable). The execution, delivery and
performance of this Agreement and the Acquirer Ancillary Agreements have
been duly and validly approved and authorized by Acquirer's Board of
Directors and shareholders, as applicable, and no other corporate approvals
or proceedings on the part of Acquirer or Parent are necessary to authorize
this Agreement and the transactions contemplated hereby.
4.2.2 No filing, authorization or approval, governmental or
otherwise, is necessary or required to be made or obtained to enable
Acquirer to enter into, and to perform its obligations under, this
Agreement and the Acquirer Ancillary Agreements, except for such filings as
may be required to comply with federal and state securities laws.
-19-
4.2.3 This Agreement is and the Acquirer Ancillary
Agreements are, or when executed and delivered by Acquirer and the other
parties thereto will be, valid and binding obligations of Acquirer,
enforceable against Acquirer in accordance with their respective terms,
except as to the effect, if any, of (a) applicable bankruptcy and other
similar laws affecting the rights of creditors generally, (b) rules of law
governing specific performance, injunctive relief and other equitable
remedies; and (c) the enforceability of provision requiring indemnification
in connection with the offering, issuance or sale of securities.
4.2.4 Since June 30, 2002, there has not been with respect
to Acquirer or Parent any Material Adverse Change.
4.3 No Violations. Neither the execution nor delivery of this
Agreement or any Acquirer Ancillary Agreement, nor the consummation of the
transactions contemplated hereby or thereby, will conflict with, or (with
or without notice or lapse of time, or both) result in a termination,
breach or violation of (a) any provision of the Certificate of
Incorporation or Bylaws of Acquirer or Parent, as currently in effect or
(b) any instrument or contract to which Acquirer or Parent is a party or by
which Acquirer or Parent is bound, or (c) any federal, state, local or
foreign judgment, writ, decree, order, statute, rule or regulation
applicable to Acquirer or Parent or their respective assets or properties,
other than, with respect to (a), (b) and (c), any such, conflict,
termination, breach or violation that would not have a Material Adverse
Effect on Acquirer or Parent.
4.4 Disclosure. Acquirer has furnished Shareholder with
Parent's most recent annual report on Form 10-K (the "Form 10-K") for the
year ended September 30, 2001 and all other reports or documents required
to be filed by Acquirer pursuant to Section 13(a) or 15(d) of the 1934 Act
since the filing of the Form 10-K through the date hereof and, hereafter,
through the Closing Date, in each case as may be amended (the "Acquirer
Disclosure Package"). The items in the Acquirer Disclosure Package,
(including, without limitation, any financial statement or schedules
included therein) (i) were prepared in substantial compliance with the
requirements of the Securities Act, or the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the rules and regulations thereunder,
as the case may be, and (ii) to Acquirer's knowledge, did not at the time
of filing (or if amended, supplemented or superseded by a filing prior to
the date hereof, on the date of that filing) contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. Parent
has filed all forms, reports and documents required to be filed with the
SEC in the last twelve (12) months under the Securities Act, or the
Exchange Act, and the rules and regulations thereunder.
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4.5 Acquirer. Acquirer has been formed for the sole purpose of
effecting the transactions contemplated herein and, except as contemplated
by this Agreement, Acquirer has not conducted any business activities and
does not have any material liabilities or obligations. The sole
shareholder of Acquirer has adopted this Agreement in accordance with
Section 16-10a-1103 of the Utah Law.
4.6 Duly Issued Shares. The Parent shares to be issued pursuant
to this Agreement (including such shares as could be issued upon conversion
of the Convertible Note) have been reserved for such issuance and, when
issued and delivered in accordance with this Agreement will be duly and
validly issued, fully paid and nonassessable.
4.7 Litigation. There is no litigation, suit, action, or
proceeding pending, or to the knowledge of Acquirer, threatened against
Parent or Acquirer, nor is there, to the knowledge of Acquirer, any basis
therefore.
4.8 Capitalization.
(a) Authorized/Outstanding Capital Stock. As of the date
hereof, the authorized capital stock of Parent consists of 20,000,000
shares of Common Stock, no par value, of which 49,774 shares are issued and
outstanding and 1,000,000 shares of Preferred Stock, no par value, of which
no shares are issued and outstanding. All issued and outstanding shares of
Parent capital stock have been duly authorized and validly issued, are
fully paid and nonassessable, are not subject to any right of rescission
and have been offered, issued, sold and delivered by Parent in compliance
with all registration or qualification requirements (or applicable
exemptions therefrom) of applicable federal and state securities laws,
except where the failure to so qualify would not result in a Material
Adverse Effect on Parent.
(b) Options/Rights. Except as disclosed in Item 3.8(b),
there are no options, warrants, calls, commitments, conversion privileges
or preemptive or other rights or agreements outstanding to purchase any of
Parent's authorized but unissued capital stock or any securities
convertible into or exchangeable for shares of Parent capital stock or
obligating Parent to grant, extend, or enter into any such option, warrant,
call, right, commitment, conversion privilege or other right or agreement,
and there is no liability for dividends accrued but unpaid. There are no
voting agreements, rights of first refusal or other restrictions (other
than normal restrictions on transfer under applicable federal and state
securities laws) applicable to any of Parent's outstanding securities.
5. TARGET PRECLOSING COVENANTS
During the period from the date of this Agreement until the
Effective Time, the Company covenants to and agrees with Acquirer as
follows:
5.1 Advice of Changes. Shareholder will promptly advise
Acquirer in writing (a) of any event occurring subsequent to the date of
this Agreement that would render any representation or warranty of the
Company contained in this Agreement, if made on or as of the date of such
event or the Closing Date, untrue or inaccurate in any material respect
(however, no advisory need be provided regarding any event or action
contemplated or permitted under this Agreement and (b) of the occurrence of
any Material Adverse Change with respect to the Company.
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5.2 Maintenance of Business. The parties hereto understand and
acknowledge that it is their intent to work closely together during the
period from the date hereof until the Closing Date. Shareholder will use
commercially reasonable efforts to carry on and preserve its business and
its relationships with customers, suppliers, employees and others in
substantially the same manner as it has prior to the date hereof. If
Shareholder becomes aware of a material deterioration in the Company's
relationship with any material customer, supplier or key employee, it will
promptly bring such information to the attention of Acquirer in writing
and, if requested by Acquirer, will use commercially reasonable efforts to
restore the relationship.
5.3 Conduct of Business. Shareholder will cause the Company to
continue to conduct its business and maintain its business relationships in
the Ordinary Course and will not, without the prior written consent of the
Chief Executive Officer or Chief Financial Officer of Acquirer, not to be
unreasonably withheld, conditioned or delayed:
(a) borrow any money other than pursuant to existing lines
of credit;
(b) enter into any capital expenditure by the Company in
excess of $10,000 (in the case of transactions or commitments which are
neither made in the Ordinary Course nor contemplated by the Company's
current capital expenditure budget) or $10,000 (in the case of transactions
or commitments made in the Ordinary Course);
(c) encumber or permit to be encumbered any of its assets
except in the Ordinary Course;
(d) dispose of any of its assets except in the Ordinary
Course;
(e) enter into any lease or contract for the purchase or
sale of any property, real or personal, tangible or intangible, except in
the Ordinary Course or enter into any agreement of the types described in
Section 3.10 to the extent involving amounts in excess of $10,000;
(f) fail to maintain its equipment and other assets in good
working condition and repair according to the standards it has maintained
to the date of this Agreement, subject only to ordinary wear and tear;
(g) pay any bonus, royalty, increased salary (except for
annual increases in the Ordinary Course and disclosed to Acquirer in
writing and approved by Acquirer, such approval not to unreasonably be
withheld) or special remuneration to any officer, employee or consultant
(except pursuant to existing arrangements heretofore disclosed in writing
to Acquirer) or enter into any new employment or consulting or severance
agreement with any such person, or enter into any new agreement or plan of
the type described in Section 3.14.3;
(h) change accounting methods;
(i) declare, set aside or pay any cash or stock dividend or
other distribution in respect of capital stock, or, except as contemplated
in this Agreement, redeem or otherwise acquire any of its capital stock
excluding repurchases of unvested shares upon employee termination;
(j) amend or terminate or settle any disputes under any
contract, agreement or license to which it is a party of a nature required
to be disclosed in Section 3.11;
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(k) lend any amount to any person or entity, other than
advances for travel and expenses which are incurred in the Ordinary Course
and which are not material in amount, which travel and expenses shall be
reasonably documented by receipts for the claimed amounts;
(l) guarantee or act as a surety for any obligation except
for the endorsement of checks and other negotiable instruments in the
Ordinary Course and which are not material in amount;
(m) waive or release any material right or claim except in
the Ordinary Course;
(n) issue or sell any shares of its capital stock of any
class or any other of its securities, or issue, grant, modify or create any
warrants, obligations, subscriptions, options, convertible securities,
stock appreciation rights or other commitments to issue shares of capital
stock or accelerate the vesting of any outstanding option or other
security;
(o) split or combine the outstanding shares of its capital
stock of any class or enter into any recapitalization affecting the number
of outstanding shares of its capital stock of any class or affecting any
other of its securities;
(p) except for the Merger, merge, consolidate or reorganize
with, or acquire any entity;
(q) amend its Articles of Incorporation or Bylaws;
(r) agree to any audit assessment by any tax authority or
file any federal or state income or franchise tax return unless copies of
such returns have been delivered to Acquirer;
(s) license any of its technology or any Company
Intellectual Property, except in the Ordinary Course;
(t) change or terminate any insurance coverage;
(u) terminate the employment of any key employee disclosed
in Item 3.9; or
(v) agree to do any of the things described in the
preceding clauses 5.3(a) through 5.3(u).
5.4 Certain Agreements. Shareholder will cause all present
employees and consultants of the Company engaged in development activity
who have not previously executed the Company's forms of assignments of
copyright and other intellectual property rights to the Company to execute
such forms.
5.5 Regulatory Approvals. Shareholder will execute and file, or
join in the execution and filing, of any application or other document that
may be necessary in order to obtain the authorization, approval or consent
of any governmental body, federal, state, local or foreign, which may be
reasonably required, or which Acquirer may reasonably request, in
connection with the consummation of the transactions provided for in this
Agreement. Shareholder will use commercially reasonable efforts to obtain
or assist Acquirer in obtaining all such authorizations, approvals and
consents.
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5.6 Necessary Consents. Shareholder will use commercially
reasonable efforts to obtain such written consents and waivers (including
waivers of any applicable refusal or co-sale rights that may apply to the
transactions hereby contemplated) and take such other actions as may be
necessary or appropriate for Shareholder to facilitate and allow the
consummation of the transactions provided for herein and to facilitate and
allow Acquirer to carry on the Company's business after the Closing Date.
5.7 Litigation. Shareholder will notify Acquirer in writing
promptly after learning of any material action, suit, proceeding or
investigation by or before any court, board or governmental agency,
initiated by or against the Company or any Subsidiary or threatened against
it or any Subsidiary.
5.8 No Other Negotiations. In consideration of the time and
effort to be devoted to the transactions contemplated by this Agreement,
Shareholder agrees that it will not engage in discussions concerning a
potential financing or an acquisition of the Company with any third party
for a 45-day period beginning on the date of this Agreement.
5.9 Access to Information. Until the Closing Date, Shareholder
will provide Acquirer and its agents with reasonable access to the files,
books, records and offices of the Company, including, without limitation,
any and all information relating to the Company taxes, commitments,
contracts, leases, licenses, real, personal and intangible property and
financial condition. Shareholder will cause the Company's accountants to
cooperate with Acquirer and its agents in making available all financial
information reasonably requested, including without limitation the right to
examine all working papers pertaining to all financial statements prepared
or audited by such accountants.
5.10 Satisfaction of Conditions Precedent. Shareholder will use
commercially reasonable efforts to satisfy or cause to be satisfied all the
conditions precedent which are set forth in Section 10, and Shareholder
will use commercially reasonable efforts to cause the transactions provided
for in this Agreement to be consummated, and, without limiting the
generality of the foregoing, to obtain all consents and authorizations of
third parties and to make all filings with, and give all notices to, third
parties that may be necessary or reasonably required on its part in order
to effect the transactions provided for herein.
5.11 Blue Sky Laws. Shareholder shall use commercially
reasonable efforts to assist Acquirer to the extent necessary to comply
with the securities and Blue Sky laws of all jurisdictions applicable in
connection with the transactions contemplated herein.
5.12 Notification of Employee Problems. Shareholder will
promptly notify Acquirer if any of the Company's officers becomes aware
that any of its key employees intends to leave its employ.
5.13 Benefit Plans; Cash Compensation. As soon as practicable
after the execution of this Agreement, Acquirer and Shareholder shall
confer and work together in good faith to agree upon mutually acceptable
employee benefit, superanuation, and compensation arrangements for the
Company's employees following the Effective Date. Shareholder shall take
such actions as are necessary to terminate its participation in such
Employee Plans as is requested by Acquirer, provided that Acquirer shall
take such steps as are commercially and administratively reasonable to
ensure that (i) those of the Company's employees who are eligible to
participate in each such Employee Plan shall be entitled to participate, on
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terms comparable to those of their current participation, in comparable
employee benefit plans maintained by Acquirer effective immediately
following the Effective Date and (ii) such employees shall be credited with
prior periods of employment with the Company for purposes of participation
in and vesting under Acquirer's employee benefit plans, vacation, long
service and sick leave entitlement where service is a factor. Base
compensation and, if applicable, eligibility for bonus compensation (with
appropriate adjustment to milestones to track the combined business) will
remain unchanged for the Company's officers and employees, or if Acquirer
so elects will be adjusted as mutually agreed.
5.14 Sale of Shares Pursuant to Regulation D or Section 4(2).
The parties hereto acknowledge and agree that the Parent Shares issuable
pursuant to Section 1 hereof shall constitute "restricted securities"
within the meaning of the Securities Act. The certificates representing
the Parent Shares shall bear the legends set forth in Section 2. It is
acknowledged and understood that Acquirer is relying on certain written
representations made by Shareholder. Shareholder will execute and deliver
to Acquirer an Investor Representation Certificate in the form attached
hereto as Exhibit 5.15.
6. ACQUIRER PRECLOSING COVENANTS
During the period from the date of this Agreement until the
Effective Time, or such later time as provided herein, Acquirer covenants
to and agrees with Shareholder as follows:
6.1 Access to Information. Until the Closing Date, Shareholder
will have reasonable access to Parent's management and officers and
material information regarding Parent, including without limitation,
material information relating to Parent's business and financial condition.
Parent's accountants will cooperate with Shareholder's accountants in
making available all financial information reasonably requested to evaluate
Parent's financial statements.
6.2 Satisfaction of Conditions Precedent. Acquirer will use all
commercially reasonable efforts to satisfy or cause to be satisfied all the
conditions precedent which are set forth in Section 9, and Acquirer will
use all commercially reasonable efforts to cause the transactions provided
for in this Agreement to be consummated, and, without limiting the
generality of the foregoing, to obtain all consents and authorizations of
third parties and to make all filings with, and give all notices to, third
parties that may be necessary or reasonably required on its part in order
to effect the transactions provided for herein.
6.3 Regulatory Approvals. Acquirer will execute and file, or
join in the execution and filing, of any application or other document that
may be necessary in order to obtain the authorization, approval or consent
of any governmental body, federal, state, local or foreign, which may be
reasonably required, or which Shareholder may reasonably request, in
connection with the consummation of the transactions provided for in this
Agreement. Acquirer will use all reasonable efforts to obtain all such
authorizations, approvals and consents.
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6.4 Indemnification. From and after the Effective Time,
Acquirer agrees to indemnify and hold harmless each current and former
director and officer of the Company against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or prior to
the Effective Time, asserted or claimed after the Effective Time, to the
fullest extent that the Company would have been permitted under its
organizational documents and applicable law in effect on the date hereof to
indemnify such person (and in connection therewith Acquirer shall advance
expenses as incurred to the fullest extent provided for under Acquirer's
organizational documents and applicable law as from time to time in effect,
provided the person to whom expenses are advanced provides an undertaking
to repay such advances if it is ultimately determined that such person is
not entitled to indemnification). Shareholder represents that there is no
current basis for any indemnity claim under this Section 6.4, except as set
out in Item 6.4.
6.5 Cooperation in Obtaining Necessary Consents. Acquirer will
cooperate with Shareholder as reasonably requested by Shareholder in order
to assist Shareholder to obtain such written consents as are contemplated
by Section 5.6 hereof.
6.6 Closing Deliverables. Prior to Closing, Acquirer shall
deliver to Shareholder true and accurate copies of the following items: (i)
Parent's Certificate of Incorporation, as amended to date; (ii) a
Certificate of Good Standing from the Utah Secretary of State, of recent
date, regarding Parent; (iii) a certified copy of the resolutions of the
Acquirer's Board of Directors approving this Agreement and the issuance of
the Parent Shares hereby contemplated; and (iv) a certificate of the
transfer agent of Parent of recent date reflecting the number of
outstanding shares of capital stock of Parent; and (v) a copy of the letter
from Parent's counsel to Parent's transfer agent confirming that the shares
of Parent stock issued pursuant to this Agreement are duly issued.
7. ACQUIRER POST-CLOSING OBLIGATIONS
7.1 The Company Loans. Acquirer shall repay Two Hundred Five
Thousand One Hundred Two and 41/100 Australian Dollars (AUD$205,102.41) of
the Company's outstanding loans from the directors of the Company (the
"Director Loans") upon the earlier to occur of (i) the first anniversary of
the Closing Date and (ii) the closing of an equity financing of Acquirer in
which the net proceeds of such equity financing, when combined with the net
proceeds of all such financings from and after the date hereof, equal or
exceed Three Million Dollars U.S. ($3,000,000). Should Three Million
Dollars be so raised prior to the Closing Date, then Acquirer shall cause
Newco to satisfy its obligations under this Section at the Closing.
7.2 Private Placement. Acquirer shall cause Parent to use
commercially reasonable efforts to close an equity financing in which the
net proceeds, when combined with the net proceeds of all such financings
from and after the date hereof, equal between One Million U.S. Dollars
($1,000,000) and Three Million U.S. Dollars ($3,000,000). Not less than
One Million Five Hundred Thousand U.S. Dollars ($1,500,000) shall, within
the subsequent twelve (12) months thereafter, be contributed as working
capital to Acquirer.
7.3 Advisors. Acquirer shall use commercially reasonable
efforts to, within 90 days of Closing, engage Kings Peak Advisors, LLC, and
European American Securities, Inc. as its financial advisors and investment
bankers, respectively.
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7.4 Post-Closing Capitalization. Until such time as Parent has
raised an aggregate amount of Three Million Five Hundred Thousand U.S.
Dollars ($3,500,000) in gross proceeds through debt and/or equity
financings (including the $500,000 financing referenced in Section 9.8)
(the "Initial Financings"), the Acquirer shall cause the Parent Shares to
represent at least ten percent (10%) of Parent's outstanding capital stock
on a Fully Diluted Basis. For purposes of this Section 7.4, a "Fully
Diluted Basis" shall include, at the time of such financings, all shares of
outstanding capital stock of Parent shares issuable upon the conversion of
any debt instrument, and shares issuable upon the exercise of all
outstanding warrants. In the event that the Parent Shares represent less
than ten percent (10%) of the outstanding capital stock of Parent on a
Fully Diluted Basis at any time up to and including the closing of the
Initial Financings, Parent will issue to Shareholder such number of shares
of Parent Common Stock as is necessary to make the total number of shares
of Parent Common Stock held by Shareholder equal ten percent (10%) of the
total outstanding capital stock of Parent on a Fully Diluted Basis.
7.5 Acquirer Board of Directors. During the term of
Shareholder's employment agreement with Acquirer and so long as any
principal or interest remains outstanding under the Convertible Note,
Acquirer shall cause Xxxxxx Xxxxxxx Xxxxxxxx ("Xxxxxxxx") and Xxxxx Xxxxxxx
("Xxxxxxx") to be elected to Acquirer's board of directors, and such board
of directors shall not have more than five (5) members, unless such larger
number has been agreed to by both Scammell and Xxxxxxx.
7.6 Reports Under the 1934 Act. With a view to making available
to Shareholder the benefits of Rule 144 promulgated under the Securities
Act of 1 ("SEC Rule 144") and any other rule or regulation of the SEC that
may at any time permit Shareholder to sell shares of Parent Common Stock to
the public without registration, Parent will:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times;
(b) file with the SEC in a timely manner all reports and
other documents required of Parent under the Act and the Securities
Exchange Act of 1934, as amended;
(c) furnish to Shareholder forthwith upon request so long as
Shareholder holds any shares of Parent Common Stock, whenever applicable
(i) a written statement by Parent that it has compiled with its reporting
requirements under SEC Rule 144, the 1933 Act, and the 1934 Act, (ii) a
copy of the most recent annual or quarterly report of Parent and such other
reports and documents filed by Parent with the SEC, and (iii) such other
information as may be reasonably requested in availing Shareholder of any
current rule or regulation of the SEC (or any future rule or regulation
containing issuer information requirements comparable to or less burdensome
than current SEC Rule 144) which permits the selling of any such securities
without registration; and
(d) in the event that at any time after the first
anniversary of the Closing, Shareholder requests to transfer any Parent
Common Stock in accordance with the provisions of SEC Rule 144, Parent will
advise its transfer agent that the holding period for such shares, as
determined pursuant to Rule 144(d), commenced on the Closing Date, and,
assuming that all other conditions to SEC Rule 144 are met, that such
shares will be transferable by Shareholder pursuant to SEC Rule 144 from
and after one year from such date.
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8. CLOSING MATTERS
8.1 The Closing. Subject to termination of this Agreement as
provided in Section 11 below, the closing of the transactions provided for
herein (the "Closing") will take place at the offices of Xxxxxxx, Xxxxx &
Xxxxxxx, 000 Xxxxx 000 Xxxx, Xxxxx 000, Xxxxxx, Xxxx 00000 at 10:00 a.m.,
Mountain Time on the first business day following the last to be satisfied
of the conditions to closing or such other date as the parties agree (the
"Closing Date"). At the Closing:
(a) Shareholder shall deliver or cause to be delivered to
Acquirer, against payment by Acquirer to Shareholder of the consideration
set forth in Sections 1.2(a) and 1.2(b):
(i) an irrevocable general proxy in favor of Acquirer
with respect to the Shares being sold by Shareholder hereunder;
(ii) all of the documents, certificates and instruments
required to be delivered, or caused to be delivered, by such Shareholder
pursuant to Section 10 hereof; and
(iii) all records, documents and files of the
Company, or copies thereof including without limitation, all minute books,
stock records and internal accounting records. Shareholder may retain
copies of and shall be provided reasonable access after the Closing to all
such records, documents and files.
(b) Against delivery of the irrevocable general proxy in
favor of Acquirer with respect to the Shares being sold by Shareholder
hereunder:
(i) Acquirer shall cause a certificate or certificates
representing the Parent Shares to be delivered to the registered holder or
placed in escrow with the Escrow Agent, as applicable;
Acquirer shall deliver the Convertible Promissory
Note; and Acquirer shall deliver all of the documents,
certificates and instruments required to be delivered,
or caused to be delivered, by such Shareholder pursuant
to Section 9 hereof.
8.2 Shares Certificates. As soon as practicable, but in any
event within seven (7) business days after the transfer of the Shares has
been stamped pursuant to applicable federal law, Shareholder shall deliver
or cause to be delivered to Acquirer a certificate or certificates
representing the Shares being sold by Shareholder hereunder duly endorsed
for transfer, or accompanied by duly executed assignments separate from
certificate, transferring to Acquirer good and marketable title to such
Shares, free and clear of all liens.
9. CONDITIONS TO OBLIGATIONS OF SHAREHOLDER
Obligations hereunder are subject to the fulfillment or satisfaction,
on and as of the Closing, of each of the following conditions (any one or
more of which may be waived by Shareholder):
9.1 Accuracy of Representations and Warranties. The
representations and warranties of Acquirer set forth in Section 4 shall be
accurate in all material respects and Shareholder shall have received a
certificate to such effect executed on behalf of Acquirer by its Chief
Executive Officer and its Chief Financial Officer.
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9.2 Covenants. Acquirer shall have performed and complied in
all material respects with all of its covenants contained in Section 6 on
or before the Closing Date, and Shareholder shall have received a
certificate to such effect executed on behalf of Acquirer by its Chief
Executive Officer or Chief Financial Officer.
9.3 Compliance with Law. There shall be no order, decree, or
ruling by any court or governmental agency or threat thereof, or any other
fact or circumstance, which would prohibit or render illegal the
transactions contemplated by this Agreement.
9.4 Government Consents. There shall have been obtained at or
prior to the Closing Date such permits or authorizations, and there shall
have been taken such other actions, as may be required to consummate the
transactions contemplated by this Agreement by any regulatory authority
having jurisdiction over the parties and the actions herein proposed to be
taken, including but not limited to satisfaction of all requirements under
applicable federal and state securities laws.
9.5 No Litigation. No litigation or proceeding initiated by a
party other than Shareholder shall be pending which will have the probable
effect of enjoining or preventing the consummation of any of the
transactions provided for in this Agreement.
9.6 Requisite Approvals. The principal terms of this Agreement
shall have been approved and adopted by Acquirer and Parent, as required by
applicable law and by their respective Boards of Directors.
9.7 Equity Raised. Parent shall have raised, from and after the
date hereof, at least Five Hundred Thousand U.S. Dollars ($500,000) in net
proceeds from one or more new debt or equity financings.
9.8 Escrow Agreement. Acquirer and Escrow Agent shall have
executed and delivered to Shareholder the Escrow Agreement.
10. CONDITIONS TO OBLIGATIONS OF ACQUIRER
The obligations of Acquirer hereunder are subject to the fulfillment
or satisfaction on, and as of the Closing, of each of the following
conditions (any one or more of which may be waived by Acquirer):
10.1 Accuracy of Representations and Warranties. The representations and
warranties of Shareholder set forth in Sections 2 and 3 shall be accurate
in all material respects and Acquirer shall have received a certificate to
such effect executed on behalf of Shareholder.
10.2 Covenants. Shareholder shall have performed and complied in
all material respects with all of its covenants contained in Section 5 on
or before the Closing and Acquirer shall have received a certificate to
such effect signed by Shareholder.
10.3 Compliance with Law. There shall be no order, decree, or
ruling by any court or governmental agency in effect that would prohibit or
render illegal the transactions provided for in this Agreement.
10.4 Government Consents. There shall have been obtained at or
prior to the Closing Date such permits or authorizations, and there shall
have been taken such other action, as may be required to consummate the
transactions contemplated by this Agreement by any regulatory authority
having jurisdiction over the parties and the actions herein proposed to be
taken, including but not limited to satisfaction of all requirements under
applicable federal and state securities laws.
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10.5 Consents. Acquirer shall have received all written
consents, assignments, waivers, authorizations or other certificates
necessary to provide for the continuation in full force and effect of any
and all contracts and leases of the Company which if not continued would
have a Material Adverse Effect on the Company.
10.6 Absence of Material Adverse Change. Since the Balance Sheet
Date, there shall not have been any Material Adverse Change with respect to
the Company.
10.7 Requisite Approvals. The principal terms of this Agreement
shall have been approved and adopted by Acquirer's shareholder, as required
by applicable law and Acquirer's Articles of Incorporation and Bylaws, and
by Parent's Board of Directors.
10.8 No Litigation. No litigation or proceeding shall be
threatened or pending which will have the probable effect of enjoining or
preventing the consummation of any of the transactions provided for in this
Agreement or which have had or could reasonably be expected to have
Material Adverse Effect on the Company.
10.9 Escrow. Acquirer shall have received the Escrow Agreement,
executed and delivered by Shareholder and the Escrow Agent, which agreement
provides for the escrow of the Escrow Shares on the terms and conditions of
the Escrow Agreement.
10.10 Investor Representation Certificate. Shareholder shall
have executed and delivered to Acquirer an Investor Representation
Certificate in the form attached hereto as Exhibit 5.15.
11. TERMINATION OF AGREEMENT
11.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by the mutual written consent of Acquirer and
Shareholder;
(b) Upon notice by either party, if the Merger shall not
have been consummated by October 15, 2002 (the "Final Date") other than as
the result of a breach of this Agreement by the terminating party;
(c) by Shareholder, if there has been a breach by Acquirer
of any representation, warranty, covenant or agreement set forth in this
Agreement on the part of Acquirer which has or can reasonably be expected
to have a Material Adverse Effect on Acquirer and which Acquirer fails to
cure within a reasonable time, not to exceed thirty (30) days, after
written notice thereof (except that no cure period will be provided for a
breach by Acquirer which by its nature cannot be cured) in which case
Acquirer shall pay Shareholder's reasonable expenses not to exceed $25,000;
(d) by Acquirer, if there has been a breach by Shareholder
of any representation, warranty, covenant or agreement set forth in this
Agreement on the part of Shareholder which has or can reasonably be
expected to have a Material Adverse Effect on the Company and which
Shareholder fails to cure within a reasonable time not to exceed thirty
(30) days after written notice thereof (except that no cure period will be
provided for a breach by Shareholder which by its nature cannot be cured) )
in which case the Company shall pay Acquirer's reasonable expenses not to
exceed $25,000;
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(e) by Acquirer, if Shareholder breaches its obligations
under Section 5.8 or Section 5.14; or
(f) by either party, if a permanent injunction or other
order by any federal or state court which would make illegal or otherwise
restrain or prohibit the consummation of the transactions contemplated by
this Agreement will have been issued and will have become final and
nonappealable.
Any termination of this Agreement under this Section 11.1 will be
effective by the delivery of written notice of the terminating party to the
other party hereto.
11.2 Certain Continuing Obligations. Following any termination
of this Agreement pursuant to this Section 11, the parties hereto will
continue to perform their respective obligations under Sections 13.11 and
13.15 but will not be required to continue to perform their other covenants
under this Agreement, except as provided in Section 11.1(c) and (d).
12. SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION
AND REMEDIES, CONTINUING COVENANTS
12.1 Survival of Representations. The representations and
warranties of the parties hereto contained in this Agreement or in any
writing delivered pursuant hereto or thereto or at the Closing shall
survive the Closing and the consummation of the transactions contemplated
hereby and thereby (and any examination or investigation by or on behalf of
any party hereto) until the first anniversary of the Closing Date (the
"Indemnification Period"); provided, that the Indemnification Period for
representations and warranties contained in Section 3.7, Section 3.14 and
Section 3.18 of this Agreement shall not terminate until the expiration of
any applicable statute of limitations; provided, further, that the
Indemnification Period for representations and warranties contained in
Sections 2.1, 2.2, 2.3, 2.4, 3.4, 3.11, 3.21 and 4.6 of this Agreement
shall not terminate but shall continue indefinitely. Notwithstanding the
foregoing, each Subparagraph under this Section 12 shall not be so limited
and shall survive until any claims under this Agreement are resolved in
accordance with this Agreement. The covenants contained in Section 7 shall
survive in accordance with their terms.
12.2 Shareholder Indemnification.
(a) Shareholder shall indemnify and hold harmless Acquirer
and its officers, shareholders, directors, agents, affiliates and employees
(the "Acquirer Indemnified Parties"), against and in respect of all
actions, damages, claims, losses, liabilities and expenses (including,
without limitation, reasonable attorneys' fees and disbursements) incurred
by an Acquirer Indemnified Party (all such amounts being hereinafter
sometimes referred to as "Damages") arising out of or related to (i) any
misrepresentation or breach of any warranty made by Shareholder pursuant to
Section 2 or Section 3 of this Agreement, (ii) the nonperformance or breach
of any covenant, agreement or obligation of the Company or Shareholder
contained in this Agreement, or (iii) any failure of Shareholder to have
good, valid and marketable title to the issued and outstanding shares of
the Company's Common Stock held by him, free and clear of all liens,
claims, pledges, options, adverse claims, assessments and charges of any
nature whatsoever, or to have the full right, capacity and authority to
vote said shares of the Company's Common Stock. There shall be no
liability for indemnification under this Section 12.2 unless the aggregate
amount of Damages hereunder exceeds Ten Thousand Dollars ($10,000), and
then only to the extent such aggregate amount of Damages exceeds $10,000.
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The total liability of Shareholder for Damages hereunder shall be satisfied
solely from the (1) Escrow Shares with respect to representations and
warranties with a one-year Indemnification Period and (2) all of the Parent
Shares and amounts paid or payable to Shareholder under the Convertible
Note with respect to representations and warranties with an Indemnification
Period of longer than one year. The total liability of Shareholder for
Damages hereunder shall not exceed the value of the Escrow Shares with
respect to clause (1) above or the Parent Shares plus amounts paid or
payable to Shareholder under the Convertible Note with respect to clause
(2) above. The Total Acquirer Shares and amounts paid or payable under the
Convertible Note shall be the exclusive source of indemnification for
Damages as provided by Section 12.2. The foregoing limitation shall not
apply to breaches resulting from fraud or intentional misrepresentation.
The value of the Parent Shares shall be the Fair Market Value (as defined
in Section 12.5) thereof as determined at on the date any such Damages
become due and payable.
(b) Acquirer shall be entitled to indemnification from the
Escrow Shares, the Parent Shares and from amounts paid and payable under
the Convertible Note in the following order:
(i) First, from the Escrow Shares deposited in escrow
pursuant to Section 1.3;
(ii) Second, in the event the aggregate Damages
exceeds the value of the Escrow Shares, from a set-off against principal
and accrued interest then outstanding under the Convertible Note;
(iii) Third, in the event the aggregate Damages
exceeds the value of the Escrow Shares and the principal and accrued
interest outstanding under the Convertible Note, the shares of Parent
Common Stock received by Shareholder on the Closing Date; and
(iv) Fourth, in the event the aggregate Damages exceeds
the value of the Parent Shares and the principal and accrued interest
outstanding under the Convertible Note, from amounts previously paid to
Shareholder under the terms of the Convertible Note that shall be returned
by Shareholder as full and complete satisfaction of his liabilities for
indemnification under this Section 12.
(c) If an Acquirer Indemnified Party believes it has
incurred any Damages which are subject to indemnification under Section
12.2, it shall promptly provide written notice thereof to Shareholder. The
Parent Shares and amounts paid or payable under the Convertible Note shall
be the exclusive source of indemnification for Damages as provided by
Section 12.2.
(d) With respect to claims or demands by third parties,
whenever an Acquirer Indemnified Party shall have received notice that such
a claim or demand has been asserted or threatened, which, if true, would
result in indemnification under Section 12.2, the Acquirer Indemnified
Party shall as soon as reasonably practicable, and in any event within
thirty (30) days of receipt of such notice, notify Shareholder of such
claim or demand and of all relevant facts within its knowledge which relate
thereto. Shareholder shall then have the right to undertake the defense of
any such claims or demands utilizing counsel he selects and approved by
Acquirer, which approval shall not be unreasonably withheld, conditioned or
delayed; provided however, that Shareholder shall not settle or otherwise
compromise any such action without the prior written consent of the
Acquirer Indemnified Party unless such settlement affords the Acquirer
Indemnified Party a full release. In the event that Shareholder shall fail
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to give notice of his intention to undertake the defense of any such claim
or demand within twenty (20) days after receiving notice that it has been
asserted or threatened, the Acquirer Indemnified Party shall have the right
to satisfy and discharge the same by payment, compromise or otherwise.
(e) If an Acquirer Indemnified Party believes it has
incurred any Damages which are subject to indemnification under Section
12.2(a) and such Damages do not involve a third party claim or demand
described in Section 12.2(d), it shall forward notice thereof to
Shareholder and shall state therein the amount of Damages it believes it
has suffered, and shall provide, in reasonable detail the facts alleged as
the basis for such claim and the section or sections of this Agreement
alleged to have been violated (a "Damages Notice"). No later than thirty
(30) days after receipt of a Damages Notice from an Acquirer Indemnified
Party, Shareholder shall deliver to Acquirer either a notice accepting such
claim for Damages or a notice that Shareholder disputes the claim for
Damages. A failure to provide the Acquirer Indemnified Party with notice
disputing a claim for Damages within thirty (30) days of receipt of a
Damages Notice from an Acquirer Indemnified Party shall be deemed
acceptance of such claim.
12.3 Acquirer Indemnification.
(a) Acquirer shall indemnify and hold harmless Shareholder and
his spouse, heirs, representatives, successor and assigns (together the
"Shareholder Indemnified Parties"), against and in respect of all actions,
damages, claims, losses, liabilities and expenses (including, without
limitation, reasonable attorneys' fees and disbursements) incurred by a
Shareholder Indemnified Party within the Indemnification Period, arising
out of or related to (i) any misrepresentation or breach of any warranty
made by Acquirer pursuant to Section 4 of this Agreement, or (ii) the
nonperformance or breach of any covenant, agreement or obligation of
Acquirer contained in this Agreement. If any Damages are incurred by a
Shareholder Indemnified Party in connection with clause (i) or (ii) above,
then such misrepresentation, breach or nonperformance shall constitute an
event of default under the Convertible Note and the Security Agreement if
(1) Shareholder Indemnified Parties shall have complied with the
requirements of this Section 12.3 and (2) the Damages have not been paid by
Acquirer within ten (10) days of becoming due and payable in accordance
with this Section 12.3. Damages shall become due and payable by Acquirer
upon Acquirer's acceptance of claim for Damages as provided in Subsection
12.3(e) or, if the Damages are disputed by Acquirer, upon a final decision
of an arbitrator pursuant to Section 13.18 or a final judgment by a court
of competent jurisdiction. There shall be no liability for indemnification
under this Section 12.3 unless the aggregate amount of Damages hereunder
exceeds Ten Thousand Dollars ($10,000), and then only to the extent such
aggregate amount of Damages exceeds $10,000.
(b) Shareholder's rights in the event of a default under the
Convertible Note and the Security Agreement and the remedies available
thereunder shall be the sole source of indemnification for Damages as
provided by Section 12.3 and shall operate as a full and complete
satisfaction of all liabilities of Acquirer for indemnification under this
Section 12.
(c) If a Shareholder Indemnified Party believes it has incurred
any Damages that are subject to indemnification under Section 12.3, it
shall promptly provide written notice thereof to Acquirer.
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(d) With respect to claims or demands by third parties, whenever
a Shareholder Indemnified Party shall have received notice that such a
claim or demand has been asserted or threatened, which, if true, would
result in indemnification under Section 12.3, Shareholder Indemnified Party
shall as soon as reasonably practicable, and in any event within thirty
(30) days of receipt of such notice, notify Acquirer of such claim or
demand and of all relevant facts within its knowledge which relate thereto.
Acquirer shall then have the right to undertake the defense of any such
claims or demands utilizing counsel selected by it and approved by
Shareholder, which approval shall not be unreasonably withheld, conditioned
or delayed, provided however, that Acquirer shall not settle or otherwise
compromise any such action without the prior written consent of Shareholder
Indemnified Party unless such settlement affords Shareholder Indemnified
Party a full release. In the event that Acquirer shall fail to give notice
of its intention to undertake the defense of any such claim or demand
within twenty (20) days after receiving notice that it has been asserted or
threatened, Shareholder Indemnified Party shall have the right to satisfy
and discharge the same by payment, compromise or otherwise.
(e) If a Shareholder Indemnified Party believes it has incurred
any Damages which are subject to indemnification under Section 12.3(a) and
such Damages do not involve a third party claim or demand described in
Section 12.3(c), it shall forward a Damages notice to Acquirer. No later
than thirty (30) days after receipt of a Damages Notice from a Shareholder
Indemnified Party, Acquirer shall deliver to Shareholder Indemnified Party
either a notice accepting such claim for Damages or a notice that Acquirer
disputes the claim for Damages. A failure to provide Shareholder
Indemnified Party with notice disputing a claim for Damages within thirty
(30) days of receipt of a Damages Notice from a Shareholder Indemnified
Party shall be deemed acceptance of such claim.
12.4 Insurance Recoveries; Tax Benefits.
Any indemnity payment made by Shareholder to any Acquirer
Indemnified Party, on the one hand, or by Acquirer to any Shareholder
Indemnified Party, on the other hand, pursuant to this Section 12 in
respect of any claim (i) shall be net of an amount equal to (x) any
insurance proceeds realized by and paid to the respective Shareholder
Indemnified Parties or Acquirer Indemnified Parties minus (y) any related
costs and expenses, including the aggregate cost of pursuing any related
insurance claims plus any correspondent increases in insurance premiums or
other chargebacks, and (ii) shall be (A) reduced by an amount equal to the
tax benefits, if any, attributable to such claim and (B) increased by an
amount equal to the taxes, if any, attributable to the receipt of such
indemnity payment, but only to the extent that such tax benefits are
actually realized, or such taxes are actually paid, as the case may be, by
Shareholder Indemnified Parties or Acquirer Indemnified Parties or any
consolidated, combined or unitary group of which such Shareholder
Indemnified Parties or Acquirer Indemnified Parties are a member.
12.5 Fair Market Value. For purposes of this Section 12, "Fair
Market Value" shall mean:
(i) if Parent's Common Stock is traded on an exchange
or are quoted on the NASDAQ National Market, the average of the closing or
last sale price reported for the ten business days immediately preceding
the date of net issuance exercise;
(ii) if Parent's Common Stock is not traded on an
exchange or on the NASDAQ National market, but is traded in the over-the-
counter market, the average of the closing bid and asked prices reported
for the ten market days immediately preceding the date of net issuance
exercise; and,
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(iii) in all other cases, the fair market value as
determined in good faith by Acquirer's Board of Directors.
13. MISCELLANEOUS
13.1 Governing Law. Except to the extent for corporate matters
governed by the internal laws of South Australia and Utah, the internal
laws of the State of Utah (irrespective of its choice of law principles)
will govern the validity of this Agreement, the construction of its terms,
and the interpretation and enforcement of the rights and duties of the
parties hereto.
13.2 Assignment; Binding Upon Successors and Assigns. No party
hereto may assign any of its rights or obligations hereunder without the
prior written consent of the other party hereto. This Agreement will be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
13.3 Severability. If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible,
the economic, business and other purposes of the void or unenforceable
provision.
13.4 Counterparts. This Agreement may be executed in
counterparts, each of which will be an original as regards any party whose
name appears thereon and all of which together will constitute one and the
same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, bear the signatures of
all parties reflected hereon as signatories.
13.5 Amendment and Waivers. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only by a writing signed by the party to
be bound thereby. The waiver by a party of any breach hereof or default in
the performance hereof will not be deemed to constitute a waiver of any
other default or any succeeding breach or default.
13.6 No Waiver. The failure of any party to enforce any of the
provisions hereof will not be construed to be a waiver of the right of such
party thereafter to enforce such provisions. The waiver by any party of
the right to enforce any of the provisions hereof on any occasion will not
be construed to be a waiver of the right of such party to enforce such
provision on any other occasion.
13.7 Notices. Any notice or other communication required or
permitted to be given under this Agreement will be in writing, will be
delivered personally or by mail or express delivery, postage prepaid, and
will be deemed given upon actual delivery or, if mailed by registered or
certified mail, on the third business day following deposit in the mails,
addressed as follows:
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(i) If to Acquirer:
Trinity Companies, Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxx, President
with a copy to:
Xxxxxxx, Xxxxx & Xxxxxxx
000 Xxxxx 000 Xxxx, Xxxxx 000
Xxxxxx, Xxxx 00000
Attention: Xxxxx Xxxxxxxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
(ii) If to the Shareholder:
Xxxxx Xxxxxxx
X.X. Xxx 000
XXXXXXXXXX 0000
Xxxxxxxxx
Phone: ______________
Fax: _______________
with a copy to:
Xxxxxx Radovsky Xxxxxxx & Share LLP
Xxxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
or to such other address as the party in question may have furnished to the
other party by written notice given in accordance with this Section 13.7.
13.8 Construction of Agreement. The language hereof will not be construed
for or against any party based solely on that party being the drafting
party. A reference to an article, section or exhibit will mean an article
or section in, or an exhibit to, this Agreement, unless otherwise
explicitly set forth. The titles and headings in this Agreement are for
reference purposes only and will not in any manner limit the construction
of this Agreement. For the purposes of such construction, this Agreement
will be considered as a whole.
13.9 No Joint Venture. Nothing contained in this Agreement will
be deemed or construed as creating a joint venture or partnership between
the parties hereto. No party is by virtue of this Agreement authorized as
an agent, employee or legal representative of any other party. No party
will have the power to control the activities and operations of any other,
and the parties' status is, and at all times, will continue to be, that of
independent contractors with respect to each other. No party will have any
power or authority to bind or commit any other. No party will hold itself
out as having any authority or relationship in contravention of this
Section.
13.10 Further Assurances. Each party agrees to cooperate
fully with the other party and to execute such further instruments,
documents and agreements and to give such further written assurances as may
be reasonably requested by the other party to evidence and reflect the
transactions provided for herein and to carry into effect the intent of
this Agreement.
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13.11 Public Announcement. Acquirer and Shareholder will
issue a press release approved by both parties announcing this Agreement as
soon as practicable following the execution of this Agreement. Parent may
issue such press releases, and make such other disclosures regarding the
transactions contemplated by this Agreement, as it determines to be
required or appropriate under applicable securities laws. Shareholder will
not make any other public announcement or disclosure of the transactions
contemplated by this Agreement until such time as Acquirer has issued such
press releases, and made such other disclosures regarding this Agreement
required under applicable securities laws or the time period designated by
federal securities laws for making such disclosures has lapsed.
Shareholder will take all reasonable precautions to prevent any trading in
the securities of Parent by officers, directors, employees and agents of
Shareholder having knowledge of any material information regarding Parent
provided hereunder, including, without limitation, the existence of the
transactions contemplated by this Agreement (the "Parent Material
Information"), until the information in question has been publicly
disclosed. Shareholder agrees not to trade in the securities of Parent
until the Parent Material Information has been disclosed.
13.12 Time is of the Essence. The parties hereto acknowledge
and agree that time is of the essence in connection with the execution,
delivery and performance of this Agreement, and that they will each utilize
reasonable best efforts to satisfy all the conditions to Closing.
13.13 Certain Definitions.
13.13.1 "Entity" shall mean any corporation
(including any non-profit corporation), general partnership, limited
partnership, limited liability partnership, joint venture, estate, trust
company (including any limited liability company or joint stock company),
firm or other enterprise, association, organization or entity.
13.13.2 "Governmental Body" shall mean any: (a)
nation, state, commonwealth, province, territory, county, municipality,
district or other jurisdiction of any nature; (b) federal, state, local,
municipal, foreign or other government; or (c) governmental or quasi-
governmental authority of any nature (including any governmental division,
department, agency, commission, instrumentality, official, organization,
unit, body or Entity and any court or other tribunal).
13.13.3 "Legal Requirement" shall mean any statute,
law, ordinance, rule, regulation, permit, order, writ, judgment,
injunction, decree or award issued, enacted or promulgated by any local,
state, federal or foreign court, government, governmental department,
commission, agency board or instrumentality.
13.13.4. "Material Adverse Effect" and "Material
Adverse Change" For purposes of this Agreement, the terms "Material
Adverse Effect" and "Material Adverse Change" mean or refer to, with
respect to any entity, any adverse change, circumstance or effect that,
individually or in the aggregate with all other adverse changes,
circumstances and effects, is or is reasonably likely to be materially
adverse to the financial condition, properties, assets, liabilities,
material Intellectual Property rights, business, or operating results of
such entity, and its subsidiaries if any, taken as a whole, except for
those changes, circumstances or events that are caused by (i) general
business or economic conditions, (ii) conditions affecting the market in
which such entity competes, (iii) conditions resulting from the
announcement of this Agreement or the pendency of the consummation of the
transactions contemplated herein and (iv) conditions resulting from or
relating to the taking of any action contemplated by this Agreement or
otherwise agreed to by Acquirer.
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13.13.5 "Person" shall mean any individual, Entity or
Governmental Body.
13.14 Expenses. All expenses incurred in connection with
this Agreement on behalf of Shareholder, including, but not limited to, all
accounting, legal and investment banking and other related fees, shall be
paid by Shareholder, and not by the Company or Acquirer.
13.15 Absence of Third Party Beneficiary Rights. No
provisions of this Agreement are intended, nor will be interpreted, to
provide or create any third party beneficiary rights or any other rights of
any kind in any client, customer, affiliate, partner or employee of any
party hereto or any other person or entity, except as specifically
otherwise provided to be for the benefit of officers, directors, employees
or shareholders of the Company in Sections 5.13 and 6.4 (as to officers and
directors), and, except as so provided, all provisions hereof will be
personal solely between the parties to this Agreement.
13.16 Entire Agreement. This Agreement and the exhibits
hereto constitute the entire understanding and agreement of the parties
hereto with respect to the subject matter hereof and supersede all prior
and contemporaneous agreements or understandings, inducements or
conditions, express or implied, written or oral, between the parties with
respect to the subject matter hereof. The express terms hereof control and
supersede any course of performance or usage of trade inconsistent with any
of the terms hereof.
13.17 Sole Remedy. The parties' sole and exclusive remedy
for breach of any representation, warranty or covenant herein shall be the
indemnification provision of Article 12.
13.18 Arbitration. Any dispute arising out of this Agreement
under the Commercial Arbitration Rules (the "AAA Rules") of the American
Arbitration Association (the "AAA"). This arbitration provision is
expressly made pursuant to and shall be governed by the Federal Arbitration
Act, 9 U.S.C. Section 1-14. The Parties agree that pursuant to Section 9
of the Federal Arbitration Act, a judgment of a United States District
Court of competent jurisdiction shall be entered upon the award made
pursuant to the arbitration. A single arbitrator, who shall have the
authority to allocate the costs of any arbitration initiated under this
paragraph, shall be selected according to the AAA Rules within ten (10)
days of the submission to the AAA of the response to the statement of claim
or the date on which any such response is due, whichever is earlier. The
arbitrator shall be required to furnish to the parties to the arbitration a
preliminary statement of the arbitrator's decision that includes the legal
rationale for the arbitrator's conclusion and the calculations pertinent to
any damage award being made by the arbitrator. The arbitrator shall then
furnish each of the parties to the arbitration the opportunity to comment
upon and/or contest the arbitrator's preliminary statement of decision
either, in the discretion of the arbitrator, through briefs or at a
hearing. The arbitrator shall render a final decision following any such
briefing or hearing. The arbitrator shall conduct the arbitration in
accordance with the Federal Rules of Evidence. The arbitrator shall decide
the amount and extent of pre-hearing discovery which is appropriate. The
arbitrator shall have the power to enter any award of monetary and/or
injunctive relief (including the power to issue permanent injunctive relief
and also the power to reconsider any prior request for immediate injunctive
relief by any party and any order as to immediate injunctive relief
previously granted or denied by a court in response to a request therefor
by any party), including the power to render an award as provided in Rule
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43 of the AAA Rules. The arbitrator shall have the power to award the
prevailing party its costs and reasonable attorneys' fees; provided,
however, that the arbitrator shall not award attorneys' fees to a
prevailing party if the prevailing party received a settlement offer unless
the arbitrator's award to the prevailing party is greater than such
settlement offer without taking into account attorneys' fees in the case of
the settlement offer or the arbitrator's award. In addition to the above
courts, the arbitration award may be enforced in any court having
jurisdiction over the parties and the subject matter of the arbitration.
13.19 Interpretation. All references to currency under this
Agreement are United States dollars and all references to "federal" shall
include both the United States and Australia in the context of such
references and all references to "state" shall include both the states of
the United States and the Australian equivalents.
13.20. Governmental Charges. Acquirer shall pay all sales
tax, stamp duty taxes or other governmental charges resulting from the
transactions contemplated by this Agreement excluding any income taxes
assessed against Shareholder or the Company as a result of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ACQUIRER SHAREHOLDER
CBL Acquisition Corp. By:
By:
Name: Xxxx Xxxx Xxxxx Xxxxxxx
Title: President
SIGNATURE PAGE TO
CBL PURCHASE AGREEMENT
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ANNEX A
Shareholder No. of Shares
Xxxxx Xxxxxxx 200
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