SECURITIES PURCHASE AGREEMENT
BY AND AMONG
KI EQUITY PARTNERS V, LLC AND
QUIKBYTE SOFTWARE, INC.
DATED AS OF MARCH 2, 2007
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is made and
entered into as of this 2nd day of March, 2007, by and among KI Equity Partners
V, LLC, a Delaware limited liability company (the "Buyer"), and QuikByte
Software, Inc., a Colorado corporation (the "Company").
RECITALS
A. The Company currently has 292,049,012 shares of common stock, $0.0001 par
value, issued and outstanding ("Common Stock"). B. As a condition to the closing
of the transactions contemplated under this Agreement, the Company will complete
a reverse stock split of its Common Stock on a 1-for-20 basis ("Reverse Split"),
which Reverse Split has been duly authorized and approved by the Company's
stockholders and directors.
C. Following the Reverse Split, the Company will have 14,602,451 shares of
common stock issued and outstanding, subject to an additional share issuance to
account for the round up of fractional shares in connection with the Reverse
Split.
D. As a condition to the closing of the transactions contemplated under this
Agreement, the Company's controlling stockholder of the Company will tender to
the Company for cancellation certain certificates representing 7,450,000 shares
of Common Stock, on a post-Reverse Split basis ("Share Cancellation").
E. The Company desires to issue 60,000,000 shares of Common Stock, on a
post-Reverse Split basis ("Shares") to the Buyer, and the Buyer desires to
purchase the Shares from the Company ("Share Issuance"), for a purchase price of
$600,000, or $0.01 per share, and on such other terms and conditions set forth
herein.
F. As a condition to the closing of the Share Issuance, all of the proceeds from
the Share Issuance shall be used to pay all liabilities and obligations of the
Company at Closing, all as more specifically set forth herein. G. In connection
with the Share Issuance, the Shares issued by the Company to the Buyer will be
granted registration rights pursuant to the terms and conditions set forth in a
certain registration rights agreement between the Company and the Buyer, the
form of which is attached hereto as Exhibit A ("Registration Rights Agreement").
H. The execution and delivery of this Agreement, the consummation of the
transactions contemplated under this Agreement and the execution and delivery of
the Registration Rights Agreement have been duly authorized and approved by the
directors of the Company, and no approval of the stockholders of the Company is
required with respect to any of the foregoing.
NOW, THEREFORE, in consideration of the above recitals, the covenants,
promises and representations set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
ARTICLE I
SALE AND PURCHASE
1.1 Sale and Purchase; Registration Rights. At the Closing and subject
to and upon the terms and conditions of this Agreement, the Company agrees to
sell and issue to the Buyer, and the Buyer agrees to purchase from the Company,
the Shares. The Shares, when issued, shall have registration rights pursuant to
the terms and conditions of the Registration Rights Agreement, which
Registration Rights Agreement shall be executed and delivered by the Company and
the Buyer at Closing. Any registration statement to be filed with respect to the
Shares, including any costs associated therewith, shall be the responsibility of
the Company after the Closing and all costs and expenses incurred in connection
with the registration of the Shares shall not be deducted or paid from the
portion of the Purchase Price paid to the Escrow Agent for the disbursement and
payment of Company Closing Obligations as described in Section 1.3 of this
Agreement. For purposes of this Agreement, the term "Registration Obligations"
shall mean any such costs and expenses or the obligations imposed on the Company
directly or indirectly related to or arising out of the registration of the
Shares, the Registration Rights Agreement, or both of them ("Registration
Obligations"). Immediately following the Closing, and after giving effect to the
Reverse Split, the Share Cancellation and the Settlement (as defined in Section
6.3(g)), the Shares shall constitute not less than 92.7% of the issued and
outstanding shares of the Company's Common Stock. The Share Issuance shall be
referred to herein as the "Transaction."
1.2 Closing. Unless this Agreement shall have been terminated pursuant
to Article VIII hereof, the closing of the Transaction (the "Closing") shall
take place at the offices of the Escrow Agent at a time and date to be specified
by the parties, which shall be no later than the third business day after the
satisfaction or waiver of the conditions set forth in Article VI, or at such
other time, date and location as the parties hereto agree in writing (the
"Closing Date").
1.3 Purchase Price. The aggregate purchase price for the Shares shall
be Six Hundred Thousand Dollars ($600,000) ("Purchase Price"). At Closing, the
Purchase Price shall be deposited in the Escrow Account (as defined herein) and
disbursed to pay the Company Closing Obligations as set forth in Section 5.1
hereof.
1.4 Issuance of Certificates Representing the Shares. At Closing, the
Company shall deliver the certificate(s) representing the Shares in accordance
with directions delivered to Executive Registrar & Transfer, Inc. ("Transfer
Agent") to issue to the Buyer certificates representing the Shares
("Certificates") with the restrictive legend under the Securities Act of 1933,
as amended ("Securities Act"), and Michael A. Littman, Esq. ("Company's
Counsel") shall deliver to the Transfer Agent an opinion in such form that is
acceptable to the Transfer Agent so that the Certificates may be promptly issued
and delivered to the Buyer (collectively, the "Issuance Opinion").
1.5 Taking of Necessary Action; Further Action. If, at any time after
the Closing, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Buyer with full right, title and
possession to the Shares, the Company shall take all such lawful and reasonable
action.
1.6 Escrow Agreement. To ensure the payment and handling of the Deposit
(as defined below), the payment of the Purchase Price and the Company Closing
Obligations, and the prompt delivery of the Certificates, the parties hereto
hereby agree that (i) the Deposit, (ii) Purchase Price (less the amount of the
Deposit), and (iii) the Certificates (collectively, the "Escrow Deliveries")
shall be delivered in escrow to Michael A. Littman, Esq., in his capacity as
escrow agent ("Escrow Agent") to be held pursuant to the terms and conditions of
a certain escrow agreement, the form of which is attached hereto as Exhibit B
("Escrow Agreement"). The Escrow Agreement shall be executed and delivered at
the time this Agreement is executed and delivered by the parties, with the
Escrow Agent to have only such obligations set forth in the Escrow Agreement.
1.7 Deposit. Within three (3) business days following execution of this
Agreement, the Buyer shall deposit the sum of $25,000 as a refundable deposit
("Deposit") in the escrow account maintained by the Escrow Agent ("Escrow
Account") to be held by the Escrow Agent in accordance with the terms and
conditions under Section 1.7 hereof and the Escrow Agreement. At Closing, the
Deposit shall be a credited against the Purchase Price. If the Transaction fails
to close solely as a result of failure by the Buyer to satisfy the conditions
precedent to Closing that are applicable to it under Section 6.2 of this
Agreement or as a result of a material breach or misrepresentation of any
warranty, representation, agreement or covenant by the Buyer under this
Agreement, then the Deposit shall be promptly paid to the Company. If the
Transaction fails to close for any reason (other than as set forth in the
preceding sentence), the Deposit shall be promptly refunded and paid to the
Buyer in accordance with the terms of the Escrow Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to, and covenants with, the
Buyer, as follows:
2.1 Organization and Qualification.
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(a) The Company is a corporation duly incorporated or
organized, validly existing and in good standing under the laws of the State of
Colorado and has the requisite corporate power and authority to own, lease and
operate its assets and properties and to carry on its business as it is now
being conducted by the Company. The Company is in possession of all franchises,
grants, authorizations, licenses, permits, easements, consents, certificates,
approvals and orders ("Approvals") necessary to own, lease and operate the
properties it purports to own, operate or lease and to carry on its business as
it is now being by the Company. The Company is duly qualified to conduct its
business in each state and each foreign jurisdiction listed on Schedule 2.1
hereof, and the Company has duly and properly surrendered its qualification to
do business in the State of California. Except as set forth in Schedule 2.1
hereof, the Company has timely filed each annual corporate or information report
("Annual Report") required to be filed by it in the state of Colorado and in
each state and foreign jurisdiction in which it is required to be qualified to
do business as a foreign corporation. Complete and correct copies of the
articles of incorporation or organization and by-laws (or other comparable
governing instruments with different names) (collectively referred to herein as
"Charter Documents") of the Company, as amended and currently in effect, and
each Annual Report filed by the Company have been heretofore delivered to the
Buyer. The Company is not in violation of any of the provisions of the Company's
Charter Documents.
(b) The minute books of the Company contain true, complete and accurate records
of all meetings and consents in lieu of meetings of its Board of Directors (and
any committees thereof), similar governing bodies and stockholders ("Corporate
Records"), since the time of the Company's organization. Copies of such
Corporate Records of the Company have been heretofore delivered to the Buyer.
(c) The Company has heretofore delivered to the Buyer a true, complete and
accurate record of the registered ownership of the Company's capital stock
maintained by the Transfer Agent as of a recent date acceptable to the Buyer and
a record of the beneficial ownership of the Company's capital stock as of a
recent date acceptable to the Buyer, together stock transfer and issuance
ledgers and records from the Transfer Agent ("Stock Records").
2.2 Subsidiaries. The Company has no Subsidiaries. Except as described
in Schedule 2.2 hereto, the Company does not own, directly or indirectly, any
ownership, equity, profits or voting interest in any Person and has no agreement
or commitment to purchase any such interest, and the Company has not agreed and
is not obligated to make and is not bound by any written, oral or other
agreement, contract, subcontract, lease, binding understanding, instrument,
note, option, warranty, purchase order, license, sublicense, insurance policy,
benefit plan, commitment or undertaking of any nature, as of the date hereof or
any date hereafter, under which any of them may be obligated to make any future
investment in or capital contribution to any other entity. For purposes of this
Agreement, the term "Subsidiary" shall mean any Person in which the Company or
any Subsidiary directly or indirectly, owns beneficially securities or interests
representing 50% or more of (x) the aggregate equity or profit interests, or (y)
the combined voting power of voting interests ordinarily entitled to vote for
management or otherwise.
2.3 Authority Relative to this Agreement. The Company has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated hereby
(including the Transaction). The execution and delivery of this Agreement and
the consummation by the Company of the transactions contemplated hereby
(including the Transaction) have been duly and validly authorized by all
necessary corporate action on the part of Company (including the approval by its
board of directors), and no other corporate proceedings on the part of the
Company (including the approval of the Company's stockholders) are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by the Company
and, assuming the due authorization, execution and delivery thereof by the
Buyer, constitutes the legal and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
and public policy.
2.4 No Conflict; Required Filings and Consents.
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(a) The execution and delivery of this Agreement by the
Company does not, and the performance of this Agreement by the Company shall
not: (i) conflict with or violate the Company's Charter Documents, (ii) conflict
with or violate any Legal Requirements to which the Company is bound, or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or materially impair the
Company's rights or alter the rights or obligations of any third party under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of the Company pursuant to any Contracts except, with
respect to clauses (ii) or (iii), for any such conflicts, violations, breaches,
defaults or other occurrences that would not, individually and in the aggregate,
have a Material Adverse Effect on the Company. For purposes of this Agreement,
the following terms are hereby defined:
(1) "Legal Requirements" means any federal, state, local, municipal,
foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Entity (as defined in
Section 2.4(b)), and all requirements set forth in applicable Contracts (as
defined in Section 2.16).
(2) "Material Adverse Effect" when used in connection with an entity means
any change, event, violation, inaccuracy, circumstance or effect, individually
or when aggregated with other changes, events, violations, inaccuracies,
circumstances or effects, that is materially adverse to the business, assets
(including intangible assets), revenues, financial condition or results of
operations of such entity, if any, taken as a whole (it being understood that
neither of the following alone or in combination shall be deemed, in and of
itself, to constitute a Material Adverse Effect: (a) changes directly and
proximately attributable to the public announcement or pendency of the
transactions contemplated hereby, (b) changes in general national or regional
economic conditions or (c) changes affecting the industry generally in which the
Company or the Buyer operates).
(b) The execution and delivery of this Agreement by the
Company does not, and the performance of its obligations hereunder will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any court, administrative agency, commission, governmental or
regulatory authority, domestic or foreign (a "Governmental Entity"), except for
applicable requirements, if any, of the Securities Act, the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), state securities laws ("Blue Sky
Laws") in connection with the issuance of the Company's securities and the
change of control (as contemplated by this Agreement), and the rules and
regulations thereunder, and appropriate documents with the relevant authorities
of other jurisdictions in which the Company is qualified to do business.
2.5 Capitalization.
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(a) The authorized capital stock of the Company consists of 500,000,000
shares of common stock, $0.0001 par value ("Common Stock") and 100,000,000
shares of preferred stock, $0.0001 par value ("Preferred Stock"). The Board of
Directors and the stockholders of the Company shall have duly authorized and
approved the Reverse Split and the amendment to the Company's articles of
incorporation reducing the Company's authorized common stock to 250,000,000
shares, $0.0001 par value, and the Company authorized preferred stock to
10,000,000 shares, $0.0001 par value ("Authorized Stock Reduction"). Prior to
the Closing, the Company shall file with, and had accepted by, the Secretary of
State of the State of Colorado, an amendment to the Company's articles of
incorporation to give effect to the Reverse Split and the Authorized Stock
Reduction ("Articles of Amendment"). At the close of business on the business
day prior to the date hereof: (i) 292,049,012 shares of Common Stock were issued
and outstanding, on a pre-Reverse Split basis, all of which are validly issued,
fully paid and nonassessable; (ii) no shares of Common Stock were held in the
Company's treasury; (iii) no shares of Preferred Stock were issued and
outstanding; (iv) no shares of Common Stock were reserved for issuance upon the
exercise of options to purchase Common Stock granted to employees of the Company
or other parties ("Stock Options"), and there have never been any grants of
Stock Options by the Company; (v) no shares of Common Stock were reserved for
issuance upon the exercise of warrants to purchase Common Stock ("Warrants"),
and there are no Warrants issued or outstanding; and (vi) no shares of Common
Stock were reserved for issuance upon the conversion of the Preferred Stock or
any outstanding convertible notes, debentures or securities ("Convertible
Securities"). All securities of the Company have been issued or granted in
compliance with (i) all applicable securities laws and regulations, (ii) all
Legal Requirements, and (iii) all requirements set forth in any applicable
contracts, except for 6,150,000 shares of Common Stock issued pursuant to the
exercise of warrants from August 1, 1990 through October 31, 1990, which
issuance may be considered unregistered and may have given rise to certain
rescission rights, which rescission rights have since expired due to the passage
of time.
(b) Except as set forth in Schedule 2.5 hereof or as set forth in Section
2.5(a) hereof there are no subscriptions, options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which the
Company is a party or by which it is bound obligating the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, or to repurchase,
redeem or otherwise acquire, or cause the repurchase, redemption or acquisition
of, any shares of capital stock, partnership interests or similar ownership
interests of the Company or obligating the Company to grant, extend, accelerate
the vesting of or enter into any such subscription, option, warrant, equity
security, call, right, commitment or agreement. Except as set forth in Schedule
2.5 hereof and except with respect to the Settlement and the Share Cancellation,
there are no lock up agreements or other agreements affecting the transfer of
any equity security of any class of the Company. Except as set forth in Schedule
2.5, no bonds, debentures, notes or other indebtedness of the Company having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which the stockholders of the Company may vote
are issued or outstanding.
(c) Except as contemplated by this Agreement and except as set forth in
Schedule 2.5 hereto, there are no registration rights, and there is no voting
trust, proxy, rights plan, anti-takeover plan, or other agreement or
understanding to which the Company is a party or by which the Company is bound
with respect to any equity security of any class of the Company.
(d) The Shares to be issued with respect to the Transaction contemplated
under this Agreement shall, when issued, be duly authorized, validly issued,
fully paid and nonassessable, shall be free and clear of all liens, claims,
charges, encumbrances, pledges, mortgages, security interests, options, rights
to acquire, proxies, voting trusts or similar agreements, restrictions on
transfer or adverse claims of any nature whatsoever ("Liens"), and shall have
been issued in compliance with all Legal Requirements.
2.6 Compliance. The Company has complied with, is not in violation
of, any laws, rules or regulations of any Governmental Entity including, without
limitation, environmental laws and regulations, and laws and regulations
regarding hazardous and toxic substances and materials, except for failures to
comply or violations which, individually or in the aggregate, have not had and
are not reasonably likely to have a Material Adverse Effect on the Company. 2.7
Financial Statements; Filings.
(a) The Company has made available to the Buyer each report and statement
filed by the Company with any Governmental Entity (the "Company Reports"), which
are all the forms, reports and documents required to be filed by the Company
with any Governmental Entity, and such Company Reports (together with the 2006
Annual Report to be filed prior to the Closing) are true, correct and complete.
As of their respective dates, the Company Reports (i) were prepared in
accordance and complied in all material respects with the requirements of the
applicable Governmental Entity, and the rules and regulations of such
Governmental Entities applicable to such Company Reports, and (ii) did not at
the time they were filed (and if amended or superseded by a filing prior to the
date of this Agreement then on the date of such filing and as so amended or
superceded) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Except to the extent set forth in the preceding sentence, the
Company makes no representation or warranty whatsoever concerning the Company
Reports as of any time other than the time they were filed.
(b) The Company has provided to the Buyer a correct and complete copy of
the audited financial statements (including, in each case, any related notes
thereto) of the Company for the prior three fiscal years ended, complied as to
form in all material respects with the published rules and regulations of any
applicable Governmental Entity, prepared in accordance with the generally
accepted accounting principles of the United States ("U.S. GAAP") applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto), audited by a certifying accountant registered with the
Public Company Accounting Oversight Board ("PCAOB"), and each fairly presents in
all material respects the financial position of the Company at the respective
dates thereof and the results of its operations and cash flows for the periods
indicated.
(c) The Company has provided to the Buyer a correct and complete copy of
the unaudited financial statements (including, in each case, any related notes
thereto) of the Company for the most recent interim period ended, complied as to
form in all material respects with the published rules and regulations of any
applicable Governmental Entity, prepared in accordance with U.S. GAAP applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereto), and each fairly presents in all material respects the
financial position of the Company at the respective dates thereof and the
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal
adjustments which were not or are not expected to have a Material Adverse Effect
on the Company.
(d) The Company has previously furnished to the Buyer a complete
and correct copy of any amendments or modifications, which have not yet been
filed with the applicable Governmental Entities but which are required to be
filed with respect to the Company, to agreements, documents or other instruments
which previously had been filed by the Company with the applicable Governmental
Entities pursuant to applicable rules and regulations. The books of account and
other financial records of the Company have been maintained in accordance with
good business practice.
(e) The Company is in full compliance with, and current in, all of the
reporting, filing and other requirements under the Exchange Act. The shares of
the Company's Common Stock have been duly and properly registered under Section
12(g) of the Exchange Act, no other securities of the Company are registered
under Section 12(g) of the Exchange Act, and the Company is in full compliance
with all of the requirements under, and imposed by, Section 12(g) of the
Exchange Act.
2.8 No Liabilities. Except as set forth on Schedule 2.8 hereto, the
Company has no Liabilities. For purposes of this Agreement, "Liability" or
"Liabilities" shall mean, all debts, liabilities and obligations, direct,
indirect, absolute or contingent of the Company, whether accrued, vested or
otherwise, whether known or unknown and whether or not reflected, or required in
accordance with U.S. GAAP to be reflected, in the Company's balance sheet, but
shall specifically exclude the Registration Obligations. Each liability set
forth on Schedule 2.8 shall be set forth on the Disbursement Schedule and paid
by the Company at Closing, pursuant to the provisions of Section 5.1 hereof.
2.9 Absence of Certain Changes or Events. Except as set forth in the
Company Reports filed with the SEC, since September 30, 2006, there has not
been: (i) any Material Adverse Effect on the Company, (ii) any declaration,
setting aside or payment of any dividend on, or other distribution (whether in
cash, stock or property) in respect of, any of the Company's capital stock, or
any purchase, redemption or other acquisition of any of the Company's capital
stock or any other securities of the Company or any options, warrants, calls or
rights to acquire any such shares or other securities, (iii) any split,
combination or reclassification of any of the Company's capital stock (other
than the Reverse Split and the Authorized Stock Reduction contemplated
hereunder), (iv) any granting by the Company of any increase in compensation or
fringe benefits, except for normal increases of cash compensation in the
ordinary course of business consistent with past practice, (v) any material
change by the Company in its accounting methods, principles or practices, except
as required by concurrent changes in U.S. GAAP, (vi) any change in the auditors
of the Company, (vii) any issuance of capital stock of the Company, or (vii) any
revaluation by the Company of any of their respective assets, other than in the
ordinary course of business.
2.10 Litigation. Except as disclosed in Schedule 2.10 hereto, (a) there
are no claims, suits, actions or proceedings (at law or in equity) pending or
threatened against the Company, before any Governmental Entity or arbitrator
(including, without limitation, any allegation of criminal conduct or a
violation of the Racketeer and Influenced Corrupt Practices, as amended), and
(b) the Company is not subject to any outstanding order, writ, judgment,
injunction, order, decree or arbitration order. There are no suits, actions,
claims, proceedings pending or threatened, seeking to prevent, hinder, modify or
challenge the transactions contemplated under this Agreement.
2.11 Employee Benefit Plans.
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(a) Except as set forth on Schedule 2.11 hereto, the Company
has no arrangement or policy (written or oral) providing for insurance coverage,
workers' compensation, disability benefits, supplemental unemployment benefits,
vacation benefits, severance or termination benefits, retirement or deferred
compensation, profit sharing, bonuses, stock options, stock appreciation rights,
stock purchases or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which is maintained or administered by the
Company, or to which the Company contributes, and which covers any employee or
former employee of the Company or under which the Company has any liability,
including any "employee welfare benefit plan," "employee benefit plan" and
"employee pension benefit plan" as defined under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
(b) Except as disclosed on Schedule 2.11 hereto, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in any payment (including
severance, unemployment compensation, golden parachute, bonus or otherwise)
becoming due to any stockholder, director, employee or consultant of the
Company.
2.12 Labor Matters. The Company is not a party to any collective
bargaining agreements or labor union contract. There are no strikes or labor
disputes or lawsuits, unfair labor or unlawful employment practice charges,
contract grievances or similar actions pending or threatened by any of the
employees, former employees or employment applicants of the Company.
2.13 Restrictions on Business Activities. There is no agreement,
commitment, judgment, injunction, order or decree binding upon Company or to
which Company is a party which has or could reasonably be expected to have the
effect of prohibiting or materially impairing any business practice of the
Company, any acquisition of property by the Company or the current or future
conduct of business by the Company.
2.14 Taxes.
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(a) Definition of Taxes. For the purposes of this Agreement,
"Tax" or "Taxes" refers to any and all federal, state, local and foreign taxes,
including, without limitation, gross receipts, income, profits, sales, use,
occupation, value added, ad valorem, transfer, franchise, withholding, payroll,
recapture, employment, excise and property taxes, assessments, governmental
charges and duties together with all interest, penalties and additions imposed
with respect to any such amounts and any obligations under any agreements or
arrangements with any other person with respect to any such amounts and
including any liability of a predecessor entity for any such amounts.
(b) Tax Returns and Audits. Except as set forth in Schedule 2.14 hereto:
(i) the Company has timely filed all federal, state, local and foreign
returns, estimates, information statements and reports relating to Taxes
("Returns") required to be filed by the Company with any Tax authority
prior to the date hereof, except such Returns which are not material to the
Company. All such Returns are true, correct and complete and the Company
has no basis to believe that any audit of the Returns would cause a
Material Adverse Effect upon the Company or its financial condition. The
Company has paid all Taxes shown to be due on such Returns.
(ii) All Taxes that the Company is required by law to withhold or
collect have been duly withheld or collected, and have been timely paid
over to the proper governmental authorities to the extent due and payable.
(iii) The Company has not been delinquent in the payment of any
material Tax nor is there any material Tax deficiency outstanding, proposed
or assessed against the Company, nor has the Company executed any unexpired
waiver of any statute of limitations on or extending the period for the
assessment or collection of any Tax.
(iv) No audit or other examination of any Return of the Company by any
Tax authority is known by the Company to be presently in progress, nor has
the Company been notified of any request for such an audit or other
examination.
(v) No adjustment relating to any Returns filed by the Company has
been proposed in writing, formally or informally, by any Tax authority to
the Company or any representative thereof.
(vi) The Company has no liability for any Taxes for its current fiscal
year, whether or not such Taxes are currently due and payable.
2.15 Brokers; Third Party Expenses. Except as set forth on Schedule
2.15, the Company has not incurred, nor will it incur, directly or indirectly,
any liability for brokerage or finders' fees or agent's commissions or any
similar charges in connection with this Agreement or any transactions
contemplated hereby.
2.16 Agreements, Contracts and Commitments. Except as set forth in
Schedule 2.16, (a) there are no written employment agreements, termination or
severance agreements, or consulting agreements with the current or former
officers, directors, employees or consultants of the Company and to which the
Company is a party; (b) the Company is not a party to or bound by any
commitment, agreement or other instrument which contemplates the payment of any
monies or which is otherwise material to the operations, assets or financial of
the Company, including but not limited to any royalty, franchising fees, or any
other fee based on a percentage of revenues or income; (c) the Company is not a
party to or is not bound by any commitment, agreement or instrument which limits
the freedom of the Company to compete in any line of business or with any
Person; and (d) the Company is not in default in any material respect under any
material lease, contract, mortgage, indentures, note, deed of trust, loan
agreement, bond, guaranty, liens, license, permit, franchise, purchase orders,
sales orders, arbitration awards, judgments, decrees, orders, documents,
instruments, understandings and commitments, or other instrument or obligation
of any kind, whether written or oral. True, correct and complete copies of each
contract, commitment, agreement, obligation or instrument to which the Company
is currently a party or bound under (or written summaries in the case of oral
contracts) have been heretofore delivered to the Buyer.
2.17 Interested Party Transactions. Except as set forth in the Schedule
2.17 hereto or the Company Reports, no employee, officer, director or 5% or more
stockholder of the Company or a member of his or her immediate family is
indebted to the Company, nor is the Company indebted (or committed to make loans
or extend or guarantee credit) to any of them, other than (i) for payment of
salary for services rendered, (ii) reimbursement for reasonable expenses
incurred on behalf of the Company, and (iii) for other employee benefits made
generally available to all employees, and all related party transactions between
such persons and the Company have been fully and properly disclosed in the
Company Reports.
2.18 Over-the-Counter Bulletin Board Quotation. The Company's common
stock is quoted on the Over-the-Counter Bulletin Board ("OTC BB"). There is no
known action or proceeding pending or, to Company's knowledge, threatened
against the Company by NASDAQ or the National Association of Securities Dealers
("NASD") with respect to any intention by such entities to prohibit or terminate
the quotation of the Company's Common Stock on the OTC BB. There is no action
pending or threatened, to Company's knowledge, by any market maker in the
Company's common stock to discontinue their market making activities with
respect thereto.
2.19 Investment Company Act. The Company is not an "investment company"
or an "affiliated person" of or "promoter" or "principal underwriter" or an
"investment company" as such terms are defined in the Investment Company Act of
1940, as amended, nor is the Company otherwise subject to regulation thereunder.
The Company is not a "holding company" as that term is defined in, and is not
otherwise subject to regulation under, the Public Utility Holding Company Act of
1935.
2.20 Bankruptcy and Criminal Proceedings. Neither the Company and its
respective officers, directors, affiliates, promoters nor any predecessor of the
Company have been subject to or suffered any of the following:
(a) a petition under the Federal bankruptcy laws or any other
insolvency or moratorium law or has a receiver, fiscal agent or similar officer
been appointed by a court for such person, or any partnership in which such
person was a general partner at or within two years before the time of such
filing, or any corporation or business association of which such person was an
executive officer at or within two years before the time of such filing;
(b) a conviction in a criminal proceeding or a named subject
of a pending criminal proceeding (excluding traffic violations which do not
relate to driving while intoxicated or driving under the influence);
(c) any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining, barring suspending or otherwise limiting such person's
involvement in any type of business, securities or banking activities;
(d) Being found guilty by a court of competent jurisdiction in
a civil action or by the U.S. Securities and Exchange Commission ("SEC"), the
Commodity Futures Trading Commission ("CFTC") or state securities regulators and
commissions to have violated any federal or state securities or commodities law,
regulation or decree and the judgment in such civil action or finding by the
SEC, CFTC or state securities regulators or commissions has not been
subsequently reversed, suspended or vacated.
2.21 Assets; Properties and Insurance. The Company has no assets, whether
tangible or intangible, owns no real or personal property and maintains no
insurance of any kind.
2.22 Environmental Matters. The Company (a) has not received any written
notice, citation, claim, assessment, proposed assessment or demand for abatement
alleging that it is responsible for the correction or cleanup of any condition
resulting from a violation of any law, ordinance or other governmental
regulation regarding environmental matters; (b) has no knowledge that any toxic
or hazardous substances or materials have been emitted, generated, disposed of
or stored on any real property owned or leased by it, or owned or controlled by
it as a trustee or fiduciary (collectively, the "Properties"), in any manner
that violates or, after the lapse of time may violate, any presently existing
federal, foreign, regional, state or local law or regulation governing or
pertaining to such substances and materials; or (c) has no knowledge that,
during its ownership or lease of such Properties, any of such Properties has
been operated in any manner that violated any applicable federal, foreign,
regional, state or local law or regulation governing or pertaining to toxic or
hazardous substances and materials.
2.23 Representations and Warranties Complete. The representations and
warranties of the Company included in this Agreement and any list, statement,
document or information set forth in, or attached to, any Schedule provided
pursuant to this Agreement or delivered hereunder, are true and complete in all
material respects and do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements contained therein not misleading, under the circumstance under
which they were made.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to, and covenants with, the Company,
as follows:
3.1 Organization. The Buyer is a limited liability company duly
organized and validly existing under the laws of the State of Delaware and has
the requisite power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being or currently planned
by the Buyer to be conducted.
3.2 Authority Relative to this Agreement. The Buyer has full power and
authority to: (i) execute, deliver and perform this Agreement, and each
ancillary document which the Buyer has executed or delivered or is to execute or
deliver pursuant to this Agreement, and (ii) carry out the Buyer's obligations
hereunder and thereunder and, to consummate the transactions contemplated hereby
(including the Transaction). The execution and delivery of this Agreement and
the consummation by the Buyer of the transactions contemplated hereby (including
the Transaction) have been duly and validly authorized by all necessary action
on the part of the Buyer (including the approval by its board of managers), and
no other proceedings on the part of the Buyer are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by the Buyer and, assuming the
due authorization, execution and delivery thereof by the Company, constitutes
the legal and binding obligation of the Buyer, enforceable against the Buyer in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity and public policy.
3.3 No Conflict; Required Filings and Consents.
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(a) The execution and delivery of this Agreement by the Buyer
do not, and the performance of this Agreement by the Buyer, shall not: (i)
conflict with or violate the Buyer's certificate of organization or operating
agreement, or (ii) subject to obtaining the adoption of this Agreement and the
Transaction by the board of managers, conflict with or violate any laws or
regulations.
(b) The execution and delivery of this Agreement by the Buyer
does not, and the performance of its obligations hereunder will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity, except for applicable requirements, if any, of the
Exchange Act and the rules and regulations thereunder.
3.4 Brokers. The Buyer has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agent's commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
3.5 Acquisition for Investment. The Buyer is an "accredited investor,"
as such term is defined in Section 2(15) of the Securities Act and Rule 501 of
Regulation D promulgated thereunder, the Buyer is purchasing the Shares for the
Buyer's own account, solely for investment purposes, and not with a view to, or
for resale in connection with, any distribution thereof or with any present
intention of distributing or selling any of the Shares, except as allowed by the
Securities Act, or any rules and regulations promulgated thereunder. The Buyer
understands and agrees that the Shares being acquired pursuant to
this Agreement have not been registered under the Securities Act or under any
applicable state securities laws and may not be sold, pledged, assigned,
hypothecated or otherwise transferred ("Transfer"), except pursuant to an
effective registration statement under the Securities Act or pursuant to an
exemption from registration under the Securities Act, the availability of which
shall be established to the satisfaction of the Company at or prior to the time
of Transfer. The Buyer acknowledges that it must bear the economic risk of its
investment in the Shares for an indefinite period of time since the Shares have
not been registered under the Securities Act and therefore cannot be sold unless
the Shares are subsequently registered or an exemption form registration is
available. The Buyer has received and reviewed such information concerning the
Company as it deems necessary to evaluate the risks and merits of its investment
in the Company and in that connection, the Buyer acknowledges and agrees that it
and its representatives have had a full and unrestricted access to the Company's
books and records and the Company's officers and directors prior to the
execution of this Agreement. The Buyer has such knowledge and experience in
financial matters as to be capable of evaluating the merits and risks of an
investment in the Shares. The sale of the Shares to the Buyer is being made
without any public solicitation or advertisements.
3.6 Bankruptcy and Criminal Proceedings. Neither the Buyer and its
respective managers, affiliates, promoters nor any predecessor of the Buyer have
been subject to or suffered any of the following:
(a) a petition under the Federal bankruptcy laws or any other
insolvency or moratorium law or has a receiver, fiscal agent or similar officer
been appointed by a court for such person, or any partnership in which such
person was a general partner at or within two years before the time of such
filing, or any corporation or business association of which such person was an
executive officer at or within two years before the time of such filing;
(b) a conviction in a criminal proceeding or a named subject
of a pending criminal proceeding (excluding traffic violations which do not
relate to driving while intoxicated or driving under the influence);
(c) any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining, barring suspending or otherwise limiting such person's
involvement in any type of business, securities or banking activities;
(d) Being found guilty by a court of competent jurisdiction in
a civil action or by the U.S. Securities and Exchange Commission ("SEC"), the
Commodity Futures Trading Commission ("CFTC") or state securities regulators and
commissions to have violated any federal or state securities or commodities law,
regulation or decree and the judgment in such civil action or finding by the
SEC, CFTC or state securities regulators or commissions has not been
subsequently reversed, suspended or vacated.
3.7 Representations and Warranties Complete. The representations and
warranties of the Buyer included in this Agreement and any list, statement,
document or information set forth in, or attached to, any Schedule provided
pursuant to this Agreement or delivered hereunder, are true and complete in all
material respects and do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements contained therein not misleading, under the circumstance under
which they were made.
Article IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement pursuant to its terms or the
Closing, the Company, except to the extent that the Buyer shall otherwise
consent in writing or contemplated by this Agreement, shall carry on its
business in the usual, regular and ordinary course consistent with past
practices, in substantially the same manner as heretofore conducted and in
compliance with all applicable laws and regulations, pay its debts and taxes
when due subject to good faith disputes over such debts or taxes, pay or perform
other material obligations when due, and use its commercially reasonable efforts
consistent with past practices and policies to preserve substantially intact its
present business organization.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Payment of Company Obligations. Any and all debts, liabilities or
obligations of the Company, whether or not such obligations are due at the time
of Closing including, without limitation: (i) the liabilities set forth on
Schedule 2.8 hereto ("Scheduled Liabilities"), (ii) any and all liabilities and
obligations of the Company incurred by the Company through and including the
date of Closing which are not included in the Scheduled Liabilities, (iii) any
Taxes payable under the 2006 Tax Returns, as defined below, (iv) any payments
required under the Settlement Agreements, and (v) any costs and expenses
incurred by the Company in connection with the transactions contemplated
hereunder (including, without limitation, all costs and expenses related to the
preparation, filing and mailing of the Information Statement, as defined below)
(collectively, the "Company Closing Obligations"), shall be paid at the Closing
from the proceeds of the Purchase Price deposited in the Escrow Account. The
Company shall prepare a disbursement schedule identifying each Company Closing
Obligation, the name of the payee and the amount of each obligation, together
with supporting invoices thereof ("Disbursement Schedule") and shall, at least
three (3) days prior to the Closing, deliver the same to the Buyer for its
approval and acceptance (with a final copy thereof delivered to the Escrow
Agent).
5.2 Resignations and Appointments of Company's Officers and Directors.
At or prior to Closing, the Company shall deliver to the Buyer resignations, in
a form and substance reasonably acceptable to the Buyer, providing for the
resignation of all of the officers of the Company effective as of the Closing
and all of the directors of the Company effective as of the tenth (10th) day
following the Company's filing and mailing of the Information Statement (as
defined in Section 6.3(e))(the "Resignations"). At or prior to Closing, the
Company shall deliver to the Buyer duly adopted resolutions, in a form and
substance reasonably acceptable to the Buyer, providing for the appointment of
Kevin R. Keating to serve as a director, the Chief Executive Officer, the Chief
Financial Officer, the President, the Treasurer and the Secretary of the
Company, and two other persons designated by the Buyer to act as directors of
the Company, each effective as of the Closing (the "Appointments").
5.3 Undertaking by Company Accountants. At or prior to Closing, the
Company shall obtain, and deliver to the Buyer, an undertaking from the
Company's accountants, Jaspers + Hall, PC ("Accountant"), in a form and
substance satisfactory to the Buyer, providing that: (i) the Accountant agree to
an engagement with the Company to serve as its registered public accounting firm
following the Closing for purposes of the Company's ongoing reporting
requirements under the Exchange Act including, without limitation, the filing of
Forms 10-QSB and 10-KSB, at the rates and charges consistent with that currently
being charged to the Company, (ii) the Accountant is duly registered with the
U.S. Public Company Accounting Oversight Board ("PCAOB"), and (iii) the
Accountant shall provide its consent to the use of its audited financial
statements and accompanying report in any regulatory filing by the Company prior
to or following the Closing ("Undertaking").
5.4 Compliance Matters. Prior to and as a condition of the Closing, the
Company shall: (i) update and complete the books and records of the Company
through December 31, 2006 and through the Closing Date deliver the same to the
Buyer, (ii) prepare and have audited by the Accountant its financial statements
for the years ended December 31, 2005 and 2006 ("2006 Audit"), (iii) prepare and
file with the SEC the Company's annual report on Form 10-KSB for the year ended
December 31, 2006 (the "2006 Annual Report"), and (iv) prepare and file all of
the Company's income, franchise and other tax returns for the year ended
December 31, 2006 ("2006 Tax Returns")(collectively, the "Compliance Matters").
All third party professional costs associated with the foregoing shall be paid
by the Company at the Closing from the proceeds of the Purchase Price proceeds
deposited into the Escrow Account.
5.5 Other Actions. The Buyer and the Company shall cooperate with each
other and use their respective reasonable best efforts to take or cause to be
taken all actions, and do or cause to be done all things, necessary, proper or
advisable on their part under this Agreement and applicable laws to consummate
the Transaction and the other transactions contemplated hereby as soon as
practicable, including preparing and filing as soon as practicable all
documentation to effect all necessary notices, reports and other filings, and
obtaining as soon as practicable all consents, registrations, approvals, permits
and authorizations necessary or advisable to be obtained from any third party
and/or any Governmental Entity in order to consummate the Transaction or any of
the other transactions contemplated hereby.
5.6 Confidentiality; Access to Information. Each party agrees to
maintain and hold in strict confidence any material, non-public information
provided by any other party in connection with transactions contemplated
hereunder. The Company shall afford the Buyer and its financial advisors,
accountants, counsel and other representatives reasonable access during normal
business hours, upon reasonable notice, to the properties, books, records and
personnel of the Company during the period prior to the Closing to obtain all
information concerning the business, including financial condition, properties,
results of operations and personnel of the Company, as the Buyer may reasonably
request. No information or knowledge obtained by the Buyer in any investigation
pursuant to this Section 5.6 will affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Transaction.
5.7 No Solicitation. Other than with respect to the Transaction, the
Company agrees that it shall not, and shall direct and use their reasonable best
efforts to cause its officers, directors, employees, representatives, agents, or
affiliates (including, but not limited to any investment banker, attorney, or
accountant retained by the Company) to, directly or indirectly, solicit,
knowingly encourage, initiate, or participate in any way in discussions or
negotiations with, or knowingly provide any nonpublic information to, any
corporation, partnership, person, or other entity or group concerning any
proposed Alternative Transaction (as defined below), or otherwise knowingly
facilitate any effort or attempt to
make or implement an Alternative Transaction. For purposes of this Agreement,
the term "Alternative Transaction" shall mean any of the following involving the
Company: (i) any tender offer, exchange offer, merger, consolidation, share
exchange, business combination or similar transaction involving capital stock of
the Company; (ii) any transaction or series of related transactions pursuant to
which any person or entity (or its shareholders), (a "Third Party") acquires
shares (or securities exercisable for or convertible into shares) representing
more that 20% of the outstanding shares of any class of capital stock of the
Company; or (iii) any sale, lease, exchange, licensing, transfer or other
disposition pursuant to which a Third Party acquires control of more than 20% of
the assets (including, but not limited to, intellectual property assets) of the
Company (determined by reference to the fair market value of such assets), in a
single transaction or series of related transactions. The Company shall
immediately terminate all discussions with Third Parties concerning any proposed
Alternate Transaction, and will request that such Third Parties promptly return
any confidential information furnished by the Company in connection with any
proposed Alternative Transaction.
5.8 Public Disclosure. The Buyer and the Company shall consult with
each other and agree in writing before issuing any press release or otherwise
making any public statement with respect to the Transaction or this Agreement
and will not issue any such press release or make any such public statement
prior to such consultation. Upon the execution of this Agreement, the Company
shall prepare and file a Current Report on Form 8-K announcing the execution of
this Agreement, which Form 8-K shall be reasonably acceptable to the Buyer.
5.9 Business Records. At Closing, the Company shall deliver to Buyer
all records and documents relating to the Company, wherever located, including,
without limitation, books, records, supplier and customer lists and files,
government filings, the Returns, consent decrees, orders, and correspondence,
financial information and records, electronic files containing any financial
information and records, and other documents used in or associated with the
Company ("Business Records").
5.10 Ownership Records; Transfer Agent Undertaking. At Closing, the
Company shall deliver to Buyer a full and complete listing of all stockholders
of the Company, dated within three (3) business days prior to Closing, from and
certified by the Transfer Agent showing the name and address of each
stockholder, the number of shares owned by each stockholder, and the certificate
number and issue dates for the shares owned by each stockholder. At or prior to
Closing, the Company shall obtain, and deliver to the Buyer, an undertaking from
the Transfer Agent, in a form and substance satisfactory to the Buyer, stating
the amount of any and all fees and charges owed to Transfer Agent by the Company
for services rendered prior to Closing together with a copy of the current
agreement in place between the Company and the Transfer Agent ("Transfer Agent
Undertaking").
Article VI
CONDITIONS TO THE TRANSACTION
6.1 Conditions to Obligations of Each Party to Effect the Transaction.
The respective obligations of each party to this Agreement to effect the
Transaction shall be subject to the satisfaction at or prior to the Closing Date
of the following conditions:
(a) No Order.
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No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Transaction illegal or
otherwise prohibiting consummation of the Transaction, substantially on the
terms contemplated by this Agreement. All waiting periods, if any, under any law
in any jurisdiction in which the Company or Buyer has material operations
relating to the transactions contemplated hereby will have expired or
terminated.
(b) Transaction Form 8-K. At least two (2) days prior to
Closing, the Buyer shall prepare, with the assistance and cooperation of the
Company, the Form 8-K announcing the Closing, and such other information that
may be required to be disclosed with respect to the Transaction in any report or
form to be filed with the SEC ("Transaction Form 8-K"), which shall be in a form
acceptable to the Company and in a format acceptable for EDGAR filing. At the
Closing, the Company shall file the Transaction Form 8-K with the SEC.
6.2 Additional Conditions to Obligations of the Company. The
obligations of the Company to consummate and effect the Transaction shall be
subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by the
Company:
(a) Representations and Warranties. Each representation and
warranty of the Buyer contained in this Agreement (i) shall have been true and
correct as of the date of this Agreement and (ii) shall be true and correct on
and as of the Closing Date with the same force and effect as if made on the
Closing Date. The Company shall have received a certificate with respect to the
foregoing signed on behalf of the Buyer by an authorized manager of the Buyer
("Buyer Closing Certificate").
(b) Agreements and Covenants. The Buyer shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Closing Date, except to the extent that any failure to perform or comply (other
than a willful failure to perform or comply or failure to perform or comply with
an agreement or covenant reasonably within the control of the Buyer) does not,
or will not, constitute a Material Adverse Effect with respect to the Buyer
taken as a whole, and the Company shall have received the Buyer Closing
Certificate to such effect.
(c) Other Deliveries. At or prior to Closing, the Buyer shall
have delivered to the Company: (i) the resolutions by the Buyer's board of
managers approving this Agreement and the transactions contemplated hereunder,
(ii) the duly executed Registration Rights Agreement, and (iii) such other
documents or certificates as shall reasonably be required by the Company and its
counsel in order to consummate the transactions contemplated hereunder. At or
prior to the Closing, the Buyer shall have delivered the Purchase Price (less
the Deposit) to the Escrow Agent to be handled and disbursed in accordance with
Sections 5.1 hereof and in accordance with the terms and conditions of the
Escrow Agreement.
6.3 Additional Conditions to the Obligations of the Buyer. The
obligations of the Buyer to consummate and effect the Transaction shall be
subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by the
Buyer:
(a) Representations and Warranties. Each representation and
warranty of the Company contained in this Agreement (i) shall have been true and
correct as of the date of this Agreement and (ii) shall be true and correct on
and as of the Closing Date with the same force and effect as if made on and as
of the Closing. The Buyer shall have received a certificate with respect to the
foregoing signed on behalf of the Company with respect to the warranties and
representations made by the Company under this Agreement ("Company Closing
Certificate")
(b) Agreements and Covenants. The Company shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by the Company at or prior to
the Closing Date except to the extent that any failure to perform or comply
(other than a willful failure to perform or comply or failure to perform or
comply with an agreement or covenant reasonably within the control of the
Company) does not, or will not, constitute a Material Adverse Effect on the
Company, and the Buyer shall have received the Company Closing Certificate to
such effect.
(c) Due Diligence; Disclosure Schedules. The Buyer shall have
completed its due diligence investigation and review of the Company, and the
results of such investigation and review are satisfactory to the Buyer in its
sole discretion and the Buyer shall, at or prior to the date for Closing,
deliver to the Escrow Agent a written acknowledgment that it has completed its
due diligence investigation and review of the Company and the same is
satisfactory to the Buyer. The Company shall have delivered the disclosure
schedules under Article II to the Buyer, and such disclosure schedules are
satisfactory to the Buyer in its sole discretion.
(d) Cancellation and Termination of Contracts. The Company
shall have delivered to the Buyer (with a copy to the Escrow Agent) written
instruments evidencing that all agreements, contracts and commitments under
which the Company is a party or under which the Company has any obligations have
been cancelled or terminated without any further liability to the Company.
(e) 14f-1 Stockholder Notice. At or prior to the Closing, the
Company shall have filed with the SEC the Schedule 14f-1 information statement
("Information Statement"), in form acceptable to the Buyer, shall have mailed
the Information Statement to each of the stockholders of the Company, and shall
have otherwise complied with all of the requirements under the Exchange Act with
respect to the change of control contemplated by this Agreement and the
Transaction, other than the passage of the ten (10) day period required
thereunder before a change of control can become effective.
(f) Reverse Split; Authorized Stock Reduction; Articles of
Amendment. Prior to Closing, the Company shall have taken all actions necessary
to complete and give effect to the Reverse Split and Authorized Stock Reduction
including, without limitation, the filing with, and acceptance by, the Secretary
of State of the State of Colorado, the Articles of Amendment.
(g) Settlement Agreement. Prior to Closing, the Company shall
have entered into settlement agreements ("Settlement Agreements") with Bruno
Koch, J.B. Heidebrecht and Mark Nixon ("Former Principals"), under which the
Former Principals agree to release the Company from all liabilities, claims and
obligations in exchange for an aggregate cash payment by the Company to the
Former Principals of $35,000 and the cancellation by the Former Principals of an
aggregate of 2,450,000 shares of the Company's Common Stock, on a post-Reverse
Split basis (the "Settlement"). The shares being cancelled pursuant to the
Settlement shall have been duly cancelled by the Company and on the records of
the Transfer Agent.
(h) Share Cancellation. Ponce Acquisition, LLC shall have
tendered to the Company for cancellation 7,450,000 shares of the Company's
common stock, and such shares shall have been duly cancelled by the Company and
on the records of the Transfer Agent.
(i) Corporate Matters. The Company shall have delivered to the
Buyer (with a copy to the Escrow Agent) a certified copy of the Company's
certificate of incorporation, with any amendments thereto, a certified copy of
the Company's bylaws, with any amendments thereto, and a certificate of good
status.
(j) Legal Opinions. The Company's Counsel shall have issued
and delivered to the Transfer Agent, with a copy to the Buyer, the Issuance
Opinion. In addition, the Company's Counsel shall have issued and delivered to
the Buyer its legal opinion (the "Legal Opinion") regarding (i) the corporate
existence and status of the Company, (ii) the authorization and enforceability
of this Agreement, the transactions contemplated hereunder, and the Registration
Rights Agreement, and (iii) that the Shares issued by the Company to the Buyer
under this Agreement are duly authorized, validly issued, fully paid and
nonassessable and have been issued in compliance with all Legal Requirements.
The Issuance Opinion and the Legal Opinion shall be subject to customary
qualifications and limitations.
(k) 2006 Annual Report. Prior to the Closing, the Company
shall have prepared and delivered to the Buyer the 2006 Annual Report, in a form
reasonably acceptable to the Buyer, and the Company shall have filed the 2006
Annual Report with the SEC.
(l) Tax Returns. The Company shall have filed all Returns
related to Taxes for the periods prior to the Closing including, without
limitation, the 2006 Tax Returns.
(m) Stock Option Plan. The Company shall have
terminated the 1989 stock option plan previously adopted by the Company.
(n) Other Deliveries. At or prior to Closing, the Company
shall have delivered to the Buyer: (i) the resolutions by the Company's board of
directors approving this Agreement and the transactions contemplated hereunder,
(ii) the duly executed Registration Rights Agreement, and (iii) such other
documents or certificates as shall reasonably be required by the Buyer and its
counsel in order to consummate the transactions contemplated hereunder. At or
prior to the Closing, the Company shall have caused the Certificates to be
delivered to the Escrow Agent.
ARTICLE VII
SURVIVAL
All representations and warranties contained in or made pursuant to
this Agreement, shall not survive the Closing.
Article VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual written agreement of the Buyer and the
Company;
(b) by either the Buyer or the Company if the Transaction
shall not have been consummated by March 15, 2007 for any reason; provided,
however, that the right to terminate this Agreement under this Section 8.1(b)
shall not be available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the Transaction to occur on or
before such date and such action or failure to act constitutes a breach of this
Agreement; or
(c) by either the Buyer or the Company if a Governmental
Entity shall have issued an order, decree or ruling or taken any other action,
in any case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Transaction, which order, decree, ruling or other action is
final and nonappealable.
8.2 Notice of Termination; Effect of Termination. Any termination of
this Agreement under Section 8.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 8.1,
this Agreement shall be of no further force or effect and the Transaction shall
be abandoned, except (i) as set forth in this Section 8.2, Section 8.3 and
Article IX (General Provisions), each of which shall survive the termination of
this Agreement, (ii) as set forth in Section 1.7 hereof with respect to the
handling of the Deposit, and (ii) nothing herein shall relieve any party from
liability for any intentional or willful breach of this Agreement.
8.3 Fees and Expenses. All fees and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expenses whether or not the Transaction is consummated.
Without limiting the foregoing sentence, the Company shall be responsible for
all costs associated with the preparation, filing and mailing of the Information
Statement.
8.4 Amendment. This Agreement may be amended by the parties
hereto at any time by execution of an instrument in writing signed on
behalf of each of the Buyer and the Company.
8.5 Extension; Waiver. At any time prior to the Closing, any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to the Buyer, to:
KI Equity Partners V, LLC
Attn: Timothy J. Keating, Manager
5251 DTC Parkway, Suite 1090
Denver, Colorado 80111
(720) 889-0135 fax
(b) if to the Company (prior to Closing), to:
QuikByte Software, Inc.
Attention: Reed Clayson, President
7609 Ralston Road
Arvada, CO 80002
(303) 431-1567 fax
(c) if to the Company (after Closing), to:
QuikByte Software, Inc
Attention: Kevin Keating, President
936A Beachland Boulevard, Suite 13
Vero Beach, Florida 32963
(772) 231-5947 fax
9.2 Interpretation.
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(a) When a reference is made in this Agreement to Exhibits,
such reference shall be to an Exhibit to this Agreement unless otherwise
indicated. When a reference is made in this Agreement to Sections, such
reference shall be to a Section of this Agreement. Unless otherwise indicated
the words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation." The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
(b) For purposes of this Agreement, the term "Person" shall
mean any individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity.
(c) For purposes of this Agreement, all monetary amounts set
forth herein are referenced in United States dollars, unless otherwise noted.
9.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart. Facsimile and electronic signatures
to this Agreement by the parties shall be accepted and shall be treated as
original signatures hereto.
9.4 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Schedules hereto (a)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
and (b) are not intended to confer upon any other person any rights or remedies
hereunder (except as specifically provided in this Agreement).
9.5 Severability. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.6 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
9.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado, USA, regardless of the laws
that might otherwise govern under applicable principles of conflicts of law
thereof.
9.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.9 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties; provided, however, that the Buyer may, upon prior written
notice, assign its rights, obligations and interests hereunder to one or more of
its affiliates. Subject to the first sentence of this Section 9.9, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
9.10 Arbitration. Any disputes or claims arising under or in connection
with this Agreement or the transactions contemplated hereunder shall be resolved
by binding arbitration. Notice of a demand to arbitrate a dispute by either
party shall be given in writing to the other at their last known address.
Arbitration shall be commenced by the filing by a party of an arbitration demand
with the American Arbitration Association ("AAA") in its office in Denver,
Colorado USA. The arbitration and resolution of the dispute shall be resolved by
a single arbitrator appointed by the AAA pursuant to AAA rules. The arbitration
shall in all respects be governed and conducted by applicable AAA rules, and any
award and/or decision shall be conclusive and binding on the parties. The
arbitration shall be conducted in Denver, Colorado. The arbitrator shall supply
a written opinion supporting any award, and judgment may be entered on the award
in any court of competent jurisdiction. Each party shall pay its own fees and
expenses for the arbitration, except that any costs and charges imposed by the
AAA and any fees of the arbitrator for his services shall be assessed against
the losing party by the arbitrator. In the event that preliminary or permanent
injunctive relief is necessary or desirable in order to prevent a party from
acting contrary to this Agreement or to prevent irreparable harm prior to a
confirmation of an arbitration award, then either party is authorized and
entitled to commence a lawsuit solely to obtain equitable relief against the
other pending the completion of the arbitration in a court having jurisdiction
over the parties. All rights and remedies of the parties shall be cumulative and
in addition to any other rights and remedies obtainable from arbitration.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above.
KI Equity Partners V, LLC
By: /s/ Timothy J. Keating
Timothy J. Keating, Manager
QUIKBYTE SOFTWARE, INC.
By: /s/ Reed Clayson
Reed Clayson, President
Index of Exhibits
Exhibit A - Registration Rights Agreement
Exhibit B - Escrow Agreement
Schedules
Disclosure Schedules by the Company