AGREEMENT OF PURCHASE
---------------------
This AGREEMENT OF PURCHASE (this "Agreement") is made as of the 7th day of
April, 2005 among Xxxxxx Financial Corporation, a Delaware corporation having an
address at 000 Xxxxxxx Xxxxxx, Xxxxx 00X, Xxxxxx Xxxx, Xxx Xxxx 00000 ("Xxxxxx"
and/or "Buyer"), and Disability Access Consultants, Inc. a California
corporation having an address at 0000 Xxxxxxx Xxxxx Xxxxxxxxx, Xxxxxxxx,
Xxxxxxxxxx 00000 ("the "Company" and/or "DAC") and XXXXXXX XXXXXX, the
stockholder of the Company (the "DAC Stockholder or "DAC Shareholder) and/or the
`Stockholder" or "Shareholder").
W I T N E S S E T H:
WHEREAS, Xxxxxx desires to acquire ninety percent (90%) of the issued and
outstanding stock of DAC upon the terms and subject to the conditions set forth
herein;
WHEREAS, the DAC Stockholder owns all of the issued and outstanding common
stock of DAC ("DAC Stock") and desires to exchange ninety percent (90%) of her
DAC Shares for a cash payment, promissory note, and earnout as more fully
described herein:
WHEREAS, in consideration of the benefits that she will receive by virtue
of the transaction contemplated by this Agreement, the DAC Stockholder is
agreeing to make the representations, warranties and indemnifications in this
Agreement with the Company and is agreeing to enter into and be bound by a non
competition, non-solicitation and confidentiality agreement (hereinafter the
"Non-Competition, Non-Solicitation and Confidentiality Agreement" and employment
agreement (hereinafter the "Employment Agreement") containing, among other
things, covenants respecting confidentiality, non-competition and non
solicitation with Buyer;
WHEREAS, the Board of Directors of DAC believes the acquisition
contemplated by this Agreement is in the best interests of DAC and the DAC
Stockholder.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and certain other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto covenant and
agree as follows:
ARTICLE 1.
PURCHASE AND SALE
1.1 Purchase Price. Upon the terms and subject to the conditions set forth
in this Agreement, at the Closing provided for in Section 1.5 hereof, the DAC
Stockholder shall sell, assign, transfer, convey and deliver to Xxxxxx, and
Xxxxxx shall purchase, all right, title and interest in and to ninety percent
(90%) of such DAC Stockholder's shares of DAC, free and clear of all liens,
security interests, charges, encumbrances and rights of others. In consideration
for the shares of DAC Stock so acquired by Xxxxxx, Xxxxxx shall pay Two Million
Dollars ($2,000,000.00) on the terms described in this Paragraph plus an
adjustment for the "Earn-Out" as specified in Section 1.2 below as follows (the
"Purchase Price"):
1.1.1 Initial Cash Payment. A cash payment in the amount of One
Million and No/100 Dollars ($1,000,000.00) ("Cash Payment") which shall be
payable in cash or certified funds which shall be paid by Buyer at Closing.
1.1.2 Secured Promissory Note. Buyer shall execute, in favor of
Stockholder, a Secured Promissory Note in the form attached hereto as Exhibit
"1.1.2" (the "Secured Promissory Note") in the principal amount of One Million
Dollars ($1,000,000.00), payable to the Stockholder over a period of forty-eight
(48) months with the first payment being due six (6) months from the date of
Closing, bearing interest at the rate of five percent (5%) per annum with
quarterly principal and interest payments as listed on Schedule 1.1.2 of this
Agreement and Exhibit A of the Secured Promissory Note. Interest shall not begin
accruing until the 6 month anniversary of the Closing..
1.1.2.1 Collateral. The Note shall be secured against DAC's
Closing inventory, deposit accounts, account receivables, tools, equipment,
furniture, fixtures, rights to income, proprietary and intellectual property,
and assets, tangible and intangible, wherever located and any subsequent change
in form (the "Collateral").
1.1.2.2 Security Agreement. Buyer shall hand to Shareholder at
the Closing a Security Agreement securing the obligation of the Secured
Promissory Note in a form and content attached hereto as Exhibit "1.1.2.2" (the
"Security Agreement").
1.1.2.3 UCC-1 Financing Statement. Buyer shall hand to
Shareholder at the Closing a UCC-1 Financing Statement allowing Shareholder to
perfect her security interest in the Collateral by filing with the California
Secretary of State in the form and content attached hereto as Exhibit "1.1.2.3"
(the "UCC-1 Financing Statement").
1.2 Earn-Out. An earn-out will be paid to the Stockholder equal to five
percent (5%) of all revenues earned and received in excess on One Million Two
Hundred Fifty Thousand Dollars ($ 1,250,000.00) on an annual basis for a period
of six (6) years up to a maximum cumulative payment of Three Million dollars
($3,000,000.00).
1.3 Purchase Option. Buyer shall have the option of purchasing the
remaining ten percent (10%) of the stock held by Shareholder in DAC it is not
purchasing at the Closing Date at any time after the four (4) year anniversary
of the Closing Date. The purchase price shall be equal to ten percent (10%) of
the product of EBITDA before parent company charges for the twelve (12) months
ending for the prior calendar year multiplied by a factor of six (6). The
purchase price shall be payable as follows: thirty five percent (35%) in cash;
thirty percent ( 30%) in Xxxxxx Common Stock ( determined by using the average
closing price of Xxxxxx Common Stock for the prior 30 trading days from the
closing of this transaction); and the remainder as a promissory note with a term
of three (3) years carrying an interest rate of Prime (the "Stock Purchase
Note", a copy of which is attached hereto as Exhibit 1.4(A)), and secured by way
of a stock pledge from Buyer to Shareholder pledging the ten percent of the
stock purchased by Buyer as collateral for the obligation to pay the remaining
purchase price on the Stock Purchase Note (the "Stock Pledge Agreement", a copy
of which is attached hereto as Exhibit "1.4(B)").
1.4. Closing. The purchase and sale provided for in this Agreement will
take place at the offices of DAC, 0000 Xxxxxxx Xxxxx Xxxxxxxxx, Xxxxxxxx,
Xxxxxxxxxx 00000 on May 6th, 2005 but which may be extended by mutual agreement
of the parties (the "Closing" or "Closing Date"). Each party will use its
reasonable best efforts to cause to be prepared, executed and delivered at the
Closing the documents to be delivered pursuant to Articles 5 and 6 and all other
appropriate and customary documents as any party or its counsel may reasonably
request for the purpose of consummating the transactions contemplated by this
Agreement. All actions taken at the Closing shall be deemed to have been taken
simultaneously at the time the last of any such actions is taken or completed.
1.5. Fees and Expenses. Whether or not the transaction contemplated herein
is consummated, the parties hereto shall pay their own respective expenses,
including, without limitation, legal fees and commissions. Buyer will advance
all costs required to perform an audit of Company's financials and to prepare an
audited financial statement related to same (the "Audit"). The costs of the
Audit shall be paid equally by Buyer and the DAC Stockholder, but in no event
shall the costs to the DAC Stockholder shall exceed the sum of $20,000.00. The
DAC Stockholder's share of the Audit fees shall be deducted from its proceeds at
the Closing.
1.6. Due Diligence Period. Buyer shall have twenty one (21) days from the
date this Agreement is executed by all parties to conduct its investigation into
the Company, its assets and financial condition (the "Due Diligence Period"). At
any time prior to the expiration of the Due Diligence Period, Buyer may give
notice of any unacceptable condition found related to the Company and request
2
that such condition be remedied by the Company or that this Agreement be
terminated with no liability whatsoever to Buyer.
1.7. Non-Solicitation. For a period from and after the execution of this
Agreement of Purchase until the earlier of Buyer providing notice to DAC that
this Agreement is terminated pursuant to Paragraph 1.6 of this Agreement or the
Closing Date, the DAC Stockholder, DAC and its agents and representatives will
not solicit nor respond to inquiries or proposals with respect to, or furnish
any information relating to, or participate in any negotiations or discussions
concerning any acquisition of its capital stock, a material debt financing
and/or the sale of all or substantially all of its assets, other than with Buyer
as contemplated herein.
1.8. Shareholder and Key Employee Employment Agreements. As a condition to
the Closing the Shareholder shall execute and deliver at Closing the Employment
Agreement, Non-Competition, Non-Solicitation and Confidentiality Agreements
attached hereto as Exhibit "1.8(A)", and the Company key employees, Xxxxxxx Xxxx
and Xxxxxxx Xxxxxxx shall have executed the Employment Agreements and
Non-Competition, Non-Solicitation and Confidentiality Agreements attached hereto
as Exhibits "1.8(B)" and "1.8(C)", respectively, and the Buyer shall have
acknowledged and approved same.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF DAC
AND THE DAC STOCKHOLDER
2.1 DAC. DAC hereby represents and warrants to Xxxxxx that, except as
otherwise set forth on the DAC Disclosure Schedule (herein so called) attached
hereto:
2.1.1 Organization and Good Standing. DAC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. DAC has no subsidiaries and does not own any equity, profit sharing,
participation or other ownership interest (including any general partnership
interest, limited partnership interest or membership interest) in any
corporation, partnership, limited partnership, limited liability company or
other entity.
2.1.2. Corporate Power and Authority. DAC has the corporate power
and authority to own, lease and operate its properties and assets and to carry
on its business as currently being conducted. DAC has the corporate power and
authority to execute and deliver this Agreement and to perform its obligations
under this Agreement. The execution, delivery and performance by DAC of this
Agreement has been duly authorized by all necessary corporate action.
2.1.3. Binding Effect. This Agreement has been duly executed and
delivered by DAC and is the legal, valid and binding obligation of DAC
enforceable in accordance with its terms, except that:
(a) enforceability may be limited by bankruptcy, insolvency or
other similar laws affecting creditors' rights;
(b) the availability of equitable remedies may be limited by
equitable principles of general applicability; and
(c) rights to indemnification may be limited by considerations
of public policy.
2.1.4. Absence of Restrictions and Conflicts. The execution,
delivery and performance of this Agreement and the consummation of the Exchange
and the fulfillment of and compliance with the terms and conditions of this
Agreement do not and will not, with the passing of time or the giving of notice
or both, violate or conflict with, constitute a breach of or default under,
result in the loss of any material benefit under, or permit the acceleration of
3
any obligation under, (i) any term or provision of the Certificate of
Incorporation or By-Laws of DAC, (ii) any DAC Material Contract (as defined in
Section 2.1.10), (iii) any judgment, decree or order of any court or
governmental authority or agency to which DAC or by which DAC or any of its
respective properties is bound, or (iv) any statute, law, regulation or rule
applicable to DAC. No consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental agency or public or
regulatory unit, agency, body or authority with respect to DAC is required in
connection with the execution, delivery or performance of this Agreement by DAC.
2.1.5. Capitalization of DAC
(a) The authorized capital stock of DAC consists of _________
shares of DAC Common Stock. As of the date hereof, there are _________ shares of
DAC Stock issued and outstanding and the DAC Stockholder owns the shares of DAC
Stock as set forth on Section 2.1.5 of the DAC Disclosure Schedule.
(b) All of the issued and outstanding shares of DAC Stock have
been duly authorized and validly issued and are fully paid and non-assessable
and free of preemptive rights.
(c) To DAC's knowledge, there are no voting trusts,
stockholder agreements or other voting arrangements, charges, liens or
encumbrances on shares issued by DAC that have been granted by the DAC
Stockholder, except as set forth on Section 2.1.5(c) of the DAC Disclosure
Schedule.
(d) There is no outstanding subscription, contract,
convertible or exchangeable security, option, warrant, call or other right
obligating DAC to issue, sell, exchange, or otherwise dispose of, or to
purchase, redeem or otherwise acquire, shares of, or securities convertible into
or exchangeable for DAC Stock, except as set forth in Section 2.1.5 (d) of the
DAC Disclosure Schedule.
2.1.6. Financial Statements
(a) The Company by the Closing Date will have heretofore
provided to Buyer true, complete and correct copies of (i) unaudited balance
sheets, statements of operations, Shareholder's capital and cash flows for the
Company (together with all notes and opinions thereto of independent auditors)
for the fiscal years ended December 31, 2003 and December 31, 2004 and (ii)
unaudited balance sheets, statements of income, shareholder's equity capital and
cash flows for the Company for the first quarter ending March 31, 2005
(collectively, the "Financial Statements").
(b) The Company shall provide to Buyer true and correct copies
of unaudited interim balance sheets, statements, of income, operations,
Shareholder's capital and cash flow for the Company for each month and three
month period (together with year-to-date statements) beginning with the
statements for the month ending January 31, 2005 and through the month preceding
the Closing (collectively, the "Interim Statements"). The Interim Statements
shall be prepared on the accrual basis and otherwise in conformity with GAAP
(except for required and normal year-end adjustments) and present fairly in all
material respects the assets, liabilities, financial position and results of
operations of the Company as of the respective dates and for the respective
periods covered thereby.
2.1.7. Absence of Certain Changes. Except as set forth on Section
2.1.7. of the DAC Disclosure Schedule, since January 1, 2004, DAC has not:
(a) suffered any adverse change in its business, operations, assets,
or condition (financial or otherwise), except as reflected on the
DAC Financial Statements;
(b) suffered any material damage or destruction to or loss of the
assets of DAC, whether or not covered by insurance, which property
or assets are material to the operations or business of DAC taken as
a whole;
4
(c) settled, forgiven, compromised, canceled, released, waived or
permitted to lapse any material rights or claims, other than in the
ordinary course of business;
(d) entered into or terminated any material agreement, commitment or
transaction, or agreed to or made any changes in material leases or
agreements, other than renewals or extensions thereof and leases,
agreements, transactions and commitments entered into or terminated
in the ordinary course of business;
(e) written up, written down or written off the book value of any
material amount of assets, other than in the ordinary course of
business. However, DAC and Shareholder have informed Buyer that some
of DAC's accounts receivable are aged and uncollectible and neither
DAC nor Shareholder make any warranty or representation, actual or
implied, as to the collectablity of same.
(f) declared, paid or set aside for payment any dividend or
distribution with respect to the DAC Stock;
(g) redeemed, purchased or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any shares of DAC
Stock or securities or any rights to acquire such capital stock or
securities, or agreed to changes in the terms and conditions of any
such rights outstanding as of the date of this Agreement;
(h) increased the compensation of or paid any bonuses to any
employees or contributed to any employee benefit plan or pension
scheme, other than in the ordinary course of business and consistent
with established policies, practices or requirements;
(i) entered into any employment, consulting or compensation
agreement with any person or group;
(j) entered into any collective bargaining agreement or trade union
recognition agreement with any person or group;
(k) entered into, adopted or amended any employee benefit plan or
share option scheme or agreement; or
(l) entered into any agreement to do any of the foregoing.
2.1.8. No Material Undisclosed Liabilities. Except as set forth on
Schedule 2.1.8 of the DAC Disclosure Schedule, there are no liabilities or
obligations of DAC of any nature, whether absolute, accrued, contingent, or
otherwise, other than liabilities and obligations:
(a) in the aggregate adequately provided for in the DAC Financial
Statements;
(b) incurred in the ordinary course of business and not required
under generally accepted accounting principles to be reflected in
the DAC Financial Statements;
(c) incurred since January 1, 2004, in the ordinary course of
business; or
(d) incurred in connection with this Agreement.
2.1.9. Tax Returns: Taxes. DAC (a) has duly filed all U.S. federal
and material state, county, local and foreign tax returns and reports required
to be filed by it, including those with respect to income, payroll, property,
withholding, social security, unemployment, franchise, excise and sales taxes
and all such returns and reports are correct in all material respects; (b) has
either paid in full all taxes that have become due as reflected on any return or
report and any interest and penalties with respect thereto or has fully accrued
on its books or has established adequate reserves for all taxes payable but not
yet due; and (c) has made required cash deposits with appropriate governmental
5
authorities representing estimated payments of taxes, including income taxes and
employee withholding tax obligations. No extension or waiver of any statute of
limitations or time within which to file any return has been granted to or
requested by DAC with respect to any tax. No unsatisfied deficiency, delinquency
or default for any tax, assessment or governmental charge has been claimed,
proposed or assessed against DAC, nor has DAC received notice of any such
deficiency, delinquency or default. DAC has no material tax liabilities, other
than those arising in the ordinary course of business since January 1, 2004. .
2.1.10. Material Contracts. DAC has furnished or made available to
Xxxxxx accurate and complete copies of the DAC Material Contracts applicable to
DAC. Except as set forth on Section 2.1.10 of the DAC Disclosure Schedule, there
is not under any of the DAC Material Contracts any existing breach, default or
event of default by DAC nor event that with notice or lapse of time or both
would constitute a breach, default or event of default by DAC, nor does DAC know
of, and DAC has not received notice of, or made a claim with respect to, any
breach or default by any other party thereto. As used herein, the term "DAC
Material Contracts" shall mean all (i) contracts, licenses, leases, instruments,
mortgages, deeds of trust [involving obligations of DAC in excess of $20,000];
(ii) employee benefit plans, or arrangements or understandings with, or for the
benefit of the employees of DAC; and (iii) insurance policies, [but shall
exclude contracts with customers entered into in the ordinary course of
business].
2.1.11. Litigation and Government Claims. There is no pending suit,
claim, action or litigation, or administrative, arbitration or other proceeding
or governmental investigation or inquiry against DAC to which its businesses or
assets is subject, and to the knowledge of DAC, there are no such proceedings
threatened or contemplated. DAC is not subject to any judgment, decree,
injunction, rule or order of any court, or, to the knowledge of DAC, any
governmental restriction applicable to DAC that is reasonably likely to cause a
material limitation on Xxxxxx'x ability to own and operate the business of DAC
(as it is currently operated) after the Closing.
2.1.12. Compliance With Laws. DAC has all material authorizations,
approvals, licenses and orders to carry on its business as it is now being
conducted, to own or hold under lease the properties and assets it owns or holds
under lease and to perform all of its obligations under the agreements to which
it is a party. DAC has been and is, to the knowledge of DAC, in compliance with
all applicable laws, regulations and administrative orders of any country, state
or municipality or of any subdivision of any thereof to which its business,
ownership of assets and its employment of labor or its use or occupancy of
properties or any part thereof are subject.
2.1.13. Pension and Profit Sharing Plans. DAC does not currently
have in effect any employee pension or profit sharing plans.
2.1.14. Employee Benefit Agreements. Section 2.1.14 of the DAC
Disclosure Schedule sets forth a complete and accurate list of all material
employee benefit plans, agreements and arrangements to which DAC is a party,
including without limitation (i) all severance, employment, consulting or
similar contracts, (ii) all material agreements and contracts with "change of
control" provisions or similar provisions and (iii) all indemnification
agreements or arrangements with directors or officers not included in its
organizational documents or provided by law.
2.1.15 Intellectual Property. Section 2.1.15 of the DAC Disclosure
Schedule contains a true and complete list of all copyrights, trademarks,
service marks, trade names, patents, business names, domain names, software and
other similar tangible or intangible property rights and interests (hereinafter
sometimes individually and collectively referred to as the "Intellectual
Property Rights") applied for, issued to or owned by the Company, under which
the Company is licensed or franchised, or used in the conduct of the Company's
business, all of which are valid and in good standing and uncontested, except as
disclosed on Part 2.1.15(a) of the Disclosure Schedule. The Company has
delivered to Buyer copies of all documents establishing the Intellectual
Property Rights. Except as disclosed on Part 2.1.15(a) of the Disclosure
Schedule, the Company is not infringing upon or otherwise acting adversely to
any Intellectual Property Right owned by any person or persons, and there is no
such claim or action pending, or to the best knowledge of the Company and the
Shareholder threatened with respect thereto. The Company and the Shareholder
have no knowledge that any Person is infringing on any Intellectual Property
Right of the Company.
(b) The Company has taken all reasonable security measures to protect the
secrecy, confidentiality, and value of its Trade Secrets, ("Trade Secrets"-all
6
licenses, processes, algorithms, formulae, designs, methods, trade secrets,
inventions, proprietary or technical information, Design Documentation and data
covering or embodied in any software or other assets owned by the Company or
used in the conduct of its business) and any other persons who have knowledge of
or access to information relating to the Trade Secrets have been put on notice
and, if appropriate, have entered into agreements that the Trade Secrets are
proprietary to the Company and are not to be divulged or misused. All of the
Trade Secrets are presently valid and protectable, are not part of the public
domain, and have not been used, divulged, or appropriated for the benefit of any
persons other than the Company or to the detriment of the Company. The Company
and the Shareholder have no knowledge that any person is infringing on any Trade
Secret of the Company.
(c) Part 2.1.15(c) of the Disclosure Schedule contains a complete and accurate
list of all software developed and owned by the Company (the "Software"). The
Company is in actual and sole possession of the complete source code of the
Software and all design documentation. Except as set forth in Part 2.1.15(c) of
the Disclosure Schedule there are no defects in any Software, and there are no
errors in any design documentation, which defects or errors would in any
material respect affect the use of any Software or the functioning of any
Software in accordance with the specifications for the Software published by the
Company or its customers, the Software has all the features described in the
design documentation for that Software and materials made available to the
Company's customers, and the Software does not contain any "back door," "time
bomb," "Trojan horse," "worm," "drop dead device," "virus" (as these terms are
commonly used in the computer software industry), or other software routines or
hardware components designed to permit unauthorized access, to disable or erase
software, hardware, or data, or to perform any other similar type of functions.
The Company has delivered to Buyer complete and accurate records of the Company
with respect to Software fixes (including fixes currently in progress), problem
lists, maintenance of the Software, and customer complaints, and all warranty
claims (including any pending claims) related to the Software are described in
Part 2.15(c) of the Disclosure Schedule. Except as set forth in Part 2.15(c) of
the Disclosure Schedule, the Company has made no representations and warranties
with respect to the Software.
2.1.16. Title to Properties and Related Matters. DAC has good and
valid title to or valid license or leasehold interests in its properties (other
than personal properties sold or otherwise disposed of in the ordinary course of
business), and all of such properties and all assets purchased by DAC are free
and clear of any lien, claim or encumbrance, except for:
(a) liens for taxes, assessments or other governmental charges not
yet due and payable or the validity of which are being contested in
good faith by appropriate proceedings;
(b) statutory liens incurred in the ordinary course of business that
are not yet due and payable or the validity of which is being
contested in good faith by appropriate proceedings;
(c) landlord liens contained in leases entered into in the ordinary
course of business; and
(d) other liens, claims or encumbrances that, in the aggregate, do
not materially subtract from the value of, or materially interfere
with, the present use of any real property owned or used by DAC.
All properties and assets material to the present operations of DAC are owned or
leased by DAC in the manner and to the extent required by applicable law.
2.1.17. Brokers. Except as set forth in Part 2.1.17 of the
Disclosure Letter, the Company, the Shareholder and her agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement other than with Sunbelt Business Advisors Norcal. The DAC Shareholder
represents and warrants that it will pay Sunbelt Business Advisors Norcal its
fee and will hold Buyer harmless and indemnify Buyer for the non-payment of
such. .
2.2. DAC Stockholder. Except as otherwise set forth in the Stockholder
Disclosure Schedule (herein so called) attached hereto, the DAC Stockholder
hereby severally represents and warrants that:
2.2.1. Ownership. Such DAC Stockholder has good and valid title to
the shares of DAC Stock described on Section 2.1.5. of the DAC Disclosure
Schedule to be sold by such DAC Stockholder hereunder on the Closing Date, free
7
and clear of all liens, encumbrances, equities or claims, and upon delivery of
such shares and payment therefor pursuant hereto, good and valid title to such
shares will pass to Xxxxxx free and clear of all liens, encumbrances, equities
or claims of any nature whatsoever.
2.2.2. Authority. Such DAC Stockholder has full right, power and
authority to enter into this Agreement.
2.2.3. Conflicts. The execution, delivery and performance of this
Agreement by such DAC Stockholder and the consummation by such DAC Stockholder
of the transactions contemplated hereby will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which such DAC Stockholder is a party or by which
such DAC Stockholder is bound or to which any of the property or assets of such
DAC Stockholder is subject, nor will such actions result in any violation of any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over such DAC Stockholder or the property or assets of
such DAC Stockholder.
2.2.4 Consents. No consent, approval, authorization or order of, or
filing or registration with, any court or governmental agency or body having
jurisdiction over such DAC Stockholder or the property or assets of such DAC
Stockholder is required for the execution, delivery and performance of this
Agreement by such DAC Stockholder and the consummation by such DAC Stockholder
of the Exchange.
2.2.5 DAC Representations. Such DAC Stockholder has no reason to
believe that the representations and warranties of DAC contained in Section 2.1
hereof, as qualified by the DAC Disclosure Schedule, are not materially true and
correct and has no knowledge of any material fact, condition or information not
disclosed in this Agreement that has adversely affected or may adversely affect
the business of DAC.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF XXXXXX
Xxxxxx hereby represents and warrants to the DAC Stockholder that, except
as otherwise set forth in the Xxxxxx Disclosure Schedule (herein so called)
attached hereto:
3.1. Organization and Good Standing. Xxxxxx is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Except as set forth in Section 3.1 of the Xxxxxx Disclosure Schedule,
Xxxxxx has no subsidiaries and no equity, profit sharing, participation or other
ownership interest (including any general partnership interest, limited
partnership interest or membership interest) in any corporation, partnership,
limited partnership, limited liability company or other entity.
3.2. Foreign Qualification. Xxxxxx is duly qualified or licensed to do
business and is in good standing as a foreign corporation in the State of New
York and the jurisdictions in which the nature of the business conducted or
property owned by it requires Xxxxxx to be qualified or licensed to do business
as a foreign corporation.
3.3. Corporate Power and Authority. Xxxxxx has the corporate power and
authority and all material licenses and permits to own, lease and operate its
properties and assets and to carry on its business as currently being conducted.
Xxxxxx has the corporate power and authority to execute and deliver this
Agreement and to perform its obligations under this Agreement and to consummate
the Exchange. The execution, delivery and performance by Xxxxxx of this
Agreement has been duly authorized by all necessary corporate action.
3.4. Binding Effect. This Agreement has been duly executed and delivered
by Xxxxxx and is the legal, valid and binding obligation of Xxxxxx, enforceable
in accordance with its terms, except that:
(a) enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting creditors' rights;
8
(b) the availability of equitable remedies may be limited by equitable
principles of general applicability; and
(c) rights to indemnification may be limited by considerations of public
policy.
3.5. Absence of Restrictions and Conflicts. The execution, delivery and
performance of this Agreement and the consummation of the Exchange and the
fulfillment of and compliance with the terms and conditions of this Agreement do
not and will not, with the passing of time or the giving of notice or both,
violate or conflict with, constitute a breach of or default under, result in the
loss of any material benefit under, or permit the acceleration of any obligation
under, (i) any term or provision of the Certificate of Incorporation or By-Laws
of Xxxxxx, (ii) any Xxxxxx Material Contract (as defined in Section 3.11 below),
(iii) any judgment, decree or order of any court or governmental authority or
agency to which Xxxxxx is a party or by which Xxxxxx or any of its properties is
bound, or (iv) any statute, law, regulation or rule applicable to Xxxxxx. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any governmental agency or public or regulatory unit, agency, body
or authority with respect to Xxxxxx is required in connection with the
execution, delivery or performance of this Agreement by Xxxxxx or the Exchange.
3.6. Absence of Certain Changes. Except as otherwise set forth in Section
3.6 of the Xxxxxx Disclosure Schedule, Xxxxxx has not:
(a) suffered any adverse change in its business, operations, assets, or
financial condition, except as reflected on Xxxxxx'x financial
statements which are public documents;
(b) suffered any material damage or destruction to or loss of the assets
of Xxxxxx, whether or not covered by insurance, which property or
assets are material to the operations or business of Xxxxxx taken as
a whole;
(c) settled, forgiven, compromised, canceled, released, waived or
permitted to lapse any material rights or claims other than in the
ordinary course of business;
(d) written up, written down or written off the book value of any
material amount of assets, other than in the ordinary course of
business;
(e) declared, paid or set aside for payment any dividend or distribution
with respect to Xxxxxx capital stock;
(f) increased the compensation of or paid any bonuses to any employees
or contributed to any employee benefit plan, other than in the
ordinary course of business and consistent with established
policies, practices or requirements;
(g) entered into any collective bargaining agreement or trade union
recognition agreement with any person or group;
(h) entered into any agreement to do any of the foregoing.
3.7. No Material Undisclosed Liabilities. Except as set forth in Schedule
3.7 of the Xxxxxx Disclosure Schedule, there are no liabilities or obligations
of Xxxxxx of any nature, whether absolute, accrued, contingent, or otherwise,
other than:
(a) in the aggregate adequately provided for in the balance sheet of
Xxxxxx as of September 30, 2004.
(b) incurred in connection with this Agreement.
9
3.8. Tax Returns; Taxes. Xxxxxx (a) has duly filed all U.S. federal and
material state, county, local and foreign tax returns and reports required to be
filed by it, including those with respect to income, payroll, property,
withholding, social security, unemployment, franchise, excise and sales taxes
and all such returns and reports are correct in all material respects; (b) has
either paid in full all taxes that have become due as reflected on any return or
report and any interest and penalties with respect thereto or has fully accrued
on its books or has established adequate reserves for all taxes payable but not
yet due; and (c) has made required cash deposits with appropriate governmental
authorities representing estimated payments of taxes, including income taxes and
employee withholding tax obligations. No extension or waiver of any statute of
limitations or time within which to file any return has been granted to or
requested by Xxxxxx with respect to any tax. No unsatisfied deficiency,
delinquency or default for any tax, assessment or governmental charge has been
claimed, proposed or assessed against Xxxxxx, nor has Xxxxxx received notice of
any such deficiency, delinquency or default. Xxxxxx has no material tax
liabilities, other than those arising in the ordinary course of business since
January 1, 2004.
3.9. Litigation and Government Claims. There is no pending suit, claim,
action or litigation, or administrative, arbitration or other proceeding or
governmental investigation or inquiry against Xxxxxx to which its businesses or
assets are subject, and to the knowledge of Xxxxxx, there are no such
proceedings threatened or contemplated. Xxxxxx is not subject to any judgment,
decree, injunction, rule or order of any court, or, to the knowledge of Xxxxxx,
any governmental restriction applicable to Xxxxxx.
3.10. Compliance with Laws. Xxxxxx has all material authorizations,
approvals, licenses and orders to carry on its businesses as it is now being
conducted, to own or hold under lease the properties or assets it owns or holds
under lease and to perform all of its obligations under the agreements to which
it is a party. Xxxxxx has been and is, to the knowledge of Xxxxxx, in compliance
with all applicable laws, regulations and administrative orders of any country,
state or municipality or any subdivision of any thereof to which its businesses,
ownership of assets and its employment of labor or its use or occupancy of
properties or any part thereof are subject.
3.11 Intellectual Property. Xxxxxx owns or has valid, binding and
enforceable rights to use all material patents, trademarks, trade names, service
marks, service names, copyrights, applications therefore and licenses or other
rights in respect thereof ("Xxxxxx Intellectual Property") used or held for use
in connection with the business of Xxxxxx, without any known conflict with the
rights of others. Xxxxxx has not received any notice from any other person
pertaining to or challenging the right of Xxxxxx to use any Xxxxxx Intellectual
Property or any trade secrets, proprietary information, inventions, know-how,
processes and procedures owned or used or licensed to Xxxxxx, except with
respect to rights the loss of which, individually or in the aggregate, would not
have an material adverse effect on Xxxxxx. The Xxxxxx Intellectual Property
represents all of the proprietary rights necessary to operate Xxxxxx'x business.
3.12. Title to Properties and Related Matters. Xxxxxx has good and
marketable title to or valid leasehold interests in its properties (other than
personal properties sold or otherwise disposed of in the ordinary course of
business), and all of such properties and all assets purchased by Xxxxxx are
free and clear of any lien, claim or encumbrance and except for:
(a) liens for taxes, assessments or other governmental charges not yet
due and payable or the validity of which are being contested in good
faith by appropriate proceedings;
(b) statutory liens incurred in the ordinary course of business that are
not yet due and payable or the validity of which are being contested
in good faith by appropriate proceedings;
(c) landlord liens contained in leases entered in the ordinary course of
business; and
(d) other liens, claims or encumbrances that, in the aggregate, do not
materially subtract from the value of, or materially interfere with,
the present use of, any real property owned or used by Xxxxxx.
All properties and assets material to the present operations of
Xxxxxx are owned or leased by Xxxxxx in the manner and to the extent
required by applicable law.
10
3.13. Brokers. Xxxxxx has not incurred any liability for brokerage fees,
finders fees, agents commission or other similar forms of compensation in
connection with this Agreement or any transaction contemplated hereby.
ARTICLE 4.
CERTAIN COVENANTS AND AGREEMENTS
4.1. Conduct of Business by DAC From the date hereof to the Closing Date,
DAC will, except as required in connection with this Agreement and except as
otherwise disclosed on the DAC Disclosure Schedule or consented to in writing by
Xxxxxx:
(a) carry on its business in the ordinary and regular course in
substantially the same manner as heretofore conducted and not engage
in any new line of business or enter into any material agreement,
transaction or activity or make any material commitment except those
in the ordinary and regular course of business and not otherwise
prohibited under this Section 4.1;
(b) neither change nor amend its Certificate of Incorporation or
By-Laws;
(c) not issue or sell or register the transfer of shares of securities
or capital stock of DAC or issue, sell or grant options, warrants or
rights to purchase or subscribe to, or enter into any arrangement or
contract with respect to the issuance or sale of any of the
securities of DAC or rights or obligations convertible into or
exchangeable for any securities of DAC and not alter the terms of
any presently outstanding warrants or options or make any changes
(by split-up, combination, reorganization or otherwise) in the
capital structure of DAC, except as set forth in Section 2.1.5(d) of
the DAC Disclosure Schedule;
(d) not declare, pay or set aside for payment any dividend or other
distribution in respect of the capital stock or other securities of
DAC and not redeem, purchase or otherwise acquire any shares of the
capital stock or other securities of DAC or rights or obligations
convertible into or exchangeable for any shares of the capital stock
or other securities of DAC or obligations convertible into such, or
any options, warrants or other rights to purchase or subscribe to
any of the foregoing;
(e) not acquire or enter into any agreement to acquire, by merger,
consolidation or purchase of securities or assets, any business or
entity or any material part of the same;
(f) use its reasonable efforts to preserve intact the corporate
existence, goodwill and business organization of DAC, to keep the
officers and employees of DAC available to Xxxxxx and to preserve
the relationships of DAC with suppliers, customers and others having
business relations with any of them;
(g) not (i) create, incur or assume any debt (except for debt incurred
for the operation of DAC's business in the ordinary course which is
specifically excepted) or create, incur or assume any short-term
debt for borrowed money, (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person,
other than endorsements of negotiable instruments in the ordinary
course of business, (iii) make any loans or advances to any other
person, or (iv) make any capital contributions to, or investments
in, any person;
(h) not (i) enter into, modify or extend in any manner the terms of any
employment, severance or similar agreements with officers and
directors, (ii) grant any increase in the compensation of officers
or directors, whether now or hereafter payable or (iii) grant any
increase in the compensation of any other employees except for
compensation increases in the ordinary course of business and
consistent with past practice (it being understood by the parties
hereto that for the purposes of (ii) and (iii) above increases in
compensation shall include any increase pursuant to any option,
11
bonus, stock purchase, pension, profit-sharing, deferred
compensation, retirement or other plan, arrangement, contract or
commitment);
(i) not make or incur (other than in the ordinary course of business)
any individual capital expenditure in excess of $10,000 or capital
expenditures in the aggregate in excess of $30,000 without the prior
approval of Xxxxxx (as used herein, "capital expenditure" shall mean
all payments in respect of the cost of any fixed asset or
improvement or replacement, substitution or addition thereto that
has a useful life of more than one year, including those costs
arising in connection with the acquisition of such assets by way of
increased product or service charges or offset items or in
connection with capital leases);
(j) perform all of its material obligations under all DAC Material
Contracts (except those being contested in good faith) and not enter
into, assume or amend any contract or commitment that would be a DAC
Material Contract other than contracts to provide services entered
into in the ordinary course of business; and
(k) prepare and file all returns for taxes and other tax reports,
filings and amendments thereto required to be filed by it, and allow
Xxxxxx, at its request, to review all such returns, reports, filings
and amendments at DAC' offices prior to the filing thereof, which
review shall not interfere with the timely filing of such returns.
4.2. Conduct of Business by Xxxxxx From the date hereof to the Closing
Date, Xxxxxx will, except as required in connection with this transaction and
except as otherwise disclosed in the Xxxxxx Disclosure Schedule or as consented
to in writing by DAC:
(a) carry on its businesses in the ordinary and regular course in
substantially the same manner as heretofore conducted and not engage
in any new line of business or enter into any agreement, transaction
or activity or make any commitment except in the ordinary and
regular course of business and not otherwise prohibited under this
Section 4.2;
(b) neither change nor amend its Certificate of Incorporation or
By-Laws;
(c) use its reasonable efforts to preserve intact the corporate
existence, goodwill and business organization of Xxxxxx, to keep the
officers and employees of Xxxxxx available to DAC and to preserve
the relationships of Xxxxxx with suppliers, customers and others
having business relations with any of them;
(d) perform all of its obligations under all Xxxxxx Material Contracts
(except those being contested in good faith); and
(e) prepare and file all federal, state, local and foreign returns for
taxes and other tax reports, filings and amendments thereto required
to be filed by it, and allow DAC, at its request, to review all such
returns, reports, filings and amendments at Xxxxxx'x offices prior
to the filing thereof, which review shall not interfere with the
timely filing of such returns.
4.3 Stockholder Covenants. From the date hereof to the Closing Date, the
DAC Stockholder covenants and agrees that, except as required in connection with
the transaction as contemplated by this Agreement and except as otherwise
disclosed in the DAC Stockholder Disclosure Schedule or consented to in writing
by Xxxxxx, such DAC Stockholder will not sell, assign, pledge, encumber, or
otherwise transfer, or grant any other rights in or option to acquire, any of
such DAC Stockholder's Stock or agree to do any of the foregoing.
4.4. Notice of any Material Change. Each party shall, promptly after the
first notice or occurrence thereof but not later than the Closing Date, advise
the other parties in writing of any event or the existence of any state of facts
that (i) would make any of his, her or its representations and warranties in
this Agreement untrue in any material respect, or (ii) would constitute a breach
of any provisions of this Article 4.
12
4.5. Reasonable Efforts; Further Assurances; Cooperation. Subject to the
other provisions of this Agreement, the parties hereto shall use all reasonable
efforts to perform their obligations herein and to take, or cause to be taken,
or do, or cause to be done, all things reasonably necessary, proper or advisable
under applicable law to obtain all regulatory approvals and satisfy all
conditions to the obligations of the parties under this Agreement and to cause
the Exchange and the other transactions contemplated herein to be carried out
promptly in accordance with the terms hereof and shall cooperate fully with each
other and their respective officers, directors, employees, agents, counsel,
accountants and other designees in connection with any steps required to be
taken as a part of their respective obligations under this Agreement, including
without limitation:
(a) Each of DAC and Xxxxxx shall promptly take, or cause to be
taken, all actions and do, or cause to be done, all things
reasonably necessary, proper or advisable to obtain any
required approval of any federal, state or local governmental
agency or regulatory body with jurisdiction over the
transactions contemplated by this Agreement.
(b) In the event any claim, action, suit, investigation or other
proceeding by any governmental body or other person is
commenced that questions the validity or legality of the
transactions as contemplated by this Agreement or any of the
other transactions contemplated hereby or seeks damages in
connection therewith, the parties agree to cooperate and use
all reasonable efforts to defend against such claim, action,
suit, investigation or other proceeding and, if an injunction
or other order is issued in any such action, suit or other
proceeding, to use all reasonable efforts to have such
injunction or other order lifted, and to cooperate reasonably
regarding any other impediment to the consummation of the
transactions contemplated by this Agreement.
ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE DAC STOCKHOLDER
Except as may be waived by a DAC Stockholder as to such DAC Stockholder
only, the obligations of the DAC Stockholder to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction on or before
the Closing Date of each of the following conditions:
5.1. Compliance. Xxxxxx shall have, or shall have caused to be, satisfied
or complied with and performed in all material respects all terms, covenants and
conditions of this Agreement to be complied with or performed by Xxxxxx on or
before the Closing Date.
5.2. Representations and Warranties. All of the representations and
warranties made by Xxxxxx in this Agreement shall be true and correct in all
material respects at and as of the Closing Date with the same force and effect
as if such representations and warranties had been made at and as of the Closing
Date, except for changes permitted or contemplated by this Agreement; provided,
however, that notwithstanding anything herein to the contrary, this Section 5.2
shall be deemed to have been satisfied even if such representations or
warranties are not true and correct, unless the failure of any of the
representations or warranties to be so true and correct would have or would be
reasonably likely to have a material adverse effect on the business, financial
condition or prospects of Xxxxxx (an "Xxxxxx Material Adverse Change").
5.3. Material Adverse Changes. There shall not have occurred a Xxxxxx
Material Adverse Change.
5.4. Officer's Certificate. Xxxxxx shall have delivered to the DAC
Stockholder a Certificate of the President of Xxxxxx, dated the Closing Date,
certifying that the conditions specified in Sections 5.1, 5.2 and 5.3 have been
satisfied.
5.5. Secretary's Certificate. Xxxxxx shall have delivered to the DAC
Stockholder, a certificate of the Secretary of Xxxxxx certifying as to its
Certificate of Incorporation, By-Laws, incumbency of officers, and the
resolutions attached thereto and any other corporate proceedings relating to the
authorization, execution and delivery of this Agreement.
13
5.6. Exchange by Stockholders. The DAC Stockholder shall have exchanged
ninety percent (90%) of her shares of DAC Stock for the $1,000,000.00 cash
portion of the Purchase Price consideration required to be paid by Xxxxxx under
the terms and conditions of this Agreement pursuant to Section 1.1.1 above.
5.7. Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be satisfactory to
the DAC Stockholder and the DAC Stockholder shall have received all such
counterpart originals or certified or other copies of such documents as they may
reasonably request.
5.8 Buyer's Legal Counsel Opinion Letter. Buyer shall have provided DAC
and Shareholder an opinion letter of Buyer's legal counsel opining that the
transaction contemplated herein is lawful in all respects and does not violate
any federal securities laws or state securities laws in any state in which the
transaction may be governed.
5.9 Buyer's Delivery of Secured Promissory Note and Related Documents.
There has been delivered by Buyer at the Closing the $1,000,000.00 Secured
Promissory Note, Security Agreement and Financing Statement, as required by
Sections 1.1.2; 1.1.2.2; and 1.1.2.3 of this Agreement;
5.10 Buyer's Approval of Shareholder and Key Employee Employment
Agreements. Buyer shall have provided its signed acknowledgment and approval of
the Shareholder Employment Agreement, Non-Competition and Confidentiality
Agreements attached hereto as Exhibit "1.8(A)", and the key employee Employment
Agreements, Non-Competition and Confidentiality Agreements for Xxxxxxx Xxxx and
Xxxxxxx Xxxxxxx attached hereto as Exhibits "1.8(B)" and "1.8(C)", respectively.
ARTICLE 6.
CONDITIONS PRECEDENT TO OBLIGATIONS OF XXXXXX
Except as may be waived by Xxxxxx, the obligations of Xxxxxx to consummate
the the transaction described in Article 1 of this Agreement of Purchase shall
be subject to the satisfaction, on or before the Closing Date, of each of the
following conditions:
6.1. Compliance. DAC and the DAC Stockholder shall have, or shall have
caused to be, satisfied or complied with and performed in all material respects
all terms, covenants, and conditions of this Agreement to be complied with or
performed by him, her or it on or before the Closing Date.
6.2. Representations and Warranties. All of the representations and
warranties made by DAC and the DAC Stockholder in this Agreement shall be true
and correct in all material respects at and as of the Closing Date with the same
force and effect as if such representations and warranties had been made at and
as of the Closing Date, except for changes permitted or contemplated by this
Agreement; provided, however, that notwithstanding anything herein to the
contrary, this Section 6.2 shall be deemed to have been satisfied even if such
representations or warranties are not true and correct, unless the failure of
any of the representations or warranties to be so true and correct would have or
would be reasonably likely to have a material adverse effect on the business,
financial condition or prospects of DAC (an "DAC Material Adverse Change").
6.3. Material Adverse Changes. Except as set forth in this Agreement or on
the schedules hereto, there shall not have occurred a DAC Material Adverse
Change.
6.4. DAC Officer's Certificate. DAC shall have delivered to Xxxxxx a
Certificate of the President of DAC, dated the Closing Date, certifying that the
conditions specified in Sections 6.1, 6.2 and 6.3 have been satisfied.
6.5. DAC Secretary's Certificate. DAC shall have delivered to Xxxxxx a
certificate of the Secretary of DAC certifying as to its Certificate of
Incorporation, By-Laws, incumbency, and certain resolutions attached thereto and
14
any other corporate proceedings relating to the authorization, execution and
delivery of this Agreement and the transactions as contemplated by this
Agreement.
6.6. Exchange by the DAC Stockholder. The DAC Stockholder shall have
exchanged ninety percent (90%) of her DAC Stock for the compensation paid by
Xxxxxx pursuant to this Agreement.
6.7. Non Competition, Non-Solicitation and Confidentiality Agreement. The
DAC Stockholder shall have executed and delivered to Xxxxxx the Non-
Competition, Non-Solicitation and Confidentiality Agreement in form and
substance satisfactory to Xxxxxx and entered into the Employment Agreement with
DAC and have executed a Stockholders Agreement all of which is attached hereto
and made apart of this Agreement.
6.8 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be satisfactory to
Xxxxxx and its counsel, and Xxxxxx and its counsel shall have received all such
counterpart originals or certified or other copies of such documents as they may
reasonably request.
6.9 Buyers Reistration Statement. The Buyer's SB-2 Registration Statement
which was filed with the SEC has been declared effective.
6.10 Financial Statements The Buyer has received the financial statements
from the Company pursuant to Paragraph 2.1.6 of this Agreement.
6.11 No Claim Regarding Assets or Sale There must not have been made or
threatened (orally or in writing) by any Person any claim asserting that such
Person (a) has the right to acquire or obtain any interest in the Stock, or (b)
is entitled to all or any portion of the Purchase Price payable for the Stock.
6.12 No Prohibition Neither the consummation nor the performance of any of
the contemplated transactions by the Company will, directly or indirectly (with
or without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer or any Person affiliated with
Buyer to suffer any material adverse consequence under, (i) any applicable Legal
Requirement or Order, or (ii) any Legal Requirement or Order that has been
published, introduced, or otherwise formally proposed by or before any
Governmental Body.
6.13 Disclosure Schedule Buyer's receipt and review of the Disclosure
Schedule within ten days from the execution of this Agreement and acceptance of
the Disclosure Schedule and the materials disclosed therein to Buyer's
satisfaction within 10 business days from the Buyers receipt of said Disclosure
Schedule.
6.14 Execution of Shareholder and Key Employee Employment Agreements.
Shareholder and Company key employees, Xxxxxxx Xxxx and Xxxxxxx Xxxxxxx, shall
have executed and deposited their respective Employment Agreements, Non
Competition and Confidentiality Agreements attached hereto as Exhibits "1.8(A)",
1.8(B)" and "1.8(C)".
ARTICLE 7.
MISCELLANEOUS
7.1. Termination. Subject to Section 7.3, this Agreement and the
transactions contemplated hereby and the provisions herein may be terminated at
any time on or before the Closing Date:
(a) by mutual consent of DAC, the DAC Stockholder and Xxxxxx;
(b) by Xxxxxx or DAC if the transaction contemplated under this
Agreement has not been or is incapable of being consummated by
______________, 2005, as extended (the "Termination Date"), unless
15
such failure of consummation is due to the failure of the
terminating party to perform or observe the covenants, agreements,
and conditions hereof to be performed or observed by him, her or it
at or before the Closing Date; provided, that the non-breaching
party's cause of action resulting from such failure to perform or to
observe the covenants, agreements and conditions hereof shall not be
terminated; or
(c) by DAC, Xxxxxx or the DAC Stockholder if the transactions
contemplated hereby violate any non-appealable final order, decree,
or judgment of any court or governmental body or agency having
competent jurisdiction.
7.2. Entire Agreement. This Agreement, including the schedules and
exhibits hereto, contain the complete agreement among the parties with respect
to the transactions contemplated hereby and supersede all prior agreements and
understandings among the parties with respect to such transactions. Section and
other headings are for reference purposes only and shall not affect the
interpretation or construction of this Agreement. The parties hereto have not
made any representation or warranty except as expressly set forth in this
Agreement or in any certificate or schedule delivered pursuant hereto. The
disclosure schedules hereto shall be read as a whole and information on any
particular section thereto shall be deemed to be responsive to other appropriate
sections of the same disclosure schedule. The obligations of any party under any
agreement executed pursuant to this Agreement shall not be affected by this
section.
7.3. Indemnification; Remedies.
7.3.1. Survival. All representations and warranties in this
Agreement, the Disclosure Letter, the supplements to the Disclosure Letter, and
any other certificate or document delivered pursuant to this Agreement will
survive the Closing. The right to indemnification, reimbursement or other remedy
based on such representations and warranties will not be affected by any
investigation conducted by Buyer or its agents. Notwithstanding the foregoing,
(a) all representations and warranties shall continue in effect if a claim for
breach thereof has been made prior to the expiration of the applicable survival
period and shall survive until such claim is resolved and (b) any representation
or warranty of which either the Company or any Shareholder had knowledge of a
misrepresentation or breach at any time prior to the date on which such
representation or warranty is made shall survive indefinitely.
7.3.2. Indemnification and Reimbursement by the Company and
Shareholder. The Company and its Shareholder jointly and severally, will
indemnify and hold harmless Buyer and its employees, officers, directors,
stockholders, controlling persons, and affiliates (collectively, the
"Indemnified Persons"), and will reimburse the Indemnified Persons, for any
loss, liability, claim, damage, expense (including costs of investigation and
defense and reasonable attorneys' fees) or diminution of value, but excluding
consequential or punitive damages, whether or not involving a third-party claim
(collectively, "Damages"), arising from or in connection with: (a) any material
misrepresentation or breach of any representation or warranty made by the
Company in or pursuant to this Agreement, the Disclosure Letter, the supplements
to the Disclosure Letter, or any other certificate or document delivered by the
Company or the Shareholder pursuant to this Agreement; (b) any non-compliance
with or breach by the Company or the Shareholder of any covenant or obligation
of the Company or the Shareholder in this Agreement; (c) (i) the operation of
the Company's business (including the development, manufacture, sale, shipment,
license or use of the Software or other product of, or services provided by, the
Company) prior to the Closing Date, or (ii) any liabilities or obligations of
the Company other than those listed Section 2.1.9 of the DAC Disclosure
Schedule; or (d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with the Company or the
Shareholders (or any Person acting on its or his behalf) in connection with any
of the Contemplated Transactions.
7.3.3 Indemnification and Reimbursement by Buyer. Buyer shall
indemnify and hold harmless the Company and the Shareholder, and will reimburse
the Company and the Shareholder, for any Damages, including reimbursement of
reasonable attorneys fees and costs, arising from or in connection with: (a) any
misrepresentation or breach of any representation or warranty made by Buyer in
this Agreement or in any certificate delivered by Buyer pursuant to this
Agreement; (b) any non-compliance with or breach by Buyer of any covenant or
obligation of Buyer in this Agreement; (c) any claim by any Person arising from
the Buyer's ownership or utilization of the Assets after the Closing Date
16
(except to the extent such claim relates to a matter for which Buyer is entitled
to indemnification pursuant to Section 7.3.2; or (d) any claim by any Person for
brokerage or finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by such Person with Buyer
(or any Person acting on its behalf) in connection with any of the Contemplated
Transactions.
7.3.4. Right of Setoff. Upon notice to the Company specifying in
reasonable detail the damages which are the basis for any such set-off, Buyer
may set off an amount equal to the known or reasonably anticipated Damages to
which it may be entitled under this Section 7.3.2 against amounts otherwise
payable under Section 1.2. Neither the exercise of nor the failure to exercise
such right of set-off will constitute an election of remedies or limit Buyer in
any manner in the enforcement of any other remedies that may be available to it.
7.3.5 Procedure for Indemnification - Third Party Claims.
(a) Promptly after receipt by an indemnified party under Section
7.3.2 or 7.3.3 of notice of a claim against it (a "Claim"), the indemnified
party will, if a claim is to be made against an indemnifying party under such
Section, give notice to the indemnifying party of the Claim, but the failure to
notify the indemnifying party will not relieve the indemnifying party of any
liability that it may have to any indemnified party, except to the extent that
the indemnifying party demonstrates that the defense of such action is
prejudiced by the indemnified party's failure to give such notice.
(b) If any Claim referred to in Section 7.3.5(a) is made against an
indemnified party and it gives notice to the indemnifying party of the Claim,
the indemnifying party will, unless the Claim involves tax liabilities, be
entitled to participate in the defense of the Claim and, to the extent that it
wishes (unless (i) the indemnifying party is also a party to the Claim and the
indemnified party determines in good faith that joint representation would
result in a conflict of interest, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend the Claim and provide indemnification with respect to the Claim), to
assume the defense of the Claim with counsel satisfactory to the indemnified
party and, after notice from the indemnifying party to the indemnified party of
its election to assume the defense of the Claim, the indemnifying party will
not, as long as it diligently conducts such defense, be liable to the
indemnified party under such Section for any fees of other counsel or any other
expenses with respect to the defense of the Claim in each case subsequently
incurred by the indemnified party in connection with the defense of the Claim,
other than reasonable costs of investigation. If the indemnifying party assumes
the defense of a Claim, (a) no compromise or settlement of such claims may be
effected by the indemnifying party without the indemnified party's consent
unless (i) there is no finding or admission of any violation of Legal
Requirements or any violation of the rights of any Person and no effect on any
other Claims that may be made against the indemnified party, and (ii) the sole
relief provided is monetary damages that are paid in full by the indemnifying
party; and (b) the indemnifying party will have no liability with respect to any
compromise or settlement of such claims effected without its consent. If notice
is given to an indemnifying party of a Claim and the indemnifying party does
not, within ten days after the indemnified party's notice is given, give notice
to the indemnified party of its election to assume the defense of the Claim, the
indemnifying party will be bound by any determination with respect to the Claim
or any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a Claim may
adversely affect it or its Related Persons other than as a result of monetary
damages for which it would be entitled to indemnification under this Agreement,
the indemnified party may, by notice to the indemnifying party, assume the
exclusive right to defend, compromise, or settle the Claim, but the indemnifying
party will not be bound by any determination of a Claim so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
7.3.6. Procedure for Indemnification - Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
7.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute only one original.
17
7.5. Notices. All notices, demands, requests, or other communications that
may be or are required to be given, served, or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be sent by
facsimile transmission, nationally recognized overnight courier, or mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery, addressed as follows:
(i) If to Xxxxxx Financial Corporation:
Xx. Xxxxxxxx Xxxxx
President
Xxxxxx Financial Corporation
000 Xxxxxxx Xxxxxx
Xxxxx 00-X
Xxxxxx Xxxx, Xxx Xxxx 00000
If to the Company:
Xx. Xxxxxxx Xxxxxx
Disability Access Consultants, Inc.
0000 Xxxxxxx Xxxxx Xxxx.
Xxxxxxxx, XX. 00000
With Copy to:
Xxxxx X. Xxxxxxxx, Esq.
Stewart, Humpherys, Xxxxxxxx & Xxxxx, LLP
0000 Xxxxxxxx Xxxx, Xxxxx 0
Xxxxx, XX 00000
Facsimile: (000) 000-0000
If to the DAC Stockholder:
Xx. Xxxxxxx Xxxxxx
------------------------------
------------------------------
Each party may designate by notice in writing a new address to which any
notice, demand, request, or communication may thereafter be so given, served, or
sent. Each notice, demand, request, or communication that is mailed, delivered,
or transmitted in the manner described above shall be deemed sufficiently given,
served, sent, and received for all purposes at such time as it is delivered to
the addressee (with the return receipt, the delivery receipt or the affidavit of
messenger being deemed conclusive evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
7.6. Successors; Assignments. This Agreement and the rights, interests,
and obligations hereunder shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned, by operation of law or otherwise, by any of the parties hereto without
the prior written consent of the other, which shall not be unreasonably
withheld.
7.7. Governing Law. This Agreement shall be construed and enforced in
accordance with the State of Delaware.
18
7.8. Waiver and Other Action. This Agreement may be amended, modified, or
supplemented only by a written instrument executed by the parties against which
enforcement of the amendment, modification or supplement is sought.
7.9. Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable, such provision shall be fully severable, and
this Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision were never a part hereof; the remaining provisions
hereof shall remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance; and in lieu of
such illegal, invalid, or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in its terms to
such illegal, invalid, or unenforceable provision as may be possible and be
legal, valid, and enforceable.
7.10 Enforcement. The DAC Stockholder acknowledges that, due to the unique
nature of her shares of DAC Stock, the breach of this Agreement by such DAC
Stockholder will cause Xxxxxx irreparable damage, and therefore, Xxxxxx may
enforce its rights under this Agreement by equitable relief, including
injunction and specific performance, in addition to other remedies it may have
at law or in equity.
8.1 Buyer's Acknowledgement of Risk and Qualification. DAC and Shareholder
advise Buyer that the purchase of the Stock contemplated under this Agreement is
risky and that there is no guaranty that the purchase of Stock will yield any
return or profit to Buyer and in fact could only result in a loss. DAC and
Shareholder further advise Buyer that there is no guaranty as to the future
profitability of the Company's operations or that the Company or its assets can
or will generate any profits. DAC and Shareholder further advise Buyer that any
projections for the future profitability of the Company or its assets are
speculative only. Buyer acknowledges that it has made and will have completed by
the Closing, its own independent investigation into the Stock and business of
the Company and that its not relying upon any representation or warranty, oral,
implied or otherwise, made by DAC or Shareholder, as an inducement to enter into
this Agreement, other than those specifically set forth in this Agreement. Buyer
warrants and represents to DAC and Shareholder that it is an experienced and
qualified investor with sufficient net worth to make and tolerate the risk
associated with the purchase of the Stock contemplated herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
19
Xxxxxx Financial Corporation Disability Access
Consultants, Inc.
By: /s/ Xxxxxxxx Xxxxx By: /s/ Xxxxxxx Xxxxxx
--------------------------- -------------------------
Xxxxxxxx Xxxxx Xxxxxxx Xxxxxx
President and Chief Executive Officer Title: President
Stockholder of Disabilty Access
Consultants, Inc.
/s/Xxxxxxx Xxxxxx
-----------------
Xxxxxxx Xxxxxx
As to Paragraph 1.6
SunBelt Business Advisors Norcal
By:____________________________
Xxxx Xxxxx, President
20
SCHEDULE 1.12 - Promissory Note Payments
Payment 1. $ 75,000.00
Payment 2. $ 74,219.00
Payment 3. $ 73,438.00
Payment 4. $ 72,656.00
Payment 5. $ 71,875.00
Payment 6. $ 71,094.00
Payment 7. $ 70,313.00
Payment 8. $ 69,531.00
Payment 9. $ 68,750.00
Payment 10. $ 67,969.00
Payment 11. $ 67,188.00
Payment 12. $ 66,406.00
Payment 13. $ 65,625.00
Payment 14. $ 64,844.00
Payment 15. $ 64,063.00
Payment 16. $ 63,281.00
