STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of December 20, 2005 (the "Agreement"),
among Digicorp, a Utah corporation (the "Purchaser"), Rebel Crew Films, Inc., a
California corporation (the "Company"), Rebel Holdings, LLC, a California
limited liability company ("Rebel Holdings"), and Xxxxx Xxxxxx ("Chatel").
W I T N E S S E T H:
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WHEREAS, Rebel Holdings and Chatel (each a "Seller" and together, the
"Sellers") own an aggregate of 100,000 shares of common stock, no par value (the
"Shares"), of the Company, which Shares constitute all of the issued and
outstanding shares of capital stock of the Company; and
WHEREAS, the Sellers desire to sell to Purchaser, and the Purchaser
desires to purchase from the Sellers, the Shares for the purchase price and upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter contained, the parties hereby agree as follows:
ARTICLE I
SALE AND PURCHASE OF SHARES
1.1 Sale and Purchase of Shares. Upon the terms and subject to the
conditions contained herein, on the Closing Date each Seller shall sell, assign,
transfer, convey and deliver to the Purchaser, and the Purchaser shall purchase
from each Seller, the Shares of such Seller set forth opposite such Seller's
name on Schedule A hereto, in exchange for consideration consisting of shares of
the Purchaser's common stock, $.001 par value ("Purchaser Common Stock"), which
the parties intend to be a tax-free transaction.
ARTICLE II
PURCHASE PRICE AND PAYMENT
2.1 Amount of Purchase Price; Payment of Purchase Price.
(a) The aggregate purchase price for the Shares shall be twenty one
million two hundred seven thousand eighty (21,207,080) shares of Purchaser
Common Stock (the "Purchase Price"). The shares of Purchaser Common Stock
comprising the Purchase Price shall be "unregistered" and "restricted" shares
and shall be issued in accordance with and subject to applicable laws, rules and
regulations, and when issued as consideration for the Shares shall be deemed
fully paid and non-assessable. The Purchase Price shall be allocated to the
Sellers in accordance with Schedule A hereto.
(b) From the Purchase Price, 4,000,000 shares of Purchaser Common
Stock (the "Escrowed Performance Shares") shall be held in escrow pursuant to
the terms of the escrow agreement attached hereto as Exhibit A pending
satisfaction of the following performance milestone: if the Company generates
revenue (determined in accordance with United States generally accepted
accounting principles ("GAAP")) of at least $1,200,000 during any twelve (12)
month period beginning October 1, 2005 and through March 31, 2007 (the "Revenue
Milestone"), then the Escrowed Performance Shares shall be released from escrow
and issued to the Sellers. For each $12,000 (1%) that the Company's revenue is
below $1,200,000, 200,000 (5%) of the Escrowed Performance Shares shall be
cancelled and returned to treasury of Purchaser. For purposes of clarification,
if, for example, the Company generates a maximum of $960,000 of revenue during
any twelve (12) month period beginning October 1, 2005 and through March 31,
2007, then all of the Escrowed Performance Shares would be cancelled and
returned to treasury of Purchaser. Notwithstanding the foregoing, the Revenue
Milestone shall not be applicable in the event: (i) Purchaser sells the Company
(or sells, conveys or otherwise disposes of all of the assets of the Company) on
or before March 31, 2007 for consideration equal to or greater than $1,200,000;
and (ii) such sale of the Company (or sale, conveyance or disposition of all of
the assets of the Company) is approved by an affirmative vote of all directors
designated or elected by Xxxxxx "Xxxx" Xxxx, III pursuant to Section 7.11 of
this Agreement.
(c) From the Purchase Price, 16,666,667 shares of Purchaser Common
Stock shall be subject to lockup agreements, in the form attached hereto as
Exhibit B, as follows: (i) 3,333,333 shares of Purchaser Common Stock shall be
subject to a lockup agreement for a period of one (1) year; (ii) 6,666,667
shares of Purchaser Common Stock shall be subject to a lockup agreement for a
period of two (2) years; and (iii) 6,666,667 shares of Purchaser Common Stock,
of which the 4,000,000 Escrowed Performance Shares are a component of, shall be
subject to a lockup agreement for a period of three (3) years.
ARTICLE III
CLOSING AND TERMINATION
3.1 Closing Date. Subject to the satisfaction of the conditions set forth
in Sections 8.1 and 8.2 hereof (or the waiver thereof by the party entitled to
waive such conditions), the closing of the sale and purchase of the Shares
provided for in Section 1.1 hereof (the "Closing") shall take place at the
offices of Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP located at 0000 Xxxxxx xx xxx
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (or at such other place as the parties may
designate in writing) no later than ninety (90) days after this Agreement is
executed by all parties hereto, unless extended by mutual consent of such
parties. The date on which the Closing shall be held is referred to in this
Agreement as the "Closing Date."
3.2 Termination of Agreement. This Agreement may be terminated prior to
the Closing as follows:
(a) At the election of the Sellers, the Company or the Purchaser on
or after the ninetieth (90th) day after this Agreement is executed by all
parties hereto, if the Closing shall not have occurred by the close of business
on such date, provided that the terminating party is not in default of any of
its obligations hereunder;
(b) by mutual written consent of the Sellers, the Company and the
Purchaser; or
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(c) by the Sellers, the Company or the Purchaser if there shall be
in effect a final nonappealable order of a governmental body of competent
jurisdiction restraining, enjoining or otherwise prohibiting the consummation of
the transactions contemplated hereby; it being agreed that the parties hereto
shall promptly appeal any adverse determination which is not nonappealable (and
pursue such appeal with reasonable diligence).
3.3 Procedure Upon Termination. In the event of termination by the
Purchaser, the Company or the Sellers, or all, pursuant to Section 3.2 hereof,
written notice thereof shall forthwith be given to the other party or parties,
and this Agreement shall terminate, and the purchase of the Shares hereunder
shall be abandoned, without further action by the Purchaser, the Company or the
Sellers. If this Agreement is terminated as provided herein each party shall
deliver all documents, work papers and other material of any other party
relating to the transactions contemplated hereby, whether so obtained before or
after the execution hereof, to the party furnishing the same.
3.4 Effect of Termination. In the event this Agreement is validly
terminated as provided herein, then each of the parties shall be relieved of
their duties and obligations arising under this Agreement after the date of such
termination and such termination shall be without liability to the Purchaser,
the Company or any Seller; provided, however, that the obligations of the
parties set forth in Sections 10.4 and 10.5 hereof shall survive any such
termination and shall be enforceable hereunder; provided, further, however, that
nothing in this Section 3.4 shall relieve the Purchaser, the Company or any
Seller of any liability for a breach of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser that:
4.1 Organization and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now conducted. The
Company is duly qualified or authorized to do business as a foreign corporation
and is in good standing under the laws of each jurisdiction in which it owns or
leases real property and each other jurisdiction in which the conduct of its
business or the ownership of its properties requires such qualification or
authorization, except where the failure to be so qualified would not have a
material adverse effect on the business, properties, assets, results of
operations, or condition (financial or otherwise) ("Material Adverse Effect") of
the Company and any subsidiaries taken as a whole.
4.2 Authorization of Agreement. The Company has full corporate power and
authority to execute and deliver this Agreement, and each other agreement,
document, instrument or certificate contemplated by this Agreement or to be
executed by the Company in connection with the consummation of the transactions
contemplated by this Agreement (together with this Agreement, the "Company
Documents"), and to consummate the transactions contemplated hereby and thereby.
This Agreement has been, and each of the Company Documents will be at or prior
to the Closing, duly and validly executed and delivered by the Company and
(assuming the due authorization, execution and delivery by the other parties
hereto and thereto) this Agreement constitutes, and each of the Company
Documents when so executed and delivered will constitute, legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
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4.3 Capitalization.
(a) The authorized capital stock of the Company consists of 100,000
shares of common stock, no par value (the "Company Common Stock"). As of the
date hereof, there are 100,000 shares of Company Common Stock issued and
outstanding. All of the issued and outstanding shares of Company Common Stock
were duly authorized for issuance and are validly issued, fully paid and
non-assessable.
(b) Except as set forth in the attached disclosure schedules of the
Company (the "Company Disclosure Schedules"), there is no existing option,
warrant, call, right, commitment or other agreement of any character to which
the Company is a party requiring, and there are no securities of the Company
outstanding which upon conversion or exchange would require, the issuance, sale
or transfer of any additional shares of capital stock or other equity securities
of the Company or other securities convertible into, exchangeable for or
evidencing the right to subscribe for or purchase shares of capital stock or
other equity securities of the Company. Except as set forth in the Company
Disclosure Schedules, the Company is not, and to the Company's knowledge none of
the Sellers is, a party to any voting trust or other voting agreement with
respect to any of the shares of Company Common Stock or to any agreement
relating to the issuance, sale, redemption, transfer or other disposition of the
capital stock of the Company.
4.4 Subsidiaries. The Company Disclosure Schedules set forth the name of
each subsidiary of the Company (each a "Subsidiary"), and, with respect to each
Subsidiary, the jurisdiction in which it is incorporated or organized, the
jurisdictions, if any, in which it is qualified to do business, the number of
shares of its authorized capital stock, the number and class of shares thereof
duly issued and outstanding, the names of all stockholders or other equity
owners and the number of shares of stock owned by each stockholder or the amount
of equity owned by each equity owner. The outstanding shares of capital stock or
equity interests of each Subsidiary are validly issued, fully paid and
non-assessable, and all such shares or other equity interests represented as
being owned by the Company are owned by it free and clear of any and all liens,
pledges, encumbrances, charges, agreements or claims of any kind whatsoever,
except as set forth in the Company Disclosure Schedules hereto. No shares of
capital stock are held by any Subsidiary as treasury stock. There is no existing
option, warrant, call, commitment or agreement to which any Subsidiary is a
party requiring, and there are no convertible securities of any Subsidiary
outstanding which upon conversion would require, the issuance of any additional
shares of capital stock or other equity interests of any Subsidiary or other
securities convertible into shares of capital stock or other equity interests of
any Subsidiary or other equity security of any Subsidiary. Each Subsidiary is a
duly organized and validly existing corporation or other entity in good standing
under the laws of the jurisdiction of its organization and is duly qualified to
do business and is in good standing under the laws of (a) each jurisdiction in
which it owns or leases real property and (b) each other jurisdiction in which
the conduct of its business or the ownership of its assets requires such
qualification, except where a failure to be so qualified would not have a
Material Adverse Effect on the Company and its Subsidiaries taken as a whole.
Each Subsidiary has all requisite corporate power and authority to own its
properties and carry on its business as presently conducted.
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4.5 Corporate Records.
(a) The Company has delivered to the Purchaser true, correct and
complete copies of the articles of incorporation (each certified by the
Secretary of State or other appropriate official of the applicable jurisdiction
of organization) and bylaws (each certified by the secretary, assistant
secretary or other appropriate officer) or comparable organizational documents
of the Company and each of its Subsidiaries.
(b) The minute books of the Company and each Subsidiary previously
made available to the Purchaser contain complete and accurate records of all
meetings and accurately reflect all other corporate action of the stockholders
and board of directors (including committees thereof) of the Company and its
Subsidiaries. The stock certificate books and stock transfer ledgers of the
Company and its Subsidiaries previously made available to the Purchaser are
true, correct and complete.
4.6 Conflicts; Consents of Third Parties.
(a) None of the execution and delivery by the Company of this
Agreement and the Company Documents, the consummation of the transactions
contemplated hereby or thereby, or compliance by the Company with any of the
provisions hereof or thereof will: (i) conflict with, or result in the breach
of, any provision of the articles of incorporation or bylaws or comparable
organizational documents of the Company or any Subsidiary; (ii) conflict with,
violate, result in the breach or termination of, or constitute a default under
any note, bond, mortgage, indenture, license, agreement or other instrument or
obligation to which the Company or any Subsidiary is a party or by which any of
them or any of their respective properties or assets is bound; (iii) violate any
statute, rule, regulation, order or decree of any governmental body or authority
by which the Company or any Subsidiary is bound; or (iv) result in the creation
of any lien, mortgage, claims, security interest, charge or encumbrance or any
kind or nature ("Lien") upon the properties or assets of the Company or any
Subsidiary.
(b) No consent, waiver, approval, order, permit or authorization of,
or declaration or filing with, or notification to, any person, entity or
governmental body is required on the part of the Company or any Subsidiary in
connection with the execution and delivery of this Agreement or the Company
Documents, or the compliance by the Company as the case may be, with any of the
provisions hereof or thereof.
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4.7 Financial Statements. Prior to Closing, the Company shall deliver to
the Purchaser copies of: (a) the audited balance sheets of the Company as at
December 31, 2004 and 2003, and the related statements of income and accumulated
deficit and of cash flows of the Company for the years then ended; and (b) the
unaudited balance sheets of the Company for the interim quarterly period(s)
ended subsequent to December 31, 2004 and more than forty-five (45) days prior
to the Closing Date, and the related statements of income and accumulated
deficit and of cash flows of the Company for the periods then ended (such
statements, including the related notes and schedules thereto, are referred to
herein as the "Financial Statements"). Each of the Financial Statements shall be
complete and correct in all material respects, shall be prepared in accordance
with GAAP (subject to normal year-end adjustments in the case of the unaudited
statements) and in conformity with the practices consistently applied by the
Company without modification of the accounting principles used in the
preparation thereof and shall present fairly the financial position, results of
operations and cash flows of the Company and its Subsidiaries as at the dates
and for the periods indicated. For the purposes hereof, the balance sheet of the
Company as at September 30, 2005 is referred to as the "Balance Sheet" and
September 30, 2005 is referred to as the "Balance Sheet Date."
4.8 No Undisclosed Liabilities. Neither the Company nor any Subsidiary has
any indebtedness, obligations or liabilities of any kind (whether accrued,
absolute, contingent or otherwise, and whether due or to become due) that would
have been required to be reflected in, reserved against or otherwise described
on the Balance Sheet or in the notes thereto in accordance with GAAP which is
not fully reflected in, reserved against or otherwise described in the Balance
Sheet or the notes thereto or was not incurred in the ordinary course of
business consistent with past practice since the Balance Sheet Date.
4.9 Absence of Certain Developments. Except as expressly contemplated by
this Agreement or as set forth in the Company Disclosure Schedules, since the
Balance Sheet Date:
(a) there has not been any material adverse change in the business,
assets or financial condition of the Company and any Subsidiaries taken as a
whole nor has there occurred any event which is reasonably likely to result in a
material adverse change in the business, assets or financial condition of the
Company and any Subsidiaries taken as a whole;
(b) there has not been any damage, destruction or loss, whether or
not covered by insurance, with respect to the property and assets of the Company
or any Subsidiary having a replacement cost of more than $25,000 for any single
loss or $50,000 for all such losses;
(c) there has not been any declaration, setting aside or payment of
any dividend or other distribution in respect of any shares of capital stock of
the Company or any repurchase, redemption or other acquisition by any Seller or
the Company or any Subsidiary of any outstanding shares of capital stock or
other securities of, or other ownership interest in, the Company or any
Subsidiary;
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(d) neither the Company nor any Subsidiary has awarded or paid any
bonuses to employees of the Company or any Subsidiary with respect to the fiscal
year ended December 31, 2004 or with respect to the fiscal year ending December
31, 2005, except to the extent accrued on the Balance Sheet or entered into any
employment, deferred compensation, severance or similar agreement (nor amended
any such agreement) or agreed to increase the compensation payable or to become
payable by it to any of the Company's or any Subsidiary's directors, officers,
employees, agents or representatives or agreed to increase the coverage or
benefits available under any severance pay, termination pay, vacation pay,
company awards, salary continuation for disability, sick leave, deferred
compensation, bonus or other incentive compensation, insurance, pension or other
employee benefit plan, payment or arrangement made to, for or with such
directors, officers, employees, agents or representatives (other than normal
increases in the ordinary course of business consistent with past practice and
that in the aggregate have not resulted in a material increase in the benefits
or compensation expense of the Company and its Subsidiaries taken as a whole);
(e) there has not been any change by the Company or any Subsidiary
in accounting or tax reporting principles, methods or policies;
(f) neither the Company nor any Subsidiary has entered into any
transaction or Contract or conducted its business other than in the ordinary
course consistent with past practice;
(g) neither the Company nor any Subsidiary has failed to promptly
pay and discharge current liabilities except where disputed in good faith by
appropriate proceedings;
(h) neither the Company nor any Subsidiary has made any loans,
advances or capital contributions to, or investments in, any person or entity or
paid any fees or expenses to any Seller or any affiliate of any Seller;
(i) neither the Company nor any Subsidiary has mortgaged, pledged or
subjected to any Lien any of its assets, or acquired any assets or sold,
assigned, transferred, conveyed, leased or otherwise disposed of any assets of
the Company or any Subsidiary, except for assets acquired or sold, assigned,
transferred, conveyed, leased or otherwise disposed of in the ordinary course of
business consistent with past practice;
(j) neither the Company nor any Subsidiary has discharged or
satisfied any Lien, or paid any obligation or liability (fixed or contingent),
except in the ordinary course of business consistent with past practice and
which, in the aggregate, would not be material to the Company and its
Subsidiaries taken as a whole;
(k) neither the Company nor any Subsidiary has canceled or
compromised any debt or claim or amended, canceled, terminated, relinquished,
waived or released any Contract or right except in the ordinary course of
business consistent with past practice and which, in the aggregate, would not be
material to the Company and its Subsidiaries taken as a whole;
(l) neither the Company nor any Subsidiary has made or committed to
make any capital expenditures or capital additions or betterments in excess of
$20,000 individually or $40,000 in the aggregate;
(m) neither the Company nor any Subsidiary has instituted or settled
any material legal proceeding; and
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(n) neither the Company nor any Subsidiary has agreed to do anything
set forth in this Section 4.9.
4.10 Taxes.
(a) Except as set forth in the Company Disclosure Schedules: to the
Company's knowledge, (i) all material tax returns required to be filed by or on
behalf of the Company have been properly prepared and duly and timely filed with
the appropriate taxing authorities in all jurisdictions in which such tax
returns are required to be filed (after giving effect to any valid extensions of
time in which to make such filings), and all such tax returns were true,
complete and correct in all material respects; (ii) all amounts shown on such
tax returns (including interest and penalties) as due from the Company have been
fully and timely paid, and adequate reserves or accruals for taxes have been
provided in the Balance Sheet with respect to any period for which tax returns
have not yet been filed or for which taxes are not yet due and owing; and (iii)
the Company has not executed or filed with the Internal Revenue Service ("IRS")
or any other taxing authority any agreement, waiver or other document or
arrangement extending or having the effect of extending the period for
assessment or collection of taxes (including, but not limited to, any applicable
statute of limitation), and no power of attorney with respect to any tax matter
is currently in force.
(b) To the Company's knowledge, the Company has complied in all
material respects with all applicable laws, rules and regulations relating to
the payment and withholding of taxes and has duly and timely withheld from
employee salaries, wages and other compensation and has paid over to the
appropriate taxing authorities all amounts required to be so withheld and paid
over for all periods under all applicable laws.
(c) Purchaser has received complete copies of: (i) all material
federal, state, local and foreign income or franchise tax returns of the Company
relating to the taxable periods since January 1, 2003; and (ii) any audit report
issued within the last three years relating to any material taxes due from or
with respect to the Company its income, assets or operations. All income and
franchise tax returns filed by or on behalf of the Company for the taxable years
ended on the respective dates set forth in the Company Disclosure Schedules have
been examined by the relevant taxing authority or the statute of limitations
with respect to such tax returns has expired.
(d) The Company Disclosure Schedules list all material types of
taxes paid and material types of tax returns filed by or on behalf of the
Company. Except as set forth in the Company Disclosure Schedules, no claim has
been made by a taxing authority in a jurisdiction where the Company does not
file tax returns such that it is or may be subject to taxation by that
jurisdiction.
(e) Except as set forth in the Company Disclosure Schedules, to the
Company's knowledge, all deficiencies asserted or assessments made as a result
of any examinations by the IRS or any other taxing authority of the tax returns
of or covering or including the Company have been fully paid, and there are no
other audits or investigations by any taxing authority in progress, nor has the
Company received any notice from any taxing authority that it intends to conduct
such an audit or investigation. To the Company's knowledge, No issue has been
raised by a federal, state, local or foreign taxing authority in any current or
prior examination which, by application of the same or similar principles, could
reasonably be expected to result in a proposed deficiency for any subsequent
taxable period.
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(f) To the Company's knowledge, the Company is not subject to any
private letter ruling of the IRS or comparable rulings of other taxing
authorities.
(g) To the Company's knowledge, there are no Liens as a result of
any unpaid taxes upon any of the assets of the Company.
4.11 Real Property.
(a) The Company Disclosure Schedules set forth a complete list of
all real property and interests in real property leased by the Company and its
Subsidiaries (individually, a "Company Real Property Lease" and the real
properties specified in such leases being referred to herein individually as a
"Company Property" and collectively as the "Company Properties") as lessee or
lessor. Company Property constitutes all interests in real property currently
used or currently held for use in connection with the business of the Company
and its Subsidiaries and which are necessary for the continued operation of the
business of the Company and its Subsidiaries as the business is currently
conducted. The Company and its Subsidiaries have a valid and enforceable
leasehold interest under each of the Company Real Property Leases, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), and neither the
Company nor any Subsidiary has received any written notice of any default or
event that with notice or lapse of time, or both, would constitute a default by
the Company or any Subsidiary under any of the Company Real Property Leases. All
of the Company Property, buildings, fixtures and improvements thereon owned or
leased by the Company and its Subsidiaries are in good operating condition and
repair (subject to normal wear and tear). The Company has delivered or otherwise
made available to the Purchaser true, correct and complete copies of the Company
Real Property Leases, together with all amendments, modifications or
supplements, if any, thereto.
(b) The Company and its Subsidiaries have all material certificates
of occupancy and permits of any governmental body necessary or useful for the
current use and operation of each Company Property, and the Company and its
Subsidiaries have fully complied with all material conditions of the permits
applicable to them. No default or violation, or event that with the lapse of
time or giving of notice or both would become a default or violation, has
occurred in the due observance of any permit.
4.12 Tangible Personal Property.
(a) The Company Disclosure Schedules set forth all leases of
personal property ("Company Personal Property Leases") involving annual payments
in excess of $25,000 relating to personal property used in the business of the
Company or any of its Subsidiaries or to which the Company or any of its
Subsidiaries is a party or by which the properties or assets of the Company or
any of its Subsidiaries is bound. The Company has delivered or otherwise made
available to the Purchaser true, correct and complete copies of the Company
Personal Property Leases, together with all amendments, modifications or
supplements thereto.
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(b) The Company and each of its Subsidiaries has a valid leasehold
interest under each of the Company Personal Property Leases under which it is a
lessee, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally and subject,
as to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), and there is no
default under any Company Personal Property Lease by the Company or any of its
Subsidiaries or, to the best knowledge of the Company, by any other party
thereto, and no event has occurred that with the lapse of time or the giving of
notice or both would constitute a default thereunder.
(c) The Company and its Subsidiaries have good and marketable title
to all of the items of tangible personal property reflected in the Balance Sheet
(except as sold or disposed of subsequent to the date thereof in the ordinary
course of business consistent with past practice), free and clear of any and all
Liens, other than as set forth in the Company Disclosure Schedules. All such
items of tangible personal property which, individually or in the aggregate, are
material to the operation of the business of the Company and its Subsidiaries
are in good condition and in a state of good maintenance and repair (ordinary
wear and tear excepted) and are suitable for the purposes used.
(d) All of the items of tangible personal property used by the
Company and its Subsidiaries under the Company Personal Property Leases are in
good condition and repair (ordinary wear and tear excepted) and are suitable for
the purposes used.
4.13 Intangible Property. The Company Disclosure Schedules contain a
complete and correct list of each patent, trademark, trade name, service xxxx
and copyright owned or used by the Company and/or its Subsidiaries as well as
all registrations thereof and pending applications therefor, and each license or
other agreement relating thereto. Except as set forth in the Company Disclosure
Schedules, each of the foregoing is owned by the party shown in such Company
Disclosure Schedules as owning the same, free and clear of all Liens and is in
good standing and not the subject of any challenge. There have been no claims
made and neither the Company nor any Subsidiary has received any notice or
otherwise knows or has reason to believe that any of the foregoing is invalid or
conflicts with the asserted rights of others. The Company and each of its
Subsidiaries possesses all patents, patent licenses, trade names, trademarks,
service marks, brand marks, brand names, copyrights, know-how, formulate and
other proprietary and trade rights necessary for the conduct of its business as
now conducted, not subject to any restrictions and without any known conflict
with the rights of others and neither the Company nor any of its Subsidiaries
has forfeited or otherwise relinquished any such patent, patent license, trade
name, trademark, service xxxx, brand xxxx, brand name, copyright, know-how,
formulate or other proprietary right necessary for the conduct of its business
as conducted on the date hereof. Neither the Company nor any of its Subsidiaries
is under any obligation to pay any royalties or similar payments in connection
with any license to any Seller or any affiliate thereof.
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4.14 Company Material Contracts. The Company Disclosure Schedules set
forth all of the following contracts, agreements, commitments ("Contracts") to
which the Company or any of its Subsidiaries is a party or by which it is bound
(collectively, the "Company Material Contracts"): (a) Contracts with any Seller
or any current officer or director of the Company or any of its Subsidiaries;
(b) Contracts with any labor union or association representing any employee of
the Company or any of its Subsidiaries; (c) Contracts pursuant to which any
party is required to purchase or sell a stated portion of its requirements or
output from or to another party; (d) Contracts for the sale of any of the assets
of the Company or any of its Subsidiaries other than in the ordinary course of
business or for the grant to any person or entity of any preferential rights to
purchase any of its assets; (e) joint venture agreements; (f) material Contracts
containing covenants of the Company or any of its Subsidiaries not to compete in
any line of business or with any person or entity in any geographical area or
covenants of any other person or entity not to compete with the Company or any
of its Subsidiaries in any line of business or in any geographical area; (g)
Contracts relating to the acquisition by the Company or any of its Subsidiaries
of any operating business or the capital stock of any other person or entity;
(h) Contracts relating to the borrowing of money; or (i) any other Contracts,
other than Company Real Property Leases, which involve the expenditure of more
than $50,000 in the aggregate or $25,000 annually or require performance by any
party more than one year from the date hereof. There have been made available to
the Purchaser, its affiliates and their representatives true and complete copies
of all of the Company Material Contracts. Except as set forth in the Company
Disclosure Schedules, all of the Company Material Contracts and other agreements
are in full force and effect and are the legal, valid and binding obligation of
the Company and/or its Subsidiaries, enforceable against them in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity). Except as
set forth in the Company Disclosure Schedules, neither the Company nor any
Subsidiary is in default in any material respect under any Company Material
Contracts, nor, to the knowledge of the Company, is any other party to any
Company Material Contract in default thereunder in any material respect.
4.15 Employee Benefits.
(a) The Company Disclosure Schedules set forth a complete and
correct list of: (i) all "employee benefit plans," as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
any other pension plans or employee benefit arrangements, programs or payroll
practices (including, without limitation, severance pay, vacation pay, company
awards, salary continuation for disability, sick leave, retirement, deferred
compensation, bonus or other incentive compensation, stock purchase arrangements
or policies, hospitalization, medical insurance, life insurance and scholarship
programs) maintained by the Company or any of its Subsidiaries or to which the
Company or any of its Subsidiaries contributes or is obligated to contribute
thereunder with respect to employees of the Company ("Company Employee Benefit
Plans"); and (ii) all "employee pension plans," as defined in Section 3(2) of
ERISA, maintained by the Company or any of its Subsidiaries or any trade or
business (whether or not incorporated) which are under control, or which are
treated as a single employer, with Company under Section 414(b), (c), (m) or (o)
of ERISA ("ERISA Affiliate") or to which the Company, any of its Subsidiaries or
any ERISA Affiliate contributed or is obligated to contribute thereunder
("Company Pension Plans").
11
(b) All contributions and premiums required by law or by the terms
of any Company Employee Benefit Plan or Company Pension Plan which are defined
benefit plans or money purchase plans or any agreement relating thereto have
been timely made (without regard to any waivers granted with respect thereto) to
any funds or trusts established thereunder or in connection therewith, and no
accumulated funding deficiencies exist in any of such plans subject to Section
412 of ERISA.
(c) There has been no violation of ERISA with respect to the filing
of applicable returns, reports, documents and notices regarding any of the
Company Employee Benefit Plans or Company Pension Plans with the Secretary of
Labor or the Secretary of the Treasury or the furnishing of such notices or
documents to the participants or beneficiaries of the Company Employee Benefit
Plans or Company Pension Plans.
(d) True, correct and complete copies of the following documents,
with respect to each of the Company Employee Benefit Plans and Company Pension
Plans (as applicable), have been delivered to the Purchaser: (i) any plans and
related trust documents, and all amendments thereto; (ii) the most recent Forms
5500 for the past three years and schedules thereto; (iii) the most recent
financial statements and actuarial valuations for the past three years; (iv) the
most recent IRS determination letter; (v) the most recent summary plan
descriptions (including letters or other documents updating such descriptions);
and (vi) written descriptions of all non-written agreements relating to the
Company Employee Benefit Plans and Company Pension Plans.
4.16 Labor.
(a) Neither the Company nor any of its Subsidiaries is party to any
labor or collective bargaining agreement and there are no labor or collective
bargaining agreements which pertain to employees of the Company or any of its
Subsidiaries. The Company has delivered or otherwise made available to the
Purchaser true, correct and complete copies of the labor or collective
bargaining agreements listed in the Company Disclosure Schedules, together with
all amendments, modifications or supplements thereto.
(b) Except as set forth in the Company Disclosure Schedules, no
employees of the Company or any of its Subsidiaries are represented by any labor
organization. No labor organization or group of employees of the Company or any
of its Subsidiaries has made a pending demand for recognition, and there are no
representation proceedings or petitions seeking a representation proceeding
presently pending or, to the best knowledge of the Company, threatened to be
brought or filed, with the National Labor Relations Board or other labor
relations tribunal. There is no organizing activity involving the Company or any
of its Subsidiaries pending or, to the best knowledge of the Company, threatened
by any labor organization or group of employees of the Company or any of its
Subsidiaries.
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(c) There are no (i) strikes, work stoppages, slowdowns, lockouts or
arbitrations or (ii) material grievances or other labor disputes pending or, to
the best knowledge of the Company, threatened against or involving the Company
or any of its Subsidiaries. There are no unfair labor practice charges,
grievances or complaints pending or, to the best knowledge of the Company,
threatened by or on behalf of any employee or group of employees of the Company.
4.17 Litigation. Except as set forth in the Company Disclosure Schedules,
to the knowledge of the Company, there is no suit, action, proceeding,
investigation, claim or order pending or, to the knowledge of the Company,
overtly threatened against the Company or any of its Subsidiaries (or to the
knowledge of the Company, pending or threatened, against any of the officers,
directors or key employees of the Company or any of its Subsidiaries with
respect to their business activities on behalf of the Company), or to which the
Company or any of its Subsidiaries is otherwise a party, which, if adversely
determined, would have a Material Adverse Effect on the Company or its
Subsidiaries, before any court, or before any governmental department,
commission, board, agency, or instrumentality; nor to the knowledge of the
Company is there any reasonable basis for any such action, proceeding, or
investigation. Neither the Company nor any Subsidiary is subject to any
judgment, order or decree of any court or governmental agency except to the
extent the same are not reasonably likely to have a Material Adverse Effect on
the Company or its Subsidiaries and neither the Company nor any Subsidiary is
engaged in any legal action to recover monies due it or for damages sustained by
it.
4.18 Compliance with Laws; Permits. To the knowledge of the Company, the
Company and each of its Subsidiaries is in compliance with all laws applicable
to the Company and its Subsidiaries or to the conduct of the business or
operations of the Company and its Subsidiaries or the use of their respective
properties (including any leased properties) and assets, except for such
non-compliances as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company or its Subsidiaries. To the knowledge of the
Company, the Company and each of its Subsidiaries has all governmental permits
and approvals from state, federal or local authorities which are required for
the Company and each of its Subsidiaries to operate its business, except for
those the absence of which would not, individually or in the aggregate, have a
Material Adverse Effect on the Company or its Subsidiaries.
4.19 Environmental Matters. Except as set forth in the Company Disclosure
Schedules hereto:
(a) the operations of the Company and each of its Subsidiaries are
in compliance with all applicable laws, rules, regulations, orders, treaties,
statutes, and codes promulgated by any governmental entity which prohibit,
regulate or control any hazardous material or any hazardous material activity
("Environmental Laws") and all permits issued pursuant to Environmental Laws or
otherwise;
(b) the Company and each of its Subsidiaries has obtained all
permits required under all applicable Environmental Laws necessary to operate
its business;
(c) neither the Company nor any of its Subsidiaries is the subject
of any outstanding written order or Contract with any governmental authority,
person or entity respecting Environmental Laws or any violation or potential
violations thereof; and
13
(d) neither the Company nor any of its Subsidiaries has received any
written communication alleging either or both that the Company or any of its
Subsidiaries may be in violation of any Environmental Law, or any permit issued
pursuant to Environmental Law, or may have any liability under any Environmental
Law.
4.20 Insurance. The Company Disclosure Schedules set forth a complete and
accurate list of all policies of insurance of any kind or nature covering the
Company or any of its Subsidiaries or any of their respective employees,
properties or assets, including, without limitation, policies of life,
disability, fire, theft, workers compensation, employee fidelity and other
casualty and liability insurance. All such policies are in full force and
effect, and, to the Company's knowledge, neither the Company nor any of its
Subsidiaries is in default of any provision thereof, except for such defaults as
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company or its Subsidiaries.
4.21 Inventories; Receivables; Payables.
(a) The inventories of the Company and its Subsidiaries are in good
and marketable condition, and are saleable in the ordinary course of business.
Adequate reserves have been reflected in the Balance Sheet for obsolete or
otherwise unusable inventory, which reserves were calculated in a manner
consistent with past practice and in accordance with GAAP consistently applied.
(b) All accounts receivable of the Company and its Subsidiaries have
arisen from bona fide transactions in the ordinary course of business consistent
with past practice. All accounts receivable of the Company and its Subsidiaries
reflected on the Balance Sheet are good and collectible at the aggregate
recorded amounts thereof, net of any applicable reserve for returns or doubtful
accounts reflected thereon, which reserves are adequate and were calculated in a
manner consistent with past practice and in accordance with GAAP consistently
applied. All accounts receivable arising after the Balance Sheet Date are good
and collectible at the aggregate recorded amounts thereof, net of any applicable
reserve for returns or doubtful accounts, which reserves are adequate and were
calculated in a manner consistent with past practice and in accordance with GAAP
consistently applied.
(c) All accounts payable of the Company and its Subsidiaries
reflected in the Balance Sheet or arising after the date thereof are the result
of bona fide transactions in the ordinary course of business and have been paid
or are not yet due and payable.
4.22 Related Party Transactions. Except as set forth in the Company
Disclosure Schedules, neither the Sellers nor any of their respective affiliates
has borrowed any moneys from or has outstanding any indebtedness or other
similar obligations to the Company or and Subsidiary. Except as set forth in the
Company Disclosure Schedules, neither the Sellers, the Company, any Subsidiary
of the Company, any affiliate of the Company or the Sellers nor any officer or
employee of any of them: (a) owns any direct or indirect interest of any kind
in, or controls or is a director, officer, employee or partner of, or consultant
to, or lender to or borrower from or has the right to participate in the profits
of, any person or entity which is (i) a competitor, supplier, customer,
landlord, tenant, creditor or debtor of the Company or any of its Subsidiaries,
(ii) engaged in a business related to the business of the Company or any of its
Subsidiaries, or (iii) a participant in any transaction to which the Company or
any of its Subsidiaries is a party; or (b) is a party to any Contract with the
Company or any of its Subsidiaries.
14
4.23 Banks. The Company Disclosure Schedules contain a complete and
correct list of the names and locations of all banks in which Company or any
Subsidiary has accounts or safe deposit boxes and the names of all persons
authorized to draw thereon or to have access thereto. Except as set forth in the
Company Disclosure Schedules, no person holds a power of attorney to act on
behalf of the Company or any Subsidiary.
4.24 Financial Advisors. Except for Xxxxxxxxx Xxxxxx, no person or entity
has acted, directly or indirectly, as a broker, finder or financial advisor for
the Company in connection with the transactions contemplated by this Agreement
and no person or entity is entitled to any fee or commission or like payment in
respect thereof.
4.25 No Misrepresentation. No representation or warranty of the Company
contained in this Agreement or in any schedule hereto or in any certificate or
other instrument furnished by the Company to the Purchaser pursuant to the terms
hereof, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers hereby severally and not jointly represent and warrant to the
Purchaser that:
5.1 Authorization of Agreement. Each Seller has all requisite power,
authority and legal capacity to execute and deliver this Agreement, and each
other agreement, document, or instrument or certificate contemplated by this
Agreement or to be executed by such Seller in connection with the consummation
of the transactions contemplated by this Agreement (together with this
Agreement, the "Seller Documents"), and to consummate the transactions
contemplated hereby and thereby. This Agreement has been, and each of the Seller
Documents will be at or prior to the Closing, duly and validly executed and
delivered by each Seller and (assuming the due authorization, execution and
delivery by the other parties hereto and thereto) this Agreement constitutes,
and each of the Seller Documents when so executed and delivered will constitute,
legal, valid and binding obligations of each Seller, enforceable against each
Seller in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
15
5.2 Conflicts; Consents of Third Parties.
(a) None of the execution and delivery by any Seller of this
Agreement and the Seller Documents, the consummation of the transactions
contemplated hereby or thereby, or compliance by any Seller with any of the
provisions hereof or thereof will: (i) conflict with, or result in the breach
of, any provision of the articles of incorporation or bylaws or comparable
organizational documents of the Seller, as applicable; (ii) conflict with,
violate, result in the breach or termination of, or constitute a default under
any note, bond, mortgage, indenture, license, agreement or other instrument or
obligation to which such Seller is a party or by which either of them or any of
their respective properties or assets is bound; (iii) violate any statute, rule,
regulation, order or decree of any governmental body or authority by which such
Seller is bound; or (iv) result in the creation of any Lien upon the properties
or assets of the Company or any Subsidiary.
(b) No consent, waiver, approval, order, permit or authorization of,
or declaration or filing with, or notification to, any person, entity or
governmental body is required on the part of any Seller in connection with the
execution and delivery of this Agreement or the Seller Documents, or the
compliance by each Seller as the case may be, with any of the provisions hereof
or thereof.
5.3 Ownership and Transfer of Shares. Each Seller is the record and
beneficial owner of the Shares indicated as being owned by such Seller on
Schedule A, free and clear of any and all Liens. Such Shares constitute all of
the issued and outstanding shares of capital stock of the Company. Each Seller
has the power and authority to sell, transfer, assign and deliver such Shares as
provided in this Agreement, and such delivery will convey to the Purchaser good
and marketable title to such Shares, free and clear of any and all Liens.
5.4 Accreditation. Each Seller is an "accredited investor" within the
meaning of Rule 501(a) of Regulation D promulgated under the Securities Act of
1933, as amended (the "Securities Act"). The Sellers understand that the shares
of Purchaser Common Stock constituting the Purchase Price are being offered to
them in reliance upon specific exemptions from the registration requirements of
United States federal and state securities laws and that the Purchaser is
relying upon the truth and accuracy of, and the Sellers' compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Sellers set forth herein in order to determine the availability of such
exemptions and the eligibility of the Sellers to acquire the shares of Purchaser
Common Stock constituting the Purchase Price.
5.5 Investment Intention. Each Seller is acquiring the shares of Purchaser
Common Stock constituting the Purchase Price for its own account, for investment
purposes only and not with a view to the distribution (as such term is used in
Section 2(11) of the Securities Act). Purchaser understands that such shares of
Purchaser Common Stock have not been registered under the Securities Act and
cannot be sold unless subsequently registered under the Securities Act or an
exemption from such registration is available.
5.6 Investment Experience; Suitability. Each Seller is familiar with the
type of risks inherent in the acquisition of securities such as shares of
Purchaser Common Stock and each Seller's financial position is such that the
Seller can afford to retain the shares of Purchaser Common Stock constituting
the Purchase Price for an indefinite period of time without realizing any direct
or indirect cash return on its investment.
16
5.7 Financial Advisors. Except for Xxxxxxxxx Xxxxxx, no person or entity
has acted, directly or indirectly, as a broker, finder or financial advisor for
the Sellers in connection with the transactions contemplated by this Agreement
and no person or entity is entitled to any fee or commission or like payment in
respect thereof.
5.8 No Misrepresentation. No representation or warranty of any Seller
contained in this Agreement or in any schedule hereto or in any certificate or
other instrument furnished by any Seller to the Purchaser pursuant to the terms
hereof, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser hereby represents and warrants to the Company and the
Sellers that:
6.1 Organization and Good Standing. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Utah and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now conducted. The
Purchaser is duly qualified or authorized to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction in which
it owns or leases real property and each other jurisdiction in which the conduct
of its business or the ownership of its properties requires such qualification
or authorization, except where the failure to be so qualified would not have a
Material Adverse Effect on the Purchaser and any subsidiaries taken as a whole.
6.2 Authorization of Agreement. The Purchaser has full corporate power and
authority to execute and deliver this Agreement and each other agreement,
document, instrument or certificate contemplated by this Agreement or to be
executed by the Purchaser in connection with the consummation of the
transactions contemplated hereby and thereby (the "Purchaser Documents"), and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by the Purchaser of this Agreement and each Purchaser
Document have been duly authorized by all necessary corporate action on behalf
of the Purchaser. This Agreement has been, and each Purchaser Document will be
at or prior to the Closing, duly executed and delivered by the Purchaser and
(assuming the due authorization, execution and delivery by the other parties
hereto and thereto) this Agreement constitutes, and each Purchaser Document when
so executed and delivered will constitute, legal, valid and binding obligations
of the Purchaser, enforceable against the Purchaser in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
17
6.3 Capitalization.
(a) The authorized capital stock of the Purchaser consists of
50,000,000 shares of common stock, $.001 par value per share. As of the date
hereof, there are 14,200,104 shares of Purchaser Common Stock issued and
outstanding. All of the issued and outstanding shares of Purchaser Common Stock
were duly authorized for issuance and are validly issued, fully paid and
non-assessable.
(b) Except as set forth in the Commission Documents (defined below),
there is no existing option, warrant, call, right, commitment or other agreement
of any character to which the Purchaser is a party requiring, and there are no
securities of the Purchaser outstanding which upon conversion or exchange would
require, the issuance, sale or transfer of any additional shares of capital
stock or other equity securities of the Purchaser or other securities
convertible into, exchangeable for or evidencing the right to subscribe for or
purchase shares of capital stock or other equity securities of the Purchaser.
The Purchaser is not, and to the Purchaser's knowledge none of the Purchaser's
shareholders is, a party to any voting trust or other voting agreement with
respect to any of the shares of Purchaser Common Stock or to any agreement
relating to the issuance, sale, redemption, transfer or other disposition of the
capital stock of the Purchaser.
6.4 Subsidiaries. The Purchaser has no subsidiaries.
6.5 Corporate Records.
(a) The Purchaser has delivered to the Company true, correct and
complete copies of the articles of incorporation (each certified by the
Secretary of State or other appropriate official of the applicable jurisdiction
of organization) and bylaws (each certified by the secretary, assistant
secretary or other appropriate officer) or comparable organizational documents
of the Purchasers.
(b) The minute books of the Purchaser previously made available to
the Company contain complete and accurate records of all meetings since December
31, 2004 and accurately reflect all other corporate action of the stockholders
and board of directors (including committees thereof) of the Purchaser since
December 31, 2004. The stock transfer ledger of the Purchaser previously made
available to the Purchaser are true, correct and complete.
18
6.6 Conflicts; Consents of Third Parties.
(a) Neither of the execution and delivery by the Purchaser of this
Agreement and of the Purchaser Documents, nor the compliance by the Purchaser
with any of the provisions hereof or thereof will: (i) conflict with, or result
in the breach of, any provision of the articles of incorporation or bylaws of
the Purchaser; (ii) conflict with, violate, result in the breach of, or
constitute a default under any note, bond, mortgage, indenture, license,
agreement or other obligation to which the Purchaser is a party or by which the
Purchaser or its properties or assets are bound; or (iii) violate any statute,
rule, regulation, order or decree of any governmental body or authority by which
the Purchaser is bound; or (iv) result in the creation of any Lien of any kind
or nature upon the properties or assets of the Purchaser.
(b) No consent, waiver, approval, order, permit or authorization of,
or declaration or filing with, or notification to, any person or governmental
body is required on the part of the Purchaser in connection with the execution
and delivery of this Agreement or the Purchaser Documents or the compliance by
Purchaser with any of the provisions hereof or thereof.
6.6 Commission Documents; Financial Statements. The Purchaser Common Stock
is registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and since December 31, 2004 the
Purchaser has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Securities and Exchange Commission
(the "Commission") pursuant to the reporting requirements of the Exchange Act,
including pursuant to Sections 13, 14 or 15(d) thereof (all of the foregoing and
all exhibits included therein and financial statement and schedules thereto,
including filings incorporated by reference therein being referred to herein as
the "Commission Documents"). At the times of their respective filings, the
Purchaser's Form 10-QSB for the fiscal quarter ended September 30, 2005 (the
"Form 10-QSB") and the Purchaser's Form 10-KSB for the fiscal year ended June
30, 2005 (the "Form 10-KSB") complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the Commission
promulgated thereunder, and the Form 10-QSB and Form 10-KSB at the time of their
respective filings 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. As of their respective dates, the financial
statements of the Company included in the Commission Documents were complete and
correct in all material respects and complied with applicable accounting
requirements and the published rules and regulations of the Commission or other
applicable rules and regulations with respect thereto. Such financial statements
have been prepared in accordance with GAAP applied on a consistent basis during
the periods involved (except (a) as may be otherwise indicated in such financial
statements or the Notes thereto or (b) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements), and fairly present in all material respects the financial
position of the Purchaser as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
19
6.7 Registration and Listing. The Purchaser Common Stock is currently
quoted on the OTC Bulletin Board and is in compliance with any continued listing
requirements thereunder.
6.8 No Undisclosed Liabilities or Liens. The Purchaser does not have any
indebtedness, obligations, liabilities, or Liens of any kind (whether accrued,
absolute, contingent or otherwise, and whether due or to become due) that are
not reflected in the Commission Documents.
6.9 Absence of Certain Developments. Except as expressly contemplated by
this Agreement, as set forth in the attached disclosure schedules of the
Purchaser (the "Purchaser Disclosure Schedules") or as set forth in the
Commission Documents, since June 30, 2005:
(a) there has not been any material adverse change in the business,
assets or financial condition of the Purchaser nor has there occurred any event
which is reasonably likely to result in a material adverse change in the
business, assets or financial condition of the Purchaser;
(b) there has not been any damage, destruction or loss, whether or
not covered by insurance, with respect to the property and assets of the
Purchaser having a replacement cost of more than $25,000 for any single loss or
$50,000 for all such losses;
(c) there has not been any declaration, setting aside or payment of
any dividend or other distribution in respect of any shares of capital stock of
the Purchaser or any repurchase, redemption or other acquisition by the
Purchaser of any outstanding shares of capital stock or other securities of, or
other ownership interest in, the Purchaser;
(d) the Purchaser has not awarded or paid any bonuses to employees
of the Purchaser or agreed to increase the compensation payable or to become
payable by it to any of the Purchaser's directors, officers, employees, agents
or representatives or agreed to increase the coverage or benefits available
under any severance pay, termination pay, vacation pay, company awards, salary
continuation for disability, sick leave, deferred compensation, bonus or other
incentive compensation, insurance, pension or other employee benefit plan,
payment or arrangement made to, for or with such directors, officers, employees,
agents or representatives (other than normal increases in the ordinary course of
business consistent with past practice and that in the aggregate have not
resulted in a material increase in the benefits or compensation expense of the
Purchaser);
(e) there has not been any change by the Purchaser in accounting or
tax reporting principles, methods or policies;
(f) the Purchaser has not entered into any transaction or Contract
or conducted its business other than in the ordinary course consistent with past
practice;
(g) the Purchaser has not failed to promptly pay and discharge
current liabilities except where disputed in good faith by appropriate
proceedings;
20
(h) the Purchaser has not made any loans, advances or capital
contributions to, or investments in, any person or entity;
(i) the Purchaser has not mortgaged, pledged or subjected to any
Lien any of its assets, or acquired any assets or sold, assigned, transferred,
conveyed, leased or otherwise disposed of any assets of the Purchaser, except
for assets acquired or sold, assigned, transferred, conveyed, leased or
otherwise disposed of in the ordinary course of business consistent with past
practice;
(j) the Purchaser has not discharged or satisfied any Lien, or paid
any obligation or liability (fixed or contingent), except in the ordinary course
of business consistent with past practice and which, in the aggregate, would not
be material to the Purchaser;
(k) the Purchaser has not canceled or compromised any debt or claim
or amended, canceled, terminated, relinquished, waived or released any Contract
or right except in the ordinary course of business consistent with past practice
and which, in the aggregate, would not be material to the Purchaser;
(l) the Purchaser has not made or committed to make any capital
expenditures or capital additions or betterments in excess of $20,000
individually or $40,000 in the aggregate;
(m) the Purchaser has instituted or settled any material legal
proceeding; and
(n) the Purchaser has not agreed to do anything set forth in this
Section 6.9.
6.10 Taxes.
(a) Except as set forth in the Purchaser Disclosure Schedules, to
the Purchaser's knowledge: (i) all material tax returns required to be filed by
or on behalf of the Purchaser have been properly prepared and duly and timely
filed with the appropriate taxing authorities in all jurisdictions in which such
tax returns are required to be filed (after giving effect to any valid
extensions of time in which to make such filings), and all such tax returns were
true, complete and correct in all material respects; (ii) all amounts shown on
such tax returns (including interest and penalties) as due from the Purchaser
have been fully and timely paid, and adequate reserves or accruals for taxes
have been provided in the Commission Documents with respect to any period for
which tax returns have not yet been filed or for which taxes are not yet due and
owing; and (iii) the Purchaser has not executed or filed with the IRS or any
other taxing authority any agreement, waiver or other document or arrangement
extending or having the effect of extending the period for assessment or
collection of taxes (including, but not limited to, any applicable statute of
limitation), and no power of attorney with respect to any tax matter is
currently in force.
(b) To the Purchaser's knowledge, the Purchaser has complied in all
material respects with all applicable laws, rules and regulations relating to
the payment and withholding of taxes and has duly and timely withheld from
employee salaries, wages and other compensation and has paid over to the
appropriate taxing authorities all amounts required to be so withheld and paid
over for all periods under all applicable laws.
21
(c) The Company and Sellers have received complete copies of: (i)
all material federal, state, local and foreign income or franchise tax returns
of the Purchaser relating to the taxable periods since January 1, 2002; and (ii)
any audit report issued within the last three years relating to any material
taxes due from or with respect to the Purchaser its income, assets or
operations. To the Purchaser's knowledge, all income and franchise tax returns
filed by or on behalf of the Purchaser for the taxable years ended on the
respective dates set forth in the Purchaser Disclosure Schedules have been
examined by the relevant taxing authority or the statute of limitations with
respect to such tax returns has expired.
(d) The Purchaser Disclosure Schedules list all material types of
taxes paid and material types of tax returns filed by or on behalf of the
Purchaser. Except as set forth in the Purchaser Disclosure Schedules, to the
Purchaser's knowledge, no claim has been made by a taxing authority in a
jurisdiction where the Purchaser does not file tax returns such that it is or
may be subject to taxation by that jurisdiction.
(e) To the Purchaser's knowledge, no claim has been made by a taxing
authority in a jurisdiction where the Purchaser does not file tax returns such
that it is or may be subject to taxation by that jurisdiction.
(f) To the Purchaser's knowledge, all deficiencies asserted or
assessments made as a result of any examinations by the IRS or any other taxing
authority of the tax returns of or covering or including the Purchaser have been
fully paid, and there are no other audits or investigations by any taxing
authority in progress, nor to the Purchaser's knowledge has the Purchaser
received any notice from any taxing authority that it intends to conduct such an
audit or investigation. To the Purchaser's knowledge, no issue has been raised
by a federal, state, local or foreign taxing authority in any current or prior
examination which, by application of the same or similar principles, could
reasonably be expected to result in a proposed deficiency for any subsequent
taxable period.
(g) To the Purchaser's knowledge, the Purchaser is not subject to
any private letter ruling of the IRS or comparable rulings of other taxing
authorities.
(h) To the Purchaser's knowledge, there are no Liens as a result of
any unpaid taxes upon any of the assets of the Purchaser.
6.11 Real Property.
(a) The Purchaser Disclosure Schedules set forth a complete list of
all real property and interests in real property leased by the Purchaser
(individually, a "Purchaser Real Property Lease" and the real properties
specified in such leases being referred to herein individually as a "Purchaser
Property" and collectively as the "Purchaser Properties") as lessee or lessor.
Purchaser Property constitutes all interests in real property currently used or
currently held for use in connection with the business of the Purchaser and
which are necessary for the continued operation of the business of the Purchaser
as the business is currently conducted. The Purchaser has a valid and
enforceable leasehold interest under each of the Purchaser Real Property Leases,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and subject, as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), and the Purchaser
has not received any written notice of any default or event that with notice or
lapse of time, or both, would constitute a default by the Purchaser under any of
the Purchaser Real Property Leases. All of the Purchaser Property, buildings,
fixtures and improvements thereon owned or leased by the Purchaser are in good
operating condition and repair (subject to normal wear and tear). The Purchaser
has delivered or otherwise made available to the Company and the Sellers true,
correct and complete copies of the Purchaser Real Property Leases, together with
all amendments, modifications or supplements, if any, thereto.
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(b) The Purchaser has all material certificates of occupancy and
permits of any governmental body necessary or useful for the current use and
operation of each Purchaser Property, and the Purchaser has fully complied with
all material conditions of the permits applicable to them. No default or
violation, or event that with the lapse of time or giving of notice or both
would become a default or violation, has occurred in the due observance of any
permit.
6.12 Tangible Personal Property.
(a) The Purchaser Disclosure Schedules set forth all leases of
personal property ("Purchaser Personal Property Leases") involving annual
payments in excess of $25,000 relating to personal property used in the business
of the Purchaser to which the Purchaser is a party or by which the properties or
assets of the Purchaser is bound.
(b) The Purchaser has a valid leasehold interest under each of the
Purchaser Personal Property Leases under which it is a lessee, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), and there is no
default under any Purchaser Personal Property Lease by the Purchaser or, to the
best knowledge of the Purchaser, by any other party thereto, and no event has
occurred that with the lapse of time or the giving of notice or both would
constitute a default thereunder.
(c) The Purchaser has good and marketable title to all of the items
of tangible personal property reflected in the Commission Documents (except as
sold or disposed of subsequent to the date thereof in the ordinary course of
business consistent with past practice), free and clear of any and all Liens,
other than as set forth in the Commission Documents. All such items of tangible
personal property which, individually or in the aggregate, are material to the
operation of the business of the Purchaser are in good condition and in a state
of good maintenance and repair (ordinary wear and tear excepted) and are
suitable for the purposes used.
(d) All of the items of tangible personal property used by the
Purchaser under the Purchaser Personal Property Leases are in good condition and
repair (ordinary wear and tear excepted) and are suitable for the purposes used.
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6.13 Intangible Property. The Purchaser Disclosure Schedules contain a
complete and correct list of each patent, trademark, trade name, service xxxx
and copyright owned or used by the Purchaser as well as all registrations
thereof and pending applications therefor, and each license or other agreement
relating thereto. Except as set forth in the Purchaser Disclosure Schedules,
each of the foregoing is owned by the party shown in such Purchaser Disclosure
Schedules as owning the same, free and clear of all Liens and is in good
standing and not the subject of any challenge. There have been no claims made
and the Purchaser has not received any notice or otherwise knows or has reason
to believe that any of the foregoing is invalid or conflicts with the asserted
rights of others. The Purchaser possesses all patents, patent licenses, trade
names, trademarks, service marks, brand marks, brand names, copyrights,
know-how, formulate and other proprietary and trade rights necessary for the
conduct of its business as now conducted, not subject to any restrictions and
without any known conflict with the rights of others and the Purchaser has not
forfeited or otherwise relinquished any such patent, patent license, trade name,
trademark, service xxxx, brand xxxx, brand name, copyright, know-how, formulate
or other proprietary right necessary for the conduct of its business as
conducted on the date hereof. The Purchaser is not under any obligation to pay
any royalties or similar payments in connection with any license.
6.14 Company Material Contracts. The Commission Documents describe all of
the following contracts, agreements, commitments ("Contracts") to which the
Purchaser is a party or by which it is bound (collectively, the "Purchaser
Material Contracts"): (a) Contracts with any current officer or director of the
Purchaser; (b) Contracts with any labor union or association representing any
employee of the Purchaser; (c) Contracts pursuant to which any party is required
to purchase or sell a stated portion of its requirements or output from or to
another party; (d) Contracts for the sale of any of the assets of the Purchaser
other than in the ordinary course of business or for the grant to any person or
entity of any preferential rights to purchase any of its assets; (e) joint
venture agreements; (f) material Contracts containing covenants of the Purchaser
not to compete in any line of business or with any person or entity in any
geographical area or covenants of any other person or entity not to compete with
the Purchaser in any line of business or in any geographical area; (g) Contracts
relating to the acquisition by the Purchaser of any operating business or the
capital stock of any other person or entity ; (h) Contracts relating to the
borrowing of money; or (i) any other Contracts, other than Purchaser Real
Property Leases, which involve the expenditure of more than $50,000 in the
aggregate or $25,000 annually or require performance by any party more than one
year from the date hereof. Except as set forth in the Commission Documents, all
of the Purchaser Material Contracts and other agreements are in full force and
effect and are the legal, valid and binding obligation of the Purchaser,
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). Except as set forth
in the Commission Documents, the Purchaser is not in default in any material
respect under any Purchaser Material Contracts, nor, to the knowledge of the
Purchaser, is any other party to any Purchaser Material Contract in default
thereunder in any material respect. There have been made available to the
Company, its affiliates and their representatives true and complete copies of
all of the Purchaser Material Contracts.
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6.15 Employee Benefits.
(a) The Purchaser Disclosure Schedules set forth a complete and
correct list of: (i) all "employee benefit plans," as defined in Section 3(3) of
ERISA, and any other pension plans or employee benefit arrangements, programs or
payroll practices (including, without limitation, severance pay, vacation pay,
company awards, salary continuation for disability, sick leave, retirement,
deferred compensation, bonus or other incentive compensation, stock purchase
arrangements or policies, hospitalization, medical insurance, life insurance and
scholarship programs) maintained by the Purchaser or to which the Purchaser
contributes or is obligated to contribute thereunder with respect to employees
of the Purchaser ("Purchaser Employee Benefit Plans"); and (ii) all "employee
pension plans," as defined in Section 3(2) of ERISA, maintained by the Purchaser
or any ERISA Affiliate or to which the Purchaser or any ERISA Affiliate
contributed or is obligated to contribute thereunder ("Purchaser Pension
Plans").
(b) All contributions and premiums required by law or by the terms
of any Purchaser Employee Benefit Plan or Purchaser Pension Plan which are
defined benefit plans or money purchase plans or any agreement relating thereto
have been timely made (without regard to any waivers granted with respect
thereto) to any funds or trusts established thereunder or in connection
therewith, and no accumulated funding deficiencies exist in any of such plans
subject to Section 412 of ERISA.
(c) There has been no violation of ERISA with respect to the filing
of applicable returns, reports, documents and notices regarding any of the
Purchaser Employee Benefit Plans or Purchaser Pension Plans with the Secretary
of Labor or the Secretary of the Treasury or the furnishing of such notices or
documents to the participants or beneficiaries of the Purchaser Employee Benefit
Plans or Purchaser Pension Plans.
(d) True, correct and complete copies of the following documents,
with respect to each of the Purchaser Employee Benefit Plans and Purchaser
Pension Plans (as applicable), have been delivered to the Company and the
Sellers: (i) any plans and related trust documents, and all amendments thereto;
(ii) the most recent Forms 5500 for the past three years and schedules thereto;
(iii) the most recent financial statements and actuarial valuations for the past
three years; (iv) the most recent IRS determination letter; (v) the most recent
summary plan descriptions (including letters or other documents updating such
descriptions); and (vi) written descriptions of all non-written agreements
relating to the Purchaser Employee Benefit Plans and Purchaser Pension Plans.
6.16 Labor.
(a) The Purchaser is not a party to any labor or collective
bargaining agreement and there are no labor or collective bargaining agreements
which pertain to employees of the Purchaser.
(b) Except as set forth in the Commission Documents, no employees of
the Purchaser are represented by any labor organization. No labor organization
or group of employees of the Purchaser has made a pending demand for
recognition, and there are no representation proceedings or petitions seeking a
representation proceeding presently pending or, to the best knowledge of the
Purchaser, threatened to be brought or filed, with the National Labor Relations
Board or other labor relations tribunal. There is no organizing activity
involving the Purchaser pending or, to the best knowledge of the Purchaser,
threatened by any labor organization or group of employees of the Purchaser.
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(c) There are no (i) strikes, work stoppages, slowdowns, lockouts or
arbitrations or (ii) material grievances or other labor disputes pending or, to
the best knowledge of the Purchaser, threatened against or involving the
Purchaser. There are no unfair labor practice charges, grievances or complaints
pending or, to the best knowledge of the Purchaser, threatened by or on behalf
of any employee or group of employees of the Purchaser.
6.17 Litigation. To the knowledge of the Purchaser, there is no suit,
action, proceeding, investigation, claim or order pending or overtly threatened
against the Purchaser (or to the knowledge of the Purchaser, pending or
threatened, against any of the officers, directors or key employees of the
Purchaser with respect to their business activities on behalf of the Purchaser),
or to which the Purchaser is otherwise a party, which, if adversely determined,
would have a Material Adverse Effect on the Purchaser, before any court, or
before any governmental department, commission, board, agency, or
instrumentality; nor to the knowledge of the Purchaser is there any reasonable
basis for any such action, proceeding, or investigation. The Purchaser is not
subject to any judgment, order or decree of any court or governmental agency
except to the extent the same are not reasonably likely to have a Material
Adverse Effect on the Purchaser and the Purchaser is not engaged in any legal
action to recover monies due it or for damages sustained by it. There are no
legal proceedings pending or, to the best knowledge of the Purchaser, threatened
that are reasonably likely to prohibit or restrain the ability of the Purchaser
to enter into this Agreement or consummate the transactions contemplated hereby.
6.18 Compliance with Laws; Permits. The Purchaser is in compliance with
all laws applicable to the Purchaser or to the conduct of the business or
operations of the Purchaser or the use of its properties (including any leased
properties) and assets, except for such non-compliances as would not,
individually or in the aggregate, have a Material Adverse Effect on the
Purchaser. The Purchaser has all governmental permits and approvals from state,
federal or local authorities which are required for the Purchaser to operate its
business as currently conducted, except for those the absence of which would
not, individually or in the aggregate, have a Material Adverse Effect on the
Purchaser.
6.19 Environmental Matters. Except as set forth in the Commission
Documents:
(a) the operations of the Purchaser are in compliance with all
Environmental Laws and all permits issued pursuant to Environmental Laws or
otherwise;
(b) the Purchaser has obtained all permits required under all
applicable Environmental Laws necessary to operate its business;
(c) the Purchaser is not the subject of any outstanding written
order or Contract with any governmental authority, person or entity respecting
Environmental Laws or any violation or potential violations thereof; and
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(d) the Purchaser has not received any written communication
alleging either or both that the Purchaser may be in violation of any
Environmental Law, or any permit issued pursuant to Environmental Law, or may
have any liability under any Environmental Law.
6.20 Insurance. The Purchaser Disclosure Schedules set forth a complete
and accurate list of all policies of insurance of any kind or nature covering
the Purchaser or any of its employees, properties or assets, including, without
limitation, policies of life, disability, fire, theft, workers compensation,
employee fidelity and other casualty and liability insurance. All such policies
are in full force and effect, and, to the Purchaser's knowledge, the Purchaser
is not in default of any provision thereof, except for such defaults as would
not, individually or in the aggregate, have a Material Adverse Effect on the
Purchaser.
6.21 Inventories; Receivables; Payables.
(a) The Purchaser has no inventories or accounts receivable.
(b) All accounts payable of the Purchaser reflected in the
Commission Documents or arising after the date thereof are the result of bona
fide transactions in the ordinary course of business and have been paid or are
not yet due and payable.
6.22 Related Party Transactions. Except as set forth in the Commission
Documents no employee, officer, director or other affiliate of the Purchaser has
borrowed any moneys from or has outstanding any indebtedness or other similar
obligations to the Purchaser. Except as set forth in the Commission Documents,
neither the Purchaser nor any affiliate of the Purchaser: (a) owns any direct or
indirect interest of any kind in, or controls or is a director, officer,
employee or partner of, or consultant to, or lender to or borrower from or has
the right to participate in the profits of, any person or entity which is (i) a
competitor, supplier, customer, landlord, tenant, creditor or debtor of the
Purchaser, (ii) engaged in a business related to the business of the Purchaser,
or (iii) a participant in any transaction to which the Purchaser is a party; or
(b) is a party to any Contract with the Purchaser.
6.23 Banks. The Purchaser Disclosure Schedules contain a complete and
correct list of the names and locations of all banks in which the Purchaser has
accounts or safe deposit boxes and the names of all persons authorized to draw
thereon or to have access thereto. Except as set forth in the Purchaser
Disclosure Schedules, no person holds a power of attorney to act on behalf of
the Purchaser.
6.24 Investment Intention. The Purchaser is acquiring the Shares for its
own account, for investment purposes only and not with a view to the
distribution (as such term is used in Section 2(11) of the Securities Act).
Purchaser understands that the Shares have not been registered under the
Securities Act and cannot be sold unless subsequently registered under the
Securities Act or an exemption from such registration is available.
6.25 Financial Advisors. Except for Aegis Equity, LLC, no person has
acted, directly or indirectly, as a broker, finder or financial advisor for the
Purchaser in connection with the transactions contemplated by this Agreement and
no person is entitled to any fee or commission or like payment in respect
thereof.
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6.26 No Misrepresentation. No representation or warranty of the Purchaser
contained in this Agreement or in any schedule hereto or in any certificate or
other instrument furnished by the Purchaser to the Sellers pursuant to the terms
hereof, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE VII
COVENANTS
7.1 Purchaser's Access to Information. The Company agrees that, prior to
the Closing Date, the Purchaser shall be entitled, through its officers,
employees and representatives (including, without limitation, its legal advisors
and accountants), to make such investigation of the properties, businesses and
operations of the Company and its Subsidiaries and such examination of the
books, records and financial condition of the Company and its Subsidiaries as it
reasonably requests and to make extracts and copies of such books and records.
Any such investigation and examination shall be conducted during regular
business hours and under reasonable circumstances, and the Company shall
cooperate, and shall cause its Subsidiaries to cooperate, fully therein. No
investigation by the Purchaser prior to or after the date of this Agreement
shall diminish or obviate any of the representations, warranties, covenants or
agreements of the Company contained in this Agreement or the Company Documents.
In order that the Purchaser may have full opportunity to make such physical,
business, accounting and legal review, examination or investigation as it may
reasonably request of the affairs of the Company and its Subsidiaries, the
Company shall cause the officers, employees, consultants, agents, accountants,
attorneys and other representatives of the Company and its Subsidiaries to
reasonably cooperate with such representatives in connection with such review
and examination.
7.2 The Company's Access to Information. The Purchaser agrees that, prior
to the Closing Date, the Company shall be entitled, through its officers,
employees and representatives (including, without limitation, its legal advisors
and accountants), to make such investigation of the properties, businesses and
operations of the Purchaser and such examination of the books, records and
financial condition of the Purchaser as it reasonably requests and to make
extracts and copies of such books and records. Any such investigation and
examination shall be conducted during regular business hours and under
reasonable circumstances, and the Purchaser shall cooperate fully therein. No
investigation by the Company prior to or after the date of this Agreement shall
diminish or obviate any of the representations, warranties, covenants or
agreements of the Purchaser contained in this Agreement or the Purchaser
Documents. In order that the Company may have full opportunity to make such
physical, business, accounting and legal review, examination or investigation as
it may reasonably request of the affairs of the Purchaser, the Purchaser shall
cause the officers, employees, consultants, agents, accountants, attorneys and
other representatives of the Purchaser to reasonably cooperate with such
representatives in connection with such review and examination.
7.3 Conduct of Business of the Purchaser and the Company Pending the
Closing.
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(a) Except as otherwise expressly contemplated by this Agreement or
with the prior written consent of the Purchaser and the Company, as applicable,
the Purchaser and the Company shall, and the Company shall cause its
Subsidiaries to:
(i) conduct the respective businesses of the Purchaser, the
Company and the Company's Subsidiaries only in the ordinary course consistent
with past practice;
(ii) use its best efforts to (A) preserve its present business
operations, organization (including, without limitation, management and the
sales force) and goodwill of the Purchaser, the Company and the Company's
Subsidiaries and (B) preserve its present relationship with persons and entities
having business dealings with the Purchaser, the Company and the Company's
Subsidiaries;
(iii) maintain (A) all of the assets and properties of the
Purchaser, the Company and the Company's Subsidiaries in their current
condition, ordinary wear and tear excepted and (B) insurance upon all of the
properties and assets of the Purchaser, the Company and the Company's
Subsidiaries in such amounts and of such kinds comparable to that in effect on
the date of this Agreement;
(iv) (A) maintain the books, accounts and records of the
Purchaser, the Company and the Company's Subsidiaries in the ordinary course of
business consistent with past practices, (B) continue to collect accounts
receivable and pay accounts payable utilizing normal procedures and without
discounting or accelerating payment of such accounts, and (C) comply with all
contractual and other obligations applicable to the operation of the Purchaser,
the Company and the Company's Subsidiaries; and
(v) comply in all material respects with applicable laws.
(b) Except as otherwise expressly contemplated by this Agreement or
with the prior written consent of the Purchaser and the Sellers, as applicable,
the Purchaser and the Sellers shall not, and the Sellers shall cause the Company
and its Subsidiaries not to:
(i) declare, set aside, make or pay any dividend or other
distribution in respect of the capital stock of the Purchaser or the Company or
repurchase, redeem or otherwise acquire any outstanding shares of the capital
stock or other securities of, or other ownership interests in, the Purchaser,
the Company or any of the Company's Subsidiaries;
(ii) transfer, issue, sell or dispose of any shares of capital
stock or other securities of the Purchaser or the Company or any of the
Company's Subsidiaries or grant options, warrants, calls or other rights to
purchase or otherwise acquire shares of the capital stock or other securities of
the Purchaser, the Company or any of the Company's Subsidiaries;
(iii) effect any recapitalization, reclassification, stock
split or like change in the capitalization of the Purchaser, the Company or any
of the Company's Subsidiaries;
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(iv) amend the articles of incorporation or bylaws of the
Purchaser, the Company or any of the Company's Subsidiaries;
(v) (A) materially increase the annual level of compensation
of any employee of the Purchaser, the Company or any of the Company's
Subsidiaries, (B) increase the annual level of compensation payable or to become
payable by the Purchaser, the Company or any of the Company's Subsidiaries to
any of their respective executive officers, (C) grant any unusual or
extraordinary bonus, benefit or other direct or indirect compensation to any
employee, director or consultant, other than in the ordinary course consistent
with past practice and in such amounts as are fully reserved against in the Form
10-QSB in the case of the Purchaser or the Financial Statements in the case of
the Company, (D) increase the coverage or benefits available under any (or
create any new) severance pay, termination pay, vacation pay, company awards,
salary continuation for disability, sick leave, deferred compensation, bonus or
other incentive compensation, insurance, pension or other employee benefit plan
or arrangement made to, for, or with any of the directors, officers, employees,
agents or representatives of the Purchaser, the Company or any of the Company's
Subsidiaries or otherwise modify or amend or terminate any such plan or
arrangement or (E) enter into any employment, deferred compensation, severance,
consulting, non-competition or similar agreement (or amend any such agreement)
to which the Purchaser, the Company or any of the Company's Subsidiaries is a
party or involving a director, officer or employee of the Purchaser, the Company
or any of the Company's Subsidiaries in his or her capacity as a director,
officer or employee of the Purchaser, the Company or any of the Company's
Subsidiaries;
(vi) except for trade payables and for indebtedness for
borrowed money incurred in the ordinary course of business and consistent with
past practice, borrow monies for any reason or draw down on any line of credit
or debt obligation, or become the guarantor, surety, endorser or otherwise
liable for any debt, obligation or liability (contingent or otherwise) of any
other person or entity;
(vii) subject to any Lien (except for leases that do not
materially impair the use of the property subject thereto in their respective
businesses as presently conducted), any of the properties or assets (whether
tangible or intangible) of the Purchaser, the Company or any of the Company's
Subsidiaries;
(viii) acquire any material properties or assets or sell,
assign, transfer, convey, lease or otherwise dispose of any of the material
properties or assets (except for fair consideration in the ordinary course of
business consistent with past practice) of the Purchaser, the Company and the
Company's Subsidiaries;
(ix) cancel or compromise any debt or claim or waive or
release any material right of the Purchaser, the Company or any of the Company's
Subsidiaries except in the ordinary course of business consistent with past
practice;
(x) enter into any commitment for capital expenditures out of
the ordinary course;
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(xi) permit the Purchaser, the Company or any of the Company's
Subsidiaries to enter into any transaction or to make or enter into any contract
which by reason of its size or otherwise is not in the ordinary course of
business consistent with past practice;
(xii) permit the Purchaser, the Company or any of the
Company's Subsidiaries to enter into or agree to enter into any merger or
consolidation with, any corporation or other entity, and not engage in any new
business or invest in, make a loan, advance or capital contribution to, or
otherwise acquire the securities of any other person or entity;
(xiii) except for transfers of cash pursuant to normal cash
management practices, permit the Purchaser, the Company or any of the Company's
Subsidiaries to make any investments in or loans to, or pay any fees or expenses
to, or enter into or modify any contract with any affiliate of the Purchaser,
any Seller or any affiliate of any Seller; or
(xiv) agree to do anything prohibited by this Section 7.3 or
anything which would make any of the representations and warranties of the
Purchaser, the Company or the Sellers in this Agreement or the Purchaser
Documents, Company Documents or Seller Documents untrue or incorrect in any
material respect as of any time through and including the Closing Date.
(c) Notwithstanding anything to the contrary in this Section 7.3,
the Purchaser acknowledges that since September 1, 2005, Xxx Xxxxxx or his
affiliated companies have been making, and will continue to make, at their sole
discretion, until the Closing, loans to the Company for working capital
purposes. Such loans shall be repaid from accounts receivable of the Company.
7.4 Consents. Each of the Company and the Purchaser shall use its best
efforts, and each of the Company and the Purchaser shall cooperate with one
another, to obtain at the earliest practicable date all consents and approvals
required to consummate the transactions contemplated by this Agreement;
provided, however, that neither the Company, Sellers nor the Purchaser shall be
obligated to pay any consideration therefor to any third party from whom consent
or approval is requested.
7.5 Other Actions. Each of the Company and the Purchaser shall use its
best efforts to: (a) take all actions necessary or appropriate to consummate the
transactions contemplated by this Agreement; and (b) cause the fulfillment at
the earliest practicable date of all of the conditions to their respective
obligations to consummate the transactions contemplated by this Agreement.
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7.6 No Solicitation by the Company. The Company will not, and will not
cause or permit the Company or any of the Company's directors, officers,
employees, representatives or agents (collectively, the "Company
Representatives") to, directly or indirectly: (a) discuss, negotiate, undertake,
authorize, recommend, propose or enter into, either as the proposed surviving,
merged, acquiring or acquired corporation, any transaction involving a merger,
consolidation, business combination, purchase or disposition of any amount of
the assets or capital stock or other equity interest in the Company or any of
its Subsidiaries other than the transactions contemplated by this Agreement (an
"Acquisition Transaction"); (b) facilitate, encourage, solicit or initiate
discussions, negotiations or submissions of proposals or offers in respect of an
Acquisition Transaction; (c) furnish or cause to be furnished, to any person or
entity, any information concerning the business, operations, properties or
assets of the Company or any of its Subsidiaries in connection with an
Acquisition Transaction; or (d) otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any other
person or entity to do or seek any of the foregoing. The Company will inform the
Purchaser in writing immediately following the receipt by the Company or any
Company Representative of any proposal or inquiry in respect of any Acquisition
Transaction.
7.7 No Solicitation by the Purchaser. The Purchaser will not, and will not
cause or permit any of the Purchaser's directors, officers, employees,
representatives or agents (collectively, the "Purchaser Representatives") to,
directly or indirectly: (a) discuss, negotiate, undertake, authorize, recommend,
propose or enter into, either as the proposed surviving, merged, acquiring or
acquired corporation, any Acquisition Transaction; (b) facilitate, encourage,
solicit or initiate discussions, negotiations or submissions of proposals or
offers in respect of an Acquisition Transaction; (c) furnish or cause to be
furnished, to any person or entity, any information concerning the business,
operations, properties or assets of the Purchaser in connection with an
Acquisition Transaction; or (d) otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any other
person or entity to do or seek any of the foregoing. The Purchaser will inform
the Company in writing immediately following the receipt by the Purchaser or any
Purchaser Representative of any proposal or inquiry in respect of any
Acquisition Transaction.
7.8 Preservation of Records. The Company and the Purchaser agree that each
of them shall preserve and keep the records held by it relating to the business
of the Company and its Subsidiaries and the Purchaser for a period of three
years from the Closing Date and shall make such records and personnel available
to the other as may be reasonably required by such party in connection with,
among other things, any insurance claims by, legal proceedings against or
governmental investigations of the Company or the Purchaser or any of their
affiliates or in order to enable the Company or the Purchaser to comply with
their respective obligations under this Agreement and each other agreement,
document or instrument contemplated hereby or thereby.
7.9 Publicity. Neither the Company nor the Purchaser shall issue any press
release or public announcement concerning this Agreement or the transactions
contemplated hereby without obtaining the prior written approval of the other
party hereto, which approval will not be unreasonably withheld or delayed,
unless, in the sole judgment of the Purchaser or the Company, disclosure is
otherwise required by applicable law or by the applicable rules of any stock
exchange on which the Purchaser lists securities, provided that, to the extent
required by applicable law, the party intending to make such release shall use
its best efforts consistent with such applicable law to consult with the other
party with respect to the text thereof.
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7.10 Use of Name. The Company hereby agrees that upon the consummation of
the transactions contemplated hereby, the Purchaser and the Company shall have
the sole right to the use of the name "Rebel Crew" and "Rebel Crew Films" and
the Company shall not, and shall not cause or permit any affiliate to, use such
name or any variation or simulation thereof.
7.11 Board of Directors. In accordance with Rule 14f-1, promulgated under
the Exchange Act, promptly after Closing the Purchaser shall file with the
Commission a report on Schedule 14f-1 disclosing a change in a majority of the
directors of the Purchaser and mail such Schedule 14f-1 to the Purchaser's
shareholders. Subject to compliance with Rule 14f-1, the Board of Directors of
the Purchaser after the Closing Date shall consist of five persons. Xxxxxx
"Xxxx" Xxxx, III shall designate or elect two of the five board members, which
shall initially be Xxxxxxx X. Xxxxx and Xxxxx X. Xxxxxxxx. Xxx Xxxxxx shall
designate or elect three of the five board members, one of which shall be Xx.
Xxxxxx. If after the Closing the number directors on Purchaser's board increases
to seven, then Xx. Xxxx shall have the right to designate or elect three of the
seven board members and Xx. Xxxxxx shall have the right to designate or elect
four of the seven board members.
7.12 Financial Statements. Before and after Closing, the Sellers shall
cooperate with the Purchaser to provide all information required to draft and
file a current report on Form 8-K containing disclosure required in a Form 10-SB
registration statement within four business days after the Closing Date.
7.13 Registration Rights.
(a) As promptly as possible, but in any event no later than ninety
(90) days following the Closing Date, the Purchaser shall prepare and file with
the Commission a registration statement (the "Registration Statement") on Form
SB-2 (or other applicable form) covering the resale of all the Purchaser Common
Stock constituting the Purchase Price (the "Registrable Securities"). The
Purchaser shall use its best efforts to cause the Registration Statement to be
declared effective by the Commission as promptly as possible after the filing
thereof and shall use its best efforts to keep the Registration Statement
continuously effective under the Securities Act until the earlier of: (i) the
date when all Registrable Securities covered by such Registration Statement have
been sold publicly; or (ii) the date when all Registrable Securities may be sold
pursuant to Rule 144(k) (the "Effectiveness Period").
(b) In connection with the Purchaser's registration obligations
hereunder, the Purchaser shall: (i) prepare and file with the Commission such
amendments, including post-effective amendments, to the Registration Statement
and the prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period; (ii) cause the related prospectus to be
amended or supplemented by any required prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424 promulgated under the
Securities Act; (iii) respond as promptly as reasonably possible to any comments
received from the Commission with respect to the Registration Statement or any
amendment thereto; and (iv) comply in all material respects with the provisions
of the Securities Act and the Exchange Act with respect to the disposition of
all Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Sellers set forth in the Registration Statement as so amended or in such
prospectus as so supplemented.
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(c) The Purchaser shall promptly deliver to each Seller, without
charge, as many copies of the final prospectus or final prospectuses and each
amendment or supplement thereto as such persons may reasonably request.
(d) The Purchaser shall cooperate with the Sellers to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be delivered to a transferee pursuant to a Registration Statement,
which certificates shall be free, to the extent permitted by law, of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Sellers may request.
(e) The Purchaser shall pay all fees and expenses incident to the
performance of or compliance with this Section 7.13, including: (i) all
registration and filing fees and expenses, including without limitation those
related to filings with the Commission and in connection with applicable state
securities or "blue sky" laws; and (ii) printing expenses (including without
limitation expenses of printing certificates for Registrable Securities and of
printing prospectuses requested by the Sellers).
(f) Subject to the last sentence of this Section 7.13(f), if at any
time prior to the expiration of the Effectiveness Period the Company shall
determine to file with the Commission a registration statement relating to an
offering for its own account or the account of others under the Securities Act
of any of its equity securities (other than on Form S-4 or Form S-8 or their
then equivalents relating to equity securities to be issued solely in connection
with an acquisition of any entity or business or equity securities issuable in
connection with employee benefit plans), the Company shall send to each Seller
who is entitled to registration rights under this Section 7.13(f) written notice
of such determination and, if within fifteen (15) days after the effective date
of such notice, such Seller shall so request in writing, the Purchaser shall
include in such registration statement all or any part of the Registrable
Securities such Seller requests to be registered. No right to registration of
Registrable Securities under this Section 7.13(f) shall be construed to limit
any registration required under Section 7.13(a) hereof. Notwithstanding anything
to the contrary set forth herein, the registration rights of the Sellers
pursuant to this Section 7.13(f) shall only be available in the event the
Purchaser fails to timely file, obtain effectiveness or maintain effectiveness
of any Registration Statement to be filed pursuant to Section 7.13(a) in
accordance with the terms of this Agreement.
7.14 Tax Election. At the sole discretion of the Purchaser, the Sellers
agree to make a timely Internal Revenue Code Section 338(h)(10) election
provided there is no additional tax liability for the Sellers due to this
election.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 Conditions Precedent to Obligations of Purchaser. The obligation of
the Purchaser to consummate the transactions contemplated by this Agreement is
subject to the fulfillment, on or prior to the Closing Date, of each of the
following conditions (any or all of which may be waived by the Purchaser in
whole or in part to the extent permitted by applicable law):
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(a) all representations and warranties of the Company and the
Sellers contained herein shall be true and correct as of the date hereof;
(b) all representations and warranties of the Company and the
Sellers contained herein qualified as to materiality shall be true and correct,
and the representations and warranties of the Company and the Sellers contained
herein not qualified as to materiality shall be true and correct in all material
respects, at and as of the Closing Date with the same effect as though those
representations and warranties had been made again at and as of that time;
(c) the Company and the Sellers shall have performed and complied in
all material respects with all obligations and covenants required by this
Agreement to be performed or complied with by them on or prior to the Closing
Date;
(d) the Purchaser shall have been furnished with certificates (dated
the Closing Date and in form and substance reasonably satisfactory to the
Purchaser) executed by the Company certifying as to the fulfillment of the
conditions specified in Sections 8.1(a), 8.1(b) and 8.1(c) hereof;
(e) certificates representing 100% of the Shares shall have been, or
shall at the Closing be, validly delivered and transferred to the Purchaser,
free and clear of any and all Liens;
(f) the Company and the Sellers shall have obtained all consents and
waivers referred to in Sections 4.6 and 5.2 hereof, in a form reasonably
satisfactory to the Purchaser, with respect to the transactions contemplated by
this Agreement and the Company Documents and Seller Documents;
(g) no legal proceedings shall have been instituted or threatened or
claim or demand made against the Sellers, the Company or any of its
Subsidiaries, or the Purchaser seeking to restrain or prohibit or to obtain
substantial damages with respect to the consummation of the transactions
contemplated hereby, and there shall not be in effect any order by a
governmental body of competent jurisdiction restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated hereby;
(h) there shall not have been or occurred any material adverse
change in the business, assets or financial condition of the Company nor has
there occurred any event which is reasonably likely to result in a material
adverse change in the business, assets or financial condition of the Company;
(i) if required by or pursuant to any agreement between the Company
and any of its debtors as a result of this Agreement any transactions
contemplated hereby, all non-trade debt of the Company shall be renegotiated on
terms and conditions (including but not limited to payment terms and amount to
be paid) to the sole satisfaction of the Purchaser;
(j) For a period of at least seventy-five (75) days prior to the
Closing Date, the Company to afford the officers and authorized representatives
of the Purchaser full access to the properties, books and records of the Company
in order that the Purchaser may have had a full opportunity to make such
reasonable investigation as it desires to make of the affairs of the Company,
and the Company shall have furnished the Purchaser with such additional
financial and operating data and other information as to the business and
properties of the Company as the Purchaser has from time to time reasonably
requested;
35
(k) the Purchaser shall have completed usual, customary and
reasonable due diligence of the Company to its reasonable satisfaction;
(l) Xxx Xxxxxx shall have entered into a three-year employment
agreement with the Purchaser, whereby Xx. Xxxxxx will serve as chief executive
officer of the Purchaser with an initial salary of $150,000 per year (the
"Employment Agreement"); and
(m) the Company shall have delivered the Financial Statements to the
Purchaser.
8.2 Conditions Precedent to Obligations of the Sellers and the Company.
The obligations of the Sellers and the Company to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, prior to or on
the Closing Date, of each of the following conditions (any or all of which may
be waived by the Sellers and the Company in whole or in part to the extent
permitted by applicable law):
(a) all representations and warranties of the Purchaser contained
herein shall be true and correct as of the date hereof;
(b) all representations and warranties of the Purchaser contained
herein qualified as to materiality shall be true and correct, and all
representations and warranties of the Purchaser contained herein not qualified
as to materiality shall be true and correct in all material respects, at and as
of the Closing Date with the same effect as though those representations and
warranties had been made again at and as of that date;
(c) the Purchaser shall have performed and complied in all material
respects with all obligations and covenants required by this Agreement to be
performed or complied with by Purchaser on or prior to the Closing Date;
(d) the Sellers shall have been furnished with certificates (dated
the Closing Date and in form and substance reasonably satisfactory to the
Sellers) executed by the Chief Executive Officer of the Purchaser certifying as
to the fulfillment of the conditions specified in Sections 8.2(a), 8.2(b) and
8.2(c);
(e) the Purchaser shall have obtained all consents and waivers
referred to in Section 6.5 hereof, in a form reasonably satisfactory to the
Seller, with respect to the transactions contemplated by this Agreement and the
Purchaser Documents;
(f) no legal proceedings shall have been instituted or threatened or
claim or demand made against the Sellers, the Company or any of its
Subsidiaries, or the Purchaser seeking to restrain or prohibit or to obtain
substantial damages with respect to the consummation of the transactions
contemplated hereby, and there shall not be in effect any order by a
governmental body of competent jurisdiction restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated hereby;
36
(g) there shall not have been or occurred any material adverse
change in the business, assets or financial condition of the Purchaser nor has
there occurred any event which is reasonably likely to result in a material
adverse change in the business, assets or financial condition of the Purchaser;
(h) for a period of at least seventy-five (75) days prior to the
Closing Date, the Purchaser shall have afforded the Company and the Sellers full
access to the properties, books and records of the Purchaser in order that the
Company and the Sellers may have had a full opportunity to make such reasonable
investigation as they desire to make of the affairs of the Purchaser, and the
Purchaser shall have furnished the Company and the Sellers with such additional
financial and operating data and other information as to the business and
properties of the Purchaser as the Company and the Sellers have from time to
time reasonably requested;
(i) the Company and the Sellers shall have completed usual,
customary and reasonable due diligence of the Purchaser to their reasonable
satisfaction;
(j) the Purchaser and the shareholders of the Purchaser listed on
Schedule B shall have entered into a voting agreement (the "Voting Agreement")
authorizing Xx. Xxxxxx to vote the shares of Purchaser Common Stock owned by
parties to such Voting Agreement on certain matters including, but not limited
to, amendments to the Purchaser's articles of incorporation, the sale of
substantially all of the Purchaser's assets, any other material transactions and
other matters specified therein;
(k) the Purchaser and Xxx Xxxxxx shall have entered into the
Employment Agreement; and
(l) the Company shall have entered into an agreement with Rebel
Holdings to purchase a $345,435.00 loan receivable due to Rebel Holdings from
the Company in exchange for the issuance by the Purchaser to Rebel Holdings of a
4.5% secured convertible note.
ARTICLE IX
DOCUMENTS TO BE DELIVERED
9.1 Documents to be Delivered by the Company and the Sellers. On or before
the Closing, the Company and the Sellers shall deliver, or cause to be
delivered, to the Purchaser the following:
(a) stock certificates representing the Shares, duly endorsed in
blank or accompanied by stock transfer powers and with all requisite stock
transfer tax stamps attached;
37
(b) the original or certified copies of the charter documents of the
Company and all corporate records, documents and instruments of the Company, the
corporate seal of the Company and all books and accounts of the Company;
(b) the certificates referred to in Section 8.1(d) hereof;
(c) copies of all consents and waivers referred to in Section 8.1(f)
hereof;
(d) duly executed lock up agreements referred to in Section 2.1(c)
hereof;
(d) the duly executed Employment Agreement referred to in Section
8.1(l) hereof;
(e) all reasonable consents or approvals required to be obtained by
the Company for the purposes of preserving and maintaining the interests of the
Company under any and all Company Material Contracts;
(f) certificates of good standing with respect to the Company and
each Subsidiary issued by the Secretary of State of the State of incorporation
of each, and for each state in which the Company or any Subsidiary is qualified
to do business as a foreign corporation;
(g) the duly executed Securities Purchase Agreement dated as of the
Closing Date for the purchase by the Purchaser of a $345,435.00 principal loan
receivable of Rebel Holdings, LLC, in exchange for the issuance by the Purchaser
to Rebel Holdings, LLC of a $345,435.00 principal amount convertible note,
together with all related documents referred to therein;
(h) the duly executed escrow agreement referred to in Section 2.1(b)
hereof;
(i) accredited investor questionnaires completed and duly executed
by each Seller; and
(j) such other documents as the Purchaser shall reasonably request.
9.2 Documents to be Delivered by the Purchaser. On or before the Closing,
the Purchaser shall deliver to the Sellers the following:
(a) stock certificates representing the Purchase Price registered in
the names of the Sellers;
(b) copies of all consents and waivers referred to in Section 8.2(f)
hereof;
38
(c) copies of such resolutions of the directors of the Purchaser as
are required to be passed to authorize the execution, delivery and
implementation of this Agreement;
(d) a copy of a resolution of the directors of the Purchaser dated
as of the Closing Date appointing nominees of the Sellers as officers of the
Purchaser and appointing nominees of the Sellers as directors of the Purchaser
subject to Section 7.11 hereof;
(c) written, undated resignations of each of Xxxxxxx Xxxxxx, Xxxxxxx
Xxxxxxxx, Xx. and Xxxxx Xxxxxxxxxxx as directors of the Purchaser;
(d) written resignations of all executive officers of the Purchaser;
(e) the certificates referred to in Section 8.2(d) hereof; and
(f) such other documents as the Sellers shall reasonably request.
ARTICLE X
MISCELLANEOUS
10.1 Payment of Sales, Use or Similar Taxes. All sales, use, transfer,
intangible, recordation, documentary stamp or similar taxes or charges, of any
nature whatsoever, applicable to, or resulting from, the transactions
contemplated by this Agreement shall be borne equally by the Purchaser and the
Sellers.
10.2 Non-Survival of Representations and Warranties. The parties hereto
hereby agree that none of the representations and warranties contained in this
Agreement or in any certificate, document or instrument delivered in connection
herewith, shall survive the execution and delivery of this Agreement, and the
Closing hereunder.
10.3 Expenses. Except for audit fees in connection with the Financial
Statements and taxes pursuant to Section 10.1, which shall be shared equally
between the Company and the Purchaser, the Company, Sellers and the Purchaser
shall each bear their own expenses incurred in connection with the negotiation
and execution of this Agreement and each other agreement, document and
instrument contemplated by this Agreement and the consummation of the
transactions contemplated hereby and thereby.
10.4 Specific Performance of the Company and the Sellers. The Company and
the Sellers acknowledge and agree that the breach of this Agreement would cause
irreparable damage to the Purchaser and that the Purchaser will not have an
adequate remedy at law. Therefore, the obligations of the Company and the
Sellers under this Agreement, including, without limitation, the Sellers'
obligation to sell the Shares to the Purchaser, shall be enforceable by a decree
of specific performance issued by any court of competent jurisdiction, and
appropriate injunctive relief may be applied for and granted in connection
therewith. Such remedies shall, however, be cumulative and not exclusive and
shall be in addition to any other remedies which any party may have under this
Agreement or otherwise.
10.5 Specific Performance of the Purchaser. The Purchaser acknowledges and
agrees that the breach of this Agreement would cause irreparable damage to the
Company and the Sellers and that the Company and the Sellers will not have an
adequate remedy at law. Therefore, the obligations of the Purchaser under this
Agreement, including, without limitation, the Purchaser's obligation to purchase
the Shares from the Sellers, shall be enforceable by a decree of specific
performance issued by any court of competent jurisdiction, and appropriate
injunctive relief may be applied for and granted in connection therewith. Such
remedies shall, however, be cumulative and not exclusive and shall be in
addition to any other remedies which any party may have under this Agreement or
otherwise.
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10.6 Further Assurances. The Company, Sellers and the Purchaser each
agrees to execute and deliver such other documents or agreements and to take
such other action as may be reasonably necessary or desirable for the
implementation of this Agreement and the consummation of the transactions
contemplated hereby.
10.7 Submission to Jurisdiction; Consent to Service of Process.
(a) The parties hereto hereby irrevocably submit to the
non-exclusive jurisdiction of any federal or state court located within the
State of California over any dispute arising out of or relating to this
Agreement or any of the transactions contemplated hereby and each party hereby
irrevocably agrees that all claims in respect of such dispute or any suit,
action proceeding related thereto may be heard and determined in such courts.
The parties hereby irrevocably waive, to the fullest extent permitted by
applicable law, any objection which they may now or hereafter have to the laying
of venue of any such dispute brought in such court or any defense of
inconvenient forum for the maintenance of such dispute. Each of the parties
hereto agrees that a judgment in any such dispute may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby consents to process being
served by any party to this Agreement in any suit, action or proceeding by the
mailing of a copy thereof in accordance with the provisions of Section 10.11.
10.8 Entire Agreement; Amendments and Waivers. This Agreement (including
the schedules and exhibits hereto) represents the entire understanding and
agreement between the parties hereto with respect to the subject matter hereof
and can be amended, supplemented or changed, and any provision hereof can be
waived, only by written instrument making specific reference to this Agreement
signed by the party against whom enforcement of any such amendment, supplement,
modification or waiver is sought. No action taken pursuant to this Agreement,
including without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party taking such action of
compliance with any representation, warranty, covenant or agreement contained
herein. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a further or continuing waiver of
such breach or as a waiver of any other or subsequent breach. No failure on the
part of any party to exercise, and no delay in exercising, any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of such right, power or remedy by such party preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
All remedies hereunder are cumulative and are not exclusive of any other
remedies provided by law.
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10.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
10.10 Article and Section Headings. The article and section headings of
this Agreement are for reference purposes only and are to be given no effect in
the construction or interpretation of this Agreement.
10.11 Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed given when delivered personally or
mailed by certified mail, return receipt requested, to the parties (and shall
also be transmitted by facsimile to the persons receiving copies thereof) at the
following addresses (or to such other address as a party may have specified by
notice given to the other party pursuant to this provision):
(a) Purchaser:
Digicorp
Attn: Xxxxxxx X. Xxxxx
000 Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Copy to (which shall not constitute notice):
Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
Attn: Xxxx X. Xxxx, Esq.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
(b) The Company and the Sellers:
Xxx Xxxxxx or Xxxxx Xxxxxx
c/o Rebel Crew Films, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxx Xxx Xxx, XX 00000
Facsimile: (000) 000-0000
Copy to:
Danzig Xxxx Xxxxxx Xxxxx & Xxx, LLP
Attn: Xxxxx X. Xxxx, Esq.
00X Xxxxxxxx Xxxx
Xxxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
10.12 Severability. If any provision of this Agreement is invalid or
unenforceable, the balance of this Agreement shall remain in effect.
41
10.13 Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns. Nothing in this Agreement shall create or be deemed to create
any third party beneficiary rights in any person or entity not a party to this
Agreement except as provided below. No assignment of this Agreement or of any
rights or obligations hereunder may be made by either the Sellers or the
Purchaser (by operation of law or otherwise) without the prior written consent
of the other parties hereto and any attempted assignment without the required
consents shall be void. Upon any such permitted assignment, the references in
this Agreement to the Purchaser shall also apply to any such assignee unless the
context otherwise requires.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Stock Purchase
Agreement as of the day and year first written above.
DIGICORP
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Xxxxxxx X. Xxxxx,
Chief Executive Officer
REBEL CREW FILMS, INC.
By: /s/ Xxxxx Xxxxxx
------------------------------------
Xxxxx Xxxxxx,
President
SELLERS:
REBEL HOLDINGS, LLC
By: /s/ Xxxxx Xxxxxx
------------------------------------
Xxx Xxxxxx,
Managing Member
/s/ Xxxxx Xxxxxx
----------------------------------
Xxxxx Xxxxxx
Schedule A
Shares and Purchase Price
Sellers Shares Owned Purchase Price
------- ------------ --------------
Rebel Holdings, LLC 90,000 19,086,372 shares of Purchaser Common Stock
Xxxxx Xxxxxx 10,000 2,120,708 shares of Purchaser Common Stock
44
Schedule B
Voting Agreement Parties
Xxxxx Xxxxxxxx
Xxxxxx Capital Management, LLC
Xxxxxxx Xxxxxxxx, Xx.
Xxxxxx Xxxxx
Xxxxxxx Xxxxx
Xxxxx Xxxxxxxxxxx
Xxxxxxx Xxxxxx
Xxxxxx "Xxxx" Xxxx, III
Xxxxxxxx Xxxxxxx
Patient Safety Technologies, Inc.
Xxxxxx Xxxxx
Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
Sothi Thillairajah
Xxxxx Xxxxxxxxxx
Xxxxxxx X. Xxxxx
Exhibit A
Escrow Agreement
Exhibit B
Lock-Up Agreements
