WEINMASTER HOMES, LTD. STOCK PURCHASE AGREEMENT AMONG INTERNATIONAL MICROCOMPUTER SOFTWARE, INC., HOUSEPLANS, INC., WEINMASTER HOMES, LTD. AND BRUCE AND JANICE WEINMASTER Dated as of July 1, 2005
Exhibit
No. 2.1
▇▇▇▇▇▇▇▇▇▇
HOMES, LTD.
AMONG
INTERNATIONAL
MICROCOMPUTER SOFTWARE,
INC.,
HOUSEPLANS,
INC., ▇▇▇▇▇▇▇▇▇▇ HOMES,
LTD. AND
▇▇▇▇▇
AND ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Dated
as of July 1,
2005
This
Stock Purchase Agreement (“Agreement”)
is
entered into as of July 1, 2005 by and among International Microcomputer
Software, Inc., a California corporation (“IMSI”),
Houseplans, Inc., a California corporation and a wholly-owned subsidiary
of IMSI
(“Purchaser”),
▇▇▇▇▇▇▇▇▇▇ Homes, Ltd., a corporation organized under the laws of Canada
(“WHL”),
and
▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (the “Shareholders”).
RECITALS
WHEREAS,
the Shareholders own 100% of the outstanding shares of capital stock (the
“Stock”)
of
WHL; and
WHEREAS,
IMSI owns 100% of the outstanding shares of capital stock of the Purchaser;
and
WHEREAS,
IMSI desires to purchase the Stock from the Shareholders through the Purchaser,
and the Shareholders desire to sell the Stock to the Purchaser, in each case
upon the terms and subject to the conditions set forth in this
Agreement;
NOW,
THEREFORE, in consideration of the premises, the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE
I.
DEFINITIONS
Section
1.1. Definitions.
In
addition to the terms defined elsewhere herein, the terms defined in the
introductory paragraph and the Recitals to this Agreement shall have the
respective meanings specified therein, and the following terms shall have
the
meanings specified below when used herein with initial capital
letters:
“Accounts
Receivable”
has the
meaning set forth in Section
3.9.
“Affiliate”
means
“affiliate” as defined in Rule 405 promulgated under the Securities Act.
“Affiliated
Group”
means
any affiliated group within the meaning of Code §1504(a) or any similar group
defined under a similar provision of state, local or foreign law.
“Agreement”
has the
meaning set forth in the preamble, and shall include all Schedules and Exhibits
hereto.
“Arbiter”
has the
meaning set forth in Section
2.3(d).
-2-
“Balance Sheet”
has the
meaning set forth in Section
3.6.
“Balance Sheet
Date”
means
March 31, 2005.
“Business”
means
the business and operations of WHL and its Subsidiaries as conducted on the
Closing Date, including but not limited to the distribution of stock houseplans
online and in retail outlets.
“Business
Day”
means a
day, other than a Saturday, a Sunday or a day on which commercial banks are
required or authorized to close in the United States or Canada.
“Cash
Consideration”
has the
meaning set forth in Section
2.2(a)(i).
“Closing”
has the
meaning set forth in Section
8.1.
“Closing
Date”
has the
meaning set forth in Section
8.1.
“Closing
Date Balance Sheet”
means
the
balance sheet of WHL as of the Closing Date, prepared in accordance with
GAAP in
a manner consistent with WHL’s historical accounting practices.
“Closing
Date Net Asset Amount”
means
the amount by which WHL’s assets exceed its liabilities on the Closing Date
Balance Sheet.
“Code”
means
the Internal Revenue Code of 1986, as amended.
“Competitive
Business Activities”
means
marketing or distributing electronic house plans online or through retail
channels.
“Contracts”
as of
any date means, collectively, all material contracts, agreements, commitments,
instruments and guaranties to which WHL is a party as of such date, including
those listed or required to be listed on Schedule
3.14,
all
material unfilled orders outstanding as of such date for the purchase of
raw
materials, goods or services by WHL, and all material unfilled orders
outstanding as of such date for the sale of goods or services by
WHL.
“Costs
of Remediation”
means
all losses, amounts paid in settlement, investigation, removal, remediation,
monitoring and reporting costs and expenses, Taxes, claims, Damages,
Liabilities, obligations, judgments, settlements and out-of-pocket costs
(including, without limitation, costs of investigation or enforcement), expenses
and attorneys’ fees including, without limitation, reasonable fees for services
of attorneys, consultants, contractors, experts, engineers and laboratories,
and
all other reasonable out-of-pocket costs, incurred in connection with
investigation, characterization, remediation, monitoring, reporting or
mitigation, arising out of or related to the presence or Release of any
Hazardous Materials existing as of or prior to the Closing Date at, on, or
emanating from any of the Leased Property or any real property at or to which
WHL, any Subsidiary or predecessor of any of the foregoing disposed, Released,
transported, stored, emitted, treated, or arranged to dispose of Hazardous
Materials prior to the Closing Date including, without limitation, off-site
liability under any Environmental Law arising from or in connection with
transportation, treatment, storage, disposal, Release, or arranging for disposal
of Hazardous Materials.
-3-
“Damages”
means
any losses, amounts paid in settlement, claims, damages, Liabilities,
obligations, judgments, settlements and reasonable out-of-pocket costs
(including, without limitation, costs of investigation or enforcement), expenses
and attorneys’ fees, including, without limitation, (i) any consequential
damages or (ii) any special or punitive damages which are assessed against
an
Indemnified Party as a result of a third party action; provided however,
that
the amount thus determined shall be reduced by any amounts actually recovered
from any third party, including the proceeds received with respect to any
applicable insurance policy.
“Delivered
Stock”
means
the Stock minus the Pledged Stock.
“Draft
Adjustment Report”
has the
meaning set forth in Section
2.3(a).
“Employee
Benefits”
means:
(a) stock option plans, stock purchase plans, stock-related rights plans,
incentive plans, deferred compensation plans, profit-sharing plans and other
similar benefits, plans or arrangements; (b) insurance (including self-insured
arrangements), health, welfare, drug, disability, sick leave, pregnancy-related
leave, workers’ compensation, supplemental unemployment benefits,
post-employment, pension, retirement (including related compensation, health
medical and insurance benefits), travel, hospitalization, medical, dental,
counseling, employee assistance program, eye care and other similar benefits,
plans or arrangements; and (c) agreements or arrangements with any labor
union
or employee association, and employment agreements.
“Employee(s)”
means
each individual who, on the applicable date, performs services as an employee
primarily for WHL or any of its Subsidiaries (including such persons who
are on
an approved leave of absence, vacation, short-term disability or otherwise
treated as an active employee of WHL or its Subsidiaries).
“Employment
Agreement”
shall
have the meaning set forth in Section
6.4.
“Environmental
Laws”
means
any Legal Requirement with respect to the protection of the public health,
safety or the environment, including, without limitation, with respect to
any
Hazardous Materials, drinking water, groundwater, wetlands, landfills, open
dumps, storage tanks, solid waste, or waste water, water, soil, air, pollution,
the protection, preservation or restoration of natural resources, plant and
animal life or human health or the environment, or waste management, regulation
or control.
“Environmental
Reference Date”
has the
meaning set forth in Section
3.21.
“Equity
Distributions”
as of
any date means the following: (i) all dividends, distributions, forgiveness
of
debt, transfer of value or similar transactions with respect to the Stock,
and
(ii) with respect to each transaction between WHL on the one hand and the
Shareholders, its Affiliates, or advisors on the other hand, the amount
(measured on a transaction by transaction basis, which amount shall never
be
deemed to be less than zero) by which the cash value of the goods or services
received by WHL was less than the greater of (x) the amount which WHL would
have
had to pay in a comparable transaction with an unaffiliated third party entered
into on an arm’s length basis, or (y) the cash value of the goods and services
paid by WHL in the transactions.
-4-
“Escrow
Agent”has
the
meaning set forth in the Escrow Agreement.
“Escrow
Agreement”
has the
meaning set forth in Section
2.2(a)(iii).
“Final
Adjustment Report”
has the
meaning set forth in
Section 2.3(b).
“Financial
Statements”
has the
meaning set forth in Section
3.6.
“Former
Employee”
means
each individual other than an Employee on the Closing Date who at any time
prior
to the Closing Date performed services as an employee primarily for WHL or
any
Subsidiary of WHL.
“GAAP”
has the
meaning set forth in Section
1.2.
“Governmental
Agency”
means
(a) any international, Canadian, foreign, federal, state, county, province,
local or municipal government or administrative agency or political subdivision
thereof, (b) any governmental agency, authority, board, bureau, commission,
department or instrumentality, (c) any court or administrative tribunal,
(d) any
non-governmental agency, tribunal or entity that is vested by a governmental
agency with applicable jurisdiction, or (e) any arbitration tribunal or other
non-governmental authority with applicable jurisdiction.
“Hazardous
Materials”
means
each and every element, compound, chemical mixture, pollutant, contaminant,
material, waste or other substance which is defined, designated, regulated,
determined, classified or identified as of the Closing Date as hazardous,
radioactive, harmful or toxic under any Environmental Law, or the Release
of
which is prohibited or regulated under any Environmental Law. Without limiting
the generality of the foregoing, the term shall include any “toxic
substance,”“hazardous substance,”“hazardous waste,” or “hazardous material” as
defined in any Environmental Law as amended to date, and any explosive or
radioactive material, asbestos, asbestos-containing material, waste water,
sludge, untreated dye, other effluent, coal ash, polychlorinated biphenyls,
special waste, petroleum or any derivative or byproduct thereof, and toxic
waste.
“IMSI
SEC Documents”
has the
meaning set forth in Section
4.8.
“Indebtedness”
means
(without duplication), with respect to any Person, whether recourse is to
all or
a portion of the assets of such Person, (i) the principal of and premium,
if
any, in respect of any indebtedness of such Person for money borrowed, (ii)
the
principal, premium, if any, and interest of such Person with respect to
obligations evidenced by bonds, debentures, notes or, except for accrued
liabilities arising in the Ordinary Course of Business, other similar
instruments, including obligations incurred in connection with the acquisition
of property, assets or businesses (other than trade payables which are not
overdue or in default), (iii) all obligations of such Person in respect of
letters of credit or other similar instruments (including reimbursement
obligations with respect thereto) but only to the extent of drawings thereunder,
(iv) every obligation of such Person issued or assumed as the deferred purchase
price of property or services (excluding trade accounts payable or accrued
liabilities arising in the Ordinary Course of Business which are not overdue
or
in default), (v) every capital lease obligation (determined in accordance
with
GAAP) of such Person, (vi) all Indebtedness of other Persons secured by a
Lien
on any asset of such Person, whether or not such Indebtedness is assumed
by such
Person; provided, however, that the amount of such Indebtedness shall be
the
lesser of (A) the fair market value of such asset at such date of determination
and (B) the amount of such Indebtedness of such other Persons, (vii) the
present
value (discounted using an interest rate of 5% per annum) as of the date
of
determination of every obligation to pay rent or other payment amounts of
such
Person with respect to any sale-leaseback transaction to which such Person
is a
party, payable through the stated maturity of such sale-leaseback transaction,
and (viii) every obligation of the type referred to in clauses (i) through
(vii)
of another Person the payment of which, in any case, such Person has guaranteed
or is responsible or liable, directly or indirectly, as obligor, guarantor
or
otherwise.
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“Indemnified
Party”
has the
meaning set forth in Section
9.3(a)
and in
the case of Purchaser shall also include WHL and its Subsidiaries.
“Indemnifying
Party”
has the
meaning set forth in Section
9.3(a).
“Insurance
Policies”
has the
meaning set forth in Section
3.19.
“Intellectual
Property” shall
mean (i) all fictional business names, trademarks and service marks (registered
or unregistered), trade dress, trade names and other names and slogans embodying
business or product goodwill or indications of origin, all applications or
registrations in any jurisdiction pertaining to the foregoing and all goodwill
associated therewith (collectively “Marks”);
(ii)
patents, patentable inventions, discoveries, improvements, ideas, know-how,
formula methodology, processes, technology and computer programs, software
and
databases (including source code, object code, development documentation,
programming tools, drawings, specifications and data) and all applications
or
registrations in any jurisdiction pertaining to the foregoing, including
all
reissues, continuations, divisions, continuations-in-part, renewals or
extensions thereof (collectively “Patents”);
(iii)
trade secrets, know-how, including confidential and other non-public
information, and the right in any jurisdiction to limit the use or disclosure
thereof (collectively, “Trade
Secrets”),
(iv)
copyrights in writings, artwork, clipart, webart, sounds, graphics, photographs,
animations, images, designs, mask works or other works, and registrations
or
applications for registration of copyrights in any jurisdiction; (v) all
of
WHL’s designs and plans (in paper and electronic form); (vi) licenses,
immunities, covenants not to ▇▇▇ and the like relating to any of the foregoing;
(vii) Internet Web sites, domain names, including, but not limited to
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ and ▇▇▇▇▇▇▇▇▇▇.▇▇▇, and registrations or applications
for
registration thereof; (viii) books and records describing or used in connection
with any of the foregoing; (ix) claims or causes of action arising out of
or
related to infringement or misappropriation of any of the foregoing; and
(x)
such items listed or required to be listed on Schedule
3.15.
-6-
“IRS”
means
the Internal Revenue Service of the U.S. Department of the
Treasury.
“Knowledge”
as
applied to the Shareholders, means the actual knowledge, after reasonable
inquiry, of ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇.
“Leased
Property”
has the
meaning set forth in Section
3.10(b).
“Leases”
has the
meaning set forth in Section
3.10(b).
“Legal
Requirement”
means
any Canadian, federal, state, local, provincial, municipal, foreign,
international, multinational, or other administrative Order, constitution,
law,
rule, ordinance, permit, principle of common law, regulation, statute, or
treaty.
“Liability”
means
any liability or obligation (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated and whether due or to become due), including,
without limitation, any liability for Taxes.
“Licensed
IP”
means
all WHL IP that is not owned by WHL, excluding any WHL IP that is licensed
to
WHL pursuant to any (i) license implied by the sale of a product, or (ii)
perpetual, paid-up licenses for commonly available software
programs.
“Lien”
means
any charge, claim, community property interest, condition, equitable interest,
lien, option, pledge, security interest, right of first refusal, or restriction
of any kind, including any restriction on use, voting, transfer, receipt
of
income, or exercise of any other attribute of ownership.
“Major
Customers”
and
“Major
Suppliers”have
the
respective meanings set forth in Section
3.26.
“▇▇▇▇”
has the
meaning set forth in this Section
1.1
in the
definition of “Intellectual Property.”
“Material
Adverse Effect”
means a
material adverse change in or effect with respect to the business, results
of
operations, properties or financial condition of WHL and its subsidiaries,
taken
as a whole.
“Net
Asset Adjustment”
means
the adjustment of the Cash Consideration in the manner set forth in
Section 2.3(d)..
“Objection
Notice”
has the
meaning set forth in
Section 2.3(c).
-7-
“Order”
means
any award, decision, injunction, judgment, order, ruling, subpoena, or verdict
entered, issued, made, or rendered by any court, administrative agency, or
other
Governmental Agency or by any arbitrator.
“Ordinary
Course of Business”
means
an action which is consistent with the past practices of WHL and is taken
in the
ordinary course of the normal day-to-day operations of WHL.
“Patent”
has the
meaning set forth in this Section
1.1
in the
definition of “Intellectual
Property”.
“Permit”
means
any permit, approval, consent, authorization, license, variance, or permission
required by a Governmental Agency under any Legal Requirement.
“Permitted
Liens”
means,
with respect to any asset, (i) covenants, conditions, restrictions,
encroachments, encumbrances, easements, rights of way, licenses, grants,
building or use restrictions, exceptions, reservations, limitations or other
imperfections of title (other than a Lien securing any Indebtedness) with
respect to such asset which, individually or in the aggregate, does not
materially detract from the value of, or materially interfere with the present
occupancy or use of, such asset and the continuation of the present occupancy
or
use of such asset; (ii) ; unfiled mechanic’s, materialmen’s and similar liens
with respect to amounts not yet due and payable or which are being contested
in
good faith through appropriate proceedings and, for those existing on the
Balance Sheet, for which adequate reserves in accordance with GAAP are reflected
on the Balance Sheet, as the case may be; (iii) liens for Taxes not yet
delinquent or which are being contested in good faith through appropriate
proceedings and, for those existing on the Balance Sheet, for which adequate
reserves are reflected on the Balance Sheet, as the case may be; and (iv)
liens
securing rental payments under capital lease arrangements, which capital
lease
arrangements existing as of the Closing Date are in accordance with GAAP
reflected as Indebtedness on the Balance Sheet.
“Person”
means
any individual, partnership, corporation, trust, association, limited liability
company, Governmental Agency or any other entity.
“Pledged
Stock”
means
that portion of the Stock pledged by the Purchaser pursuant to the Escrow
Agreement.
“Pre-Closing
Taxes”
has the
meaning set forth in
Section 9.2(b).
“Promissory
Note”
has the
meaning set forth in Section
2.2(a)(iii).
“Purchase
Price”
has the
meaning set forth in Section
2.2.
“Purchaser”
has the
meaning set forth in the preamble hereto.
“Purchaser’s
Opinion of Counsel”
has the
meaning set forth in Section
6.5.
-8-
“Registration
Rights Agreement”
has the
meaning set forth in Section
6.3.
“Release”
means
any spilling, leaking, pumping, releasing, depositing, pouring, emitting,
emptying, migrating, discharging, injecting, storing, escaping, leaching,
dumping, burying, abandoning, disposing or moving into the
environment.
“Salaried
Employee”
has the
meaning set forth in Section
3.23(h).
“Schedules”
means,
collectively, the various Schedules referred to in this Agreement delivered
separately to Purchaser on or before the date of this Agreement.
“Section
338(h)(10) Election”has
the
meaning set forth in Section
5.5(f).
“Section
338 Forms”has
the
meaning set forth in Section
5.5(d).
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Securities
Exchange Act”
means
the Securities Exchange Act of 1934, as amended.
“Shareholders
Entity”
means
the Shareholders and their respective Affiliates (other than WHL and its
Subsidiaries).
“Shareholders”
has the
meaning set forth in the preamble hereto.
“Software”
has the
meaning set forth in Section
3.16.
“Stock”
has the
meaning set forth in the Recitals hereto.
“Stock
Consideration”
has the
meaning set forth in Section
2.2(a)(ii).
“Subsidiary”
means
“subsidiary” as defined in Rule 405 promulgated under the Securities
Act.
“Tax
Claim”
has the
meaning set forth in Section
9.5.
“Tax
Return”
means
any report, return, information return, forms, declarations, claims for refund,
statements or other information (including any amendments thereto and including
any schedule or statement thereto) required to be supplied to a Governmental
Agency in connection with Taxes.
“Taxes”
means
all Canadian, federal, state, local, foreign, province of British Columbia
and
other taxes, assessments and water and sewer charges and rents, including
without limitation, income, gross receipts, excise, employment, sales, use,
transfer, license, payroll, franchise, severance, stamp, withholding, Social
Security, unemployment, real property, personal property, property gains,
registration, capital stock, value added, single business, occupation, workers’
compensation, alternative or add-on minimum, estimated, or other tax, including
without limitation any interest, penalties or additions thereto.
-9-
“Trade
Secret”
has the
meaning set forth in this Section
1.1 in
the
definition of “Intellectual Property.”
“Transaction
Documents”
means
this Agreement, the Promissory Note, the Registration Rights Agreement, the
Escrow Agreement, the General Security Agreement defined in Section
2.2(a)(iii),
and the
Guarantee defined in Section
2.2 (a)(iii).
“WHL”,
except
where the context indicates otherwise, includes ▇▇▇▇▇▇▇▇▇▇ Homes, Ltd. and
its
subsidiaries, if any.
“WHL
IP”
means
all Intellectual Property owned, used or licensed by WHL as licensor or licensee
that is necessary for the carrying on of, or that is otherwise material to,
the
business of WHL.
“WHL
Revenue”
shall
mean the gross revenue of the Business, including but not limited to revenue
from all products, services and assets of the Business (including without
limitation the ▇▇▇▇▇▇▇▇▇▇ plans sold online, the plans of other designers
sold
by WHL, advertising revenue for advertisements on ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇,
▇▇▇▇▇▇▇▇▇▇.▇▇▇ and any other web site of the Business, including appropriate
credit for gratuitous advertisements or advertisements made in exchange for
products or services), as of the Closing Date as calculated by the Purchaser
in
accordance with GAAP and adjusted as necessary for sales returns, allowances
and
bad debts.
“WHL’s
Opinion of Counsel”,
has
the meaning set forth in Section
7.6.
Section
1.2. Accounting
Terms and Determinations.
All
references in this Agreement to “generally
accepted accounting principles”
or
“GAAP”
shall
mean generally accepted accounting principles in effect in Canada at the
time of
application thereof, applied on a consistent basis.
ARTICLE
II.
SALE
AND PURCHASE
Section
2.1. Agreement
to Sell and to Purchase.
On
the
terms and subject to the conditions set forth in this Agreement, at the Closing,
the Purchaser shall purchase from the Shareholders, and the Shareholders
shall
sell, transfer, assign, convey and deliver to the Purchaser,
the
Stock. At the Closing, the Shareholders shall
(i)
deliver to the Purchaser or its designees a certificate or certificates
representing the Delivered Stock and (ii) deliver to the Escrow Agent a
certificate or certificates representing the Pledged Stock, in each case
duly
endorsed in blank for transfer or accompanied by appropriate powers duly
executed in blank, against payment of the Purchase Price as contemplated
herein.
-10-
Section
2.2. Purchase
Price.
(a) The
purchase price (the “Purchase
Price”)
for
the Stock shall consist of the following:
(i) $2,000,000
United States Dollars (“USD”),
in
immediately available funds (the “Cash
Consideration”);
(ii) The
equivalent of $1,000,000 USD in shares of the Common Stock, no par value,
of
IMSI (“IMSI
Stock”)
based
on a price per share equal to the average closing price of IMSI Stock on
the OTC
Bulletin Board (“OTCBB”)
over
the five (5) trading days immediately preceding and including June 28, 2005
(the
“Stock
Consideration”);
(iii) A
one
year Promissory Note in the amount of $1,000,000, in the form attached as
Exhibit A hereto, given by the Purchaser (the “Promissory
Note”),
and
secured by the Pledged Stock as provided in the Escrow Agreement attached
as
Exhibit B (the “Escrow
Agreement”),
and
guaranteed and secured by WHL as provided in the Guarantee of WHL (the
“Guarantee”)
and by
the General Security Agreement (the “General
Security Agreement”)
attached
as Exhibit C and Exhibit D, respectively.
Section
2.3. Purchase
Price Adjustment.
(a) The
parties shall estimate on Schedule
2.3
the
amount by which WHL’s assets exceed its liabilities as of the Closing Date (the
“Estimated
Closing Date Net Asset Amount”).
In
addition, Schedule
2.3
shall
reflect the parties’ agreement as to the allocation of certain revenues of WHL
and as to responsibility for certain expenses of WHL. As soon as reasonably
practical after the Closing, but in no event more than thirty (30) days after
the Closing Date, the Purchaser shall prepare the Closing Date Balance Sheet
and
a computation the Closing Date Net Asset Amount and the Net Asset Adjustment
resulting therefrom (collectively, the “Draft
Adjustment Report”).
The
Purchaser shall deliver the Draft Adjustment Report to Shareholders and WHL
(who
for purposes of this Section
2.3
shall be
collectively referred to as “Seller”) within such 30-day period after the
Closing Date.
(b) During
the fifteen (15)day period after the Seller’s receipt of the Draft Adjustment
Report, the Seller and the Purchaser shall cooperate with each other to resolve
any disagreements between them with respect to the Draft Adjustment Report.
In
the event the Seller and the Purchaser agree on the Draft Adjustment Report
and
the proposed Net Asset Adjustment set forth therein (such agreement to be
indicated in writing by the Seller and the Purchaser by signing such Draft
Adjustment Report), then the Draft Adjustment Report shall be deemed to be
the
final Adjustment Report (the “Final
Adjustment Report”),
and
the Net Asset Adjustment set forth therein shall be conclusive and binding
upon
the Purchaser and the Seller and shall have the effect of adjusting the Cash
Consideration as set forth therein.
-11-
(c) In
the
event the Seller and the Purchaser shall not reach agreement on all aspects
of
the Draft Adjustment Report, including with respect to the Net Asset Adjustment
set forth therein, within such 15-day period after the Seller’s receipt of the
Draft Adjustment Report, the Seller shall promptly (but in no event later
than
five (5) days following the expiration of such 15-day period) prepare a written
notice of its objections (the “Objection
Notice”):
(i)
objecting in good faith to the Net Asset Adjustment set forth in the Draft
Adjustment Report, (ii) setting forth the items being disputed and the reasons
therefor, and (iii) specifying the Seller’s calculation of the Net Asset
Adjustment as of the Closing Date and the adjustment to be made in accordance
with this Section
2.3.
In
connection with the preparation of the Objection Notice, the Purchaser shall
grant the Seller’s accountants and other representatives reasonable access to
all of the books and records of WHL.
If the
Seller fails to deliver timely notice of its objection to the Net Asset
Adjustment as set forth in the Draft Adjustment Report, then the Draft
Adjustment Report shall be deemed to be the Final Adjustment Report, and
the Net
Asset Adjustment set forth therein shall be conclusive and binding upon the
Purchaser and the Seller and shall have the effect of adjusting the Cash
Consideration as set forth therein.
(d) The
matters in dispute shall be determined by a nationally recognized independent
public accounting firm mutually satisfactory to the Purchaser and the Seller
(which accounting firm shall not be the current or former auditors of either
the
Purchaser or the Seller) (the “Arbiter”),
and
the Purchaser and the Seller shall promptly deliver to the Arbiter Schedule
2.3,
the
Draft Adjustment Report and Seller’s Objection Notice. Promptly, but not later
than 30 days after the acceptance of its appointment, the Arbiter shall
determine (based solely on the information provided by the Seller and the
Purchaser to the Arbiter and not by independent review) only those items
in
dispute and shall render a report as to its resolution of such items and
the
resulting calculation of the Net Asset Adjustment. For purposes of the Arbiter’s
determination, the amounts to be included shall be the appropriate amounts
from
Schedule
2.3
or the
Draft Adjustment Report, as the case may be, as to items that are not in
dispute, and the amounts determined by the Arbiter, as to items that are
submitted for resolution by the Arbiter. In resolving any disputed item,
the
Arbiter may not assign a value to such item greater than the greatest value
for
such item claimed by either party in Schedule
2.3,
the
Draft Adjustment Report or Objection Notice or less than the lowest value
for
such item claimed by either party in Schedule
2.3,
the
Draft Adjustment Report or Objection Notice. The Purchaser and the Seller
shall
cooperate with the Arbiter in making its determination and such determination
shall be conclusive and binding upon the Purchaser and the Seller.
(e) The
Purchaser and the Seller shall each bear one-half of the fees and expenses
of
the Arbiter.
(f) Within
five Business Days after the final determination of the Net Asset Adjustment
in
accordance with this Section
2.3:
either
(i) the Purchaser shall pay the Seller by wire transfer of immediately available
funds the amount, if any, by which the Closing Date Net Asset Amount exceeds
the
Estimated Closing Date Net Asset Amount; or (ii) the Seller shall pay the
Purchaser by wire transfer of immediately available funds the amount, if
any, by
which the Estimated Closing Date Net Asset Amount exceeds the Closing Date
Net
Asset Amount.
-12-
Nothing
in this Section
2.3
or in
the statements, reports or documents contemplated hereby shall affect the
parties’ rights and obligations in respect of a breach or alleged breach of any
representation or warranty herein.
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES OF THE SHAREHOLDERS
AND WHL
The
Shareholders and WHL jointly and severally represent and warrant to the
Purchaser and IMSI as set forth in this Article III:
Section
3.1. Authority
of WHL.
WHL
has
full corporate power and authority to execute and deliver the Transaction
Documents, and the execution and delivery by WHL of the Transaction Documents
and the consummation of the transactions contemplated hereby and thereby
have
been duly and validly authorized by all necessary corporate action on the
part
of WHL, including the consent or approval of the holders of the requisite
majority(ies) of the Shareholders’ common stock and each other class and series
of equity securities of the Shareholders. This Agreement constitutes, and
the
other Transaction Documents when executed and delivered by the parties thereto
will constitute, the legal, valid and binding obligations of WHL enforceable
against WHL in accordance with their terms, except as such enforcement may
be
limited by applicable bankruptcy, insolvency, moratorium, or similar laws
from
time to time in effect which affect creditors’ rights generally and by legal and
equitable limitations on the enforceability of specific remedies.
Section
3.2. Organization
of WHL.
As
of the
date hereof: (i) WHL is a corporation duly organized, validly existing, and
is,
or by the Closing will be, in good standing under the laws of the province
of
British Columbia; (ii) WHL is duly qualified to do business and is in good
standing in each jurisdiction in which the ownership of its properties or
the
conduct of its business requires such qualification, except for failures
to be
so qualified which, individually or in the aggregate, would not reasonably
be
expected to result in a Material Adverse Effect and (iii) WHL has the requisite
corporate power and authority to own its properties and to conduct its business
as presently conducted. Schedule
3.2 includes
true and correct copies of the Articles of Incorporation and Bylaws of WHL
as in
effect on the date hereof.
Section
3.3. Capitalization
of WHL.
As
of the
date hereof, the authorized capital stock of WHL consists of (i) 50,000 shares
of Class “A” Common Voting Shares, no par value per share, of which 100 shares
are issued and outstanding and owned by the Shareholders and (ii) 9,000 Class
“B” Non-Voting Redeemable Shares, no par value per share, of which no shares
are
issued and outstanding. There are or will be at Closing no outstanding options,
warrants, agreements, conversion rights, preemptive rights or other rights
to
subscribe for, purchase or otherwise acquire shares of capital stock of
WHL.
-13-
Section
3.4. No
Conflict or Violation; Consents.
Except
as
set forth on Schedule
3.4,
neither
the execution and delivery of this Agreement or any other Transaction Document
nor the consummation or performance of any of the transactions contemplated
hereby or thereby will, directly or indirectly (with or without notice or
lapse
of time):
(a) contravene,
conflict with, or result in a violation of (i) any provision of the
Articles of Incorporation or Bylaws of WHL or (ii) any resolution
adopted
by the board of directors or the stockholders of WHL;
(b) contravene,
conflict with, or result in a violation of, or give any Governmental Agency
or
other Person the right to challenge any of the transactions contemplated
hereby
or by any other Transaction Document or to exercise any remedy or obtain
any
relief under, any Legal Requirement to which WHL or the Shareholders, or
any of
the assets owned or used by WHL, may be subject, except for contraventions,
conflicts, violations or breaches or other matters which, individually or
in the
aggregate, result in a Material Adverse Effect;
(c) to
the
Knowledge of Shareholders, contravene, conflict with, or result in a violation
of any of the terms or requirements of, or give any Governmental Agency the
right to revoke, withdraw, suspend, cancel, terminate, or modify, any Permit
that is held by WHL and is material to the Business;
(d) to
the
Knowledge of Shareholders, contravene, conflict with, or result in a violation
or breach of any provision of, or give any Person the right to declare a
default
or exercise any remedy under, or to accelerate the maturity or performance
of,
or to cancel, terminate, or modify, any Contract, Lease or Permit, except
for
contraventions, conflicts, violations or breaches which, individually or
in the
aggregate, result in a Material Adverse Effect;
(e) result
in
the imposition or creation of any Lien upon or with respect to any of the
assets
owned or used by WHL; or
(f) except
for filings under the Securities Act and the Securities Exchange Act, require
the consent, approval, or authorization of, or registration or filing with,
any
Governmental Agency or any other Person.
Section
3.5. Subsidiaries
and Investments.
Except
as
set forth in Schedule
3.5,
WHL
does not own any stock of, or any equity participation in, any Person and
has no
Subsidiaries.
-14-
Section
3.6. Financial
Statements.
The
unaudited balance sheet of WHL as of the Balance Sheet Date (the “Balance
Sheet”),
and
related statements of income, retained earnings and cash flow for the periods
then ended and the notes thereto, if any (collectively, the “Financial
Statements”)
are
included as Schedule
3.6.
Except
as set forth on Schedule
3.6,
the
Financial Statements present fairly the financial condition and the results
of
operations of WHL as of the dates and for the periods indicated thereon and
are
in accordance with the books of account and records of WHL.
Section
3.7. Undisclosed
Liabilities.
(a) As
of the
Balance Sheet Date, WHL has, and at Closing will have, no material Liabilities,
except for Liabilities: (i) reflected or reserved for on the Balance Sheet,
as
the case may be, (ii) relating to performance obligations under Leases,
Contracts and Permitted Liens in accordance with the terms and conditions
thereof which are not required by GAAP to be reflected on the Balance Sheet,
or
(iii) as set forth on Schedule
3.7(a).
(b) As
of the
Closing Date, WHL will have resolved or provided for the payment of all
Liabilities, except as provided in Schedule
3.7(a).
Section
3.8. Material
Adverse Effect.
Other
than changes resulting from general economic conditions and except as provided
on Schedule
3.8,
since
the Balance Sheet Date, there has not been any Material Adverse Effect, nor
have
any events occurred nor do any circumstances exist which, individually or
in the
aggregate, would reasonably be expected to result in a Material Adverse
Effect.
Section
3.9. Accounts
Receivable.
All
accounts receivable of WHL that are reflected on the Balance Sheet or on
the
accounting records of WHL as of the Closing Date (collectively, the
“Accounts
Receivable”)
represent or will represent valid obligations arising from sales actually
made
or services actually performed in the Ordinary Course of Business. There
is no
contest, claim, or right of set-off, other than returns or other set-offs
in the
Ordinary Course of Business, under any Contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable.
Schedule
3.9
contains
a complete and accurate list of all Accounts Receivable as of the Balance
Sheet
Date, which list sets forth the aging of such Accounts Receivable.
Section
3.10. Real
Property.
(a) WHL
does
not own any real property.
(b) Schedule
3.10(b)
contains
a list of all leases and subleases, together with any amendments thereto
and any
subordination, nondisturbance and attornment agreements (the “Leases”),
with
respect to all real property leased by WHL (the “Leased
Property”).
Each
Lease is in full force and effect. WHL has performed all material obligations
required to be performed by it to date under each of the Leases and neither
WHL
nor, to the Knowledge of the Shareholders, any other party thereto is in
material default under any of the Leases (and no event has occurred which,
with
due notice or lapse of time or both, would constitute such a lapse or default).
No amount due under the Leases remains unpaid, and no material controversy,
claim, dispute or disagreement exists between the parties to any of the Leases.
WHL has delivered to the Purchaser a copy of each Lease, and all amendments
thereto, listed in Schedule 3.10(b),
except
to the extent otherwise noted therein.
-15-
(c) The
covenants, conditions, restrictions, encroachments, encumbrances, easements,
rights of way, licenses, grants, building or use restrictions, exceptions,
reservations, limitations or other impediments affecting the Leased Property
do
not and will not, with respect to each Leased Property, materially impair
WHL’s
ability to use any such Leased Property in the operation of WHL’s business as
presently conducted. To the Shareholders’ Knowledge, there are no pending or
threatened condemnation or similar proceedings affecting the Leased Property.
WHL has access to public roads, streets or the like or valid easements over
private streets, roads or other private property for such ingress to and
egress
from the Leased Property, except as would not materially impair WHL’s ability to
use any such Leased Property in the operation of WHL’s business as presently
conducted.
(d) All
brokerage commissions and other compensation and fees payable by reason of
the
Leases have been paid in full or are reflected in the Balance Sheet except
for
such commissions and other compensation related to options or extensions
in the
Leases which are not yet exercised.
(e) To
the
Knowledge of the Shareholders, all improvements on the Leased Property and
the
operations therein conducted conform in all material respects to all applicable
Legal Requirements, including without limitation, health, fire, environmental,
safety, zoning and building laws, ordinances and administrative regulations,
except for possible nonconforming uses or violations which do not and will
not
expose any person or property to injury or damage, materially and adversely
affect any insurance coverage, give rise to strict liability, penalties or
fines, jeopardize any Permit or materially interfere with the present use,
operation or maintenance thereof by WHL as now used, operated or maintained,
and
which do not and will not materially and adversely affect the value thereof.
To
the Knowledge of the Shareholders all buildings, structures, improvements
and
fixtures owned, leased or used by WHL in the conduct of its business at the
Leased Property conform in all material respects to all applicable codes
and
rules adopted by national and local associations and boards of insurance
underwriters, and all such buildings, structures, improvements and fixtures
are
in good operating condition and repair.
(f) There
are
no outstanding requirements or recommendations by any insurance company which
has issued to WHL a policy covering the Leased Property, or by any board
of fire
underwriters or other body exercising similar functions, requiring or
recommending any repairs or work to be done on such property.
-16-
(g) All
public utilities required for the operation of the Leased Property and necessary
for the conduct of the business of WHL as presently conducted are installed
and
operating, and all installation and connection charges, to the Knowledge
of the
Shareholders, are paid in full.
(h) Except
as
set forth in Schedule
3.10(b),
the
Leased Property is not subject to any lease, sublease, license or other
agreement granting to any Person any right to the use, occupancy or enjoyment
of
such property or any portion thereof.
(i) To
the
Knowledge of the Shareholders, the plumbing, electrical, heating, air
conditioning, elevator, ventilating and all other mechanical or structural
systems for which WHL is responsible under the Leases in the buildings or
improvements are in good working order and condition, and the roof, basement
and
foundation walls of such buildings and improvements for which WHL is responsible
under said Leases are in good condition and free of leaks and other material
defects. All such mechanical and structural systems and such roofs, basement
and
foundation walls for which others are responsible under said Leases are,
to the
Knowledge of the Shareholders, in good working order and condition and free
of
leaks and other material defects.
(j) WHL
shall
have access and use of the Leased Property for a period of twelve (12) months,
the rent for which has been pre-paid, commencing on the July 1, 2005, (the
“Pre-Paid Period”). WHL shall have an option, upon the expiration of the
Pre-Paid Period, to extend the lease for the Leased Property for another
12-month period at a mutually agreed rental price, which lease would also
include a minimum notice of 3 months to renew or cancel the lease.
Section
3.11. Condition
and Compliance of Property.
(a) Schedule
3.11(a)
contains
a list of owned computers, information technology, hardware, software, facsimile
machines and copier machines with an individual current fair market value
of
over $500. As of such date, WHL owned outright and had good and marketable
title
to all such personal property subject to no Lien except Permitted Liens and
except as set forth on Schedule
3.11(a).
(b) Schedule
3.11(b)
sets
forth the name, parties and date of all personal property leases to which
WHL is
a party or in respect of the Business. Except as set forth in
Schedule 3.11(b),
WHL
holds good leaseholds in all of the personal property shown or required to
be
shown on Schedule
3.11(b)
as
leased by WHL, in each case under valid and enforceable leases. WHL is not,
and
to Shareholders’s Knowledge no other party to any such personal property lease
is, in material breach of or in material default under any lease of any item
of
personal property listed on Schedule
3.11(b)
(and no
event has occurred which, with due notice or lapse of time or both, would
constitute such a lapse or default).
(c) Except
as
set forth in Schedule
3.11(c), the
assets of WHL: (i) in the aggregate are adequate to conduct the operations
of
WHL in substantially the manner currently conducted, (ii) are suitable for
the
purposes for which they are currently used, and (iii) are in good condition,
ordinary wear and tear excepted. Each plant, building, office, shop and other
structure and each item of personal property is in good operating condition,
subject to ordinary wear and tear, and is suitable and sufficient for the
operation of the business of WHL, as currently conducted and currently proposed
to be conducted.
-17-
Section
3.12. Compliance
with Legal Requirements.
(a) Except
as
set forth on Schedule
3.12(a),
WHL has
complied with and has not received any notice of violation of any material
Legal
Requirements. Since the Balance Sheet Date, except as set forth on Schedule 3.12(a),
neither
the Shareholders nor WHL has received any written or, to the Shareholders’
Knowledge, oral notice or other communication from any Governmental Agency
or
any other Person regarding (i) any actual, alleged, possible, or potential
violation of, or failure to comply with, any Legal Requirement, or (ii) any
actual, alleged, possible, or potential obligation on the part of the
Shareholders or WHL to undertake, or to bear all or any portion of the cost
of,
any remedial action of any nature.
(b) Schedule
3.12(b)
sets
forth a list of each material Permit that is necessary or appropriate for
the
operations of WHL as currently conducted, including, if applicable, the issuing
Governmental Agency, the expiration date, and the permit number. All Permits
included on Schedule
3.12(b),
except
as noted therein, are in full force and effect and no proceeding is pending
or,
to the Knowledge of the Shareholders, threatened, to revoke or limit any
such
Permit. Except as set forth in Schedule
3.12(b),
to the
Knowledge of the Shareholders:
(i) WHL
is,
and at all times since January 1, 2000 has been, in full compliance with
all of
the terms and requirements of each Permit listed in Schedule
3.12(b);
(ii) since
January 1, 2000, neither the Shareholders nor WHL has received any notice
or
other communication (whether oral or written) from any Governmental Agency
or
any other Person regarding (A) any actual, alleged, possible, or potential
violation of or failure to comply with any term or requirement of any Permit,
or
(B) any actual, proposed, possible, or potential revocation, withdrawal,
suspension, cancellation, termination of, or modification to any Permit,
nor is
there any Basis for such notice or other communication; and
(iii) all
applications required to have been filed for the renewal of the Permits have
been duly filed on a timely basis with the appropriate Governmental Agencies,
and all other filings required to have been made with respect to such Permits
have been duly made on a timely basis with the appropriate Governmental
Agencies.
Section
3.13. Affiliate
Agreements and Liabilities.
Except
as
set forth on Schedule 3.13:
-18-
(a) there
are
no written or oral Contracts between WHL and any Shareholders Entity including,
without limitation, any such Contracts relating to the provision of any services
by WHL to any such Shareholders Entity, or by any such Shareholders Entity
to
WHL; and
(b) (i)
since
the Balance Sheet Date, there have been, (ii) from the date hereof to the
Closing Date there will be, and (iii) after the Closing Date there will be,
no
transactions, agreements, arrangements or indebtedness between WHL and (x)
any
Shareholders Entity, (y) any director or officer of WHL or (z) any member
of the
immediate family of any individual described in clause (x) or (y) of this
sentence.
Section
3.14. Contracts.
(a) Schedule
3.14
hereto
lists all of the Contracts, commitments, arrangements and understandings
which
are material to the properties, conduct, operations or financial condition
of
WHL or are otherwise material.
(b) Except
as
set forth on Schedule
3.14
(and for
Leases and Permitted Liens), WHL is not a party to or bound by any of the
following, which are material to the properties, conduct, operations or
financial condition of WHL or are otherwise material to the
Business:
(i) mortgage,
indenture, note, or installment obligation, or other instrument for or relating
to Indebtedness;
(ii) guaranty
of any obligation for borrowings or performance, or guaranty or warranty
of
products or services, excluding endorsements or guaranties of instruments
made
in the Ordinary Course of Business in connection with the deposit of items
for
collection, and statutory warranties;
(iii) agreement
or arrangement for the sale or lease of any of its assets other than in the
usual, regular and Ordinary Course of Business;
(iv) agreement
or other arrangement for the purchase of any real estate, machinery, equipment,
or other capital assets;
(v) Contract
for the future purchase of materials, supplies, services, merchandise, or
equipment parts;
(vi) Contract
pursuant to which it is
or may
be obligated to make payments, contingent or otherwise, on account of or
arising
out of prior acquisitions or sales of businesses, assets, or stock of other
companies;
(vii) distribution,
dealership, representative, broker, sales agency, advertising or consulting
Contract excepting any such contract that is terminable at will, or by giving
notice of 30 days or less, without Liability;
(viii) lease
or
other agreement for the use of real or personal property;
-19-
(ix) agreement
imposing non-competition or exclusive dealing obligations on it;
(x) agreement
providing for payments to or by any Person based on sales, purchases, or
profits, other than direct payments for goods;
(xi) license
or royalty agreement with obligations payable by or to WHL;
(xii) Contract
or agreement for the employment of any stockholder, director, officer,
consultant or key employee not terminable without penalty or Liability arising
from such termination or any severance or change-in-control contract or
arrangement;
(xiii) Contract
relating to cleanup, abatement or other actions in connection with environmental
liabilities; or
(xiv) Contract
which is otherwise material to the extent relating to the conduct of the
business of WHL.
(c) Each
contract, including the contracts listed or required to be listed on
Schedule
3.14,
is
valid, binding, and enforceable against WHL and, to the knowledge of the
Shareholders and WHL, the other parties thereto in accordance with its terms,
and is in full force and effect. WHL has performed all material obligations
required to be performed by it to date under each of the Contracts. Except
as
set forth in Schedule
3.14,
neither
WHL nor, to the Knowledge of the Shareholders, any other party thereto is
in
material breach of or default under any Contract to which WHL is a party
or by
which it is bound or to which its assets are subject (and no event has occurred
which, with due notice or lapse of time or both, would constitute such a
lapse
or default). The Shareholders have delivered to the Purchaser a copy of each
Contract or other written evidence of the obligations, and all amendments
thereto, listed or required to be listed in Schedule
3.14,
except
to the extent otherwise noted thereon.
Section
3.15. Intellectual
Property.
(a) Schedule
3.15 contains
a list of all WHL IP (other than know-how, non-customized computer software,
and
customer lists) which WHL owns or uses in connection with, or which relates
to,
its business, (including, but not limited to, all of WHL’s plans and designs),
the jurisdictions in which the WHL IP has been registered or in which a Patent
has been issued or in which an application for such registration or Patent
has
been filed and any licenses, sublicenses and other agreements in which WHL
grants a license to any Person to use the WHL IP. Except as set forth
on
Schedule 3.15, WHL
is
the owner of all right, title, and interest in all WHL IP, other than the
Licensed IP, (the “Owned
IP”)
free
and clear of all Liens and other adverse claims, and has the right to use
without payment to a third party all of the Owned IP.
-20-
(b) Schedule
3.15 contains
a complete and accurate categorized list of all Contracts relating to the
Licensed IP to which WHL is a party or by which WHL is bound.
(c) To
the
Knowledge of the Shareholders, there are no grants, registrations or
applications relating to the Owned IP and none are pending. To the Knowledge
of
the Shareholders, all products and materials containing a ▇▇▇▇ ▇▇▇▇ the proper
notice where permitted or as required by law.
(d) Trade
Secrets
(i) With
respect to each Trade Secret, to the Knowledge of the Shareholders, the
documentation relating to such Trade Secret is current, accurate, and sufficient
in detail and content to identify and explain it and to allow its full and
proper use without reliance on the knowledge or memory of any
individual.
(ii) The
Shareholders and WHL have taken all reasonable precautions to protect the
secrecy, confidentiality, and value of the Trade Secrets.
(iii) WHL
has
good title and an absolute (but not necessarily exclusive) right to use the
Trade Secrets. The Trade Secrets are not part of the public knowledge or
literature, and, to the Knowledge of the Shareholders, have not been used,
divulged, or appropriated either for the benefit of any Person (other than
WHL)
or to the detriment of WHL. No Trade Secret is subject to any adverse claim
or
has been challenged or threatened in any way.
(e) To
the
Knowledge of the Shareholders, there are no conflicts with or infringements
of
any Owned IP by any third party. To the Knowledge of the Shareholders, the
conduct of WHL’s business as currently conducted does not conflict with or
infringe in any way with any proprietary right of any third party, which
conflict or infringement could have a material adverse effect on WHL, the
Owned
IP or the Business. There is no claim, suit, action or proceeding pending
or
threatened against WHL (i) alleging any such conflict or infringement with
any
third party’s proprietary rights or (ii) challenging the ownership, use,
validity or enforceability of the WHL IP.
(f) Except
as
set forth on Schedule
3.15,
all
consents, filings and authorizations by or with Governmental Agencies or
third
parties necessary with respect to the consummation of the transactions
contemplated hereby as they may affect the Owned IP or WHL’s rights in the
Licensed IP have been obtained.
(g) Except
as
set forth in Schedule
3.15,
neither
the Shareholders nor WHL have entered into any material consent,
indemnification, forbearance to ▇▇▇, settlement agreement or cross-licensing
arrangement with any person relating to the WHL IP or the Intellectual Property
of any third party other than as may be contained in the license agreements
listed in Schedule
3.15.
Except
as set forth in Schedule
3.15,
WHL is
not under any obligation to pay royalties or similar payments in connection
with
any license to any of its Affiliates.
-21-
(h) Except
as
set forth on
Schedule 3.15,
WHL is
not, nor will it be as a result of the execution and delivery of this Agreement
or any other Transaction Document or the performance of its obligations
hereunder or thereunder, in breach of any license, sublicense or other agreement
relating to the WHL IP. The validity and enforceability of the Owned IP or
WHL’s
rights in the Licensed IP have not been impugned or otherwise affected adversely
as a result of the consummation of the transactions contemplated by the
Transaction Documents.
(i) No
former
or present employees, consultants, shareholders, officers or directors of
WHL
hold any right, title or interest directly or indirectly, in whole or in
part,
in or to any Owned IP.
(j) The
WHL
IP is sufficient, adequate and all that is necessary for WHL to carry on
its
business as presently conducted.
Section
3.16. Software.
(a) The
current software applications used by WHL in the operation of the Business
are
listed on Schedule
3.16
hereto
(the “Software”).
Except as set forth on Schedule
3.16,
to the
Knowledge of the Shareholders, Software that has been designed or developed
by
WHL’s staff or by consultants on WHL’s behalf (the “Owned
Software”),
is
original and is protected by the copyright laws of the United States and
Canada,
and WHL has complete rights to and ownership of the Owned Software. To the
Knowledge of the Shareholders, no part of any Owned Software or the use thereof
by WHL in its business as currently conducted infringes upon the rights of
any
other person or entity, or violates or infringes upon any common law or
statutory rights of any other person or entity, including, without limitation,
rights relating to defamation, contractual rights, copyrights, patents, trade
secrets and rights of privacy or publicity. WHL has not sold or assigned
or
exclusively licensed or distributed or in any other way disposed of or
encumbered the Owned Software.
(b) The
Software, to the extent it is licensed from any third party licensor or
constitutes “off-the-shelf” software, is held by WHL legitimately and is fully
and freely transferable without any third party consent. All of WHL’s computer
hardware has legitimately-licensed software installed therein.
(c) To
the
Knowledge of the Shareholders, the Owned Software is free from any significant
software defect or programming or documentation error, operates and runs
in a
reasonable and efficient business manner, conforms to the specifications
thereof, and, with respect to owned Software, the applications can be recreated
from their associated source code.
(d) WHL
has
not knowingly altered the data, or any Software or supporting software which
may
in turn damage the integrity of the data, stored in electronic, optical or
magnetic form. Except as set forth on Schedule
3.16 hereto,
the Shareholders have no Knowledge of the existence of any bugs or viruses
with
respect to the Owned Software.
-22-
Section
3.17. Labor
Relations.
Except
as
set forth on Schedule
3.17,
WHL is
not a party to any collective bargaining agreement covering Employees, there
are
no controversies or unfair labor practice proceedings pending, or to the
Knowledge of the Shareholders and WHL, threatened between WHL and any of
its
current or former Employees or any labor or other collective bargaining unit
representing any current or former Employee of WHL that could reasonably
be
expected to result in a labor strike, dispute, slow down or work stoppage
or
otherwise have a Material Adverse Effect. To the Knowledge of the Shareholders
and WHL, except as set forth on Schedule
3.17,
no
organizational effort is presently being made or, to the knowledge of the
Shareholders, is threatened by or on behalf of any labor union.
Section
3.18. Employment
and Employee Benefit Matters.
(a) Schedule
3.18
contains
a correct and complete list of Employees or Former Employees with respect
to
which the WHL has any liability, and a copy of each employment agreement,
termination notice, separation or settlement agreement, release or any other
related agreement has been made available to the Purchaser and is a legal,
valid
and binding obligation of the WHL, in full force and effect, unamended. There
are no complaints, demands, claims or charges outstanding or anticipated,
to the
Knowledge of the Shareholders, relating to the employment of such individuals.
(b) Schedule
3.18 contains
a correct and complete list of all Employee Benefits maintained, or otherwise
contributed to or required to be contributed to, by WHL for the benefit of
Employees or Former Employees, and sets out a description of all policies,
handbooks and manuals relating to employment matters, including any related
communications, reports, audits or filings in respect of such Employee
Benefits.
(c) Except
as
set forth and described in Schedule3.18:
(i) WHL
is
not a party to or bound by or subject to any agreement or arrangement with
respect to Employee Benefits;
(ii) WHL
has
no obligations to amend any Employee Benefit and no amendments will be made
or
promised, except with the prior written consent of the Purchaser;
(iii) all
obligations of WHL with respect to Employee Benefits have been met as of
the
financial year end;
(iv) all
accruals for unpaid Employee Benefits, including, without limitation, premiums
for Employment Insurance, Canada Pension Plan, workers’ compensation, Medical
Services Plan, group insurance plans and employee income taxes have been
accurately reflected in the books and records of WHL and there are no other
liabilities, payments, contributions, penalties or fines outstanding or,
to the
Knowledge of the Shareholders, anticipated in respect of the above;
-23-
(v) all
contributions and payments accrued under the Employee Benefits, determined
in
accordance with prior funding and accrual practices, as adjusted to include
proportional accruals for the period ending as of the Closing Date, are
reflected in and have been fully accrued in the Financial Statements and
have
been discharged and paid on or prior to the date hereof except to the extent
reflected as a liability on the Balance Sheet;
(vi) there
has
been no amendment to, written interpretation or announcement (whether or
not
written) by WHL or any of its Affiliates relating to, or change in employee
participation or coverage under, Employee Benefits which would materially
increase the expense of maintaining such Employee Benefits above the level
of
the expense incurred in respect thereof for the fiscal year ended December
31,
2004;
(vii) WHL
is
not a party to or bound by or subject to any collective bargaining agreement
or
other similar arrangement with any labour union or employee association nor
has
it made any commitment to or conducted any negotiation or discussion with
any
labour union or employee association with respect to any future agreement
or
arrangement and, to the Knowledge of the Shareholders, there is no current
application for certification or other attempt to organize or establish any
labour union or employee association with respect to employees of
WHL;
(viii) there
are
no existing or, to the Knowledge of the Shareholders, threatened labour strikes,
slow downs, work stoppages or other similar labour troubles affecting
WHL;
(ix) WHL
has
made no representations or commitments to its employees with respect to
retroactive, current or future increases to Employee Benefits; and
(x) no
person
will, as a result of the transactions contemplated hereby (either alone or
together with any other event or events), become entitled to (A) except as
provided for in this Agreement, the acceleration of the vesting or time to
exercise of any outstanding stock options or other Employee Benefits, (B)
the
forgiveness or postponement of payment of any indebtedness owing to WHL,
or (C)
receive any additional payments or compensation under or in respect of any
Employee Benefits.
Section
3.19. Insurance.
Schedule
3.19(a)
sets
forth a list of all insurance policies and all material fidelity bonds or
other
insurance service contracts (the “Insurance
Policies”)
providing coverage for the properties or operations of WHL, the type and
amount
of coverage, and the expiration dates of the Insurance Policies. Except as
set
forth on Schedule 3.19(a),
there
is no claim by WHL pending under any of the Insurance Policies as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies. All premiums payable under all Insurance Policies have been paid,
and
to the Knowledge of the Shareholders, WHL has otherwise complied in all material
respects with the terms and conditions of all the Insurance Policies. Neither
the Shareholders nor WHL has received written notice from any insurance carrier:
(i) threatening a suspension, revocation, modification or cancellation of
any
Insurance Policy or a material increase in any premium in connection therewith,
or (ii) informing Shareholders that any coverage listed on Schedule 3.19(a)
will or
may not be available in the future on substantially the same terms as now
in
effect.
-24-
Section
3.20. Litigation.
Except
as
set forth in Schedule
3.20
there
are no claims, actions, suits, proceedings, labor disputes or investigations
pending or, to the Knowledge of the Shareholders, threatened before any
Governmental Agency brought by or against the Shareholders, WHL or any of
their
respective current or former officers, directors, Employees, agents or
Affiliates involving, affecting or relating to any assets, properties or
operations of WHL or the transactions contemplated
by the Transaction Documents. Schedule
3.20
sets
forth a list and a summary description of all such pending actions, suits,
proceedings, disputes or investigations. Neither WHL nor any of its assets
or
properties is subject to any Order that affects or might affect its assets,
properties, operations, prospects, net income or financial condition or which
would or might interfere with the transactions contemplated by the Transaction
Documents.
Section
3.21. Environmental
Matters.
Except
as
set forth on Schedule
3.21,
to its
Knowledge
and to
the Knowledge of the Shareholders:
(a) WHL
is,
and since January 1, 2000 (the “Environmental
Reference Date”),
has
been in compliance with all Environmental Laws;
(b) WHL
has
no Liability, whether contingent or otherwise, under any Environmental
Law;
(c) no
request for information, notice, Governmental Agency inquiry, demand letter,
notice of violation or alleged violation of, non-compliance or alleged
non-compliance with or any Liability under, any Environmental Law by or relating
to operations or properties of WHL has been received by or threatened in
writing
against WHL since the Environmental Reference Date, or, to Shareholders’s
Knowledge, before the Environmental Reference Date;
(d) WHL
has
not entered into or been subject to, and is not currently a party or respondent
to, any Orders nor are any administrative, civil or criminal actions, suits,
proceedings or investigations pending or, to Shareholders’s Knowledge,
threatened, relating to any Environmental Law affecting WHL;
(e) WHL
has
neither expressly nor by operation of law, assumed or undertaken any Liability,
including without limitation any obligation for Costs of Remediation, of
any
other Person;
-25-
(f) WHL
has
not, and the Shareholders has no Knowledge of any other Person who has, caused
any Release or threatened Release of any Hazardous Material on, in, under,
or
from the Leased Property nor does the Shareholders have Knowledge of any
such
Release; and
(g) WHL
has
not received any written or, to the Knowledge of the Shareholders, other
communication indicating or claiming potential Liability for Damages or Costs
of
Remediation with respect to a Release or threatened Release of any Hazardous
Material.
Section
3.22. Tax
Matters.
Except
as
otherwise disclosed in
Schedule 0,
(i) WHL
has filed (or joined in the filing of) when due, or applied for an extension
of
time for filing with respect to, all Tax Returns required by applicable law
to
be filed with respect to WHL and all Taxes shown to be due on such Tax Returns
have been paid; (ii) all such Tax Returns were true, correct and complete
as of
the time of each such filing; (iii) all Taxes relating to periods ending
on or
before the Closing Date owed by WHL (whether or not shown on any Tax Return)
have been paid (except for Taxes which are being contested in good faith);
(iv)
any liability of WHL for Taxes not yet due and payable, or which are being
contested in good faith, has been provided for on the financial statements
of
WHL in accordance with generally accepted accounting principles; (v) there
is no
action, suit, proceeding, investigation, audit or claim now pending against,
or
with respect to, WHL in respect of any Tax or assessment, nor is any claim
for
additional Tax or assessment asserted by any Governmental Agency; (vi) since
January 1, 2000, no claim has been made by any Governmental Agency in a
jurisdiction where WHL does not currently file a Tax Return that it is or
may be
subject to Tax by such jurisdiction, nor, to the Knowledge of the Shareholders,
is any such assertion threatened; (vii) there is no outstanding request for
any
extension of time within which to pay any Taxes or file any Tax Returns (viii)
there has been no waiver or extension of any applicable statute of limitations
for the assessment or collection of any Taxes of WHL; (ix) WHL is not a party
to
any agreement, whether written or unwritten, providing for the payment of
Taxes,
payment for Tax losses, entitlements to refunds or similar Tax matters; (x)
no
ruling with respect to Taxes (other than a request for determination of the
status of a qualified pension plan) has been requested by or on behalf of
WHL;
(xi) WHL has withheld and paid all Taxes required to be withheld in connection
with any amounts paid or owing to any employee, creditor, independent contractor
or other third party;
and (x)
WHL has provided for or paid all taxes assessed relating to the activities
set
forth in Schedule
3.23.
Section
3.23. Interim
Operations.
Since
the
Balance Sheet Date, WHL has operated only in the Ordinary Course of Business,
and except as set forth in Schedule
3.23,
WHL has
not:
(a) suffered
any material adverse change in the assets, properties, business, operations,
prospects, net income or financial condition of WHL or any Basis
therefor;
-26-
(b) changed
its authorized or issued capital stock; granted any stock option or right
to
purchase shares of capital stock; issued any security convertible into such
capital stock; or made any Equity Distributions;
(c) incurred
or become subject to, or agreed to incur or become subject to, any material
obligation or Liability, except in the Ordinary Course of Business;
(d) mortgaged
or pledged any of its assets, tangible or intangible, except for Permitted
Liens;
(e) sold
or
transferred or agreed to sell or transfer any of its assets, or canceled
or
agreed to cancel any debts or claims except in the Ordinary Course of
Business;
(f) suffered
any extraordinary losses or, except in the Ordinary Course of Business, waived
any material rights;
(g) terminated
any contract, agreement, license, or other instrument to which it is a party,
except in the Ordinary Course of Business;
(h) increased
the rate of compensation payable by it to any employee, whose compensation
is
determined other than by multiplying the number of hours worked by an hourly
rate (a “Salaried
Employee”),
over
the rate being paid or accrued to them as of the Balance Sheet Date;
(i) made
or
agreed to make any accrual or arrangement for or payment of bonuses or special
compensation of any kind to any of its Salaried Employees; or general increase
in the salary or bonus payable or to become payable by WHL to any Employee
other
than Salaried Employees (other than increases granted to individual employees
for merit, length of service, change in position or responsibility or other
reasons applicable to specific Employees and not generally to a class or
group
thereof);
(j) entered
into any agreement, written or oral, providing for the employment of any
Employee or any severance or termination benefits payable or to become payable
by WHL to any Employee;
(k) taken
any
action which would have constituted a breach of any negative covenant of
the
Shareholders set forth in Article V if
such
negative covenant had applied since the Balance Sheet Date; or
(l) suffered
any shortages of materials or supplies or any casualty that individually
or in
the aggregate has had or could reasonably be expected to have a Material
Adverse
Effect.
Section
3.24. Brokers.
All
negotiations relative to the Transaction Documents and the transactions
contemplated hereby and thereby have been carried on by the Shareholders
without
the intervention of any other Person acting on their behalf in such manner
as to
give rise to any valid claim by any such Person against WHL or Purchaser
for a
finder’s fee, brokerage commission or other similar payment based on an
arrangement with the Shareholders.
-27-
Section
3.25. Books
and Records of WHL.
To
the
Knowledge of the Shareholders, the books of account, minute books, stock
record
books, and other records of WHL, all of which have been made available to
the
Purchaser, are complete and correct in all material respects, accurately
reflect
in reasonable detail the transactions to which WHL is a party or by which
its
properties are bound and have been maintained in accordance with sound business
practices. The minute books of WHL contain accurate and complete records
of all
meetings held of, and corporate action taken by, the stockholders, the boards
of
directors, and committees of the board of directors of WHL, and no meeting
of
any such stockholders, board of directors, or committee has been held for
which
minutes have not been prepared and are not contained in such minute books.
At
the Closing, all of those books and records will be delivered to the
Purchaser.
Section
3.26. Customers
and Suppliers.
Schedule
3.26
lists
the ten largest customers and the ten largest suppliers (measured by dollar
volume) of WHL during the last fiscal year (“Major
Customers”
and
“Major
Suppliers,”
respectively) and the amount of business done with each Major Customer and
Major
Supplier in such year. As of the date of this Agreement, except as set forth
on
Schedule
3.26,
(a) WHL
is not engaged in a material dispute with any Major Customer or Major Supplier,
(b) there has been no material adverse change in the business relationship
of
WHL with any Major Customer or Major Supplier since January 1, 2000, and
(c) no
Major Customer or Major Supplier has threatened in writing any material
modification or change in the business relationship with WHL.
Section
3.27. Certain
Payments.
Except
as
set forth on Schedule
3.27,
since
January 1, 2000, neither the Shareholders nor WHL nor any of their respective
directors, officers, agents, or Employees, or, to the Knowledge of the
Shareholders, any other Person associated with or acting for or on behalf
of the
Shareholders or WHL, has directly or indirectly (a) made any contribution,
gift,
bribe, rebate, payoff, influence payment, kickback, or other payment to any
Person, private or public, regardless of form, whether in money, property,
or
services (i) to obtain favorable treatment in securing business, (ii) to
pay for
favorable treatment for business secured, (iii) to obtain special concessions
or
for special concessions already obtained, for or in respect of WHL, or (iv)
in
violation of any Legal Requirement, or (b) established or maintained any
fund or
asset that has not been recorded in the books and records of WHL.
Section
3.28. Accounts
.
Schedule
3.28
hereto
correctly identifies each bank account, brokerage account and safety deposit
box
maintained by or on behalf or for the benefit of WHL and the name of each
person
with any power or authority to act with respect thereto.
-28-
Section
3.29. No
Change to Business.
Since
the
Balance Sheet Date, there has been no material change to the conduct or
operation of the Business.
Section
3.30. Disclosure.
(a) No
representation or warranty of the Shareholders in this Agreement omits to
state
a material fact necessary to make the statements herein or therein, in light
of
the circumstances in which they were made, not misleading.
(b) WHL
and
the Shareholders have disclosed to the Purchaser all material information
relating to the Business and the transactions contemplated by this
Agreement.
ARTICLE
IV.
REPRESENTATIONS
AND WARRANTIES OF PURCHASER
AND IMSI
The
Purchaser and IMSI jointly and severally represent and warrant to the
Shareholders as follows:
Section
4.1. Authority
of Purchaser and IMSI.
Each
of
the Purchaser and IMSI is a corporation duly organized, validly existing,
and in
good standing under the laws of the State of California, and is duly qualified
to do business and is in good standing in each jurisdiction in which the
ownership of its properties or the conduct of its business requires such
qualification, except for failures to be so qualified which, individually
or in
the aggregate, would not reasonably be expected to result in a material adverse
change in or effect with respect to the business, results of operations,
properties or financial condition of IMSI and its subsidiaries, taken as
a whole
(an “IMSI Material Adverse Effect”). IMSI owns 100% of the outstanding shares of
capital stock of the Purchaser. Each of IMSI and the Purchaser has full
corporate power and authority to execute and deliver the Transaction Documents
to which it is a party and the execution and delivery by each of Purchaser
and
IMSI of the Transaction Documents to which it is a party and the consummation
of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of the Purchaser
and
IMSI. This Agreement constitutes, and the other Transaction Documents when
executed and delivered by the parties thereto will constitute, the legal,
valid
and binding obligation of the Purchaser and, if it is a party thereto, IMSI
enforceable against the Purchaser and IMSI in accordance with their terms,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
moratorium or similar laws from time to time in effect which affect creditors’
rights generally, and by legal and equitable limitations on the enforceability
of specific remedies. Each of IMSI and the Purchaser has the requisite corporate
power and authority to own its properties and to carry on the business presently
being conducted by it.
-29-
Section
4.2. Capitalization
of IMSI.
The
authorized capital stock of IMSI consists solely of 300,000,000 shares of
Common
Stock and 20,000,000 share of Preferred Stock, of which , as of May 9, 2005,
28,401,103 shares of Common Stock and no shares of Preferred Stock are issued
and outstanding, and, except as provided in Schedule
4.2,
no
shares of Common Stock and no shares of Preferred Stock are issuable upon
the
conversion, exercise or exchange of securities of IMSI currently issued and
outstanding or pursuant to any agreements entered into by IMSI or any of
its
subsidiaries, and no shares of any class of the capital stock of IMSI are
held
by IMSI in its treasury or by any of its subsidiaries. All the issued and
outstanding shares of IMSI Stock have been duly authorized and are validly
issued, fully paid and nonassessable and free of preemptive (or similar)
rights.
Except as disclosed in Schedule
4.2,
there
are no securities of IMSI or any of its subsidiaries that are convertible
into
or exercisable or exchangeable for shares of any capital stock of IMSI or
any of
its subsidiaries, and no options, warrants, calls, subscriptions, convertible
securities, or other rights, agreements or commitments which obligate IMSI
or
any of its subsidiaries to issue, transfer or sell any shares of capital
stock
of, or other interests in, IMSI or any of its subsidiaries. There are no
outstanding obligations of IMSI or any of its subsidiaries to repurchase,
redeem
or otherwise acquire any shares of capital stock of IMSI or any of its
subsidiaries and, except as disclosed in Schedule
4.2
neither
IMSI nor any of its subsidiaries has any awards or options outstanding under
any
stock option plans or agreements or any other outstanding stock-related awards.
Neither IMSI nor any of its subsidiaries has any outstanding bonds, debentures,
notes or other obligations or other securities that entitle the holders thereof
to vote with the shareholders of IMSI or any of its subsidiaries on any matter
or which are convertible into or exercisable or exercisable for securities
having such a right to vote.
Section
4.3. No
Conflict or Violation.
Neither
IMSI nor the Purchaser is (i) in violation of its articles of incorporation
or
bylaws (or comparable constitutent governing documents) or (ii) in default
(or,
with the giving of notice, lapse of time or both, would be in default) under
any
material contract, agreement, commitment, instrument or guaranty to which
IMSI
or the Purchaser is a party or under which IMSI or the Purchaser or any of
their
respective properties or assets is bound, except for any such defaults that,
individually or in the aggregate, have not had and could not reasonably be
expected to result in an IMSI Material Adverse Effect. Neither the execution
and
delivery of the Transaction Documents by the Purchaser or, as applicable,
IMSI,
nor the consummation or performance by Purchaser or IMSI of any of the
transactions contemplated hereby or thereby will, directly or indirectly
(with
or without notice or lapse of time):
(a) contravene,
conflict with, or result in a violation of (i) any provision of the
Articles of Incorporation or Bylaws of the Purchaser or IMSI, or (ii) any
resolution adopted by the board of directors or the stockholders of the
Purchaser or IMSI;
(b) contravene,
conflict with, or result in a violation of, or give any Governmental Agency
or
other Person the right to challenge any of the transactions contemplated
hereby
or to exercise any remedy or obtain any relief under, any Legal Requirement
to
which the Purchaser or IMSI may be subject;
-30-
(c) contravene,
conflict with, or result in a violation or breach of any provision of, or
give
any Person the right to declare a default or exercise any remedy under, or
to
accelerate the maturity or performance of, or to cancel, terminate, or modify,
any material contract, lease, or permit of the Purchaser or IMSI; or
(d) except
for filings under the Securities Act and the Securities Exchange Act, require
the consent, approval, or authorization of, or registration or filing with,
any
Governmental Agency or any other Person on behalf of Purchaser or
IMSI;
provided,
however, that no representation or warranty is made hereby by the Purchaser
with
respect to the effect of antitrust laws or regulations.
Section
4.4. Litigation.
There
are
no actions, causes of action, claims, suits, proceedings or Orders pending
or,
to the actual knowledge, after reasonable inquiry, of the executive officers
of
the Purchaser and IMSI, threatened against the IMSI or the Purchaser at law,
in
equity, in admiralty or otherwise, or before or by any Governmental Agency,
which (i) seek to restrain or enjoin the consummation of the transactions
contemplated by the Transaction Documents.
To the
actual knowledge, after reasonable inquiry, of the executive officers of
the
Purchaser and IMSI, no Governmental Agency has notified IMSI of an intention
to
conduct any action, suit, proceeding, audit, investigation or other review
with
respect to IMSI or the Purchaser.
Section
4.5. Compliance
with Legal Requirements; Permits.
Each
of
IMSI and each of its subsidiaries is and has been in compliance with all
applicable Legal Requirements and has, and is and has been in compliance
with,
all Permits required or necessary for the conduct of its business as currently
conducted and all such Permits are in full force and effect, except for any
failures to be in compliance with applicable Legal Requirements or such Permits,
or to have such Permits, which, individually or in the aggregate, have not
had
and could not reasonably be expected to result in an IMSI Material Adverse
Effect. No proceeding is pending or, to the actual knowledge, after reasonable
inquiry, of the executive officers of the Purchaser and IMSI, threatened
to
revoke or limit any such Permit that could reasonably be expected to result
in
an IMSI Material Adverse Effect.
Section
4.6. Brokers.
All
negotiations relative to this Agreement and the transactions contemplated
hereby
have been carried on by the Purchaser and/or IMSI without the intervention
of
any other Person acting on its
behalf in such manner as to give rise to any valid claim by any such Person
against the Shareholders or their Affiliates (other than, after the Closing,
WHL) for a finder’s fee, brokerage commission or other similar payment based on
an arrangement with the Purchaser.
Section
4.7. Stock
Consideration.
The
issuance of the Stock Consideration to the Shareholders has been duly authorized
and, when issued in accordance with the terms of this Agreement, will be
validly
issued, fully paid and nonassessable.
Except
as otherwise provided in this Agreement, the Stock Consideration and the
issuance thereof to the Shareholders will be free and clear of all preemptive
(or similar) rights, taxes and Liens other than those created or suffered
to
exist by the Shareholders.
-31-
Section
4.8. SEC
Reports and Financial Statements.
IMSI
has
filed with the Securities and Exchange Commission (“SEC”)
true
and complete copies of IMSI’s Annual Report on Form 10-KSB for the year ended
June 30, 2004 and all forms, reports, schedules, statements and other documents
required to be filed by IMSI under the Securities Act, or the Securities
Exchange Act, from and after the filing thereof, including most recently
a 10Q
filed on May 16, 2005 (such annual report, forms, reports, schedules, statements
and other documents, including any financial statements or schedules included
therein, the “IMSI
SEC Documents”).
The
IMSI SEC Documents, at the time filed, (a) did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the
circumstances under which they were made, not misleading, and (b) complied
in
all material respects with the applicable requirements of the Securities
Exchange Act and the Securities Act, as the case may be, and the applicable
rules and regulations promulgated thereunder, and Purchaser and IMSI have
informed Shareholders of any material public information that would make
these
statements untrue since the time the IMSI SEC Documents were filed. There
have
not been any amendments to IMSI SEC Documents since the initial filing thereof.
The financial statements of IMSI contained in IMSI SEC Documents have been
prepared in accordance with GAAP applied on a consistent basis during the
period
involved (except as may be indicated in the notes thereto or, in the case
of the
unaudited statements, as permitted by Rule 10-01 of Regulation S-X promulgated
by the Securities and Exchange Commission) and fairly present (subject, in
the
case of the unaudited statements, to normal, recurring audit adjustments
which
are not material in amount or effect) the consolidated financial position
of
IMSI and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended.
Section
4.9. Absence
of Certain Changes and Undisclosed Liabilities.
(a) Except
as
disclosed in the IMSI SEC Documents, since June 30, 2004 (i) there has not
been
any material adverse change in, or any development reasonably likely to result
in a prospective material adverse change in, the business, assets, liabilities,
financial condition or results of operations of IMSI and its subsidiaries,
taken
as a whole, and (ii) there has not been any material change in the capital
stock
or long-term debt of IMSI or any of its subsidiaries.
(b) Except
as
disclosed in the IMSI SEC Documents, deither IMSI nor any of its subsidiaries
has any liabilities or obligations, whether accrued, contingent or otherwise,
except for liabilities and obligations (i) in the respective amounts reflected
or reserved against in the consolidated balance sheets contained in the IMSI
SEC
Documents or (ii) incurred since December 31, 2004 in the ordinary course
of
business and which, individually or in the aggregate, have not and could
not
reasonably be expected to (A) result in an IMSI Material Adverse Effect,
or (B)
impair or otherwise adversely affect the validity or enforceability of, or
the
ability of IMSI or the Purchaser to perform their respective obligations
hereunder or under any other Transaction Document.
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Section
4.10. Solvency.
Immediately
after giving effect to the transactions contemplated by this Agreement, the
Purchaser and IMSI shall be able to pay their debts as they become due and
shall
own property which has a fair saleable value greater than the amounts required
to pay their debts and Purchaser and IMSI shall have adequate capital to
carry
on their business and to pay their obligations as they become due. No transfer
of property is being made and no obligation is being incurred by Purchaser
or
IMSI with the intent to hinder, delay or defraud present or future creditors
of
Purchaser or IMSI including but not limited to the Shareholders.
Section
4.11. Investigation.
The
Purchaser and IMSI represent and acknowledge that they have conducted an
independent investigation of the financial condition, results of operations,
assets, liabilities, properties and operations of WHL. In making their
determination to proceed with the transactions contemplated by this Agreement,
Purchaser and IMSI have relied on the results of that independent investigation
and the representations and warranties of the Shareholders contained in this
Agreement.
ARTICLE
V.
CERTAIN
COVENANTS AND AGREEMENTS
Section
5.1. Transfer
Taxes.
All
sales, recording, transfer, stamp, registration, conveyance, value added,
use,
or other similar Taxes, duties, excise, governmental charges or fees (including
penalties and interest) imposed as a result of the sale of the Stock to the
Purchaser, the issuance of the Stock Consideration to the Shareholders pursuant
to this Agreement or or associated with the transactions set forth in
Schedule
3.23
shall be
borne by the Shareholders. The Purchaser shall promptly remit any refunds
of
such items to the Shareholders. The Shareholders and the Purchaser, to the
extent required by Legal Requirements, shall prepare and file all Tax Returns
and other documentation on a timely basis with respect to any such Taxes
or
fees.
Section
5.2. Obligation
to File Tax Returns.
WHL
shall
cause to be prepared and filed all Tax Returns with the appropriate Canadian,
province of British Columbia, federal, state, local and foreign Governmental
Agencies relating to WHL for periods ending on or prior to the Closing Date
and
shall pay all Taxes due with respect to such Tax Returns. The Purchaser shall
cause to be prepared and filed all Tax Returns required to be filed by WHL
for
periods after to the Closing Date and shall pay all Taxes due with respect
to
such Tax Returns.
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Section
5.3. Certain
Provisions Relating to Consents.
The
Shareholders shall use commercially reasonable efforts prior to and after
the
Closing Date to obtain all consents that are required in connection with
the
transactions contemplated by this Agreement and the other Transaction Documents
except for consents that will affect the Purchaser or WHL to the economic
detriment of either, including any modification of any Contract, Lease or
Permit. The Purchaser shall cooperate as reasonably necessary or desirable
to
secure the third party consents, including, without limitation, providing
to
such third party information, including financial information; provided,
however, that neither the Purchaser nor WHL shall be required to incur any
liability or obligation in connection therewith, other than for the underlying
matter for which such consent was obtained as in effect immediately prior
to
such consent.
Section
5.4. Nondisclosure;
Noncompetition; Non-solicitation.
(a) Except
as
required by law or in connection with Shareholders’ employment or other
obligations to Purchaser or IMSI, from and after the Closing Date, the
Shareholders shall not use, divulge, furnish or make accessible to anyone
any
proprietary, material non-public, confidential or secret information to the
extent relating to WHL (including, without limitation, customer lists, supplier
lists and pricing and marketing arrangements with customers or suppliers)
or the
Business, and the Shareholders shall cooperate reasonably with the Purchaser
in
preserving such proprietary, confidential or secret aspects of WHL and the
Business. Notwithstanding the foregoing, nothing in this Agreement shall
prohibit the disclosure of the tax treatment and tax structure, each as defined
in Treasury Regulations Section 1.6011-4, of the transaction (but no other
details about the matters covered by this Agreement, including, without
limitation, the identities of the parties except as may be required by legal
rule, regulation or legal process).
(b) For
a
period of five (5) years from the Closing Date, except as required in connection
with the Consulting Agreement or other obligations to Purchaser or IMSI,
Shareholders shall not (i) engage in Competitive Business Activities, (ii)
solicit for hire or enter into any contractual agreement with any Employee
in
respect of Competitive Business Activities or induce any Employee to leave
the
employ of, or breach an employment agreement with, WHL or its Subsidiaries
in
order to accept employment in a business or enterprise to which Shareholders
is
affiliated without the prior written consent of the Purchaser, which consent
will not be unreasonably withheld, unless such Employee has not been employed
by
WHL or the Purchaser for a period of two (2) years; or (iii) have interactions
with any of the customers or suppliers of the Business with respect to
Competitive Business Activities (with the understanding that Shareholders
may
interact with customers or suppliers of the Business with respect to activities
that are not Competitive Business Activities) or make known (A) the names
and
addresses of such customers or suppliers as it relates to the Business, (B)
WHL’s relationships with such customers or suppliers, or (C) any information
relating in any manner to the Business; provided,
however,
that
the Shareholders may purchase or otherwise own up to five percent (5%) of
any
class of securities of any enterprise if such securities are listed on any
national or regional securities exchange or have been registered under Section
12(g), or subject to Section 15(d), of the Securities Exchange Act.
The
Shareholders agree that a violation of this Section will
cause irreparable injury to the Purchaser, and the Purchaser shall be entitled,
in addition to any other rights and remedies it may have at law or in equity,
to
an injunction enjoining and restraining the Shareholders from doing or
continuing to do any such violation and any other violations or threatened
violations of this Section.
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(c) The
Shareholders acknowledge and agree that the covenants set forth in this Section
are reasonable and valid in scope and in all other respects. If any of such
covenants is found to be invalid or unenforceable by a final determination
of a
court of competent jurisdiction (i) the remaining terms and provisions hereof
shall be unimpaired and (ii) the invalid or unenforceable term or provision
shall be deemed replaced by 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. In the event that, notwithstanding the first
sentence of this paragraph (c), any of the provisions of this Section relating
to scope of the covenants contained therein or the nature of the business
restricted thereby shall be declared by a court of competent jurisdiction
to
exceed the maximum restrictiveness such court deems enforceable, such provision
shall be deemed to be replaced herein by the maximum restriction deemed
enforceable by such court.
Section
5.5. Section
338(h)(10) Election.
(a) With
respect to the sale of the Stock, the Shareholders and the Purchaser shall
jointly make a Section 338(h)(10) Election (as hereinafter defined) in
accordance with applicable laws and under any comparable provision of state,
local or foreign law for which a separate election is permissible and as
set
forth herein. The Purchaser and the Shareholders shall take all necessary
steps
to properly make a Section 338(h)(10) Election in accordance with applicable
laws and under any comparable provision of state, local or foreign law for
which
a separate election is permissible. The Purchaser and the Shareholders agree
to
cooperate in good faith with each other in the preparation and timely filing
of
any Tax Returns required to be filed in connection with the making of such
an
election, including the exchange of information and the joint preparation
and
filing of Form 8023 and related schedules. The Purchaser and the Shareholders
agree to report the transfers under this Agreement consistent with such
elections and shall take no position contrary thereto unless required to
do so
by applicable tax law pursuant to a determination as defined in Section 1313(a)
of the Code.
(b) The
Purchaser shall be responsible for the preparation and filing of all Section
338
Forms (as hereinafter defined) in accordance with applicable tax laws and
the
terms of this Agreement and shall deliver such Section 338 Forms to the
Shareholders at least 45 days prior to the date such Section 338 Forms are
required to be filed. Shareholders shall execute and deliver to the Purchaser
such documents or forms (including executed Section 338 Forms) as are requested
and are required by any laws in order to properly complete the Section 338
Forms
at least 20 days prior to the date such Section 338 Forms are required to
be
filed. The Shareholders shall provide the Purchaser with such information
as the
Purchaser reasonably requests in order to prepare the Section 338 Forms no
later
than 30 days after the Purchaser’s request for such information.
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(c) The
Purchase Price, liabilities of WHL and other relevant items shall be allocated
in accordance with Section 338(b)(5) of the Code and the Treasury Regulations
thereunder. Purchaser and Shareholders shall jointly agree upon the fair
market
value of the assets of WHL (the “Valuation”).
All
values contained in the Valuation shall be used by each party in preparing
the
forms referred to in Section
5.5(b)
above
and all other relevant Tax Returns.
(d) “Section
338 Forms”
means
all returns, documents, statements, and other forms that are required to
be
submitted to any federal, state, county or other local Tax authority in
connection with a Section 338(h)(10) Election. Section 338 Forms shall include,
without limitation, any “statement of section 338 election” and IRS Form 8023
(together with any schedules or attachments thereto) that are required pursuant
to Treas. Regs. Section 1.338-1 or Treas. Regs. Section 1.338(h)(10)-1 or
any
successor provisions.
(e) Notwithstanding
any other provision of this Agreement to the contrary, the Shareholders agree
that any income and gain of Shareholders recognized as a result of, and in
accordance with, the making of the Section 338(h)(10) Election will be included
in the consolidated federal income tax return of the Shareholders’ consolidated
group and any resulting tax liability will be paid by the Shareholders, as
the
common parent of the Shareholders’ consolidated group. The Purchaser agrees that
it will pay and be responsible for, and will indemnify and save the Shareholders
harmless from, any reasonable costs incurred by the Shareholders (including
but
not limited to costs incurred in connection with the preparation or restatement
of any Tax Return) for Taxes imposed on the Shareholders by any federal,
state
or local Tax authority, in each case resulting from the Purchaser’s election to
treat the purchase of the Stock as an asset acquisition under the statutes
of
any such Tax authority.
(f) “Section
338(h)(10) Election”
means
an election described in Section 338(h)(10) of the Code with respect to
Purchaser's acquisition of Stock pursuant to this Agreement. Section 338(h)(10)
Election shall include any corresponding election under state or local law
pursuant to which a separate election is permissible with respect to Purchaser's
acquisition of Stock pursuant to this Agreement.
Section
5.6. Ongoing
Tax/Audit Cooperation.
(a) After
the
Closing, the Shareholders and the Purchaser shall cooperate fully with each
other and make available or cause to be made available to each other in a
timely
fashion such Tax data, prior Tax Returns and filings and other information
as
may be reasonably required for the preparation by the Purchaser or the
Shareholders of any Tax Returns, elections, consents or certificates required
to
be prepared and filed by the Purchaser or the Shareholders and any audit
or
other examination by any Governmental Agency, or judicial or administrative
proceeding relating to liability for Taxes.
Without
limiting the generality of the foregoing, each of the Purchaser and the
Shareholders shall retain copies of all Tax Returns, supporting work schedules
and other records relating to tax periods or portions thereof ending prior
to or
including the Closing Date until the later of (i) the expiration of the statute
of limitations for the taxable periods to which such Tax Returns and other
documents relate, without regard to extensions except for extensions obtained
by
that party or its Affiliates or extensions regarding which such party has
received written notice from another party, or (ii) six years following the
due
date (without extensions) for such Tax Returns; provided, however, that no
party
will dispose of its copies without first notifying the other parties and
providing such other parties with a reasonable period of time to assume
possession of such copies. In addition, without limiting the generality of
the
foregoing, each party shall make its personnel and those of its Affiliates
reasonably available for deposition and testimony in any tax controversy
or
proceeding. The Purchaser shall cooperate with the Shareholders to the extent
reasonably necessary for the Shareholders’ preparation of its financial
statements and Tax Returns and in the sharing of financial and accounting
information with respect thereto or with respect to any audit, examination,
or
other proceeding with respect thereto.
-36-
(b) After
the
Closing, the Shareholders and the Purchaser shall cooperate fully with each
other and make available or cause to be made available to each other in a
timely
fashion such financial data and other information as may be reasonably required
for the preparation by IMSI of its year-end audits and Form 10-KSB filings
for
the fiscal year ending June 30, 2005, and any other filings required to be
prepared and filed by the Shareholders, Purchaser or IMSI by any Governmental
Agency. Without limiting the generality of the foregoing, IMSI and the
Shareholders shall retain copies of all financial data and other financial
records relating to WHL for at least six years following the date of this
Agreement. IMSI and the Shareholders shall cooperate to the extent reasonably
necessary for the preparation of IMSI’s financial statements and accounting
information with respect thereto or with respect to any audit.
(c) No
information or documentation provided pursuant to this Section
5.6
shall be
disclosed by the recipient thereof to any Person except its accountants and
relevant tax authorities or as required by applicable law (in which case
the
disclosing party shall consult in good faith with the other party prior to
making any such disclosure).
Section
5.7. Tax
Related Covenants.
Without
the prior written consent of the Purchaser, which consent shall not be
unreasonably withheld, neither WHL nor any of its Subsidiaries shall make
or
change any election, change an annual accounting period, adopt or change
any
accounting method, file any amended Tax Return, enter into any closing
agreement, settle any Tax claim or assessment relating to WHL or any of its
Subsidiaries, surrender any right to claim a refund of Taxes, consent to
any
extension or waiver of the limitation period applicable to any Tax claim
or
assessment relating to WHL or any of its Subsidiaries, or take any other
similar
action relating to the filing of any Tax Return or the payment of any Tax,
if
such election, adoption, change, amendment, agreement, settlement, surrender,
consent or other action would have the effect of increasing the Tax liability
of
WHL or any of its Subsidiaries for any period ending after the Closing Date
or
decreasing any Tax attribute of WHL or any of its Subsidiaries existing on
the
Closing Date.
-37-
Section
5.8. Further
Assurances.
Upon
the
request of the Purchaser at any time after the Closing Date, the Shareholders
shall forthwith execute and deliver such further instruments of assignment,
transfer, conveyance, endorsement, direction or authorization and other
documents as the Purchaser may reasonably request in order to perfect title
of
the Purchaser and its successors and assigns to the Stock or otherwise to
effectuate the purposes of this Agreement.
Section
5.9. Notice
of Developments.
Each
party to this Agreement will promptly notify any other party of any development
which could reasonably be expected to result in a breach of any party’s
representations, warranties or covenants in this Agreement.
ARTICLE
VI.
CONDITIONS
TO SHAREHOLDERS AND WHL’S OBLIGATIONS
The
obligation of the Shareholders and WHL to consummate the transactions
contemplated by this Agreement is subject to the satisfaction (unless waived
in
writing by the Shareholders) of each of the following conditions on or prior
to
the Closing Date:
Section
6.1. Corporate
Documents.
The
Shareholders shall have received from the Purchaser and IMSI certified copies
of
the resolutions duly adopted by the board of directors of the Purchaser and
IMSI
approving the execution and delivery of this Agreement and the other Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby, and such resolutions shall be in full force and effect as of the
Closing Date.
Section
6.2. No
Violation of Orders.
No
preliminary or permanent injunction or other order issued by any court or
Governmental Agency, nor any statute, rule, regulation, decree or executive
order promulgated or enacted by any Governmental Agency that declares this
Agreement or any other Transaction Document invalid or unenforceable in any
respect or which prevents the consummation of the transactions contemplated
hereby or thereby shall be in effect; and no action or proceeding before
any
court or Governmental Agency, shall have been instituted or threatened by
any
Governmental Agency or by any other person or entity, which seeks to prevent
or
delay the consummation of the transactions contemplated by this Agreement
or any
other Transaction Document or which challenges the validity or enforceability
hereof or thereof.
Section
6.3. Transaction
Documents.
The
Purchaser shall have executed and delivered to the Shareholders this Agreement,
the Escrow Agreement, the Promissory Note and caused the execution and delivery
of the Guarantee and the General Security Agreement. IMSI shall have executed
and delivered to the Shareholders this Agreement and the Registration Rights
Agreement in substantially the form attached hereto as Exhibit E (the
“Registration
Rights Agreement”).
-38-
Section
6.4. Employment
Agreement.
The
Purchaser shall have agreed to engage ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ on substantially the
terms
set forth in that Employment Agreement attached hereto as Exhibit F (the
“Employment
Agreement”).
Section
6.5. Opinion
of Counsel.
Shareholders
shall have received an opinion of ▇▇▇▇▇▇ Curls ▇▇▇▇▇▇▇▇ LLP, counsel to the
Purchaser and IMSI, substantially in the form attached hereto as Exhibit
G
(“Purchaser’s
Opinion of Counsel”).
Section
6.6. Consulting
Agreement.
The
Purchaser shall have agreed to retain ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ as a consultant for
a
period of six (6) months on substantially the same terms set forth in that
Consultant Agreement attached hereto as Exhibit H (the “Consulting
Agreement”).
ARTICLE
VII.
CONDITIONS
TO PURCHASER’S AND IMSI’S OBLIGATIONS
The
obligation of the Purchaser and IMSI to consummate the transactions contemplated
by this Agreement is subject to the satisfaction (unless waived in writing
by
the Purchaser) of each of the following conditions on or prior to the Closing
Date:
Section
7.1. Consents.
All
consents, Permits, authorizations, approvals, waivers and amendments which
are
listed on Schedule
7.1 hereto
shall have been obtained.
Section
7.2. Corporate
Documents.
The
Purchaser shall have received from the Shareholders certified copies of the
resolutions duly adopted by the board of directors of WHL approving the
execution and delivery of this Agreement and the other Transaction Documents
and
the consummation of the transactions contemplated hereby and thereby, and
such
resolutions shall be in full force and effect as of the Closing
Date.
Section
7.3. Employment.
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ shall have agreed to accept employment by Purchaser on substantially
the
terms set forth in the Employment Agreement.
-39-
Section
7.4. No
Claim Regarding Stock Ownership or Sale Proceeds.
There
must not have been made or threatened by any Person any claim asserting that
such Person (a) is the holder or the beneficial owner of, or has the
right
to acquire or to obtain beneficial ownership of, any Stock of, or any other
voting, equity, or ownership interest in, WHL, or (b) is entitled
to all or
any portion of the Purchase Price payable for the Stock.
Section
7.5. No
Violation of Orders.
No
preliminary or permanent injunction or other order issued by any court or
Governmental Agency, nor any statute, rule, regulation, decree or executive
order promulgated or enacted by any Governmental Agency that declares this
Agreement or any other Transaction Document invalid or unenforceable in any
respect or which prevents the consummation of the transactions contemplated
hereby or thereby shall be in effect; and no action or proceeding before
any
court or Governmental Agency, shall have been instituted or threatened by
any
Governmental Agency or by any other person or entity, which seeks to prevent
or
delay the consummation of the transactions contemplated by this Agreement
or any
other Transaction Document or which challenges the validity or enforceability
hereof or thereof.
Section
7.6. Opinion
of Counsel.
Purchaser
shall have received an opinion of ▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, counsel to WHL,
substantially in the form attached hereto as Exhibit I (“WHL’s
Opinion of Counsel”).
Section
7.7. Due
Diligence.
The
Purchaser shall have received all business, legal, accounting and other due
diligence materials requested from WHL and the Shareholders, shall have
completed the review of said due diligence to its satisfaction, and such
due
diligence shall be reasonably satisfactory to the Purchaser in its sole
discretion.
Section
7.8. Transaction
Documents.
The
Shareholders shall have executed and delivered to the Purchaser this Agreement,
the Registration Rights Agreement, and the Share Escrow Agreement.
WHL
shall also have delivered an executed copy of the Employment
Agreement.
Section
7.9. Resignations.
The
Purchaser shall have received the resignations, effective as of the Closing
Date, of each of the directors and officers of WHL.
Section
7.10. Options
and Warrants.
The
Shareholders shall have caused any and all outstanding options and warrants
to
purchase capital stock of WHL or any of its subsidiaries to have been (i)
cancelled in accordance with their terms or (ii) exercised in accordance
with
their terms, and in the case of (ii) the Shareholders shall have repurchased
all
shares of its capital stock underlying such exercised options.
-40-
Section
7.11. Tax
Sharing Agreements.
Any
tax
sharing agreements among WHL or any Subsidiaries and any other Person shall
have
been terminated as of the Closing Date with no further liability to the
Purchaser, WHL or any such Subsidiary.
Section
7.12. Balance
Sheet Reserves.
On
the
Closing Date, WHL shall have sufficient cash in its business banking account
to
cover the liabilities set forth on the Balance Sheet and those incurred up
to
the Closing Date plus an additional two hundred thousand USD
($200,000.00).
Section
7.13. Consulting
Agreement.
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ shall have agreed to serve as a consultant on substantially the
terms
set forth in the Consulting Agreement and executed and delivered said Consulting
Agreement.
ARTICLE
VIII.
THE
CLOSING
Section
8.1. The
Closing.
The
Closing of the transactions contemplated hereby (the “Closing”)
shall
be held on July 1, 2005 (the “Closing
Date”)
or at
such other time as the parties may mutually agree. The Closing shall be held
at
the offices of ▇▇▇▇▇▇ Curls ▇▇▇▇▇▇▇▇ LLP, ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇
▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ or at such other place as the parties may mutually
agree. Alternatively, the parties may mutually agree that the Closing may
occur
by mail, fax, overnight courier or a combination thereof. At the Closing,
all of
the transactions provided for in Article II
hereof
shall be consummated on a substantially concurrent basis.
Section
8.2. Deliveries
by the Shareholders at the Closing.
At
the
Closing, the Shareholders shall deliver, or cause to be delivered, to the
Purchaser, in addition to an executed copy of this Agreement, the following
items:
(a) the
duly
executed certified resolutions referred to in Section
7.2;
(b) the
consents listed on Schedule
7.1;
(c) the
resignations referred to in Section
7.9.
(d) WHL’s
Opinion of Counsel;
(e) the
Escrow Agreement;
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(f) the
Registration Rights Agreement duly executed by the Shareholders;
(g) the
Consultant Agreement duly executed by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇; and
(h) the
Employment Agreement duly executed by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇;
and
(i) all
other
previously undelivered documents that the Shareholders are required to deliver
to the Purchaser pursuant to this Agreement.
Section
8.3. Delivery
of Certificate Representing Delivered Stock.
Promptly
upon execution of this Agreement, Shareholders shall deliver to his counsel
a
certificate or certificates representing the Delivered Stock, duly endorsed
in
blank for transfer or accompanied by appropriate powers duly executed in
blank,
together with a letter, executed by the Purchaser and the Shareholders, in
the
form attached as Exhibit I instructing Shareholders’ counsel to deliver such
certificate(s) and stock power(s) to the Purchaser upon receipt by the
Shareholders of the Cash Consideration.
Section
8.4. Delivery
of Certificate Representing Pledged Stock.
Immediately
upon the Closing, Shareholders shall cause to be delivered to the Escrow
Agent
a
certificate or certificates representing the Pledged Stock, duly endorsed
in
blank for transfer or accompanied by appropriate powers duly executed in
blank,
to be
held in escrow in accordance with the terms of the Escrow
Agreement.
Section
8.5. Deliveries
by the Purchaser at the Closing.
At
the
Closing, the Purchaser shall deliver, or cause to be delivered, to the
Shareholders, in addition to an executed copy of this Agreement by it and
IMSI,
the following items:
(a) the
duly
executed certified resolutions referred to in Section
6.1;
(b) the
Stock
Consideration;
(c) the
originally executed Promissory Note;
(d) the
first
installment payment due under the Promissory Note;
(e) the
Purchaser’s Opinion of Counsel;
(f) duly
executed and acknowledged transfer tax and other required tax forms reasonably
required by the Shareholders to consummate the transactions contemplated
hereby,
all in the form required by applicable law;
(g) the
Escrow Agreement;
(h)
the
Consultant Agreement;
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(i) the
Employment Agreement duly executed by the Purchaser;
(j) the
Registration Rights Agreement duly executed by IMSI;
(k)
the
Guarantee by WHL; and
(l) the
General Security Agreement.
(m) all
other
previously undelivered documents that the Purchaser is required to deliver
to
the Shareholders pursuant to this Agreement.
Section
8.6. Payment
of Cash Consideration.
At
the
Closing, the Purchaser shall pay the Cash Consideration to the Shareholders
by
wire transfer of immediately available funds.
ARTICLE
IX.
INDEMNIFICATION
Section
9.1. Survival.
All
of
the representations and warranties of the Shareholders contained in Article
III
of this Agreement or in any certificate delivered by the Shareholders pursuant
to this Agreement shall survive the Closing and continue in full force and
effect as follows: (a) in the case of the representations and warranties
of the
Shareholders contained in Section
3.22
(Tax
Matters), until two weeks following the expiration of the statute of limitations
with respect to the matter to which the claim relates (including any extension
of the statute of limitation consented to by or on behalf of WHL), (b) in
the
case of the representations and warranties of the Shareholders contained
in
Section
3.21
Environmental Matters), until the fifth anniversary of the Closing Date,
and (c)
in the case of any other representation or warranty of the Shareholders
contained in this Agreement and any certificate delivered by the Shareholders
pursuant to this Agreement pertaining to any of the Shareholders’
representations and warranties, until the second anniversary of the Closing
Date. Notwithstanding the foregoing, any notice given in accordance with
Section
10.1
of this
Agreement claiming an alleged breach of any representation or warranty hereunder
shall without further action extend the survival period for the representation
or warranty alleged to have been breached, but only as applied to the
circumstances set forth in such notice, until immediately after the final
resolution of the matter. All of the representations and warranties of the
Purchaser contained in Article IV of this Agreement or in any certificate
delivered by the Purchaser pursuant to this Agreement pertaining thereto
shall
survive the Closing and continue in full force and effect until the second
anniversary of the Closing Date.
Section
9.2. Indemnification
Provisions for Benefit of Purchaser.
(a) In
the
event that either Shareholder breaches any of his or her representations,
warranties or covenants contained in this Agreement or in any certificate
delivered by said Shareholder pursuant hereto and provided that, as to any
claim
for breach of representations or warranties, the Purchaser makes a written
claim
for indemnification against the Shareholders within the applicable survival
period, if applicable, then the Shareholders agree to indemnify the Purchaser
and its Affiliates from and against all Damages the Purchaser and its Affiliates
suffer resulting from or arising out of such event; provided, however, that
the
Shareholders shall not have any obligation to indemnify the Purchaser from
and
against any such Damages until the Purchaser has suffered aggregate Damages
by
reason of all such breaches in excess of $50,000.00 USD and then only to
the
extent of Damages in excess of said $50,000.00
USD;
provided further that no claim may be made by Purchaser under this Section
unless the total of the Damages associated with any single event or occurrence
triggering an indemnification claim exceeds $10,000.00 USD. In any event,
the
maximum amount that Shareholders shall be required to pay as to all claims
made
under this Section shall be equal to the lesser of $4,000,000.00 USD, or
the
actual consideration received by Shareholders pursuant to this Agreement
as of
the date of Shareholders’ payment of such indemnification claim, and the payment
of which, at Shareholders’ election, may be satisfied in whole or in part by (A)
the return of any portion of the Stock Consideration remaining in the
Shareholders’ possession, which shall be valued for purposes of this paragraph
at the greater of (i) the per share price at which they were issued to the
Shareholders, or (ii) the per share closing price of IMSI’s common stock as
reported on the OTCBB on the date on which the shares are returned to IMSI
or
(B) setting off of such amounts against all or any portion of the remaining
amounts due under the Promissory Note. In addition, the maximum indemnification
amount set forth herein shall be reduced by the net loss (including brokerage
fees and commissions), if any, incurred by the Shareholders as a result of
the
sale of any portion of the Stock Consideration.
-43-
(b) Without
limiting the generality or effect of the foregoing, the Shareholder shall
indemnify, defend and hold harmless IMSI, the Purchaser and any of their
respective Affiliates from and against any and all Damages resulting from
or
arising out of Pre-Closing Taxes (which indemnification, defense and hold
harmless shall not be subject to any of the limitations set forth in Section
9.2(a) above). For purposes of this Agreement, “Pre-Closing
Taxes”
shall
mean: (i) all liability for Taxes of WHL for tax periods ending on or prior
to
the Closing Date; (ii) all liability for Taxes described in Section 5.1;
(iii)
all liability for Taxes associated with the activities set forth on Schedule
3.23;
and
(iv) all liability for Taxes of any other person or entity due and owing
with
respect to the period on or before the Closing Date pursuant to any contractual
agreement entered into on or before the Closing Date.
Section
9.3. Matters
Involving Third Parties.
(a) If
any
third party notifies a party to this Agreement (the “Indemnified
Party”)
with
respect to any matter which may give rise to a claim (other than a Tax Claim)
for indemnification against another party to this Agreement (the “Indemnifying
Party”)
under
this Article IX,
then the
Indemnified Party shall use reasonable efforts to notify the Indemnifying
Party
thereof promptly and in any event within ten days after receiving any written
notice from a third party; provided, however, that no delay on the part of
the
Indemnified Party in notifying the Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless, and then solely
to the
extent that, the Indemnifying Party is actually prejudiced thereby.
-44-
(b) Once
the
Indemnified Party has given notice of the matter to the Indemnifying Party,
the
Indemnified Party may, subject to the Indemnifying Party’s rights to assume the
defense of such matter pursuant to paragraph (c)
below,
defend against the matter in any manner it deems appropriate.
(c) The
Indemnifying Party may at any point in time choose to assume the defense
of all
of such matter, in which event:
(i) the
Indemnifying Party shall defend the Indemnified Party against the matter
with
counsel of its choice reasonably satisfactory to the Indemnified Party,
(ii) the
Indemnified Party may retain separate counsel at its sole cost and expense
(except that the Indemnifying Party shall be responsible for the fees and
expenses of one separate co-counsel for all Indemnified Parties to the extent
the Indemnified Party is advised, in writing by its counsel, that either
(x) the
counsel the Indemnifying Party has selected has a conflict of interest, or
(y)
there are legal defenses available to the Indemnified Party that are different
from or additional to those available to the Indemnifying Party), and
(iii) the
Indemnifying Party shall reimburse the Indemnified Party for the reasonable
costs of defense or investigation for the period prior to the assumption
of the
defense.
(d) Assumption
of the defense of any matter by the Indemnifying Party shall without further
action constitute an irrevocable waiver by the Indemnifying Party of its
right
to claim at a later date that such third party action for which the defense
was
assumed is not a proper matter for indemnification pursuant to this Article
IX.
(e) The
Indemnified Party shall not consent to the entry of a judgment or enter into
any
settlement with respect to any matter which may give rise to a claim for
indemnification without the written consent of the Indemnifying Party, which
consent may not be unreasonably withheld or delayed; provided, however, that
if
the Indemnifying Party has failed to provide indemnification required to
be
provided pursuant to this Article
IX for
fifteen days after a request therefor, then the Indemnified Party may take
any
such action without the consent of the Indemnifying Party.
(f) The
Indemnifying Party shall not consent to the entry of a judgment with respect
to
any matter which may give rise to a claim for indemnification or enter into
any
settlement which does not include a provision whereby the plaintiff or claimant
in the matter releases the Indemnified Party from all liability with respect
thereto, without the written consent of the Indemnified Party (not to be
unreasonably withheld or delayed).
-45-
Section
9.4. Certain
Additional Provisions Relating to Indemnification.
(a) After
the
Closing Date, the indemnification provisions set forth in this Article
IX shall
constitute the sole and exclusive recourse and remedy available to the Purchaser
with respect to the breach of any representation or warranty contained in
this
Agreement or in any certificate delivered pursuant to this Agreement, except
for
actual fraud, together with those rights set forth in Section
10.11.
(b) All
payments by an Indemnifying Party under this Article
IX shall
be
treated as an adjustment to the Purchase Price for all foreign, federal,
state
and local income tax purposes.
Section
9.5. Procedures
Relating to Tax Claims.
If
a
claim is made by any Tax Governmental Agency which, if successful, is likely
to
result in an indemnity payment to the Purchaser or any of its Affiliates
pursuant to this Article
IX,
the
Purchaser shall notify the Shareholders of such claim (a “Tax
Claim”),
stating the nature and basis of such claim and the amount thereof, to the
extent
known. Failure to give such notice shall not relieve the Shareholders from
any
liability which they may have on account of this indemnification or otherwise,
except to the extent that the Shareholders are materially prejudiced thereby.
The Shareholders will have the right, at their option, upon timely notice
to the
Purchaser, to assume control of any defense of any Tax Claim with their own
counsel, provided, however, such counsel is reasonable satisfactory to the
Purchaser. The Shareholders’ right to control a Tax Claim will be limited to
amounts in dispute which would be paid by the Shareholders or for which the
Shareholders would be liable pursuant to this Article
IX.
Costs
of such Tax Claims are to be borne by the Shareholders unless the Tax Claim
relates to taxable periods ending after the Closing Date, in which event
such
costs will be fairly apportioned. The Purchaser and IMSI shall cooperate
with
the Shareholders in contesting any Tax Claim, which cooperation shall include
the retention and, upon the Shareholders’ request, the provision of records and
information which are reasonably relevant to such Tax Claim and making employees
available on a mutually convenient basis to provide additional information
or
explanation of any material provided hereunder. Notwithstanding the foregoing,
the Shareholders shall neither consent nor agree (nor cause WHL to consent
or
agree) to the settlement of any Tax Claim with respect to any liability for
Taxes that may affect the liability for any Canadian, province of British
Columbia, state or federal income tax of WHL or any Affiliated Group of which
WHL is a member for any taxable period ending subsequent to the Closing Date
without the prior written consent of the Purchaser, and neither the
Shareholders, nor any Shareholders Entity, shall file an amended Tax Return
with
respect to such period that may affect the liability for Taxes of WHL without
the prior written consent of the Purchaser.
Section
9.6. Purchaser's
Indemnification of Shareholders.
In
the
event that the Purchaser or IMSI breach any of their representations, warranties
or covenants contained in this Agreement or in any certificate delivered
by the
Purchaser or IMSI pursuant hereto and provided that, as to any claim for
breach
of representations or warranties, the Shareholders make a written claim for
indemnification against the Purchaser within the applicable survival period,
if
applicable, then the Purchaser and IMSI agree to indemnify the Shareholders
and
its Affiliates from and against all Damages the Shareholders and its Affiliates
suffer resulting from or arising out of such event; provided, however, that
the
Purchaser and IMSI shall not have any obligation to indemnify the Shareholders
from and against any Damages resulting from the breach of any representation
or
warranty of the Purchaser (as opposed to any covenant of the Purchaser)
contained in Article
IV of
this
Agreement until the Shareholders have suffered aggregate Damages, by reason
of
all such breaches in excess of $25,000; provided further that no claim may
be
made by Shareholders under this Section unless such claim exceeds $10,000
in
value. In any event, the maximum amount that Purchaser and IMSI shall together
be required to pay as to all claims made under this Section shall be the
maximum
indemnification amount set forth in Section
9.2(a)
for
Shareholders' indemnification of Purchaser.
-46-
ARTICLE
X.
MISCELLANEOUS
PROVISIONS
Section
10.1. Notices.
All
notices, demands or other communications to be given or delivered under or
by
reason of the provisions of this Agreement shall be in writing and shall
be
deemed to have been given (a) when delivered personally to the recipient,
(b)
when sent to the recipient by telecopy (receipt electronically confirmed
by
sender’s telecopy machine) if during normal business hours of the recipient,
otherwise on the next Business Day, (c) one Business Day after the date when
sent to the recipient by reputable express courier service (charges prepaid),
or
(d) seven Business Days after the date when mailed to the recipient by certified
or registered mail, return receipt requested and postage prepaid. Such notices,
demands and other communications shall be sent to the Shareholders and to
the
Purchaser at the addresses indicated below:
|
If
to the Shareholders:
|
▇▇▇▇▇
and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇
- ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇
▇▇▇
|
|
|
With
a copy to:
(which
shall not constitute notice)
|
▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇-▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇ ▇▇▇
Attn:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
|
|
|
If
to the Purchaser:
|
Houseplans,
Inc.
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇
Attn:
▇▇▇▇ ▇▇▇▇, President
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
|
|
|
With
a copy to:
(which
shall not constitute notice)
|
▇▇▇▇▇▇
Curls ▇▇▇▇▇▇▇▇ LLP
▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
|
-47-
Section
10.2. Amendments.
The
terms, provisions and conditions of this Agreement may not be changed, modified
or amended in any manner except by an instrument in writing duly executed
by
both of the parties hereto.
Section
10.3. Announcements.
All
press
releases, notices to customers and suppliers and similar public announcements
prior to or within five days after the Closing Date with respect to this
Agreement and the transactions contemplated by this Agreement shall be approved
by both the Purchaser and the Shareholders prior to the issuance thereof;
provided that either party may make any public disclosure it believes in
good
faith is required by law, regulation or rule of any stock exchange on which
its
securities are traded (in which case the disclosing party shall use reasonable
efforts to advise the other party prior to making such disclosure and to
provide
the other party a reasonable opportunity to review the proposed
disclosure).
Section
10.4. Expenses.
Except
as
expressly set forth in this Agreement, each party to this Agreement shall
bear
all of its legal, accounting, investment banking, and other expenses incurred
by
it or on its behalf in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated.
Section
10.5. Entire
Agreement.
This
Agreement, together with the Exhibits and Schedules, constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof,
supersedes and is in full substitution for any and all prior agreements and
understandings among them relating to such subject matter, including without
limitation the Letter of Intent, dated March 1, 2005, between the Purchaser
and
WHL, and no party shall be liable or bound to the other party hereto in any
manner with respect to such subject matter by any warranties, representations,
indemnities, covenants, or agreements except as specifically set forth herein.
The Exhibits and Schedules to this Agreement are hereby incorporated and
made a
part hereof and are an integral part of this Agreement.
Section
10.6. Descriptive
Headings.
The
descriptive headings of the several sections of this Agreement are inserted
for
convenience only and shall not control or affect the meaning or construction
of
any of the provisions hereof.
-48-
Section
10.7. Counterparts.
For
the
convenience of the parties, any number of counterparts of this Agreement
may be
executed by any one or more parties hereto, and each such executed counterpart
shall be, and shall be deemed to be, an original, but all of which shall
constitute, and shall be deemed to constitute, in the aggregate but one and
the
same instrument.
Section
10.8. Governing
Law; Jurisdiction.
(a) This
Agreement and the legal relations between the parties hereto shall be governed
by and construed in accordance with the laws of the State of California
applicable to contracts made and performed therein without regard to principles
of conflicts of law.
(b) Any
legal
action or proceeding with respect to this Agreement shall be brought in the
courts of the State of California, and, by execution and delivery of this
Agreement, the parties hereto hereby accept for themselves and in respect
of
their property, generally and unconditionally, the jurisdiction of the aforesaid
courts. The parties hereto hereby irrevocably waive any objection, including
any
objection to the laying of venue or based on the grounds of forum non conveniens,
which
any of them may now or hereafter have to the bringing of any such action
or
proceeding in such respective jurisdictions.
Section
10.9. Construction.
The
language used in this Agreement will be deemed to be the language chosen
by the
parties to express their mutual intent, and no rule of strict construction
will
be applied against any party. Any references to any Canadian, British Columbian,
federal, state, local or foreign statute or law will also refer to all rules
and
regulations promulgated thereunder, unless the context requires otherwise.
Unless the context otherwise requires: (a) a term has the meaning assigned
to it
by this Agreement; (b) including means “including but not limited to”;
(c) “or” is disjunctive but not exclusive; (d) words in the singular
include the plural, and in the plural include the singular; and (e) “$” means
the currency of the United States of America.
Section
10.10. Severability.
In
the
event that any one or more of the provisions contained in this Agreement
or in
any other instrument referred to herein, shall, for any reason, be held to
be
invalid, illegal or unenforceable in any respect, then to the maximum extent
permitted by law, such invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement or any other such instrument.
Furthermore, in lieu of any such invalid or unenforceable term or provision,
the
parties hereto intend that there shall be added as a part of this Agreement
a
provision as similar in terms to such invalid or unenforceable provision
as may
be possible and be valid and enforceable.
-49-
Section
10.11. Specific
Performance.
Without
limiting or waiving in any respect any rights or remedies of the parties
under
this Agreement now or hereinafter existing at law or in equity or by statute,
each of the parties hereto shall be entitled to seek specific performance
of the
obligations to be performed by the other in accordance with the provisions
of
this Agreement.
-50-
IN
WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement
as of the day and year first written above.
|
SHAREHOLDERS
|
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
________________________________________________
Signature
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
________________________________________________ Signature |
|
WHL
|
▇▇▇▇▇▇▇▇▇▇
HOMES, LTD.
By:
_____________________________________________
Name:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title:
President
|
|
PURCHASER
|
HOUSEPLANS,
INC.
By:
_____________________________________________ Name:
▇▇▇▇▇▇▇ ▇▇▇▇Title:
President
|
|
IMSI
|
INTERNATIONAL
MICROCOMPUTER SOFTWARE, INC.
By:
_____________________________________________ Name:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇Title:
President
|
TABLE
OF
CONTENTS
|
Page
|
||
|
ARTICLE
I. DEFINITIONS
|
2
|
|
|
Section
1.1.
|
Definitions.
|
2
|
|
Section
1.2.
|
Accounting
Terms and Determinations.
|
10
|
|
ARTICLE
II. SALE AND PURCHASE
|
10
|
|
|
Section
2.1.
|
Agreement
to Sell and to Purchase.
|
10
|
|
Section
2.2.
|
Purchase
Price.
|
11
|
|
Section
2.3.
|
Purchase
Price Adjustment.
|
11
|
|
ARTICLE
III. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
AND
WHL
|
13
|
|
|
Section
3.1.
|
Authority
of WHL.
|
13
|
|
Section
3.2.
|
Organization
of WHL.
|
13
|
|
Section
3.3.
|
Capitalization
of WHL.
|
13
|
|
Section
3.4.
|
No
Conflict or Violation; Consents.
|
14
|
|
Section
3.5.
|
Subsidiaries
and Investments.
|
14
|
|
Section
3.6.
|
Financial
Statements.
|
15
|
|
Section
3.7.
|
Undisclosed
Liabilities.
|
15
|
|
Section
3.8.
|
Material
Adverse Effect.
|
15
|
|
Section
3.9.
|
Accounts
Receivable.
|
15
|
|
Section
3.10.
|
Real
Property.
|
15
|
|
Section
3.11.
|
Condition
and Compliance of Property.
|
17
|
|
Section
3.12.
|
Compliance
with Legal Requirements.
|
18
|
|
Section
3.13.
|
Affiliate
Agreements and Liabilities.
|
18
|
|
Section
3.14.
|
Contracts.
|
19
|
|
Section
3.15.
|
Intellectual
Property.
|
20
|
|
Section
3.16.
|
Software.
|
22
|
|
Section
3.17.
|
Labor
Relations
|
23
|
|
Section
3.18
|
Employment
and Employee Benefit Matters.
|
23
|
|
Section
3.19.
|
Insurance.
|
24
|
|
Section
3.20.
|
Litigation.
|
25
|
|
Section
3.21.
|
Environmental
Matters.
|
25
|
|
Section
3.22.
|
Tax
Matters.
|
26
|
|
Section
3.23.
|
Interim
Operations.
|
26
|
|
Section
3.24.
|
Brokers.
|
27
|
|
Section
3.25.
|
Books
and Records of WHL.
|
28
|
|
Section
3.26.
|
Customers
and Suppliers.
|
28
|
|
Section
3.27.
|
Certain
Payments.
|
28
|
|
Section
3.28.
|
Accounts.
|
28
|
|
Section
3.29.
|
No
Change to Business.
|
29
|
|
Section
3.30.
|
Disclosure
|
29
|
-i-
TABLE
OF
CONTENTS
(continued)
|
Page
|
||
|
ARTICLE
IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND IMSI
|
29
|
|
|
Section
4.1.
|
Authority
of Purchaser and IMSI.
|
29
|
|
Section
4.2.
|
Capitalization
of IMSI.
|
30
|
|
Section
4.3.
|
No
Conflict or Violation.
|
30
|
|
Section
4.4.
|
Litigation.
|
31
|
|
Section
4.5.
|
Compliance
with Legal Requirements; Permits
|
31
|
|
Section
4.6.
|
Brokers.
|
31
|
|
Section
4.7.
|
Stock
Consideration.
|
31
|
|
Section
4.8.
|
SEC
Reports and Financial Statements.
|
32
|
|
Section
4.9.
|
Absence
of Certain Changes and Undisclosed Liabilities.
|
32
|
|
Section
4.10.
|
Solvency.
|
33
|
|
Section
4.11.
|
Investigation.
|
33
|
|
ARTICLE
V. CERTAIN COVENANTS AND AGREEMENTS
|
33
|
|
|
Section
5.1.
|
Transfer
Taxes.
|
33
|
|
Section
5.2.
|
Obligation
to File Tax Returns.
|
33
|
|
Section
5.3.
|
Certain
Provisions Relating to Consents.
|
34
|
|
Section
5.4.
|
Nondisclosure;
Noncompetition; Non-solicitation.
|
34
|
|
Section
5.5.
|
Section
338(h)(10) Election.
|
35
|
|
Section
5.6.
|
Ongoing
Tax/Audit Cooperation.
|
36
|
|
Section
5.7.
|
Tax
Related Covenants.
|
37
|
|
Section
5.8.
|
Further
Assurances.
|
38
|
|
Section
5.9.
|
Notice
of Developments.
|
38
|
|
ARTICLE
VI. CONDITIONS TO SHAREHOLDERS AND WHL’S OBLIGATIONS
|
38
|
|
|
Section
6.1.
|
Corporate
Documents.
|
38
|
|
Section
6.2.
|
No
Violation of Orders.
|
38
|
|
Section
6.3.
|
Transaction
Documents.
|
38
|
|
Section
6.4.
|
Employment
Agreement.
|
39
|
|
Section
6.5.
|
Opinion
of Counsel.
|
39
|
|
Section
6.6.
|
Consulting
Agreement.
|
39
|
|
|
||
|
ARTICLE
VII. CONDITIONS TO PURCHASER’S AND IMSI’S OBLIGATIONS
|
39
|
|
|
Section
7.1.
|
Consents.
|
39
|
|
Section
7.2.
|
Corporate
Documents.
|
39
|
|
Section
7.3.
|
Employment.
|
39
|
|
Section
7.4.
|
No
Claim Regarding Stock Ownership or Sale Proceeds.
|
40
|
|
Section
7.5.
|
No
Violation of Orders.
|
40
|
|
Section
7.6.
|
Opinion
of Counsel.
|
40
|
|
Section
7.7.
|
Due
Diligence.
|
40
|
|
Section
7.8.
|
Transaction
Documents.
|
40
|
-ii-
TABLE
OF
CONTENTS
(continued)
|
Page
|
||
|
Section
7.9.
|
Resignations.
|
40
|
|
Section
7.10.
|
Options
and Warrants.
|
40
|
|
Section
7.11.
|
Tax
Sharing Agreements.
|
41
|
|
Section
7.12.
|
Balance
Sheet Reserves.
|
41
|
|
Section
7.13.
|
Consulting
Agreement.
|
41
|
|
|
||
|
ARTICLE
VIII. THE CLOSING
|
41
|
|
|
Section
8.1.
|
The
Closing.
|
41
|
|
Section
8.2.
|
Deliveries
by the Shareholders at the Closing.
|
41
|
|
Section
8.3.
|
Delivery
of Certificate Representing Delivered Stock.
|
42
|
|
Section
8.4.
|
Delivery
of Certificate Representing Pledged Stock.
|
42
|
|
Section
8.5.
|
Deliveries
by the Purchaser at the Closing.
|
42
|
|
Section
8.6.
|
Payment
of Cash Consideration.
|
43
|
|
ARTICLE
IX. INDEMNIFICATION
|
43
|
|
|
Section
9.1.
|
Survival.
|
43
|
|
Section
9.2.
|
Indemnification
Provisions for Benefit of Purchaser.
|
43
|
|
Section
9.3.
|
Matters
Involving Third Parties.
|
44
|
|
Section
9.4.
|
Certain
Additional Provisions Relating to Indemnification.
|
46
|
|
Section
9.5.
|
Procedures
Relating to Tax Claims.
|
46
|
|
Section
9.6.
|
Purchaser's
Indemnification of Shareholders.
|
46
|
|
ARTICLE
X. MISCELLANEOUS PROVISIONS
|
47
|
|
|
Section
10.1.
|
Notices.
|
47
|
|
Section
10.2.
|
Amendments.
|
48
|
|
Section
10.3.
|
Announcements.
|
48
|
|
Section
10.4.
|
Expenses.
|
48
|
|
Section
10.5.
|
Entire
Agreement.
|
48
|
|
Section
10.6.
|
Descriptive
Headings.
|
48
|
|
Section
10.7.
|
Counterparts.
|
49
|
|
Section
10.8.
|
Governing
Law; Jurisdiction.
|
49
|
|
Section
10.9.
|
Construction.
|
49
|
|
Section
10.10.
|
Severability.
|
49
|
|
Section
10.11.
|
Specific
Performance.
|
50
|
-iii-
|
SCHEDULE
NUMBER
|
SCHEDULE
NAME
|
|
2.3
|
Estimated
Closing Date Net Asset Amount
|
|
3.2
|
Organization
of WHL
|
|
3.4
|
Conflicts
or Violations; Consents
|
|
3.5
|
Subsidiaries
and Investments
|
|
3.6
|
Financial
Statements of WHL
|
|
3.7(a)
|
Undisclosed
Liabilities
|
|
3.8
|
Material
Adverse Effect on Balance Sheet
|
|
3.9
|
Accounts
Receivable
|
|
3.10(b)
|
Real
Property Lease
|
|
3.11(a)
|
Condition
and Compliance of Personal Property
|
|
3.11(b)
|
Condition
and Compliance of Personal Property
|
|
3.11(c)
|
Condition
and Compliance of Personal Property
|
|
3.12(a)
|
Compliance
with Legal Requirements
|
|
3.12(b)
|
Permits
|
|
3.13
|
Affiliate
Agreements and Liabilities
|
|
3.14
|
Contracts
|
|
3.15
|
Intellectual
Property
|
|
3.16
|
Software
|
|
3.17
|
Labor
Relations
|
|
3.18
|
Employment
and Employment Benefit Matters
|
|
3.19(a)
|
Insurance;
Claims Made
|
|
3.20
|
Litigation
|
|
3.21
|
Environmental
Matters
|
|
3.22
|
Tax
Matters
|
|
3.23
|
Interim
Operations
|
|
3.26
|
Major
Customers and Major Suppliers
|
|
3.27
|
Certain
Payments
|
|
3.28
|
Accounts
|
|
4.2
|
Capitalization
of IMSI - Outstanding Options & Warrants
|
|
7.1
|
Consents
|
-iv-
|
EXHIBIT
|
EXHIBIT
NAME
|
|
A
|
Form
of Promissory Note
|
|
B
|
Form
of Escrow Agreement
|
|
C
|
Form
of Guarantee by WHL
|
|
D
|
Form
of General Security Agreement
|
|
E
|
Form
of Registration Rights Agreement
|
|
F
|
Form
of Employment Agreement - ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
|
|
G
|
Purchaser’s
Opinion of Counsel
|
|
H
|
Form
of Consultant Agreement- ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
|
|
I
|
WHL’s
Opinion of Counsel
|
|
J
|
Instruction
Letter to Shareholders’ Counsel re Delivery of Certificate Representing
the Stock
|
-v-