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EXHIBIT 10.20
ASSET PURCHASE AGREEMENT
by and among
Innuity, Inc.,
a Utah corporation
and
Hello Metro Incorporated,
an Indiana corporation
Superfly Advertising, Inc.,
an Indiana corporation
Treefrog Commerce, Inc.,
an Indiana corporation
Clark Scott, an individual
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Dated as of March 9, 2006
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ASSET PURCHASE AGREEMENT
THIS ASSET
PURCHASE AGREEMENT (this "Agreement") is entered into as of
March 9, 2006, by and among Innuity, Inc., a Utah corporation
("Purchaser"), and
Hello Metro Incorporated, an Indiana corporation ("Hello Metro"),
Superfly
Advertising, Inc., an Indiana corporation ("Superfly"), and
Treefrog Commerce,
Inc., an Indiana corporation ("Treefrog") and Clark Scott, an
individual
residing in Indiana ("Scott"). Hello Metro, Superfly and Treefrog
are
collectively referred to herein as the "Sellers" and individually
as a "Seller."
RECITALS
A. Hello
Metro is engaged in the business of providing to internet users
local content, guides and information concerning certain cities
around the
world, and Superfly and Treefrog are each engaged in the business
of arbitrage
(simultaneous buying and selling to make a profit on price
differences in
different markets) of internet traffic (excluding the Excluded
Assets, as
defined below, the "Business"), and Purchaser is interested in
purchasing, and
Sellers are interested in selling, certain assets related to the
Business; and
B.
Purchaser desires to purchase or acquire from Sellers, and
Sellers
desire to sell, assign and transfer to Purchaser, substantially all
the assets
and properties held in connection with, necessary for, or material
to the
Business, and Purchaser has agreed to assume the Assumed
Liabilities, all for
the purchase price and upon the terms and subject to the conditions
contained in
this Agreement (the "Transaction").
NOW,
THEREFORE, in consideration of the representations, warranties
and
covenants herein contained and other good and valuable
consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in
this Agreement, the following terms shall have the meanings set
forth or referenced below:
1.1
"Accounts Payable" shall mean those amounts owing by Sellers
under
Assumed Contracts or otherwise arising in connection with the
Business listed on
Schedule 1.1 as such Schedule 1.1 may be updated through the date
that is four
days prior to Closing to include those accounts payable arising in
the ordinary
course of business in connection with the Business.
1.2
"Accounts Receivable" shall mean the accounts receivable and
notes
receivable of or amounts owing or payable to Sellers in connection
with or
relating to the Business, including those set forth on Schedule 1.2
as such
Schedule 1.2 may be updated through the date that is four days
prior to Closing
to include those accounts receivable arising in the ordinary course
of business
in connection with the Business.
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1.3
"Affiliate" shall mean a Person that directly or indirectly,
through
one or more intermediaries, is controlled by, or is under common
control with
another Person.
1.4
"Ancillary Agreements" shall mean the following agreements and
documents:
(a) The Escrow Agreement, in substantially the form of Exhibit
A
hereto; and
(b) The Employment Agreement, in substantially the form of Exhibit
D
hereto.
1.5
"Assets" shall have the meaning set forth in Section 2.2
hereof.
1.6
"Assumed Contracts" shall mean only those Contracts listed on
Schedule
1.6, as such schedule may be updated through the Closing Date to
include
Contracts entered into in the ordinary course of business and
subject to review
and approval of Purchaser.
1.7
"Assumed Liabilities" shall have the meaning set forth in
Section
2.4(a) hereof.
1.8
"Business" shall have the meaning set forth in Recital A.
1.9
"Business Financial Statements" shall have the meaning set forth
in
Section 4.7 hereof.
1.10
"Business Records" shall mean any and all books, records,
files,
drawings, documentation, data or information that have been or now
are used in
or with respect to, in connection with or otherwise relating to the
Assets or
the Assumed Liabilities, excluding Sellers' corporate minute books,
tax returns
and other tax records.
1.11
"Business System" shall mean the proprietary methods,
information,
technology and know-how used in the Business conducted by Superfly
and Treefrog
and described on Schedule 1.11.
1.12
"Closing" shall have the meaning set forth in Section 3.1
hereof.
1.13
"Closing Date" shall have the meaning set forth in Section 3.1
hereof.
1.14
"Code" shall mean the Internal Revenue Code of 1986, as amended
from
time to time.
1.15
"Confidentiality Agreement" shall mean the mutual
confidentiality
agreement, dated January 30, 2006, by and between Purchaser and
Sellers.
1.16
"Contracts" has the meaning given it in Section 4.10(a).
1.17
"Employee Plan" means any program, policy, contract, agreement
or
other arrangement providing for employment, compensation,
severance, relocation,
termination pay,
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deferred compensation, performance awards, fringe benefit,
cafeteria benefit,
dependent care, including without limitation each "employee benefit
plan" within
the meaning of Section 3(3) of ERISA which is or has been
sponsored, maintained,
contributed to, or required to be contributed to by any Seller.
1.18
"Employment Liability" means any claim, debt, liability,
commitment
and obligation, whether fixed, contingent or absolute, matured or
unmatured,
liquidated or unliquidated, accrued or unaccrued, known or unknown,
whenever or
however, including all costs and expenses relating thereto, arising
under any
law, rule, regulation, permit, action or proceeding before any
Governmental
Entity, order or consent decree or any award of any kind, any
Employee Plan, any
liability which may be imposed upon Purchaser under COBRA or
otherwise relating
to an Employee or Employee's employment.
1.19
"Encumbrances" shall mean any and all restrictions on or
conditions
to transfer or assignment, claims, liabilities, liens, pledges,
mortgages,
restrictions, and encumbrances of any kind, whether accrued,
absolute,
contingent or otherwise affecting the Assets.
1.20
"Environmental Laws" shall mean any and all applicable civil,
criminal, and administrative laws (including common law), statutes,
codes,
rules, regulations, ordinances, orders, decrees, judgments,
permits, licenses,
approvals, authorizations, and other requirements, directives,
consents and
obligations lawfully imposed by any Governmental Entity pertaining
to the
protection of the environment, protection of ecology, protection of
public
health, protection of worker health and safety, and/or the
treatment, emission
and/or discharge of gaseous, particulate and/or effluent
pollutants, and/or the
Handling of Hazardous Materials, and regulations, guidelines, and
policies
promulgated under any of the foregoing, all as amended from time to
time.
1.21
"ERISA" shall mean the Employee Retirement Income Security Act
of
1974, as amended from time to time.
1.22
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which is or, at any relevant time, was treated as a
single
employer with any Seller within the meaning of Section 414(b), (c),
(m) or (o)
of the Code.
1.23
"Excluded Assets" shall mean the assets of Sellers as of the
Closing
set forth in Schedule 2.3.
1.24
"Excluded Liabilities" shall have the meaning set forth in
Section
2.5 hereof.
1.25
"Facility" shall mean any facility or real property, including
without limitation any improvement, equipment, structure, building,
or fixture,
that is or was owned, used, operated, occupied, controlled, or
rented, by any
Seller in connection with the Business.
1.26
"Governmental Approvals" means any and all permits, licenses,
consents, rights, exemptions, concessions, authorizations,
certificates, orders,
franchises, determinations or approvals of any Governmental Entity
relating to
the Business, the Assets or the Assumed Liabilities.
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1.27
"Governmental Entity" shall mean any court, or any federal,
state,
municipal, provincial or other governmental authority, department,
commission,
board, service, agency, political subdivision or other
instrumentality.
1.28
"Handling" or "Handled" shall mean used, generated,
manufactured,
processed, contained, transferred, recycled, stored, treated,
loaded,
transported, removed or released.
1.29
"Hazardous Materials" shall mean any substance, waste,
material,
chemical, compound or mixture which is defined, listed, designated,
described or
characterized under Environmental Laws or under any rules,
guidances, policies,
or regulations promulgated thereunder, as hazardous, toxic, a
contaminant, a
pollutant or words of similar import, and includes without
limitation any
asbestos, polychlorinated biphenyls, petroleum (including crude oil
or any
fraction or distillate thereof), natural gas, natural gas liquids,
and liquefied
natural gas.
1.30
"Intangibles" shall mean all customer lists, supply lists,
importation lists, distribution lists, brokers and agent lists,
guarantees,
rights, warranties, defenses and claims, choses in action, causes
of action,
demands, rights of recovery, suits, covenants not to compete and
other rights in
favor of Sellers relating to the Assets, the Assumed Liabilities or
the
Business.
1.31
"Intellectual Property" shall have the meaning set forth in
Section
4.12 hereof.
1.32
"Knowledge" or "Known" shall mean the current actual knowledge
or
awareness, after reasonable inquiry, of any of the officers or
directors of a
Person.
1.33 "Laws
and Decrees" shall mean all applicable federal, state,
provincial and local laws, ordinances, rules, statutes, regulations
and all
orders, writs, injunctions, awards, judgments or decrees.
1.34
"Liability" shall mean any direct or indirect liability,
indebtedness, obligation, guarantee or endorsement, whether known
or unknown,
whether accrued or unaccrued, whether absolute or contingent,
whether due or to
become due, or whether liquidated or unliquidated.
1.35
"Losses" shall mean any loss, demand, action, cause of action,
assessment, damage, cost or expense, including without limitation,
interest,
penalties and reasonable attorneys' and other professional fees and
expenses
incurred in the investigation, prosecution, defense or settlement
thereof, but
excluding special or consequential damages (including without
limitation loss of
profits or revenues) related to any such loss, demand, action,
cause of action,
assessment, damage, liability, cost or expense, other than special
or
consequential damages actually awarded to a third party and paid or
payable to
such third party by a party hereto.
1.36
"Material Adverse Change" shall mean any material adverse change
in
the Assets or Assumed Liabilities that has resulted in or is
reasonably likely
to result in a Material Adverse Effect.
1.37
"Material Adverse Effect" shall mean with respect to the Business
or
the Assets any significant and substantial adverse effect or change
in the
Business or the Assets, including the operations, properties,
financial
condition, or results of operations of the Business, taken as a
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whole, or on the condition, marketability, usability or title of
the Assets,
taken as a whole, or on the ability of Sellers or Purchaser, as the
case may be,
to consummate the transactions contemplated hereby.
1.38
"Permits" shall mean any and all licenses, permits,
authorizations,
certificates, franchises, variances, waivers, consents and other
approvals from
any Governmental Entity relating solely to the Business, the Assets
or the
Assumed Liabilities.
1.39
"Permitted Encumbrances" shall mean (a) liens for current taxes
which
are not past due, (b) easements, covenants, rights-of-way or other
similar
restrictions and imperfections of title, and (c) restrictions on or
conditions
to transfer or assignment of the Assumed Contracts disclosed on
Schedule 4.5(c).
1.40
"Person" shall mean an individual, a partnership, a corporation,
an
association, a joint stock company, a trust, a joint venture, an
unincorporated
organization or a Governmental Entity.
1.41
"Prepaid Expenses" shall mean all prepaid expenses, advances,
deposits, and rights to volume and other rebates due from
suppliers, as well as
performance bonds, including those listed on Schedule 1.41.
1.42
"Proceeding" means any claim, action, suit, litigation,
arbitration,
proceeding (including any civil, criminal, administrative,
investigative or
appellate proceeding and any informal proceeding), prosecution,
contest,
hearing, inquiry, inquest, audit, examination or investigation
commenced,
brought, conducted or heard by or before, or otherwise involving,
any
Governmental Entity or any arbitrator or arbitration panel.
1.43
"Prospective New Purchaser Employees" shall have the meaning
set
forth in Section 9.1 hereof.
1.44
"Purchaser Indemnifiable Losses" shall have the meaning set forth
in
Section 11.3(a) hereof.
1.45
"Related Party" means (a) each individual who is an officer or
director of a Seller; (b) any nominee for election as a director of
a Seller;
(c) any security holder who is known, or any "group" or member of a
"group"
(within the meaning of Section 13(d)(3) of the Exchange Act) which
is known, to
any Seller to own of record or beneficially more than 5% of any
class of a
Seller's voting securities; and (d) any member of the immediate
family of any of
the individuals referred to in clauses (a) through (c) above.
1.46
"Seller Indemnifiable Losses" shall have the meaning set forth
in
Section 11.4(a) hereof.
1.47
"Seller Accounting Principles" shall mean accounting principles
that
reflect the financial transactions of the Sellers for the
applicable periods
applied on a basis consistent with Sellers' past accounting
practices.
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1.48
"Tangible Assets" shall mean all tangible assets, equipment and
other
fixed assets, including all computer hardware, service tools, aids,
manuals,
schematics, diagnostics, machinery and office furnishings, owned,
or held for
use in the conduct of the Business, including the Tangible Assets
listed on
Schedule 1.48.
1.49
"Taxes" shall mean any federal, provincial, territorial, local,
or
foreign income, profits, gross receipts, capital gains taxes,
license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall
profits,
environmental, customs duties, capital stock, franchise, profits,
withholding,
social security (or similar), unemployment, disability, real
property, personal
property, sales, use, transfer, registration, business license,
occupation,
value added, goods and service, alternative or add-on minimum,
estimated, or
other tax or governmental charge of any kind whatsoever, including
any interest,
penalty, or addition thereto, whether disputed or not, assessed
with respect to
the Assets or the Business.
1.50 "Tax
Return" means a declaration, statement, report, return or other
document or information required to be filed or supplied to a
Governmental
Entity with respect to Taxes, including, where permitted or
required, combined
or consolidated returns for any group of entities that include
Seller.
1.51
"Transaction" shall have the meaning set forth in Recital B.
1.52 "Transaction
Documents" means this Agreement together with all other
documents required to be executed and delivered by the Parties as
contemplated
hereunder, including without limitation the Ancillary Agreements,
all of which
are listed on Schedule 1.52.
ARTICLE II
PURCHASE AND SALE OF ASSETS;
ASSUMPTION OF LIABILITIES
2.1
Purchase and Sale of Assets and Assumption of Assumed
Liabilities.
(a) Upon the terms and subject to the conditions set forth in
this
Agreement, effective as of the Closing Date:
(i) Sellers agree to sell, assign, transfer, convey and
deliver to Purchaser, and Purchaser agrees to purchase from
Sellers, all of
Sellers' right, title and interest in and to the Assets, free and
clear of all
Encumbrances except Permitted Encumbrances;
(ii) Sellers agree to assign to Purchaser, and Purchaser
agrees to assume from Sellers, the Assumed Liabilities; and
(iii) Sellers agree to assign to Purchaser, and Purchaser
shall assume from Sellers, all of Sellers' rights and obligations
under the
Assumed Contracts, subject to the obtaining of all necessary
consents by the
other parties thereto.
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(b) In connection with the Transaction, on the Closing Date,
Sellers
shall take any and all actions that may be required, or as
reasonably requested
by Purchaser, to transfer good and valid title to all of the Assets
free and
clear of all Encumbrances (except Permitted Encumbrances) to
Purchaser. Sellers
shall deliver possession of all of the Assets to Purchaser on the
Closing Date
in the manner that is customary under the circumstances, and
Sellers shall
further deliver to Purchaser proper assignments, bills of sale,
conveyances and
other instruments of sale and/or transfer in forms reasonably
satisfactory to
Purchaser in order to convey to Purchaser all Assets, free and
clear of all
Encumbrances (except Permitted Encumbrances), as well as such other
instruments
of sale and/or transfer as counsel to Purchaser may reasonably
request (whether
at or after the Closing Date) to evidence and effect the
Transaction
contemplated herein.
2.2
Assets. As used in this Agreement, the term "Assets" means,
collectively, all right, title and interest in and to all of the
assets,
properties, rights and claims owned or held for use in the conduct
of the
Business by Sellers as the same shall exist on the Closing Date,
including the
following, but excluding the Excluded Assets:
(a) Assumed Contracts. All rights and benefits of Sellers in
existence on the Closing Date or arising from and after the Closing
Date under
the Assumed Contracts;
(b) Intellectual Property. All Intellectual Property owned or
held
for use by Sellers in the Business, including without limitation
the Business
System;
(c) Tangible Assets. All Tangible Assets;
(d) Business Records. All Business Records;
(e) Prepaid Expenses. All Prepaid Expenses.
(f) Permits. All Permits to the extent transferable by Seller;
(g) Accounts Receivable. All Accounts Receivable;
(h) Intangibles. All Intangibles;
(i) Telephone and Fax Numbers; Websites. The telephone and fax
numbers and websites set forth on Schedule 2.2(i).
2.3
Excluded Assets. Notwithstanding anything herein to the
contrary,
Sellers shall retain all of their respective right, title and
interest in and
to, and Purchaser shall not acquire any interest in, the assets
identified on
Schedule 2.3 (the "Excluded Assets").
2.4
Assumption of Liabilities.
(a) Subject to and upon the terms and conditions of this
Agreement,
effective as of the Closing Date, Purchaser agrees to assume from
Sellers and to
thereafter pay, perform and/or otherwise discharge in a timely
manner certain of
the debts, obligations, contracts and
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liabilities of Seller existing or incurred prior to the Closing or
arising out
of transactions or events occurring prior to Closing and certain
debts,
obligations, contracts and liabilities relating to the Business and
the Assets,
of any kind, character or description whether known or unknown,
accrued,
absolute, contingent or otherwise, except for the Excluded
Liabilities of Seller
(the "Assumed Liabilities"), including the following:
(i) All Liabilities relating to any products sold or services
rendered by Purchaser after the Closing, including without
limitation warranty
obligations and product liability claims;
(ii) All Liabilities of Sellers arising under the express
terms of the Assumed Contracts (other than any Assumed Contract for
which a
consent for the effective assignment and assumption by Purchaser of
such Assumed
Contract is required but not obtained) after the Closing Date,
other than any
Liabilities that arise from or relate to any breach by Sellers of
any provision
of any such Assumed Contracts; and
(iii) all Accounts Payable.
(b) Nothing herein shall be deemed to deprive Purchaser or any
Affiliate of Purchaser, as applicable, of any defenses, set-offs
or
counterclaims which any Seller may have had or which Purchaser, or
any Affiliate
of Purchaser, as applicable, shall have (to the extent relating to
the Assumed
Liabilities) to any of the Assumed Liabilities (the "Defenses and
Claims").
Effective as of the Closing, Sellers agree to assign, transfer and
convey to
Purchaser all Defenses and Claims and agrees to cooperate with
Purchaser to
maintain, secure, perfect and enforce such Defenses and Claims.
2.5
Liabilities Not Assumed. Purchaser shall not assume or become
liable
or obligated in any way, and Sellers shall retain and remain solely
liable for
and obligated to discharge and indemnify and hold Purchaser
harmless for all
liabilities not assumed by Purchaser pursuant to Section 2.4,
including, without
limitation, the Liabilities identified on Schedule 2.5
(collectively referred to
herein as "Excluded Liabilities").
2.6
Payment of Purchase Price.
(a) Subject to the terms and conditions of this Agreement, and
in
consideration for the Assets and in full payment therefor: (i)
Purchaser shall
assume the Assumed Liabilities as provided in Section 2.4; and (ii)
Purchaser
shall pay or cause to be paid to Seller, in accordance with Section
2.6(b), an
amount in cash equal to Eighteen Million Dollars ($18,000,000)
(with the items
referred to in clauses (i) and (ii) being referred to collectively
as the
"Purchase Price"). Notwithstanding the foregoing, if the remainder
of Accounts
Receivable less Accounts Payable is less than $363,000, the
Purchase Price shall
be reduced by an amount equal to the difference between $363,000
and such
remainder.
(b) At the Closing:
(i) Purchaser shall pay to the Sellers, Fifteen Million Three
Hundred Thousand Dollars ($15,300,000.00), in immediately available
federal
funds by wire transfer to an
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account designated by Scott in writing at least five (5) days prior
to the
Closing (the "Closing Consideration"), or if no such written
designation is
provided, by certified check payable to Scott.
(ii) Purchaser shall deposit or cause to be deposited with the
Escrow Agent (as defined in Section 11.1) Two Million Seven Hundred
Thousand
Dollars ($2,700,000.00) (the "Escrow Amount") pursuant to the terms
of an escrow
agreement in the form attached hereto as Exhibit A (the "Escrow
Agreement"). The
Escrow Amount shall be held in escrow commencing on the Closing
Date for
purposes of securing certain indemnification obligations in
accordance with
Article XI. The Escrow Amount shall be released by the Escrow Agent
in
accordance with the terms of the Escrow Agreement. The Sellers
hereby appoint
Scott to act as the Sellers' Representative for all purposes as set
forth in the
Escrow Agreement.
2.7
Allocation. The Purchase Price shall be allocated among the Assets
in
the manner required by Section 1060 of the Code and as mutually
agreed among
Purchaser and Sellers (the "Allocation Schedule"). If Sellers and
Purchaser are
able to agree upon the Allocation Schedule within thirty (30) days
after the
Closing Date, Sellers and Purchaser shall each prepare and file on
a timely
basis with the Internal Revenue Service (and applicable state tax
authorities)
Internal Revenue Service Forms 8594 (and all federal, state, local
and foreign
tax returns and forms), including any required amendment thereto,
which shall
reflect the allocations set forth in the Allocation Schedule. If
Sellers and
Purchaser are unable to complete the Allocation Schedule within
thirty (30) days
after the Closing Date, each Seller and Purchaser may file IRS Form
8594 (and
all federal, state, local and foreign tax returns and forms),
including any
required amendment thereto, allocating the aggregate consideration
(including
the Assumed Liabilities) among the Assets in the manner each
believes
appropriate, provided such allocation is reasonable and in
accordance with
Section 1060 of the Code. The Sellers and Purchaser hereby agree to
allocate
$100,000 of the Purchase Price to the Sellers' and Scott's
noncompete and
nonsolicitation obligations pursuant to Section 6.7 hereof.
2.8
Assignment of Sellers' Contracts. Nothing in this Agreement shall
be
deemed to constitute an assignment or an attempt to assign any
Asset, contract,
claim, right or other agreement to which any Seller is a party if
the attempted
assignment thereof without the consent of the other party to such
Asset,
contract, claim, right or other agreement would constitute a breach
or other
contravention thereof or affect in any way adversely the rights of
such Seller
thereunder. If after any Seller has used its best efforts to obtain
the consent
of any such other party to such Asset, contract, claim, right or
other
agreement, such consent shall not be obtained at or prior to the
Closing, or an
attempted assignment thereof at the Closing would be ineffective
and would
affect adversely the rights of Seller thereunder, such Seller will
cooperate
with Purchaser in any reasonable arrangement designed to provide
for Purchaser
the benefits under any such Asset, contract, claim, right or other
agreement,
including the enforcement, at the cost and for the benefit of
Purchaser, of any
and all rights of such Seller against such other party thereto
arising out of
the breach or cancellation thereof by such other party or
otherwise. Nothing in
this Section 2.8 shall be deemed a waiver by Purchaser of its
rights to have
received on or before the Closing an effective assignment of all of
the Assets
nor shall this Section 2.8 be deemed to constitute an agreement to
exclude from
the Assets any assets described under Section 2.2.
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2.9 Taxes.
Any transfer, gains, sales, bulk sales, purchase, use or
similar conveyance taxes incurred, if any, in connection with the
transactions
contemplated by this Agreement and any deficiency, interest or
penalty asserted
with respect thereto shall be the responsibility of, and paid
promptly by,
Purchaser.
ARTICLE III
THE CLOSING
3.1 The
Closing. The consummation of the purchase and sale of the
Business
and Assets will take place at a closing to be held at the offices
of DLA Piper
Rudnick Gray Cary US LLP, 701 Fifth Avenue, Suite 7000, Seattle,
Washington (the
"Closing") on April 3, 2006, or at such other time or date as may
be agreed to
by the parties to this Agreement (the "Closing Date").
3.2
Documents to be Delivered by Sellers and Scott to Purchaser. At
the
Closing, Sellers and Scott will deliver to Purchaser:
(a) A general instrument of sale, conveyance, assignment,
transfer
and delivery of the Assets in substantially the form of Exhibit B
hereto;
(b) Such quitclaim deeds, endorsements, consents, assignments
and
other good and sufficient instruments of conveyance and assignment
as the
parties and their respective counsel shall deem reasonably
necessary or
appropriate to vest in Purchaser all right, title and interest in,
to and under
the Assets;
(c) The Ancillary Agreements to which each Seller and/or Scott is
or
will be a party, executed by such Seller and/or Scott, as
applicable;
(d) All certificates, instruments and documents required of
Sellers
and Scott pursuant to Article IX hereof;
(e) Detailed instructions for implementing the Business System;
and
(f) Such other certificates, instruments and documents as may
be
reasonably requested by Purchaser that are necessary, appropriate
or desirable
for the consummation at the Closing of the Transaction.
3.3
Documents to be Delivered by Purchaser to Sellers. At the
Closing,
Purchaser will deliver to Sellers:
(a) Confirmation of transfer of immediately available federal
funds
to such account(s) at such bank(s) as Sellers shall direct, in the
aggregate
amount of Fifteen Million Three Hundred Thousand Dollars
($15,300,000.00), or if
no wire transfer instructions are given at least five (5) days
prior to Closing
a certified check in such amount payable to Scott;
(b) The Ancillary Agreements to which Purchaser is or will be
party,
executed by Purchaser;
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(c) An instrument of assumption of the Assumed Liabilities and
Assumed Contracts in substantially the form of Exhibit C
hereto;
(d) All certificates, instruments and documents required of
Purchaser pursuant to Article IX hereof; and
(e) Such other certificates, instruments and documents as may
be
reasonably requested by Seller that are necessary, appropriate or
desirable for
the consummation at the Closing of the Transaction.
3.4
Purchaser's Deliveries to Escrow Agent at Closing. At the
Closing, Purchaser shall deliver or cause to be delivered to Escrow
Agent the
Escrow Amount.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS AND SCOTT
Each
Seller and Scott hereby, jointly and severally, represents and
warrants to Purchaser that, except as set forth in the Sellers'
disclosure
schedules attached hereto as Schedule IV or in any updates to such
disclosure
schedules delivered to Purchaser by Sellers or Scott on or before
March 28, 2006
(in each case which indicates the specific subsection of this
Article IV to
which each disclosure or exception is made, and which disclosures
and exceptions
shall be deemed to be representations and warranties as if made
hereunder) (the
"Sellers' Disclosure Schedule"), and except for events occurring
after March 28,
2006 in the ordinary course of the Business and consistent with
Sellers' and
Scott's past practices, the following statements are true, accurate
and complete
as of the date of this Agreement (provided that those
representations and
warranties which address matters only as of a particular date shall
be true and
correct as of such date):
4.1
Organization and Standing.
(a) Hello Metro is a corporation duly organized, validly
existing
and in good standing under the laws of the state of Indiana.
Superfly is a
corporation duly organized, validly existing and in good standing
under the laws
of the state of Indiana. Treefrog is a corporation duly organized,
validly
existing and in good standing under the laws of the state of
Indiana.
(b) Each
Seller has all requisite corporate power and authority to
own, lease and operate its properties and conduct the Business as
now being
conducted. Each Seller is duly qualified to do business and is in
good standing
in each jurisdiction where the nature of the business conducted by
it or the
property it owns, leases or operates requires it to qualify to do
business as a
foreign corporation except where the failure to so qualify would
not have a
Material Adverse Effect.
(c) None of Sellers has (i) filed or had filed against it a
petition
in bankruptcy or a petition to take advantage of any other
insolvency act, (ii)
admitted in writing its inability to pay its debts generally, (iii)
made an
assignment for the benefit of creditors, (iv) consented to the
appointment of a
receiver for itself or any substantial part of its property, or (v)
generally
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committed any act of insolvency (including the failure to pay
obligations as
they become due) or bankruptcy.
4.2
Authority; Validity; Enforceability. Each Seller has the
requisite
power and authority to execute and deliver the Transaction
Documents, as
applicable, and to consummate the transactions contemplated hereby
and thereby,
and to perform its obligations hereunder and thereunder. The
execution, delivery
and performance of the Transaction Documents, and the consummation
of the
transactions contemplated hereby and thereby, have been duly
authorized by all
necessary corporate or other action on the part of each Seller, and
no other
proceedings on the part of such Seller or its board of directors or
stockholders
is necessary to authorize the Transaction Documents or to
consummate the
transactions contemplated hereby or thereby. This Agreement has
been duly
executed and delivered by or on behalf of each Seller, and when
executed and
delivered, the Transaction Documents will be valid and legally
binding
obligations of each Seller, enforceable against each such Seller in
accordance
with their terms, except as such enforceability may be limited by
bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors'
rights generally or by general equitable principles.
4.3 Title;
Sufficiency of Acquired Assets.
(a)
Sellers collectively have good and valid title to the Assets
and
Sellers collectively are the true and lawful owner of the Assets,
free and clear
of any and all Encumbrances of any kind other than the Permitted
Encumbrances,
and Sellers collectively have the full right to sell and transfer
to Purchaser
good and valid title to the Assets, free and clear of any and all
Encumbrances
other than the Permitted Encumbrances. No subsidiary or Affiliate
of any Seller
has any right, title or interest in any of the Assets. The delivery
to Purchaser
of the instruments of transfer of ownership contemplated by this
Agreement will
vest good and valid title to the Assets in Purchaser, free and
clear of all
Encumbrances other than Permitted Encumbrances. Schedule 1.48 sets
forth a
complete and accurate list of the Tangible Assets owned by Sellers
and used in
the Business (other than the Excluded Assets), which description
identifies, to
the extent available, original acquisition date and cost of such
items.
(b)
The Business is conducted solely through Sellers. The Assets
collectively constitute all of the properties, rights, interests
and other
tangible and intangible assets now used in and necessary to enable
Purchaser to
conduct the Business in the manner in which the Business has been
conducted by
Sellers.
(c) No Seller is a party to any outstanding contracts or other
arrangements giving any Person any present or future right to
require any Seller
to transfer to any Person any ownership or possessory interest in,
or to grant
any lien on, any of the Assets, other than pursuant to this
Agreement.
(d) All of the Tangible Assets are structurally sound, free of
material defects and deficiencies and in good condition and repair
(ordinary
wear and tear excepted), and are adequate for the uses to which
they are being
put to use by the respective Seller.
4.4
Business System.
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(a) The Business System is accurately described on Schedule
1.11.
(b) The Business System is comprised of confidential,
proprietary,
trade secret information of Sellers, and Sellers have used
commercially
reasonable efforts to preserve the confidentiality of the Business
System. The
Business System has not been disclosed to any third party except
pursuant to a
confidentiality or non-disclosure agreement described on Schedule
4.4. All such
confidentiality or non-disclosure agreements are in full force and
effect, and
to Sellers' Knowledge no third party has breached any such
confidentiality or
non-disclosure agreement.
(c) The income reflected in the financial statements of Superfly
and
Treefrog has been generated solely by the Business System. The
Business System
is fully transferable and capable of being implemented by Purchaser
in the same
manner and, except for differences due to (i) changes in market
conditions, (ii)
actions or omissions of third parties who are not subject to the
direction or
control of the Sellers, or (iii) failure of the Purchaser after
Closing to
follow the instructions provided pursuant to Section 3.2(e)
(collectively,
"External Forces"), with substantially the same results as
implemented
previously by Superfly and Treefrog without any special personnel,
consulting or
training other than the instructions to be delivered at Closing
pursuant to
Section 3.2(e). The instructions that will be provided by Sellers
and Scott to
Purchaser at Closing pursuant to Section 3.2(e) will describe in
reasonable
detail the steps necessary or desirable to enable Purchaser to
implement the
Business System in the same manner and, except for differences due
to External
Forces, with substantially the same results as implemented
previously by
Superfly and Treefrog. To Sellers' Knowledge, no facts or
circumstances exist
that would prevent or inhibit the implementation at Closing by
Purchaser of the
Business System in the same manner as implemented previously by
Superfly and
Treefrog.
4.5 No
Conflicts.
(a) None of each Seller's ownership and use of the Assets, nor
the
conduct of Business relating to the Assets, prior to the Closing
Date (i) to
Sellers' Knowledge conflicts with any material rights of any other
Person, or
(ii) violates, conflicts with or will result in a default, right to
accelerate
or loss of rights under, any term or provision of any Encumbrance,
mortgage,
deed of trust, lease, license, agreement, contract, Laws and
Decrees to which
any Seller is a party or by which it or its properties may be bound
or affected;
nor will the giving of notice or passage of time result in any such
violation,
conflict, default, right or loss of rights.
(b) Neither the execution and delivery of the Transaction
Documents
by Sellers, nor compliance by Sellers with the terms and provisions
hereof and
thereof, including the performance and consummation by Sellers of
the
transactions contemplated hereby and thereby, will (whether upon
failure to give
notice or the passage of time or otherwise) result in any conflict
with, breach
or violation of or default, termination or forfeiture under (i) any
term or
provision of each Seller's respective charter documents or bylaws,
(ii) any Laws
and Decrees Known to any Seller to be applicable to such Seller, or
(iii) any
contract, agreement, lease, license, permit or other instrument to
which any
Seller is a party or to which any of its assets are subject.
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(c) The execution and delivery of the Transaction Documents by
Sellers and the consummation of the transactions contemplated
hereby and
thereby, do not require Sellers to obtain the consent, approval or
action of, or
to make any filing with or provide any notice to, any Person or
Governmental
Entity, except as described on Schedule 4.5(c).
(d) There is no action, suit, proceeding or investigation
pending
or, to Sellers' Knowledge, threatened against any Seller that
questions the
validity of any of the Transaction Documents or the right of any
Seller to enter
into any of the Transaction Documents or to consummate the
transactions
contemplated hereby or thereby.
4.6 No
Other Liabilities. Except for the Assumed Liabilities, there is
no
Seller debt, liability or obligation of any kind, whether accrued,
absolute,
contingent or otherwise, whether due or to become due and whether
or not the
amount thereof is readily ascertainable, that will become a
liability or
obligation of Purchaser following the Closing, except those arising
under
agreements or other commitments to be expressly assumed by
Purchaser at the
Closing. Schedule 4.6 specifies the names of all creditors, equity
holders and
claimants to whom each Seller is indebted, including, but not
limited to, trade
debt and debt owed to customers, landlords, capital or equipment
lessors,
suppliers, employees, stockholders, taxing authorities, or other
third party
creditors, and the approximate amount owed to each such creditor
and claimant,
as of the Closing Date.
4.7
Financial Statements. Sellers have delivered to Purchaser copies
of
(i) Hello Metro's and Superfly's unaudited balance sheets
pertaining to the
Business as of the year ended December 31, 2004, and (ii) Sellers'
unaudited
balance sheets pertaining to the Business as of the year ended
December 31, 2005
and as of the month ended January 31, 2006, and the related
unaudited statements
of operations pertaining to the Business for such periods
(collectively, the
"Business Financial Statements"). The Business Financial Statements
have been
prepared in accordance with Sellers' Accounting Principles, and
present fairly,
in all material respects, the financial position of the Business as
of their
respective dates and the results of operations and changes in
financial position
of the Business for the periods indicated.
4.8
Absence of Certain Changes or Events. Since the date of the
Business
Financial Statements, Sellers have conducted the Business in the
ordinary and
usual course consistent with past practices and, without limiting
the generality
of the foregoing, have not:
(a) suffered any Material Adverse Change in the Assets or the
Intellectual Property;
(b) suffered any damage, destruction or loss, whether or not
covered
by insurance, having a Material Adverse Change in the Assets or the
Intellectual
Property;
(c) effected any acquisition, sale or transfer of any material
asset
of Seller or any of its subsidiaries other than in the ordinary
course of
business and consistent with past practice;
(d)
granted any exclusive license with respect to the Intellectual
Property; or
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(e) agreed to take any action described in this Section 4.8 or
outside of its ordinary course of business or which would
constitute a breach of
any of the representations or warranties of Sellers contained in
this Agreement.
4.9
Governmental Consents; Legal Compliance. Schedule 4.9 provides
an
accurate and complete list of all Governmental Approvals, pursuant
to which any
Seller enjoys any right or benefit or undertakes any obligation
related to the
Business, the Assets or the Assumed Liabilities, and includes any
and all
Governmental Approvals that are now used in and necessary to enable
Purchaser to
conduct the Business in the manner in which the Business has been
conducted by
Sellers. Other than the Governmental Approvals listed on Schedule
4.9, no
consent, approval or authorization of, or designation, declaration
or filing
with any Governmental Entity on the part of any Seller is required
in connection
with the execution or delivery by Sellers of this Agreement, the
Transaction
Documents or the consummation by Sellers of the transactions
contemplated by any
of the foregoing, including without limitation Purchaser's
assumption of the
Assumed Contracts and Sellers' assignment and transfer of the
Assets. Sellers
have all licenses and permits and other Governmental Approvals
required for
Sellers' operation of the Assets and the Business as currently
conducted by the
Sellers, and such licenses and permits held by Sellers are valid
and in full
force and effect. Sellers have complied with all applicable Laws
and Decrees
with respect to or affecting the Business, the Assets, or the
Assumed
Liabilities, except for such failure to comply as which would not
result in a
Material Adverse Effect. Sellers are not subject to any order,
writ, award,
judgment, injunction or other decree issued by any Governmental
Entity which
could impair the ability of Sellers to consummate the transactions
contemplated
herein or which could adversely affect Purchaser's conduct of the
Business or
its use and enjoyment of the Assets, the Assumed Contracts or the
Intellectual
Property from and afer the Closing Date.
4.10
Contracts.
(a) All agreements, contracts, commitments, licenses, claims
and
rights (including refunds), contract rights, franchise rights and
agreements,
purchase and sales orders, quotations and executory commitments,
instruments,
guaranties, indemnifications, leases, arrangements and
understandings of
Sellers, whether written or oral, by which any Seller is bound,
including any
agreements by which any Seller is obligated to provide service or
support
services, which are necessary to enable Purchaser to conduct the
Business in the
manner in which the Business has been conducted by Sellers and are
material to
the Business, the Assets or the Assumed Liabilities, are listed on
Schedule
4.10(a) (the "Contracts"). Except for the Contracts, no Seller is a
party to or
otherwise bound by the terms of any material contract, agreement or
obligation,
written or oral, affecting the Business, the Assets or the Assumed
Liabilities.
Complete and correct copies or originals of all written Contracts,
together with
all exhibits, attachments, schedules and amendments thereto, and
summaries of
all oral Contracts, have been provided to Purchaser.
(b) Each Contract is a valid and legally binding obligation of
one
or more of the Sellers, as their interest appears, and to Sellers'
Knowledge the
other parties thereto, enforceable against each such Seller and to
Sellers'
Knowledge the other parties thereto, in accordance with its
respective terms. No
Seller has, nor to Sellers' Knowledge any other party to
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any Contract has, performed any act or omitted to perform any act
which act
or omission, with the giving of notice or passage of time or
otherwise, will
become a default under any Contract, and there are no existing
disputes or
claims of default relating to any Assumed Contract, or any facts or
conditions
Known to such Seller which, if continued, will result in a default
or claim of
default thereunder, which default could reasonably be expected to
have a
Material Adverse Effect. No party to any Contract has threatened or
given prior
written notice of its intention to cancel or withdraw such
Contract.
(c) Except as set forth on Schedule 4.10(c), no Seller has
received
any advanced, prepaid or other payment from or on behalf of any of
its customers
under or with respect to any Assumed Contract which represent
payments made
before an equivalent amount of work or passage of time or similar
action or
event has occurred, and there are no credits owed to customers
because of any
Seller's failure to perform as required by such Assumed Contract.
Except as set
forth in the Assumed Contracts, no Seller has any written or oral
agreements to
provide any warranty relating to any Product or service or to
provide any
material change in functionality or other alterations in the
performance of any
Product or to provide new products, technology or services.
(d) Purchaser has been furnished with complete and correct copies
of
the standard terms and conditions of Sellers' services (containing
applicable
guaranty, warranty and indemnity provisions, if any). Except as
required by
applicable Laws and Decrees, no product sold, or delivered by, or
service
rendered by or on behalf of, any Seller is subject to any guaranty,
warranty or
other indemnity, express or implied, beyond such standard terms and
conditions.
No Seller has received any notice or has any reason to believe that
any product
sold or delivered by, or service rendered by or on behalf of, any
Seller is
subject to any guaranty, warranty or other indemnity claim or
liability beyond
that which is in the ordinary course of business and consistent
with past
practices.
(e) Except as set forth on Schedule 4.10(e), no Seller is a party
or
subject to any Contract:
(i) that calls for any fixed or contingent payment or
expenditure or any related series of fixed or contingent payments
or
expenditures by or to any Seller totaling more than $25,000 in the
twelve-month
period prior to or following the Closing Date;
(ii) with agents, advisors, managers, salesmen, sales
representatives, independent contractors or consultants that are
not cancelable
by it without liability, penalty or premium on no more than thirty
(30) days'
notice;
(iii) that explicitly restricts any Seller from carrying on
anywhere in the world its business or any portion thereof as
currently conducted
or from carrying on business of any other sort anywhere in the
world or not to
solicit business from any entity or class of entities;
(iv) to provide funds to or to make any investment in any
Person other than a Seller (in the form of a loan, capital
contribution or
otherwise);
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(v) with respect to any Seller's obligations as guarantor,
surety, co-signer, endorser, co-maker, indemnitor or otherwise in
respect of the
obligation of any Person other than a Seller;
(vi) for any line of credit, standby financing, revolving
credit or other similar financing arrangement;
(vii) with any distributor, original equipment manufacturer,
value added remarketer or other person for the distribution of any
Product;
(viii) with any customers that grant such customers a refund
right (other than as a remedy for a breach of warranty) on the
installation of
any Product, and that the refund period with respect to any such
installations
has not passed, lapsed, expired or terminated;
(ix) with any customers for services that were on a fixed bid
basis and have not been completed (a list and description of any
incomplete or
outstanding arrangements is set forth on such schedule);
(x) with any customers whose agreement with any Seller
contains a "most favored" customer clause;
(xi) to Sellers' Knowledge, with any customers who have filed
for bankruptcy;
(xii) with any Governmental Entity or involving the provision
of products or services to a Governmental Entity;
(xiii) that requires either party to the Contract to place
such Seller's source code in escrow pursuant to such Contract;
(xiv) that grants any rights with respect to the Assets on an
exclusive basis;
(xv) that obligates any Seller to provide any services at no
cost or substantially discounted cost to any customer (and if any
Seller has
such an obligation, Schedule 4.10(e) shall list the amount of
services yet to be
performed thereunder); or
(xvi) that is otherwise material to the Business as currently
being conducted, or as currently proposed to be conducted and that
is not
otherwise listed in Schedule 4.10(a).
(f) No Person is renegotiating, or has the right to renegotiate,
any
amount paid or payable to Sellers under any Assumed Contract or any
other term
or provision of any such Assumed Contract.
4.11
Absence of Litigation, Orders, Judgments. There is no Proceeding,
in
law or in equity, pending or to Sellers' Knowledge threatened (i)
against or
relating to any Seller in
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connection with the Business, Assets or the Assumed Liabilities or
against,
relating to or that challenge the validity or propriety of the
transactions
contemplated by this Agreement or by any of the Transaction
Documents; (ii)
involving any Seller or any of their services; or (iii) challenging
Sellers'
right to use, sell, or export any products owned or licensed by any
of Sellers'
vendors. There are no outstanding orders, writs, injunctions,
decrees,
judgments, awards, determinations or directions, which involve
transactions of
or otherwise relate to the Business, Assets or Assumed Liabilities,
of any court
or arbitrator or under any outstanding order, regulation or demand
of any
federal, state, municipal or other governmental instrumentality,
domestic or
foreign.
4.12
Intellectual Property Rights.
(a) For purposes of this Agreement, "Intellectual Property"
means:
(i) all copyrights, copyrightable works, semiconductor
topography and mask work rights, including all rights of
authorship, use,
publication, reproduction, distribution, performance
transformation, moral
rights and rights of ownership of copyrightable works,
semiconductor topography
works and mask works, and all rights to register and obtain
renewals and
extensions of registrations, together with all other interests
accruing by
reason of international copyright, semiconductor topography and
mask work
conventions (collectively, "Copyrights");
(ii) trademarks, registered trademarks, applications for
registration of trademarks, service marks, registered service
marks,
applications for registration of service marks, trade names,
registered trade
names and applications for registrations of trade names and all
goodwill
associated therewith (collectively, "Trademarks") and domain name
registrations;
(iii) all technology, ideas, inventions, designs, proprietary
information, manufacturing and operating specifications, know-how,
formulae,
trade secrets, technical data, computer programs, hardware,
Software, processes,
brand names, inventions, trade secrets, websites (including
sub-pages), URLs and
other related intellectual property and know-how;
(iv) the Business System; and
(v) all other intangible assets, properties and rights
(whether or not appropriate steps have been taken to protect, under
applicable
law, such other intangible assets, properties or rights).
(b) Sellers co
