(b) In furtherance of the foregoing, since March 31, 2006,
Seller has not (a) incurred any obligations or liabilities, whether
absolute, accrued, contingent or other, other than obligations and
liabilities incurred in the ordinary course of business, (b) mortgaged,
pledged or subjected to any lien, lease, security interest or other
encumbrance (other than liens for taxes, assessments or other governmental
charges not yet due and payable, or presently payable without penalty or
interest) any of its assets, real or personal, tangible or intangible, (c)
acquired or disposed of any assets or properties, or entered into any
agreement for any such acquisition or disposition, except in the ordinary
course of business, (d) declared, made, paid or set apart any cash for any
dividend or other distribution to its shareholders, or purchased or
redeemed any shares of its capital stock or granted any option, warrant or
right to purchase any such capital stock, (e) forgiven or canceled any
debts or claims other than in the ordinary course of business or waived
any rights of material value not previously accrued for, (f) granted any
increase in compensation in any form to any officer, salaried employee or
any class of other employees, or granted any severance or termination pay,
or entered into any employment agreement, or any modification of a
previously existing employment agreement, with any officer or any other
salaried employee, other than increases in compensation of less than 10%
(ten percent) granted in the ordinary course of business consistent with
prior practice to employees whose base pay at the time of such increase
was less than $10,000, (g) adopted, amended or entered into any collective
bargaining, bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation or other plan, agreement or arrangement
for the benefit of employees, (h) granted any rights or licenses under or
to any of its patents, trademarks, trade names, copyrights, domain names
or other intellectual property rights, (i) suffered any loss of, or
material adverse change in its relationship with, any supplier or customer
or has knowledge that any such supplier or customer intends any action
which would constitute or lead to such a loss or material adverse change,
(j) suffered any damage, destruction or loss (whether or not covered by
insurance) which has a material adverse effect on its business, (k)
suffered any strike or other labor trouble which has had a material
adverse effect on its operations, (l) terminated or made any substantial
revision of, or engaged in any renegotiation of, any material contract,
(m) decreased the level of maintenance on, or its expenditures for
maintenance of, the real property, machinery, equipment, tools, furniture
and fixtures owned or leased by it, (n) made any change in accounting
principles or methods or in classification, depreciation or amortization
policies or rates, (o) settled any dispute involving payment by the Seller
in excess of $5,000, (p) made any loan or advance in excess of $5,000 to
any person or entity other than travel or expense advances in accordance
with its normal policies which have been accounted for or repaid and
extension of trade credit in accordance with its normal business
practices, or (q) entered into any material transaction other than in the
ordinary course of business.
3.05 TAX MATTERS. Other than as disclosed on SCHEDULE 3.05,
there is no tax obligation of Seller which constitutes, or may in the future
constitute, a lien on the Purchased Assets, and if any such lien exists or
arises, it will be promptly discharged by Seller. The Seller has withheld and
paid any and all taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
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3.06 MATERIAL CONTRACTS AND COMMITMENTS. SCHEDULE 1.01(c)(z)
hereto constitutes a full and complete list, as of the date hereof, of all
contracts and commitments of Seller related to the Business involving aggregate
rights or obligations of Seller in excess of $5,000 per contract or which have a
remaining term, as of the date hereof, of over six months in length of
obligation on the part of Seller ("Material Contracts"). Except as indicated on
SCHEDULE 1.01(c)(z), Seller is not in breach or violation of, or in default
under any of the Material Contracts; the execution of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
default or breach under the Material Contracts; and, except as specifically
indicated in SCHEDULE 1.01(c)(z), the execution of this Agreement and the
consummation of the transactions contemplated hereby will not give rise to any
consent requirement under any of the Material Contracts. All of the contracts
listed on SCHEDULE 1.01(c)(z) are in full force and effect and have not been
modified or amended, except as set forth on SCHEDULE 1.01(c)(z).
3.07 LICENSES, PERMITS AND AUTHORIZATIONS. Seller has
obtained, and will as of the Closing Date continue to have, all material
approvals, authorizations, consents, licenses, franchises, orders, certificates
and other permits of, and has made and will have made on the Closing Date all
filings with, any governmental authority, whether foreign, Federal, state or
local, which are required for the ownership of the Purchased Assets or the
conduct of Seller's Business as presently conducted. A complete list of all such
approvals, authorizations, consents, licenses, franchises, orders, certificates,
permits and filings is included as SCHEDULE 3.07 hereto.
3.08 TITLE TO PURCHASED ASSETS. Seller has good title to the
Purchased Assets and shall at the Closing deliver to Buyer good title to the
Purchased Assets free and clear of all title defects, liabilities, obligations,
liens, mortgages, security interests, encumbrances, easements, claims or similar
adverse interests of any kind or character except (i) any Assumed Liabilities
expressly assumed by Buyer pursuant to Section 1.03 hereof, and (ii) the title
exceptions listed on SCHEDULE 3.08 hereto. All leases pursuant to which Seller
leases any of the Purchased Assets are valid and binding in accordance with
their respective terms.
3.09 TRANSFERRED INTELLECTUAL PROPERTY. Except as set forth
in SCHEDULE 1.01(d), to the knowledge of Seller and Principal Stockholders and
only insofar as they relate to the Business:
(a) Seller owns or has the right to use pursuant to license,
sublicense, public domain, agreement, or permission the following
intellectual property (the "Transferred Intellectual Property"): (i) all
trademarks, service marks, trade dress, logos, trade names, and corporate
names, including all goodwill associated therewith, and all applications
registrations, and renewals in connection therewith, (ii) all trade
secrets and confidential business information (including protocols, ideas,
research and development, know-how, formulas, compositions, manufacturing
and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (iii) all
other proprietary rights, and (iv) all copies and tangible embodiments
thereof (in whatever form or medium).
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(b) Seller has not knowingly interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any
intellectual property rights of third parties, and none of Seller's
officers have ever received any charge, complaint, claim, demand, or
notice alleging any such interference, infringement, misappropriation, or
violation, including any claim that Seller must license or refrain from
using any intellectual property rights of any third party. To the
knowledge of Seller, no third party has interfered with, infringed upon,
or misappropriated in any material respect any intellectual property
rights of Seller.
(c) SCHEDULE 1.01(d) identifies each patent or registration
which has been issued to Seller with respect to any of the Transferred
Intellectual Property, identifies each pending patent application or
application for registration which Seller has made with respect to any of
the Transferred Intellectual Property, and identifies each material
license, agreement, or other permission which Seller has granted to any
third party with respect to any of the Transferred Intellectual Property
outside the ordinary course of business. SCHEDULE 1.01(d) also identifies
each registered trade name or registered trademark used by Seller with
respect to the Transferred Intellectual Property and identifies each
pending trademark application filed with respect to the Transferred
Intellectual Property. Except as set forth on the SCHEDULE 1.01(d) to
Seller's knowledge with respect to each such item of Transferred
Intellectual Property required to be identified in SCHEDULE 1.01(d):
(i) Seller possesses all rights, title, and interest
in and to the item, free and clear of any security interest, license or
other restriction;
(ii) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling or charge; and
(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
knowledge of Seller, is threatened which challenges the legality,
validity, enforceability, use or ownership of the item.
(d) SCHEDULE 1.01(d) identifies each item of Transferred
Intellectual Property that any third party owns and that Seller uses
pursuant to license, sublicense, agreement, or permission. Seller has
delivered or made available at its offices to Buyer correct and complete
copies of all such licenses, sublicenses, agreements, and permissions (as
amended to date). Except as set forth on SCHEDULE 1.01(d), to Seller's
knowledge with respect to each such item of Transferred Intellectual
Property:
(i) the license, sublicense, agreement, or permission
covering the item is, to Seller's knowledge, legal, valid, binding,
enforceable, and in full force and effect;
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(ii) the license, sublicense, agreement, or permission
will continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms and to the same extent following the
consummation of the transactions contemplated hereby;
(iii) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(iv) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof; and
(v) Seller has not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or permission.
(e) Seller is not aware that any of the Transferred
Employees (as defined in Section 8.01 hereinbelow) is obligated under any
contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court
or administrative agency, that would conflict with the Business.
3.10 EMPLOYEE BENEFIT PLANS.
(a) SCHEDULE 3.10 contains a description of all employee
benefit plans, policies, practices and arrangements (including, without
limitation, those within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended) of Seller which have
been applicable at any time to any of the Seller's employees (as defined
below) (each an "Employee Plan" and collectively, the "Employee Plans"),
including, without limitation, retirement, disability, sick leave,
medical, dental and other health insurance, life insurance, separation,
stock options, deferred compensation and vacation. All of the Employee
Plans are and have at all times been in material compliance with and have
been administered in material accordance with all applicable laws.
(b) There is no pending or, to the best of Seller's
knowledge, threatened legal action, arbitration or other proceeding or
investigation against Seller or any Employee Plan with respect to any
Employee Plan, other than routine claims for benefits, which could result
in liability to any such Employee Plan, Seller or Buyer, and there is no
reasonable basis for any such legal action or proceeding.
(c) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in
payment (either of severance pay or otherwise) becoming due from any of
the Employee Plans, Seller or Buyer to any current or former employee or
self-employed individual, and will not result in the payment, vesting,
acceleration or increase of any benefit payable under any Employee Plan to
any current or former employee or self-employed individual.
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(d) There does not exist any liability, obligation or claim
(other than a routine claim for benefits) resulting from, relating to or
arising out of any Employee Plan, or any liability, obligation or claim
(other than a routine claim for benefits) resulting from, relating to or
arising out of any "employee benefit plan," as defined in Section 3(3) of
ERISA, maintained by an employer which, with Seller, is considered to be,
or to be part of, a single employer under Section 414(b), (c), (m) or (o)
of the Code, including, but not limited to, any liability, obligation or
claim (other than a routine claim for benefits) in connection with a
"multi-employer plan" as defined in Section 3(37) of ERISA, or in
connection with the Consolidated Omnibus Budget Reconciliation Act of 1985
(COBRA).
(e) All obligations relating to the Employee Plans
(including, without limitation, payroll taxes and deductions) have been
satisfied and there are no outstanding defaults or violations by any party
thereto and no taxes, penalties or fees owing or eligible under any of the
Employee Plans.
3.11 LITIGATION AND OTHER CLAIMS. Except as described in
SCHEDULE 3.11, there are no actions, suits, arbitration proceedings, claims or
other proceedings arising out of or related to the Business of the Seller
pending or, to the knowledge of Seller, threatened before any foreign, Federal,
state, municipal or other court, department, commission, arbitration panel,
board, bureau, agency, body or instrumentality against Seller or affecting the
Purchased Assets at law or in equity. Seller is not a party to or subject to the
provisions of any order, writ, injunction, decree or judgment of any court or
foreign, Federal, state, municipal or other governmental or administrative body,
department, commission, board, bureau, securities exchange or other agency or
instrumentality in connection with the ongoing operations of Seller except as
set forth in SCHEDULE 3.11.
3.12 NO MATERIAL ADVERSE CHANGE. Since the close of business
on the date of the Financial Statements, there has been no material adverse
change in the financial condition, results of operations or Business of Seller.
3.13 SUFFICIENCY OF PURCHASED ASSETS. The Purchased Assets
are sufficient to operate Seller's Business as currently operated. Seller is not
a party to any contract which is necessary in any material respect to Seller's
Business other than contracts which will be assigned to Buyer at the Closing
hereunder.
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3.14 COMPLIANCE WITH LAWS.
(a) Neither the Purchased Assets nor the operations of Seller's
Business, as conducted at the date hereof and as will be conducted through
the Closing Date, violate, in any material respect, any foreign, Federal,
state or local law, ordinance, rule or regulation.
(b) Seller is not subject to the regulatory requirements and the
authority of the Federal Communications Commission.
3.15 INSURANCE. Seller maintains, and through the Closing Date will
maintain, adequate insurance including self-insurance insuring the Purchased
Assets and the operations of Seller's Business. All policies of insurance of any
kind maintained, owned or held by Seller which cover the Purchased Assets or
Seller's Business are set forth on SCHEDULE 3.15 hereto and such policies are in
full force and effect, all premiums with respect thereto covering all periods up
to and including the Closing Date have been paid, and no notice of cancellation
or termination has been received with respect to any such policy which has not
been replaced on substantially similar terms prior to the date of such
cancellation or termination. The insurance policies to which Seller is a party
which cover the Purchased Assets or Seller's Business are sufficient for
compliance with all requirements of applicable laws and all agreements to which
Seller is a party or by which Seller or the Purchased Assets may be bound. In
the three years preceding the date of this Agreement, Seller has not been
refused any insurance with respect to the Purchased Assets or the operations of
Seller or had its coverage limited by any insurance carrier to which it has
applied for any such insurance or with which it has carried such insurance.
3.16 INVENTORY. The inventories of the Seller are, as of the most
recent date of the Financial Statements, and as of the Closing Date will be (a)
saleable to customers in the normal course of its business, and (b) not
obsolete, deteriorated, unusable or in excess of customary levels.
3.17 REAL PROPERTY LEASES. Seller's Real Property Lease, operating
on a month-to-month tenancy, is valid and binding upon the lessor and is in full
force and effect. There are no existing defaults by Seller under the Real
Property Lease and no event has occurred which (whether with or without notice,
lapse of time, or both) would constitute a default thereunder by Seller. Seller
has delivered to Buyer a true and complete copy of the Real Property Lease.
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3.18 LABOR MATTERS. SCHEDULE 3.18 lists the current salaries and
bonuses (together with pending or anticipated increases therein) of each
director, officer, employee, and other remuneration with respect to any
consultant or agent of the Seller currently paid at a rate in excess of $5,000
per year. Except as disclosed on SCHEDULE 3.18, no officer or other key employee
of the Seller has indicated to the Seller or, to the knowledge of the Seller,
has an intention to terminate his or her employment with the Seller. Except as
set forth on SCHEDULE 3.18: (a) Seller is in compliance in all material respects
with all applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, and is not engaged in any
unfair labor practice; (b) there is no unfair labor practice complaint against
Seller pending or threatened with respect to Seller's employees before the
National Labor Relations Board or any other applicable tribunal; (c) there is no
labor strike, dispute, slowdown or stoppage actually pending or, to the best of
Seller's knowledge, threatened against or affecting Seller; (d) Seller has
received no notice that any representation or petition respecting the employees
of Seller has been filed with the National Labor Relations Board or any other
applicable tribunal; (e) no grievance nor any arbitration proceeding arising out
of or under any collective bargaining agreements with respect to Seller's
employees is pending against Seller; and (f) Seller has not experienced any
strike or work stoppage or other industrial dispute involving Seller's employees
in the past five years.
3.19 CONDITION OF PURCHASED ASSETS. The Purchased Assets are in
good repair and working condition, normal wear and tear excepted, are suited for
the uses currently intended, are in conformity with all applicable laws,
ordinances, rules and regulations and are in good saleable condition, normal
wear and tear excepted.
3.20 ENVIRONMENTAL MATTERS.
(a) Except as set forth in SCHEDULE 3.20 hereto: (i) Seller is in
compliance in all material respects with all environmental laws,
regulations, permits and orders applicable to it, and with all laws,
regulations, permits and orders governing or relating to asbestos removal
and abatement; (ii) Seller has not transported, stored, treated or
disposed, or allowed or arranged for any third parties to transport,
store, treat or dispose, of any Hazardous Substances or other waste to or
at any location other than a site lawfully permitted to receive such
Hazardous Substances or other waste for such purposes, or had performed,
arranged for or allowed by any method or procedure such transportation,
storage, treatment or disposal in contravention of any laws or
regulations, nor has Seller disposed of, or allowed or arranged for any
third parties to dispose of, Hazardous Substances or other waste upon
property owned or leased by it; (iii) there has not occurred, nor is there
presently occurring, a Release of any Hazardous Substance on, into or
beneath the surface of any parcel of real property in which Seller has an
ownership interest or any leasehold interest; (iv) Seller has not
transported or disposed of, or allowed or arranged for any third parties
to transport or dispose of, any Hazardous Substance or other waste to or
at a site which, pursuant to the U.S. Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA") or
any similar law, (A) has been placed on the National Priorities List or
its state equivalent, or (B) the Environmental Protection Agency or the
relevant state agency has proposed or is proposing to place on the
National Priorities List or its state equivalent; (v) Seller has not
received notice, and has no knowledge of any facts which could give rise
to any notice, that Seller is a potentially responsible party for a
Federal or state environmental cleanup site or for corrective action under
CERCLA or any other applicable law or regulation or notice of any other
Environmental Claim; (vi) Seller has not received any written or oral
request for information in connection with any Federal or state
environmental cleanup site and has not undertaken (or been requested to
undertake) any response or remedial actions or cleanup actions of any kind
at the request of any Federal, state or local governmental entity, or at
the request of any other person or entity; (vii) there are no laws,
regulations, ordinances, licenses, permits or orders relating to
environmental or worker safety matters requiring any work, repairs,
construction or capital expenditures with respect to the assets or
properties of Seller; and (viii) SCHEDULE 3.20 identifies (w) all
environmental audits, assessments or occupational health studies
undertaken by Seller or its agents or by any governmental agencies with
respect to the operations or properties of Seller; (x) the results of any
ground water, soil, air or asbestos monitoring undertaken with respect to
any real property owned or leased by Seller; (y) all written
communications of Seller with environmental agencies; and (z) all
citations issued to Seller under the Occupational Safety and Health Act
(29 U.S.C. Sections 651 ET SEQ.).
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(b) For the purposes of this Agreement, "Environmental Claim"
shall mean any demand, claim, governmental notice or threat of litigation
or the actual institution of any action, suit or proceeding at any time by
a person other than the parties which asserts that an Environmental
Condition constitutes a violation of or otherwise may give rise to any
liability or obligation under, any statute, ordinance, regulation, or
other governmental requirement or the common law, including, without
limitation, any such statute, ordinance, regulation, or other governmental
requirement relating to the emission, discharge, or release of any
Hazardous Substance into the environment or the generation, treatment,
storage, transportation, or disposal of any Hazardous Substance.
"Environmental Condition" shall mean the presence on the Closing Date,
whether discovered or undiscovered on the Closing Date, in surface water,
ground water, drinking water supply, land surface, subsurface strata or
ambient air of any pollutant, contaminant, industrial solid waste or
Hazardous Substance arising out of or otherwise related to the operations
or other activities of Seller, or of any predecessor in interest or line
of business to Seller, conducted or undertaken prior to the Closing Date.
"Hazardous Substance" shall mean any substance defined in the manner set
forth in Section 101(14) of the U.S. Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and shall include any
additional substances designated under Section 102(a) thereof. "Release"
shall mean releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing
into the environment.
3.21 ABSENCE OF CERTAIN PAYMENTS. The Seller nor any officers,
directors, employees, agents, representatives, or independent contractors of the
Seller has made, or arranged for the making of, any unlawful payment to any
official, officer or employee of any foreign, Federal, state, county, municipal
or other governmental or regulatory body or authority or any self regulatory
body or authority, or made any payment to any customer or supplier of the Seller
or any officer, director, partner, employee or agent of any customer or
supplier, for the unlawful sharing of fees or to any such customer or supplier
or any such officer, director, partner, employee or agent for the unlawful
rebating of charges, or engaged in any other unlawful reciprocal practice, or
made any other unlawful payment or given any other unlawful consideration to any
such customer or supplier or any such officer, director, partner, employee or
agent, in respect of the Seller.
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3.22 FULL DISCLOSURE. All information furnished to Buyer in
accordance herewith is, and as of the Closing Date shall be, correct and
complete in all material respects. No representation or warranty of Seller and
no information, schedule or certificate furnished or to be furnished by or on
behalf of Seller to Buyer, its affiliates or its agents pursuant to or in
connection with this Agreement contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary in
order to make the statements contained herein or therein not misleading.
ARTICLE IIIA
REPRESENTATIONS AND WARRANTIES OF PRINCIPAL STOCKHOLDERS
Each Principal Stockholder hereby represents and warrants to the Buyer,
severally as to itself, and not jointly with the other Principal Stockholders,
as follows:
3A.1. ORGANIZATION AND GOOD STANDING. If such Principal Stockholder is not
a trust, partnership or a natural person, it is duly incorporated under the laws
of its jurisdiction of incorporation and is validly existing and in good
standing with respect to the filing of annual reports under such laws, and has
all necessary legal and corporate right, authority, power and capacity to own
its property and assets and to carry on its business as presently conducted.
3A.2. OWNERSHIP OF SECURITIES. Such Principal Stockholder is the sole
registered legal and beneficial owner of the shares of Common Stock of the
Seller designated as being owned by such Principal Stockholder opposite such
Principal Stockholder's name in SCHEDULE 3A.2(i) hereto. Donald Simons and Dale
Zuehls are the sole holders of all of the issued and outstanding shares of the
Principal Stockholder and securities convertible or exercisable into shares of
the Principal Stockholder. Each of Donald Simons and Dale Zuehls is the sole
registered legal and beneficial owner of the shares of the Seller designated as
being owned by such person opposite such person's name in SCHEDULE 3A.2(ii)
hereto.
3A.3. VALIDITY AND ENFORCEABILITY. This Agreement and any of the Related
Agreements to which such Principal Stockholder is a party have been duly
executed and delivered by such Principal Stockholder and, assuming due
authorization, execution and delivery by Buyer, represent the legal, valid and
binding obligations of such Principal Stockholder, enforceable against such
Principal Stockholder in accordance with their respective terms, subject to the
effect of (a) applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws in effect relating to the rights of creditors generally, and
(b) rules of law and equity governing specific performance, injunctive relief
and other equitable remedies. No further action on the part of such Principal
Stockholder is or will be required in connection with the transactions
contemplated by this Agreement or any of the Related Agreements to which such
Principal Stockholder is a party.
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3A.4. NO LITIGATION. There are no actions or proceedings outstanding or
pending or threatened against or affecting such Principal Stockholder that would
prevent such Principal Stockholder from (a) executing and delivering this
Agreement or any of the Related Agreements to which such Principal Stockholder
is a party, or (b) performing such Principal Stockholder's obligations pursuant
to, or observing any of the terms and provisions of, this Agreement or any of
the Related Agreements to which such Principal Stockholder is a party.
3A.5. NO CONFLICT. Neither the execution and delivery of this Agreement or
any of the Related Agreements to which such Principal Stockholder is a party,
nor the performance by such Principal Stockholder of its obligations hereunder
or thereunder will (a) if such Principal Stockholder is not an individual,
conflict with, or result in a violation of or default under (with or without
notice, lapse of time, or both) the memorandum and articles of association or
the bylaws (or equivalent constitutional documents) of such Principal
Stockholder or any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to it, (b) conflict with, or result in a violation of or
default under (with or without notice, lapse of time, or both), or give rise to
a right of termination, cancellation, renegotiation or acceleration of any
obligation or loss of any benefit under, or require consent, approval or waiver
from any person or entity in accordance with the terms of any contract to which
such Principal Stockholder is a party, in each case that would reasonably be
likely to have an adverse effect on the ability of the Principal Stockholder to
perform his, her or its obligations hereunder.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
Buyer hereby represents and warrants to, and covenants with, Seller
and Principal Stockholders:
4.01 ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
the corporate power and authority to own and operate its properties and assets
and to conduct its business as it is now being conducted. Buyer is duly
qualified to do business in all other jurisdictions in which Buyer owns, leases
or operates property or otherwise conducts Buyer's business if the failure to be
qualified would have a material adverse effect on Buyer's ability to conduct
business using the Purchased Assets.
4.02 DUE AUTHORIZATION. Buyer has full corporate power and
authority to enter into this Agreement and the Related Agreements and to
consummate the transactions contemplated hereby and thereby and to perform its
obligations hereunder and thereunder. The execution, delivery and performance of
this Agreement and the Related Agreements, and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary corporate action on the part of Buyer. This Agreement has been duly
executed and delivered by Buyer, and is a valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms. The execution, delivery
and performance of this Agreement and the Related Agreements will not conflict
with or result in a violation of any provision of the Memorandum of Association
and Articles of Association (or similar corporate organizational documents) of
Buyer, or of any material contract by which it is bound, or of any judgment or
decree to which it is a party or by which it is bound. All necessary
authorizations of the transactions contemplated by this Agreement and the
Related Agreements required to be obtained by Buyer from any Federal, state,
local or foreign government or agency shall have been obtained prior to the
Closing, and any filings, notifications or disclosures required by law or
regulations of such government or agency shall have been made in such form as is
acceptable to file. Seller shall cooperate with Buyer with respect to the
aforesaid filings, notifications or disclosures to the extent necessary to
obtain said authorizations. Buyer will deliver to Seller at the Closing true and
complete copies of all resolutions of its board of directors by which the
execution, delivery and performance of this Agreement and the Related Agreements
and consummation of the transactions contemplated hereby and thereby were
authorized, certified by the Secretary of Buyer as of the Closing Date.
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ARTICLE V
COVENANTS PENDING CLOSING
5.01 CONDUCT OF BUSINESS OF SELLER PRIOR TO THE CLOSING. Except as
contemplated by this Agreement, during the period from the date of this
Agreement to the Closing Date, Seller will conduct Seller's Business and
operations in, and only in, the ordinary course of business and substantially in
the manner heretofore conducted. Without limiting the generality of the
foregoing, and except as contemplated in this Agreement, prior to the Closing
Date, without the prior written consent of Buyer, Seller will not:
(a) except for Retained Liabilities, create, incur or assume any
indebtedness for money borrowed, including obligations in respect of
capital leases; or incur any material liabilities or obligations other
than in the ordinary course of business consistent with past practices; or
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly or contingently or otherwise) for the obligations of any
person; PROVIDED, that Seller may endorse negotiable instruments for
collection in the ordinary course of business;
(b) except as a result of a normal individual review cycle, or
individual plan cycle, increase the rate or terms of compensation payable
or to become payable by Seller to Seller's employees; or increase the rate
or terms of any bonus, insurance, pension or other employee benefit plan,
payment or arrangement made to, for or with the employees of Seller; or
enter into any new employment agreement or modify the terms of any
existing employment agreement;
(c) except in the ordinary course of business with product
purchasers, enter into any material contract or arrangement providing for,
in the aggregate, payment or receipt of more than US$5,000 or which is
greater than six months in duration without Buyer's consent which shall
not be unreasonably withheld or delayed;
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(d) in any material way, violate, breach or allow to lapse any
Material Contract or enter into any other agreement, commitment or
transaction (including without limitation any borrowing, capital
expenditure or capital financing), except in the ordinary course of
business consistent with past practice;
(e) sell, transfer, mortgage, encumber or otherwise dispose of any
of the Purchased Assets, except in the ordinary course of business
consistent with past practice; or
(f) agree or make any commitment to take any actions prohibited by
this Section 5.01.
5.02 ACCESS TO INFORMATION. Between the date of this Agreement and
the Closing Date, Seller will, during ordinary business hours (a) give Buyer and
its authorized representatives and advisors access to all books, records,
offices and other facilities and properties of Seller, (b) permit Buyer to make
such inspections thereof as Buyer may reasonably request, and (c) cause its
officers and advisors to furnish Buyer with such financial and operating data
and other information with respect to Seller as Buyer may from time to time
reasonably request; in addition, Seller will cause its accountants to make their
personnel, their work papers and such other requested documentation relating to
their work papers and to their audits of the books and records of Seller
available to Buyer and its advisors and representatives.
5.03 CONSENTS. The parties hereto will use their best efforts to
promptly obtain any required consents (including any required consents to the
assignment of contracts) of all persons and governmental authorities necessary
for the consummation of the sale of the Purchased Assets and the other
transactions contemplated by this Agreement and the Related Agreements.
5.04 PUBLIC ANNOUNCEMENTS. From the date hereof through the
Closing, no party hereto shall make any press release or public announcement or
any disclosure to any third person (other than to employees of Seller, employees
of Buyer, attorneys, accountants and other advisors of the parties hereto in
connection with the transactions contemplated hereby) concerning the
transactions contemplated by this Agreement; PROVIDED, HOWEVER, that the parties
will make such announcements, if any, as are required by applicable law or stock
exchange rules or rules of the association that maintains the listing of the
securities of a party hereto or its affiliates and will mutually agree to the
content thereof. In conjunction with the Closing, Buyer and Seller shall consult
with each other concerning the form of any post-closing press release or any
other public announcement concerning the transactions contemplated by this
Agreement, and the parties shall use their best efforts to cause a mutually
agreeable form of such release or announcement to be issued.
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5.05 CONFIDENTIALITY.
(a) All information furnished by Buyer (or its agents and
representatives) to Seller (or their agents and representatives) or
furnished by Seller (or their agents or representatives) to Buyer (or its
agents and representatives) pursuant hereto shall be treated as the sole
property of the party furnishing the information until the Closing Date,
and if the Closing shall not occur, the party receiving the information
shall return to the party which furnished such information all copies of
any documents or other materials containing, reflecting or referring to
such information, shall keep confidential all of such information regarded
as confidential by the party supplying such information, and shall not
directly or indirectly use such information for any competitive or other
commercial purpose. The obligation to keep such information confidential
shall not apply to (i) any information which (w) the party receiving the
information can establish was already in its possession prior to the
disclosure thereof by the party furnishing the information, (x) was then
generally known to the public, (y) became known to the public through no
fault of the party receiving the information; or (z) was disclosed to the
party receiving the information by a third party not bound by an
obligation of confidentiality to the party furnishing the information; or
(ii) disclosures in accordance with an order of a court of competent
jurisdiction or as required by any law, rule or regulation applicable to
the party making the disclosure, including any rule of, or agreement of
any party or its affiliates with, any stock exchange or association that
maintains the listing of a party's securities.
(b) Seller, each Principal Stockholder and Buyer agree, whether or
not the Closing shall occur, to maintain, and to cause their agents and
representatives to maintain, the confidentiality of the terms and
conditions of this Agreement and the Related Agreements and all documents
executed and delivered in connection with the transactions contemplated by
this Agreement and the Related Agreements. The provisions of this Section
5.05(b) shall not apply to particular conditions or terms of the above
referenced documents (i) if the party seeking to make such disclosure
shall have obtained the prior written consent of the other party to the
disclosure of such conditions or terms, (ii) that are required to be
disclosed during the course of any litigation or arbitration which may be
brought by any party related to the provisions of any of the above
referenced documents, (iii) that are or become generally available to the
public other than as a result of actions taken by the party seeking to
make such disclosure or its agents and representatives, or (iv) that are
required to be disclosed pursuant to and in accordance with any law, rule
or regulation applicable to the party seeking to make such disclosure,
including any rule of, or agreement of any party or its affiliates with,
any stock exchange or association that maintains the listing of a party's
securities.
Notwithstanding the foregoing, if a party is requested or required
(by oral questions, interrogatories, requests for information or document
subpoena, civil investigative demand or similar process) to disclose any of the
above-referenced documents, such party will promptly notify the other party of
such request so that such other party may seek an appropriate protective order
or waive compliance with the provisions hereof. If, in the absence of a
protective order or the receipt of a waiver hereunder, a party is nonetheless,
in the opinion of its counsel, compelled to disclose any terms or conditions of
the above-referenced documents to any tribunal or else stand liable for contempt
or suffer other censure or penalty, such party may disclose such information to
such tribunal without liability hereunder.
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5.06 RELATED AGREEMENTS. The parties hereto agree that at Closing
they will execute and deliver (or cause their affiliates to execute and deliver)
the Related Agreements to which they or their affiliates are to be a party.
5.07 NO-SHOP. Seller hereby agrees that it shall not pursue or
become involved in any negotiations or discussions or enter into any agreement
regarding the sale of the business, assets or stock of Seller to any third
person or entity.
ARTICLE VI
CLOSING CONDITIONS
6.01 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE
TRANSACTIONS CONTEMPLATED HEREBY. The respective obligations of each party to
effect the transactions contemplated hereby shall be subject to the fulfillment
at or prior to the Closing Date of the following conditions:
(a) NO ORDER, DECREE OR INJUNCTION. Neither Seller, any Principal
Stockholder nor Buyer shall be subject to any order, decree or injunction
of a court of competent jurisdiction or governmental agency and no
statute, rule or regulation shall be in effect or be enacted or issued
which (i) prevents or delays any of the transactions contemplated by this
Agreement, or (ii) would impose any limitation on the ability of Buyer
effectively to exercise full rights of ownership of the Purchased Assets.
(b) RELATED AGREEMENTS. All Related Agreements shall have been
executed and delivered by the parties thereto.
6.02 CONDITIONS TO THE OBLIGATIONS OF SELLER TO EFFECT THE
TRANSACTIONS CONTEMPLATED HEREBY. The obligations of Seller to effect the
transactions contemplated hereby shall be further subject to the fulfillment at
or prior to the Closing Date of the following conditions, any one or more of
which may be waived by Seller:
(a) COVENANTS PERFORMED; REPRESENTATIONS AND WARRANTIES TRUE.
Buyer shall have performed and complied with the covenants and agreements
contained in this Agreement required to be performed and complied with by
it at or prior to the Closing Date and the representations and warranties
of Buyer set forth in this Agreement shall be true and correct as of the
Closing Date as though made at and as of the Closing Date, and Seller
shall have received a certificate to that effect signed on behalf of Buyer
by an authorized officer of Buyer;
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(b) CORPORATE APPROVAL. At the Closing, Seller shall have received
from Buyer certified board resolutions of Buyer approving this agreement
and any and all transactions contemplated by it and the Related
Agreements.
(c) PURCHASE PRICE. At the Closing, Buyer shall have paid and
delivered the Purchase Price in accordance with Section 1.05(a) hereof.
6.03 CONDITIONS TO THE OBLIGATIONS OF BUYER TO EFFECT THE
TRANSACTIONS CONTEMPLATED HEREBY. The obligations of Buyer to effect the
transactions contemplated hereby shall be further subject to the fulfillment at
or prior to the Closing Date of the following conditions, any one or more of
which may be waived by Buyer:
(a) COVENANTS PERFORMED; REPRESENTATIONS AND WARRANTIES TRUE.
Seller and each Principal Stockholder shall have performed and complied
with the covenants and agreements contained in this Agreement required to
be performed and complied with by them at or prior to the Closing Date,
and the representations and warranties of Seller and Principal
Stockholders set forth in this Agreement shall be true and correct as of
the Closing Date as though made at and as of the Closing Date, and Buyer
shall have received a certificate to that effect signed by authorized
officers of Seller;
(b) NO MATERIAL ADVERSE CHANGE. There shall not have been, since
the date of the Financial Statements, any material adverse change in the
business, results of operations, financial condition or prospects of
Seller, and Buyer shall have received a certificate to that effect signed
by authorized officers of Seller;
(c) OPINION LETTER. At the Closing, Buyer shall have received an
opinion or opinions from counsel for Seller and Principal Stockholders,
dated as of the Closing Date and satisfactory in form and substance to
Buyer and its counsel, substantially in the form of EXHIBIT I;
(d) CONSENTS OBTAINED. Prior to Closing, all licenses, permits and
other governmental approvals and authorizations and all consents of third
parties required to effect the transactions contemplated by this
Agreement, and for the Business of Seller to be operated by Buyer after
the Closing in the manner and to the extent of Seller's current operations
(including, without limitation, all consents required for the assignment
of the Real Property Lease and Material Contracts), as listed on SCHEDULE
6.03(D), shall have been obtained and delivered to Buyer; and
ARTICLE VII
THE CLOSING
7.01 TIME AND PLACE OF CLOSING. Upon the terms and subject to the
satisfaction or waiver of the conditions in this Agreement, the Closing of the
transactions contemplated hereby (the "Closing") shall take place on July 31,
2006 at the offices of Buyer's counsel, Carter Ledyard & Milburn LLP, Two Wall
Street, New York, New York 10005, or at such other time and place as the parties
hereto may agree in writing. The effective time of the Closing is herein
referred to as the "Closing Date."
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7.02 CLOSING. At the Closing, the Buyer shall deliver to Seller an
instrument in the form of EXHIBIT B hereto by which Buyer shall assume and agree
to perform and discharge the Assumed Liabilities with effect from the Closing
Date in a form satisfactory to Seller. Seller will deliver to Buyer such
warranty deeds, bills of sale, instruments of assignment, including an
instrument in the form of EXHIBIT C and other good and sufficient instruments of
transfer and the other instruments and documents contemplated hereby, executed
by Seller or its affiliates and in form and substance reasonably satisfactory to
Buyer, as Buyer may reasonably require to vest in Buyer all right, title and
interest of Seller and their affiliates in and to the Purchased Assets, and
Buyer shall pay to Seller the amount, and deliver to Seller the other
instruments and documents required of it at the Closing.
Seller shall deliver to Buyer at the Closing possession of the
Purchased Assets being sold pursuant to this Agreement and the entire right,
title and interest of Seller in and to such Purchased Assets shall pass to Buyer
at the Closing.
ARTICLE VIII
SUCCESSOR EMPLOYER
8.01 EMPLOYMENT WITH BUYER. Buyer shall offer to enter into
employment agreements substantially in the form of EXHIBIT F hereto immediately
prior to the Closing with those employees of Seller who are employed by Seller
with respect to the Business at such time, as listed on SCHEDULE 8.01. Such
offer of employment shall include provision for compensation at rates not less
than the rates of compensation in effect for such employees immediately prior to
the Closing Date as set forth on SCHEDULE 8.01 and such other terms and
conditions as are set forth on SCHEDULE 8.01. (Those employees of Seller who
accept employment with Buyer are hereinafter referred to as the "Transferred
Employees.") Transferred Employees shall be offered employment for a term of not
less than twelve (12) months after the Closing Date; PROVIDED, HOWEVER, that as
long as he is an employee of Buyer, Donald Simons shall be entitled to terminate
the employment of any Transferred Employee during such twelve (12) month period
at his sole discretion. Buyer shall not be responsible for compensation,
bonuses, sales commissions, severance and any other payment or benefits due to
any Transferred Employee with respect to periods prior to the Closing. Buyer
shall be responsible for the payment of severance, if any, to any employee of
Seller whose employment is terminated after Closing for any reason with respect
to periods after the Closing.
8.02 ADDITIONAL EMPLOYEES. The employment of any individual by
Buyer following the Closing, other than the Transferred Employees, shall be
subject to the prior written consent of the chief executive officer of Mer
Telemanagement Solutions Ltd., which consent shall not be unreasonably withheld.
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8.03 THIRD PARTIES. The covenants of Buyer and Seller in this
Article VIII are not intended to create any right in any Transferred Employee or
his or her heirs, executors, beneficiaries or personal representatives.
8.04 ACCRUED VACATION, PERSONAL AND SICK TIME. Buyer shall not be
responsible for any vacation time, personal time or sick time accrued and unused
by any of the Transferred Employees with respect to periods prior to the Closing
Date, and prior to the Closing Date, Seller shall pay each of the Transferred
Employees for any such accrued and unused vacation, personal or sick time.
ARTICLE IX
WORKERS' COMPENSATION AND
PRODUCT LIABILITY RESPONSIBILITY
9.01 WORKERS' COMPENSATION. Seller will retain responsibility for
all workers' compensation claims of employees of Seller other than Transferred
Employees and will retain responsibility for workers' compensation claims by
Transferred Employees pending as of the Closing Date or arising as a result of
events occurring or conditions caused solely on or prior to the Closing Date.
For workers' compensation claims by Transferred Employees filed after the
Closing Date and arising solely as a result of events occurring or conditions
caused solely after the Closing Date, Buyer will be responsible. The
responsibility for workers' compensation claims by Transferred Employees
relating to events occurring or conditions caused both during the period before
and the period after the Closing Date shall be shared equitably by Buyer and
Seller.
9.02 PRODUCT LIABILITY AND WARRANTY CLAIMS. At the Closing, Buyer
shall assume and agree to perform and discharge all product liability and
warranty claims (including claims for injury to person or property) and
litigation relating to the business conducted by Buyer and arising from products
sold after the Closing Date; Seller and Principal Stockholders shall retain
responsibility for such claims and litigation relating to products sold by
Seller or any predecessor of Seller's Business on or prior to the Closing Date,
unless arising from Buyer's improper actions after the Closing Date.
9.03 RESPONSIBILITY FOR PRIOR CLAIMS. It is understood and agreed
that Buyer does not assume any liability for, and shall not otherwise be
responsible for, any product liability or warranty claims (including warranty
claims for injury to person or property) of Seller and arising from products
sold or occurrences on or prior to the Closing Date, and Seller agrees to
indemnify and hold harmless Buyer with respect to any such claims as provided in
Section 10.06.
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ARTICLE X
POST-CLOSING COVENANTS
10.01 FURTHER ASSURANCES. Subject to the terms and conditions of
this Agreement, each of the parties hereto will use its best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the sale of the Purchased Assets, the Assumed
Liabilities and the other transactions contemplated by this Agreement and the
Related Agreements. From time to time after the date hereof (including after the
Closing Date if requested), Seller and its affiliates will, at their own expense
and without further consideration, execute and deliver such instruments and
documents to Buyer as Buyer may reasonably request in order more effectively to
vest in Buyer good title to the Purchased Assets and to more effectively
consummate the transactions contemplated by this Agreement and the Related
Agreements. From time to time after the date hereof, including after the Closing
Date if requested, Buyer will, at its expense and without further consideration,
execute and deliver such instruments and documents to Seller as Seller may
reasonably request in order to more effectively transfer to Buyer the Assumed
Liabilities and to more effectively consummate the transactions contemplated
hereby and the Related Agreements.
10.02 COMMISSIONS AND FEES. Except for PASCO Business Trust d.b.a
Peter A. Sokoloff & Co., a limited liability organization and Oberon Securities,
LLC, Seller, Principal Stockholders and Buyer each represent and warrant to
the other that no broker, finder, financial adviser or other person is entitled
to any brokerage fees, commissions or finder's fees in connection with the
transactions contemplated hereby by reason of any action taken by the party
making such representation. Seller on the one hand, and Buyer, on the other
hand, will pay to the other or otherwise discharge, and will jointly and
severally indemnify and hold the other harmless from and against, any and all
claims or liabilities for all brokerage fees, commissions and finder's fees
(other than as described above) incurred by reason of any action taken by such
party.
10.03 SALES, TRANSFER AND USE TAXES. All sales, transfer and use
taxes incurred in connection with this Agreement and the Related Agreements and
the transactions contemplated hereby and thereby will be borne by Seller, and
Seller will, at its own expense, file all necessary tax returns and other
documentation with respect to all such sales, transfer and use taxes, and, if
required by applicable law, Buyer will join in the execution of any such tax
returns or other documentation.
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10.04 NONDISCLOSURE; NONCOMPETITION.
(a) Seller and Principal Stockholders agree not to use or
disclose at any time after consummation of the transactions contemplated
hereby, except with the prior written consent of an officer authorized to
act in the matter by the Board of Directors of Buyer, any trade secrets,
proprietary information or other information relating to the Business that
Buyer considers confidential relating to suppliers, operations, marketing,
cost and pricing data, master files or customer lists utilized by Seller
prior to the Closing or by Buyer or any of its affiliates (the "Buyer
Group"), or the skills, abilities and compensation of the Buyer Group's
employees, and all other similar information material to the conduct of
the Buyer Group's business, which is not presently generally known to the
public; PROVIDED, HOWEVER, that this provision shall not preclude Seller
or Principal Stockholders from (i) the use or disclosure of such
information which presently is known generally to the public or which
subsequently comes into the public domain, other than by way of disclosure
in violation of this Agreement or in any other unauthorized fashion, or
(ii) disclosure of such information required by law or court order,
provided that prior to such disclosure required by law or court order
Seller or Principal Stockholders will give Buyer three business days'
written notice (or, if disclosure is required to be made in less than
three business days, then such notice shall be given as promptly as
practicable after determination that disclosure may be required) of the
nature of the law or order requiring disclosure and the disclosure to be
made in accordance therewith.
(b) For a period of four years from the Closing Date, Seller,
Principal Stockholders and their affiliates (defined to include (i) any
entity (x) controlled by Seller or Principal Stockholders, (y) controlling
(i.e. owning beneficially more than 50% of) Seller or Principal
Stockholders or (z) under common control with Seller or Principal
Stockholders; or (ii) any executive officer, director or 5% or greater
holder of the voting equity of Seller who is not employed by the Buyer or
its subsidiaries immediately after the Closing or any entity controlled by
such person; PROVIDED, HOWEVER, notwithstanding the foregoing, that
ownership of less than 5% of the total voting equity of a publicly held
company which competes with the Business shall not be a violation of this
Section 10.04(b) (collectively, the "Seller Group")) shall not, without
the written consent of an officer authorized to act in the matter by the
Board of Directors of Buyer, directly or indirectly: (i) own, manage,
operate, join, control, participate in, invest in, or otherwise be
connected with, in any manner, whether as an officer, director, employee,
partner, investor, consultant, lender or otherwise, any business entity
which is engaged in, or is in any way related to or competitive with, the
business currently conducted by Seller; or (ii) on behalf of anyone else
engaged in any such line of business (x) persuade or attempt to persuade
any employee of any member of the Buyer Group or any individual who was an
employee of any member of the Buyer Group during the one year prior to the
date of this Agreement, to leave the employ of any member of the Buyer
Group or to become employed by any person other than the members of the
Buyer Group or hire any such employee; (y) persuade or attempt to persuade
any current client or former customer of any member of the Buyer Group to
cease doing business with, or to reduce the amount of business it does or
intends or anticipates doing with, Buyer (or any successor to Buyer's
business); or (z) solicit the business of any of such customer or former
customer with respect to the business conducted by Seller.
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10.05 INDEMNIFICATION
(a) INDEMNIFICATION BY SELLER PRINCIPALS. Seller Principals
jointly and severally agree to save, defend and indemnify Buyer and its
officers, directors, agents and employees, subsidiaries, directors and
employees of subsidiaries, and each person, if any, who controls or may
control Buyer within the meaning of the Securities Act (each of the
foregoing, a "Buyer Indemnified Party") against and hold it harmless from
any and all claims, liabilities, losses, damages, deficiencies, costs and
expenses, of every kind, nature and description, fixed or contingent
(including, without limitation, interest, penalties and counsel's fees and
expenses in connection with any action, claim or proceeding relating
thereto or seeking enforcement of a party's obligations hereunder)
("Losses"), asserted against, resulting to, imposed upon or incurred by a
Buyer Indemnified Party, directly or indirectly, arising out of (i) any
breach of any representation, warranty, covenant or agreement made by
Seller and/or Principal Stockholders under this Agreement, or (ii) any
Retained Liability, or (iii) any Environmental Claim; PROVIDED, HOWEVER,
that (A) Seller Principals shall not have any obligation to indemnify a
Buyer Indemnified Party from and against any Losses with respect to
breaches described in (i) above until a Buyer Indemnified Party has
suffered aggregate Losses by reason of all such breaches (excluding de
Minimis Claims as hereinafter defined) in excess of $15,000, in which
event a Buyer Indemnified Party shall be entitled to indemnification for
the full amount of its aggregate Losses, (B) in no event shall the
aggregate of Seller Principals' indemnification payments with respect to
breaches described in (i) above exceed 50% of the Purchase Price plus the
Contingent Payment paid by Buyer hereunder other than with respect to
fraud by any of the Seller Principals, in which case a Buyer Indemnified
Party may recover all of its Losses from the relevant Seller Principal
without limitation, and (C) indemnification claims with respect to the
representations and warranties contained in Article III and Article IIIA
hereof must be made by a Buyer Indemnified Party within the survival
period therefor specified in Section 11.06 hereof. The foregoing
limitations shall not apply with respect to any Losses arising out of any
Retained Liability or any third party claim. For purposes hereof, "de
Minimis Claims" shall mean any indemnification claim for which the amount
of Losses claimed is less than $1,000 (providing that any series of claims
arising from the same or substantially similar facts or circumstances
shall be treated as one claim for such determination).
(b) BY BUYER. Buyer agrees to save, defend and indemnify Seller
and Principal Stockholders against and hold them harmless from any and all
Losses arising out of any breach of any representation, warranty, covenant
or agreement made by Buyer under this Agreement; PROVIDED, HOWEVER, that
(A) Buyer shall not have any obligation to indemnify Seller or Principal
Stockholders from and against any Losses with respect to breaches
described in (i) above until Seller and Principal Stockholders have
suffered aggregate Losses by reason of all such breaches (excluding de
Minimis Claims) in excess of $15,000, in which event Seller and Principal
Stockholders shall be entitled to indemnification for the full amount of
their aggregate Losses, and (B) in no event shall the aggregate of Buyer's
indemnification payments with respect to breaches described in (i) above
exceed 50% of the Purchase Price plus the Contingent Payment paid by Buyer
hereunder other than with respect to fraud by the Buyer, in which case
Seller and Principal Stockholders may recover all of their Losses from the
Buyer without limitation, and (C) indemnification claims with respect to
the representations and warranties contained in Article IV hereof must be
made by Seller or Shareholders within the survival period therefor
specified in Section 11.06 hereof. The foregoing limitations shall not
apply with respect to any Losses arising out of any Assumed Liability or
any third party claim.
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10.06 DEFENSE OF CLAIMS.
(a) Should any claim, action or proceeding by or involving a third
party arise after the Closing Date for which any party (the "Indemnifying
Party") is liable for indemnification under the terms of this Agreement,
the other party (the "Indemnified Party") shall notify the Indemnifying
Party within a reasonable time after such claim, action or proceeding
arises and is known to the Indemnified Party (provided that the failure to
give timely notice shall not affect the right to indemnification hereunder
except to the extent that the Indemnifying Party is actually damaged or
prejudiced by such delay), and if the Indemnifying Party shall admit in
writing its potential indemnification obligation in respect thereof, the
Indemnified Party shall give the Indemnifying Party a reasonable
opportunity:
(i) to take part in any examination of the books and
records;
(ii) to conduct any proceedings or negotiations in connection
therewith and necessary or appropriate to defend the Indemnified Party or
prosecute any claim, action, counterclaim or other proceeding with respect
thereto;
(iii) to take all other required steps or proceedings to
settle or defend any such claim, action or proceeding; and
(iv) to employ counsel to contest any such claim, action or
proceeding in the name of the Indemnified Party or otherwise.
The expenses of all proceedings, contests or lawsuits with respect
to such claims or actions shall be borne by the Indemnifying Party. If the
Indemnifying Party wishes to assume the defense and/or settlement of any
such claim or action, it shall give written notice to the Indemnified
Party admitting the possibility of its indemnification obligation in
respect thereof and stating that it intends to assume such defense within
fifteen days after notice from the Indemnified Party of such claim or
action (unless the claim or action reasonably requires a response in less
than fifteen days after notice thereof is given to the Indemnifying Party,
in which event it shall notify the Indemnified Party at least five days
prior to such reasonably required response date), and the Indemnifying
Party shall thereafter assume the defense of such claim or action, through
counsel reasonably satisfactory to the Indemnified Party; provided that
the Indemnified Party may participate in any such defense at its own
expense. The Indemnified Party shall afford the Indemnifying Party's
counsel and other authorized representatives reasonable access during
normal business hours to all books, records, offices and other facilities
and properties of the Indemnified Party, and to the personnel of the
Indemnified Party, and shall otherwise use all reasonable efforts to
cooperate with the Indemnifying Party, such counsel and such other
authorized representatives in connection with the exercise of the rights
of the Indemnifying Party pursuant to this Section 10.07; PROVIDED,
HOWEVER, that prior to the Indemnifying Party entering into any settlement
arrangement it must first acknowledge its obligation to indemnify the
Indemnified Party.
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(b) If the Indemnifying Party shall not assume the defense of, or
if after so assuming it shall fail to actively defend, any such claim or
action, the Indemnified Party may defend against any such claim or action
in such manner as it may deem appropriate, and the Indemnified Party may
settle such claim or action on such terms as it may deem appropriate, and
the Indemnifying Party promptly shall reimburse the Indemnified Party for
the amount of such settlement and for all expenses, legal and otherwise,
reasonably and necessarily incurred by the Indemnified Party in connection
with the defense against and settlement of such claim or action. If no
settlement of such claim or action is made, the Indemnifying Party shall
satisfy any judgment rendered with respect to such claim or in such
action, before the Indemnified Party is required to do so, and pay all
expenses, legal or otherwise, reasonably and necessarily incurred by the
Indemnified Party in the defense against such claim or action.
(c) If a judgment is rendered against the Indemnified Party in any
action covered by the indemnification hereunder, or any lien attaches to
any of the assets of the Indemnified Party, the Indemnifying Party
immediately upon such entry or attachment shall pay such judgment in full
or discharge such lien unless, at the Indemnifying Party's expense and
direction, an appeal is taken under which the execution of the judgment or
satisfaction of the lien is stayed. If and when a final judgment is
rendered in any such action, the Indemnifying Party shall forthwith pay
such judgment before the Indemnified Party is compelled to do so.
10.07 MTS INTEGRATRAK GUARANTEE. MTS IntegraTRAK unconditionally and
irrevocably herby guarantees to Seller and Principal Stockholders that if Buyer
fails to make any payment pursuant to this Agreement, including, without
limitation, any Initial Contingent Payment, Subsequent Contingent Payment or
indemnification payment, MTS IntegraTRAK shall make such payment(s), subject to
any and all limitations and defenses available to Buyer. The foregoing guarantee
of MTS IntegraTRAK shall not be construed to impose upon MTS IntegraTRAK any
obligations greater than, in addition to, or other than, the Buyer's express
obligations under this Agreement. The guarantee of MTS IntegraTRAK under this
Section 10.07 shall continue in effect until the date on which Buyer has
fulfilled all of its financial obligations pursuant to the terms and conditions
of this Agreement.
MTS IntegraTRAK hereby represents and warrants to Seller and Principal
Stockholders that: (a) MTS IntegraTRAK is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware; (b) MTS
IntegraTRAK has the full corporate power and authority, and has taken all
necessary corporate action to authorize, execute, deliver and perform this
Agreement; (c) this Agreement has been duly executed and delivered by MTS
IntegraTRAK and is a valid and binding obligation of MTS IntegraTRAK enforceable
against MTS IntegraTRAK in accordance with its terms.
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10.08 NAME. Seller will grant to Buyer all necessary consents to
enable Buyer to change its corporate name to "MTS TelSoft, Inc." in its State of
incorporation and to qualify its business with the name "MTS TelSoft, Inc."
After the Closing, Seller will abstain from using the name "TelSoft Solutions,
Inc.," except as required by law, and within five days of the Closing Date will
change its name by removing the words "TelSoft Solutions" to a name reasonably
not to be deemed similar to "TelSoft Solutions, Inc."
10.09 EXPENSES. Except as otherwise provided herein, Seller,
Principal Stockholders and Buyer shall each bear their own costs and expenses
incurred in connection with this Agreement, the Related Agreements and the
transactions contemplated hereby and thereby. Buyer shall be responsible for the
fees, commissions, expenses and reimbursements incurred by or required to be
paid to its and Buyer's professional advisors, and Seller and Principal
Stockholders shall be responsible for the fees, commissions, expenses and
reimbursements incurred by or required to be paid to Seller's or Principal
Stockholders' professional advisors.
ARTICLE XI
MISCELLANEOUS
11.01 BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
11.02 NO ASSIGNMENT. This Agreement may not be assigned by any party
hereto without the prior written consent of the other parties, PROVIDED,
HOWEVER, that each party may assign its rights, but not its obligations,
hereunder, in whole or in part, to any corporation or other entity controlled
by, controlling or under common control with such party, and such party or its
assignee may assign their rights hereunder, in whole or in part, to any
purchaser of substantially all of the assets or business of such party or such
assignee. Any attempted or purported assignment by either party other than in
accordance with this Section 11.02 shall be null and void. Nothing herein is
intended to prohibit Seller from assigning the proceeds of the sale hereunder to
a third party.
11.03 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and by any party on separate counterparts, each of which as so
executed and delivered shall be deemed an original but all of which together
shall constitute one and the same instrument, and it shall not be necessary in
making proof of this Agreement as to any party hereto to produce or account for
more than one such counterpart executed and delivered by such party. Execution
by facsimile signature shall be deemed to be, and shall have the same effect as,
execution by original signature.
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11.04 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal substantive laws of the State of
California (without regard to conflict of law principles) as to all matters,
including but not limited to matters of validity, construction, effect,
performance and remedies.
11.05 ARBITRATION. The parties hereto agree that any dispute or
claim arising out of or relating in any way to this Agreement or the Related
Agreements or the transactions contemplated hereby and thereby, shall be settled
by arbitration administered by the American Arbitration Association under its
Commercial Arbitration Rules. Unless the parties otherwise agree in writing, the
arbitration shall be held in Los Angeles, California. Judgment on the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof.
11.06 SURVIVAL. The representations, warranties, indemnities and
agreements of the parties to this Agreement contained herein or in any document
delivered pursuant to or in connection herewith shall survive the Closing for
fifteen (15) months and shall survive any investigation by any party hereto;
PROVIDED, HOWEVER, that the representations and warranties of Seller contained
in Sections 3.05, 3.09 and 3.20 shall survive until the expiration of the
relevant statute of limitations. The covenants contained in Section 5.05 and
Article X shall survive the Closing indefinitely, except as otherwise provided
therein.
11.07 NOTICES. All notices required to be given under the terms of
this Agreement or which any of the parties desires to give hereunder shall be in
writing and personally delivered or sent by registered or certified mail, return
receipt requested, or sent by overnight courier, or sent by fax addressed as
follows:
(a) TO BUYER. If to Buyer addressed to:
MTS Acquisition Corp.
c/o MTS IntegraTRAK Inc.
12600 S.E. 38th. Street
Suite 250
Bellevue, WA 98006
Fax: 425-401-1700
Attn: President
With copies to:
Mer Telemanagement Solutions Ltd.
22 Zarhin Street
Ra'anana 43662, Israel
Fax: +972-9-746-6596
Attn: Chief Financial Officer
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Carter Ledyard & Milburn LLP
2 Wall Street
New York, New York 10005
Fax: 212-732-3232
Attn: Steven J. Glusband, Esq.
(b) TO MTS INTEGRATRAK. If to MTS IntegraTRAK addressed to:
MTS IntegraTRAK Inc.
12600 S.E. 38th. Street
Suite 250
Bellevue, WA 98006
Fax: 425-401-1700
Attn: President
With copies to:
Mer Telemanagement Solutions Ltd.
22 Zarhin Street
Ra'anana 43662, Israel
Fax: +972-9-746-6596
Attn: Chief Financial Officer
Carter Ledyard & Milburn LLP
2 Wall Street
New York, New York 10005
Fax: 212-732-3232
Attn: Steven J. Glusband, Esq.
(c) TO SELLER OR PRINCIPAL STOCKHOLDERS. If to Seller or Principal
Stockholders addressed to:
TelSoft Solutions, Inc.
100 N. Brand Blvd., Suite 400
Glendale, CA 91203
Fax: 818-545-9704
Attn: Donald Simons
Any such notice shall be deemed to have been duly given or made and
to have become effective (a) if delivered by hand to an officer of the party to
which it is directed at the time of the receipt thereof by such officer, (b) if
sent by recognized overnight carrier or by registered or certified first-class
mail, postage pre-paid, upon the date of first attempted delivery, as shown on
the return receipt therefore or the returned item itself; and (c) if sent by
facsimile at the time of dispatch thereof which machine generated confirmation
of transmission, if in normal business hours in the country of receipt, or
otherwise at the opening of business on the following business day.
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Any party may designate a change of address at any time by giving
written notice thereof to the other parties.
11.08 AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified or supplemented only by a written instrument executed by all of the
parties hereto.
11.09 WAIVER OF COMPLIANCE. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party or parties
entitled to the benefits thereof only by a written instrument signed by the
party or parties granting such waiver, but any such waiver or the failure to
insist upon strict compliance with any obligation, covenant, agreement or
condition herein, shall not operate as a waiver of, or estoppel with respect to,
any subsequent or other failure or breach.
11.10 INTERPRETATION. The table of contents and the article and
section headings contained in this Agreement are solely for the purpose of
reference, are not part of the agreement of the parties and shall not in any way
affect the meaning or interpretation of this Agreement. As used in this
Agreement, the term "person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization or a governmental entity or any department or agency thereof. As
used in this Agreement, the term "subsidiary," when used in reference to any
other person, shall mean any corporation of which outstanding securities having
ordinary voting power to elect a majority of the Board of Directors of such
corporation are owned directly or indirectly by such other person. As used in
this Agreement, the term "generally accepted accounting principles" means
generally accepted accounting principles as in effect and as applied in the
United States. As used in this Agreement, the term "affiliate" shall have the
meaning set forth in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934. When used herein, the masculine, feminine or
neuter gender and the singular or plural number shall each be deemed to include
the others whenever the context so indicates or permits.
11.11 ENTIRE AGREEMENT. This Agreement and the Related Agreements,
including the schedules, exhibits, documents, certificates and instruments
referred to herein and therein, embody the entire agreement and understanding of
the parties hereto in respect of any transactions contemplated by this Agreement
and the Related Agreements and supersede all prior agreements, representations
and understandings among the parties with respect thereto or with respect to the
transactions contemplated hereby.
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11.12 SPECIFIC PERFORMANCE.
(a) Seller and Principal Stockholders acknowledge that, in view of
the uniqueness of the Business of Seller and the transactions contemplated
hereby, Buyer may not have an adequate remedy at law for money damages in
the event that this Agreement with respect to the sale of the Purchased
Assets has not been performed in accordance with its terms by Seller or
Principal Stockholders and therefore Seller and Principal Stockholders
agree that Buyer shall be entitled to specific enforcement of the terms
hereof with respect to the sale of the Purchased Assets and the other
transactions contemplated hereby in the event of breach by Seller or
Principal Stockholders in addition to any other remedy to which Buyer may
be entitled, at law or in equity, for such breach.
(b) In the event of a breach or threatened breach by the Seller
Group of their covenants under Section 10.05 hereof, Seller and Principal
Stockholders acknowledge that Buyer may not have an adequate remedy at law
for money damages. Accordingly, in the event of such breach or threatened
breach, Buyer will be entitled to such equitable and injunctive relief as
may be available to restrain the Seller Group from the violation of the
provisions of said Section 10.05 in addition to any other remedy to which
Buyer may be entitled, at law or in equity, for such breach or threatened
breach.
11.13 SEVERABILITY OF COVENANTS. Seller and Principal Stockholders
acknowledge that the covenants contained in Section 10.04 of this Agreement are
reasonable and necessary for the protection of Buyer and its investment in the
Purchased Assets and that each covenant, and the period or periods of time and
the types and scope of restrictions on the activities specified therein are, and
are intended to be, divisible and shall be deemed a series of separate
covenants, one for each state or jurisdiction to which they are applicable. In
the event that any provision of this Agreement, including any sentence, clause
or part hereof, shall be deemed contrary to law or invalid or unenforceable in
any respect by a court of competent jurisdiction, the remaining provisions shall
remain in full force and effect to the extent that such provisions can still
reasonably be given effect in accordance with the intentions of the parties, and
any invalid and unenforceable provisions shall be deemed, without further action
on the part of the parties, modified, amended and limited solely to the extent
necessary to render the same valid and enforceable.
ARTICLE XII
TERMINATION AND ABANDONMENT
12.01 TERMINATION. This Agreement may be terminated at any time
prior to the Closing:
(a) by the written agreement of all of the parties hereto;
(b) by Buyer if there has been a material violation or breach by
Seller or Principal Stockholders of any covenant, agreement,
representation or warranty contained in this Agreement entitling Buyer not
to Close under Article VI;
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(c) by Seller or Principal Stockholders if there has been a
material violation or breach by Buyer of any covenant, agreement,
representation or warranty contained in this Agreement entitling Seller
not to Close under Article VI; or
(d) by either Buyer, Seller or Principal Stockholders if the
Closing of the transactions contemplated by this Agreement shall not have
been consummated on or before August 1, 2006, PROVIDED, HOWEVER, that
termination pursuant to this subsection (d) shall not relieve any party of
the liabilities contemplated by the proviso to the second sentence of
Section 12.02 hereof, if applicable.
12.02 PROCEDURE AND EFFECT OF TERMINATION. In the event of
termination of this Agreement and abandonment of the transactions contemplated
hereby by any of the parties pursuant to Section 12.01(b), (c) or (d) of this
Agreement, written notice thereof shall forthwith be given by the terminating
party to the other parties and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned, without further action by
any of the parties hereto. If this Agreement is properly terminated, none of the
parties hereto nor any of their respective directors, officers or affiliates, as
the case may be, shall have any liability or further obligation to any of the
other parties or any of their respective directors, officers or affiliates, as
the case may be, pursuant to this Agreement; PROVIDED, HOWEVER, that if any such
termination shall result from the breach of a warranty or the failure of a party
to fulfill a condition to the performance of the obligations of the other
parties or to perform a covenant or agreement contained in this Agreement or
from any other willful breach by any party to this Agreement, such party shall
be solely liable for any and all damages, costs and expenses (including, but not
limited to, counsel's fees) sustained or incurred by the other parties as a
result of such failure or breach. The provisions of Sections 5.05, 11.04, 11.05,
11.07, 11.13 and 12.02 shall survive any termination hereof.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the parties have each caused this Agreement to
be executed by their duly authorized officers as of the date first above
written.
MTS ACQUISITION CORP.
By: /s/Eytan Bar
------------
Name: Eytan Bar
Title: President
MTS INTEGRATRAK INC.
By: /s/Eytan Bar
------------
Name: Eytan Bar
Title: President
TELSOFT SOLUTIONS, INC.
By: /s/Donald Simons
----------------
Name: Donald Simons
Title: President
PRINCIPAL STOCKHOLDERS
CONSULTING SCIENCES, INC.
By: /s/Dale Zuehls
--------------
Name: Dale Zuehls
Title: President
DONALD SIMONS
By: /s/Donald Simons
----------------
DALE ZUEHLS
By: /s/Dale Zuehls
--------------
SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT
49
