Exhibit 10.1
________________________________________________________________________________
ASSET PURCHASE AGREEMENT
among:
DESTINY NETWORKS, INC.,
a Delaware corporation;
and
BRENT BILGER,
an individual
and
HOME DIRECTOR, INC.,
a Delaware corporation
-----------------------------
Dated as of December 28, 2006
-----------------------------
________________________________________________________________________________
TABLE OF CONTENTS
PAGE
1.
SALE OF ASSETS; RELATED
TRANSACTIONS..............................................1
1.1
Sale of
Assets...........................................................1
1.2
Purchase
Price...........................................................2
1.3
Milestones...............................................................4
1.4
Sales
Taxes..............................................................5
1.5
Allocation of the Purchase
Price.........................................5
1.6
Closing..................................................................5
2.
REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL STOCKHOLDER AND THE
SELLER........6
2.1
Capitalization...........................................................6
2.2
Due Organization; No Subsidiaries;
Etc...................................6
2.3
Certificate of Incorporation and Bylaws;
Records.........................7
2.4
Financial
Statements.....................................................7
2.5
Absence Of
Changes.......................................................7
2.6
Title To
Assets..........................................................9
2.7
Bank
Accounts............................................................9
2.8
Receivables..............................................................9
2.9
Inventory................................................................9
2.10
Equipment,
Etc..........................................................10
2.11
Contracts...............................................................10
2.12
Real
Property...........................................................11
2.13
Intellectual
Property...................................................11
2.14
Agreements;
Action......................................................15
2.15
Major Customers and
Suppliers...........................................16
2.16
Compliance with Other
Instruments.......................................16
2.17
Governmental
Consents...................................................17
2.18
Tax
Matters.............................................................17
2.19
Employee And Labor
Matters..............................................17
2.20
Employee Benefit Plans and
Compensation.................................18
2.21
Environmental
Matters...................................................18
2.22
Insurance...............................................................18
2.23
Related Party
Transactions..............................................18
2.24
Authority; Binding Nature Of
Agreements.................................18
2.25
Brokers.................................................................19
2.26
Full
Disclosure.........................................................19
2.27
Litigation.
...........................................................19
2.28
Permits.................................................................19
2.29
Manufacturing and Marketing
Rights......................................20
3.
REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER..................................20
3.1
Authority; Binding Nature Of
Agreements.................................20
3.2
Valid
Issuance..........................................................20
3.3
Organization, Standing and
Power........................................20
3.4
Brokers.................................................................20
4.
PRE-CLOSING COVENANTS OF THE PRINCIPAL STOCKHOLDER AND THE
SELLER................20
4.1
Access And
Investigation................................................20
4.2
Operation Of
Business...................................................21
4.3
Filings and
Consents....................................................23
4.4
Notification; Updates to Disclosure
Schedule............................23
4.5
No
Negotiation..........................................................23
4.6
Best
Efforts............................................................24
4.7
Confidentiality.........................................................24
5.
ADDITIONAL COVENANTS AND
AGREEMENTS..............................................24
5.1
Expenses................................................................24
5.2
Tax
Treatment...........................................................24
5.3
Press
Releases..........................................................24
5.4
Projections.............................................................24
5.5
Restrictions on
Transfer................................................24
5.6
Change Of
Name..........................................................25
5.7
Principal Stockholder
Support...........................................25
6.
CONDITIONS TO OBLIGATIONS OF EACH
PARTY..........................................26
7.
CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATION TO
CLOSE......................26
ii
7.1
Representations and
Compliance..........................................26
7.2
Consents and
Approvals..................................................26
7.3
Additional
Documents...................................................26
8.
CONDITIONS PRECEDENT
TO THE SELLER'S OBLIGATION TO CLOSE........................27
8.1
Representations and
Compliance..........................................28
8.2
Consents and
Approvals..................................................28
8.3
Additional
Documents....................................................28
9.
TERMINATION......................................................................28
9.1
Termination
Events......................................................28
9.2
Termination
Procedures..................................................29
9.3
Effect Of
Termination...................................................29
9.4
Nonexclusivity Of Termination
Rights....................................29
10. INDEMNIFICATION,
ETC.............................................................29
10.1
Survival Of Representations And
Covenants...............................29
10.2
Indemnification By The Principal Stockholder and The
Seller.............30
10.3
Setoff..................................................................31
10.4
Nonexclusivity Of Indemnification
Remedies..............................31
10.5
Defense of Third Party
Claims...........................................31
10.6
Exercise Of Remedies By Persons Other Than an
Indemnitee................32
11. GENERAL
PROVISIONS...............................................................32
11.1
Joint And Several
Liability.............................................32
11.2
Notices.................................................................33
11.3
Counterparts............................................................33
11.4
Governing
Law...........................................................33
11.5
Mandatory
Arbitration...................................................33
11.6
Successors And Assigns; Parties In
Interest.............................34
11.7
Waiver..................................................................35
11.8
Amendments..............................................................35
11.9
Severability............................................................35
11.10
Entire
Agreement........................................................35
11.11
Currency................................................................35
iii
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as
of
December 28, 2006, by and between: DESTINY NETWORKS, INC., a
Delaware
corporation (the "Seller"), BRENT BILGER (the "Principal
Stockholder"); and HOME
DIRECTOR INC., a Delaware corporation (the "Purchaser"). Certain
capitalized
terms used in this Agreement are defined in Exhibit A.
RECITALS
A.
The Seller owns and operates a manufacturer of home and theater
controllers (the "Business").
B.
The Boards of Directors of the Seller (the "Seller's Board") and
Purchaser (the "Purchaser's Board") have determined that it is in
the best
interests of the Seller, and Purchaser, respectively, and their
respective
stockholders to consummate the purchase of all of the assets of the
Business by
Purchaser and the assumption of certain liabilities (the
"Acquisition").
C.
The Seller wishes to provide for the sale of substantially all of
the
assets of the Seller to the Purchaser, and Purchaser wishes to
acquire all such
assets, on the terms set forth in this Agreement.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree
as
follows:
1.
SALE OF ASSETS; RELATED TRANSACTIONS.
1.1
Sale of Assets. The Seller shall cause to be sold, assigned,
transferred, conveyed and delivered to the Purchaser, at the
Closing (as defined
below), good and valid title to the Assets (as defined below), free
of any
Encumbrances, on the terms and subject to the conditions set forth
in this
Agreement. For purposes of this Agreement, "Assets" shall mean and
include: (a)
all of the properties, rights, interests and other tangible and
intangible
assets of the Seller (wherever located and whether or not required
to be
reflected on a balance sheet prepared in accordance with generally
accepted
accounting principles), including any assets acquired by the Seller
during the
Pre-Closing Period; and (b) any other assets that are owned by any
of the Seller
or any other Related Party and that are needed for the conduct of,
or are useful
in connection with, the business of the Seller; provided, however,
that the
Assets shall not include any Excluded Assets. Without limiting the
generality of
the foregoing, the Assets shall include:
(1) all accounts receivable, notes receivable and other receivables
of
the Seller;
(2) all inventories and work-in-progress of the Seller, and all
rights
to collect from customers (and to retain) all fees and other
amounts payable, or
that may become payable, to the Seller with respect to services
performed on
behalf of the Seller on or prior to the Closing Date;
(3) all equipment, materials, prototypes, tools, supplies,
vehicles,
furniture, fixtures, improvements and other tangible assets of the
Seller
(including the tangible assets identified in Part 2.10 of the
Seller Disclosure
Schedule);
(4) all advertising and promotional materials possessed by the
Seller;
(5) all Intellectual Property Assets and related goodwill of the
Seller (including the right to use the name "Elegant Home Systems"
and
variations thereof, and the Intellectual Property Assets identified
in Part 2.13
of the Seller Disclosure Schedule);
(6) all rights of the Seller under the Seller's Contracts
(including
the Contracts identified in Exhibit B of the Seller Disclosure
Schedule);
(7) all Governmental Authorizations held by the Seller (including
the
Governmental Authorizations identified in Part 2.17 of the Seller
Disclosure
Schedule);
(8) all claims (including claims for past infringement or
misappropriation of Intellectual Property Assets or Intellectual
Property
Rights) and causes of action of the Seller against other Persons
(regardless of
whether or not such claims and causes of action have been asserted
by the
Seller), and all rights of indemnity, warranty rights, rights of
contribution,
rights to refunds, rights of reimbursement and other rights of
recovery
possessed by the Seller (regardless of whether such rights are
currently
exercisable); and
(9) all books, records, files and data of the Seller.
1.2 Purchase Price.
(a) As consideration for the sale of the Assets to the Purchaser:
(i) at the Closing, the Purchaser shall become obligated to issue
One Million Seven Hundred Fifty Thousand (1,750,000) shares of
Common Stock of
the Purchaser to be subscribed by the Seller;
(ii) at the Closing, the Purchaser shall assume the Assumed
Liabilities by delivering to the Seller an Assumption Agreement in
substantially
the form of Exhibit C (the "Assumption Agreement");
(iii) upon achievement of the milestones, as specified in Section
1.3 hereof, Purchaser shall pay to the Seller the Milestone
Consideration, as
such term is defined in Section 1.3;
(iv) upon the one year anniversary of the Closing, subject to
withholding and deduction pursuant to Section 10.3 hereof, the
Purchaser shall
issue to the Seller Two Hundred Fifty Thousand (250,000) shares of
Common Stock
of the Purchaser (the "Holdback Amount").
2
(b) For purposes of this Agreement "Assumed Liabilities" shall mean
only the following liabilities of the Seller:
(i) all accounts payable of the Seller that arose from bona fide
transactions entered into in the Ordinary Course of Business and
that remain
unpaid as of the Closing Date, but only to the extent and in the
amount
reflected as "accounts payable" as set forth on Exhibit B;
(ii) the obligations of the Seller under the Contracts identified
on Exhibit B hereto, but only to the extent such obligations (A)
arise after the
Closing Date, (B) do not arise from or relate to any Breach by the
Seller of any
provision of any of such Contracts, (C) do not arise from or relate
to any
event, circumstance or condition occurring or existing on or prior
to the
Closing Date that, with notice or lapse of time, would constitute
or result in a
Breach of any of such Contracts, and (D) are ascertainable (in
nature and
amount) solely by reference to the express terms of such Contracts;
and
(iii) the accrued employee vacation balances set forth on Exhibit
B hereto;
provided, however, that notwithstanding the foregoing, and
notwithstanding
anything to the contrary contained in this Agreement, the "Assumed
Liabilities"
shall not include, and the Purchaser shall not be required to
assume or to
perform or discharge:
(1) any Liability of any stockholder of the Company or any other
Person, except for the Seller;
(2) any Liability of the Seller arising out of or relating to the
execution, delivery or performance of any of the Transactional
Agreements;
(3) any Liability of the Seller for any fees, costs or expenses
of the type referred to in Section 5.2 hereof;
(4) any Liability of the Seller arising from or relating to any
action taken by the Seller, or any failure on the part of the
Seller to take any
action, at any time after the Closing Date;
(5) any Liability of the Seller arising from or relating to (x)
any services performed by the Seller for any customer, (y) any
claim or
Proceeding against the Seller, or (z) any service agreement entered
into by the
Seller for on-going service or maintenance related to products or
services sold
by the Seller;
(6) any Liability of the Seller for the payment of any Tax;
3
(7) any Liability of the Seller to any employee or former
employee of the Seller under or with respect to any Seller Employee
Plan, profit
sharing plan or dental plan or for severance pay;
(8) any Liability of the Seller to any of its stockholders or any
other Related Party;
(9) any Liability under any Contract, if the Seller shall not
have obtained, prior to the Closing Date, any Consent required to
be obtained
from any Person with respect to the assignment or delegation to the
Purchaser of
any rights or obligations under such Contract;
(10) any Liability that is inconsistent with or constitutes an
inaccuracy in, or that arises or exists by virtue of any Breach of,
(x) any
representation or warranty made by the Seller or the Principal
Stockholder in
any of the Transactional Agreements, or (y) any covenant or
obligation of the
Seller or the Principal Stockholder contained in any of the
Transactional
Agreements;
(11) any Liability owed by the Seller or any stockholder of the
Seller to any broker or finder, including, without limitation, any
fee payable
by the Seller or any stockholder of the Seller to Stratagem
Partnering, Inc.,
(12) any Liability listed on Exhibit G hereto; or
(11) any other Liability that is not referred to specifically in
clause "(i)", "(ii)" or "(iii)" of this sentence.
1.3 Milestones.
(a) If both of the following milestones are achieved by the
Purchaser
on or before December 31, 2007, then the Purchaser shall pay to the
Seller the
Milestone Consideration, as set forth in Section 1.3(c):
(i) The completed development of a product known as the "Digital
Home Access Service (DHAS)" which will allow homeowners and
integrators to
access the Domain 3000 from the Internet; and
(ii) The completed development of a product known as the "D3Can,"
a version of the Domain 3000 that allows it to be physically
installed into a
Home Director network connection center.
(b) The determination as to whether the milestones set forth in
Section 1.3(a) have been achieved shall be made by the Chief
Executive Officer
of the Purchaser (or, if the Company does not at such time have a
Chief
Executive Officer, by the then most senior executive officer of the
Purchaser)
in his sole discretion.
(c) The Milestone Consideration shall be comprised of the
following:
4
(i) Five Million Dollars ($5,000,000) cash, provided, however,
that if the Purchaser in good faith determines that its financial
resources do
not at the Milestone Consideration Due Date permit Purchaser to
make such cash
payment, Purchaser may instead issue an unsecured promissory note
to Seller, in
the principal amount of Five Million Dollars ($5,000,000) and
bearing simple
interest at a rate of eight percent per annum, with a term of one
(1) year; and
(ii) The Purchaser shall issue to the Seller One Million Five
Hundred Thousand (1,500,000) shares of Common Stock of the
Purchaser.
(d) The Milestone Consideration shall be due and payable fifteen
(15)
Trading Days after the determination, in accordance with Section
1.3(b), that
the milestones set forth in Section 1.3(a) have been achieved (the
"Milestone
Consideration Due Date").
1.4 Sales Taxes. The Seller shall bear and pay, and shall reimburse
the
Purchaser and the Purchaser's affiliates for, any sales taxes, use
taxes,
transfer taxes, documentary charges, recording fees or similar
taxes, charges,
fees or expenses that may become payable in connection with the
sale of the
Assets to the Purchaser or in connection with any of the other
Transactions.
1.5 Allocation of the Purchase Price. At or prior to the Closing,
the
Purchaser shall deliver to the Seller a statement setting forth the
Purchaser's
good faith determination of the manner in which the consideration
referred to in
Sections 1.2(a)(i), 1.2(a)(ii) and 1.2(a)(iii) is to be allocated
among the
Assets. The allocation prescribed by such statement shall be
conclusive and
binding upon the Seller for all purposes, and the Seller shall not
file any Tax
Return or other document with, or make any statement or declaration
to, any
Governmental Body that is inconsistent with such allocation.
1.6 Closing.
(a) The closing of the sale of the Assets to the Purchaser (the
"Closing") shall take place at the offices of Cooley Godward
Kronish LLP in Palo
Alto, California, at 10:00 a.m. on December 28, 2006; provided,
however, that if
any condition set forth in Section 7 has not been satisfied as of
the date
designated by the Purchaser, then the Purchaser may, at its
election,
unilaterally postpone the Scheduled Closing Time by up to 60 days.
For purposes
of this Agreement, "Closing Date" shall mean the time and date as
of which the
Closing actually takes place.
(b) At the Closing the Seller shall execute and deliver to the
Purchaser such bills of sale, endorsements, assignments and other
documents as
may (in the reasonable judgment of the Purchaser or its counsel) be
necessary or
appropriate to assign, convey, transfer and deliver to the
Purchaser good and
valid title to the Assets free of any Encumbrances.
(c) The Purchaser shall use commercially reasonable means to issue
One
Million Seven Hundred Fifty Thousand (1,750,000) shares of Common
Stock of the
Purchaser to be subscribed by the Seller as contemplated by Section
1.2(a)(i) as
soon as reasonably practicable following the issuance of shares of
Common Stock
of Purchaser pursuant to that certain Plan of Reorganization
regarding the
Purchaser, as approved by the U.S. Bankruptcy Court for the
Northern District of
California, Oakland Division by order dated October 12, 2006.
5
2.
REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL STOCKHOLDER AND THE
SELLER.
Except as set forth on the Seller Disclosure Schedule specifying
the
relevant subsection hereof, the Principal Stockholder and the
Seller, jointly
and severally, represent and warrant, to and for the benefit of the
Indemnitees,
as follows:
2.1
Capitalization.
(a) The authorized capital of the Seller consists of 20 Million
shares
of Common Stock, no par value ("Common Stock"), of which 6,642,556
shares are
issued and outstanding; and 10 million shares of Preferred Stock,
no par value
("Preferred Stock"), of which 1,407,261 shares are issued and
outstanding. There
are no other shares of capital stock of the Seller authorized or
outstanding.
(b) The outstanding shares of capital stock of the Seller have been
duly and validly authorized and issued, are fully paid and
nonassessable, and
were issued in accordance with the registration or qualification
provisions of
the Securities Act and any relevant state securities laws, or
pursuant to valid
exemptions therefrom.
(c) The Principal Stockholder is, and will be as of the Closing
Date,
the holder of a majority of the voting stock of the Seller. Except
for (i)
currently outstanding options to purchase shares of Common Stock
granted to
employees and other service providers pursuant to the Seller's 2000
Employee
Stock Option Plan (the "Seller Option Plan"), and (ii) as set forth
in Part
2.1(c) of the Seller Disclosure Schedule, there are not outstanding
any options,
warrants, rights (including conversion or preemptive rights) or
agreements for
the purchase or acquisition from the Seller of any shares of its
capital stock.
The Seller is not a party or subject to any agreement or
understanding, and,
there is no agreement or understanding between any persons and/or
entities,
which affects or relates to the voting or giving of written
consents with
respect to any security or by a director of the Seller.
(d) Each holder of the Seller's capital stock is an "accredited
investor" as that term is defined under Rule 501(a) of Regulation D
promulgated
under the Securities Act.
2.2 Due Organization; No Subsidiaries; Etc. The Seller is a
corporation
duly organized, validly existing and in good standing under the
laws of the
State of Delaware. The Seller is not required to be qualified,
authorized,
registered or licensed to do business as a foreign corporation in
any
jurisdiction other than the jurisdictions listed in Part 2.1 of the
Seller
Disclosure Schedule. The Seller is in good standing as a foreign
corporation in
each of the jurisdictions listed in Part 2.2 of the Seller
Disclosure Schedule.
The Seller does not have any subsidiaries, and does not own,
beneficially or
otherwise, any shares or other securities of, or any direct or
indirect interest
of any nature in, any other Entity. The Seller has never conducted
any business
under or otherwise used, for any purpose or in any jurisdiction,
any fictitious
name, assumed name, trade name or other name, other than "Destiny
Networks,
Inc." and " Elegant Home Systems".
6
2.3 Certificate of Incorporation and Bylaws; Records. The Seller
has
delivered to (or made available for inspection by) the Purchaser
accurate and
complete copies of: (i) the Certificate of Incorporation of the
Seller,
including all amendments thereto and bylaws of the Seller,
including all
amendments thereto; (ii) the stock records of the Seller; and (iii)
the minutes
and other records of the meetings and other proceedings (including
any actions
taken by written consent or otherwise without a meeting) of the
stockholders of
the Seller and the board of directors of the Seller. There have
been no meetings
or other proceedings of the stockholders of the Seller, the board
of directors
of the Seller or any committee of the board of directors of the
Seller that are
not fully reflected in such minutes or other records. The books of
account,
stock records, minute books and other records of the Seller are
accurate,
up-to-date and complete, and have been maintained in accordance
with sound and
prudent business practices. All of the records of the Seller are in
the actual
possession and direct control of the Seller.
2.4 Financial Statements. The Seller has delivered to the Purchaser
the
following financial statements (collectively, the "Financial
Statements"): (a)
the unaudited balance sheets of the Seller as of December 31, 2004,
December 31,
2005 and September 30, 2006, and the related statements of income
and retained
earnings and cash flows for the years then ended. The Financial
Statements are
accurate and complete in all respects, have been prepared in
accordance with
generally accepted accounting principles applied on a consistent
basis
throughout the periods covered and present fairly the financial
position of the
Seller as of the respective dates thereof and the results of
operations and cash
flows of the Seller for the periods covered thereby. Except as set
forth in the
Financial Statements, the Seller has no material liabilities,
contingent or
otherwise, other than (i) liabilities incurred in the Ordinary
Course of
Business subsequent to September 30, 2006 and (ii) obligations
under Contracts
and commitments incurred in the Ordinary Course of Business and not
required
under generally accepted accounting principles to be reflected in
the Financial
Statements, which, in both cases, individually or in the aggregate,
are not
material to the financial condition or operating results of the
Seller. Except
as disclosed in the Financial Statements, the Seller is not a
guarantor or
indemnitor of any indebtedness of any other person, firm or
corporation. The
Seller maintains and will continue to maintain a standard system of
accounting
established and administered in accordance with generally accepted
accounting
principles.
2.5 Absence Of Changes. Except as set forth in Part 2.5 of the
Seller
Disclosure Schedule, since September 30, 2006:
(a) there has not been any adverse change in, and no event has
occurred that might have an adverse effect on, the business,
condition, assets,
liabilities, operations, financial performance, net income or
prospects of the
Seller;
(b) there has not been any loss, damage or destruction to, or any
interruption in the use of, any of the assets of the Seller
(whether or not
covered by insurance);
7
(c) the Seller has not (i) declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of
capital
stock or other securities, or (ii) repurchased, redeemed or
otherwise reacquired
any shares of capital stock or other securities;
(d) the Seller has not purchased or otherwise acquired any asset
from
any other Person, except for supplies acquired by the Seller in the
Ordinary
Course of Business;
(e) the Seller has not leased or licensed any asset from any other
Person;
(f) the Seller has not made any capital expenditure;
(g) the Seller has not sold or otherwise transferred, or leased or
licensed, any asset to any other Person;
(h) the Seller has not written off as uncollectible, or established
any extraordinary reserve with respect to, any account receivable
or other
indebtedness;
(i) the Seller has not made any loan or advance to any other
Person;
(j) the Seller has not (i) established or adopted any employee
plan,
or (ii) paid any bonus or made any profit-sharing or similar
payment to, or
increased the amount of the wages, salary, commissions, fees,
fringe benefits or
other compensation or remuneration payable to, any of its
directors, officers,
employees or independent contractors;
(k) no Contract by which the Seller or any of the assets owned or
used
by the Seller is or was bound, or under which the Seller has or had
any rights
or interest, has been amended or terminated;
(l) the Seller has not incurred, assumed or otherwise become
subject
to any Liability, other than accounts payable (of the type required
to be
reflected as current liabilities in the "liabilities" column of a
balance sheet
prepared in accordance with GAAP) incurred by the Seller in bona
fide
transactions entered into in the Ordinary Course of Business;
(m) the Seller has not discharged any Encumbrance or discharged or
paid any indebtedness or other Liability, except for accounts
payable that (i)
are reflected as current liabilities in the "liabilities" column of
the
Financial Statements or have been incurred by the Seller since
September 30,
2006, in bona fide transactions entered into in the Ordinary Course
of Business,
and (ii) have been discharged or paid in the Ordinary Course of
Business;
(n) the Seller has not forgiven any debt or otherwise released or
waived any right or claim;
8
(o) the Seller has not changed any of its methods of accounting or
accounting practices in any respect;
(p) the Seller has not entered into any transaction or taken any
other
action outside the Ordinary Course of Business; and
(q) the Seller has not agreed, committed or offered (in writing or
otherwise) to take any of the actions referred to in clauses "(c)"
through
"(p)" above.
2.6 Title To Assets. The Seller owns, and has good and valid title
to, all
of the assets purported to be owned by it, including: all assets
reflected on
the Financial Statements; all assets acquired by the Seller since
September 30,
2006; all assets referred to in the Seller Disclosure Schedule; all
rights of
the Seller under the Contracts; and all other assets reflected in
the books and
records of the Seller as being owned by the Seller. Except as set
forth in Part
2.6 of the Seller Disclosure Schedule, all of said assets are owned
by the
Seller free and clear of any Encumbrances. Part 2.6 of the Seller
Disclosure
Schedule identifies all of the assets that are being leased or
licensed to the
Seller. The Assets will collectively constitute, as of the Closing
Date, all of
the properties, rights, interests and other tangible and intangible
assets
necessary to enable the Seller to conduct its business in the
manner in which
such business is currently being conducted and in the manner in
which such
business is proposed to be conducted.
2.7 Bank Accounts. Part 2.7 of the Seller Disclosure Schedule
accurately
sets forth, with respect to each account maintained by or for the
benefit of the
Seller at any bank or other financial institution: (a) the name and
location of
the institution at which such account is maintained; (b) the name
in which such
account is maintained and the account number of such account; (c) a
description
of such account and the purpose for which such account is used; (d)
the current
balance in such account; (e) the rate of interest being earned on
the funds in
such account; and (f) the names of all individuals authorized to
draw on or make
withdrawals from such account. There are no safe deposit boxes or
similar
arrangements maintained by or for the benefit of the Seller.
2.8 Receivables. Part 2.8 of the Seller Disclosure Schedule
provides an
accurate and complete breakdown and aging of all accounts
receivable, notes
receivable and other receivables of the Seller as of September 30,
2006. Except
as set forth in Part 2.8 of the Seller Disclosure Schedule, all
existing
accounts receivable of the Seller (including those accounts
receivable reflected
on the Financial Statements that have not yet been collected and
those accounts
receivable that have arisen since September 30, 2006 and have not
yet been
collected): (i) represent valid obligations of customers of the
Seller arising
from bona fide transactions entered into in the Ordinary Course of
Business.
2.9 Inventory. Part 2.9 of the Seller Disclosure Schedule provides
an
accurate and complete breakdown of all inventory (including raw
materials, work
in process and finished goods) of the Seller as of September 30,
2006. All of
the Seller's existing inventory (including all inventory that is
reflected on
the Financial Statements and that has not been disposed of by the
Seller since
September 30, 2006): (a) is of such quality and quantity as to be
usable and
saleable by the Seller in the Ordinary Course of Business; (b) has
been priced
at the lower of cost or market value using the "last-in, first-out"
method; and
(c) is free of any defect or deficiency. The inventory levels
maintained by the
Seller (i) are not excessive in light of the Seller's normal
operating
requirements, (ii) are adequate for the conduct of the Seller's
operations in
the Ordinary Course of Business, and (iii) are comparable to the
inventory
levels maintained by other companies of similar size and business.
9
2.10 Equipment, Etc. Part 2.10 of the Seller Disclosure Schedule
accurately
identifies all equipment, materials, prototypes, tools, supplies,
vehicles,
furniture, fixtures, improvements and other tangible assets owned
by the Seller,
and accurately sets forth the date of acquisition, original cost
and book value
of each of said assets. Part 2.10 of the Seller Disclosure Schedule
also
accurately identifies all tangible assets leased to the Seller.
Each asset
identified or required to be identified in Part 2.10 of the Seller
Disclosure
Schedule: (i) is structurally sound, free of defects and
deficiencies and in
good condition and repair (ordinary wear and tear excepted); (ii)
complies in
all respects with, and is being operated and otherwise used in full
compliance
with, all applicable Legal Requirements; and (iii) is adequate and
appropriate
for the uses to which it is being put. The assets identified in
Part 2.10 of the
Seller Disclosure Schedule are adequate for the conduct of the
business of the
Seller in the manner in which such business is currently being
conducted and in
the manner in which such business is proposed to be conducted.
2.11 Contracts.
(a) Part 2.11 of the Seller Disclosure Schedule identifies and
provides an accurate and complete description of each Seller
Contract. The
Seller has delivered to the Purchaser accurate and complete copies
of all
Contracts identified in Part 2.11 of the Seller Disclosure
Schedule, including
all amendments thereto. Each Seller Contract is valid and in full
force and
effect.
(b) Except as set forth in Part 2.11 of the Seller Disclosure
Schedule: (i) no Person has violated or breached, or declared or
committed any
default under, any Seller Contract; (ii) no event has occurred, and
no
circumstance or condition exists, that might (with or without
notice or lapse of
time) (A) result in a violation or breach of any of the provisions
of any Seller
Contract, (B) give any Person the right to declare a default or
exercise any
remedy under any Seller Contract, (C) give any Person the right to
accelerate
the maturity or performance of any Seller Contract, or (D) give any
Person the
right to cancel, terminate or modify any Seller Contract; (iii) the
Seller has
not received any notice or other communication (in writing or
otherwise)
regarding any actual, alleged, possible or potential violation or
breach of, or
default under, any Seller Contract; and (iv) the Seller has not
waived any right
under any Seller Contract.
(c) To the best of the knowledge of the Seller and the Principal
Stockholder, each Person against which the Seller has or may
acquire any rights
under any Seller Contract is solvent and is able to satisfy all of
such Person's
current and future monetary obligations and other obligations and
Liabilities
thereunder.
(d) Except as set forth in Part 2.11 of the Seller Disclosure
Schedule, the Seller has never guaranteed or otherwise agreed to
cause, ensure
or become liable for, and the Seller has never pledged any of its
assets to
secure, the performance or payment of any obligation or other
Liability of any
other Person.
10
(e) To the best of the Seller's and Principal Shareholder's
knowledge,
the performance of the Seller Contracts will not result in any
violation of or
failure to comply with any Legal Requirements.
(f) No Person is renegotiating, or has the right to renegotiate,
any
amount paid or payable to the Seller under any Seller Contract or
any other term
or provision of any Seller Contract.
(g) The Seller has no knowledge of any basis upon which any party
to
any Seller Contract may object to (i) the assignment to the
Purchaser of any
right under such Seller Contract, or (ii) the delegation to or
performance by
the Purchaser of any obligation under such Seller Contract.
(h) The Contracts identified in Part 2.11 of the Seller Disclosure
Schedule collectively constitute all of the Contracts necessary to
enable the
Seller to conduct its business in the manner in which such business
is currently
being conducted and in the manner in which such business is
proposed to be
conducted.
(i) Part 2.11 of the Seller Disclosure Schedule identifies and
provides an accurate and complete description of each proposed
Contract as to
which any bid, offer, written proposal, term sheet or similar
document has been
submitted or received by the Seller.
2.12 Real Property. The Seller does not own any real property or
any
interest in real property, except for the leaseholds created under
the real
property leases identified in Part 2.12 of the Seller Disclosure
Schedule. Part
2.12 of the Seller Disclosure Schedule provides an accurate and
complete
description of the premises covered by said leases and the
facilities located on
such premises. The Seller enjoys peaceful and undisturbed
possession of such
premises.
2.13 Intellectual Property.
(a) The term "Intellectual Property Assets" means all intellectual
property
owned or licensed (as licensor or licensee) by Seller in which
Seller has a
proprietary interest, including:
(i) Seller's name, all assumed fictional business names, trade
names,
registered and unregistered trademarks, service marks and
applications
(collectively, "Marks");
(ii) all patents, patent applications and inventions and
discoveries
that may be patentable (collectively, "Patents");
(iii) all registered and unregistered copyrights in both published
works and unpublished works (collectively, "Copyrights");
(iv) all rights in mask works;
11
(v) all know-how, trade secrets, confidential or proprietary
information, customer lists, Software, technical information, data,
process
technology, plans, drawings and blue prints (collectively, "Trade
Secrets"); and
(vi) all rights in internet web sites and internet domain names
presently used by Seller (collectively "Net Names").
(b) Part 2.13(b) contains a complete and accurate list and summary
description, including any royalties paid or received by Seller,
and Seller has
delivered to Buyer accurate and complete copies, of all Seller
Contracts
relating to the Intellectual Property Assets, except for any
license implied by
the sale of a product and perpetual, paid-up licenses for commonly
available
Software programs with a value of less than $10,000 under which
Seller is the
licensee. There are no outstanding and, to Seller's Knowledge, no
threatened
disputes or disagreements with respect to any such Contract.
(c) (i) Except as set forth in Part 2.13(c), the Intellectual
Property
Assets are all those necessary for the operation of Seller's
business as it is
currently conducted. Seller is the owner or licensee of all right,
title and
interest in and to each of the Intellectual Property Assets, free
and clear of
all Encumbrances, and has the right to use without payment to a
third party all
of the Intellectual Property Assets, other than in respect of
licenses listed in
Part 2.13(c).
(ii) Except as set forth in Part 2.13(c), each Person who is or was
an
employee or contractor of the Seller and who is or was involved in
the creation
or development of any Seller Intellectual Property Asset has signed
a valid,
enforceable agreement containing an assignment of Intellectual
Property Rights
pertaining to such Seller product or Intellectual Property Asset to
the Seller
and confidentiality provisions protecting the Intellectual Property
Asset. No
current or former shareholder, officer, director, or employee of
the Seller has
any claim, right (whether or not currently exercisable), or
interest to or in
any Intellectual Property Asset. No employee of the Seller is (a)
bound by or
otherwise subject to any Contract restricting him from performing
his duties for
the Seller or (b) in breach of any Contract with any former
employer or other
Person concerning Intellectual Property Rights or confidentiality
due to his
activities as an employee of the Seller.
(d)
(i) Part 2.13(d) contains a complete and accurate list and summary
description of all Patents.
(ii) All of the issued Patents are currently in compliance with
formal
legal requirements (including payment of filing, examination and
maintenance
fees and proofs of working or use), are valid and enforceable, and
are not
subject to any maintenance fees or taxes or actions falling due
within ninety
(90) days after the Closing Date.
(iii) No Patent has been or is now involved in any interference,
reissue, reexamination, or opposition Proceeding. To Seller's
Knowledge, there
is n o potentially interfering patent or patent application of any
third party.
12
(iv) Except as set forth in Part 2.13 (d), (A) no Patent is
infringed
or, to Seller's Knowledge, has been challenged or threatened in any
way and (B)
none of the products manufactured or sold, nor any process or
know-how used, by
Seller infringes or is alleged to infringe any patent or other
proprietary right
of any other Person.
(v) All products made, used or sold under the Patents have been
marked
with the proper patent notice.
(e)
(i) Part 2.13(e) contains a complete and accurate list and summary
description of all Marks.
(ii) All Marks have been registered with the United States Patent
and
Trademark Office, are currently in compliance with all formal Legal
Requirements
(including the timely post-registration filing of affidavits of use
and
incontestability and renewal applications), are valid and
enforceable and are
not subject to any maintenance fees or taxes or actions falling due
within
ninety (90) days after the Closing Date.
(iii) No Mark has been or is now involved in any opposition,
invalidation or cancellation Proceeding and, to Seller's Knowledge,
no such
action is threatened with respect to any of the Marks.
(iv) To Seller's Knowledge, there is no potentially interfering
trademark or trademark application of any other Person.
(v) No Mark is infringed or, to Seller's Knowledge, has been
challenged or threatened in any way. None of the Marks used by
Seller infringes
or is alleged to infringe any trade name, trademark or service mark
of any other
Person.
(vi) All products and materials containing a Mark bear the proper
federal registration notice where permitted by law.
(f)
(i) Part 2.13(f) contains a complete and accurate list and summary
description of all Copyrights.
(ii) All of the registered Copyrights are currently in compliance
with
formal Legal Requirements, are valid and enforceable, and are not
subject to any
maintenance fees or taxes or actions falling due within ninety (90)
days after
the date of Closing.
(iii) No Copyright is infringed or, to Seller's Knowledge, has been
challenged or threatened in any way. None of the subject matter of
any of the
Copyrights infringes or is alleged to infringe any copyright of any
third party
or is a derivative work based upon the work of any other Person.
(iv) All works encompassed by the Copyrights have been marked with
the
proper copyright notice.
13
(g)
(i) With respect to each Trade Secret, the documentation relating
to
such Trade Secret is current, accurate and sufficient in detail and
content to
identify and explain it and to allow its full and proper use
without reliance on
the knowledge or memory of any individual.
(ii) Seller has taken all reasonable precautions to protect the
secrecy, confidentiality and value of all Trade Secrets (including
the
enforcement by Seller of a policy requiring each employee or
contractor to
execute proprietary information and confidentiality agreements
substantially in
Seller's standard form, and all current and former employees and
contractors of
Seller have executed such an agreement).
(iii) Seller has good title to and an absolute right to use the
Trade
Secrets. The Trade Secrets are not part of the public knowledge or
literature
and, to Seller's Knowledge, have not been used, divulged or
appropriated either
for the benefit of any Person (other than Seller) or to the
detriment of Seller.
No Trade Secret is subject to any adverse claim or has been
challenged or
threatened in any way or infringes any intellectual property right
of any other
Person.
(h)
(i) Part 2.13(h) contains a complete and accurate list and summary
description of all Net Names.
(ii) All Net Names have been registered in the name of Seller and
are
in compliance with all formal Legal Requirements.
(iii) No Net Name has been or is now involved in any dispute,
opposition, invalidation or cancellation Proceeding and, to
Seller's Knowledge,
no such action is threatened with respect to any Net Name.
(iv) To Seller's Knowledge, there is no domain name application
pending of any other person which would or would potentially
interfere with or
infringe any Net Name.
No Net Name is infringed or, to Seller's Knowledge, has been
challenged,
interfered with or threatened in any way. No Net Name infringes,
interferes with
or is alleged to interfere with or infringe the trademark,
copyright or domain
name of any other Person.
(i) To the best of the Seller's and Principal Shareholder's
knowledge, none
of the software (including firmware and other software embedded in
hardware
devices) owned, developed (or currently being developed), used,
marketed,
distributed, licensed, or sold by the Seller (including any
software that is
part of, is distributed with, or is used in the design,
development,
manufacturing, production, distribution, testing, maintenance, or
support of any
Seller product, but excluding any third-party software that is
generally
available on standard commercial terms and is licensed to the
Seller solely for
internal use on a non-exclusive basis) (collectively, "Seller
Software") (a)
contains any bug, defect, or error (including any bug, defect, or
error relating
to or resulting from the display, manipulation, processing,
storage,
transmission, or use of date data) that materially and adversely
affects the
use, functionality, or performance of such Seller Software or any
product or
system containing or used in conjunction with such Seller Software;
or (b) fails
to comply with any applicable warranty or other contractual
commitment relating
to the use, functionality, or performance of such Seller Software
or the Seller
has provided to the Purchaser a complete and accurate list of all
known bugs,
defects, and errors in each version of the Seller Software.
14
(j) To the best of the Seller's and Principal Shareholder's
knowledge, no
Seller Software contains any "back door," "drop dead device," "time
bomb,"
"Trojan horse," "virus," or "worm" (as such terms are commonly
understood in the
software industry) or any other code designed or intended to have,
or capable of
performing, any of the following functions: (a) disrupting,
disabling, harming,
or otherwise impeding in any manner the operation of, or providing
unauthorized
access to, a computer system or network or other device on which
such code is
stored or installed; or (b) damaging or destroying any data or file
without the
user's consent.
(k) The source code for all Seller Software contains clear and
accurate
annotations and programmer's comments, and otherwise has been
documented in a
professional manner that is both: (i) consistent with customary
code annotation
conventions and best practices in the software industry; and (ii)
sufficient to
independently enable a programmer of reasonable skill and
competence to
understand, analyze, and interpret program logic, correct errors
and improve,
enhance, modify and support the Seller Software. No source code for
any Seller
Software has been delivered, licensed, or made available to any
escrow agent or
other Person who is not, as of the date of this Agreement, an
employee of the
Seller. The Seller has no duty or obligation (whether present,
contingent, or
otherwise) to deliver, license, or make available the source code
for any Seller
Software to any escrow agent or other Person. No event has
occurred, and no
circumstance or condition exists, that (with or without notice or
lapse of time)
will, or could reasonably be expected to, result in the delivery,
license, or
disclosure of the source code for any Seller Software to any other
Person.
(l)
Part 2.13(l) of the Seller Disclosure Schedule accurately
identifies
and describes (i) each item of Open Source Code that is contained
in,
distributed with, or used in the development of the Seller products
or from
which any part of any Seller product is derived, (ii) the
applicable license
terms for each such item of Open Source Code, and (iii) the Seller
product or
Seller products to which each such item of Open Source Code
relates.
No Seller product contains, is derived from, is distributed with,
or is
being or was developed using Open Source Code that is licensed
under any terms
that (i) impose or could impose a requirement or condition that any
Seller
product or part thereof (A) be disclosed or distributed in source
code form, (B)
be licensed for the purpose of making modifications or derivative
works, or (C)
be redistributable at no charge, or (ii) otherwise impose or could
impose any
other material limitation, restriction, or condition on the right
or ability of
the Seller to use or distribute any Seller product.
2.14 Agreements; Action.
(a) Except for agreements explicitly contemplated hereby, and
except
for agreements between the Seller and its employees regarding the
sale of shares
of the Seller's Common Stock under the Seller Option Plan, there
are no
agreements, understandings or proposed transactions between the
Seller and any
of its officers, directors, affiliates, or any affiliate thereof
except as set
forth on the Balance Sheet.
15
(b) There are no agreements, understandings, instruments,
Contracts,
proposed transactions, judgments, orders, writs or decrees to which
the Seller
is a party or by which it is bound that may involve (i) future
obligations
(contingent or otherwise) of, or payments to the Seller in excess
of $10,000
(other than obligations arising from purchase or sale agreements
entered into in
the Ordinary Course of Business), (ii) provisions restricting or
affecting the
development, manufacture or distribution of the Seller's products
or services,
or (iii) indemnification by the Seller with respect to
infringements of
proprietary rights (other than indemnification obligations arising
from
purchase, sale or license agreements entered into in the Ordinary
Course of
Business).
(c) The Seller has not (i) declared or paid any dividends or
authorized or made any distribution upon or with respect to any
class or series
of its capital stock, (ii) incurred any indebtedness for money
borrowed or any
other liabilities (other than with respect to dividend obligations,
distributions, indebtedness and other obligations incurred in the
Ordinary
Course of Business or as disclosed in the Financial Statements
individually in
excess of $10,000 or, in the case of indebtedness and/or
liabilities
individually less than $10,000, in excess of $25,000 in the
aggregate, (iii)
made any loans or advances to any person, other than ordinary
advances for
travel expenses, or (iv) sold, exchanged or otherwise disposed of
any of its
assets or rights, other than the sale of its inventory in the
Ordinary Course of
Business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments,
Contracts
and proposed transactions involving the same person or entity
(including persons
or entities the Seller has reason to believe are affiliated
therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar
amounts of
such subsections.
(e) Other than with Purchaser, the Seller has not engaged in the
past
three (3) months in any discussion (i) with any representative of
any
corporation or corporations regarding the consolidation or merger
of the Seller
with or into any such corporation or corporations, (ii) with any
corporation,
partnership, association or other business entity or any individual
regarding
the sale, conveyance or disposition of all or substantially all of
the assets of
the Seller or a transaction or series of related transactions in
which more than
fifty percent (50%) of the voting power of the Seller is disposed
of, or (iii)
regarding any other form of acquisition, liquidation, dissolution
or winding up
of the Seller.
2.15 Major Customers and Suppliers. No customer or supplier that
was
significant to the Seller during the period covered by the
Financial Statements
or that has been significant to the Seller thereafter, has
terminated,
materially reduced or threatened to terminate or materially reduce
its purchases
from or provision of products or services to the Seller, as the
case may be.
2.16 Compliance with Other Instruments. The Seller is not in
violation or
default of any provision of its Certificate of Incorporation or
Bylaws, or of
any instrument, judgment, order, writ, decree or contract to which
it is a party
or by which it is bound, or, of any provision of any federal or
state statute,
16
rule or regulation applicable to the Seller. The execution,
delivery and
performance of this Agreement, and the consummation of the
transactions
contemplated hereby, will not result in any such violation or be in
conflict
with or constitute, with or without the passage of time and giving
of notice,
either a default under any such provision, instrument, judgment,
order, writ,
decree or contract or an event that results in the creation of any
lien, charge
or encumbrance upon any assets of the Seller or the suspension,
revocation,
impairment, forfeiture, or nonrenewal of any material permit,
license,
authorization, or approval applicable to the Seller, its business
or operations
or any of its assets or properties.
2.17 Governmental Consents. No consent, approval, order or
authorization
of, or registration, qualification, designation, declaration or
filing with, any
federal, state or local governmental authority on the part of the
Seller is
required in connection with the consummation of the transactions
contemplated by
this Agreement, except filings required pursuant to federal and
state securities
laws, which filings will be effected no later than the time such
filings are
required to be filed, or such other post-closing filings as may be
required.
2.18 Tax Matters. The Seller has filed all Tax Returns and reports
(including information returns and reports) as required by United
States federal
or state law. These Tax Returns and reports are true and correct in
all material
respects. The Seller has paid all taxes and other assessments due,
except those
contested by it in good faith that are listed in the Seller
Disclosure Schedule.
The provision for taxes of the Seller as shown in the Financial
Statements is
adequate for taxes due or accrued as of the date thereof. The
Seller is and
always has been a Subchapter C corporation. The Seller has never
had any tax
deficiency proposed or assessed against it and has not executed any
waiver of
any statute of limitations on the assessment or collection of any
tax or
governmental charge. None of the Seller's federal income Tax
Returns and none of
its state income or franchise tax or sales or use Tax Returns has
ever been
audited by governmental authorities. Since the date of the
Financial Statements,
the Seller has not incurred any taxes, assessments or governmental
charges other
than in the Ordinary Course of Business and the Seller has made
adequate
provisions on its books of account for all taxes, assessments and
governmental
charges with respect to its business, properties and operations for
such period.
The Seller has withheld or collected from each payment made to each
of its
employees, the amount of all taxes (including, but not limited to,
federal
income taxes, Federal Insurance Contribution Act taxes and Federal
Unemployment
Tax Act taxes) required to be withheld or collected therefrom, and
has paid the
same to the proper tax receiving officers or authorized
depositories.
2.19 Employee And Labor Matters. The Seller is not bound by or
subject to
(and none of its assets or properties is bound by or subject to)
any written or
oral, express or implied, contract, commitment or arrangement with
any labor
union, and no labor union has requested or, to the best of the
Seller's
Knowledge, has sought to represent any of the employees,
representatives or
agents of the Seller. There is no strike or other labor dispute
involving the
Seller pending, or to the best of the Seller's Knowledge,
threatened, that could
have a Material Adverse Effect on the properties, assets, affairs,
operations,
financial condition, operating results, or business of the Seller
(as such
business is presently conducted and as it is presently proposed to
be
conducted), nor is the Seller aware of any labor organization
activity involving
its employees. The Seller is not aware that any officer or key
employee, or that
any group of key employees, intends to terminate their employment
with the
Seller, nor does the Seller have a present intention to terminate
the employment
of any of the foregoing. The employment of each officer and
employee of the
17
Seller is terminable at the will of the Seller. The Seller has
complied in all
material respects with all applicable state and federal equal
employment
opportunity and other laws related to employment. The Seller is not
a party to
or bound by any currently effective employment contract, deferred
compensation
agreement, bonus plan, incentive plan, profit sharing plan,
retirement
agreement, or other employee compensation agreement, other than the
Seller
Option Plan. The Seller is not aware that any of its employees is
obligated
under any contract or other agreement, or subject to any judgment,
decree or
order of any court or administrative agency, that would materially
interfere
with the use of his or her efforts to promote the interests of the
Seller or
that would conflict with the Seller's business as presently
conducted. No
officer or employee of the Seller has entered into an employment
agreement with
the Seller or is entitled to any compensation following termination
of
employment with the Seller.
2.20 Employee Benefit Plans and Compensation. The Seller does not
have any
Employee Benefit Plan as defined in the Employee Retirement Income
Security Act
of 1974.
2.21 Environmental Matters. The Seller is not in violation of any
applicable statute, law or regulation relating to the environment
or
occupational health and safety, and no material expenditures are or
will be
required in order to comply with any such existing statute, law or
regulation.
2.22 Insurance. The Seller has in full force and effect fire and
casualty
insurance policies, with extended coverage, sufficient in amount
(subject to
reasonable deductibles) to allow it to replace any of its material
properties
that might be damaged or destroyed. The Seller has in full force
and effect
general liability and errors and omissions insurance in amounts
customary for
similarly situated companies.
2.23 Related Party Transactions. No employee, officer, or director
of the
Seller or member of his or her immediate family is indebted to the
Seller, nor
is the Seller indebted (or committed to make loans or extend or
guarantee
credit) to any of them, other than for (a) payment of salary for
services
rendered, (b) reimbursement for reasonable expenses incurred on
behalf of the
Seller, and (c) other standard employee benefits made generally
available to all
employees (including stock option agreements outstanding under the
Seller Option
Plan or any other stock option plan approved by the Seller's
Board). To the best
of the Seller's Knowledge, none of such persons has any direct or
indirect
ownership interest in any firm or corporation with which the Seller
is
affiliated or with which the Seller has a business relationship, or
any firm or
corporation that competes with the Seller, except that employees,
officers, or
directors of the Seller and members of their immediate families may
own stock in
publicly traded companies that may compete with the Seller. No
member of the
immediate family of any officer or director of the Seller is
directly or
indirectly interested in any material Contracts with the Seller.
2.24 Authority; Binding Nature Of Agreements. The Seller has the
absolute
and unrestricted right, power and authority to enter into and to
perform its
obligations under each of the Transactional Agreements to which it
is or may
become a party; and the execution, delivery and performance by the
Seller of the
18
Transactional Agreements to which it is or may become a party have
been duly
authorized by all necessary action on the part of the Seller and
its
stockholders, board of directors and officers. This Agreement
constitutes the
legal, valid and binding obligation of the Seller, enforceable
against the
Seller in accordance with its terms. Upon the execution of each of
the other
Transactional Agreements at the Closing, each of such other
Transactional
Agreements to which the Seller is a party will constitute the
legal, valid and
binding obligation of the Seller and will be enforceable against
the Seller in
accordance with its terms.
2.25 Brokers. Neither the Seller nor the Principal Stockholder has
agreed
or become obligated to pay, or has taken any action that might
result in any
Person claiming to be entitled to receive, any brokerage
commission, finder's
fee or similar commission or fee in connection with any of the
Transactions.(1)
2.26 Full Disclosure. None of the Transactional Agreements contains
or will
contain any untrue statement of fact; and none of the Transactional
Agreements
omits or will omit to state any fact necessary to make any of the
representations, warranties or other statements or information
contained therein
not misleading. All of the information set forth in the Seller
Disclosure
Schedule, and all other information regarding the Seller and the
Business,
condition, assets, liabilities, operations, financial performance,
net income
and prospects that has been furnished to the Purchaser or any of
the Purchaser's
Representatives by or on behalf of the Seller or by any
Representative of the
Seller, is accurate and complete in all respects.
2.27 Litigation. There is no action, suit proceeding or
investigation
pending or, to the Seller's Knowledge, currently threatened against
the Seller
that questions the validity of this Agreement, or the right of the
Seller to
enter into this Agreement, or to consummate the transactions
contemplated
hereby, or that could reasonably be expected to result, either
individually or
in the aggregate, in a Material Adverse Effect in the business,
properties,
affairs, assets, operations or financial condition of the Seller,
or any change
in the current equity ownership of the Seller, nor is the Seller
aware that
there is any basis for the foregoing. The foregoing includes,
without
limitation, actions, suits, proceedings or investigations pending
or, to the
Seller's Knowledge, threatened (or any basis therefor known to the
Seller)
involving the prior employment of any of the Seller's employees,
their use in
connection with the Seller's business of any information or
techniques allegedly
proprietary to any of their former employers, or their obligations
under any
agreements with prior employers. The Seller is not a party or
subject to the
provisions of any order, writ, injunction, judgment or decree of
any court or
government agency or instrumentality. There is no action, suit,
proceeding or
investigation by the Seller currently pend
