ASSET PURCHASE AGREEMENT
Dated December 1, 2005
by and among
▇▇▇▇▇ NETWORKS, INC.,
ABUNDANCE NETWORKS, INC.
and
ABUNDANCE NETWORKS, LLC
and
ABUNDANCE NETWORKS (INDIA) PVT LTD
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into as of December 1, 2005, by
and among ▇▇▇▇▇ Networks, Inc., a Nevada corporation (the "Buyer"), Abundance
Networks, Inc., a Delaware corporation and wholly-owned subsidiary of the Buyer
(the "Operating Sub") and Abundance Networks, LLC, a Delaware limited liability
company the "Seller"), and Abundance Networks (India) Pvt Ltd, an India private
limited company and a wholly owned subsidiary of Seller ("Abundance India") .
A. This Agreement contemplates a transaction in which the Buyer will
purchase and then subsequently transfer substantially all of the assets and
assume certain of the liabilities of the Seller to the Operating Sub.
B. Capitalized terms used in this Agreement shall have the meanings
ascribed to them in Article 9.
C. In consideration of the representations, warranties and covenants
herein contained, the Parties agree as follows.
1. THE ASSET PURCHASE
1.1 Purchase and Sale of Assets.
(a) Upon and subject to the terms and conditions of this Agreement,
the Buyer shall purchase from the Seller, and the Seller shall sell, transfer,
convey, assign and deliver to the Operating Sub, at the Closing, for the
consideration specified below in this Article 1, all right, title and interest
in, to and under the Acquired Assets.
(b) Notwithstanding the provisions of Section 1.1(a), the Acquired
Assets shall not include the Excluded Assets.
1.2 Assumption of Liabilities.
(a) Upon and subject to the terms and conditions of this Agreement,
the Operating Sub shall assume and become responsible for, from and after the
Closing, the Assumed Liabilities.
(b) Notwithstanding the terms of Section 1.2(a) or any other
provision of this Agreement to the contrary, the Operating Sub shall not assume
or become responsible for, and the Seller shall remain liable for, the Retained
Liabilities.
1.3 Purchase Price. The Purchase Price to be paid by the Buyer for the
Acquired Assets shall be the number of shares of Common Stock to be issued in
the manner set forth below:
(a) At the Closing,
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(i) 900,000 shares (the "Initial Shares") plus an additional
number of shares equal to $1,000,000 divided by the Average Closing Price on the
Closing Date shall be issued to Seller;
(ii) 350,000 shares ("Indemnification Shares") shall be
registered in the name of Seller and deposited into an escrow account as
security for Seller's indemnification obligations ("Indemnification Escrow") as
described below; and
(iii) 1,750,000 shares (the "Earnout Shares") shall be
registered in the name of Seller and deposited into an escrow account ("Earnout
Escrow") to be released, if at all, pursuant to the earnout provisions described
in subsections (c) and (d) below.
Any Indemnification Shares not released to Buyer pursuant to Section 7 below
shall be released from the Indemnification Escrow account to Seller on the later
of (i) the date fifteen months following the Closing and (ii) the date on which
any indemnification claims pending on the date fifteen months following the
Closing have been resolved (in either case, the "Indemnification Release Date").
(b) True-Up.
(i) If, on the one-year anniversary of the Closing, the
Initial Shares do not have an Average Closing Price of at least $2.00 per share,
then Buyer shall issue an additional number of shares of Common Stock to Seller
as is determined by the following formula: (900,000 x ($2.00 - the Average
Closing Price)) / the Average Closing Price (the "Initial True-Up Shares").
(ii) If, on the Indemnification Release Date, the
Indemnification Shares do not have an Average Closing Price of at least $2.00
per share, then, on such Indemnification Release Date, Buyer shall issue an
additional number of shares of Common Stock to Seller as is determined by the
following formula: (the number of Indemnification Shares to be released pursuant
to the terms of this Agreement x ($2.00 - the Average Closing Price on the
Indemnification Release Date)) / the Average Closing Price on the
Indemnification Release Date (the "Indemnification True-Up Shares").
(iii) If, on the date that any of the Earnout Shares become
due and issuable (in each case, an "Issue Date") to Seller, any such Earnout
Shares do not have an Average Closing Price of at least $2.00 per share, then,
on such Issue Date Buyer shall issue an additional number of shares of Common
Stock to Seller as is determined by the following formula: (the number of shares
earned pursuant to subsection (c) or (d) below (as applicable) x ($2.00 - the
Average Closing Price at such Issue Date)) / the Average Closing Price at such
Issue Date (the "Earnout True-Up Shares" and, together with the Initial True-Up
Shares, the Indemnification True-Up Shares, collectively, the "True-Up Shares").
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(c) If, for the 12-month period ending March 31, 2006 (the "First
Earnout Period"), the revenue generated by the Seller's business (on a
stand-alone basis as a wholly-owned subsidiary or division, as the case may be,
of Buyer and from sales of Seller's products by Buyer or its other Subsidiaries
or affiliates) (the "Revenue") is at least $2,000,000, then, within ten business
days of the date on which Buyer's independent accountants have completed their
review of the financial statements indicating the revenues so generated, the
Escrow Agent shall release a number of shares (the "First Earnout Shares") equal
to the product of (i) 875,000 shares multiplied by (ii) a fraction, the
numerator of which is the Revenues actually generated during the First Earnout
Period and the denominator of which is $6,000,000 multiplied by (iii) a
fraction, the numerator of which is the Adjusted EBITDA (as defined below)
actually generated during the First Earnout Period based on the Revenues earned
for such period and the denominator of which is $900,000; provided, however,
that the First Earnout Shares shall in no event exceed 750,000. Buyer shall use
good faith reasonable efforts to have their independent accountants complete
their review of the financial statements for the 12-month period ending March
31, 2006, as soon as practicable following March 31, 2006.
(d) If, for the 12-month period ending March 31, 2007 (the "Second
Earnout Period"), the Revenue is at least $2,000,000, then, within ten business
days of the date on which Buyer's independent accountants have completed their
review of the financial statements indicating the revenues so generated, the
Escrow Agent shall release a number of shares (the "Second Earnout Shares")
equal to the product of (i) 875,000 shares plus the First Earnout Shares not
issued pursuant to subsection (c) above multiplied by (ii) a fraction, the
numerator of which is the Revenues actually generated during the Second Earnout
Period and the denominator of which is $12,000,000 multiplied by (iii) a
fraction, the numerator of which is the EBITDA actually generated during the
Second Earnout Period based on the Revenues earned for such period and the
denominator of which is $1,500,000; provided, however, that the aggregate total
of the First Earnout Shares and the Second Earnout Shares released pursuant to
subsections (c) and (d) shall in no event exceed 1,750,000. Buyer shall use good
faith reasonable efforts to have their independent accountants complete their
review of the financial statements for the 12-month period ending March 31,
2007, as soon as practicable following March 31, 2007.
1.4 The Closing.
(a) The Closing shall take place at the offices of ▇▇▇▇▇▇▇▇▇ + ▇▇▇▇▇
PLLC in Raleigh, North Carolina commencing at 9:00 a.m. local time on the
Closing Date, or at such other place and time as shall be mutually agreed upon
by the Buyer and the Seller. All transactions at the Closing shall be deemed to
take place simultaneously, and no transaction shall be deemed to have been
completed and no documents or certificates shall be deemed to have been
delivered until all other transactions are completed and all other documents and
certificates are delivered.
(b) At the Closing:
(i) the Seller shall execute and deliver to the Buyer a ▇▇▇▇
of sale in substantially the form attached hereto as Exhibit A, one or more
trademark assignments in substantially the form attached hereto as Exhibit B,
and such other instruments of conveyance (such as real estate deeds, assigned
certificates or documents of title, assigned negotiable instruments and stock
transfer powers) as the Buyer may reasonably request in order to effect the
sale, transfer, conveyance and assignment to the Buyer of valid ownership of the
Acquired Assets;
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(ii) the Buyer shall execute and deliver to the Seller an
instrument of assumption in substantially the form attached hereto as Exhibit C
and such other instruments as the Seller may reasonably request in order to
effect the assumption by the Buyer of the Assumed Liabilities;
(iii) the Buyer shall issue to the Seller the portion of the
Purchase Price set forth in Section 1.3(a)(i);
(iv) the Buyer shall deposit the Indemnification Shares into
the Indemnification Escrow; and
(v) the Seller shall deliver to the Buyer, or otherwise put
the Buyer in possession and control of, all of the Acquired Assets of a tangible
nature.
1.5 Allocation. The Buyer and the Seller agree to allocate the
Purchase Price (and all other capitalizable costs) among the Acquired Assets and
the non-solicitation and non-competition covenants set forth in Sections 6.2 and
6.3 for all purposes (including financial accounting and tax purposes) in
accordance with the allocation schedule attached hereto as Schedule 1.5.
1.6 Further Assurances. At any time and from time to time after the
Closing, at the request of the Buyer and without further consideration, the
Seller shall execute and deliver such other instruments of sale, transfer,
conveyance and assignment and take such actions as the Buyer may reasonably
request to more effectively transfer, convey and assign to the Buyer, and to
confirm the Buyer's rights to, title in and ownership of, the Acquired Assets
and to place the Buyer in actual possession and operating control thereof.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller and Abundance India, each jointly and severally represents and
warrants to the Buyer that, except as set forth in the Disclosure Schedule, the
statements contained in this Article 2 are true and correct as of the date of
this Agreement, except to the extent such representations and warranties are
specifically made as of a particular date (in which case such representations
and warranties will be true and correct as of such date). The Disclosure
Schedule shall be arranged in sections and subsections corresponding to the
numbered and lettered sections and subsections contained in this Article 2. The
disclosures in any section or subsection of the Disclosure Schedule shall
qualify only the corresponding section or subsection in this Article 2.
2.1 Organization, Qualification and Corporate Power. The Seller is a
limited liability company duly organized, validly existing and in good standing
under the laws of the state of Delaware, and has all requisite power and
authority (corporate and other) to own its properties, to carry on its business
as now being conducted, to execute and deliver this Agreement and the agreements
contemplated herein, and to consummate the transactions contemplated hereby. The
Seller is duly qualified to conduct business and is in good standing under the
laws of each jurisdiction listed in Section 2.1 of the Disclosure Schedule,
which jurisdictions constitute the only jurisdictions in which the nature of the
Seller's businesses or the ownership or leasing of its properties requires such
qualification, except for those jurisdictions in which the failure to be so
qualified or in good standing, individually or in the aggregate, has not had and
would not reasonably be expected to have a Seller Material Adverse Effect. True,
correct and complete copies of the Certificate of Formation and Limited
Liability Company Agreement of the Seller, each as amended to date, have been
previously delivered to the Buyer, and no amendments have been made thereto or
have been authorized since the date thereof. The Seller is not in default under
or in violation of any provision of its Certificate of Formation or Limited
Liability Company Agreement.
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2.2 Authorization of Transaction. The Seller has all requisite power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to perform its obligations hereunder and thereunder. The execution and delivery
by the Seller of this Agreement and, subject to the Requisite Member Approval,
the performance by the Seller of this Agreement and the Ancillary Agreements and
the consummation by the Seller of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate action
on the part of the Seller. Without limiting the generality of the foregoing, the
managers of the Seller, at a meeting duly called and held, by the unanimous vote
of all managers determined that, in their opinion, the sale of assets
contemplated by this Agreement is fair to and in the best interests of the
Seller and its members, approved this Agreement in accordance with the Delaware
Limited Liability Company Act, directed that such asset sale be submitted to the
members of the Seller for their approval, and resolved to recommend that the
members of the Seller vote in favor of the approval of such asset sale. This
Agreement has been duly and validly executed and delivered by the Seller and
constitutes, and each of the Ancillary Agreements, upon its execution and
delivery by the Seller, will constitute, a valid and binding obligation of the
Seller, enforceable against the Seller in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to creditors' rights
generally, and is subject to general principles of equity.
2.3 Noncontravention. Except as set forth in Section 2.3 of the Disclosure
Schedule, neither the execution and delivery by the Seller of this Agreement or
the Ancillary Agreements, nor the consummation by the Seller of the transactions
contemplated hereby or thereby, will (a) conflict with or violate any provision
of the Certificate of Formation or Limited Liability Company Agreement of the
Seller or the charter, by-laws or other organizational document of any
Subsidiary, (b) require on the part of the Seller or any Subsidiary any notice
to or filing with, or any permit, authorization, consent or approval of, any
Governmental Entity the failure of which to obtain would have a Seller Material
Adverse Effect, (c) conflict with, result in a breach of, constitute (with or
without due notice or lapse of time or both) a default under, result in the
acceleration of obligations under, create in any party the right to terminate,
modify or cancel, or require any notice, consent or waiver under, any material
contract or instrument to which the Seller or any Subsidiary is a party or by
which the Seller or any Subsidiary is bound or to which any of their respective
assets is subject, (d) result in the imposition of any Security Interest upon
any assets of the Seller or any Subsidiary or (e) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Seller, any
Subsidiary or any of their respective properties or assets.
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2.4 Subsidiaries.
(a) Section 2.4 of the Disclosure Schedule sets forth: (i) the name
of each Subsidiary; (ii) the number and type of outstanding equity securities of
each Subsidiary and a list of the holders thereof; (iii) the jurisdiction of
organization of each Subsidiary; (iv) the names of the officers and directors of
each Subsidiary; and (v) the jurisdictions in which each Subsidiary is qualified
or holds licenses to do business as a foreign corporation or other entity.
(b) Each Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization. Each Subsidiary
is duly qualified to conduct business and is in good standing under the laws of
each jurisdiction in which the nature of its businesses or the ownership or
leasing of its properties requires such qualification. Each Subsidiary has all
requisite power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. The Seller has delivered
to the Buyer complete and accurate copies of the charter, by-laws or other
organizational documents of each Subsidiary. No Subsidiary is in default under
or in violation of any provision of its charter, by-laws or other organizational
documents. All of the issued and outstanding shares of capital stock of each
Subsidiary are duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights. All shares of each Subsidiary that are held of record
or owned beneficially by either the Seller or any Subsidiary are held or owned
free and clear of any restrictions on transfer (other than restrictions under
the Securities Act of 1933, as amended (the "Securities Act") and state
securities laws), claims, Security Interests, options, warrants, rights,
contracts, calls, commitments, equities and demands. There are no outstanding or
authorized options, warrants, rights, agreements or commitments to which the
Seller or any Subsidiary is a party or which are binding on any of them
providing for the issuance, disposition or acquisition of any capital stock of
any Subsidiary. There are no outstanding stock appreciation, phantom stock or
similar rights with respect to any Subsidiary. There are no voting trusts,
proxies or other agreements or understandings with respect to the voting of any
capital stock of any Subsidiary.
(c) The Seller does not control directly or indirectly or have any
direct or indirect equity participation or similar interest in any corporation,
partnership, limited liability company, joint venture or other business
association or entity which is not a Subsidiary.
2.5 Financial Statements. Except as set forth in Section 2.5 of the
Disclosure Schedule, the Seller has provided to the Buyer the Financial
Statements. Except as set forth in Section 2.5 of the Disclosure Schedule, the
Financial Statements have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, fairly present the
consolidated financial condition, results of operations and cash flows of the
Seller and the Subsidiaries as of the respective dates thereof and for the
periods referred to therein and are consistent with the books and records of the
Seller and the Subsidiaries; provided, however, that the Financial Statements
referred to in clause (b) of the definition of such term are subject to normal
recurring year-end adjustments (which will not be material) and do not include
footnotes.
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2.6 Absence of Certain Changes. Since the Most Recent Balance Sheet Date,
(a) there has occurred no event or development which, individually or in the
aggregate, has had, or could reasonably be expected to have in the future, a
Seller Material Adverse Effect, and (b) neither the Seller nor any Subsidiary
has taken any of the actions set forth in paragraphs (a) through (n) of Section
4.4.
2.7 Undisclosed Liabilities. None of the Seller and its Subsidiaries has
any liability (whether known or unknown, whether absolute or contingent, whether
liquidated or unliquidated and whether due or to become due), except for (a)
liabilities shown on the Most Recent Balance Sheet and (b) liabilities which
have arisen since the Most Recent Balance Sheet Date in the Ordinary Course of
Business and (c) contractual and other liabilities incurred in the Ordinary
Course of Business which are not required by GAAP to be reflected on a balance
sheet.
2.8 Tax Matters. Except as set forth in Section 2.8 of the Disclosure
Schedule, each of the Seller and the Subsidiaries has filed on a timely basis
all Tax Returns that it was required to file, and all such Tax Returns were
complete and accurate in all material respects. Neither the Seller nor any
Subsidiary is or has ever been a member of a group of corporations with which it
has filed (or been required to file) consolidated, combined or unitary Tax
Returns, other than a group of which only the Seller and the Subsidiaries are or
were members. Except as set forth in Section 2.8 of the Disclosure Schedule,
each of the Seller and the Subsidiaries has paid on a timely basis all Taxes
that were due and payable.
2.9 Ownership and Condition of Assets.
(a) The Seller is the true and lawful owner, and has good title to,
all of the Acquired Assets, free and clear of all Security Interests, except as
set forth in Section 2.9(a)(i) of the Disclosure Schedule. Each Subsidiary is
the true and lawful owner, and has good title to, all assets purported to be
owned by such Subsidiary, free and clear of all Security Interests, except as
set forth in Section 2.9(a)(i) of the Disclosure Schedule. Upon execution and
delivery by the Seller to the Buyer of the instruments of conveyance referred to
in Section 1.5(b)(iii), the Buyer will become the true and lawful owner of, and
will receive good title to, the Acquired Assets, free and clear of all Security
Interests other than those set forth in Section 2.9(a)(ii) of the Disclosure
Schedule.
(b) The Acquired Assets together with the OSS Agreement (as defined
in Section 5.3(h)) are sufficient for the conduct of the Seller's businesses as
presently conducted and constitute all assets used by the Seller in such
businesses. Each tangible Acquired Asset is free from material defects, has been
maintained in accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear) and is suitable for the
purposes for which it presently is used.
(c) Section 2.9(c) of the Disclosure Schedule lists individually (i)
all Acquired Assets which are fixed assets (within the meaning of GAAP) having a
book value greater than $5,000, indicating the cost, accumulated book
depreciation (if any) and the net book value of each such fixed asset as of the
Most Recent Balance Sheet Date, and (ii) all other Acquired Assets of a tangible
nature (other than inventories) whose book value exceeds $5,000.
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(d) Each item of equipment, motor vehicle and other asset that is
being transferred to the Buyer as part of the Acquired Assets and that the
Seller or a Subsidiary has possession of pursuant to a lease agreement or other
contractual arrangement is in such condition that, upon its return to its lessor
or owner under the applicable lease or contract, the obligations of the Seller
or such Subsidiary to such lessor or owner will have been discharged in full.
2.10 Owned Real Property. Neither Seller nor any of its Subsidiaries has
any Owned Real Property.
2.11 Real Property Leases. Section 2.11 of the Disclosure Schedule lists
all Leases. The Seller has delivered to the Buyer complete and accurate copies
of the Leases. With respect to each Lease:
(a) such Lease is valid;
(b) such Lease is assignable by the Seller or a Subsidiary to the
Buyer without the consent or approval of any party (except as set forth in
Section 2.3 of the Disclosure Schedule) and such Lease will continue to be
legal, valid, binding, enforceable and in full force and effect immediately
following the Closing in accordance with the terms thereof as in effect
immediately prior to the Closing;
(c) neither the Seller nor any Subsidiary nor, to the knowledge of
the Seller, any other party, is in breach or violation of, or default under, any
such Lease, and no event has occurred, is pending or, to the knowledge of the
Seller, is threatened, which, after the giving of notice, with lapse of time, or
otherwise, would constitute a breach or default by the Seller or any Subsidiary
or, to the knowledge of the Seller, any other party under such Lease;
(d) there are no disputes, oral agreements or forbearance programs
in effect as to such Lease;
(e) neither the Seller nor any Subsidiary has assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in the leasehold
or subleasehold;
(f) to the knowledge of the Seller, all facilities leased or
subleased thereunder are supplied with utilities and other services adequate for
the operation of said facilities;
(g) the Seller is not aware of any Security Interest, easement,
covenant or other restriction applicable to the real property subject to such
lease which would reasonably be expected to materially impair the current uses
or the occupancy by the Seller or a Subsidiary of the property subject thereto;
and
2.12 Intellectual Property.
(a) Section 2.12(a) of the Disclosure Schedule lists (i) each
patent, patent application, copyright registration or application therefor, mask
work registration or application therefor, and trademark, service ▇▇▇▇ and
domain name registration or application therefor of the Seller or any Subsidiary
and (ii) each Customer Deliverable of the Seller or any Subsidiary.
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(b) Each of the Seller and the Subsidiaries owns or has the right to
use all Intellectual Property necessary (i) to use, manufacture, have
manufactured, market and distribute the Customer Deliverables and (ii) to
operate the Internal Systems. Upon execution and delivery by the Seller to the
Buyer of the instruments of conveyance referred to in Section 1.5(b)(iii), each
item of Seller Intellectual Property will be owned or available for use by the
Buyer or such Subsidiary immediately following the Closing on substantially
identical terms and conditions as it was immediately prior to the Closing. The
Seller or the appropriate Subsidiary has taken all reasonable measures to
protect the proprietary nature of each item of Seller Intellectual Property, and
to maintain in confidence all trade secrets and confidential information, that
it owns or uses. No other person or entity has any rights to any of the Seller
Intellectual Property owned by the Seller or the Subsidiaries (except pursuant
to agreements or licenses specified in Section 2.12(d) of the Disclosure
Schedule), and, to the knowledge of the Seller, no other person or entity is
infringing, violating or misappropriating any of the Seller Intellectual
Property.
(c) None of the Customer Deliverables, or the marketing,
distribution, provision or use thereof, infringes or violates, or constitutes a
misappropriation of, any Intellectual Property rights of any person or entity.
None of the Internal Systems, or the use thereof, infringes or violates, or
constitutes a misappropriation of, any Intellectual Property rights of any
person or entity. Section 2.12(c) of the Disclosure Schedule lists any
complaint, claim or notice, or written threat thereof, received by the Seller or
any Subsidiary alleging any such infringement, violation or misappropriation;
and the Seller has provided to the Buyer complete and accurate copies of all
written documentation in the possession of the Seller or any Subsidiary relating
to any such complaint, claim, notice or threat. The Seller has provided to the
Buyer complete and accurate copies of all written documentation in the Seller's
possession relating to claims or disputes known to the Seller concerning any
Seller Intellectual Property.
(d) Section 2.12(d) of the Disclosure Schedule identifies each
license or other agreement pursuant to which the Seller or a Subsidiary has
licensed, distributed or otherwise granted any rights to any third party with
respect to, any Seller Intellectual Property. Except as described in Section
2.12(d) of the Disclosure Schedule, neither the Seller nor any Subsidiary has
agreed to indemnify any person or entity against any infringement, violation or
misappropriation of any Intellectual Property rights with respect to any
Customer Deliverables.
(e) Section 2.12(e) of the Disclosure Schedule identifies each item
of Seller Intellectual Property that is owned by a party other than the Seller
or a Subsidiary, and the license or agreement pursuant to which the Seller or a
Subsidiary uses it (excluding off-the-shelf software programs licensed by the
Seller pursuant to "shrink wrap" licenses).
(f) All of the copyrightable materials incorporated in or bundled
with the Customer Deliverables have been created by employees of the Seller or a
Subsidiary within the scope of their employment by the Seller or a Subsidiary or
by independent contractors of the Seller or a Subsidiary who have executed
agreements expressly assigning all right, title and interest in such
copyrightable materials to the Seller or a Subsidiary. No portion of such
copyrightable materials was jointly developed with any third party.
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(g) The Customer Deliverables and the Internal Systems are free from
significant defects or programming errors and conform in all material respects
to the written documentation and specifications therefor.
2.13 Inventory. All inventory of the Seller and the Subsidiaries, whether
or not reflected on the Most Recent Balance Sheet, consists of a quality and
quantity usable and saleable in the Ordinary Course of Business, except for
obsolete items and items of below-standard quality, all of which have been
written-off or written-down to net realizable value on the Most Recent Balance
Sheet. All inventories not written-off have been priced at the lower of cost or
net realizable value on a first-in, first-out basis. The quantities of each type
of inventory, whether raw materials, work-in-process or finished goods, are not
excessive in the present circumstances of the Seller and the Subsidiaries.
2.14 Contracts.
(a) Section 2.14 of the Disclosure Schedule lists the following
agreements (written or oral) to which the Seller or any Subsidiary is a party as
of the date of this Agreement:
(i) any agreement (or group of related agreements) for the
lease of personal property from or to third parties providing for lease payments
in excess of $1,000 per annum or having a remaining term longer than 12 months;
(ii) any agreement (or group of related agreements) for the
purchase or sale of products or for the furnishing or receipt of services (A)
which calls for performance over a period of more than one year, (B) which
involves more than the sum of $10,000, or (C) in which the Seller or any
Subsidiary has granted manufacturing rights, "most favored nation" pricing
provisions or exclusive marketing or distribution rights relating to any
products or territory or has agreed to purchase a minimum quantity of goods or
services or has agreed to purchase goods or services exclusively from a certain
party;
(iii) any agreement concerning the establishment or operation
of a partnership, joint venture or limited liability company;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed or guaranteed (or may create, incur,
assume or guarantee) indebtedness (including capitalized lease obligations)
involving more than $10,000 or under which it has imposed (or may impose) a
Security Interest on any of its assets, tangible or intangible;
(v) any agreement for the disposition of any significant
portion of the assets or business of the Seller or any Subsidiary (other than
sales of products in the Ordinary Course of Business) or any agreement for the
acquisition of the assets or business of any other entity (other than purchases
of inventory or components in the Ordinary Course of Business);
(vi) any agreement concerning confidentiality or
noncompetition;
(vii) any employment or consulting agreement;
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(viii) any agreement involving any current or former officer,
director or member of the Seller or an Affiliate thereof;
(ix) any agreement under which the consequences of a default
or termination would reasonably be expected to have a Seller Material Adverse
Effect;
(x) any agreement which contains any provisions requiring the
Seller or any Subsidiary to indemnify any other party (excluding indemnities
contained in agreements for the purchase, sale or license of products entered
into in the Ordinary Course of Business); and
(xi) any other agreement (or group of related agreements)
either involving more than $10,000 or not entered into in the Ordinary Course of
Business.
(b) The Seller has delivered to the Buyer a complete and accurate
copy of each agreement listed in Section 2.12 or Section 2.14 of the Disclosure
Schedule, except as otherwise indicated in such Section 2.14 of the Disclosure
Schedule. With respect to each agreement so listed: (i) the agreement is legal,
valid, binding and enforceable and in full force and effect; (ii) for those
agreements to which the Seller is a party, the agreement is assignable by the
Seller to the Buyer without the consent or approval of any party (except as set
forth in Section 2.3 and 2.14 of the Disclosure Schedule) and will continue to
be legal, valid, binding and enforceable and in full force and effect
immediately following the Closing in accordance with the terms thereof as in
effect immediately prior to the Closing; and (iii) neither the Seller nor any
Subsidiary nor, to the knowledge of the Seller, any other party, is in breach or
violation of, or default under, any such agreement, and no event has occurred,
is pending or, to the knowledge of the Seller, is threatened, which, after the
giving of notice, with lapse of time, or otherwise, would constitute a breach or
default by the Seller or any Subsidiary or, to the knowledge of the Seller, any
other party under such agreement.
2.15 Accounts Receivable. All accounts receivable of the Seller and the
Subsidiaries reflected on the Most Recent Balance Sheet (other than those paid
since such date) are valid receivables and, to the knowledge of Seller, are
current and collectible, net of the applicable reserve for bad debts on the Most
Recent Balance Sheet. All accounts receivable of the Seller and the Subsidiaries
that have arisen since the Most Recent Balance Sheet Date are valid receivables
and, to the knowledge of Seller, are collectible, net of a reserve for bad debts
in an amount proportionate to the reserve shown on the Most Recent Balance
Sheet. Neither the Seller nor any Subsidiary has received any written notice
from an account debtor stating that any account receivable in an amount in
excess of $10,000 is subject to any contest, claim or setoff by such account
debtor.
2.16 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the any Subsidiary.
2.17 Insurance. To Seller's knowledge, there is no material claim pending
under any insurance policy as to which coverage has been questioned, denied or
disputed by the underwriter of such policy. All premiums due and payable under
all such policies have been paid, neither the Seller nor any Subsidiary, to
their knowledge, may be liable for retroactive premiums or similar payments, and
the Seller and the Subsidiaries are otherwise in compliance in all material
respects with the terms of such policies.
11
2.18 Litigation. Except as set forth in Section 2.18 of the Disclosure
Schedule, there is no Legal Proceeding which is pending or has been threatened
in writing against the Seller or any Subsidiary which (a) seeks either damages
in excess of $10,000 or equitable relief or (b) in any manner challenges or
seeks to prevent, enjoin, alter or delay the transactions contemplated by this
Agreement. There are no material judgments, orders or decrees outstanding
against the Seller or any Subsidiary.
2.19 Warranties. No product or service manufactured, sold, leased,
licensed or delivered by the Seller or any Subsidiary is subject to any
guaranty, warranty, right of return, right of credit or other indemnity other
than (i) the applicable standard terms and conditions of sale or lease of the
Seller or the appropriate Subsidiary, which are set forth in Section 2.19 of the
Disclosure Schedule, and (ii) manufacturers' warranties for which neither the
Seller nor any Subsidiary has any liability. Section 2.19 of the Disclosure
Schedule sets forth the aggregate expenses incurred by the Seller and the
Subsidiaries in fulfilling their obligations under their guaranty, warranty,
right of return and indemnity provisions during each of the fiscal years and the
interim period covered by the Financial Statements; and the Seller does not know
of any reason why such expenses should significantly increase as a percentage of
sales in the future.
2.20 Employees.
(a) Section 2.20 of the Disclosure Schedule contains a list of all
employees of the Seller and each Subsidiary, along with the position and the
annual rate of compensation of each such person. The annual rate of compensation
listed next to each employee and consultant in Section 2.20 of the Disclosure
Schedule has not been materially increased at any time within sixty (60) days
prior to the date of this Agreement. Each current or past employee of the Seller
or any Subsidiary has entered into a confidentiality/assignment of inventions
agreement with the Seller or such Subsidiary, a copy or form of which has
previously been delivered to the Buyer. Section 2.20 of the Disclosure Schedule
contains a list of all employees of the Seller or any Subsidiary who are a party
to a non-competition agreement with the Seller or any Subsidiary; copies of such
agreements have previously been delivered to the Buyer. Each such agreement
referenced in the two preceding sentences to which the Seller is a party is
assignable by the Seller to the Buyer without the consent or approval of any
party and will continue to be legal, valid, binding and enforceable and in full
force and effect immediately following the Closing in accordance with the terms
thereof as in effect immediately prior to the Closing. Section 2.20 of the
Disclosure Schedule contains a list of all employees of the Seller or any
Subsidiary who are not citizens of the United States. To the knowledge of the
Seller, no key employee or group of employees has any plans to terminate
employment with the Seller or any Subsidiary (other than for the purpose of
accepting employment with the Buyer following the Closing) or not to accept
employment with the Buyer.
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(b) Neither the Seller nor any Subsidiary is a party to or bound by
any collective bargaining agreement, nor has any of them experienced any
strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Seller has no knowledge of any organizational effort
made or threatened, either currently or within the past two years, by or on
behalf of any labor union with respect to employees of the Seller or any
Subsidiary.
2.21 Employee Benefits.
(a) Section 2.21(a) of the Disclosure Schedule contains a complete
and accurate list of all Seller Plans. Complete and accurate copies of (i) all
Seller Plans which have been reduced to writing, (ii) written summaries of all
unwritten Seller Plans, (iii) all related trust agreements, insurance contracts
and summary plan descriptions, and (iv) annual reports filed on IRS Form 5500
and (for all funded plans) all plan financial statements for the last three plan
years for each Seller Plan, have been delivered to the Buyer.
(b) Each Seller Plan has been administered in all material respects
in accordance with its terms and the Seller and the Subsidiaries have in all
material respects met their obligations with respect to each Seller Plan and
have made all required contributions thereto. The Seller and each Subsidiary and
each Seller Plan are in compliance in all material respects with the currently
applicable provisions of ERISA and the Code and the regulations thereunder
(including Section 4980B of the Code, Subtitle K, Chapter 100 of the Code and
Sections 601 through 608 and Section 701 et seq. of ERISA). All filings and
reports as to each Seller Plan required to have been submitted to the Internal
Revenue Service or to the United States Department of Labor have been duly
submitted. No Seller Plan has assets that include securities issued by the
Seller or any ERISA Affiliate.
(c) There are no Legal Proceedings (except claims for benefits
payable in the normal operation of the Seller Plans and proceedings with respect
to qualified domestic relations orders) against or involving any Seller Plan or
asserting any rights or claims to benefits under any Seller Plan that could give
rise to any material liability.
(d) Each Seller Plan that is intended to be qualified under Section
401(a) of the Code has received a determination letter from the Internal Revenue
Service to the effect that such Seller Plan is qualified and the plan and the
trust related thereto is exempt from federal income taxes under Sections 401(a)
and 501(a), respectively, of the Code, and no such determination letter has been
revoked and revocation has not been threatened, or such plan is a prototype plan
that is the subject of an IRS opinion letter, and no act or omission has
occurred, that would reasonably be expected to adversely affect its
qualification or materially increase its cost. Each Seller Plan which is
required to satisfy Section 401(k)(3) or Section 401(m)(2) of the Code has been
tested for compliance with, and satisfies the requirements of Section 401(k)(3)
and Section 401(m)(2) of the Code for each of the three plan years ending prior
to the Closing Date.
(e) Neither the Seller, any Subsidiary, nor any ERISA Affiliate has
ever maintained an Employee Benefit Plan subject to Section 412 of the Code or
Title IV of ERISA.
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(f) At no time has the Seller, any Subsidiary or any ERISA Affiliate
been obligated to contribute to any "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA).
(g) There are no unfunded obligations under any Seller Plan
providing benefits after termination of employment to any employee of the Seller
or any Subsidiary (or to any beneficiary of any such employee), including but
not limited to retiree health coverage and deferred compensation, but excluding
continuation of health coverage required to be continued under Section 4980B of
the Code or other applicable law and insurance conversion privileges under state
law. The assets of each Seller Plan which is funded are reported at their fair
market value on the books and records of such Seller Plan.
(h) No act or omission has occurred and no condition exists with
respect to any Seller Plan that would subject the Seller or any Subsidiary to
any material fine, penalty or tax imposed under ERISA or the Code.
(i) No Seller Plan is funded by, associated with or related to a
"voluntary employee's beneficiary association" within the meaning of Section
501(c)(9) of the Code.
(j) Each Seller Plan may be amended or terminated unilaterally by
the Seller at any time without liability or expense to the Seller or such Seller
Plan as a result thereof (other than for benefits accrued through the date of
termination or amendment and reasonable administrative expenses related thereto)
and no Seller Plan, plan documentation or agreement, summary plan description or
other written communication distributed generally to employees by its terms
prohibits the Seller from amending or terminating any such Seller Plan.
(k) Section 2.21(k) of the Disclosure Schedule discloses each: (i)
agreement with any member, director, executive officer or other key employee of
the Seller or any Subsidiary (A) the benefits of which are contingent, or the
terms of which are altered, upon the occurrence of a transaction involving the
Seller or any Subsidiary of the nature of any of the transactions contemplated
by this Agreement, (B) providing any term of employment or compensation
guarantee or (C) providing severance benefits or other benefits after the
termination of employment of such director, executive officer or key employee;
(ii) agreement, plan or arrangement under which any person may receive payments
from the Seller or any Subsidiary that may be subject to the tax imposed by
Section 4999 of the Code or included in the determination of such person's
"parachute payment" under Section 280G of the Code; and (iii) agreement or plan
binding the Seller or any Subsidiary, including any stock option plan, stock
appreciation right plan, restricted stock plan, stock purchase plan, severance
benefit plan or Seller Plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
(l) Section 2.21(l) of the Disclosure Schedule sets forth the policy
of the Seller and any Subsidiary with respect to accrued vacation, accrued sick
time and earned time off and the amount of such liabilities as of September 30,
2005.
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2.22 Environmental Matters.
(a) Each of the Seller and the Subsidiaries has complied with all
applicable Environmental Laws. There is no pending or, to the knowledge of the
Seller, threatened civil or criminal litigation, written notice of violation,
formal administrative proceeding, or investigation, inquiry or information
request by any Governmental Entity, relating to any Environmental Law involving
the Seller or any Subsidiary.
(b) Neither the Seller nor any Subsidiary has any liabilities or
obligations arising from the release of any Materials of Environmental Concern
into the environment.
(c) Neither the Seller nor any Subsidiary is a party to or bound by
any court order, administrative order, consent order or other agreement with any
Governmental Entity entered into in connection with any legal obligation or
liability arising under any Environmental Law.
(d) Set forth in Section 2.22(d) of the Disclosure Schedule is a
list of all documents (whether in hard copy or electronic form) that contain any
environmental reports, investigations and audits relating to premises currently
or previously owned or operated by the Seller or a Subsidiary (whether conducted
by or on behalf of the Seller or a Subsidiary or a third party, and whether done
at the initiative of the Seller or a Subsidiary or directed by a Governmental
Entity or other third party) which were issued or conducted during the past five
years and which the Seller has possession of or access to. A complete and
accurate copy of each such document has been provided to the Buyer.
(e) The Seller is not aware of any material environmental liability
of any solid or hazardous waste transporter or treatment, storage or disposal
facility that has been used by the Seller or any Subsidiary.
2.23 Legal Compliance. Each of the Seller and the Subsidiaries is
currently conducting, and have at all times since their inception conducted,
their respective businesses in compliance with each applicable law (including
rules and regulations thereunder) of any federal, state, local or applicable
foreign government, or any Governmental Entity, except for any noncompliance,
violations or defaults that, individually or in the aggregate, have not had and
would not reasonably be expected to have a Seller Material Adverse Effect.
Neither the Seller nor any Subsidiary has received any notice or communication
from any Governmental Entity alleging noncompliance with any applicable law,
rule or regulation.
2.24 Customers and Suppliers. Section 2.24 of the Disclosure Schedule sets
forth a list of (a) each customer that accounted for more than 10% of the
consolidated revenues of the Seller during the last full fiscal year or the
interim period through the Most Recent Balance Sheet Date and the amount of
revenues accounted for by such customer during each such period and (b) each
supplier that is the sole supplier of any significant product or service to the
Seller or a Subsidiary. No such customer or supplier has indicated within the
past year that it will stop, or decrease the rate of, buying products or
supplying products, as applicable, to the Seller or any Subsidiary, in any such
case as would reasonably be expected to have a Seller Material Adverse Effect.
No unfilled customer order or commitment obligating the Seller or any Subsidiary
to process, manufacture or deliver products or perform services will result in a
material loss to the Seller or any Subsidiary upon completion of performance. No
purchase order or commitment of the Seller or any Subsidiary is in excess of
normal requirements, nor are prices provided therein in excess of current market
prices for the products or services to be provided thereunder, in any such case
as would reasonably be expected to have a Seller Material Adverse Effect.
15
2.25 Permits. Section 2.25 of the Disclosure Schedule sets forth a list of
all Permits issued to or held by the Seller or any Subsidiary. Such listed
Permits are the only Permits that are required for the Seller and the
Subsidiaries to conduct their respective businesses as presently conducted or as
proposed to be conducted. Each such Permit is in full force and effect; the
Seller or the applicable Subsidiary is in compliance with the terms of each such
Permit; and, to the knowledge of the Seller, no suspension or cancellation of
such Permit is threatened and there is no basis for believing that such Permit
will not be renewable upon expiration. Each such Permit is assignable by the
Seller to the Buyer without the consent or approval of any party and will
continue in full force and effect immediately following the Closing.
2.26 Certain Business Relationships With Affiliates. Except as disclosed
on Section 2.26 of the Disclosure Schedule, no Affiliate of the Seller or of any
Subsidiary (a) owns any property or right, tangible or intangible, which is used
in the business of the Seller or any Subsidiary, (b) has any claim or cause of
action against the Seller or any Subsidiary, or (c) owes any money to, or is
owed any money by, the Seller or any Subsidiary. Section 2.26 of the Disclosure
Schedule describes any transactions or relationships between the Seller or a
Subsidiary and any Affiliate thereof which occurred or have existed since the
beginning of the time period covered by the Financial Statements.
2.27 Brokers' Fees. Neither the Seller nor any Subsidiary has any
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement
2.28 Disclosure. No representation or warranty by the Seller contained in
this Agreement, and no statement contained in the Disclosure Schedule or any
other document, certificate or other instrument delivered or to be delivered by
or on behalf of the Seller pursuant to this Agreement, contains or will contain
any untrue statement of material fact or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading.
16
3. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE OPERATING SUB
The Buyer and the Operating Sub, each jointly and severally, represents and
warrants to the Seller that the statements contained in this Article 3 are true
and correct as of the date of this Agreement.
3.1 Organization, Standing and Power. Each of Buyer and Operating Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware. Each of Buyer and Operating Sub has the corporate
power to own its properties and to carry on its business as now being conducted
and as proposed to be conducted and is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to be so qualified and
in good standing could reasonably be expected to have a Buyer Material Adverse
Effect. Buyer has delivered a true and correct copy of the Certificate of
Incorporation and Bylaws or other charter documents, as applicable, of Buyer and
Operating Sub, each as amended to date, to Seller. Neither Buyer nor Operating
Sub is in violation of any of the provisions of its Certificate of Incorporation
or Bylaws.
3.2 Authority. Buyer and Operating Sub have all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been, or will have
been by the Closing, duly authorized by all necessary corporate action on the
part of Buyer and Operating Sub. This Agreement has been duly executed and
delivered by Buyer and Operating Sub and constitutes the valid and binding
obligations of Buyer and Operating Sub enforceable against Buyer and Operating
Sub in accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to creditors' rights generally, and subject to general principles of
equity. The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any material obligation or loss of a material benefit under (a)
any provision of the Certificate of Incorporation or Bylaws of Buyer or any of
its Subsidiaries; or (b) any material mortgage, indenture, lease, contract or
other agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Buyer
or any of its Subsidiaries or their properties or assets No consent, approval,
order or authorization of or registration, declaration or filing with any
Governmental Entity is required by or with respect to Buyer or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
Buyer and Operating Sub or the consummation by Buyer and Operating Sub of the
transactions contemplated hereby, except for (a) filings required under
Regulation D of the Securities Act following the Closing Date; (b) the filing of
a Form 8-K with the Securities and Exchange Commission ("SEC") and National
Association of Securities Dealers ("NASD") within 15 days after the Closing
Date; (c) such filings as may be required under applicable state securities laws
and the securities laws of any foreign country; and (d) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, could not reasonably be expected to have a Buyer Material Adverse Effect
and could not prevent, materially alter or delay any of the transactions
contemplated by this Agreement.
17
3.3 Capital Structure. The authorized capital stock of Buyer consists of
1,000,000,000 shares of common stock, $0.0001 par value, of which there were
issued and outstanding as of the close of business on the date hereof,
36,528,504 shares of Common Stock. There are no other outstanding shares of
capital stock or voting securities of Buyer other than shares of Common Stock
issued after that same date upon the exercise of options issued under the ▇▇▇▇▇
Networks, Inc. 2000 Stock Plan (the "Buyer Option Plan"). All outstanding shares
of Buyer have been duly authorized, validly issued, fully paid and are
nonassessable. As of the close of business on that same date, Buyer has reserved
(a) 5,967,480 shares of Common Stock for issuance to employees, directors and
independent contractors pursuant to the Buyer Option Plan, of which 4,827,907
shares are subject to outstanding, unexercised options and 480,396 shares have
been exercised and are outstanding and 659,177 are available for grants; (b)
1,895,268 shares of Common Stock for issuance pursuant to outstanding warrants
(the "Buyer Warrants"); and 3,132,536 shares of Common Stock for issuance
pursuant to outstanding Convertible Notes (the "Buyer Notes"). The Buyer is
obligated to issue additional Buyer Notes and Buyer Warrants, which will be
convertible into and exercisable for shares of Buyer Common Stock in connection
with the financing it closed on November 17, 2005 (the "Financing"). Other than
this Agreement, the Buyer Option Plan, the Buyer Warrants and Buyer Notes and
shares of Buyer Common Stock to be issued to brokers in connection with the
Financing and the transactions contemplated by this Agreement, there are no
other options, warrants, calls, rights, commitments or agreements of any
character to which Buyer is a party or by which either of them is bound
obligating Buyer to issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any shares of the capital
stock of Buyer or obligating Buyer to grant, extend or enter into any such
option, warrant, call, right, commitment or agreement.
3.4 Issuance of Shares. The issuance and delivery of the Common Stock in
accordance with this Agreement shall be, at or prior to the Closing Date, duly
authorized by all necessary corporate action on the part of Buyer, and, when
issued on the Closing Date as contemplated hereby, such shares of Common Stock
will be duly and validly issued, fully paid and nonassessable. Such Common
Stock, when so issued and delivered in accordance with the provisions of this
Agreement, shall be free and clear of all liens and encumbrances and adverse
claims, other than restrictions on transfer created by applicable securities
laws and will not have been issued in violation of their respective properties
or any preemptive rights or rights of first refusal or similar rights.
3.5 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Buyer threatened
against Buyer or any of its properties or any of its officers or directors (in
their capacities as such) that, individually or in the aggregate, could
reasonably be expected to have a Buyer Material Adverse Effect. There is no
judgment, decree or order against Buyer or any of its Subsidiaries or, to the
knowledge of Buyer, or any of its directors or officers (in their capacities as
such) that could prevent, enjoin or materially alter or delay any of the
transactions contemplated by this Agreement, or that could reasonably be
expected to have a Buyer Material Adverse Effect.
18
3.6 Interim Operations of Operating Sub. Operating Sub was formed solely
for the purpose of engaging in the transactions contemplated by this Agreement,
has engaged in no other business activities and has conducted its operations
only as contemplated by this Agreement.
3.7 Representations Complete. None of the representations or warranties
made by Buyer or Operating Sub herein or in any Schedule hereto, including the
Buyer Disclosure Schedule, or certificate furnished by Buyer or Operating Sub
pursuant to this Agreement, or the SEC Documents, or any written statement
furnished to Seller pursuant hereto or in connection with the transactions
contemplated hereby, when all such documents are read together in their
entirety, contains or will contain on the Closing Date any untrue statement of a
material fact or omits or will omit on the Closing Date to state any material
fact necessary in order to make the statements contained herein or therein, in
the light of the circumstances under which made, not misleading.
3.8 SEC Documents; Financial Statements. Buyer has filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934 (the "Exchange Act") (all of the foregoing filed prior to the date hereof
(including all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein) being hereinafter
referred to as the "SEC Documents"). Except as set forth on Schedule 3.8, each
of the SEC Documents was filed with the SEC within the timeframes prescribed by
the SEC for the filing of such SEC Documents such that each filing was timely
filed with the SEC. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder applicable to the SEC
Documents. None of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted 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. As of their respective dates, the consolidated financial statements
of Buyer and its Subsidiaries included in the SEC Documents complied as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. None of Buyer
or any of its Subsidiaries, or any of their respective officers, directors or
affiliates (as defined below) or, to Buyer's knowledge, any shareholder of Buyer
has made any other filing with the SEC, issued any press release or made any
other public statement or communication on behalf of Buyer or any of its
Subsidiaries or otherwise relating to Buyer or any of its Subsidiaries that
contains any untrue statement of a material fact or omits any statement of
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they are or were made, not misleading or has
provided any other information to Seller that contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they are or
were made, not misleading. None of Buyer, any of its Subsidiaries and any of
their respective officers, directors, employees or agents has provided Seller
with any material, nonpublic information. Buyer is not required to file and will
not be required to file any agreement, note, lease, mortgage, deed or other
instrument entered into prior to the date hereof and to which Buyer or any
Subsidiary is a party or by which Buyer or any Subsidiary is bound that has not
been previously filed as an exhibit (including by way of incorporation by
reference) to its reports filed or made with the SEC under the Exchange Act. The
auditing firm, which has expressed its opinion with respect to the consolidated
financial statements included in Buyer's annual report on Form 10-KSB for the
last completed fiscal year (the "Audit Opinion"), is independent of Buyer
pursuant to the standards set forth in Rule 2-01 of Regulation S-X promulgated
by the SEC, and such firm was otherwise qualified to render the Audit Opinion
under applicable law and the rules and regulation of the SEC. There is no
transaction, arrangement or other relationship between Buyer and an
unconsolidated or other off-balance-sheet entity that is required to be
disclosed by Buyer in its reports pursuant to the Exchange Act that has not been
so disclosed in the SEC Documents.
19
3.9 Absence of Certain Changes. Since the filing of Buyer's most recent
Quarterly Report on Form 10-Q, and other than as disclosed in the SEC Documents,
(a) there has occurred no event or development which, individually or in the
aggregate, has had, or could reasonably be expected to have in the future, a
Buyer Material Adverse Effect and (b) Buyer has conducted its business in the
ordinary course consistent with past practices.
3.10 Brokers' Fees. Except for fees to be paid to Wyndam Partners, Buyer
has no liability or obligation to pay any fees or commissions to any broker,
finder or agent with respect to the transactions contemplated by this Agreement.
4. PRE-CLOSING COVENANTS
4.1 Closing Efforts. Each of the Parties shall use its Reasonable Best
Efforts to take all actions and to do all things necessary, proper or advisable
to consummate the transactions contemplated by this Agreement, including using
its Reasonable Best Efforts to ensure that (i) its representations and
warranties remain true and correct in all material respects through the Closing
Date and (ii) the conditions to the obligations of the other Party to consummate
the transactions contemplated by this Agreement are satisfied.
4.2 Governmental and Third-Party Notices and Consents.
(a) Each Party shall use its Reasonable Best Efforts to obtain, at
its expense, all waivers, permits, consents, approvals or other authorizations
from Governmental Entities, and to effect all registrations, filings and notices
with or to Governmental Entities, as may be required for such Party to
consummate the transactions contemplated by this Agreement and to otherwise
comply with all applicable laws and regulations in connection with the
consummation of the transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, each of the Parties shall promptly
file any Notification and Report Forms and related material that it may be
required to file with the Federal Trade Commission and the Antitrust Division of
the United States Department of Justice under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, shall
use its Reasonable Best Efforts to obtain an early termination of the applicable
waiting period, and shall make any further filings or information submissions
pursuant thereto that may be necessary, proper or advisable; provided, however,
that notwithstanding anything to the contrary in this Agreement, the Buyer shall
not be obligated (A) to respond to formal requests for additional information or
documentary material pursuant to 16 C.F.R. 803.20 under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Act except to the extent it elects to do so in its sole discretion or (B) to
sell or dispose of or hold separately (through a trust or otherwise) any assets
or businesses of the Buyer or its Affiliates.
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(b) The Seller shall use its Reasonable Best Efforts to obtain, at
its expense, all such waivers, consents or approvals from third parties, and to
give all such notices to third parties, as are required to be listed in the
Disclosure Schedule.
(c) If (i) any of the Assigned Contracts or other assets or rights
constituting Acquired Assets may not be assigned and transferred by the Seller
to the Buyer (as a result of either the provisions thereof or applicable law)
without the consent or approval of a third party, (ii) the Seller, after using
its Reasonable Best Efforts, is unable to obtain such consent or approval prior
to the Closing and (iii) the Closing occurs nevertheless, then (A) such Assigned
Contracts and/or other assets or rights shall not be assigned and transferred by
the Seller to the Buyer at the Closing and the Buyer shall not assume the
Seller's liabilities or obligations with respect thereto at the Closing, (B) the
Seller shall continue to use its Reasonable Best Efforts to obtain the necessary
consent or approval as soon as practicable after the Closing, and (C) upon the
obtaining of such consent or approval, the Buyer and the Seller shall execute
such further instruments of conveyance (in substantially the form executed at
the Closing) as may be necessary to assign and transfer such Assigned Contracts
and/or other assets or rights (and the associated liabilities and obligations of
the Seller) to the Buyer.
4.3 Member Approval.
(a) The Seller shall use its Reasonable Best Efforts to obtain, as
promptly as practicable, the Requisite Member Approval, either at a special
meeting of members or pursuant to a written member consent, all in accordance
with the applicable requirements of the Delaware Limited Liability Company Law.
If the Requisite Member Approval is obtained by means of a written consent, the
Seller shall send, pursuant to Delaware Limited Liability Company Law, a written
notice to all members of the Seller that did not execute such written consent
informing them that the sale of the Acquired Assets as contemplated by this
Agreement was approved by the members of the Seller.
4.4 Operation of Business. Except as contemplated by this Agreement,
during the period from the date of this Agreement to the Closing, the Seller
shall (and shall cause each Subsidiary to) conduct its operations in the
Ordinary Course of Business and in compliance with all applicable laws and
regulations and, to the extent consistent therewith, use its Reasonable Best
Efforts to preserve intact its current business organization, keep its physical
assets in good working condition, keep available the services of its current
officers and employees and preserve its relationships with customers, suppliers
and others having business dealings with it. Without limiting the generality of
the foregoing, prior to the Closing, the Seller shall not (and shall cause each
Subsidiary not to), without the written consent of the Buyer which consent shall
not be unreasonably withheld:
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(a) issue or sell any stock or other securities of the Company or
any Subsidiary or any options, warrants or other rights to acquire any such
stock or other securities (except pursuant to the conversion or exercise of
options, warrants or other convertible securities outstanding on the date
hereof);
(b) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock;
(c) create, incur or assume any indebtedness (including obligations
in respect of capital leases); assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person or entity; or make any loans, advances or
capital contributions to, or investments in, any other person or entity;
(d) enter into, adopt or amend any Employee Benefit Plan or any
employment or severance agreement or arrangement of the type described in
Section 2.21(k) or (except for normal increases in the Ordinary Course of
Business for employees who are not Affiliates) increase in any manner the
compensation or fringe benefits of, or materially modify the employment terms
of, its directors, officers or employees, generally or individually, or pay any
bonus or other benefit to its directors, officers or employees (except for
existing payment obligations listed in Section 2.21 of the Disclosure Schedule)
or hire any new officers or (except in the Ordinary Course of Business) any new
employees;
(e) acquire, sell, lease, license or dispose of any assets or
property (including any shares or other equity interests in or securities of any
Subsidiary or any corporation, partnership, association or other business
organization or division thereof), other than purchases and sales of assets in
the Ordinary Course of Business;
(f) mortgage or pledge any of its property or assets or subject any
such property or assets to any Security Interest;
(g) discharge or satisfy any Security Interest or pay any obligation
or liability other than in the Ordinary Course of Business;
(h) amend its certificate of formation, operating agreement or other
organizational documents in a manner that could have an adverse effect on the
transactions contemplated by this Agreement;
(i) change its accounting methods, principles or practices, except
insofar as may be required by a generally applicable change in GAAP, or make any
new elections, or changes to any current elections, with respect to Taxes that
affect the Acquired Assets;
(j) enter into, amend, terminate, take or omit to take any action
that would constitute a violation of or default under, or waive any rights
under, any contract or agreement of a nature required to be listed in Section
2.11, Section 2.12 or Section 2.14 of the Disclosure Schedule;
(k) make or commit to make any capital expenditure in excess of
$10,000 per item or $50,000 in the aggregate;
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(l) institute or settle any Legal Proceeding;
(m) take any action or fail to take any action permitted by this
Agreement with the knowledge that such action or failure to take action would
result in (i) any of the representations and warranties of the Seller set forth
in this Agreement becoming untrue or (ii) any of the conditions to the Closing
set forth in Article 5 not being satisfied; or
(n) agree in writing or otherwise to take any of the foregoing
actions.
4.5 Access to Information.
(a) The Seller shall (and shall cause each Subsidiary to) permit
representatives of the Buyer to have full access (at all reasonable times, and
in a manner so as not to interfere with the normal business operations of the
Seller and the Subsidiaries) to all premises, properties, financial, tax and
accounting records (including the work papers of the Seller's independent
accountants), contracts, other records and documents, and personnel, of or
pertaining to the Seller and each Subsidiary for the purpose of performing such
inspections and tests as the Buyer deems necessary or appropriate.
(b) Within 15 days after the end of each month ending prior to the
Closing, beginning with May 2005, the Seller shall furnish to the Buyer an
unaudited income statement for such month and a balance sheet as of the end of
such month, prepared on a basis consistent with the Financial Statements. Such
financial statements shall present fairly the financial condition and results of
operations of the Seller and the Subsidiaries on a consolidated basis as of the
dates thereof and for the periods covered thereby, and shall be consistent with
the books and records of the Seller and the Subsidiaries.
(c) The Buyer (i) shall treat and hold as confidential any
Confidential Information, (ii) shall not use any of the Confidential Information
except in connection with this Agreement, and (iii) if this Agreement is
terminated for any reason whatsoever, shall return to the Seller all tangible
embodiments (and all copies) thereof which are in its possession.
4.6 Notice of Breaches.
(a) From the date of this Agreement until the Closing, the Seller
shall promptly deliver to the Buyer supplemental information concerning events
or circumstances occurring subsequent to the date hereof which would render any
representation, warranty or statement in this Agreement or the Disclosure
Schedule inaccurate or incomplete in any material respect at any time after the
date of this Agreement until the Closing. No such supplemental information shall
be deemed to avoid or cure any misrepresentation or breach of warranty or
constitute an amendment of any representation, warranty or statement in this
Agreement or the Disclosure Schedule.
(b) From the date of this Agreement until the Closing, the Buyer
shall promptly deliver to the Seller supplemental information concerning events
or circumstances occurring subsequent to the date hereof which would render any
representation, warranty or statement in this Agreement inaccurate or incomplete
in any material respect at any time after the date of this Agreement until the
Closing. No such supplemental information shall be deemed to avoid or cure any
misrepresentation or breach of warranty or constitute an amendment of any
representation, warranty or statement in this Agreement.
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4.7 Exclusivity.
(a) The Seller shall not, and the Seller shall require each of its
officers, directors, employees, representatives and agents not to, directly or
indirectly, (i) initiate, solicit, encourage or otherwise facilitate any
inquiry, proposal, offer or discussion with any party (other than the Buyer)
concerning any merger, reorganization, consolidation, recapitalization, business
combination, liquidation, dissolution, share exchange, sale of stock, sale of
material assets or similar business transaction involving the Seller, any
Subsidiary or any division of the Seller, (ii) furnish any non-public
information concerning the business, properties or assets of the Seller, any
Subsidiary or any division of the Seller to any party (other than the Buyer) or
(iii) engage in discussions or negotiations with any party (other than the
Buyer) concerning any such transaction.
(b) The Seller shall immediately notify any party with which
discussions or negotiations of the nature described in paragraph (a) above were
pending that the Seller is terminating such discussions or negotiations. If the
Seller receives any inquiry, proposal or offer of the nature described in
paragraph (a) above, the Seller shall, within one business day after such
receipt, notify the Buyer of such inquiry, proposal or offer, including the
identity of the other party and the terms of such inquiry, proposal or offer.
5. CONDITIONS TO CLOSING
5.1 Conditions to Obligations of each Party. The respective obligations of
each Party to consummate the transactions contemplated by this Agreement to be
consummated at the Closing are subject to the satisfaction of the following
condition:
(a) the sale of the Acquired Assets by the Seller to the Buyer as
contemplated by this Agreement shall have received the Requisite Member
Approval.
5.2 Conditions to Obligations of the Buyer. The obligation of the Buyer to
consummate the transactions contemplated by this Agreement to be consummated at
the Closing is subject to the satisfaction of the following additional
conditions:
(a) the Seller and the Subsidiaries shall have obtained at their own
expense (and shall have provided copies thereof to the Buyer) all of the
waivers, permits, consents, approvals or other authorizations, and effected all
of the registrations, filings and notices, referred to in Section 4.2 which are
required on the part of the Seller or the Subsidiaries;
(b) the representations and warranties of the Seller set forth in
the first sentence of Section 2.1 and in Section 2.2 and any representations and
warranties of the Seller set forth in this Agreement that are qualified as to
materiality shall be true and correct in all respects, and all other
representations and warranties of the Seller set forth in this Agreement shall
be true and correct in all material respects, in each case as of the date of
this Agreement and as of the Closing as though made as of the Closing, except to
the extent such representations and warranties are specifically made as of a
particular date (in which case such representations and warranties shall be true
and correct as of such date);
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(c) the Seller shall have performed or complied with in all material
respects its agreements and covenants required to be performed or complied with
under this Agreement as of or prior to the Closing;
(d) no Legal Proceeding shall be pending or threatened wherein an
unfavorable judgment, order, decree, stipulation or injunction would (i) prevent
consummation of the transactions contemplated by this Agreement, (ii) cause the
transactions contemplated by this Agreement to be rescinded following
consummation or (iii) affect adversely the right of the Buyer to own, operate or
control any of the Acquired Assets, or to conduct the business of the Seller and
the Subsidiaries as currently conducted, following the Closing, and no such
judgment, order, decree, stipulation or injunction shall be in effect;
(e) the Seller shall have delivered to the Buyer the Seller
Certificate;
(f) the Seller shall have delivered to the Buyer documents
evidencing the release or termination of all Security Interests on the Acquired
Assets, and copies of filed UCC termination statements with respect to all UCC
financing statements evidencing Security Interests;
(g) the Buyer shall have received from counsel to the Seller an
opinion in substantially the form attached hereto as Exhibit D, addressed to the
Buyer and dated as of the Closing Date;
(h) the Buyer shall have received such other certificates and
instruments (including certificates of good standing of the Seller and the
Subsidiaries in their jurisdiction of organization and the various foreign
jurisdictions in which they are qualified, certified charter documents,
certificates as to the incumbency of officers and the adoption of authorizing
resolutions) as it shall reasonably request in connection with the Closing;
(i) the Buyer shall have received a fully executed employment
agreement from ▇▇▇▇▇▇ ▇▇▇▇▇▇; and
(j) the Buyer shall have received a fully executed Confidentiality,
Invention Assignment and Noncompetition Agreement, from each officer, employee
and consultant of the Seller as of the Closing Date.
5.3 Conditions to Obligations of the Seller. The obligation of the Seller
to consummate the transactions contemplated by this Agreement to be consummated
at the Closing is subject to the satisfaction of the following additional
conditions:
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(a) the representations and warranties of the Buyer set forth in the first
sentence of Section 3.1 and in Section 3.2 and any representations and
warranties of the Buyer set forth in this Agreement that are qualified as to
materiality shall be true and correct in all respects, and all other
representations and warranties of the Buyer set forth in this Agreement shall be
true and correct in all material respects, in each case as of the date of this
Agreement and as of the Closing as though made as of the Closing, except to the
extent such representations and warranties are specifically made as of a
particular date (in which case such representations and warranties shall be true
and correct as of such date);
(b) the Buyer shall have performed or complied with in all material
respects its agreements and covenants required to be performed or complied with
under this Agreement as of or prior to the Closing;
(c) no Legal Proceeding shall be pending or threatened wherein an
unfavorable judgment, order, decree, stipulation or injunction would (i) prevent
consummation of the transactions contemplated by this Agreement or (ii) cause
the transactions contemplated by this Agreement to be rescinded following
consummation, and no such judgment, order, decree, stipulation or injunction
shall be in effect;
(d) the Buyer shall have delivered to the Seller the Buyer Certificate;
(e) the Seller shall have received from counsel to the Buyer an opinion in
substantially the form attached hereto as Exhibit E, addressed to the Seller and
dated as of the Closing Date;
(f) the Seller shall have received such other certificates and instruments
(including certificates of good standing of the Buyer in its jurisdiction of
organization, certificates as to the incumbency of officers and the adoption of
authorizing resolutions) as it shall reasonably request in connection with the
Closing;
(g) ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall have received a fully executed employment
agreement from the Buyer;
(h) Buyer shall have entered into a mutually agreeable Service and Support
Agreement with OSS Corporation (the "OSS Agreement").
6. POST-CLOSING COVENANTS
6.1 Proprietary Information. From and after the Closing, the Seller shall
not disclose or make use of (except to pursue its rights, under this Agreement
or the Ancillary Agreements), and shall use its best efforts to cause all of its
Affiliates not to disclose or make use of, any knowledge, information or
documents of a confidential nature or not generally known to the public with
respect to Acquired Assets, the Seller's business or the Buyer or its business
(including the financial information, technical information or data relating to
the Seller's products and names of customers of the Seller), as well as filings
and testimony (if any) presented in the course of any arbitration of a Dispute
pursuant to Section 7.3 and the arbitral award and the Arbitrator's reasons
therefor relating to the same), except to the extent that such knowledge,
information or documents shall have become public knowledge other than through
improper disclosure by the Seller or an Affiliate. The Seller shall enforce, for
the benefit of the Buyer, all confidentiality, invention assignments and similar
agreements between the Seller and any other party relating to the Acquired
Assets or the business of the Seller which are not Assigned Contracts.
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6.2 Solicitation and Hiring. For a period of 3 years after the Closing
Date, the Seller shall not, either directly or indirectly (including through an
Affiliate), (a) solicit or attempt to induce any Restricted Employee to
terminate his employment with the Buyer or any Subsidiary of the Buyer or (b)
hire or attempt to hire any Restricted Employee; provided, that this clause (b)
shall not apply to any individual whose employment with the Buyer or a
Subsidiary of the Buyer has been terminated for a period of six months or
longer. The Seller shall enforce, for the benefit of the Buyer, all
confidentiality, non-solicitation and non-hiring assignments and similar
agreements between the Seller and any other party which are not Assigned
Contracts.
6.3 Non-Competition.
(a) For a period of 3 years after the Closing Date, the Seller shall
not, either directly or indirectly as a stockholder, investor, partner,
consultant or otherwise, (i) design, develop, manufacture, market, sell or
license any product or provide any service anywhere in the world which is
competitive with any product designed, developed (or under development),
manufactured, sold or licensed or any service provided by the Seller within the
three-year period prior to the Closing Date or (ii) engage anywhere in the world
in any business competitive with the business of the Seller as conducted as of
the Closing Date or during the three-year period prior to the Closing Date. The
Seller shall enforce, for the benefit of the Buyer, all non-competition and
similar agreements between the Seller and any other party which are not Assigned
Contracts.
(b) The Seller agrees that the duration and geographic scope of the
non-competition provision set forth in this Section 6.3 are reasonable. In the
event that any court determines that the duration or the geographic scope, or
both, are unreasonable and that such provision is to that extent unenforceable,
the Parties agree that the provision shall remain in full force and effect for
the greatest time period and in the greatest area that would not render it
unenforceable. The Parties intend that this non-competition provision shall be
deemed to be a series of separate covenants, one for each and every county of
each and every state of the United States of America and each and every
political subdivision of each and every country outside the United States of
America where this provision is intended to be effective.
(c) The Seller shall, and shall use its best efforts to cause its
Affiliates to, refer all inquiries regarding the business, products and services
of the Seller to the Buyer.
6.4 Tax Matters.
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(a) Any agreement between the Seller and any of the Subsidiaries
regarding allocation or payment of Taxes or amounts in lieu of Taxes will be
terminated at and as of the Closing.
(b) All transfer taxes, deed excise stamps and similar charges
related to the sale of the Acquired Assets contemplated by this Agreement shall
be paid by the Seller.
6.5 Sharing of Data.
(a) The Seller shall have the right for a period of seven years
following the Closing Date to have reasonable access to such books, records and
accounts, including financial and tax information, correspondence, production
records, employment records and other records that are transferred to the Buyer
pursuant to the terms of this Agreement for the limited purposes of concluding
its involvement in the business conducted by the Seller prior to the Closing
Date and for complying with its obligations under applicable securities, tax,
environmental, employment or other laws and regulations. The Buyer shall have
the right for a period of seven years following the Closing Date to have
reasonable access to those books, records and accounts, including financial and
accounting records (including the work papers of the Seller's independent
accountants), tax records, correspondence, production records, employment
records and other records that are retained by the Seller pursuant to the terms
of this Agreement to the extent that any of the foregoing is needed by the Buyer
for the purpose of conducting the business of the Seller after the Closing and
complying with its obligations under applicable securities, tax, environmental,
employment or other laws and regulations. Neither the Buyer nor the Seller shall
destroy any such books, records or accounts retained by it without first
providing the other Party with the opportunity to obtain or copy such books,
records, or accounts at such other Party's expense.
(b) Promptly upon request by the Buyer made at any time following
the Closing Date, the Seller shall authorize the release to the Buyer of all
files pertaining to the Seller, the Acquired Assets or the business or
operations of the Seller or the Subsidiaries held by any federal, state, county
or local authorities, agencies or instrumentalities.
6.6 Use of Name. The Seller shall not use, and shall not permit any
Affiliate to use, the name "Abundance Networks" or any name reasonably similar
thereto after the Closing Date in connection with any business related to,
competitive with, or an outgrowth of, the business conducted by the Seller on
the date of this Agreement. Within 10 days following the Closing, the Seller
shall amend its Certificate of Formation and other corporate records, if
necessary, to comply with this provision.
6.7 Cooperation in Litigation. From and after the Closing Date, each Party
shall fully cooperate with the other in the defense or prosecution of any
litigation or proceeding already instituted or which may be instituted hereafter
against or by such other Party relating to or arising out of the conduct of the
business of the Seller or the Buyer prior to or after the Closing Date (other
than litigation among the Parties and/or their Affiliates arising out the
transactions contemplated by this Agreement). The Party requesting such
cooperation shall pay the reasonable out-of-pocket expenses incurred in
providing such cooperation (including legal fees and disbursements) by the Party
providing such cooperation and by its officers, directors, employees and agents,
but shall not be responsible for reimbursing such Party or its officers,
directors, employees and agents, for their time spent in such cooperation.
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6.8 Collection of Accounts Receivable. The Seller agrees that it shall
forward promptly to the Buyer any monies, checks or instruments received by the
Seller after the Closing Date with respect to the accounts receivable purchased
by the Buyer from the Seller pursuant to this Agreement. The Seller shall
provide to the Buyer such reasonable assistance as the Buyer may request with
respect to the collection of any such accounts receivable, provided the Buyer
pays the reasonable out-of-pocket expenses of the Seller and its officers,
directors and employees incurred in providing such assistance. The Seller hereby
grants to the Buyer a power of attorney to endorse and cash any checks or
instruments payable or endorsed to the Seller or its order which are received by
the Buyer and which relate to accounts receivable purchased by the Buyer from
the Seller.
6.9 Employees and Consultants. Effective as of the Closing, the Seller
shall terminate the employment/services of each of its employees/consultants
listed in Section 2.20 of the Disclosure Schedule. The Buyer shall offer
employment to each such employee and a consulting agreement with each such
consultant, each terminable at the will of the Buyer. The Seller hereby consents
to the hiring of any such employees/consultants by the Buyer and waives, with
respect to the employment/engagement by the Buyer of such employees/consultants,
any claims or rights the Seller may have against the Buyer or any such
employee/consultant under any non-competition, confidentiality, employment or
consulting agreement.
6.10 Maintenance of Corporate Existence. The Seller shall maintain its
corporate existence for a period of two years following the Closing Date.
6.11 Registration of Shares Issued.
(a) Buyer shall use its reasonable commercial efforts to cause the
shares of Common Stock issued pursuant to section 1.3, including without
limitation the True-Up Shares (the "Registrable Securities") to be registered
under the Securities Act so as to permit the resale thereof, and in connection
therewith shall use its commercially reasonable efforts to prepare and file a
registration statement (the "Registration Statement") with the SEC with respect
to the Registrable Securities as soon as practicable after the date hereof, but
no later than ninety (90) days after the Closing, and shall use its reasonable
commercial efforts to cause the Registration Statement to become effective as
soon as possible after the Closing; provided, however, that each holder of
Registrable Securities ("Holder") shall provide all such information and
materials to Buyer and take all such action as may be required in order to
permit Buyer to comply with all applicable requirements of the SEC and to obtain
any desired acceleration of the effective date of such Registration Statement.
Such provision of information and materials is a condition precedent to the
obligations of Buyer pursuant to this Section 6.11. Buyer shall not be required
to effect more than one (1) registration under this Section 6.11. The offering
made pursuant to such registration shall not be underwritten.
29
(b) Buyer shall: (i) prepare and file with the SEC the Registration
Statement in accordance with Section 6.11(a) with respect to the shares of
Registrable Securities and shall use all commercially reasonable efforts to
cause the Registration Statement to remain effective for a period ending on the
first to occur of (A) the date all of the shares registered thereunder may be
sold under Rule 144 in one three-month period (assuming compliance by the
Holders with the provisions thereof) or (B) the date on which the registration
statement covering the securities sold in the Financing ceases to be effective,
subject to Section 6.11(a); (ii) prepare and file with the SEC such amendments
and supplements to the Registration Statement and the prospectus used in
connection therewith as may be necessary, and comply with the provisions of the
Securities Act with respect to the sale or other disposition of all securities
proposed to be registered in the Registration Statement until the termination of
effectiveness of the Registration Statement; and (iii) for so long as Buyer is
required to cause the Registration Statement to remain effective, furnish to
each Holder such number of copies of any prospectus (including any preliminary
prospectus and any amended or supplemented prospectus) as required by the
Securities Act, and such other documents as each Holder may reasonably request
in order to effect the offering and sale of the shares of Registrable Securities
to be offered and sold.
(c) Notwithstanding any other provision of this Section 6.11, Buyer
shall have the right at any time to require that all Holders suspend open market
offers and sales of Registrable Securities whenever, and for so long as, in the
reasonable, good-faith judgment of Buyer after consultation with counsel, there
is in existence material undisclosed information or events with respect to Buyer
(the "Suspension Right"). In the event Buyer exercises the Suspension Right,
such suspension will continue for the period of time reasonably necessary for
disclosure to occur at a time that is not materially detrimental to Buyer or
until such time as the information or event is no longer material, each as
reasonably determined in good faith by Buyer after consultation with counsel.
Buyer will promptly give the Members notice, in a writing signed by an executive
officer of Buyer, of any such suspension (the "Suspension Notice"). Buyer agrees
to notify the Members promptly upon termination of the suspension (the
"Resumption Notice"). Upon receipt of either a Suspension Notice or Resumption
Notice, the Purchaser Representative (as defined in Section 7.2(l)) shall
immediately notify each Holder concerning the status of the Registration
Statement. The period during which Buyer is required to cause the Registration
Statement to remain effective shall be extended by a period equal in length to
any and all periods during which open market offers and sales of Registrable
Securities are suspended pursuant to exercise of the Suspension Right.
(d) Buyer shall pay all of the out-of-pocket expenses, other than
underwriting discounts and commissions, incurred in connection with any
registration of Registrable Securities pursuant to this Section 6.11, including
without limitation all registration and filing fees, printing expenses, transfer
agents' and registrars' fees, the fees and disbursements of Buyer's outside
counsel and independent accountants, and the reasonable fees and disbursements
of a single U.S. counsel for the Holders and, as appropriate, any non-U.S.
counsel.
30
(e) To the fullest extent permitted by law, Buyer will indemnify,
defend, protect and hold harmless each selling Holder, each underwriter of
Registrable Securities being sold pursuant to this Section 6.11, each person, if
any, who controls any such Holder or underwriter within the meaning of the
Securities Act or the Exchange Act and their respective affiliates, officers,
directors, partners, successors and assigns (each a "Holder Indemnitee"),
against all actions, claims, losses, damages, liabilities and expenses to which
they or any of them become subject under the Securities Act, the Exchange Act or
under any other statute or at common law or otherwise and, except as hereinafter
provided, will promptly reimburse each Holder Indemnitee for any legal or other
expenses reasonably incurred in connection with investigating or defending any
actions whether or not resulting in any liability, insofar as such actions,
claims, losses, damages, liabilities and expenses arise out of or are based upon
any untrue statement or alleged untrue statement of material fact in any
registration statement and any prospectus filed pursuant to Section 6.11 or any
post-effective amendment thereto or arise out of or are based upon any omission
or alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or any violation by
Buyer of any rule or regulation promulgated under the Securities Act, the
Exchange Act or any statute, regulation or law applicable to Buyer and relating
to action or inaction required of Buyer in connection with such registration;
provided, however, that Buyer shall not be liable to any such Holder Indemnitee
in respect of any actions, claims, losses, damages, liabilities and expenses
resulting from any untrue statement or alleged untrue statement, or omission or
alleged omission made in reliance upon and in conformity with information
furnished in writing to Buyer by such Holder Indemnitee or any of such Holder
Affiliate specifically for use in connection with such registration statement
and prospectus or post-effective amendment.
(f) To the fullest extent permitted by law, each selling Holder of
Registrable Securities will indemnify Buyer, each person, if any, who controls
Buyer within the meaning of the Securities Act or the Exchange Act, each
underwriter of Registrable Securities and their respective affiliates, officers,
directors, partners, successors and assigns (each a "Buyer Indemnitee") against
any actions, claims, losses, damages, liabilities and expenses to which they or
any of them may become subject under the Securities Act, the Exchange Act or
under any other statute or at common law or otherwise, and, except as
hereinafter provided, will promptly reimburse each Buyer Indemnitee for any
legal or other expenses reasonably incurred in connection with investigating or
defending any actions, whether or not resulting in any liability, insofar as
such actions, claims, losses, damages, liabilities and expenses arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact in any registration statement and any prospectus filed pursuant to Section
6.11 or any post-effective amendment thereto, or any omission or alleged
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, which untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and
in conformity with information furnished in writing to the Buyer by such Holder
or underwriter specifically for use in connection with such registration
statement, prospectus or post-effective amendment; provided, however, that the
obligations of each such selling Holder hereunder shall be limited to an amount
equal to the proceeds to such Holder from the sale of such Holder's Registrable
Securities hereunder.
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(g) Each person entitled to indemnification under this Section 6.11
(an "Indemnified Person") shall give notice to the party required to provide
indemnification (the "Indemnifying Person") promptly after such Indemnified
Person has actual knowledge of any claim as to which indemnity may be sought and
shall permit the Indemnifying Person to assume the defense of any such claim and
any litigation resulting therefrom; provided, however, that counsel for the
Indemnifying Person who conducts the defense of such claim or any litigation
resulting therefrom shall be approved by the Indemnified Person (whose approval
shall not unreasonably be withheld), and the Indemnified Person may participate
in such defense at such party's expense (unless the Indemnified Person has
reasonably concluded that there may be a conflict of interest between the
Indemnifying Person and the Indemnified Person in such action, in which case the
fees and expenses of counsel for the Indemnified Person shall be at the expense
of the Indemnifying Person); and provided, further, that the failure of any
Indemnified Person to give notice as provided herein shall not relieve the
Indemnifying Person of its obligations under this Section 6.11 except to the
extent that the Indemnifying Person is materially prejudiced thereby. No
Indemnifying Person, in the defense of any such claim or litigation, shall
(except with the consent of each Indemnified Person) consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Person
of a release from all liability in respect to such claim or litigation. Each
Indemnified Person shall furnish such information regarding itself or the claim
in question as an Indemnifying Person may reasonably request in writing and as
shall be reasonably required in connection with the defense of such claim and
litigation resulting therefrom.
(h) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which Buyer or any Holder
makes a claim for indemnification pursuant to this Section 6.11 but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding that this Section 6.11 provides for indemnification in such
case, then Buyer and such Holder shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion as is appropriate to reflect the relative fault
of Buyer on the one hand and the Holder on the other in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations or, if the
allocation provided herein is not permitted by applicable law, in such
proportion as shall be permitted by applicable law and reflect as nearly as
possible the allocation provided herein. The relative fault of the Buyer on the
one hand and of the Holder on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by Buyer on the one hand or by the Holder on the other, and
each party's relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission; provided, however, that in any
such case (i) no Holder will be required to contribute any amount in excess of
the proceeds received by such Holder from the sale of Registrable Securities
pursuant to the Registration Statement; and (ii) no person or entity guilty of
fraudulent misrepresentation within the meaning of Section 11(f) of the
Securities Act will be entitled to contribution from any person or entity who
was not guilty of such fraudulent misrepresentation.
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6.12 Following the Closing until the earlier of (i) March 31, 2007 and
(ii) such time as the Abundance Business Unit ("ABU") within the Operating Sub
materially deviates from the mutually agreed upon Abundance operating plan, as
mutually revised and updated from time to time, (the "Abundance Operating
Plan"), other than as the result of actions taken by, or reasonably related to
actions taken by, Buyer, the ABU shall be operated as a separate,
semi-autonomous business unit of Buyer. Without limiting the foregoing, for so
long as the ABU has not materially deviated from the Abundance Operating Plan,
other than as the result of actions taken by, or reasonably related to actions
taken by, Buyer, the Seller's current management shall be permitted to operate
the ABU substantially in accordance with the Abundance Operating Plan.
7. INDEMNIFICATION
7.1 Indemnification by the Seller. The Seller shall indemnify the Buyer in
respect of, and hold the Buyer harmless against, Damages incurred or suffered by
the Buyer or any Affiliate thereof resulting from, relating to or constituting:
(a) any breach, as of the date of this Agreement or as of the
Closing Date, of any representation or warranty of the Seller contained in this
Agreement, any Ancillary Agreement or any other agreement or instrument
furnished by the Seller to the Buyer pursuant to this Agreement;
(b) any failure to perform any covenant or agreement of the Seller
contained in this Agreement, any Ancillary Agreement or any agreement or
instrument furnished by the Seller to the Buyer pursuant to this Agreement;
(c) any Retained Liabilities;
(d) any Excluded Assets; or
(e) the failure of the Buyer and the Seller, in connection with the
sale of the Purchased Assets by the Sellers to the Buyer pursuant to this
Agreement, to comply with, and obtain for the Buyer the benefits afforded by
compliance with, any applicable bulk transfers laws.
7.2 Indemnification by the Buyer. The Buyer shall indemnify the Seller in
respect of, and hold it harmless against, any and all Damages incurred or
suffered by the Seller resulting from, relating to or constituting:
(a) any breach, as of the date of this Agreement or as of the
Closing Date, of any representation or warranty of the Buyer contained in this
Agreement, any Ancillary Agreement or any other agreement or instrument
furnished by the Buyer to the Seller pursuant to this Agreement;
(b) any failure to perform any covenant or agreement of the Buyer
contained in this Agreement, any Ancillary Agreement or any other agreement or
instrument furnished by the Buyer to the Seller pursuant to this Agreement; or
(c) any Assumed Liabilities.
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7.3 Indemnification Claims.
(a) An Indemnified Party shall give written notification to the
Indemnifying Party of the commencement of any Third Party Action. Such
notification shall be given within 20 days after receipt by the Indemnified
Party of notice of such Third Party Action, and shall describe in reasonable
detail (to the extent known by the Indemnified Party) the facts constituting the
basis for such Third Party Action and the amount of the claimed damages;
provided, however, that no delay or failure on the part of the Indemnified Party
in so notifying the Indemnifying Party shall relieve the Indemnifying Party of
any liability or obligation hereunder except to the extent of any damage or
liability caused by or arising out of such failure. Within 20 days after
delivery of such notification, the Indemnifying Party may, upon written notice
thereof to the Indemnified Party, assume control of the defense of such Third
Party Action with counsel reasonably satisfactory to the Indemnified Party;
provided that (i) the Indemnifying Party may only assume control of such defense
if (A) it acknowledges in writing to the Indemnified Party that any damages,
fines, costs or other liabilities that may be assessed against the Indemnified
Party in connection with such Third Party Action constitute Damages for which
the Indemnified Party shall be indemnified pursuant to this Article 7 and (B)
the ad damnum is less than or equal to the amount of Damages for which the
Indemnifying Party is liable under this Article 7 and (ii) the Indemnifying
Party may not assume control of the defense of Third Party Action involving
criminal liability or in which equitable relief is sought against the
Indemnified Party. If the Indemnifying Party does not, or is not permitted under
the terms hereof to, so assume control of the defense of a Third Party Action,
the Indemnified Party shall control such defense. The Non-controlling Party may
participate in such defense at its own expense. The Controlling Party shall keep
the Non-controlling Party advised of the status of such Third Party Action and
the defense thereof and shall consider in good faith recommendations made by the
Non-controlling Party with respect thereto. The Non-controlling Party shall
furnish the Controlling Party with such information as it may have with respect
to such Third Party Action (including copies of any summons, complaint or other
pleading which may have been served on such party and any written claim, demand,
invoice, billing or other document evidencing or asserting the same) and shall
otherwise cooperate with and assist the Controlling Party in the defense of such
Third Party Action. The fees and expenses of counsel to the Indemnified Party
with respect to a Third Party Action shall be considered Damages for purposes of
this Agreement if (i) the Indemnified Party controls the defense of such Third
Party Action pursuant to the terms of this Section 7.3(a) or (ii) the
Indemnifying Party assumes control of such defense and the Indemnified Party
reasonably concludes that the Indemnifying Party and the Indemnified Party have
conflicting interests or different defenses available with respect to such Third
Party Action. The Indemnifying Party shall not agree to any settlement of, or
the entry of any judgment arising from, any Third Party Action without the prior
written consent of the Indemnified Party, which shall not be unreasonably
withheld, conditioned or delayed; provided that the consent of the Indemnified
Party shall not be required if the Indemnifying Party agrees in writing to pay
any amounts payable pursuant to such settlement or judgment and such settlement
or judgment includes a complete release of the Indemnified Party from further
liability and has no other adverse effect on the Indemnified Party. The
Indemnified Party shall not agree to any settlement of, or the entry of any
judgment arising from, any such Third Party Action without the prior written
consent of the Indemnifying Party, which shall not be unreasonably withheld,
conditioned or delayed.
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(b) In order to seek indemnification under this Article 7, an
Indemnified Party shall deliver a Claim Notice to the Indemnifying Party. If the
Indemnified Party is the Buyer and is seeking to enforce such claim pursuant to
the Escrow Agreement, the Indemnifying Party shall deliver a copy of the Claim
Notice to the Escrow Agent.
(c) Within 20 days after delivery of a Claim Notice, the
Indemnifying Party shall deliver to the Indemnified Party a Response, in which
the Indemnifying Party shall: (i) agree that the Indemnified Party is entitled
to receive all of the Claimed Amount (in which case the Response shall be
accompanied by a payment by the Indemnifying Party to the Indemnified Party of
the Claimed Amount, by check or by wire transfer; provided that if the
Indemnified Party is the Buyer and is seeking to enforce such claim pursuant to
the Escrow Agreement, the Indemnifying Party and the Indemnified Party shall
deliver to the Escrow Agent, within three days following the delivery of the
Response, a written notice executed by both parties instructing the Escrow Agent
to disburse the Claimed Amount to the Buyer), (ii) agree that the Indemnified
Party is entitled to receive the Agreed Amount (in which case the Response shall
be accompanied by a payment by the Indemnifying Party to the Indemnified Party
of the Agreed Amount, by check or by wire transfer; provided that if the
Indemnified Party is the Buyer and is seeking to enforce such claim pursuant to
the Escrow Agreement, the Indemnifying Party and the Indemnified Party shall
deliver to the Escrow Agent, within three days following the delivery of the
Response, a written notice executed by both parties instructing the Escrow Agent
to disburse the Claimed Amount to the Buyer), or (iii) dispute that the
Indemnified Party is entitled to receive any of the Claimed Amount. The Buyer
shall be compensated for its Damages pursuant to this Agreement in accordance
with Section 7.5 hereof.
(d) During the 30-day period following the delivery of a Response
that reflects a Dispute, the Indemnifying Party and the Indemnified Party shall
use good faith efforts to resolve the Dispute. If the Dispute is not resolved
within such 30-day period, the Indemnifying Party and the Indemnified Party
shall discuss in good faith the submission of the Dispute to binding
arbitration, and if the Indemnifying Party and the Indemnified Party agree in
writing to submit the Dispute to such arbitration, then the provisions of
Section 7.3(e) shall become effective with respect to such Dispute. The
provisions of this Section 7.3(d) shall not obligate the Indemnifying Party and
the Indemnified Party to submit to arbitration or any other alternative dispute
resolution procedure with respect to any Dispute, and in the absence of an
agreement by the Indemnifying Party and the Indemnified Party to arbitrate any
Dispute, such Dispute shall be resolved in a state or federal court sitting in
the State of California, in accordance with Section 10.12. If the Indemnified
Party is the Buyer and is seeking to enforce the claim that is the subject of
the Dispute pursuant to the Escrow Agreement, the Indemnifying Party and the
Indemnified Party shall deliver to the Escrow Agent, promptly following the
resolution of the Dispute (whether by mutual agreement, arbitration, judicial
decision or otherwise), a written notice executed by both parties instructing
the Escrow Agent as to what (if any) portion of the Indemnification Shares shall
be disbursed to the Buyer and/or the Seller (which notice shall be consistent
with the terms of the resolution of the Dispute).
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(e) If, as set forth in Section 7.3(d), the Indemnified Party and
the Indemnifying Party agree to submit any Dispute to binding arbitration, the
arbitration shall be conducted by a single arbitrator (the "Arbitrator") in
accordance with the Commercial Rules in effect from time to time and the
following provisions.
(i) In the event of any conflict between the Commercial Rules
in effect from time to time and the provisions of this Agreement, the provisions
of this Agreement shall prevail and be controlling.
(ii) The parties shall commence the arbitration by jointly
filing a written submission with the California office of the AAA in accordance
with Commercial Rule 5 (or any successor provision).
(iii) No depositions or other discovery shall be conducted in
connection with the arbitration.
(iv) Not later than 30 days after the conclusion of the
arbitration hearing, the Arbitrator shall prepare and distribute to the parties
a writing setting forth the arbitral award and the Arbitrator's reasons
therefor. Any award rendered by the Arbitrator shall be final, conclusive and
binding upon the parties, and judgment thereon may be entered and enforced in
any court of competent jurisdiction (subject to Section 10.12), provided that
the Arbitrator shall have no power or authority to grant injunctive relief,
specific performance or other equitable relief.
(v) The Arbitrator shall have no power or authority, under the
Commercial Rules or otherwise, to (x) modify or disregard any provision of this
Agreement, including the provisions of this Section 7.3(e), or (y) address or
resolve any issue not submitted by the parties.
(vi) In connection with any arbitration proceeding pursuant to
this Agreement, each party shall bear its own costs and expenses, except that
the fees and costs of the AAA and the Arbitrator, the costs and expenses of
obtaining the facility where the arbitration hearing is held, and such other
costs and expenses as the Arbitrator may determine to be directly related to the
conduct of the arbitration and appropriately borne jointly by the parties (which
shall not include any party's attorneys' fees or costs, witness fees (if any),
costs of investigation and similar expenses) shall be shared equally by the
Indemnified Party and the Indemnifying Party.
(f) Notwithstanding the other provisions of this Section 7.3, if a
third party asserts (other than by means of a lawsuit) that an Indemnified Party
is liable to such third party for a monetary or other obligation which may
constitute or result in Damages for which such Indemnified Party may be entitled
to indemnification pursuant to this Article 7, and such Indemnified Party
reasonably determines that it has a valid business reason to fulfill such
obligation, then (i) such Indemnified Party shall be entitled to satisfy such
obligation, without prior notice to or consent from the Indemnifying Party, (ii)
such Indemnified Party may subsequently make a claim for indemnification in
accordance with the provisions of this Article 7, and (iii) such Indemnified
Party shall be reimbursed, in accordance with the provisions of this Article 7,
for any such Damages for which it is entitled to indemnification pursuant to
this Article 7 (subject to the right of the Indemnifying Party to dispute the
Indemnified Party's entitlement to indemnification, or the amount for which it
is entitled to indemnification, under the terms of this Article 7).
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7.4 Survival of Representations and Warranties. All representations and
warranties that are covered by the indemnification agreements in Section 7.1(a)
and Section 7.2(a) shall (a) survive the Closing and (b) shall expire on the
date twelve months following the Closing Date. If an Indemnified Party delivers
to an Indemnifying Party, before expiration of a representation or warranty,
either a Claim Notice based upon a breach of such representation or warranty, or
an Expected Claim Notice based upon a breach of such representation or warranty,
then the applicable representation or warranty shall survive until, but only for
purposes of, the resolution of the matter covered by such notice. If the legal
proceeding or written claim with respect to which an Expected Claim Notice has
been given is definitively withdrawn or resolved in favor of the Indemnified
Party, the Indemnified Party shall promptly so notify the Indemnifying Party;
and if the Indemnified Party has delivered a copy of the Claim Notice to the
Escrow Agent and Indemnification Shares have been retained in escrow, the
Indemnifying Party and the Indemnified Party shall promptly deliver to the
Escrow Agent a written notice executed by both parties instructing the Escrow
Agent to disburse such retained Indemnification Shares to Seller in accordance
with the terms of the Escrow Agreement. The rights to indemnification set forth
in this Article 7 shall not be affected by (i) any investigation conducted by or
on behalf of an Indemnified Party or any knowledge acquired (or capable of being
acquired) by an Indemnified Party, whether before or after the date of this
Agreement or the Closing Date (including through supplements to the Disclosure
Schedule permitted by Section 4.6, except to the extent specifically provided in
Section 4.6), with respect to the inaccuracy or noncompliance with any
representation, warranty, covenant or obligation which is the subject of
indemnification hereunder or (ii) any waiver by an Indemnified Party of any
closing condition relating to the accuracy of any representations and warranties
or the performance of or compliance with agreements and covenants.
7.5 Limitations.
(a) Notwithstanding anything to the contrary herein, (i) any
liability of the Seller for Damages under this Article 7 shall be satisfied
solely from the Indemnification Shares, for which purpose such shares shall be
valued at the greater of (A) the original issue price thereof, and (B) the
Average Closing Price thereof on the date on which such shares are released from
the Indemnification Escrow, and (ii) the Seller shall not be liable under this
Agreement unless and until the aggregate Damages for which it would otherwise be
liable under this Agreement exceed $50,000 (at which point the Seller shall
become liable for the aggregate Damages under this Agreement, and not just
amounts in excess of $50,000.
(b) Notwithstanding anything to the contrary herein, (i) the
aggregate liability of the Buyer for Damages under this Article 7 shall not
exceed the value of the Indemnification Shares, and (ii) the Buyer shall not be
liable under this Agreement unless and until the aggregate Damages for which it
would otherwise be liable under this Agreement exceed $50,000 (at which point
the Buyer shall become liable for the aggregate Damages under this Agreement and
not just amounts in excess of $50,000).
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(c) Except with respect to claims based on fraud, after the Closing,
the rights of the Indemnified Parties under this Article 7 shall be the
exclusive remedy of the Indemnified Parties with respect to claims resulting
from or relating to any misrepresentation, breach of warranty or failure to
perform any covenant or agreement contained in this Agreement.
7.6 Treatment of Indemnity Payments. Any payments made to an Indemnified
Party pursuant to this Article 7, or pursuant to the Escrow Agreement, shall be
treated as an adjustment to the Purchase Price for tax purposes.
8. TERMINATION
8.1 Termination of Agreement. The Parties may terminate this Agreement
prior to the Closing (whether before or after Requisite Member Approval), as
provided below:
(a) the Parties may terminate this Agreement by mutual written
consent;
(b) the Buyer may terminate this Agreement by giving written notice
to the Seller in the event the Seller is in breach of any representation,
warranty or covenant contained in this Agreement, and such breach (i)
individually or in combination with any other such breach, would cause the
conditions set forth in clauses (b) or (c) of Section 5.2 not to be satisfied
and (ii) is not cured within 20 days following delivery by the Buyer to the
Seller of written notice of such breach;
(c) the Seller may terminate this Agreement by giving written notice
to the Buyer in the event the Buyer is in breach of any representation, warranty
or covenant contained in this Agreement, and such breach (i) individually or in
combination with any other such breach, would cause the conditions set forth in
clauses (a) or (b) of Section 5.3 not to be satisfied and (ii) is not cured
within 20 days following delivery by the Seller to the Buyer of written notice
of such breach;
(d) either Party may terminate this Agreement by giving written
notice to the other Party at any time after the members of the Seller have voted
on whether to approve the sale of the Acquired Assets contemplated by this
Agreement in the event such matter failed to receive the Requisite Member
Approval;
(e) the Buyer may terminate this Agreement by giving written notice
to the Seller if the Closing shall not have occurred on or before February 28,
2006 by reason of the failure of any condition precedent under Section 5.1 or
5.2 (unless the failure results primarily from a breach by the Buyer of any
representation, warranty or covenant contained in this Agreement); or
(f) the Seller may terminate this Agreement by giving written notice
to the Buyer if the Closing shall not have occurred on or before February 28,
2006 by reason of the failure of any condition precedent under Section 5.1 or
5.3 (unless the failure results primarily from a breach by the Seller of any
representation, warranty or covenant contained in this Agreement).
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8.2 Effect of Termination. If either Party terminates this Agreement
pursuant to Section 8.1, all obligations of the Parties hereunder shall
terminate without any liability of either Party to the other Party (except for
any liability of a Party for willful breaches of this Agreement).
9. DEFINITIONS
For purposes of this Agreement, each of the following terms shall
have the meaning set forth below.
"AAA" shall mean the American Arbitration Association.
"Acquired Assets" shall mean all of the assets, properties and
rights of the Seller existing as of the Closing, including:
(a) all cash, short-term investments, deposits, bank accounts and
other similar assets;
(b) all trade and other accounts receivable and notes and loans
receivable that are payable to the Seller, and all rights to unbilled amounts
for products delivered or services provided, together with any security held by
the Seller for the payment thereof;
(c) all inventories of raw materials, work in process, finished
goods, supplies, packaging materials, spare parts and similar items, wherever
located, including consignment inventory and inventory held on order or in
transit;
(d) all computers, machinery, equipment, tools and tooling,
furniture, fixtures, supplies, leasehold improvements, motor vehicles and other
tangible personal property;
(e) all real property, leaseholds and subleaseholds in real
property, and easements, rights-of-way and other appurtenants thereto;
(f) all Intellectual Property;
(g) all rights under Assigned Contracts;
(h) all securities owned by the Seller, including all capital stock
held by the Seller in any Subsidiary;
(i) all claims, prepayments, deposits, refunds, causes of action,
chooses in action, rights of recovery, rights of setoff and rights of
recoupment;
(j) all Permits;
39
(k) all books, records, accounts, ledgers, files, documents,
correspondence, lists (including customer and prospect lists), employment
records, manufacturing and procedural manuals, Intellectual Property records,
sales and promotional materials, studies, reports and other printed or written
materials; and
(l) all insurance policies of the Seller, as well as all proceeds
which may be payable thereunder.
"Adjusted EBITDA" shall mean the earnings generated from the Revenue
before interest, taxes, depreciation and amortization (each calculated in
accordance with generally accepted accounting principals) and excluding the
following: (i) corporate overhead or other administrative charges imposed on the
Seller and the Operating Sub; (ii) any extraordinary charges as defined in GAAP;
(iii) any expenses incurred by the Seller and the Operating Sub in connection
with the consummation of the Acquisition; (iv) any administrative overhead
expenses not approved in writing by the Seller or the Operating Sub. In
addition, any amounts paid by Buyer in satisfaction of the $608,000 of Assumed
Liabilities, including any interest or other fees paid thereon, shall be
deducted from the calculation of Adjusted EBITDA.
"Affiliate" shall mean any affiliate, as defined in Rule 12b-2 under
the Securities Exchange Act of 1934.
"Agreed Amount" shall mean part, but not all, of the Claimed Amount.
"Ancillary Agreements" shall mean the ▇▇▇▇ of sale and other
instruments of conveyance referred to in Section 1.5(b)(iii), and the instrument
of assumption and other instruments referred to in Section 1.5(b)(iv).
"Arbitrator" shall have the meaning set forth in Section 7.3(e).
"Assigned Contracts" shall mean any contracts, agreements or
instruments to which the Seller is a party, including any agreements or
instruments securing any amounts owed to the Seller, any leases or subleases of
real property, any employment contracts and any licenses or sublicenses relating
to Intellectual Property.
"Assumed Liabilities" shall mean all of the following liabilities of
the Seller:
(a) $608,000 of bank debt of Abundance India (any bank debt of
Abundance India in excess of $608,000 shall be deemed to be Retained
Liabilities); and
(b) all obligations of the Seller arising after the Closing under
the Assigned Contracts.
"Average Closing Price" shall mean the average of the closing prices
of the Buyer's Common Stock as reported on the Over The Counter Bulletin Board
during the twenty consecutive trading days ending one day prior to the relevant
date with respect to which such average is relevant in accordance with the terms
hereof.
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"Buyer" shall have the meaning set forth in the first paragraph of
this Agreement.
"Buyer Certificate" shall mean a certificate to the effect that each
of the conditions specified in clauses (a) through (c) (insofar as clause (c)
relates to Legal Proceedings involving the Buyer) of Section 5.3 is satisfied in
all respects.
"Buyer Material Adverse Effect" shall mean any material adverse
change, event, circumstance or development with respect to, or material adverse
effect on, the business, assets, liabilities, capitalization, prospects,
condition (financial or other), or results of operations of the Buyer and its
Subsidiaries, taken as a whole. For the avoidance of doubt, the parties agree
that the terms "material", "materially" or "materiality" as used in this
Agreement with an initial lower case "m" shall have their respective customary
and ordinary meanings, without regard to the meaning ascribed to Buyer Material
Adverse Effect.
"CERCLA" shall mean the federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended.
"Claimed Amount" shall mean the amount of any Damages incurred or
reasonably expected to be incurred by the Indemnified Party.
"Claim Notice" shall mean written notification which contains (i) a
description of the Damages incurred or reasonably expected to be incurred by the
Indemnified Party and the Claimed Amount of such Damages, to the extent then
known, (ii) a statement that the Indemnified Party is entitled to
indemnification under Article 7 for such Damages and a reasonable explanation of
the basis therefor, and (iii) a demand for payment in the amount of such
Damages.
"Closing" shall mean the closing of the transactions contemplated by
this Agreement.
"Closing Date" shall mean the date two business days after the
satisfaction or waiver of all of the conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (excluding the
delivery at the Closing of any of the documents set forth in Article 5), or such
other date as may be mutually agreeable to the Parties.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commercial Rules" shall mean the Commercial Arbitration Rules of
the AAA.
"Common Stock" shall mean unregistered shares of the common stock,
$0.001 par value per share, of the Buyer.
"Confidential Information" shall mean any confidential or
proprietary information of the Seller or any Subsidiary that is furnished in
writing to the Buyer by the Seller or any Subsidiary in connection with this
Agreement and is labeled confidential or proprietary; provided, however, that it
shall not include any information (A) which, at the time of disclosure, is
available publicly, (B) which, after disclosure, becomes available publicly
through no fault of the Buyer, (C) which the Buyer knew or to which the Buyer
had access prior to disclosure or (D) which the Buyer rightfully obtains from a
source other than the Seller or a Subsidiary.
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"Controlling Party" shall mean the party controlling the defense of
any Third Party Action.
"Customer Deliverables" shall mean (a) the products that the Seller
or any Subsidiary (i) currently manufactures, markets, sells or licenses, or
(ii) has manufactured, marketed, sold or licensed within the previous three
years and (b) the services that the Seller or any Subsidiary (i) currently
provides, or (ii) has provided within the previous three years.
"Damages" shall mean any and all debts, obligations and other
liabilities (whether absolute, accrued, contingent, fixed or otherwise, or
whether known or unknown, or due or to become due or otherwise), diminution in
value, monetary damages, fines, fees, penalties, interest obligations,
deficiencies, losses and expenses (including amounts paid in settlement,
interest, court costs, costs of investigators, fees and expenses of attorneys,
accountants, financial advisors and other experts, and other expenses of
litigation), other than those costs and expenses of arbitration of a Dispute
which are to be shared equally by the Indemnified Party and the Indemnifying
Party as set forth in Section 7.3(e)(vi).
"Disclosure Schedule" shall mean the disclosure schedule provided by
the Seller to the Buyer on the date hereof and accepted in writing by the Buyer,
as the same may be supplemented pursuant to Section 4.6.
"Dispute" shall mean the dispute resulting if the Indemnifying Party
in a Response disputes its liability for all or part of the Claimed Amount.
"Effective Date" shall mean the date on which the Registration
Statement becomes effective under the Securities Act.
"Employee Benefit Plan" shall mean any "employee pension benefit
plan" (as defined in Section 3(2) of ERISA), any "employee welfare benefit plan"
(as defined in Section 3(1) of ERISA), and any other written or oral plan,
agreement or arrangement involving direct or indirect compensation, including
insurance coverage, severance benefits, disability benefits, deferred
compensation, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
compensation.
"Environmental Law" shall mean any federal, state or local law,
statute, rule, order, directive, judgment, Permit or regulation or the common
law relating to the environment, occupational health and safety, or exposure of
persons or property to Materials of Environmental Concern, including any
statute, regulation, administrative decision or order pertaining to: (i) the
presence of or the treatment, storage, disposal, generation, transportation,
handling, distribution, manufacture, processing, use, import, export, labeling,
recycling, registration, investigation or remediation of Materials of
Environmental Concern or documentation related to the foregoing; (ii) air, water
and noise pollution; (iii) groundwater and soil contamination; (iv) the release,
threatened release, or accidental release into the environment, the workplace or
other areas of Materials of Environmental Concern, including emissions,
discharges, injections, spills, escapes or dumping of Materials of Environmental
Concern; (v) transfer of interests in or control of real property which may be
contaminated; (vi) community or worker right-to-know disclosures with respect to
Materials of Environmental Concern; (vii) the protection of wild life, marine
life and wetlands, and endangered and threatened species; (viii) storage tanks,
vessels, containers, abandoned or discarded barrels and other closed
receptacles; and (ix) health and safety of employees and other persons. As used
above, the term "release" shall have the meaning set forth in CERCLA.
42
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean any entity which is, or at any
applicable time was, a member of (1) a controlled group of corporations (as
defined in Section 414(b) of the Code), (2) a group of trades or businesses
under common control (as defined in Section 414(c) of the Code), or (3) an
affiliated service group (as defined under Section 414(m) of the Code or the
regulations under Section 414(o) of the Code), any of which includes or included
the Seller or a Subsidiary.
"Excluded Assets" shall mean the following assets of the Seller:
(a) the corporate charter, qualifications to conduct business as a
foreign corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books and other documents relating to the organization and
existence of the Seller as a corporation;
(b) all rights relating to refunds, recovery or recoupment of Taxes;
(c) any of the rights of the Seller under this Agreement or under
the Ancillary Agreements;
(d) all rights of the Seller in and with respect to the assets
associated with the Seller Plans; and
(e) those assets listed on Schedule 1.1(b) attached hereto.
"Expected Claim Notice" shall mean a notice that, as a result of a
legal proceeding instituted by or written claim made by a third party, an
Indemnified Party reasonably expects to incur Damages for which it is entitled
to indemnification under Article 7.
"Financial Statements" shall mean:
(a) the audited consolidated balance sheets and statements of
income, changes in stockholders' equity and cash flows of the Seller as of the
end of and for each of the last three fiscal years, and
43
(b) the Most Recent Balance Sheet and the unaudited consolidated
statements of income, changes in stockholders' equity and cash flows for the six
months ended as of the Most Recent Balance Sheet Date.
"GAAP" shall mean United States generally accepted accounting
principles.
"Governmental Entity" shall mean any court, arbitrational tribunal,
administrative agency or commission or other governmental or regulatory
authority or agency.
"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended.
"Indemnified Party" shall mean a party entitled, or seeking to
assert rights, to indemnification under Article 7 of this Agreement.
"Indemnifying Party" shall mean the party from whom indemnification
is sought by the Indemnified Party.
"Intellectual Property" shall mean all:
(a) patents, patent applications, patent disclosures and all related
continuation, continuation-in-part, divisional, reissue, reexamination, utility
model, certificate of invention and design patents, patent applications,
registrations and applications for registrations;
(b) trademarks, service marks, trade dress, Internet domain names,
logos, trade names and corporate names and registrations and applications for
registration thereof;
(c) copyrights and registrations and applications for registration
thereof;
(d) mask works and registrations and applications for registration
thereof;
(e) computer software, data and documentation;
(f) inventions, trade secrets and confidential business information,
whether patentable or nonpatentable and whether or not reduced to practice,
know-how, manufacturing and product processes and techniques, research and
development information, copyrightable works, financial, marketing and business
data, pricing and cost information, business and marketing plans and customer
and supplier lists and information;
(g) other proprietary rights relating to any of the foregoing
(including remedies against infringements thereof and rights of protection of
interest therein under the laws of all jurisdictions); and
(h) copies and tangible embodiments thereof.
44
"Internal Systems" shall mean the internal systems of the Seller or
any Subsidiary that are used in its business or operations, including computer
hardware systems, software applications and embedded systems.
"Lease" shall mean any lease or sublease pursuant to which the
Seller or a Subsidiary leases or subleases from another party any real property.
"Legal Proceeding" shall mean any action, suit, proceeding, claim,
arbitration or investigation before any Governmental Entity or before any
arbitrator.
"Materials of Environmental Concern" shall mean any: pollutants,
contaminants or hazardous substances (as such terms are defined under CERCLA),
pesticides (as such term is defined under the Federal Insecticide, Fungicide and
Rodenticide Act), solid wastes and hazardous wastes (as such terms are defined
under the Resource Conservation and Recovery Act), chemicals, other hazardous,
radioactive or toxic materials, oil, petroleum and petroleum products (and
fractions thereof), or any other material (or article containing such material)
listed or subject to regulation under any law, statute, rule, regulation, order,
Permit, or directive due to its potential, directly or indirectly, to harm the
environment or the health of humans or other living beings.
"Most Recent Balance Sheet" shall mean the unaudited consolidated
balance sheet of the Seller as of the Most Recent Balance Sheet Date.
"Most Recent Balance Sheet Date" shall mean September 30, 2005.
"Non-controlling Party" shall mean the party not controlling the
defense of any Third Party Action.
"Operating Sub" shall have the meaning set forth in the first
paragraph of this Agreement.
"Ordinary Course of Business" shall mean the ordinary course of
business consistent with past custom and practice (including with respect to
frequency and amount).
"Owned Real Property" shall mean each item of real property owned by
the Seller or a Subsidiary.
"Parties" shall mean the Buyer, Operating Sub, the Seller and
Abundance India.
"Permits" shall mean all permits, licenses, registrations,
certificates, orders, approvals, franchises, variances and similar rights issued
by or obtained from any Governmental Entity (including those issued or required
under Environmental Laws and those relating to the occupancy or use of owned or
leased real property).
"Purchase Price" shall mean the purchase price to be paid by the
Buyer for the Acquired Assets at the Closing, as set forth in Section 1.3.
45
"Reasonable Best Efforts" shall mean best efforts, to the extent
commercially reasonable.
"Requisite Member Approval" shall mean the approval of the sale of
the Acquired Assets by the Seller to the Buyer as contemplated by this Agreement
by a majority of the votes represented by the outstanding membership interests
of the Seller entitled to vote thereon.
"Response" shall mean a written response containing the information
provided for in Section 7.3(c).
"Restricted Employee" shall mean any person who either (i) was an
employee of the Buyer on either the date of this Agreement or the Closing Date
or (ii) was an employee of the Seller on either the date of this Agreement or
the Closing Date and received an employment offer from the Buyer within five
business days following the Closing Date.
"Retained Liabilities" shall mean any and all liabilities or
obligations (whether known or unknown, absolute or contingent, liquidated or
unliquidated, due or to become due and accrued or unaccrued, and whether claims
with respect thereto are asserted before or after the Closing) of the Seller
which are not Assumed Liabilities. The Retained Liabilities shall include,
without limitation, all liabilities and obligations of the Seller:
(a) for income, transfer, sales, use or other Taxes arising in
connection with the consummation of the transactions contemplated by this
Agreement (including any income Taxes arising as a result of (i) the transfer by
the Seller to the Buyer of the Acquired Assets, (ii) any deemed transfer by a
Subsidiary of the Seller of its assets pursuant to an election under Section
338(h)(10) of the Code, (iii) the Seller having an "excess loss account" (within
the meaning of Treasury Regulation ss.1.1502-19) in the stock of any Subsidiary
of the Seller, or (iv) the Seller having deferred gain on any "deferred
intercompany transaction" (within the meaning of Treasury Regulation
ss.1.1502-13));
(b) for costs and expenses incurred in connection with this
Agreement or the consummation of the transactions contemplated by this
Agreement;
(c) under this Agreement or the Ancillary Agreements;
(d) for any Taxes, including deferred taxes or taxes measured by
income of the Seller earned prior to the Closing, any liabilities for federal or
state income tax and FICA taxes of employees of the Seller which the Seller is
legally obligated to withhold, any liabilities of the Seller for employer FICA
and unemployment taxes incurred, and any liabilities of the Seller for sales,
use or excise taxes or customs and duties;
(e) under any agreements, contracts, leases or licenses which are
listed on Schedule 1.1(b);
(f) arising prior to the Closing under the Assigned Contracts, and
all liabilities for any breach, act or omission by the Seller prior to the
Closing under any Assigned Contract;
46
(g) for repair, replacement or return of products manufactured or
sold prior to the Closing, except to the extent set forth in clause (c) of the
definition of Assumed Liabilities;
(h) arising out of events, conduct or conditions existing or
occurring prior to the Closing that constitute a violation of or non-compliance
with any law, rule or regulation (including Environmental Laws), any judgment,
decree or order of any Governmental Entity, or any Permit or that give rise to
liabilities or obligations with respect to Materials of Environmental Concern;
(i) to pay severance benefits to any employee of the Seller whose
employment is terminated (or treated as terminated) in connection with the
consummation of the transactions contemplated by this Agreement, and all
liabilities resulting from the termination of employment of employees of the
Seller prior to the Closing that arose under any federal or state law or under
any Employee Benefit Plan established or maintained by the Seller;
(j) to indemnify any person or entity by reason of the fact that
such person or entity was a director, officer, employee, or agent of the Seller
or a Subsidiary or was serving at the request of the Seller or a Subsidiary as a
partner, trustee, director, officer, employee, or agent of another entity
(whether such indemnification is for judgments, damages, penalties, fines,
costs, amounts paid in settlement, losses, expenses, or otherwise and whether
such indemnification is pursuant to any statute, charter document, bylaw,
agreement, or otherwise);
(k) injury to or death of persons or damage to or destruction of
property occurring prior to the Closing (including any workers compensation
claim);
(l) all Seller Plans and all liabilities and obligations of the
Seller arising after the Closing under the Seller Plans; and
(m) subject to the terms of the applicable Seller Plan, for medical,
dental and disability benefits arising under each Seller Plan (both long-term
and short-term benefits), whether insured or self-insured, owed to employees or
former employees of the Seller based upon (A) dates of service for medical or
dental benefits under the applicable Seller Plan prior to the Closing or (B)
disabilities determined by the U.S. Social Security Administration or Seller
Plan that is a disability plan as existing prior to the Closing (including any
such disabilities which may have been aggravated following the Closing).
"Security Interest" shall mean any mortgage, pledge, security
interest, encumbrance, charge or other lien (whether arising by contract or by
operation of law), other than (i) mechanic's, materialmen's, and similar liens,
(ii) liens arising under worker's compensation, unemployment insurance, social
security, retirement, and similar legislation (iii) liens on goods in transit
incurred pursuant to documentary letters of credit, in each case arising in the
Ordinary Course of Business of the Seller and not material to the Seller, (iv)
statutory liens for current Taxes or other governmental charges not yet due and
payable or the amount or validity of which is being contested in good faith by
appropriate proceedings by the Seller or any of its Subsidiaries and (v) such
other liens as would not have, individually or in the aggregate, a Seller
Material Adverse Effect.
47
"Seller" shall have the meaning set forth in the first paragraph of
this Agreement.
"Seller Certificate" shall mean a certificate to the effect that
each of the conditions specified in clause (a) of Section 5.1 and clauses (a)
through (d) (insofar as clause (d) relates to Legal Proceedings involving the
Seller or a Subsidiary) of Section 5.2 is satisfied in all respects.
"Seller Intellectual Property" shall mean the Intellectual Property
owned by or licensed to the Seller or a Subsidiary and covering, incorporated
in, underlying or used in connection with the Customer Deliverables or the
Internal Systems.
"Seller Material Adverse Effect" shall mean any material adverse
change, event, circumstance or development with respect to, or material adverse
effect on, (i) the business, assets, liabilities, capitalization, prospects,
condition (financial or other), or results of operations of the Seller and the
Subsidiaries, taken as a whole, or (ii) the ability of the Buyer to operate the
business of the Seller and each of the Subsidiaries immediately after the
Closing. For the avoidance of doubt, the parties agree that the terms
"material", "materially" or "materiality" as used in this Agreement with an
initial lower case "m" shall have their respective customary and ordinary
meanings, without regard to the meaning ascribed to Seller Material Adverse
Effect.
"Seller Plan" shall mean any Employee Benefit Plan maintained, or
contributed to, by the Seller or any Subsidiary.
"Subsidiary" shall mean any corporation, partnership, trust, limited
liability company or other non-corporate business enterprise in which the Seller
or the Buyer, as the case may be (or another Subsidiary thereof), holds stock or
other ownership interests representing (a) more than 50% of the voting power of
all outstanding stock or ownership interests of such entity or (b) the right to
receive more than 50% of the net assets of such entity available for
distribution to the holders of outstanding stock or ownership interests upon a
liquidation or dissolution of such entity.
"Taxes" shall mean all taxes, charges, fees, levies or other similar
assessments or liabilities, including income, gross receipts, ad valorem,
premium, value-added, excise, real property, personal property, sales, use,
transfer, withholding, employment, unemployment, insurance, social security,
business license, business organization, environmental, workers compensation,
payroll, profits, license, lease, service, service use, severance, stamp,
occupation, windfall profits, customs, duties, franchise and other taxes imposed
by the United States of America or any state, local or foreign government, or
any agency thereof, or other political subdivision of the United States or any
such government, and any interest, fines, penalties, assessments or additions to
tax resulting from, attributable to or incurred in connection with any tax or
any contest or dispute thereof.
"Tax Returns" shall mean all reports, returns, declarations,
statements or other information required to be supplied to a taxing authority in
connection with Taxes.
"Third Party Action" shall mean any suit or proceeding by a person
or entity other than a Party for which indemnification may be sought by a Party
under Article 7.
48
10. MISCELLANEOUS
10.1 Press Releases and Announcements. Neither Party shall issue any press
release or public announcement relating to the subject matter of this Agreement
without the prior written approval of the other Party; provided, however, that
either Party may make any public disclosure it believes in good faith is
required by applicable law, regulation or stock market rule (in which case the
disclosing Party shall use reasonable efforts to advise the other Party and
provide it with a copy of the proposed disclosure prior to making the
disclosure).
10.2 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
10.3 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, with respect to the subject matter hereof.
10.4 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. Neither Party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided that the Buyer may assign some or all of
its rights, interests and/or obligations hereunder to one or more Affiliates of
the Buyer.
10.5 Counterparts and Facsimile Signature. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument. This Agreement
may be executed by facsimile signature.
10.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.7 Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered four business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, or one business day after it is sent for next business day
delivery via a reputable nationwide overnight courier service, in each case to
the intended recipient as set forth below:
If to the Seller: Copy to:
---------------- -------
Abundance Networks, LLC DLA ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ US LLP
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇ Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ of the Americas
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 29th Floor
Tel: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
49
If to the Buyer: Copy to:
--------------- -------
▇▇▇▇▇ Networks, Inc. ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, PLLC
Attn: Chief Executive Officer Attn: ▇▇▇▇ ▇. ▇▇▇▇, Esquire
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇. ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇ Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Either Party may give any notice, request, demand, claim or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it
actually is received by the party for whom it is intended. Either Party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other Party notice in
the manner herein set forth.
10.8 Governing Law. This Agreement (including the validity and
applicability of the arbitration provisions of this Agreement, the conduct of
any arbitration of a Dispute, the enforcement of any arbitral award made
hereunder and any other questions of arbitration law or procedure arising
hereunder) shall be governed by and construed in accordance with the internal
laws of the State of California, without giving effect to any choice or conflict
of law provision or rule (whether of the State of California or any other
jurisdiction) that would cause the application of laws of any jurisdictions
other than those of the State of California.
10.9 Amendments and Waivers. The Parties may mutually amend any provision
of this Agreement at any time prior to the Closing; provided, however, that any
amendment effected subsequent to the Requisite Member Approval shall be subject
to any restrictions contained in the Delaware Limited Liability Company Act. No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by each of the Parties. No waiver by either Party
of any right or remedy hereunder shall be valid unless the same shall be in
writing and signed by the Party giving such waiver. No waiver by either Party
with respect to any default, misrepresentation, or breach of warranty or
covenant hereunder shall be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence.
50
10.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified.
10.11 Expenses. Each Party shall bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby. The Seller agrees that none of the
costs and expenses (including legal fees and expenses) incurred by it in
connection with this Agreement or the transactions contemplated hereby will be
(a) borne by any Subsidiary or (b) paid until after the Closing.
10.12 Submission to Jurisdiction. Each Party (a) submits to the
jurisdiction of any state or federal court sitting in the State of California in
any action or proceeding arising out of or relating to this Agreement or the
Ancillary Agreements (including any action or proceeding for the enforcement of
any arbitral award made in connection with any arbitration of a Dispute
hereunder), (b) agrees that all claims in respect of such action or proceeding
may be heard and determined in any such court, (c) waives any claim of
inconvenient forum or other challenge to venue in such court, (d) agrees not to
bring any action or proceeding arising out of or relating to this Agreement or
the Ancillary Agreements in any other court; provided in each case that, solely
with respect to any arbitration of a Dispute, the Arbitrator shall resolve all
threshold issues relating to the validity and applicability of the arbitration
provisions of this Agreement, contract validity, applicability of statutes of
limitations and issue preclusion, and such threshold issues shall not be heard
or determined by such court. Each party agrees to accept service of any summons,
complaint or other initial pleading made in the manner provided for the giving
of notices in Section 10.7, provided that nothing in this Section 10.12 shall
affect the right of either Party to serve such summons, complaint or other
initial pleading in any other manner permitted by law.
10.13 Specific Performance. Each Party acknowledges and agrees that the
other Party would be damaged irreparably in the event any of the provisions of
this Agreement (including Sections 6.1, 6.2 and 6.3) are not performed in
accordance with their specific terms or otherwise are breached. Accordingly,
each Party agrees that the other Party shall be entitled to an injunction or
other equitable relief to prevent breaches of the provisions of this Agreement
and to enforce specifically this Agreement and the terms and provisions hereof
in any action instituted in any court of the United States or any state thereof
having jurisdiction over the Parties and the matter, in addition to any other
remedy to which it may be entitled, at law or in equity. Notwithstanding the
foregoing, the Parties agree that if a Dispute is submitted to arbitration in
accordance with Section 7.3(d) and Section 7.3(e), then the foregoing provisions
of this Section 10.13 shall not apply to such Dispute, and the provisions of
Section 7.3(d) and Section 7.3(e) shall govern availability of injunctive
relief, specific performance or other equitable relief with respect to such
Dispute.
51
10.14 Construction.
(a) The language used in this Agreement shall be deemed to be the
language chosen by the Parties to express their mutual intent, and no rule of
strict construction shall be applied against either Party.
(b) Any reference to any federal, state, local, or foreign statute
or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise.
(c) Any reference herein to "including" shall be interpreted as
"including without limitation".
(d) Any reference to any Article, Section or paragraph shall be
deemed to refer to an Article, Section or paragraph of this Agreement, unless
the context clearly indicates otherwise.
[remainder of page intentionally left blank; signature page follows]
52
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
▇▇▇▇▇ NETWORKS, INC
a Nevada corporation
By:
-------------------------------------------------
Name:
-----------------------------------------------
Title:
----------------------------------------------
ABUNDANCE NETWORKS, INC.
a Delaware corporation
By:
-------------------------------------------------
Name:
-----------------------------------------------
Title:
----------------------------------------------
ABUNDANCE NETWORKS, LLC
a Delaware limited liability company
By:
-------------------------------------------------
Name:
-----------------------------------------------
Title:
----------------------------------------------
ABUNDANCE NETWORKS (INDIA) PVT LTD
an India private limited company
By:
-------------------------------------------------
Name:
-----------------------------------------------
Title:
----------------------------------------------
53