EXECUTION COPY
ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT (this "Agreement") is
entered
into as of September 30, 2006, by and between TEXAS CAPITAL BANK,
N.A., a
national banking association ("Seller"), and TRANSNATIONAL
FINANCIAL NETWORK,
INC., a California corporation ("Buyer").
WITNESSETH:
WHEREAS, Seller wishes to sell to Buyer and Buyer wishes to
purchase from Seller substantially all of the assets of
Seller's
residential mortgage lending division (the "Business") upon the
terms
and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the
mutual
covenants and promises contained in this Agreement, and other good
and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged,
Buyer and Seller agree as follows:
I.
PURCHASE AND SALE OF ASSETS.
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A.
Sale of Assets.
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1. Assets. Seller shall cause to be sold, assigned,
transferred, conveyed and delivered to Buyer, at the Closing (as
defined
herein), 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 all
of the properties, rights, interest and other tangible and
intangible assets of
the Business (wherever located and whether or not required to be
reflected on a
balance sheet prepared in accordance with generally accepted
accounting
principles) required to operate the Business in the ordinary course
of business.
Without limiting the generality of the foregoing, the Assets
specifically shall
include those assets of the Business listed on Schedule I(A)(1)
attached hereto
and made a part hereof but shall not include the Excluded Assets
(hereafter
defined).
2. Excluded Assets. Ownership of the Assets of the Business
set forth in Schedule I(A)(2) (the "Excluded Assets") shall not be
transferred
to Buyer and shall be retained by Seller following the consummation
of the
transactions contemplated by this Agreement.
3. Legally Restricted Assets. With regard to that portion of
the Assets listed on Schedule I(A)(3), the sale of which is subject
to
regulatory restrictions and licensing requirements (the "Legally
Restricted
Assets"), the parties agree that Seller shall transfer ownership of
the Legally
Restricted Assets, or portions thereof, to Buyer at Partial
Closing(s)
(hereafter defined), each of which shall be held promptly after
Buyer has
satisfied the legal restrictions applicable to the transfer of the
Legally
Restricted Assets or portion thereof
4. Net Branches. Schedule 1(A)(4) lists Seller's so-called
"net branches". Pursuant to the business arrangements between
Seller and the net
branches, the net branches are not contractually obligated to do
business with
Buyer after the date hereof. Notwithstanding the
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foregoing, Seller shall make good faith efforts to encourage the
net branches to
do business with Buyer after the date hereof.
5. Mortgage Loans. From time to time between the date hereof
and the Closing, Seller may sell to Buyer, and Buyer may purchase
from Seller,
mortgage loans originated by Seller and typically sold by Seller to
investors
and servicers in the ordinary course of the Business (the "Mortgage
Loans"). The
terms and conditions of Buyer's purchase of any Mortgage Loans
shall be governed
by Seller's standard form of note purchase agreement.
B. Liabilities. In connection with its purchase of the Assets,
Buyer
shall assume only those liabilities of Seller, if any, which are
listed on
Schedule I(B)(1) attached hereto and made a part hereof (the
"Assumed
Liabilities"). Except as specifically set forth in this Section
I(B), Buyer
shall not be liable for any debt, obligation, claim or liability of
Seller of
any kind or description whatsoever, contingent or otherwise, known
or unknown,
whether incurred prior to, or for claims for events prior to
Closing but paid
subsequent to or at the Closing, all such unassumed liabilities
being
hereinafter collectively referred to as the "Retained Liabilities".
Buyer shall
assume the Assumed Liabilities at or prior to the Closing and, upon
the
assumption of the Assumed Liabilities, shall pay when due the
Assumed
Liabilities and shall perform executory obligations arising from
the Assumed
Liabilities after the assumption thereof pursuant to the express
terms of those
contracts, leases and agreements, if any, listed on Schedule
I(B)(2) attached
hereto and made a part hereof (the "Assumed Contracts and
Leases").
II.
PURCHASE PRICE.
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A. Subject to the adjustment set forth in Section II(B) hereof,
the
purchase price (the "Purchase Price") payable by Buyer to Seller
for the Assets
shall be three million (3,000,000) shares of the voting common
stock, no par
value, of Buyer (the "Buyer Common Stock"), all of which shares
shall be
delivered as follows:
1. Promptly following the receipt from the American Stock
Exchange ("AMEX") of approval of Buyer's Listing Application (as
defined in
Section VI(F)(1)), Buyer shall deliver the following
certificates:
(a) a certificate representing one million one
hundred thirty-three thousand six hundred forty-five (I,133,645)
shares of the
Buyer Common Stock issued in the name of Seller, which shall be
delivered to
Seller; and
(b) certificates representing the number of shares of
Buyer Common Stock shown opposite the name of each person shown in
Schedule
II(A)(1)(b) hereto the (the "Employees"), in the "Employee Shares
to be
Delivered at Signing" column of Schedule II(A)(l)(b), for an
aggregate of five
hundred seventy-five thousand (575,000) shares for all Employees,
which shall be
issued in the names of and delivered to the Employees; and
(c) a promissory note (the "Note") substantially in
the form of Exhibit F attached hereto, made by the Buyer to the
order of the
Seller in the original principal amount of Four Hundred Forty-Five
Thousand Two
Hundred Dollars and NO/100 Cents ($445,200.00), which shall be
delivered to
Escrow Agent (as hereafter defined) and shall be
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subject to the provision of Section II(A)(2). Buyer shall be
required to
exchange the Note for the Remaining Earn-out Shares (as hereafter
defined) as
provided in Section II(A)(2).
Concurrent with Buyer's delivery of the share certificates
described in this
Section II(A)(1), Buyer and Seller shall execute and deliver two
copies of each
of (i) an escrow agreement substantially in the form of Exhibit B
hereto (the
"Escrow Agreement") with Bracewell & Giuliani LLP as the escrow
agent (the
"Escrow Agent") thereunder, and (ii) a stock put and call
agreement
substantially in the form of Exhibit C hereto (the "Put/Call
Agreement").
2. Promptly after the receipt of the shareholder approval
described in Section VI(F) (following the expiration of applicable
SEC review
periods or the receipt of SEC approval of the SEC filing described
in the
Section VI(F)(2)), Buyer shall deliver all of the following items
to Escrow
Agent:
(a) a certificate representing two hundred thirty
thousand three hundred fifty-five (230,355) shares of Buyer Common
Stock issued
in the name of Seller, which shares shall be subject to the
earn-out as set
forth in Section II(B) hereof and shall be referred to herein as
the "Seller
Initial Earn-out Shares";
(b) certificates representing the number of shares of
Buyer Common Stock shown opposite the name of each Employee in the
"Employee
Initial Earn-out Shares" column of Schedule II(A)(1)(b), and issued
in the names
of the Employees, for an aggregate of one hundred seven thousand
(I07,000)
shares of Buyer Common Stock, which shares shall be subject to the
earn-out as
set forth in Section II(B) hereof and shall be referred to herein
as the
"Employees Initial Earn-out Shares" (and, together with the Seller
Initial
Earn-out Shares, the "Initial Earn-out Shares");
(c) a certificate representing six hundred thirty-six
thousand (636,000) shares of Buyer Common Stock issued in the name
of Seller,
which shares shall be subject to the earn-out as set forth in
Section II(C)
hereof and shall be referred to herein as the "Seller Remaining
Earn-out
Shares"; and
(d) representing the number of shares of Buyer Common
Stock shown opposite the name of each Employee in the "Employee
Remaining
Earn-out Shares" column of Schedule II(A)(1)(b), and issued in the
names of the
Employees, for an aggregate of three hundred eighteen thousand
(3I8,000) shares
of Buyer Common Stock, which shares shall be subject to the
earn-out as set
forth in Section II(C) hereof and shall be referred to herein as
the "Employees
Remaining Earn-out Shares" (and, together with the Seller Remaining
Earn-out
Shares, the "Remaining Earn-out Shares").
The Initial Earn-out Shares and the Remaining Earn-out Shares
collectively may
be referred to herein as the "Earn-out Shares".
B. If the gross revenues of the Business for the twelve (12)
month
period beginning on October I, 2006 and ending on September 30,
2007 (the
"Initial Post-Closing Period") are greater than twenty percent
(20%) of the
gross revenues of the Business for the twelve (I2) month period
beginning on
October I, 2005 and ending on September 30, 2006 (the
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"Comparison Period"), then Seller and the Employees shall be
entitled to receive
the Initial Earn-out Shares from Escrow Agent. If the gross
revenues of the
Business for the Initial Post-Closing Period do not exceed twenty
percent (20%)
of the gross revenues of the Business for the Comparison Period,
then ownership
of the Initial Earn-out Shares shall revert to Buyer. If the twenty
percent
(20%) threshhold under this Section II(B) is met prior to the
conclusion of the
Initial Post-Closing Period, then at the time such threshhold is
met, Seller and
the Employees shall become entitled to receive the Initial Earn-out
Shares.
Promptly following the satisfaction of the twenty percent (20%)
threshh, if
Buyer has delivered the Initial Earn-out Shares to Escrow Agent,
then Buyer
shall deliver a written notice to Escrow Agent directing Escrow
Agent to release
the Escrowed Shares to Seller and the Employees. If Buyer has not
yet delivered
the Initial Earn-out Shares to Escrow Agent then, in lieu of doing
so, Buyer
shall deliver the Initial Earn-out Shares to Seller and the
Employees and shall
notify Escrow Agent of such delivery.
C. If the gross revenues of the Business for the twelve (I2)
month
period beginning on the date after the Closing Date (the "Final
Post-Closing
Period" and, together with Initial Post-Closing Period, the
"Post-Closing
Period") are greater than sixty percent (60%) of the gross revenues
of the
Business for the Comparison Period, then Seller and the Employees
shall be
entitled to receive the Remaining Earn-out Shares from Escrow
Agent. If the
gross revenues of the Business for the Final Post-Closing Period do
not exceed
sixty percent (60%) of the gross revenues of the Business for the
Comparison
Period, then ownership of the Remaining Earn-out Shares shall
revert to Buyer.
D. Buyer shall determine the gross revenues of the Business for
the
Post-Closing Period as soon as practicable but in any event no
later than ten
(10) days after the conclusion of such period. On or before the
tenth day
following the conclusion of the Post-Closing Period, Buyer must
deliver either
(I) a written notice to Escrow Agent, with a copy to Seller and to
the
Employees, directing Escrow Agent to release the Earn-out Shares to
Seller and
the Employees, or (2) a written notice to Seller containing the
amount of the
gross revenues of the Business for the Post-Closing Period and a
statement that
the gross revenues of the Business for the Post-Closing Period did
not exceed
sixty percent (60%) of the gross revenues of the Business for the
Comparison
Period.
1. If Seller wishes to dispute Buyer's calculation of the
gross revenues of the Business for the Post-Closing Period, within
five (5) days
of the delivery date of the notice under Section II(C)(2), Seller
must deliver
to Buyer a written dispute notice. If Seller does not deliver a
written dispute
notice within the specified time frame, Buyer's calculation of the
gross
revenues of the Business for the Post-Closing Period shall be
deemed to be final
and binding on Seller, the Employees and Buyer, and Buyer may issue
a written
notice to Escrow Agent, with a copy to Seller, directing Escrow
Agent to release
the Escrowed Shares to Buyer.
2. Promptly upon receiving a written dispute notice from
Seller, Buyer shall deliver to Seller a written report describing
the basis for
Buyer's calculation of the gross revenues of the Business for the
Post-Closing
Period and, upon Seller's request, shall make available to Seller
such books and
records of Buyer as may be necessary or appropriate to review the
disputed
calculation. The parties shall negotiate in good faith to resolve
any
differences with respect to a disputed calculation within ten (10)
days of the
delivery date of Seller's dispute notice. If the parties can not
resolve their
differences within the specified time frame, then Buyer and
Seller
4.
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shall retain a mutually acceptable independent public accountant to
calculate
the gross revenues of the Business for the Post-Closing Period. The
calculation
of the independent public accountant shall be binding on Seller and
Buyer.
Seller and Buyer shall be jointly responsible for the payment of
the fees and
expenses of any independent public accountant retained under this
Section
II(C)(2). Promptly following receipt of the determination of the
independent
public calculation, Buyer and Seller jointly shall deliver a notice
to Escrow
Agent directing the release of the Escrowed Shares consistent with
such
determination.
E.
For the purposes of this Section II, the gross revenues of the
Business for a fiscal period shall be determined in accordance with
the standard
accounting practices of Seller consistently applied, as such
practices may be
modified by this Section II(D).
1. Gross revenues of the Business for any period means
interest accrued on loans, fees on loans and gains on the sale of
loans during
such period. As of the signing of this Agreement, the unadjusted
gross revenues
of the Business for the Comparison Period are $I7,060,000.
2. Gross revenues of the Business for the Comparison Period
shall include revenues generated by all Assets of the Business,
whether or not
such Assets are transferred to Buyer concurrent with the execution
of this
Agreement, at a Partial Closing or at the Closing. Notwithstanding
the preceding
sentence, if any portion of the Assets is not transferred to Buyer
hereunder
because of Buyer's failure to obtain one or more licenses or
regulatory
approvals required by Section VI(A) hereof, with such Assets being
referred to
as the "Non-Transferred Assets", then revenues generated by such
Non-Transferred
Assets shall be excluded from the calculations of the gross
revenues of the
Business for the Comparison and Post-Closing Periods under this
Section II.
3. Revenues generated from Seller's business relationships
with net branches which do not do business with Buyer after the
date hereof
("Non-Transferred Net Branches") shall be included in the
calculation of gross
revenues of the Business for the Comparison Period. Buyer shall
make good faith
and commercially reasonable efforts to replace the business
attributable to the
Non-Transferred Net Branches by entering into business arrangements
with new net
branches ("Replacement Net Branches"), and revenues generated from
Buyer's
business relationships with Replacement Net Branches will be
included in the
calculations of the gross revenues of the Business for the
Post-Closing Period.
4. If this Agreement is terminated in accordance with Section
XII hereof, then gross revenues of the Business for the
Post-Closing Period
shall be calculated for the twelve (12) month period following the
Termination
Date.
III. REPRESENTATIONS AND WARRANTIES OF SELLER.
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Seller makes the following representations and warranties to Buyer
on
and as of the date of signing this Agreement, which shall be
equally true on the
Closing Date as though made on such date, and only through such
date.
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A. Organization and Qualification. Seller is a national banking
association organized, validly existing and in good standing under
the laws of
the United States of America and the regulations of the Office of
the
Comptroller of the Currency (the "OCC"), is qualified and in good
standing in
each state where the nature of its business requires it to be so
qualified, and
has the requisite power and authority to own, lease and operate its
properties
including the Assets and to carry on the Business as now being
conducted. Seller
has the power and authority to execute and deliver this Agreement
and to
consummate the transactions and perform its obligations
contemplated by this
Agreement.
B. Authority. The execution and delivery of, and the consummation
of
the transactions contemplated by, this Agreement (and all other
agreements &
instruments to be executed by them in connection herewith) have
been duly
authorized by all necessary corporate action of Seller. This
Agreement
constitutes, and all instruments required to be executed and
delivered by Seller
at the Closing will constitute, the valid and binding obligation of
Seller,
enforceable against Seller in accordance with their respective
terms. All
persons who have executed this Agreement on behalf of Seller have
been duly
authorized to do so by all necessary corporate action of Seller,
and all persons
who execute instruments required to be executed and delivered by
Seller at the
Closing shall have been duly authorized to do so by all necessary
corporate
action of Seller. Neither the execution and delivery of this
Agreement nor the
consummation of the transactions contemplated by this Agreement
will (i)
violate, conflict with or result in the breach or termination of,
or otherwise
give any other contracting party the right to terminate, or
constitute a default
(by way of substitution, novation or otherwise) under the terms of,
any
agreement or instrument to which Seller is a party or by or to
which Seller or
any of the Assets may be bound or subject or affected; (ii) result
in the
creation of any lien, charge or encumbrance upon any of the Assets
pursuant to
the terms of any agreement or instrument to which Seller is a party
or by or to
which Seller or any of the Assets may be bound or subject or
affected; (iii)
violate any judgment, order, injunction, decree or award against,
or binding
upon, Seller or upon the securities, property or business of
Seller; or (iv) to
the best knowledge of Seller (and assuming that Seller and Buyer
execute and
deliver the Put/Call Agreement), constitute a violation by Seller
of any law or
regulation of any jurisdiction, to an extent that such violation or
result will
adversely affect the Assets or Buyer's rights thereto or enjoyment
thereof after
Closing.
C. Title to and Condition of Assets. Seller has as of the date of
this
Agreement, and will have as of the Closing, good and valid title to
each of the
Assets being sold or transferred by it, and the absolute power and
right to
sell, assign, transfer and deliver the Assets to Buyer without the
requirement
of notice to or consent or approval of any third party, free and
clear of any
lien, security interest, or encumbrance except as described on
Schedule
III(C)(1), attached hereto and made a part hereof. Attached hereto
as Schedule
III(C)(2) is a complete and accurate list of all vehicles,
equipment and other
properties, if any, including real property, used in the operation
of the
Business of Seller which are leased from third parties, and Seller
has furnished
to Buyer true and complete copies of all leases relating to such
vehicles,
equipment, real property and other properties.
D. Filing of Tax Returns and Payment of Taxes. Seller will have
duly
filed all federal, state and local tax returns required to be filed
through the
Closing Date with respect to
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the Business and the Assets and, except as otherwise stated herein,
has duly
paid all taxes, interest, assessments, penalties or charges which
have become
due pursuant to such returns. Seller has also paid all other
assessments or
taxes of every kind relating to the Business and the Assets to the
extent that
the same have become due and payable. All sales or other transfer
taxes payable
to any jurisdiction by reason of the sale and transfer of the
Assets pursuant to
this Agreement shall be paid by Seller, except that Buyer will pay
any sales
taxes assessed or charged incident to the purchase and sale of
vehicles sold as
a part of this transaction.
E.
Compliance with Laws and Agreements.
1. Seller operates the Business in the states listed in
Schedule III(E) attached hereto and made a part hereof.
2. The operations of the Business have not violated and are
not now in violation of any judgment, order, injunction, award or
decree.
3. Seller has not received any notice that the Business is in
violation of any law, ordinance or regulation, which violation
could have a
material adverse affect on the Business.
4. Seller has performed all material obligations required to
be performed by it under any lease, license, mortgage, note,
indenture, loan or
other instrument, document, or agreement relating to the Business,
to which
Seller is a party or by or to which it or any of the Assets is
bound or subject
or affected.
F.
Contracts. Except as described in Schedule III(F) or other
Schedules
to this Agreement, Seller is not a party to (in its own name or as
successor in
interest to any predecessor) or bound by any of the following,
whether written
or oral, relating to the Business or properties of Seller used in
the Business:
1. contract not made in the ordinary course of the Business;
2. employment or advisory contract or consulting contract;
3. lease with respect to any property (real, personal or
mixed), whether as lessor or lessee;
4. continuing contract for the future purchase of materials,
supplies, equipment or services;
5. single contract for expenditures or commitment for
expenditures in excess of $5,000 or in any amount extending beyond
one year
after the Closing Date;
6. contract not cancelable without penalty by either party
upon thirty (30) or a lesser number of days' notice;
7. contract containing covenants limiting the freedom of
Seller to compete in the Business;
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8. agreement with any officer, director or Shareholder of
Seller; or
9. any written contract or agreement of any other kind
relating to the Business or properties of Seller which involves a
value of
$5,000 or more or a time of performance of more than one year.
True and complete copies of all contracts referenced in the
preceding sentence
have been furnished to Buyer. To the best of Seller's knowledge,
there does not
now exist, nor will there exist at closing, any default or event
which, with
passage of time or notice or both, would constitute an event of
default by
Seller under any contract related to the Assets or the Business,
which would
have a material adverse affect on the Business.
G. Financial Statements; Absence of Material Adverse Changes.
Seller
has delivered to Buyer the following financial statements
(collectively, the
"Financial Statements"); (a) the audited balance sheets of Seller
as of December
31, 2005, the related statements of income and retained earnings
and cash flows,
the notes thereto and the report of Ernst & Young with respect
thereto; and (b)
the balance sheet of Seller as of June 30, 2006 (the "Unaudited
Interim Balance
Sheet"), and the related statements of income and retained earnings
and cash
flows for the six months 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 (except that the Unaudited Interim Balance Sheet
does not have
notes) and present fairly the financial position of Seller as of
the respective
dates thereof and are the results of operations and cash flows of
Seller for the
periods covered thereby. Seller hereby certifies that there are no
financial
transactions, assets or liabilities, fixed or contingent, which
individually or
collectively represent a significant claim or liability against the
Business or
the Assets, which are not disclosed or set forth in the Financial
Statements.
Seller further certifies that, since December 31, 2005, Seller has
not entered
into any transaction with respect to its operation (other than this
Agreement)
not in the ordinary course of the Business, and there has not been
any change in
the Assets the effect of which was or will be in any case, or in
the aggregate,
materially adverse to the Business.
Seller agrees to allow access to all financial and other
information
necessary for Buyer and its agents to perform a complete audit of
the Business,
and not Seller as a whole, prior to Closing. Seller does not hereby
make any
representations or warranties, nor shall Seller be deemed to make
or to have
made any representations or warranties, as to the accuracy,
completeness or
correctness of any pro forma financial statements or financial
forecasts with
respect to the Business which Buyer and Seller may prepare jointly,
or
severally, between the date of this Agreement and the Closing.
H. Legal and Administrative Proceedings. Schedule III(H) to
this
Agreement contains a complete and accurate list and description of
each of the
following: all suits, actions, administrative proceedings, workers
compensation
claims or proceedings, governmental investigations, arbitrations,
mediations or
other similar proceedings relating to the Business, to which Seller
is a party
or against or affecting the Business or the Assets and of which
Seller has
received notice, and each judgment, order, injunction, decree or
award (whether
rendered by a court, administrative agency, or by arbitrator)
relating to the
Business, to which such Seller is a party or against or affecting
the Business
or the Assets properties (such suits, actions,
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administrative proceedings, governmental investigations,
arbitrations or similar
proceedings, and judgments, orders, injunctions, decrees or awards
being
hereinafter referred to as "Legal Proceedings").
I. Insurance. Schedule III(I) to this Agreement contains a complete
and
accurate list and description of all insurance policies of Seller
presently in
effect with respect to the Business and the Assets, copies of which
shall be
delivered to Buyer upon request.
J. Patents, Trademarks and Trade Names. Schedule III(J) to this
Agreement contains a complete and accurate description of all
trademarks
(including service marks), trademark registrations, and
applications therefore,
trade names, copyrights and copyright registrations, and
applications therefore,
patents, patent applications and patent licenses owned by Seller
and used in
connection with the Business. In the operation of the Business, to
the best of
Seller's knowledge, Seller is not infringing upon, or otherwise
violating the
rights of any third party with respect to, any trademark, service
mark, trade
name, copyright or patent. Seller has not received notice of any
proceedings
instituted or threatened, or any claim, against Seller alleging any
such
infringement or violation.
K. No Labor Activity; Employees. None of Seller's employees are
represented as of the date of this Agreement by any unit or group
as his or his
representative for collective bargaining or other labor purposes
and no such
representation will exist as of the Closing. Seller has not
received notice of
any (i) charges of unfair labor practices or of employment
discrimination
against Seller, or (ii) of any union representation questions which
involve any
of Seller's employees which are pending or threatened before any
governmental
agency or authority. Seller is not currently, nor during the past
twenty-four
(24) months has it been, involved in any labor discussion with any
unit or group
seeking to become the bargaining unit for any of its employees.
L. No Change in Conduct of Business. Since June 30, 2006, there
has
been no material change in the manner in which Seller conducts the
Business.
M. Customers. Seller has made available to Buyer information
concerning
each and every person, company or other entity, including contact
address, to
whom or which Seller has provided any Business services in the
twelve (I2)
months immediately preceding the date of this Agreement and every
person,
company or other entity with which Seller has an agreement to
provide Business
services after the date hereof.
N. No Broker or Finder. Seller represents and warrants to Buyer
that no
broker, finder or other financial consultant has acted on Seller's
behalf in
connection with this Agreement or the transactions contemplated by
this
Agreement.
IV. REPRESENTATIONS AND WARRANTIES OF BUYER.
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Buyer makes the following representations and warranties on and as
of
the date of signing this Agreement, which shall be equally true on
the Closing
Date as though made on such date, and only through such date:
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A. Corporate Organization and Qualification. Buyer is a
corporation
duly organized, validly existing and in good standing under the
laws of the
State of California, and has the requisite power and authority to
own, lease and
operate its properties and to carry on its business as now being
conducted.
Buyer has the corporate power and authority to execute and deliver
this
Agreement and to consummate the transactions and perform its
obligations
contemplated by this Agreement.
B.
Authority. The execution delivery and consummation of the
transactions contemplated by this Agreement have been duly
authorized by all
necessary corporate action of Buyer. This Agreement constitutes,
and all
instruments required to be executed and delivered by Buyer at the
Closing will
constitute, the valid and binding obligations of Buyer, enforceable
against
Buyer in accordance with their respective terms. All persons who
have executed
this Agreement on behalf of Buyer have been duly authorized to do
so by all
necessary corporate action of Buyer, and all persons who execute
instruments
required to be executed and delivered by Buyer at the Closing shall
have been
duly authorized to do so by all necessary corporate action of
Buyer. Neither the
execution and delivery of this Agreement nor the consummation of
the
transactions contemplated by this Agreement will (i) violate any
provision of
the Charter or By-Laws of Buyer, (ii) violate any contract or
agreement to which
Buyer is a party or by or to which Buyer may be bound or subject or
affected, or
any judgment, order, injunction, decree or award against, or
binding upon, Buyer
or upon the securities, property or business of Buyer, which
violation would
prevent the consummation of the transactions contemplated by this
Agreement or
(iii) constitute a violation by Buyer of any law or regulation of
any
jurisdiction.
C. Compliance with Laws. Buyer is required to be licensed or to
obtain
regulatory approval in order to undertake the operation of the
Business and/or
ownership of the Assets in the states listed in Schedule IV(C)(1)
and has
obtained the required licenses and regulatory approvals as listed
in Schedule
IV(C)(2).
D. Buyer Common Stock. The Buyer Common Stock consists of
twenty
million (20,000,000) authorized shares, no par value, of which six
million eight
hundred thirty-eight thousand one hundred sixty (6,838,I60) shares
were issued
and outstanding as of September 29, 2006. Each share of the Buyer
Common Stock
is validly issued and outstanding, fully paid and non-assessable
and was not
issued in violation of the preemptive rights of any person or
entity. All
issuances, sales, and repurchases by Buyer of shares of the Buyer
Common Stock
have been effected in compliance with applicable laws, rules and
regulations
including without limitation applicable federal and state
securities laws. Each
of the three million (3,000,000) shares of Buyer Common Stock to be
delivered as
the Purchase Price for the Assets is unregistered and has been (or
will be)
issued hereunder pursuant to an exemption from such laws and
regulations.
E. Financial Statements; Absence of Material Adverse Changes. Buyer
has
delivered to Seller the following financial statements
(collectively, the "Buyer
Financial Statements"); (a) the audited balance sheets of Buyer as
of April 30,
2006, the related statements of income and retained earnings and
cash flows, the
notes thereto and the report of Buyer's independent auditor with
respect
thereto; and (b) the balance sheet of Buyer as of July 3I, 2006
(the "Buyer
Unaudited Interim Balance Sheet"), and the related statements of
income and
retained earnings and cash flows for the six months then ended. The
Buyer
Financial Statements are accurate and complete in all respects,
have been
prepared in accordance with generally accepted accounting
10
<PAGE>
principles applied on a consistent basis throughout the periods
covered (except
that the Buyer Unaudited Interim Balance Sheet does not have notes)
and present
fairly the financial position of Buyer as of the respective dates
thereof and
are the results of operations and cash flows of Buyer for the
periods covered
thereby. Buyer hereby certifies that there are no financial
transactions, assets
or liabilities, fixed or contingent, which individually or
collectively
represent a significant claim or liability against Buyer, its
business
operations or its assets which are not disclosed or set forth in
the Buyer
Financial Statements.
F. Legal
and Administrative Proceedings. Except as set forth in
Schedule IV(F) to this Agreement, neither Buyer nor any of its
business
operations or assets are subject to any of the following:
1. suits, actions, administrative proceedings, workers
compensation claims or proceedings, governmental investigations,
arbitrations,
mediations or other similar proceedings relating to Buyer's
business operations
or assets, to which Buyer is a party or against or affecting
Buyer's business
operations or assets and of which Buyer has received notice;
and
2. judgments, orders, injunctions, decrees or awards (whether
rendered by a court, administrative agency, or by arbitrator) to
which such
Buyer is a party or against or affecting Buyer's business
operations or assets.
V. SELLER'S COVENANTS.
-------------------
Seller agrees that:
A. Conduct of Business. Except as contemplated by this
Agreement,
between the date of this Agreement and the Closing Date, Seller
shall conduct
the Business in the ordinary course and shall preserve
substantially intact the
Business, keep available the services of its present officers and
employees and
preserve in all material respects its present Business
relationships, financing
arrangements and goodwill. As the Assets are transferred to Buyer
hereunder,
Seller shall facilitate the transfer of the employment of the
Business employees
to Buyer's employ.
B. Outsourcing Services. To facilitate Buyer's acquisition of
the
Assets and operation of the Business, Seller shall provide to Buyer
the
operational and processing services as described in and in
accordance with the
terms and provisions of a Services Agreement between Seller and
Buyer
substantially in the form of Exhibit A hereto.
C. Leased Space. To facilitate Buyer's acquisition of the Assets
and
operation of the Business, Seller shall sublease to Buyer office
space at the
present principal locations of the Business in Dallas, Texas and
Austin, Texas
as described in and in accordance with the terms and provisions of
one or more
sublease agreements (the "Subleases") between Seller and Buyer to
be executed
and delivered by Seller and Buyer as soon as practicable following
the execution
and delivery hereof In addition to representations, warranties,
covenants and
indemnifications typical for subleases of commercial office space,
the Subleases
shall contain the general business terms set forth in Schedule V(C)
hereto.
11
<PAGE>
D. Insurance. Between the date hereof and the Closing, Seller
shall
maintain in force full insurance for all public liabilities and
claims. Seller
acknowledges and agrees that Buyer will not provide insurance for
or indemnify
or defend Seller or any of Seller's officers, directors, agents or
employees
from any claims or damages for acts or omissions arising prior to
the date of
Closing.
E. Litigation. Between the date hereof and the Closing Date,
Seller
shall notify Buyer in writing of any and all Legal Proceedings
pending, filed,
asserted or threatened by or against Seller and related to the
Business or the
Assets which are not described in Schedule III(H) hereto,
immediately upon
receiving notice of such matters.
F. Notice of Change. Between the date of this Agreement and the
Closing
Date, Seller shall notify Buyer in writing immediately of the
occurrence or
existence of any fact, event or circumstance which renders untrue,
inaccurate,
incomplete or misleading in any respect any warranty or
representation or other
disclosure previously made by Seller to Buyer or which will
constitute or cause
a failure to satisfy any condition of Buyer's obligations to
consummate the
transactions contemplated hereby (including without limitation any
material
damage to any Assets which are tangible).
G. Access for Buyer. Between the date hereof and the Closing Date,
in
order to permit Buyer to audit and evaluate the books and records
of the
Business, Seller shall give Buyer's representatives full access,
upon reasonable
notice and during normal business hours, to all the assets,
properties, books,
records, agreements and commitments of Seller pertaining to the
Business,
furnish Buyer's representatives during such period with all such
information
concerning the affairs of the Business as Buyer may reasonably
request and cause
Seller's employees and outside experts and advisors to render to
the
representatives of Buyer, such cooperation and assistance in
connection with
their investigations of the assets, properties, books, records,
agreements and
commitments and other information concerning the affairs of the
Business as
Buyer may reasonably request, including, without limitation,
information
required to be delivered in connection with any audit of the
Business conducted
in accordance with Section VI(F)(3) hereof.
VI. BUYER'S COVENANTS.
Buyer agrees that:
A. Regulatory Licenses and Approvals. Promptly after its execution
and
delivery of this Agreement, Buyer shall take all steps necessary
and appropriate
to obtain all of the licenses and regulatory approvals set forth in
Schedule
IV(C)(1), all of which licenses and regulatory approvals shall be
obtained by
Buyer no later than March I5, 2007. Buyer acknowledges and agrees
that Seller
may not transfer, and Buyer may not acquire, ownership of certain
of the Assets
unless Buyer has obtained legally required licenses and regulatory
approvals.
Buyer shall provided to Seller a written monthly report, on the
first business
day of each month, which report shall describe the licenses and
regulatory
approvals obtained during the calendar month preceding the date of
the report.
12
<PAGE>
B. Confidentiality. Buyer shall, and shall cause Buyer's
officers,
employees, representatives, consultants and advisors through the
Closing, to
hold in confidence all confidential information in the possession
of Buyer
concerning Seller and the Business of Seller. Buyer will not
release or disclose
any such information to any person other than Seller and
authorized
representatives. If the transactions contemplated by this Agreement
shall not be
consummated, all such confidential information shall immediately
thereafter be
returned to Seller. Notwithstanding the foregoing, the
confidentiality
obligations of this Section VI(A) shall not apply to
information:
1. which Buyer is compelled to disclose by judicial or
administrative process, or, in the opinion of counsel, by other
mandatory
requirements of law;
2. which can be shown to have been generally available to the
public other than as a result of a breach of this Section VI(B);
or
3. which can be shown to have been provided to Buyer by a
third party who obtained such information other than as a result of
a breach of
this Section VI(B).
C. Notice of Change. Between the date of this Agreement and the
Closing
Date, Buyer shall notify Seller in writing immediately of the
occurrence or
existence of any fact, event or circumstance which renders untrue,
inaccurate,
incomplete or misleading in any respect any warranty or
representation or other
disclosure previously made by Buyer to Seller or which will
constitute or cause
a failure to satisfy any condition of Seller's obligations to
consummate the
transactions contemplated hereby.
D. Restrictions on Buyer Common Stock. All of the shares of
Buyer
Common Stock to be issued as the Purchase Price hereunder shall be
unregistered
and subject to restrictions on sale by Seller under Securities and
Exchange
Commission ("SEC") Rule 144, for a period of up to two (2) years
after the date
hereof. Notwithstanding the foregoing and provided that Seller
bears all
applicable legal fees and expenses and filing costs, Buyer agrees
that at any
time after the date hereof Seller may require Buyer to file with
the SEC an S-3
similar registration statement with respect to the shares of Buyer
Common Stock
comprising the Purchase Price. In addition, from and after the date
hereof, with
respect to the shares of Buyer Common Stock comprising the Purchase
Price, Buyer
hereby grants and Seller shall have incidental ("piggy-back")
registration
rights in connection with any future registration and/or other
public offering
of Buyer Common Stock under applicable federal or state securities
laws.
E. Employee Benefits. With respect to each current employee of
Seller
who is retained by Buyer in connection with Buyer's acquisition of
the Business
(each a "Business Employee"), Buyer shall provide to each such
Business Employee
insurance, retirement and other employment benefits comparable to
the employment
benefits Seller provides to such Business Employees on the date
hereof. With
respect to any Business Employee who is hired by Buyer and whose
employment
subsequently is terminated by Buyer, regardless of the reason for
termination,
Buyer shall be fully responsible for any financial, legal and other
benefits to
which each such terminated Business Employee may be entitled as a
result of such
termination, including, but not limited to, COBRA and unemployment
insurance.
13
<PAGE>
F.
AMEX and SEC Filings; Related Financial Audit.
----------------------------------------------
1. Promptly following the signing of this Agreement, Buyer
shall file with the AMEX a listing application (the "Listing
Application") with
respect to the issuance of the shares of Buyer Common Stock
described in Section
II(A)(I) hereof. Buyer shall take all commercially reasonable
actions to ensure
that the Listing Application complies in all respects with
applicable AMEX
requirements and shall respond promptly to any request or
requirement of the
AMEX in connection with the Listing Application.
2. Buyer shall take all commercially reasonable actions to
file with the SEC, as soon as practicable following the signing of
this
Agreement, a proxy on Schedule 14A or an information statement on
Schedule I4C
(or other equivalent form or filing) and obtain shareholder
approval (as
required by rules and regulations of the AMEX) with respect to the
issuance of
the shares of Buyer Common Stock described in Section II(A)(2)
hereof.
3. In connection with the filing that Buyer shall make under
Section VI(F)(2), the rules and regulations of the SEC may require
Buyer to
submit audited financials of the Business for one or more quarterly
or annual
fiscal periods. Buyer may retain the public accounting firm of its
choice to
perform the audit, which audit shall be limited to the fiscal
periods
specifically required by the applicable SEC rules and regulations.
Buyer shall
be responsible for and shall bear all fees, costs and expenses
associated with
any audit to be performed under this Section VI(F)(3). Buyer shall
and shall
cause its representatives to take steps to minimize the disruption
to Seller's
operations during the course of any audit under this Section
VI(F)(3).
Consistent with its obligations under Section V(G).Seller shall
cooperate with
any audit conducted in accordance with this Section VI(F)(3).
VII. CLOSING; CLOSING DATE.
A. Closing. The closing of the transactions contemplated by
this
Agreement (the "Closing") shall take place promptly upon the
satisfaction of all
conditions to each party's obligations under this agreement, but in
any event no
later than March 31, 2007, at 2:00 p.m. at the offices of Hermes
Sargent Bates,
LLP, Dallas, Texas (the date and time of the Closing being referred
to in this
Agreement as the "Closing Date"). Notwithstanding the foregoing,
some of the
Assets may be sold by Seller and purchased by Buyer prior to the
Closing Date at
times and locations mutually agreeable to the parties, with each
such sale being
referred to herein as a "Partial Closing".
B. Further Assurances. From the effective date hereof and after
the
Closing, each party hereto shall use its best efforts to take, or
cause to be
taken, all actions and to do, or cause to be done, all things
necessary or
desirable under applicable laws to cause the transactions
contemplated by this
Agreement and the other ancillary agreements to be consummated,
and, without
limiting the generality of the foregoing, to obtain all consents
and
authorizations of government agencies and third parties and to make
all filings
with and give all notices to government agencies and third parties
that may be
necessary or reasonably required to effect the transactions
contemplated by this
Agreement and the other ancillary agreements. The parties agree to
execute and
deliver such other documents, certificates, agreements and other
writings and to
take such other actions as may be necessary or desirable in order
to consummate
or
14
<PAGE>
implement expeditiously the transactions contemplated by this
Agreement and the
other ancillary agreements and to vest in Buyer good and marketable
title to the
Assets and to vest in Seller the Purchase Price. The parties shall
cooperate
with each other (a) in determining whether any action by or in
respect of, or
filing with, any governmental entity or self regulatory
organization is
required, or any actions, consents, approvals or waivers are
required to be
obtained from parties to any material contracts, in connection with
the
consummation of the transactions contemplated by this Agreement and
the
ancillary agreements and (b) in taking such actions or making any
such filings,
furnishing information required in connection therewith and seeking
timely to
obtain any such actions, consents, approvals or waivers.
VIII. DELIVERIES BY SELLER.
---------------------
A. Concurrent with Seller's execution and delivery of this
Agreement,
Seller shall execute and deliver or cause to be delivered to
Buyer:
1. The Schedules containing the information required to be
provided by Seller hereunder;
2. Two (2) original, signed copies of the Services Agreement;
3. Two (2) original, signed copies of a certificate of the
secretary of the Seller certifying as to resolutions adopted by the
Board of
Directors of Seller approving the sale of substantially all of the
assets of the
Business to Buyer; and
4. A Certificate of Good Standing or Certificate of Existence
from the OCC certifying the existence of Seller as of a recent date
prior to the
Closing.
In the event that Buyer shall acquire any portion of the Assets or
shall assume
any of the Assumed Liabilities and/or Assumed Contracts and Leases
concurrent
with the execution of this Agreement, subject to the terms and
conditions of
this Agreement, Seller also shall execute and deliver or cause to
be delivered
to Buyer the following documents:
5. Two (2) original Bills of Sale in the form of Exhibit D
hereto, endorsements, assignments and any other documents or
instruments as may
be necessary or appropriate (in the reasonable judgment of Buyer or
its counsel)
to assign, convey, transfer, and deliver to Buyer good and valid
title, free of
any encumbrances, to that portion the Assets being transferred to
Buyer
concurrent with the execution of hereof;
6. All other instruments of conveyance as shall be necessary,
in the reasonable opinion of Buyer and its counsel, to transfer to
Buyer that
portion of the Assets being transferred to Buyer concurrent with
the execution
of hereof, duly executed and acknowledged by Seller and, if
necessary, in
recordable form;
7. Business records and customer lists, commitments and rights
pertaining to the Assets being transferred to Buyer concurrent with
the
execution hereof;
8. Assignments of any licenses and assumption agreements for
any Assumed Contracts and Leases being assumed by Buyer concurrent
with the
execution hereof, such
15
<PAGE>
assignments and assumption agreements to be in such form as may be
reasonably
necessary in discretion of Buyer and Seller to ensure that Buyer
shall have the
full benefit of such rights and full liability for such obligations
following
the assignment and assumption thereof; 9. All of the documents
evidencing any
Assumed Liabilities to be assumed by Buyer concurrent with the
execution hereof;
and 10. Such other documents or deliveries as Buyer may reasonably
request of
Seller.
B. Subject to the terms and conditions of this Agreement, at
each
Partial Closing with respect to the portion of the Assets to be
transferred to
Buyer at such Partial Closing, Seller shall execute and deliver or
cause to be
delivered to Buyer:
1. The documents set forth in Section VIII(A)(5) - (I0), as
appropriate;
2. Written updates to the Schedules as of the date of the
Partial Closing; and
3. A certificate (a "Seller Closing Certificate") setting
forth the representations and warranties of Seller that (A) each of
the
representations and warranties made by Seller in this Agreement was
accurate in
all respects as of the date of this Agreement, (B) except as
expressly set forth
in the Seller Closing Certificate, each of the representation and
warranties
made by Seller in this Agreement is accurate in all respects as of
the date of
the Partial Closing as if made on such date, (C) each of the
covenants and
obligations of Seller is required to have complied with or
performed pursuant to
this Agreement at or prior to the Partial Closing has been duly
complied with
and performed in all respects, (D) expect as expressly set forth in
the Seller
Closing Certificate, each of the conditions set forth in Section X
has been
satisfied in all respects.
C. Subject to the terms and conditions of this Agreement, at
the
Closing, Seller shall execute and deliver or cause to be delivered
to Buyer:
1. Two (2) original Non-competition Agreements with Buyer in
the form of Exhibit E hereto;
2. The documents set forth in Section VIII(A)(5) - (I0), as
appropriate;
3. Written updates to the Schedules as of the Closing Date;
4. A Seller Closing Certificate containing the information
required by Section VIII(B)(3) with reference to the Closing Date;
and
5. All other agreements and documents required by this
Agreement not previously delivered by Seller to Buyer.
[THIS SPACE INTENTIONALLY LEFT BLANK.]
16
<PAGE>
IX. DELIVERIES BY BUYER.
--------------------
A. Concurrent with Buyer's execution and delivery of this
Agreement,
Buyer shall execute and deliver or cause to be delivered to
Seller:
1. A Certificate of Good Standing or Certificate of Existence
from the California Secretary of State certifying the existence and
good
standing of Seller as of a recent date prior to the Closing;
2. Two (2) original, signed copies of a unanimous written
consent or certified copies of resolutions of the Board of
Directors of Buyer
approving the purchase of the Business and the Assets from
Seller;
3. The Schedules containing the information required to be
provided by Buyer hereunder; and
4.
Two (2) original, signed copies of the Services Agreement.
In the event that Buyer shall acquire any portion of the Assets or
shall assume
any of the Assumed Liabilities and/or Assumed Contracts and Leases
concurrent
with the execution of this Agreement, subject to the terms and
conditions of
this Agreement, Buyer also shall execute and deliver or cause to be
delivered to
Seller the following documents:
5. Assumption agreements for any licenses, any Assumed
Contracts and Leases and any Assumed Liabilities being assumed by
Buyer
concurrent with the execution hereof, such assumption agreements to
be in such
form as may be reasonably necessary in discretion of Seller to
ensure that Buyer
shall have the full benefit of such rights and full liability for
such
obligations following Buyer's assumption thereof; and
6. Such other documents or deliveries as Seller may reasonably
request of Buyer.
B. Subject to the terms and conditions of this Agreement, at
each
Partial Closing with respect to the portion of the Assets to be
transferred to
Buyer at such Partial Closing, Buyer shall execute and deliver or
cause to be
delivered to Seller:
1. The documents set forth in Section IX(A)(5) - (6), as
appropriate;
2. Written updates to the Schedules as of the date of the
Partial Closing; and
3. A certificate (the "Buyer Closing Certificate") setting
forth the representations and warranties of Buyer that (A) each of
the
representations and warranties made by Buyer in this Agreement was
accurate in
all respects as of the date of this Agreement, (B) except as
expressly set forth
in the Buyer Closing Certificate, each of the representation and
warranties made
by Buyer in this Agreement is accurate in all respects as of the
date of the
Partial Closing Date as if made on such date, (C) each of the
covenants and
obligations of Buyer is required to have complied with or performed
pursuant to
this Agreement at or prior to the Partial Closing has been duly
complied with
and performed in all respects, (D) expect as expressly set
17
<PAGE>
forth in the Buyer Closing Certificate, each of the conditions set
forth in
Section XI has been satisfied in all respects.
C. At the Closing, Buyer shall execute and deliver or cause to
be
delivered to Seller:
1. Two (2) original, signed copies of the Non-Competition
Agreement;
2. The documents set forth in Section IX(A)(5) - (6), as
appropriate;
3. Written updates to the Schedules as of the Closing Date;
4. A Buyer Closing Certificate containing the information
required by Section IX(B)(3) with reference to the Closing Date;
and
5. All other agreements and documents required by this
Agreement not previously delivered by Buyer to Seller.
X. CONDITIONS TO OBLIGATIONS OF BUYER.
-----------------------------------
The obligation of Buyer to consummate the transactions contemplated
by
this Agreement are subject to the fulfillment on or prior to the
Closing Date of
the following conditions:
A. Authorization. Seller shall have the corporate power and
authority
to consummate the transactions and perform its obligations
contemplated by this
Agreement.
B. Notices; Consents. All requisite notice to and consents,
permits,
licenses and authorizations of third parties, including but not
limited to
governmental or other regulatory agencies, required in the
reasonable discretion
of Buyer's counsel to be given or received, as the case may be, by
or on the
part of Seller or Buyer for the consummation of the transactions
contemplated by
this Agreement shall have been given or obtained.
C. Representations and Warranties True. The representations and
warranties of Seller contained in this Agreement or in the
Schedules hereto
shall be true in all material respects on and as of the Closing
Date with the
same effect as though made on and as of the Closing Date, except to
the extent
expressly waived by Buyer in writing or as effected by transactions
contemplated
by this Agreement.
D. Compliance with Covenants. Seller shall have performed and
complied
with all covenants, agreements and conditions required by this
Agreement to be
performed or complied with by Seller prior to or at the
Closing.
E.
Litigation. No action or proceeding shall be pending or
threatened
before any court or governmental body to restrain or prohibit (or
which would
have the effect of restraining or prohibiting), or to obtain
damages in respect
of, this Agreement or the consummation of the transactions
contemplated by this
Agreement.
18
<PAGE>
F. Delivery of Documents and Agreements. Seller shall have executed
and
delivered or caused to be delivered to Buyer all of the documents
and agreements
set forth in Section VIII(C).
G. Documents. All documents and proceedings of Seller in
connection
with the transactions contemplated by this Agreement shall be as to
form and
substance reasonably satisfactory to Buyer and its counsel.
XI. CONDITIONS TO OBLIGATIONS OF SELLER.
------------------------------------
The obligations of Seller to consummate the transactions
contemplated
by this Agreement are subject to the fulfillment on or prior to the
Closing Date
of the following conditions:
A. Authority. Buyer shall have the corporate power and authority
to
consummate the transactions and perform its obligations
contemplated by this
Agreement.
B. Notices; Consents. All requisite notice to and consents,
permits,
licenses and authorizations of third parties, including but not
limited to
governmental or other regulatory agencies, required in the
reasonable discretion
of Seller's counsel to be given or received, as the case may be, by
or on the
part of Seller or Buyer for the consummation of the transactions
contemplated by
this Agreement shall have been given or obtained.
C. Representations and Warranties True. The representations and
warranties of Buyer contained in this Agreement or in the Schedules
hereto shall
be true in all material respects on and as of the Closing Date with
the same
effect as though made on and as of the Closing Date, except to the
extent
expressly waived by Seller in writing or as effected by
transactions
contemplated by this Agreement.
D. Compliance with Covenants. Buyer shall have performed and
complied
with all covenants, agreements and conditions required by this
Agreement to be
performed or complied with by Buyer prior to or at the Closing.
E. Litigation. No action or proceeding shall be pending or
threatened
before any court or governmental body to restrain or prohibit (or
which would
have the effect of restraining or prohibiting), or to obtain
damages in respect
of, this Agreement or the consummation of the transactions
contemplated by this
Agreement.
F. Exemption from Registration. Buyer shall have provided to
Seller
evidence satisfactory to Seller and its counsel that each of the
three million
(3,000,000) shares of Buyer Common Stock to be delivered hereunder
as the
Purchase Price for the Assets is unregistered and has been (or will
be) issued
hereunder pursuant to exemption(s) from applicable federal and
state securities
laws and regulations.
G. Delivery of Documents and Agreements. Buyer shall have executed
and
delivered or caused to be delivered to Seller all of the documents
and
agreements set forth in Section IX(C).
19
<PAGE>
H.
Documents. All documents and proceedings of Buyer in connection
with
the transactions contemplated by this Agreement shall be as to form
and
substance reasonably satisfactory to Seller and its counsel.
XII. TERMINATION.
------------
A. In the event that
Buyer does not satisfy its obligations under
Section VI(A) hereof on or before March 31, 2007, then Seller may
terminate this
Agreement by providing to Buyer written notice of such termination,
with such
termination to be effective as of the date of the notice (the
"Termination
Date"). Notwithstanding the foregoing, during the period from March
I5, 2007 to
March 28, 2007, Buyer may deliver to Seller a written request that
Seller extend
the term of this Agreement and, if Seller determines, in its
reasonable
discretion, that Buyer is acting in good faith and is taking all
commercially
reasonable steps to obtain the licenses and regulatory approval
described in
Section VI(A) and Schedule IV(C)(I) hereof, Seller shall not
unreasonably
withhold its agreement to extend the term hereof.
B. The following shall apply if this Agreement is terminated in
accordance with this Section XII:
1. Buyer shall be entitled to retain any portion of the Assets
purchased from Seller on or prior to the Termination Date;
2. Buyer shall remain obligated under all Assumed Liabilities
and Assumed Contracts and Leases which Buyer assumed on or prior to
the
Termination Date;
3. Seller shall be entitled to retain any portion of the
Assets not purchased by Buyer on or prior to the Termination
Date;
4. All agreements executed in connection herewith, including
but not limited to the Sublease Agreement, the Services Agreement
and the
Non-Competition Agreement, shall remain in effect following the
Termination Date
in accordance with their respective terms; and
5. Except as set forth in Section II, which shall remain in
effect following any termination hereof, Buyer shall not be
entitled to the
refund of any portion of the Purchase Price.
XIII. GENERAL AND MISCELLANEOUS.
--------------------------
A. Broker or Finder. Buyer has retained Pegasus Funds to
represent
Buyer in connection with this Agreement and the transactions
contemplated by
this Agreement and has agreed to pay Pegasus Funds a finder's fee
consistent
with its agreement to compensate Pegasus Funds for acting as a
finder. Buyer and
Seller each agree to indemnify and hold the other harmless from any
claim or
demand for commission or other compensation by any broker, finder,
financial
consultant or similar agent claiming to have been employed by or on
behalf of
such party in connection with this Agreement and to bear the cost
of legal
expenses incurred in defending against any such claim.
B. Entire Agreement. This Agreement contains, and is intended as,
a
complete statement of all of the terms and the arrangements between
the parties
with respect to the matters
20
<PAGE>
provided for and supersedes any previous agreements and
understandings between
the parties with respect to those matters. This Agreement may not
be amended,
terminated or otherwise modified except by a writing executed and
delivered by
both Buyer and Seller.
C. Headings. The headings in this Agreement are solely for
reference
and shall not in any way affect the interpretation of this
Agreement. All
references to Sections, Schedules and Exhibits are to Sections,
Schedules and
Exhibits in or to this Agreement, unless otherwise indicated.
D. Binding Affect; Assignment. This Agreement shall be binding upon
and
inure to the benefit of the parties and their respective successors
and
permitted assigns. No assignment of this Agreement or of any rights
or
obligations hereunder may be made by either party (by operation of
law or
otherwise) without the prior written consent of the other, and any
attempted
assignment without the required consent shall be void and of no
force or effect.
E. Notices. All notices and other communications under this
Agreement
shall be in writing and shall be deemed given when (a) delivered by
hand, (b)
transmitted by prepaid cable, telex or telecopier (provided that a
copy is sent
at about the same time by registered or certified mail, return
receipt
requested), or (c) received by the addressee, if sent by Express
Mail, Federal
Express, or other express delivery service to the addressee at the
following
addresses, telex numbers or telecopier numbers (or to such other
address, telex
number or telecopier number as a party may specify by notice given
to the other
party pursuant to this provision):
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