EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
XSVOICE, INC.
AND
UPSNAP, INC.
DATED AS OF JANUARY 6, 2006
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I.
PURCHASE OF
ASSETS...............................................1
1.1
Purchase
and Sale of Assets......................................1
1.2
Excluded
Assets..................................................2
1.3
Nonassignable
Contracts..........................................3
ARTICLE II.
ASSUMPTION OF
LIABILITIES........................................4
2.1
Assumed
Liabilities..............................................4
2.2 Retained
Liabilities.............................................4
ARTICLE III. PURCHASE
PRICE...................................................5
3.1
Purchase
Price...................................................5
3.2
Resale and
Registration of Shares................................6
3.3
Tax Free
Reorganization..........................................7
3.4
Guaranty
of Revenues.............................................7
ARTICLE IV. THE
CLOSING......................................................8
4.1
Date of
Closing..................................................8
ARTICLE V.
REPRESENTATIONS AND
WARRANTIES...................................9
5.1
Representations and Warranties of
Seller.........................9
5.2
Representations and Warranties of
Purchaser.....................14
ARTICLE VI.
DOCUMENTS TO BE DELIVERED AT THE
CLOSING........................16
6.1
Documents
to be Delivered by the Seller.........................16
6.2
Documents
to be Delivered by Purchaser..........................17
ARTICLE VII.
POST-CLOSING
COVENANTS..........................................18
7.1
Discharge
of Business Obligations...............................18
7.2
Maintenance of Books and
Records................................18
7.3
Payments
Received...............................................18
7.4
Use of
Name.....................................................19
7.5
UCC
Matters.....................................................19
7.6
Financial
Statements............................................19
7.7
Post-Closing
Notifications......................................19
7.8 Certain
Tax Matters.............................................19
7.9
Insurance.......................................................20
7.10
SEC
Filings.....................................................20
ARTICLE VIII. SURVIVAL AND
INDEMNIFICATION....................................20
8.1
Survival
of Representations, Warranties, and Covenants..........20
8.2
Limitations on
Liability........................................20
8.3
Indemnification.................................................21
8.4
Defense of
Claims...............................................21
i
<PAGE>
ARTICLE IX.
MISCELLANEOUS
PROVISIONS........................................22
9.1
Arbitration.....................................................22
9.2
Specific
Performance............................................23
9.3
Notices.........................................................23
9.4
Expenses........................................................24
9.5
Successors
and Assigns..........................................24
9.6
Waiver..........................................................24
9.7
Entire
Agreement................................................25
9.8
Amendments
and Supplements......................................25
9.9
Rights of
the Parties...........................................25
9.10
Brokers.........................................................25
9.11
Further
Assurances..............................................25
9.12
Governing
Law...................................................25
9.13
Severability....................................................25
9.14
Counterparts....................................................26
9.15
Titles and
Headings.............................................26
9.16
Passage of Title and Risk of
Loss...............................26
9.17
Certain Interpretive Matters and
Definitions....................26
ii
<PAGE>
EXHIBIT AND DISCLOSURE SCHEDULE LIST
------------------------------------
Exhibits
--------
Exhibit A Escrow
Agreement
Schedules
---------
Receivables Schedule
Contracts Schedule
Personal Property Schedule
Intellectual Property Schedule
Prepaid Items Schedule
Insurance Schedule
Claims Schedule
Required Consents Schedule
iii
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
This
Asset Purchase Agreement (the "Agreement") is made and entered into
as
of the 6th day of January, 2006, by and between UPSNAP, INC., a
Nevada
corporation ("Purchaser"), and XSVOICE, INC., a Tennessee
corporation
("Seller"). Buyer and Seller are also referred to collectively
herein as the
"Parties" and individually herein as a "Party."
RECITALS:
---------
WHEREAS, Seller has engaged in the business of developing and
delivering
wireless platforms and applications (the "Business");
WHEREAS, Seller, through its Board of Directors and stockholders,
has
determined that it is in its best interests to sell the Business
and
substantially all of the Seller's assets to Buyer;
WHEREAS, on the terms and subject to the conditions contained in
this
Agreement, Seller desires to sell, transfer, and assign to
Purchaser, and
Purchaser desires to purchase from Seller, all of the Purchased
Assets (as
hereinafter defined),
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and
agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
mutually
acknowledged, the Parties hereby covenant and agree as follows:
ARTICLE I.
PURCHASE OF ASSETS
------------------
1.1
Purchase and Sale of
Assets. On the terms and subject to the
conditions hereof, at the Closing (as hereinafter defined), Seller
will sell,
transfer, convey, assign, and deliver to Purchaser, and Purchaser
will purchase
and accept, all right, title, and interest of Seller, in and to all
rights,
properties, and assets of Seller of every kind, character, and
description used
or useful in connection with the conduct of the Business or
otherwise arising
out of the conduct of the Business, in each case free and clear of
all
mortgages, liens, pledges, security interests, charges, claims,
restrictions,
and encumbrances of any nature (collectively, "Liens") except
Permitted Liens
(as hereinafter defined), including the rights, properties, and
assets described
in this Section 1.1 (collectively, the "Purchased Assets"):
1.1.1 Accounts Receivable. All accounts or notes receivable of,
and
any other amounts due to, Seller arising out of the operation of
the Business,
including such of the foregoing as are listed on the Accounts
Receivable
Schedule attached hereto (the "Receivables Schedule");
1.1.2 Contract Rights. All rights and incidents of interest as of
the
date hereof in and to all contracts, agreements, leases, licenses,
joint
ventures, purchase orders (as vendor or purchaser), commitments,
and other
agreements and arrangements, whether oral or written of Seller used
or useful in
the Business (individually a "Contract" and collectively,
"Contracts"),
including such of the foregoing as are described on the Contracts
Schedule
attached hereto (the "Contracts Schedule");
<PAGE>
1.1.3 Tangible Personal Property. All machinery and equipment,
maintenance parts, furniture, fixtures, vehicles, leasehold
improvements, and
all other tangible personal property, wherever located
(collectively, the
"Tangible Personal Property"), including the tangible personal
property listed
on the Tangible Personal Property Schedule attached hereto (the
"Personal
Property Schedule");
1.1.4 Manufacturers' and Vendors' Warranties. All rights under
manufacturers' and vendors' warranties relating to items included
in the
Purchased Assets and all similar rights against third persons
relating to items
included in the Purchased Assets;
1.1.5 Intellectual Property. All right, title, and interest in and
to
all domestic and foreign letters patent, patents, patent
applications, patent
licenses, software licenses, know-how licenses, trade names,
trademarks,
registered copyrights, service marks, trademark registrations and
applications,
service mark registrations and applications, all Seller's rights to
the name
XSVoice, and any derivatives thereof and copyright registrations
and
applications, owned or used by Seller in the operation of the
Business,
including those listed or described on the Intellectual Property
Schedule
attached hereto (the "Intellectual Property Schedule"), and all
trade secrets,
technical knowledge, know-how, and other confidential proprietary
information
and related ownership, use, and other rights of Seller
(collectively, the
"Intellectual Property");
1.1.6 Books and Records. All the books and records of Seller,
including all books and records relating to employees, the purchase
of
materials, supplies, and services, financial, accounting,
operations matters,
product, research and development, manufacture and sale of
products, and all
customer and vendor lists relating to the operation of the Business
and all
files and documents (including credit information) relating to
customers and
vendors of the Business (provided that Seller may keep duplicate
copies of any
records required to be retained by Seller under applicable
Law);
1.1.7 Prepaid Items. All prepaid items, deposits, costs, and
fees
("Prepaid Items") including such of the foregoing as are listed on
the Prepaid
Items Schedule attached hereto (the "Prepaid Items Schedule");
and
1.1.8 Insurance. All contracts of insurance of Seller
("Insurance
Contracts") including the Insurance Contracts listed on the
Insurance Contracts
Schedule (the "Insurance Schedule").
1.1.9 The Mobile Broadcast Network. All assets and rights in or
relating to the Mobile Broadcast Network (the "MBN").
1.2
Excluded Assets.
Notwithstanding anything contained in this Agreement
to the contrary, the following rights, properties, and assets
(collectively, the
"Excluded Assets") will not be included in the Purchased
Assets:
1.2.1 Corporate Documents. Seller's corporate seal, minute
books,
charter documents, corporate stock record books, and such other
books and
records as pertain to the organization, existence, or share
capitalization of
Seller and duplicate copies of such records included in the
Purchased Assets as
are necessary to enable Seller to file its tax returns and reports
or as are
otherwise required to be retained by Seller under applicable Law,
and any other
2
<PAGE>
records or materials relating to Seller generally and not involving
or relating
to the Purchased Assets or the operation or operations of the
Business;
1.2.2 Employee Benefit Plans. Each and every Employee Benefit Plan
(as
hereinafter defined) and any and all assets and related trusts
thereof;
1.2.3 Tax Refunds. Seller's rights to receive any refund
attributable
to, or right of offset against, any Taxes (as hereinafter defined)
with respect
to the Business attributable to periods ending on or prior to the
Closing Date
or to the pre-Closing portion of any taxable period that includes
but does not
end on the Closing Date;
1.2.4 Rights under this Agreement. Seller's rights arising out of
or
relating to this Agreement or the transactions contemplated
hereby;
1.2.5 Cash; Cash and Stock Consideration; Other Excluded Assets.
All
of the Seller's cash and cash equivalents on hand and/or in banks
("Cash"), the
Cash Consideration and Stock Consideration and the November 2005
account
receivable from Nextel Communications ("Nextel") in the amount of
$59,136.43.
1.3
Nonassignable
Contracts
1.3.1 Nonassignability. Without limiting or otherwise affecting
the
rights of Purchaser pursuant to Article VIII, to the extent that
any Contract or
Insurance Contract to be assigned pursuant to the terms of Section
1.1 is not
capable of being assigned (each, a "Nonassignable Contract"),
without the
consent, approval, or waiver of any Person (including a
Governmental Entity), or
if such assignment or attempted assignment would constitute a
breach thereof or
a violation of any applicable foreign or United States federal,
state, or local
law, statute, ordinance, regulation, order, writ, injunction, or
decree ("Law"),
nothing in this Agreement will constitute an assignment or require
the
assignment thereof prior to the time at which all consents,
approvals, and
waivers necessary for such assignment shall have been obtained.
1.3.2 Seller to Use Best Efforts. Notwithstanding anything
contained
in this Agreement to the contrary, Seller will not be obligated to
assign to
Purchaser, any of its rights or obligations in, to, or under any of
the
Nonassignable Contracts without first having obtained all consents,
approvals,
and waivers necessary for such assignment; provided, however, that
Seller shall
use its best efforts to obtain all such consents, approvals, and
waivers prior
to and after the Closing Date; and provided, further, that Seller
shall not be
required to make any payments in connection with any such
assignment (other than
in respect of obligations then due under any such Contract).
1.3.3 If Waivers or Consents Cannot Be Obtained. To the extent and
for
so long as all consents, approvals, and waivers required for the
assignment of
any Nonassignable Contracts shall not have been obtained by Seller,
Seller shall
use its best efforts to, (a) provide to Purchaser the financial and
business
benefits of any such Nonassignable Contract and (b) enforce, at the
request of
Purchaser, for the account of Purchaser, any rights of Seller
arising from any
such Nonassignable Contract (including the right to elect to
terminate in
accordance with the terms thereof upon the advice of Purchaser).
Following the
3
<PAGE>
Closing, Seller shall not terminate, modify, or amend any
Nonassignable Contract
without Purchaser's prior written consent.
ARTICLE II.
ASSUMPTION OF LIABILITIES
-------------------------
2.1
Assumed Liabilities.
Except as specifically set forth herein, no
liabilities will be assumed by Purchaser. Purchaser will assume the
following
liabilities (the "Assumed Liabilities"):
2.1.1 all executory obligations of Seller in respect of the
Contracts
described in the Contracts Schedule except that Purchaser shall not
assume or
agree to pay, discharge, or perform any:
(a) liabilities and obligations under any Nonassignable
Contract,
Insurance Contract or Permit, except to the extent Purchaser has
realized
the
corresponding financial and business benefits and other rights
thereunder as contemplated by Section 1.3.3; or
(b) liabilities or obligations arising out of any breach by Seller
of
any
provision of any contract referred to in this Section 2.1.1(b),
including liabilities or obligations arising out of Seller's
failure to
perform any contract in accordance with its terms prior to the
Closing.
2.1.2 all liabilities and obligations of Seller pursuant to and
under
those certain promissory notes dated _________, (the "Notes")
issued by the
Seller to Nextel; provided, however, that in no event shall the
Purchaser be
liable to repay an amount exceeding $113,500 in the aggregate under
the Notes;
and provided, further, that it is understood that Purchaser will
seek to
negotiate terms with Nextel.
2.2
Retained Liabilities.
Notwithstanding anything contained in this
Agreement to the contrary, Purchaser will not assume or agree to
pay, satisfy,
discharge, or perform, and will not be deemed by virtue of the
execution and
delivery of this Agreement or any document delivered at the Closing
pursuant to
this Agreement, or as a result of the consummation of the
transactions
contemplated by this Agreement, to have assumed, or to have agreed
to pay,
satisfy, discharge, or perform, any liability, obligation, or
indebtedness of
Seller, whether primary or secondary, direct or indirect, other
than the Assumed
Liabilities. Seller will retain and pay, satisfy, discharge, and
perform in
accordance with the terms thereof, all liabilities and obligations
other than
the Assumed Liabilities to the extent specifically provided in
Section 2.1,
including those set forth below (such liabilities and obligations
retained by
Seller being referred to herein as the "Retained Liabilities"):
2.2.1 all liabilities or obligations of Seller or any predecessor
or
Affiliate thereof which relate to any of the Excluded Assets;
2.2.2 all liabilities or obligations of Seller or any predecessor
or
Affiliate thereof for or relating to Taxes, whether relating to or
arising out
of the Business, the Purchased Assets or otherwise, fixed or
contingent,
disclosed or undisclosed, and with respect to any Transfer Tax (as
hereinafter
4
<PAGE>
defined) arising from or in connection with the transfer or the
sale of the
Business, Purchased Assets or the Assumed Liabilities;
2.2.3 all liabilities or obligations of Seller arising out of
or
relating to this Agreement or the transactions contemplated hereby
(including
any prior efforts to sell or otherwise dispose of the Purchased
Assets or the
Business or any portion thereof), and all liabilities or
obligations for any
legal, accounting, investment banking, brokerage, or similar fees
or expenses
incurred by Seller in connection with, resulting from, or
attributable to, the
transactions contemplated by this Agreement;
2.2.4 subject to Section 2.1 all liabilities or obligations for
any
indebtedness for borrowed money incurred with respect to the
Business prior to
the Closing Date;
2.2.5 all liabilities and obligations of Seller or any predecessor
or
Affiliate of Seller resulting from, caused by, or arising out of,
directly or
indirectly, the conduct of the Business or ownership or lease of
any of the
Purchased Assets or any properties or assets previously used in the
Business at
any time prior to or on the Closing Date as constitute, may
constitute, or are
alleged to constitute a tort, breach of contract, or violation or
requirement of
any Law, or which relate to, result in, or arise out of, the
existence or
imposition of any liability or obligation to remediate or
contribute or
otherwise pay any amount under or in respect of any environmental,
superfund, or
other environmental cleanup or remedial Laws, occupational safety
and health
Laws, or other Laws;
2.2.6 all claims for severance, other employee benefits
(including
benefits mandated by Law), or other compensation or damages by or
on behalf of
any employees (present or former), agents, or independent
contractors of Seller
or by or on behalf of any Governmental Entity in respect of
employees (present
or former), agents, or independent contractors of Seller involving
any alleged
employment loss, violation of any Law, or termination of employment
actually or
constructively (by operation of Law or pre-existing contract,
including any
liability for severance), all liabilities and obligations of Seller
or any
predecessor or Affiliate of Seller with respect to employees
(present or
former), agents, or independent contractors of Seller under any
Employee Benefit
Plan, or in respect of payments for unemployment compensation or
unemployment
insurance, all liabilities and obligations with respect to
physical, mental, or
other health conditions of employees (present or former), agents,
or independent
contractors of Seller existing prior to or at the Closing and all
other
obligations in respect of employees (present or former), agents, or
independent
contractors of Seller relating to periods of employment ending on
or prior to
the Closing Date;
2.2.7 all liabilities and obligations with respect to any and
all
accrued and unpaid Tennessee personal property or other tax, and
any interest
and penalty payments thereon, owed by Seller to the appropriate
taxing authority
in the State of Tennessee.
ARTICLE III.
PURCHASE PRICE
--------------
3.1
Purchase Price. In
addition to assuming the Assumed Liabilities,
Purchaser will pay for the Purchased Assets an aggregate purchase
price
consisting of (i) $198,828.81 in cash, which shall be paid to
Seller on the
Closing Date by wire transfer or certified check of immediately
available funds
5
<PAGE>
to such account as shall have been designated by Seller to
Purchaser prior to
the Closing (the "Closing Payment"); (ii) an additional $500,000 to
be delivered
to Seller if and when a majority of Purchaser's Series A Warrants
are exercised
or at least $3,200,000 of additional equity capital has been raised
by Purchaser
within 12 months from Closing (the "Warrant Payment" and
collectively with the
Closing Payment the "Cash Consideration"). Amounts received in
respect to the
Warrant Payment will be placed in an escrow account pursuant to the
terms of the
Escrow Agreement (as hereinafter defined); (iii) 2,258,470
unregistered shares
of Purchaser's common stock (the "Stock Consideration") to be
delivered to
Seller promptly after the Closing, (at the Closing Purchaser shall
deliver to
Seller an acknowledgement from Purchaser's transfer agent of
instructions to
deliver certificates representing the shares), valued at $5,735,000
based on a
share price (the "Share Price") determined by the average closing
price over the
15 trading days preceding Closing, 590,710 of these shares to be
held by
Lassiter, Tidwell & Hildebrand, PLLC (the "Escrow Agent")
pursuant to the terms
of the Escrow Agreement to be executed by and among Seller,
Purchaser, and the
Escrow Agent in the form of Exhibit A attached hereto (the "Escrow
Agreement");
3.2
Resale and
Registration of Shares. All shares part of the Stock
Consideration shall be "restricted," as such term is used in Rule
144,
promulgated under the United States Securities Act of 1933, as
amended (the
"1933 Act") and the certificates representing the same shall
contain the
following legend:
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE
NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THESE
SHARES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW
TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, ASSIGNED,
PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT
OF
1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR AN
OPINION
OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SHARES TO THE
EFFECT
THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT AND SUCH STATE
SECURITIES LAWS."
It is understood that "stop transfer" orders will be placed with
the transfer
agent with respect to the Stock Consideration in accordance with
normal
practices for restricted shares.
If
at any time or times, the Purchaser shall determine to register any
of
its shares of common stock (the "Common Stock") that are held by
Richard Jones
or Tony Philipp, under the 1933 Act and other than on Forms S-4 or
S-8 or any
successor forms, the Purchaser will give prompt written notice
thereof to all
holders who own Registrable Shares (the "Holders"). For purposes of
this
Agreement, "Registrable Shares" means all shares of Purchaser's
Common Stock
that are being issued pursuant to the Agreement. Upon the written
request of any
Holders, given within fifteen (15) days after receipt of any such
notice, the
Purchaser will use its reasonable best efforts to afford such
Holders the
opportunity to include that amount of Registrable Securities which
such Holder
has requested to be registered to be included in the Purchaser's
registration
6
<PAGE>
statement ("Registration Statement"), all to the extent requisite
to permit the
sale or other disposition of such Registrable Securities; provided,
however,
that if the Purchaser proposes to register less than all of the
shares owned by
Richard Jones and Tony Philipp, then the Purchaser shall be
obligated to include
only the same percentage of Registrable Shares as the percentage of
shares held
by Richard Jones and Tony Philipp as are being registered. In
addition, the
Holders acknowledge that, subject to the treatment of the Richard
Jones and Tony
Philipp shares on the same basis, the Purchaser, in its discretion,
may elect
not to file the Registration Statement or may elect to withdraw the
Registration
Statement after it has been filed. In connection with any such
registration, the
undertakings, indemnification and expense shares shall be upon the
same terms as
are typical of selling shareholders in a secondary registration and
as may be
required of Richard Jones and Tony Philipp as a condition of such
registration.
It
is understood that the Seller and or its shareholders will be able
to
resell their shares of Common Stock in accordance with and subject
to Rule 144,
promulgated under the 1933 Act after a holding period of two years,
computed in
accordance with such rule, without limit as permitted under Rule
144(k).
3.3
Tax Free
Reorganization. It is the intent of both Purchaser and Seller
to effectuate a type-C tax free reorganization pursuant to Section
368(a)(1)(C)
of the Internal Revenue Code (the "Code").
3.4
Guaranty of Revenues .
The assets held in escrow pursuant to Section
3.1 of the Agreement shall be released to the Seller as the
cumulative or
year-to-date revenues of the Business conducted with the Purchased
Assets
("Revenues") achieve target levels or tiers of revenue. "Revenues"
shall be
defined as the gross revenue, meaning revenues generated, directly
or
indirectly, from any and all sources, uses or exploitation of the
Purchased
Assets and/or Business, including, without limitation, subscription
revenue,
advertising revenue or licensing revenue, less carrier share,
transaction fees,
refunds, and write-off or chargebacks, but shall not include any
amounts
received where there is an obligation to reimburse or otherwise
credit customers
for such amounts. The target levels of Revenues that must be
achieved (in the
aggregate) in order for the assets to be released are set forth in
the following
table (the "Target Revenue Table"):
<TABLE>
<CAPTION>
-------- ------------------------------
--------------------------------
LOWER THRESHOLD OF REVENUES UPPER THRESHOLD OF
REVENUES
(YEAR-TO-DATE)
(YEAR-TO-DATE)
-------- ------------------------------
--------------------------------
<S>
<C>
<C>
Tier
#1
$ 140,000.00
$ 165,000.00
-------- ------------------------------
--------------------------------
Tier
#2
$ 692,500.00
$ 805,000.00
-------- ------------------------------
--------------------------------
Tier
#3
$1,492,500.00
$1,730,000.00
-------- ------------------------------
--------------------------------
Tier
#4
$2,517,500.00
$2,905,000.00
-------- ------------------------------
--------------------------------
</TABLE>
The assets to be released upon the achievement of the target
Revenues is set
forth in the following table (the "Released Assets Table"):
7
<PAGE>
<TABLE>
<CAPTION>
-------- ----------------------------------
-----------------------------------
ASSETS TO BE RELEASED AS LOWER ASSETS TO BE
RELEASED AS UPPER
THRESHOLD OF REVENUES IS ACHIEVED THRESHOLD OF REVENUES IS
ACHIEVED
-------- ----------------------------------
-----------------------------------
<S> <C>
<C>
Tier
#1 15% of Initial
Shares(1)
15% of Initial Shares
-------- ----------------------------------
-----------------------------------
Tier
#2 15% of Initial
Shares
15% of Initial Shares
-------- ----------------------------------
-----------------------------------
Tier
#3 15% of Initial
Shares plus
15% of Initial Shares plus
$100,000 from Warrant Payment $100,000
from Warrant Payment
-------- ----------------------------------
-----------------------------------
Tier
#4 5% of Initial
Shares plus
Balance of shares plus balance of
$150,000 from Warrant Payment cash held
in escrow
--------
----------------------------------
-----------------------------------
--------------------
<FN>
1 Initial Shares shall mean shares of stock used to fund the escrow
plus
any additions thereto via stock dividends, stock splits or
otherwise.
</FN>
</TABLE>
As each tier amount is achieved, the applicable number of shares
and cash, if
applicable, shall be distributed accordingly at that time. There
will be no
proration based on achieving any amounts other than the specific
targeted
amounts set forth in the Target Revenue Table. In the event that
the Revenues
have not reached the target of revenues for a tier by the end of
the year, then
the lesser of (i) remaining assets in escrow or (ii) assets having
a value of
$1.5 million (plus sums deposited in escrow from the Warrant
Payment), LESS a
sum equal to the number of shares distributed to Seller out of the
escrow
multiplied by $2.54 per share (plus cash sums from Warrant Payment
distributed
to Seller) shall be transferred to Purchaser and the balance, if
any, shall be
released to Seller. The escrow shall expire at the earlier of when
all assets
held in escrow have been distributed or on the one year anniversary
of the
Closing Date.
Upon a change of control (as defined hereinafter), the Warrant
Payment and the
shares held in escrow pursuant to Section 3.1 of the Agreement
shall be
immediately released to the Seller. A "change of control" shall be
deemed to
have occurred if there is a sale by Purchaser of substantially all
of its assets
or if any person or persons acting in concert, other than Richard
Jones, Tony
Philipp and/or members of their Families ("Family" means the heirs,
legatees,
descendants and blood relatives to the third degree of
consanguinity of such
individual), together with persons controlled by or under common
control of the
aforementioned individuals, directly or indirectly acquires, in the
aggregate,
more than 50% (by number of shares) of the issued and outstanding
voting stock
of the Purchaser and take effective control over the Purchaser. A
change of
control shall be deemed to have occurred only if the transaction
values the
Purchaser at $50,000,000 or more (if a stock transaction for 100%
of the stock
of Purchaser or its proportionate amount if a lesser percentage of
the stock is
acquired).
ARTICLE IV.
THE CLOSING
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4.1
Date of Closing. The
consummation of the purchase and sale of the
Purchased Assets contemplated hereby (the "Closing") shall take
place on or
before January 6, 2006, at the offices of Lassiter, Tidwell &
Hildebrand, PLLC,
1850 One Nashville Place, 150 Fourth Avenue, North, Nashville,
Tennessee
37219-2408. The date on which the Closing is effected is referred
to in this
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Agreement as the "Closing Date." At the Closing, the parties shall
execute and
deliver the documents referred to in Article VI.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
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5.1
Representations and
Warranties of Seller. Seller makes the following
representations and warranties to Purchaser, each of which is true
and correct
as of the date hereof and shall be unaffected by any investigation
heretofore or
hereafter made by Purchaser.
5.1.1 Organization. Seller is a corporation duly organized,
validly
existing, and in good standing under the laws of the State of
Tennessee. Seller
has the requisite corporate power and authority to own, lease, or
otherwise hold
the Purchased Assets owned, leased, or otherwise held by it and to
carry on the
Business as presently conducted by it.
5.1.2 Good Standing. Seller is in good standing and duly qualified
to
conduct business as a foreign corporation in every state of the
United States in
which its ownership or lease of property or conduct of its business
activities
makes such qualification necessary, except where the failure to be
so qualified
would not, individually or in the aggregate, have a Material
Adverse Effect. For
the purposes of this Agreement, "Material Adverse Effect" shall
mean any event,
circumstance, condition, fact, effect, or other matter which has
had or could
reasonably be expected to have a material adverse effect (i) on the
Purchased
Assets or on the financial condition, prospects, financial
projections, or
results of operations of the Business taken as a whole or (ii) on
the ability of
Seller to perform on a timely basis any material obligation under
this Agreement
or to consummate the transactions contemplated hereby.
5.1.3 Authorization and Effect of Agreement. Seller has the
requisite
corporate power to execute and deliver this Agreement and the other
agreements
to be entered into by it pursuant to this Agreement (the "Seller
Ancillary
Documents") and to perform the transactions contemplated hereby and
thereby to
be performed by it. The execution and delivery by Seller of this
Agreement and
the Seller Ancillary Documents and the performance by it of the
transactions
contemplated hereby and thereby to be performed by it have been
duly authorized
by all necessary corporate and shareholder action on the part of
Seller. This
Agreement and each Seller Ancillary Document have been duly
executed and
delivered by duly authorized officers of Seller and, assuming the
due execution
and delivery of this Agreement and, as applicable, any Seller
Ancillary
Document, by Purchaser, constitutes a valid and binding obligation
of Seller
enforceable against it in accordance with its terms, except as may
be limited by
bankruptcy, insolvency, reorganization, moratorium, or other
similar laws
affecting the enforcement of creditors' rights in general and
subject to general
principles of equity (regardless of whether such enforceability is
considered in
a proceeding in equity or at law).
5.1.4 No Restrictions Against Sale of the Purchased Assets;
Required
Consents. The execution and delivery of this Agreement and each
Seller Ancillary
Document by Seller does not and the performance by Seller of the
transactions
contemplated hereby or thereby to be performed by any of them will
not (a)
conflict with or violate any provision of the articles or
certificate of
incorporation or by-laws (or other organizational documents) of
Seller, (b)
except as set forth on the Required Consents Schedule (the
"Required Consents
Schedule"), conflict with, or result in any violation of, or
constitute a
default (with or without notice or lapse of time, or both) under,
or give rise
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to a right of termination, cancellation, or acceleration of any
obligation or to
loss of a benefit under, any provision of any Contract or Permit to
which Seller
is a party or by which it or any of its properties are bound, (c)
constitute a
violation of any Law applicable to any of Seller or the Purchased
Assets, or (d)
result in the creation of any Lien (other than any Permitted Lien)
upon any of
the Purchased Assets, except in the case of clauses (b) or (c)
above, for such
conflicts, violations, breaches, defaults, accelerations,
terminations,
modifications, or cancellations that would not, individually or in
the
aggregate, have a Material Adverse Effect. No consent, approval,
order, or
authorization of, or registration, declaration, or filing with, any
Governmental
Entity is required to be obtained or made by or with respect to
Seller in
connection with the execution and delivery of this Agreement or any
Seller
Ancillary Document by Seller or the performance by Seller of the
transactions
contemplated hereby to be performed by it.
5.1.5 No Third Party Options. There are no existing agreements
with,
options, or rights of, or commitme
